End of times sentiment weighed on all asset classes last week and is likely to continue to do so this week. Considering the reporting of five housing relevant data points last week, we thought now might be a good time to review the housing market. We sensed a negative tone to the housing newswire last week, but in reality, the data generally came in about as stagnant as always. There was even a tasting of good housing news, though that bright spot was promptly drowned out by a depressed stock market. That said, there is clearly enough reason now to view any recently achieved real estate stabilization as vulnerable, given the many dangers, both external in nature and domestic that threaten all asset classes. Still, I view no other asset currently more important than shelter, which may soon be hard to come by as well.
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Shelter Threatened by Apocalypse
Low and behold, five housing relative reports hit the wire last week, but did we learn anything new? The Housing Market Index offered the latest measure of builder sentiment, while Housing Starts produced fresh data on new home construction. The Weekly Applications Survey reflected the most recent levels of mortgage application activity, while the National Association of Realtors offered a fresh take on Existing Home Sales. Finally, home price data reached the wire from the FHFA.
Eschewing data that contains noise in it, we are leaving out mortgage report analysis here. As the mortgage application activity was compared against the Labor Day period that preceded it, we’re not going to review it here due to the noise it contains. And, I’m going to hold off on home price analysis until after the S&P Case Shiller data is reported. Builders have been down and out for years now, and the latest Housing Market Index reflected more of the same feeling. We covered the HMI in an earlier article found here. Let’s take a look now at real activity, which was reflected in the Housing Starts and Existing Home Sales data reported last week.
Noted for its negative points, August Housing Starts declined 5.0% against the revised July figure, dropping to an annual rate of 571K. Data since June has indicated year-over-year growth in many metrics though, but unfortunately, that was not the case in the August Starts data. Starts were 5.8% short of the prior year mark. Housing Permits though, which offer a more forward looking metric for housing activity, increased 3.2% over July, to an annual rate of 620K. And against the prior year, new permits were 7.8% higher. So we could go ahead and list this as a modestly positive to neutral data point for real estate, despite its seeming softness on the headline.
In order to provide a pure view of things, we consider a second perspective. Since this data includes both multi-family and single-family properties, growth could represent increasing demand for rental property, which might not be the best indicator for housing purists. Thankfully, the government breaks out the data. Housing Starts for single-family properties fell by a lesser rate of 1.4% against July and were 2.3% under the prior year. Permits for single-family properties rose 2.5% against July and were 2.0% greater than in August 2010. Basically the single family activity was not as exaggerated as the overall changes were.
National Association of Realtors (NAR) reported on Existing Home Sales for August last week and offered the brightest bit of news for housing. Unfortunately, the bad brew from Europe and ongoing political turmoil in the U.S. drowned it out. Still, August Existing Home Sales climbed 7.7% over July, to an annual rate of 5.03 million. That was also 18.6% higher than the prior year period.
In the past, we’ve discussed just how easy housing growth would be to attain through the second half of 2011, since the bar is set low. However, given what appears to be developing across the globe, including renewed recession with all sorts of Apocalyptic feeling nuances (US credit downgrade and other unspeakables), it would appear the latest floor for housing may be pulled out from under us soon enough. That said, I pray we all find shelter to weather the storm.
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