Photograph by David Paul Morris/Bloomberg

A couple looks at home listings at a real estate office in Berkeley, California, on May 17, 2013.

New single-family home sales are off to the best start for a year since 2008, and lean inventories and rising prices show the outlook for residential construction will continue to brighten.

Purchases have averaged an annualized rate of 446,250 homes from January through April, up from a 396,000 pace in December, as Americans with access to credit take advantage of lower mortgage rates.

While builders were a bit more successful in boosting the number of homes available — 156,000 in April, the most since October 2011 — sales gains show they’re making little headway.

The number of homes on the market in April would last 4.1 months at the current sales pace, just above the 3.9 months in January that was the lowest since October 2004, according to Commerce Department data released today.

National Association of Realtors’ figures yesterday showed that 2.16 million previously owned homes were available last month, the fewest for any April since 2001.

That bodes well for further increases in construction that will help underpin GDP.

“In many markets you’ve got below three months’ supply of actual housing available for sale,” Robert O’Shaughnessy, chief financial officer at PulteGroup Inc., said at a conference this week. “So when folks are actually out shopping, new becomes an even better alternative, being it’s one of the only things around.”

Home values are also rising, which will allow more existing homeowners to sell. Prices rose a record 1.3 percent in March from a month earlier, the Federal Housing Finance Agency reported today. Compared with a year earlier, values were up 7.2 percent, the most since May 2006. The FHFA figures are based on changes in real estate values using purchases of properties with mortgages backed by Fannie Mae or Freddie Mac.

Still, about 22 million Americans may lack the home equity to move, keeping property listings tight and hindering even bigger progress in the housing market, according to Zillow Inc., a  real estate data company.

About 1.4 million homeowners will regain positive equity by the first quarter of 2014, according to Zillow.

Original post is Housing Outlook Brightens Amid Lean Inventories, Price Gains by Political Capital.

Photograph by David Paul Morris/Bloomberg

Construction crews work on new homes being built in San Ramon, California, on April 12, 2013.

Applications to build homes climbed in April to the highest level since June 2008, helping alleviate concern that a slump the same month in construction starts on new houses would mean less support for the economy in the second half of the year.

Building permits surged 14.3 percent to a 1.02 million annualized rate, while housing starts plummeted 16.5 percent to an 853,000 pace, Commerce Department data released today showed. The annualized rate of permit applications filed by builders exceeded the pace of actual ground-breaking by the most since March 2005.

When permits outpace the rate at which foundation crews are preparing home sites with backhoes and bulldozers, it’s a signal that builders will likely stay busy in the ensuing months. And demand shows few signs of stumbling as Americans take advantage of near record-low mortgage rates.

Details of today’s report show that building permits for apartments and other multifamily homes, which are volatile month to month, surged to the highest level since June 2008. The difference between April’s annualized rates of permits and multifamily starts was also the biggest since that time.

The increase in multifamily permitting is a sign that builders have enough faith in the market to take on bigger construction projects.

Permits for single-family dwellings exceeded starts for the first time since July. While the difference is less than that of multifamily units, economists at Credit Suisse point out that some builders may be limiting construction of single-family homes in order to maximize price. Builders are after all paying plenty more for construction materials than a year ago.

Original post is Building Permits Dwarf Ground-Breaking by Political Capital.

Photograph by Justin Sullivan/Getty Images

New homes are under construction at a housing development on March 6, 2013 in Gilbert, Arizona.

While prices for most commodities are falling, real-estate values are surging.

The Labor Department’s report on producer prices today showed wholesale costs dropped 0.7 percent in April from the prior month, the biggest decline in three years, Bloomberg’s Alex Kowalski reported. Costs for fuel, food and passenger cars all declined.

One notable exception was prices paid to real estate agents — which correspond to residential sales, brokerage fees and commissions – according to economists at Credit Suisse in New York. Those jumped 2.7 percent from March, the biggest surge for any April going back to 1996, according to Jonathan Basile, a Credit Suisse economist in New York.

The figures aren’t adjusted for seasonal changes, which means a better gauge is to focus on comparisons with the same month in prior years. By that metric, wholesale real-estate costs climbed 9.1 percent over the past 12 months, the biggest year-to-year pop since 2005, Basile said.

Basile went further, comparing the little-known PPI real-estate index to the more widely followed S&P/Case-Shiller home-price gauge of 20 U.S. cities. His figures show the correlation is fairly tight, particularly since about 2006. The latest data available show the Case-Shiller index climbed 9.3 percent in February from the same month in 2012, making it the biggest gain since mid 2006.

If the correlation with the PPI report holds, then the Case-Shiller index may approach its 2005 year-to-year gains of almost 17 percent in coming months, according to Basile’s chart.

“Positive news on house prices should continue,” Basile said in a report.

Original post is Real-Estate Agent Earnings Point to Home-Price Jump by Political Capital.

Photograph by Ronda Churchill/Bloomberg

The Strip in Las Vegas, Nevada.

DJ Steve Aoki sprayed champagne on attendees before selecting some to surf the crowd on an inflatable raft during opening week of the Hakkasan night club in Las Vegas last month.

The five-story, $100 million-plus addition to the MGM Grand symbolizes a revival of the unbridled partying Sin City was known for before the real-estate bust turned Las Vegas into the foreclosure capital of the U.S. It also created 500 jobs in a state that had an unemployment rate of 9.7 percent in March, the highest in the nation.

“The domestic customer is coming back, they’re spending a bit more money,” MGM Resorts International Chairman and Chief Executive Officer James Murren said in a telephone interview. “When you see a strong housing number, that bodes very well. People feel they’re wealthy.”

Years of dipping in backyard pools and exploring neighborhood festivals during so-called summer staycations are over. New attractions, such as Walt Disney Co.’s Cars Land at its California Adventure Park in Anaheim, California, or Jimmy Buffett’s Margaritaville, a beach-front casino in Atlantic City, New Jersey, may again draw crowds as Americans feel more secure in their jobs and home prices rebound.

Home prices climbing at the fastest pace since 2006 are helping repair household finances, while unemployment at a four-year low of 7.5 percent boosts confidence. The Bloomberg Consumer Comfort Index reached a five-year high in the week ended April 28.

With travel expenditures projected to increase 3.6 percent this year, faster than economic growth, the share of gross domestic product coming from the industry may approach 3 percent in 2013, up from about 2.7 percent in 2010, David M. Huether, vice president for research at the U.S. Travel Association, said in an interview. The world’s largest economy is forecast to expand 2 percent this year, according to the median estimate of 81 economists surveyed by Bloomberg.

Orlando, Florida, New York and Los Angeles are among this year’s top visitor destinations, Simon Bramley, Travelocity.com Inc. vice president for transportation and lodging, said in a telephone interview.

“We saw people traveling further from home,” said Travelocity’s Bramley. “The austerity years of the staycation are behind us at this point.”

See the full report on Staycations fading, at Bloomberg.com.

Christopher Palmeri contributed reporting. 

Original post is Staycations Yield to Vegas, Margaritaville: Sure Rebound Signs by Political Capital.

Photograph by John Moore/Getty Images

A housing development on May 3, 2013 in Denver, Colorado.

Cash-in has replaced cash-out as the strategy of choice for homeowners refinancing their mortgages.

Rather than using their properties as ATM machines to boost spending, homeowners increasingly are paying down the principal and shortening the maturities of their mortgages in a move Florida banker Rob Nunziata calls “forced savings.” Cash-in refinancings — in which borrowers invest more of their own money in the house — outnumbered cash-outs by more than two-to-one in the fourth quarter, according to Freddie Mac.

“We don’t see a lot of cash-out refis,” said Nunziata, who is co-chief executive officer of Orlando-based FBC Mortgage LLC, a retail mortgage banker mainly serving the southeastern U.S. “What we’re seeing a lot of people do is shorten the term” of their mortgages so they build equity quicker.

Darvin Boothe, a Tampa, Florida, businessman, is one of them. He refinanced into a 15-year loan last month from a 30-year, while reducing the interest rate on his $690,000 mortgage to 3.25 percent from 4.75 percent. The move “made a lot of sense” even though his monthly payments rose, he said.

“Having a house paid off by the time I’m 55 and the kids are out of school, I don’t think it gets any better than that,” said Boothe, 40, who runs a recruiting company and has two children, a 5-year-old and a 9-year-old.

The shift in attitudes has implications for the economy — and for the Federal Reserve. While homeowners who choose to put more money into their homes may be better off in the long run, it means they’ll have less money to spend in the short-run, holding back economic growth. To offset that, Fed Chairman Ben S. Bernanke and his central bank colleagues will have to continue flooding the economy with money until the U.S. finally achieves an expansion that’s worthy of its name.

Original post is Americans See Homes as Way to Save Not Spend by Political Capital.

Photograph by John Adkisson/Getty Images

A Bank of America ATM in Charlotte, North Carolina.

That’s the amount of campaign contributions that U.S. Rep. Mel Watt, President Barack Obama’s nominee to oversee Fannie Mae and Freddie Mac, received from Bank of America Corp. employees, beginning with his first House run in 1992.

That’s more than Watt, a North Carolina Democrat, took in from any other company’s employees, according to the Center for Responsive Politics.

Also among Watt’s five biggest lifetime sources of campaign cash: Employees of the American Bankers Association, who donated $76,500; and those working at Wachovia Corp., now Wells Fargo & Co., who contributed $69,050.

Original post is Bloomberg by the Numbers: $87,600 by Political Capital.

Photograph by Ty Wright/Bloomberg

A “FOR SALE” sign is displayed in front of a homes in the Fox Glen subdivision of Pickerington, Ohio.

If you want to know where the housing market is headed, don’t ask prospective buyers. The ones that really have their fingers on the pulse are sellers, and they’re telling us the housing rebound is about to get a second wind.

That’s the conclusion of economists at Credit Suisse in New York who burrow deep into the minutiae of the Thomson Reuters/University of Michigan consumer sentiment figures. Among the questions asked by the group is whether it’s a good or bad time to put a house on the market.

Those answering in the affirmative outnumbered negative responses by a whopping 73 points in April, up a near-record 18 points from March, according to Credit Suisse economist Jonathan Basile. Changes in the University of Michigan’s sellers gauge, which came out today, have a near-perfect correlation with changes in demand, according to his research. Their models suggest sales of existing houses will climb to about a 5.6 million annualized rate in the next few months.

Such a jump would be eye-popping. After reaching a 4.96 million pace in November, purchases have seesawed within a narrow range, according to figures from the National Association of Realtors. If you exclude the surge in demand in late 2009 spurred by an approaching lapse of the government’s first-time homebuyer credit, November’s sales rate would have been the highest since July 2007.

One reason sales have recently leveled off is that there isn’t enough inventory to meet demand, the NAR has said. There were 1.93 million houses on the market at the end of March, the fewest for that month since March 2000. Those figures aren’t adjusted for seasonal variations, which means you should only compare the same month between years.

The lack of properties is also boosting prices, which would eventually undercut the recovery if it continued. The median price of an existing home climbed 11.8 percent in March from the same month in 2012, the biggest year-to-year gain since November 2005, according to NAR data.

The more upbeat sellers are about prospects, the more likely they’d put their properties on the market, Basile said.

“So besides faster sales, a rise in months’ supply from recent below-average levels, and an eventual moderation in home price gains should follow down the pike,” Basile wrote in a research note this month. “All would be healthy developments for the housing sector.”

The first confirmation may come Monday, April 29, with the NAR’s figures on pending home sales.

Original post is Housing Rebound: Sellers Know Best by Political Capital.

Photograph by David Paul Morris/Bloomberg

A contractor works on a KB Home under construction at the Vicino community in San Jose, California.

Shares of homebuilders from KB Home to Toll Brothers Inc. have enjoyed their best day since mid-2012.

Analysts at Barclays Plc upgraded their views of the industry today to positive from neutral, projecting a 10 percent jump in new-home prices this year amid a “fast and furious” recovery. They see “large numbers” of potential buyers with no home to sell. That’s good news considering the collapse in residential real estate left many Americans with underwater mortgages.

Demand is holding up, a report from the Commerce Department showed today. Purchases of new single-family properties climbed 1.5 percent to a 417,000 annual rate in March.

For the first three months of the year, combined sales of new and previously owned homes averaged a 5.36 million annual rate, the strongest since the third quarter of 2007 — just before the start of the worst recession since World War II.

The Standard & Poor’s Supercomposite Homebuilding Index, which includes KB Home, Toll and Lennar Corp., climbed 5.6  percent today, the most since July 26.

KB Home, the Los Angeles-based builder that’s traditionally targeted first-time buyers, is among companies benefiting from tight supply of available properties and 30-year fixed mortgage rates just 10 basis points above the all-time low of 3.31 percent in November.

Doug Yearley, chief executive officer at luxury-homebuilder Toll Brothers, said in an interview on March 20 that orders this spring are up 49 percent.

“It sure feels good right now,” Yearley said in an interview with Tom Keene and Sara Eisen on Bloomberg Television’s “Surveillance.”

Original post is Homebuilder Shares Boosted by Sales by Political Capital.

Photograph by Ty Wright/Bloomberg

Home sales at the River Valley Highlands neighborhood in Lancaster, Ohio.

If you want to own a house, it may pay to be less educated.

Homeownership rates among 30-year-olds with student debt plunged in 2012 more than for those without, according to an analysis published today by researchers at the New York Federal Reserve. The report shows the recession has actually hampered purchasing activity more for those with higher education, reversing the trend in place since at least 2002.

Home-secured debt for both categories of young adults sank during the recession that ended in June 2009, the New York Fed research shows. While those without student debt saw homeownership decline by 5 percentage points, those with it saw a 10 percentage-point drop. By last year, the rate for student debtors was almost 2 percentage points lower than for those without it.

Between 2003 and 2009, student debt holders had “significantly higher” rates of homeownership, owing to the stronger incomes associated with the higher education.

Two recession-induced factors could be to blame for the diploma’s prospective drop in value: tightened access to credit in the wake of the subprime mortgage collapse that triggered the economic slowdown, and depressed expectations of future earnings. If the pattern holds, it could restrain recovery in the housing and auto industries, as well as consumer spending more broadly, the researchers note.

“While highly skilled young workers have traditionally provided a vital influx of new, affluent consumers to U.S. housing and auto markets, unprecedented student debt may dampen their influence in today’s marketplace,” according to the commentary.

Original post is Home-buying? Forgo College by Political Capital.

Photograph by David Paul Morris/Bloomberg

Construction crews work on new homes being built in San Ramon, California, on April 12, 2013.

The U.S. housing market looked even healthier today on growing demand for rental properties.

Data released by the Commerce Department showed builders broke ground on 1.04 million new homes in March at an annualized rate, the most since June 2008. All the gains in activity, however, occurred in multifamily construction last month.

Builders began work on dwellings suited for two or more families at a faster rate in March than the prior month, whereas they slowed production of single-family homes.

The report provides more evidence that the rental market is the main driver, with the construction of multifamily homes now proceeding at the fastest pace in more than seven years. Other figures only underscore this trend.

The vacancy rate on rentals averaged 8.7 percent last year, the lowest since 2001, according to Census Bureau figures. Homeownership has moved inversely, with the share of Americans’ owning their residence falling in 2012 to a 16-year low of just over 65 percent.

Other data today showed the cost of living in an apartment is outstripping total inflation. The Labor Department’s rent measure rose 2.8 percent over the past 12 months, while consumer prices climbed 1.5 percent.

Economists at Barclays PLC offer one explanation for the surge in rental demand, and it centers on the fallout from the housing crisis that started the recession in the first place.

Foreclosures are forcing more former owners to become renters, “which accounts for the relative strength of multifamily starts over single-family,” Barclay’s Michael Gapen wrote today in a note to clients.

Original post is Rentals on Fire — Construction, That Is: Driving Housing by Political Capital.