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The U.S. Census Bureau and the Department of Housing and Urban Development jointly announced the following new residential construction statistics for October 2006:

BUILDING PERMITS

Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,535,000. This is 6.3 percent (±1.2%) below the revised September rate of 1,638,000 and is 28.0 percent (±1.2%) below the October 2005 estimate of 2,131,000. Single-family authorizations in October were at a rate of 1,173,000; this is 3.8 percent (±1.3%) below the September figure of 1,219,000. Authorizations of units in buildings with five units or more were at a rate of 294,000 in October.

HOUSING STARTS

Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,486,000. This is 14.6 percent (±7.6%) below the revised September estimate of 1,740,000 and is 27.4 percent (±5.3%) below the October 2005 rate of 2,046,000. Single-family housing starts in October were at a rate of 1,177,000; this is 15.9 percent (±7.4%) below the September figure of 1,400,000. The October rate for units in buildings with five units or more was 266,000.

HOUSING COMPLETIONS

Privately-owned housing completions in October were at a seasonally adjusted annual rate of 1,953,000. This is 3.8 percent (±7.9%)below the revised September estimate of 2,031,000 and is 0.7 percent (±7.5%)below the October 2005 rate of 1,967,000. Single-family housing completions in October were at a rate of 1,561,000; this is 8.3 percent (±7.6%) below the September figure of 1,702,000. The October rate for units in buildings with five units or more was 348,000.

The full report can be found here

10 cities where housing prices will slump the most

Reasons for pessimism
Zandi’s predictions for specific markets are sobering. The worst-hit metro areas, he asserts, will be Cape Coral, Fla., with an 18.6% decline in housing prices; Reno, Nev., with a 17.2% drop; and Stockton, Calif., with a 15.7% fall. To conduct his analysis, Zandi looked at the supply and demand of housing, changes in mortgage rates, demographic trends, the job market and new housing (see “Can Wall Street Withstand Weak Housing?“).   

The CME covers just 10 housing markets, rather than the 379 examined by Zandi. The exchange launched the trading in housing prices in May, and volumes are still modest, which may affect accuracy. Investors are predicting declines in all 10 cities over the next 12 months. In fact, by August 2007, when the one-year contract expires, futures traders expect the San Diego real estate prices will have declined 8.2%, Las Vegas 7.9% and Los Angeles 6.9%. The composite index is expected to fall 6.8%. “The markets are clearly concerned that home prices are going to fall,” says Robert Shiller, an economics professor at Yale University. Shiller helped develop the contracts with professor Karl Case and Standard & Poor’s (which, like BusinessWeek, is a unit of McGraw-Hill).

In the cases where they cover the same ground, Zandi and the CME traders have some uncanny similarities. For instance, Zandi expects San Diego to drop 8.4% through the second quarter of 2008, while the futures market is expecting a drop of 8.2% by August 2007. In Washington, D.C., Zandi expects prices to drop 12% through the second quarter of 2008, and the futures market expects a 7.7% decline by August 2007 (see “Hopeful Glimmers in the Housing Slump“). 

Anybody’s guess
But in Boston, there’s a sharp contrast. Zandi thinks that the worst is over. He estimates that prices declined 2.2% in the second and third quarter of 2006, and that should be the end of the meaningful declines. “Boston’s jobs market is coming back, and the city didn’t see much froth anyway,” says Zandi. But the CME futures markets expect Boston to continue to drop, at least 7% by August 2007. Similarly, Zandi expects New York to drop 3.5% through the fourth quarter of 2008, while the futures traders are betting that New York’s real estate will drop a sharper 6% by next year.

Who would you put your money on? Zandi is certainly a smart, resourceful economist. But “predictive markets” like those used at the CME have proved surprisingly accurate in forecasting everything from the weather to political races. They’re particularly accurate when money is on the line, as it is in Chicago.

As Rick Redding, CME managing director for products and services says: “These products create a liquid and transparent market that can be used … to help reduce risks associated with holding real estate assets.” This is no academic experiment. The results of these predictions will be made all too public in the months and years ahead.

10 markets headed for trouble

*Based on Chicago Mercantile Exchange trading

 

 

The rate of single-family housing starts dropped 20.3 percent in September compared to September 2005, the U.S. Census Bureau and the Department of Housing and Urban Development announced today, while total housing starts dropped 17.9 percent.Privately owned housing starts reached a seasonally adjusted annual rate of 1.77 million in September, which is about 5.9 percent above the revised August estimate. The seasonally adjusted annual rate is a projection of a monthly total over a 12-month period, adjusted for seasonal fluctuations in construction activity.

Single-family housing starts in September were at a rate of 1.43 million, which is about 4.3 percent above the August figure. The September rate for units in buildings with five units or more was 314,000.

Meanwhile, privately owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 1.62 million, which is about 6.3 percent below the revised August rate and about 27.7 percent below the September 2005 estimate.

Single-family building permit authorizations in September were at a rate of 1.21 million, which is about 6 percent below the August figure. Authorizations of units in buildings with five units or more were at a rate of 342,000 in September.

Privately owned housing completions in September were at a seasonally adjusted annual rate of 2.08 million, which is about 11.1 percent above the revised August estimate and about 7.2 percent above the September 2005 rate.

Single-family housing completions in September were at a rate of 1.73 million, which is about 7.1 percent above the August figure of 1.62 million. The September rate for units in buildings with five units or more was 316,000.

The Census Bureau and HUD noted that month-to-month changes in seasonally adjusted statistics can show irregular movements. It may take four months to establish an underlying trend for building permit authorizations, five months for total starts, and six months for total completions, the agencies noted.

Statistics in the report are estimated from sample surveys and are subject to sampling variability and nonsampling error including bias and variance from response, nonreporting, and undercoverage.

On average, the preliminary seasonally adjusted estimates of total building permits, housing starts and housing completions are revised about 1 percent, according to the report.

Forecast sees housing prices falling - Yahoo! News
Housing prices, slumping after a five-year boom, are projected to decline in more than 100 of the nation’s metropolitan areas, with the Northeast, Florida and California among the areas hardest hit.
The forecast by Moody’s Economy.com, a private research firm, presents one of the starkest views yet of the housing slowdown that has been gathering force in recent months.

The West Chester, Pa., forecasting firm projects that the median sales price for an existing home will decline in 2007 by 3.6 percent, which would be the first decline for an entire year in home prices since the Great Depression of the 1930s.

The forecast is included in a 195-page report, “Housing at the Tipping Point,” which The Associated Press obtained before its general release on Wednesday.

The report projected that 133 of the nation’s 379 metropolitan areas would suffer price declines. Those metropolitan areas with declining prices account for nearly one-half of the value of the nation’s stock of single-family homes.

The price declines represent quite a contrast from the past five years when low mortgage rates pushed sales to five consecutive annual records and prices in the hottest sales areas skyrocketed.

But this year, the once red-hot housing market has cooled significantly. Some analysts are worried that the slowdown could become so severe that it could drag the entire country into a recession, much as the bursting of the stock market bubble in 2000 led to the 2001 slump.

The housing report said the biggest percentage price decline will be in Danville, Ill., where prices have already fallen by 18.7 percent from the peak in the second quarter of 2005 to a low-point in the first three months of this year. That setback occurred because of layoffs in autos and other manufacturing industries, which depressed the local economy.

The second biggest decline is projected to occur in the Fort Myers, Fla., area, a fall of 18.6 percent from the peak in the final three months of last year to a low-point for prices that is projected to occur in the second quarter of 2007.

The 133 areas with slumping prices are concentrated in the states of California and Florida and the Northeast corridor from southern Maine to just south of Washington, D.C., as well as boom areas of Nevada and Arizona and some depressed sections of the Midwest such as Detroit.

Of the areas with falling prices, 73 were forecast to hit their low point by the end of this year with the rest seeing a trough for prices in 2007 or later.

But even in areas which have already hit a low point, the rebound in prices is not expected to occur quickly.

“Prices are going to go down and stay down for awhile. It will take at least a couple of years to work off the excesses of the last decade,” said Mark Zandi, chief economist at Moody’s Economy.com and the principal author of the report.

Not all parts of the country will experience price declines. The report said Texas, the Southeastern states other than Florida and much of the Midwest Farm Belt should be immune from price declines.

It projected that annual price gains over the next two years would average 4.2 percent in the Dallas area, 3.3 percent in the Charlotte, N.C., area and 3 percent in the Columbus, Ohio, area.

The report said the most vulnerable areas for price declines were those regions where red-hot markets attracted speculators known as “flippers” who purchased homes in hopes of selling them fast for a quick profit.

“Housing’s downturn has turned even more dramatic with the rapid flight of the flipper from the market,” the report said. “These investors have gone from sending home sales and prices shooting higher to driving sales and prices lower.”

The report described the current environment as a “correction” and not a “crash,” but it cautioned that there were downside risks that could make the slowdown more serious.

A big threat is that the fall in home prices could have a significant impact on consumer spending patterns. The so-called wealth effect pushed consumer spending higher during the housing boom as soaring home prices made homeowners feel more wealthy and thus more inclined to spend money. But falling home prices could have the reverse effect and depress consumer spending.

“We believe the housing downturn will weigh on the economic expansion but will not break it. But there are risks,” Zandi said.

The slowdown in housing occurred as a result of a two-year campaign by the
Federal Reserve to push interest rates higher as a way of slowing the economy enough to keep inflation under control.

The Fed has kept rates unchanged for the past two months and many economists believe the central bank has finished its rate hikes as long as inflation pressures keep falling.

The belief that the current economic slowdown is restraining inflation has helped push mortgage rates lower with the 30-year mortgage now at a six-month low of 6.31 percent, an improvement that is expected to help put a floor on housing’s fall.

___

On the Net:

Moody’s Economy.com: http://www.economy.com

Moving to a Cheaper Neighborhood Doesn’t Always Pay
From Business Week Online:

Interesting report out today from the Center for Housing Policy, which concludes that most of the savings that moderate-income families get from moving to a neighborhood with cheaper housing are eaten up by higher transportation expenses. And the problem seems to be getting worse: 15 of the 20 fastest-growing counties in the U.S. are 30 or more miles from the nearest central business district (where a lot of the jobs are). The center defines “working families” as ones with incomes of $20,000 to $50,000 a year.

San Francisco comes out worst in the study, with working families spending about 35% of their income on housing and another 27% on transportation, which rounds up to 63% combined. Pittsburgh comes out best, but not a whole lot better, at 22% for housing and 33% for transportation, which rounds down to 54%.

There is a very interesting discussion about demand for housing at the Calculated Risk Blog. The most recent posting can be found here. This blog began this discussion with a basic primer on the national housing market. The initial post can be found here. For those of you into this type of stuff, this is a good series of articles to give you basic understanding of the housing markets.

I intend to post more on this topic soon.

Offbeat Homes

I recently came across this blog dedicated to the unique, odd and downright weird homes of yesterday, today and tomorrow!  Go take a look for some really great homes??!!

RealEstateJournal | The Hottest Markets For Housing This Decade
The Hottest Markets
For Housing This Decade
From The Wall Street Journal Online

Median home values rose 32% from 2000 to 2005, but homes in San Diego fared a lot better than the national estimate, according to U.S. Census Bureau data released Tuesday.

The median home value for San Diego homes, adjusted for inflation, rose 127% to $567,000 from $249,000, during the period. It was the largest increase among the country’s biggest cities, according to the Bureau’s American Community Survey. The survey covered 7,000 areas with a population of 65,000 or more.

Of the 15 largest cities surveyed, Los Angeles came in behind San Diego, with a median home-value increase of 110%, adjusted for inflation, followed by New York, with a rise of 79%.

Of the 15 smallest cities surveyed, Boynton Beach, Fla., reigned with a real median home-value increase of 120%, followed by Folsom, Calif., where the median home value rose 100%, and Redondo Beach, Calif., with a 92% gain.

Although the survey quantifies some of the home-value gains seen in recent years, the findings aren’t especially surprising.

“Just about anyone who owns a home or has been in the market for one in the past few years knows first-hand how home values jumped from 2000 to 2005,” said Census Bureau Director Louis Kincannon in a news release.

Perspective on recent declines

But the data put recent headlines about home price declines into perspective, said Charles Jolly, president of the San Diego Association of Realtors and a Realtor for more than 30 years.

Real estate reports that focus on recent losses are “comparing everything to last year,” Jolly said. He said he’s seen his share of ups and downs in the market; the current state of affairs is just another part of a cycle.

He gave an example of a particular San Diego property that sold in 2000 for $345,000 and would have sold for $745,000 in 2005. Today, it would probably sell for less than $700,000, he said.

Costs rise

The monthly cost of owning a home also rose during the first half of the decade, according to the survey. Homeowners’ median monthly cost — including mortgage payment and certain other costs, adjusted for inflation — rose 5%, the survey found.

Among the largest cities, Detroit, Chicago and San Francisco experienced some of the greatest increases. The median monthly cost rose 24% in Detroit, 22% in Chicago and 20% in San Francisco.

Some smaller cities, such as Bryan, Texas, and Greenville, N.C., saw cost decreases of about 10%.

Rents on the rise

The median cost of renting a home also increased, jumping an inflation-adjusted 6.7% nationally between 2000 and 2005.

Large cities that experienced high jumps in the median cost of renting include San Diego, where costs rose 27%; Detroit, up 27%; and Los Angeles, up 16%.

Among the smallest cities surveyed, Redondo Beach, Calif., saw the median cost of renting increase 22%.

Real median rent cost decreased in some large cities, including San Jose, where rent costs fell 9%, and Dallas, where they dropped 3%.

Also, the survey found that more than two-thirds of the country’s total occupied housing units were owner-occupied in 2005. That is, 74.3 million housing units were owner-occupied in 2005, up 4.5 million from 69.8 million owner-occupied units reported in the 2000 Census.

Largest 15 cities

Here’s how home prices have fared, adjusted for inflation, in the biggest U.S. cities:

Here’s how home prices have fared, adjusted for inflation, in the biggest U.S. cities:

Source: U.S. Census Bureau’s American Community Survey

RealEstateJournal | Prices in 100 U.S. Cities Expected To Decline for Next Few Years

Home buyers have another reason to sit on their hands.

In the latest news from the slumping U.S. housing market, a report released this week says that median house prices are likely to decline more than 10% over the next few years in 20 metro areas, including Las Vegas, Tucson, Ariz., and Washington, D.C.

The report, by Moody’s Economy.com Inc., a research firm in West Chester, Pa., also says that the slump won’t end quickly. Indeed, according to the report, prices may keep falling until 2008 or even 2009 in some areas. In all, prices are falling or likely to decline soon in about 100 metro areas, the firm says.
The study comes on the heels of a survey from the U.S. Census Bureau showing that 35% of American homeowners with mortgages last year spent 30% or more of their household income on housing costs, including loan payments, real-estate taxes, insurance and utilities. In 2003, a similar survey found that 30% of such homeowners were spending that much on housing. The new survey illustrates the strain on household budgets that has already helped slow house-price increases in some areas and push them modestly lower in others.

The proliferation of headlines about a weakening housing market is encouraging some potential buyers to hold off until prices look like they’re near a bottom.

Nillani McClain, a 35-year-old human-resources manager who lives in an apartment in Brooklyn, N.Y., has been looking at condominiums and townhouses in New Jersey with her husband, David. But given the recent slowdown news, the McClains are leaning toward waiting until next spring — and then looking in Manhattan, a market they had originally thought they couldn’t afford.

“We are taking into consideration the option of finding something in the city and not having to move out to Jersey if prices drop considerably,” Ms. McClain says.

Buyers and sellers can use forecasts from Economy.com and others for guidance as they try to figure out how to play this tricky market. But because the reports don’t agree on which markets will be the weakest or how severe the slump will be, they could also be left scratching their heads.

While various studies generally agree that some of the biggest risks of declines are in California and Florida, there are striking differences, reflecting different forecasting methods. For instance, a recent “risk index” study published by PMI Mortgage Insurance Co. ranks the Boston metro area as the seventh-riskiest in the nation in terms of the likelihood of price declines over the next two years. But Economy.com says that home prices in Boston likely bottomed out in this year’s third quarter after a modest 2.2% decline.

No study, of course, can tell exactly how bad the market will get or when it will hit bottom. Even if accurate, a prediction for a metro area won’t hold true for all neighborhoods or all types of housing.

The good news, according to Economy.com’s chief economist, Mark Zandi, is that the current downturn so far looks more like a correction than a crash on a national scale, slowing economic growth but not tipping the economy into a recession. The bad news is that falling prices could be very painful for some people who have bought homes near peak levels over the past year or so in such areas as California, Arizona, Nevada, Florida, Washington, D.C., and the coastal Northeast.

Housing markets in most of these areas began turning down about a year ago after prices more than doubled in many cities during a frantic five-year buying spree. It still isn’t clear how hard the landing will be. Last week, the National Association of Realtors reported that the median sales price of a previously occupied home slipped 1.7% in August from a year earlier. That was the first decline from a year earlier in more than a decade.

Other signals are mixed. Yesterday, for example, the Mortgage Bankers Association reported that its seasonally adjusted index of applications for home-purchase loans surged 7.6% in the week ended Sept. 29. But that index is volatile from week to week, and it is still down about 15% from a year ago. In a more positive sign for housing, mortgage interest rates have declined over the past two months. Inventories of unsold homes continue to rise in much of the country, though they have leveled off or fallen slightly in some cities.

Economy.com based its price forecasts on a broad range of factors including demographic trends, job markets, mortgage rates, lending standards, construction costs and limits on land development. Mr. Zandi says the economic model doesn’t take into account the supply of previously occupied homes available for sale because there aren’t enough reliable data on that nationwide.

Among major metro areas vulnerable to steep price declines, Economy.com points to Nassau and Suffolk counties in suburban New York. For the rest of the New York City area, the firm sees a milder downturn, with the median price bottoming out in late 2008 just 3.5% below its peak in this year’s second quarter.

The Las Vegas housing market is being hurt by an exodus of speculators who have dumped homes on the market, and construction payrolls have been shrinking as developers cancel condo projects. But Economy.com says job growth in leisure and retail businesses will help offset the housing downturn in Las Vegas.

Miami’s high house prices have sent some residents scurrying northward to slightly less expensive areas, and the city is highly dependent on investment from Latin America, which “could easily dry up or even go into reverse,” the report warns.

For sellers, the real-estate news adds to their headaches. Laurie Siegel, a 62-year-old retired nurse in West Orange, N.J., is trying to sell a three-bedroom house so that she can buy a condo. The house was listed six weeks ago at $449,900, and Ms. Siegel hasn’t had any serious offers.

“If I don’t get enough for the house, how am I going to buy the condo?” Ms. Siegel asks.

So far, she has refused to lower the price of the house. “I think it’s all a gamble,” she says.

Home Prices Decline For First Time In 11 Years

Buyers have been hoping for it and sellers have been dreading it but home prices have apparently started a long-expected decline while existing home sales continued their five month slide.

On the price front the change is not dramatic, at least not yet. The monthly survey conducted by the National Association of Realtors reported that existing homes sold nationwide during the month of August had a median price of $225,000. The revised median price for July was $230,000. In August 2005 the median price was $229,000 thus the year-over-year price changed -1.7 percent. According to The New York Times, this was the first time since April, 1995 that house prices were lower than reported the same month one year earlier. (A median price is one at which half of the houses in the study sold for less and one half for more.)

Sales of existing homes, a category which covers single-family, condos, co-ops, and townhouses were down 0.5 percent to a seasonally adjusted annual rate of 6.30 million units in August from the annual rate of 6.33 million the previous month. Sales were off of the August 2005 level of 7.21 million units by 12.6 percent but that month was the second highest since NAR has been keeping records, a hard pace to maintain.

Inventories of unsold houses have climbed appreciably in the last year. At present there are 3,918,000 unsold homes on the market. This does not include new construction. At the present absorption rate this is a 7.5 months supply. In July there was a 7.3 months supply and one year ago 2,841,000 homes were available - a 4.7 month backlog. The inventory has increased 1.5 percent in sheer numbers since last month but as sales have slowed the attrition rate has increased 2.7 percent. When compared to August of 2005 the inventory is 37.9 percent higher and will take nearly 60 percent longer to sell.

A bit of good news in home sales; single family homes sold at a seasonally adjusted rate of 5.51 million in August which was unchanged from the July figure and down only 1.7 percent from August 2005. Condo and co-op sales, however, fell 3.5 percent to a seasonally adjusted rate of 793,000 units and were 14.5 percent lower than one year ago.

The West suffered the biggest setback in sales; down 2.3 percent (seasonally adjusted) from July and 22.8 percent compared to last August. However, the median sale price of $345,000 was actually up a fractional 0.3 percent over last year. This appears to be a situation where sellers are refusing to reduce their prices even if it means a prolonged selling period. Other media reports indicate that California is driving figures for the West. For example, DataQuick, a firm that monitors real estate activity nationwide, reported that sales in California were up 12.5 percent in August over July but were down 25.1 percent from August 2005 figures. The median price for a home in California in August 2006 was $472,000, down 0.6 percent from July but up 3.5 percent from $456,000 in August 2005.

Sales in the Northeast and the Midwest were actually up from July; 1.9 percent and 0.7 percent respectively although both regions were off of the August 2005 pace by a little over 11 percent. The Northeast region was most affected price wise with median sales prices off 3.9 percent from last year. The Midwest was down 1.1 percent and the South 2.6 percent.

NAR, of course, put its best spin on the August report referring to the numbers as an indication that existing home sales were stabilizing “at a sustainable pace.”

David Lereah, NAR’s chief economist said home sales appear to be leveling out. “After a stronger than expected drop in July.” (Preliminary figures that month reported that existing house sales had dropped 4.1 percent to an annual rate of 6.33 million units.) “The fairly even sales numbers in August tell us the market is at a more sustainable pace. It keeps us on track to see the third highest sales year on record, but we do expect an adjustment in home prices to last several months as we work through a build up in the inventory of homes on the market.”

The Commerce Department in conjunction with the Department of Housing and Urban Development usually issues their joint new home sales report the day before or the day after the existing home report but so far it has not materialized. We will do a short review when it does.