There is just no momentum changing news in the American housing market that would cause industry folks to say the turnaround is finally here in a big way.
Case in point, nationwide housing starts edged down 1.1 percent in February to a seasonally adjusted rate of 698,000. On the positive side, the U.S. Commerce Department said this was the second-best pace of new construction since October 2008, following an upwardly revised 706,000-unit pace in January.
“Builders are reporting increased buyer interest and are expecting demand for new homes to improve in the coming months, but continue to exercise caution regarding new projects until that interest translates into more sales contracts,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB). “This process is certainly being slowed by today’s overtight lending conditions, the difficulty of obtaining accurate appraisals on new construction and competition from depressed properties that can make it tough for prospective new home buyers to sell an existing home.”
Looking deeper into the numbers, following four months of gains, single-family starts declined 99 percent to a seasonally adjusted annual rate of 457,000 units in February. Meanwhile, multi-family starts, which tend to be more volatile from month to month, gained 21.1 percent to a 241,000-unit rate, their fastest pace since November 2011.
In the meantime, sales of newly-built single family homes slowed 1.6 percent to a seasonal adjusted annual rate of 313,000 units in February, according to Commerce. Reasons? See Rutenberg’s earlier comments.
David Crowe, chief economist for NAHB, noted that the sales report indicated greater buying activity in the above $200,000 range in February. This, he said, suggested that those who have higher incomes and can more easily quality for a mortgage are the ones who are moving forward with home purchases. First-timers, who are looking in the lower price ranges, may be having a tougher time getting qualified.
The net result is that builder confidence in the market for newly built single-family homes was unchanged in March from a reviewed level of 28 on the NAHB/Wells Fargo Housing Market Index (HMI). The result is that following five consecutive months of gains, the HMI is now holding at its highest level since June of 2007.
Before betting the ranch on the confidence numbers, keep in mind that any number over 50 indicates that more builders view conditions as good rather than poor. Hey, folks, we’re at 28.
In the overall real estate market, home sales fell in February, but upward revisions to the prior month’s pace and the first yearly increase in prices in l5 months pointed to a steady improvement in the housing market, according to the National Association of Realtors.
Existing home sales fell 0.9 percent in February from January but still notched their second highest level since May 2010.
“We are starting to improve slowly,” said a principal at a major New York real estate firm. “There is some encouraging news, but that dramatic things that need to happen to really turn the market around aren’t here.”
Those things being a significant strengthening of the labor market and a major easing of lending conditions, which every month result in about one third of contracts being cancelled.
In the overall construction market, McGraw Hill Construction reported that new construction dropped seven percent from the previous month. Residential building in February grew three percent, with most of the growth coming from the multi-family sector. On the commercial side, hotels fell 47 percent and office construction was up 11 percent.
And here's something to chew on: housing expert Robert Shiller said would-be home buyers are settling into modern apartments and condominiums, further hindering a housing rally. Shiller says the shift toward renting and city living could mean "That we will never in our lifetime see a rebound in these prices in the suburbs."
He said this after home prices in January were flat compared to the prior month, according to the Standard and Poors Shiller Home Price Index, which declined 3.8 percent year over year basis. Sales of existing homes rose 0.3 percent in February and prices for new homes jumped 6.1 percent, yet demand for housing remains weak, with 4.4 million homes for sale in the U.S.