Home Builders Slow New Construction, Raise Prices

Wed, 19 Jun 2013 01:45:27 +0000

(Read More: Home Builder Confidence Hits 7-Year High)

“What are they so excited about?” asked Hunter. “That they have pricing power.”

Housing completions fell 0.9 percent to an annualized rate of 690,000, well below demand. Underlying demand consists of new households forming (about 1.1 million, according to Census data,) replacement demand (about 250,000 homes) and second home demand (about 50,000,) according to IHS Global Insight.

“The wide gap between housing completions and underlying demand suggests that inventories are likely to get leaner over the next 12 months,” IHS analysts said in a report to investors. “For the record, it takes about seven months on average for a single-family permit to turn into a completed home.”

The supply pinch can be seen quite dramatically in California, where there was barely a two-month supply of homes for sale in May. That, and a change in the mix of home sales from distressed to nondistressed, pushed the median sale price up 32 percent from a year ago. Some might call that a “bubble,” but the real state agents do not.

(Read More: Rising Rates Scare Borrowers Into Action)

“While home prices are increasing at levels above those observed in 2006-2007, the fundamentals of the housing market are much more solid than what we experienced a few years ago,” said Leslie Appleton-Young, chief economist for the California Association of Realtors. “More home buyers are putting down larger down payments, and many of them are opting for more stable loan products.”

That may be, but the jump in the median California home price jump is predominantly due to a change in the mix of homes selling, that is, more nondistressed sales and fewer foreclosure and short sales. The median price is where half the homes sell for more and half sell for less. In May, distressed properties accounted for 31 percent of total sales in California, down from 52 percent of sales a year ago, according to Propertyradar, a data and analytics company. Meanwhile, nondistressed sales were 69 percent of total sales, up from 48 percent a year ago.

Article source: http://www.cnbc.com/id/100821976

Why Today’s Housing Report Spooked Investors So Much

Fri, 26 Oct 2012 01:34:16 +0000

The good housing numbers are all up from a year ago: Sales, starts, building permits, prices, earnings. The bad numbers are down: Mortgage delinquencies, foreclosures, negative equity.

So why are investors pulling out of the home builders today? And why are some analysts now questioning the strength of this housing recovery?

It’s the numbers you don’t see or can’t see. It’s the “what ifs.”

Barely a few hours after Pulte Homes
[PHM
Loading...

()

] reported a 27 percent jump in new orders, following Ryland’s 55 percent leap, the National Association of Realtors reported no change in signed contracts to buy existing homes in September.

(Read More: Pending Home Sales Barely Budge in September)

Suddenly the stocks of the big builders reversed. It wasn’t so much the slight disappointment in the monthly index, it was more the comment from the Realtors’ chief economist Lawrence Yun:

“This means only minor movement is likely in near-term existing-home sales, but with positive underlying market fundamentals they should continue on an uptrend in 2013.”

Not exactly a rave.

We know we’re coming off the bottom of the housing crash, but over the summer it felt to some like we were rocketing off the bottom. Now, not so much.

It is a matter of perspective. New home construction is still barely half of what a normal, non-bubble market would look like. Existing home sales are coming off lows from last year, but last year was the hangover from the 2010 home buyer tax credit, so again, a little perspective.

“The year-over-year gain was the smallest of the year and comps against last year when the housing market was in a full blown double-dip mode,” notes analyst Mark Hanson.

(Read More: Is There a Housing Shortage?)

Hanson expects a drop-off in home sales this fall, due to lack of supply out West, where home sales had been fueled by distressed properties (foreclosures and short sales).

We are already seeing weakness. California home sales fell 16.5 percent in September from August and were down nearly 3 percent from a year ago, according to DataQuick. Foreclosure activity in California is at its lowest since 2007.

While the nation’s home builders are seeing improvements in gross margins and big gains in new orders, they are coming off such historic lows that their overall volume is still quite weak. Another problem is that investors rushed into the builder stocks the moment they got a whiff of any recovery last year.

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

“Remember, valuation is a big issue now with these stocks at new highs. Data may continue to improve but stocks may stall out,” notes CNBC’s Bob Pisani.

The concerns in the market are manifold: What if mortgage rates rise? What if we fall off the fiscal cliff? What if lawmakers yank the mortgage interest deduction? What if new mortgage regulations tighten credit even further?

What if the shadow inventory of distressed/foreclosed properties moves onto the market faster? What if the unemployment picture doesn’t improve markedly?

(Read More: What Is the ‘Fiscal Cliff’)

“When you compare against 2011 (the tail-end of the homebuyer tax credit hangover and a double dip) when rates were at 5.25 percent versus 2012 with rates at 3.5 percent and supply artificially suppressed due to a surge in mortgage modifications, can-kicking of foreclosures, servicer settlement further reducing distressed supply etc, things are going to look really good,” argues Hanson. “But as the 2012 conditions go flat — rates, etc., turn into headwinds -— in 2013 and sales are not coming against a hangover, things will not look as great.”

Again, it is all about perspective.

—By CNBC’s Diana Olick; follow her on Twitter @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...

()

]

Questions? Comments?

Article source: http://www.cnbc.com/id/49553171?__source=RSS*blog*&par=RSS

homesmillbrae.com » California Home

Home Builders Slow New Construction, Raise Prices

Why Today’s Housing Report Spooked Investors So Much