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Next Boom? ‘Spec’ Homes Are Back

Sat, 27 Apr 2013 05:52:40 +0000

“We’ve seen the listings in the market drop dramatically. It’s been way, way down for months and months and months. The wave of foreclosures hasn’t come to us in a way that impacts the market. Investors are coming in and buying up inventory,” said Paul, who sees these factors as solid arguments for spec building.

(Read More: The Million-Dollar Home Challenge)

Mid-Atlantic, a small Maryland builder with six communities, now has 10 percent of its backlog in spec homes, and they are not alone. The big public builders are heading back to spec as well.

“I think the biggest competitive advantage builders have right now is that they have product, and with existing inventory so low they need to take advantage of the fact that they actually have something to sell,” explained Megan McGrath, a home building analyst at MKM Partners. “When you’re starting to think about the first-time buyer coming back into the market, you may want to increase your spec inventory a little.”

(Read More: Housing “Stuck” Due to Short Supply)

Supplies of homes for sale are down across the nation. Inventory in March fell 17 percent from a year ago, according to the National Association of Realtors. Listings usually rise dramatically in the spring, but they have not kept pace with historical averages.

In its earnings release Monday Meritage Homes CEO Stephen J. Hilton noted, “Housing demand is greater than the supply of homes available for sale in many of the areas where we operate, causing home prices to increase.”

Article source: http://www.cnbc.com/id/100669083

With Home Listings Low, ‘Spec’ Building Is Back

Wed, 24 Apr 2013 23:19:16 +0000

(Read More: The Million-Dollar Home Challenge)

Mid-Atlantic, a small Maryland builder with six communities, now has 10 percent of its backlog in spec homes, and they are not alone. The big public builders are heading back to spec as well.

(Read More: Housing “Stuck” Due to Short Supply)

Article source: http://www.cnbc.com/id/100669083

Home Builder Stocks Soar as Housing Battles Back

Tue, 09 Apr 2013 20:42:54 +0000

But not all are bullish on the builders, especially those that concentrate in the formerly hard hit housing markets like Arizona and California. Inventories are low in these states and prices are surging largely because of huge investor demand for foreclosed properties. With a strong, new single family rental market, investors rushed in and are cashing in on rents, but some say that demand is already starting to ease.

“Despite multi-billion dollar buying sprees by well-funded Wall Street hedge funds, real estate investors bought fewer properties in 2012 than they did in 2011, which was a record year for investors. Investment-home sales declined 2.1 percent to 1.21 million from 1.23 million in 2011, but those sales had been well under a million during the market downturn,” according to a new survey from the National Association of Realtors.

Meanwhile, previously surging single family rents are flattening. Nearly 4 million more single-family homes have been added to the rental market since 2005, according to Trulia.com. Supply has finally caught up with demand, with single family rents up just 0.1 percent in March from a year ago. That has housing bears roaring again.

“In Phoenix—like Las Vegas, Florida, the Inland Empire, Central Valley et al—we now have a rental supply glut,” said Mark Hanson, a California-based housing and mortgage analyst.

“Wherever the institutional money has gone in and ravaged is high risk for housing investment or building. These regions have become highly volatile speculative regions in which prices can rise 20 percent one year and fall 15 percent the next. The insti’s have turned these markets into something I have never seen before…more like high-beta, speculative, volatile tech stock markets than housing markets.”

Prices are soaring in these markets because all-cash investors are finding very little left to buy. Regular buyers can’t compete with investors, so they are heading to the home builders. The builders were caught off guard, because they did not foresee this dynamic. Now they are rushing back to meet demand, while having no idea how long that demand will last. Why? Because when home prices get high enough, investors could cash out, pushing inventories higher and prices lower.

The birth of the new asset class, the REO (bank owned foreclosures) to Rent model, put a floor on home prices and reduced distress dramatically in the market. It also, however, added a new volatility to housing for years to come.

If investors hold and rent the homes, recovery will continue apace, but if sentiment shifts, and investors see bigger returns in sales than rents, the game could turn quickly.

RealtyCheck producer Stephanie Dhue contributed to this report.

—By CNBC’s Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Questions? Comments? RealtyCheck@cnbc.com

Article source: http://www.cnbc.com/id/100627586

After Brisk Summer, Pending Home Sales Drop in August

Fri, 28 Sep 2012 06:01:36 +0000

Fewer Americans signed contracts to buy existing homes in August. After gains in home sales over the spring and summer, an industry survey surprised expectations, registering a 2.6 percent drop in pending home sales from July. This drop forecasts that final closings on existing homes will be lower heading into fall.

“The performance in month-to-month contract signings has been uneven with ongoing shortages of lower priced inventory in much of the country, and across most price ranges in the West, but activity has remained at notably higher levels this year,” wrote National Association of Realtors’ chief economist Lawrence Yun in a release.

Yun pointed out that contract signings have been up year-over-year for sixteen consecutive months, which indicates overall home sales will be higher in 2012 than 2011. The Realtors predict a 9 percent gain to 4.64 million units.

Regionally, pending home sales rose slightly in the Northeast, up 0.9 percent month-to-month, but fell 2.6 percent in the Midwest, 1.1 percent in the South, and really plummeted out West, down 7.2 percent.

The drop in the West is largely due to a supply issue on the low end of the market. Investors have been fueling the low end with all-cash, bulk purchases of foreclosures in markets like Phoenix, Las Vegas, and parts of Southern California. Supplies of those homes have dropped dramatically, leaving little for those investors to buy.

Some housing analysts are concerned that the housing recovery so far has been driven so much by all-cash investors that as these supplies dwindle, due to continuing bank delays and more loan modifications, the overall home sales numbers will drop going into the end of the year.

New home sales for August also disappointed, coming in lower than expected. New home sales are measured by signed contracts, rather than closings.