homesmillbrae.com » Miller Tabak

Higher-End Homes Finally Selling Again

Thu, 20 Dec 2012 17:59:50 +0000

“While there’s still a risk that the fiscal cliff will derail the housing recovery, the balance between supply and demand suggests that, if anything, the risks around our forecast of a 5 percent increase in house prices next year are on the upside,” notes Paul Diggle of Capital Economics.

The shift in the sales mix is also largely due to a drop in the number of distressed homes for sale. Foreclosures and short sales made up just 22 percent of home sales in November, according to the Realtors, the lowest share in five years. Much of that is due to a lack of supply on the distressed side, as investors continue to compete for these properties to take advantage of the still-lucrative rental market.

The Realtors claim the distressed share of sales will continue to decline in 2013, due to fewer seriously delinquent loans, but banks are now ramping up foreclosures of long-delayed delinquent loans, so there could be another bump in that supply before it finally falls dramatically. Bank repossessionsjumped 11 percent month-to-month in November and saw the first annual increase since 2010, according to RealtyTrac.

Overall, the supply of all homes nationally is at its lowest level in 7 years,, just 4.8 months’ worth at the current sales pace.

(Read More: Best US HousingMarkets for Buyers and Sellers)

“With the homebuyer affordability index near multi-decade highs combined with decent job creation at the same time renting has gotten more expensive — all lead to a continued improvement in sales,” writes Peter Boockvar of Miller Tabak. “This said, sales are still 30 percent below the bubble highs and are still where they were in 1998, both pointing to the degree of possible improvement ahead but also evidence of the damage that was done where historically the pace of recovery takes time.”

(Read More: New Nightmare forHome Builders: Not Enough Skilled Workers)

Article source: http://www.cnbc.com/id/100331527

Rising Mortgage Rates Spook Housing

Wed, 19 Dec 2012 23:55:34 +0000

“Despite the Federal Reserve’s announcement last week that it would purchase an additional $45 billion in Treasury securities per month as part of its continuing quantitative easing effort, rates increased in the second half of the week,” said Mike Fratantoni, MBA’s Vice President of Research and Economics.

“As a result, refinance applications dropped sharply to the lowest level in over a month.”

Applications to buy a home also dropped 5 percent week-to-week, indicating a still weak and rate-sensitive purchase market. One third of buyers in today’s housing market use all-cash. Many in the housing industry complain that it is not the rates but the availability of potential borrowers to obtain financing that is holding the market back from a more robust recovery.

The chairman of the National Association of Home builders says that while his cohort is feeling more confident about their business, “overly stringent lending standards” are holding back a more robust recovery.

(Read More: Housing Starts Fall as Sandy Slows Northeast)

Mortgage rates have been below 4 percent since May of 2012 and refinance volume has surged accordingly. Those refinances, many of them under the government’s Home Affordable Refinance Program (HARP) for underwater borrowers, have helped to fuel consumer spending and have likely kept many borrowers from defaulting on their loans.

The big drop in refinances after such a small move up in rates indicates that the slightest move, up or down, can really change activity. The hope, of course, had been for rates to continue moving down.

“A lot of money has been spent between OT [Operation Twist] and QE3 for very little incremental reward,” notes Peter Boockvar of Miller Tabak. “The true cost, yet to be determined, will of course occur when the likely market forced exit begins.”

If mortgage rates rise markedly in 2013, the housing recovery will undoubtedly take a hit. The recovery in housing began with all-cash investors, but owner-occupants are quickly moving in.

“Fannie Mae, Freddie Mac and the FHA financed a record $31.2 billion in so-called conforming jumbo mortgages during the third quarter of 2012,” according to a new Inside Mortgage Finance ranking and analysis. “Business in conforming jumbo loans – defined as mortgages on one-unit properties that exceed $417,000 – rose 29.6 percent from the second quarter and represented the highest quarterly volume for the agencies since emergency loan limits went into effect back in 2008.”

Unfortunately many buyers are either too young or too forgetful to realize that mortgage rates are incredibly, historically low, despite slight moves up week-to-week. The good news is in the near term is that when some buyers see rates tick up, they jump into purchase more quickly, for fear the rates will keep going up.

Article source: http://www.cnbc.com/id/100327898

Yes, Housing Starts Surge, but Rentals Are the Drivers

Thu, 22 Nov 2012 03:16:05 +0000

The headline number for housing starts was big, exceeding expectations and sending the home builder stocks on yet another tear.

Starts hit 894,000 (annualized) in October, over 50,000 more than the analysts forecast. Housing starts are now at their highest level since July 2008. (Read More: Good News Keeps Coming for Housing as Starts Surge)

“We expect the builder equities will react positively initially, but then fade through the day once the report is fully digested as ‘multifamily’ was the key driver of the results,” warned Stephen East at ISI.

There is no question that home builders are benefiting from tight supply in the existing home market and overall improved consumer confidence. That was apparent in the home builder confidence numbers released this week, which hit the highest level in six years. (Read More: Builders Bump Up Thanks to Drop in Existing Home Supply)

Single family housing starts hit historic lows and are now just rising from the ashes. That is why some of the comparisons, like single family starts (up 35 percent from a year ago), sound so monumental and push the stocks higher. But investors need to keep these numbers in perspective.

“Housing starts at 894,000 is near where they were at the depths of the 1981 and 1991 recessions and 60 percent below the peak in January 2006,” pointed out Peter Boockvar at Miller Tabak.

The October numbers were driven entirely by multifamily apartment starts, up 10 percent month-to-month and up 63 percent year over year. Why are developers putting up so many more apartments when housing is supposedly recovering? Because there is still big rental demand and low supply.

“The consensus view on supply remains that it is not a threat to apartment fundamentals in the near term. Overall, demand for apartments (driven by household formations) should continue to rise with deliveries, especially in high(er) barrier coastal markets,” analysts at Cantor Fitzgerald said in a note.

There has been a lot of talk of increasing household formation, but what some fail to realize is that household formation can be a single family owner-occupied home or an occupied rental unit. Younger Americans are in fact moving out of their parents’ basements, but many are moving into rental units, and that is also a formed household. (Read More: The Housing Recovery Is Getting Real)

Should investors be concerned about overbuilding in the apartment sector, given these huge jumps in starts coupled with the fledgling single family housing recovery? No.

“We’ve had four years of zero supply,” said David Toti of Cantor Fitzgerald. “There’s still a groundswell of demand. The shift from owning to renting is still moving in favor of the renter.”

Multifamily starts are now above 10-year averages. In fact they officially crossed them in October, but home ownership levels continue to contract. As for apartment performance? Landlords are raising rents and occupancies, and that does not point to any weakness, for now at least. (Read More: Existing Home Sales, Homebuilder Sentiment Rise)

So why then are the multifamily REITs all down on the starts numbers? They have actually been underperforming all year, as investors seek higher yield in other sectors, like industrial REITs. But another factor could be Archstone Inc., an apartment building owner and developer owned by Lehman Brothers Holdings. It said Monday that it plans to raise up to $3.45 billion in its initial public offering that may happen this year. Investors may be making room for Archstone, pulling out of others to get in to the new player.

—By CNBC’s Diana Olick

Click on ticker to follow real estate news:

US Home Builders

—Toll Brothers
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—DR Horton
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—Hovnanian Enterprises
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—Ryland Group
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—Lennar Corp
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—Beazer Homes USA
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—Meritage Homes
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—KB Home
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Construction General Building Materials

—The Home Depot
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—Lowe’s Companies
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—The Sherwin-WIlliams Company
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—E. I. du Pont de Nemours and Company
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—Apogee Enterprises
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Questions? Comments?

Follow me on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Article source: http://www.cnbc.com/id/49901568?__source=RSS*blog*&par=RSS

Yes, Housing Starts Surge, But Rentals Are the Drivers

Wed, 21 Nov 2012 09:15:07 +0000

The headline number for housing starts was big, exceeding expectations and sending the home builder stocks on yet another tear.

Starts hit 894,000 (annualized) in October, over 50,000 more than the analysts forecast. Housing starts are now at their highest level since July 2008. (Read More: Good News Keeps Coming for Housing as Starts Surge)
“We expect the builder equities will react positively initially, but then fade through the day once the report is fully digested as ‘multifamily’ was the key driver of the results,” warned Stephen East at ISI.

There is no question that home builders are benefiting from tight supply in the existing home market and overall improved consumer confidence. That was apparent in the home builder confidence numbers released this week, which hit the highest level in six years. (Read More: Builders Bump Up Thanks to Drop in Existing Home Supply.)

Single family housing starts hit historic lows and are now just rising from the ashes. That is why some of the comparisons, like single family starts (up 35 percent from a year ago), sound so monumental and push the stocks higher. But investors need to keep these numbers in perspective.

“Housing starts at 894,000 is near where they were at the depths of the 1981 and 1991 recessions and 60 percent below the peak in January 2006,” pointed out Peter Boockvar at Miller Tabak.

The October numbers were driven entirely by multifamily apartment starts, up 10 percent month-to-month and up 63 percent year over year. Why are developers putting up so many more apartments when housing is supposedly recovering? Because there is still big rental demand and low supply.

“The consensus view on supply remains that it is not a threat to apartment fundamentals in the near term. Overall, demand for apartments (driven by household formations) should continue to rise with deliveries, especially in high(er) barrier coastal markets,” analysts at Cantor Fitzgerald said in a note.

There has been a lot of talk of increasing household formation, but what some fail to realize is that household formation can be a single family owner-occupied home or an occupied rental unit. Younger Americans are in fact moving out of their parents’ basements, but many are moving into rental units, and that is also a formed household. (Read More: The Housing Recovery Is Getting Real.)

Should investors be concerned about overbuilding in the apartment sector, given these huge jumps in starts coupled with the fledgling single family housing recovery? No.

“We’ve had four years of zero supply,” said David Toti of Cantor Fitzgerald. “There’s still a groundswell of demand. The shift from owning to renting is still moving in favor of the renter.”

Multifamily starts are now above 10-year averages. In fact they officially crossed them in October, but home ownership levels continue to contract. As for apartment performance? Landlords are raising rents and occupancies, and that does not point to any weakness, for now at least. (Read More: Existing Home Sales, Homebuilder Sentiment Rise.)

So why then are the multifamily REITs all down on the starts numbers? They have actually been underperforming all year, as investors seek higher yield in other sectors, like industrial REITs. But another factor could be Archstone Inc., an apartment building owner and developer owned by Lehman Brothers Holdings. It said Monday that it plans to raise up to $3.45 billion in its initial public offering that may happen this year. Investors may be making room for Archstone, pulling out of others to get in to the new player.

—By CNBC’s Diana Olick

Click on ticker to follow real estate news:

US Home Builders

—Toll Brothers
[TOL
Loading...

()

]

—DR Horton
[DHI
Loading...

()

]

—Hovnanian Enterprises
[HOV
Loading...

()

]

—PulteGroup
[PHM
Loading...

()

]

—Ryland Group
[RYL
Loading...

()

]

—Lennar Corp
[LEN
Loading...

()

]

—Beazer Homes USA
[BZH
Loading...

()

]

—Meritage Homes
[MTH
Loading...

()

]

—KB Home
[KBH
Loading...

()

]

Construction General Building Materials

—The Home Depot
[HD
Loading...

()

]

—Lowe’s Companies
[LOW
Loading...

()

]

—The Sherwin-WIlliams Company
[SHW
Loading...

()

]

—E. I. du Pont de Nemours and Company
[DD
Loading...

()

]

—Apogee Enterprises
[APOG
Loading...

()

]

Questions? Comments?

Follow me on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Article source: http://www.cnbc.com/id/49901568?__source=RSS*blog*&par=RSS

Apartment Bubble Inflating Fast

Wed, 17 Oct 2012 19:12:21 +0000

Housing construction numbers for September were “blowout” and “smashed consensus,” according to analysts who follow the sector. Single family starts rose 11 percent from August and are up nearly 43 percent from a year ago. This from the depths of the housing recession.

Multi-family starts and permits, however, garnered a different headline: “Headline Risk as Data Cross 10-year Averages,” came the report from Cantor Fitzgerald.

Building permits for multi-family buildings, which means five units or more, and which will be rental buildings, not condos, jumped 93.4 percent from a year ago to 323,000, which is above the 10-year average of 296,000.

“While the silver lining is good news for the broader ‘housing recovery,’ the elevated permitting activity in the 5+ unit segment may set off alarms in apartment-land,” write David Toti and Gaurav Mehta in the Cantor report. “We expect the multifamily REITs could be under pressure today.”

These include Equity Residential
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They offer the caveat that the group has been underperforming of late and that fears around supply are already priced into current valuations. But it all begs the question, as single family home building recovers, are investors throwing too much cash at new rental apartments? This new construction won’t come on line for at least two years, when housing may be surging again.

(Read More: Property Flippers Are Back as Housing’s New Middle Men)

In order to answer the question, we need to put a few things in perspective about these total housing starts stats:

Peter Boockvar of Miller Tabak: “At a starts level of 872,000, it comes close to matching the level of starts at the depths of the 1991 recession when starts fell to 798,000 and before that, starts bottomed at 837,000 in the recession of 1981. This of course is not adjusted for population growth where we had about 250 million people in 1991 and 225 million in 1981 versus 310 million today.”

(Read More: Where the Mega-Rich Live)

The bottom line is we’re up, but we are up from the very bottom, so these big single family starts percentage jumps don’t mean that we are anywhere close to even normal times. What’s driving the starts? Demand, plain and simple.

“It is underlying demographic demand that is finally starting to kick in,” notes Patrick Newport of HIS Global insight, citing an annual US population increase of about 3 million and an annual household increase of 1.1-1.3 million (historically). So if demand is growing for single family housing, does that necessarily mean it is all being pulled from multi-family rentals? Maybe not.

“There is still a tremendous amount of demand for apartments,” says Mitch Roschelle of PWC. “The supply side of the equation is a different story, there’s clearly been a run-up in building permits and the projections of growth in supply continue to be strong, however, the question becomes is there too much risk of overbuilding? If you look back at the last several overbuilding cycles that we’ve had, whether it be the one after the SL crisis or the one from the 90s or the one from this decade, we really haven’t been a situation where we’ve overbuilt multifamily in the last 6-7 years, so we don’t have an excess of supply, and we don’t have an excess of financing to fund future growth in supply.”

(Read More: Is Housing Recovering as Much as Everyone Thinks?)

PWC, which put out its 2013 forecast today, does not see overbuilding risk. Despite the recovery in the single family housing market, there are still many Americans who cannot afford to buy a home and/or cannot qualify for today’s mortgages due to impaired credit. The worst of the housing crash may be over, but the scars are not yet healed, both fiscal and emotional. The prime demographic for home buying, those in their 20s and early 30s, are still seeing homeownership is as risky. Either that, or they don’t have the down payment or the credit scores to get in the game.

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/49448427?__source=RSS*blog*&par=RSS

Home Sales Disappoint Twice

Fri, 27 Jul 2012 17:15:24 +0000

Sales of newly built homes fell hard in June, despite newfound optimism in the housing recovery, especially among the home builders themselves.

Signed contracts to buy new homes fell 8.4 percent from the previous month, according to the U.S. Commerce Department, although they are still up 15 percent from a year ago.

Sales levels are now at their lowest since January.

This is the second miss for housing in the same month. Sales of existing homes fell as well, despite expectations for a gain.

The biggest drop in new home sales came in the Northeast, down 60 percent month-to-month, but the Northeast represents the smallest sample and is therefore highly volatile. In May it was that same segment of the country that pushed new home sales higher. The biggest June gains were seen in the Midwest, with a slight gain out West, where dwindling supplies of foreclosed homes have removed some of the competition for the home builders.

“With new home sales at current levels 75 percent below peak and with a run rate near 50+ year lows, new home construction has bottomed, but there is still a long bridge between a bottom and a robust recovery, as existing home inventories (shadow and otherwise) remain elevated,” writes Peter Boockvar, an analyst at Miller Tabak.

These latest numbers fly in the face of rising home builder optimism and a huge run on the stocks of the public builders. Some analysts, however, have been warning that this recovery is fragile at best, given other factors in the economy, specifically lackluster job growth and poor consumer sentiment.

“Builder stocks have continued to outperform the market as demand has remained strong into summer; also, earnings and the next few macro data points should be positive,” wrote analysts at Deutsche Bank earlier this week. “However, we think downside tail risk is mounting for 2H12. It shouldn’t take more than muddle-through economic growth for housing recovery to continue, but the risks are that even that doesn’t happen or it happens unevenly against tenuous investor optimism.”

Several home builders reported big jumps in new orders this spring, but those orders did not translate into pricing power for the market. Prices of new homes fell 3.2 percent in June after several months of gains.

Single family housing starts rose 4.7 percent in June from the previous month to a four year high, but they are still running at about one third the historical average volume. Inventories of new homes for sale rose to 144,000, representing a 4.9 month supply, but that is still historically very low.

Questions? Comments? And follow me on Twitter @Diana_Olick

Article source: http://www.cnbc.com/id/48318563?__source=RSS*blog*&par=RSS

Huge Jump in Housing Starts Does Not Point to Solid Recovery

Tue, 19 Jul 2011 19:52:55 +0000

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How could anyone take pot shots at a nearly 15 percent monthly jump in anything, not to mention housing starts, which have been mired in the mud for ages now?

Apparently pretty easily.

I knew the moment I saw the number that there would be those arguing that any gain in new home construction is a negative because of the already bloated inventory of new, existing and foreclosed properties on the market.

Miller Tabak’s Peter Boockvar provided that: “Bottom line, I repeat again that we don’t need an increase in single family housing starts with a 9.3 month inventory to sales ratio of existing homes, but hopefully the pace of permits will prove the June jump as being an outlier (admittedly, the pace is still extremely depressed). Multi-family is where the housing construction benefits are being seen, and that will be the case for years to come.”

While single family starts were up over 9 percent, it was multi-family driving the train in this report, up nearly 32% month-to-month. We all saw that coming, as rental demand has been surging, and there is not near enough supply in the pipeline. Patrick Newport of IHS Global Insight sees today’s report as highly predictive of housing’s slow slog back.

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Consumer Prices Reflect Growing Rental Market

Sat, 16 Jul 2011 00:43:40 +0000

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What does the consumer price index (CPI) have to tell us about the future of the housing market?

Apparently a lot.

Let me first explain a few things for those of you housing types who don’t follow this monthly number. The CPI is the most common way to measure inflation. There’s the big number and then what’s called the “core” number, which is the big number minus food and energy costs (gas prices obviously skewing things a lot these days). The big number was pushed down thanks to a drop in gasoline prices, but the core number was higher than expected, thanks to housing.

One component of the CPI is the “Owners Equivalent Rent,” (OER) measures the amount of money it costs to live somewhere, anywhere, be it a rental apartment or your own home.

“The key factor in the higher than expected core rate was a .2 percent rise in Owners Equivalent Rent, the biggest gain since March ’09,” writes Peter Boockvar of Miller Tabak. “This figure is important because it makes up 25 percent of CPI and 40 percent of the core. Apartment landlords are gaining pricing power as vacancies fall as the homeownership continues its decline. This is a secular trend and will result in a further lift in core inflation going forward.”

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If Mortgage Rates Keep Falling, Why Are Home Sales So Bad?

Sat, 28 May 2011 05:12:48 +0000

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As mortgage rates continue to fall, so too are home sales. That wouldn’t make sense in a normal housing market, but these are very unique times.

Credit, or lack thereof, coupled with extremely weak consumer confidence is keeping potential buyers on the fence.

Contracts to purchase existing homes plunged a far weaker-than-expected 11.6 percent in April, the heart of the spring housing season.

The National Association of Realtors’ Pending Home Sales Index is now 26 percent below its cyclical high in April of 2010, which was the deadline for the now-expired home buyer tax credit.

“The pullback in contract signings is disappointing and implies a slower than expected market recovery in upcoming months,” said NAR chief economist Lawrence Yun.

The drop in new contracts comes as mortgage rates continue to fall, just last week to the lowest level of the year so far. Freddie Mac reported 4.60 percent on the 30-year fixed, but analysts say even that’s not enough to move this tough housing market.

“Because mortgage rates have been so historically low for so long, the law of diminishing of returns has set in with respect to the low rates being the main influence and catalyst in purchasing a home,” says Peter Boockvar of Miller Tabak.

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Home Builders Still in the Woods

Wed, 25 May 2011 03:11:33 +0000

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The best number out of today’s report on sales of newly built homes is not the 7.3 percent bump up in signed contracts, it’s the drop in inventories to a 6.5 month supply.

That number is based on a quicker sales pace and a drop of 5000 in the absolute number of newly built homes on the market.

That volume is the lowest since at least 1963, according to Miller Tabak’s Peter Boockvar, who worries that the supply of existing homes is still simply too much for anyone to be touting the builders.

“The best response on the part of builders is to shoot themselves in the foot for as long as they can financially stand, so the market can more quickly absorb the excess inventory of existing homes which make up most of the overall market,” writes Boockvar.

Aristar’s JT Smith chimes in on the actual April sales number: “Unadjusted sales of 32k makes April 2011 tied for the worst April sales number in recorded history.”

My concern is not over the inventory of newly built homes. I think it’s a big positive. My problem is the glut of bargain-priced REO (bank owned) homes against which the builders compete.

Check out a chart we re-made from data by the Calculated Risk Blog.

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