homesmillbrae.com » Headwinds

Even as Housing Revives, Apartment Growth to Boom

Fri, 17 May 2013 16:11:02 +0000

“Despite overtures of the headwinds from new supply, our April survey results showed positive gains in both occupancy and rents ahead of expected seasonal trends,” she wrote in a report to clients.

(Read More: Apartment Building Bubbles as Single-Family Homes Struggles)

Zelman noted an intentional slowing by home builders, who are strapped by labor and supply shortages and who are looking to gain pricing power as the market recovers, as a key driver of apartment demand.

Rising rents are pushing some tenants to move, but not as many as expected. 11.5 percent of departing residents in April left due to rent increases, according to the report, up from 10.9 percent in 2012 but way down from 17 percent in 2011. In addition, more than half of those moving out remained in the apartment rental market. Thirty percent bought a home, and ten percent rented a single family home; the remaining moved in with family or friends.

The concern for investors in the apartment sector, especially in multi-family REITs (real estate investment trusts), is that there is too much new supply coming on line, just as demand is about to turn. The government numbers for housing starts in April added confusion to that argument, but some say the monthly numbers, especially for new construction, which have a wide margin of error, are just “noise.”

(Read More: Rising Rates Rattle Mortgage Market)

“Multi-family starts plunged 38.9 percent to 23,000 units, but the more important average of March and April was still a solid 321,000 units,” noted Michael Montgomery, an economist at IHS Global Insight.

Article source: http://www.cnbc.com/id/100746253

Home Improvement Shows Gains—But May Not Last

Tue, 14 Aug 2012 19:30:32 +0000

The nation’s largest home improvement retailer, Home Depot, surprised the Street on Tuesday, beating profit estimates for the last quarter. It is also raising earnings outlooks for fiscal 2012.

It’s banking on continued improvement in market share and in the housing market, especially in California and Florida, which were two of the worst hit states in the recent crash.

Those two states were among the top sales performers for Home Depot
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] in the quarter. (Related: Home Depot Earnings)

“These are encouraging signs of stabilization in the housing market,” said Home Depot Chairman and CEO Frank Blake on an investor conference call.

As some analysts claim the housing market is rising from the bottom, citing the highest level of housing starts in three years, others caution that the ills still plaguing the market stand as severe headwinds to the home improvement retailers in general.

The foreclosure slowdown to a five-year low, said California-based analyst Mark Hanson, could hurt the likes of Home Depot. He cites the 22 percent (month-over-month) July drop in home sales in Phoenix as an example.

“The Phoenix region is a leading indicator to other more ‘distressed’ regions that made up most of the dead-cat bounce in Q1 and Q2 housing. The foreclosure rehab trade is now a headwind to Home Depot,” Hanson said. (Related: Why Drop in Foreclosures Is Bad for Housing Market)

Hanson expects July existing home sales to come in at the lowest annualized rate of the year. While few others are predicting such a “triple-dip,” Hanson has been warning for months that a drop in distressed supplies would stem the rebound in home sales, and it did just that in May and June.

This is not to say that the foreclosure crisis is gone, just perhaps delayed for the next few quarters. There are still 5.7 million loans that are either delinquent or in the foreclosure process, according to the latest reading from Lender Processing Services. While not all of those loans will go to final foreclosure, many of them will, and there is a huge cadre of hungry investors waiting to buy them up and do quick rehabs in order to rent them out.

Along with foreclosure issues, rising mortgage rates could also thwart some home improvement gains. Record low rates have prompted a surge in refinancing, giving many Americans extra cash to spend on remodeling. Home Depot cites sales gains in kitchen and bath, some of the first projects homeowners undertake when they have the means to do so.

“Today’s rates on the street are the highest since the last week in May, back at 4 percent,” said Hanson (quoting no-point to no-cost loan rates).

He also also noted most of those who could benefit from rates below 4 percent already refinanced in June and July. “Thus the cliff dive in weekly mortgage applications over the next three weeks will be one for the record books.”

—By CNBC’s Diana Olick

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/48662461?__source=RSS*blog*&par=RSS

Home Builder Confidence Surges Amid Big Headwinds

Sun, 19 Feb 2012 01:56:31 +0000

Article source: http://www.cnbc.com/id/46398028?__source=RSS*blog*&par=RSS

Mortgage Interest Deduction Big in Budget Play

Mon, 25 Jul 2011 21:36:34 +0000

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It’s not like the housing market needs any more headwinds, so here’s the government potentially giving us another: The mortgage interest deduction is back in big play in the budget deal.

It never exactly came off the table, but the bigger the budget deal, the more likely the mortgage deduction will take a bigger hit.

Right now, home loan borrowers can deduct the amount of interest they pay on their mortgages from their taxable income. This goes for principal residences and second homes. The interest deduction is capped at the first million dollars of debt on the home. For home equity loans it’s capped at $100,000 in debt.

The deduction costs the U.S. Treasury about $100 billion a year. There are proposals now to either reduce the cap to $500,000 and/or to eliminate the deduction on second homes. Eliminating the deduction on second homes would save about $15 billion, and reducing the cap to $500,000 would save another $15 billion, according to economist William Wheaton at MIT. 10.5 percent of existing home sales in June were of homes over $500,000 according to the Mortgage Bankers Association.

Then there’s the idea from the President’ bipartisan commission of turning the interest deduction into a 12 percent credit, limited to $500,000 in mortgage debt, only on primary residences. That could save the Treasury $65 billion.

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Article source: http://www.cnbc.com/id/43882179?__source=RSS*blog*&par=RSS