This was a busy week for housing. Data is in from the NAR on existing home sales, builder confidence, interest rates, housing starts, housing completions, and building permits.
Existing Home Sales Rise
March gave us a marked improvement in existing home sales. The National Association of Realtors reported that sales of existing homes rose 3.7% in March to a seasonally adjusted annual rate of 5.10 million. While up from February, home sales are down 6.3% from last March. At this time last year the second home buyer tax credit had just kicked off.
After a disappointing February, existing home sales ticked up in March. Much of the cold weather is behind us and we should see more improvement in the month-over-month results. I doubt we’ll see year-over-year improvement until the last tax credit fully 1 year behind us. What’s important to note is the impact that cash buyers and investors are having on the market. Cash buyers made up 35% of sales this March versus 27% a year ago and investors are 22% of existing home sales vs. 19% a year ago.
Housing Starts Increase, Building Permits Up, and Housing Completions Down
The Census Bureau reported this week that housing starts increased by 7.2% in March to a seasonally adjusted annual rate of 549,000. Housing starts are still 13.4% below March of 2010. Building permits were also up over February. Permits were 11.2% higher than February to a rate of 594,000 annually. Lastly, the number of homes being completed dropped in March by 14.2% to a rate of 509,000. This is 20.8% below last March.
Essentially builders continue to struggle. March was an improvement on leading indicators. Any improvement in permits and starts is a step in the right direction for builders. For the rest of the housing market, continued low completions means less supply.
Interest Rates Decrease
After seeing 4 weeks of rate increases, mortgage rates dropped, wiping out a month of increases. Freddie Mac reported that the 30-year fixed mortgage rate decreased to 4.80% from 4.91% for the week ending April 21st, 2011. The 15-year fixed decreased to 4.02% from 4.13%.
Rates have backed down again providing some relief for the market. This follows reports that core prices increased only 0.1%. Unfortunately the Consumer Price Index doesn’t include food or energy prices. I still believe this is a false low in rates and we’re trending up from here. Just a quick side note, the owner’s equivalent index for rents rose 0.1%.
Builder Confidence Goes Even Lower:
Just when you thought builders couldn’t be less confident in market conditions, confidence declines. The National Association of Home builders reported builder confidence declined from 17 to 16; anything above 50 is considered healthy.
Home builders are having a tough time getting financing to build. This year is projected to be the lowest on record for housing completions. Financing is improving for some larger developers. In fact I was at an event a week ago where some of the largest developers in New York were in attendance. Representatives from SL Green, Fortress, Avalon Communities, and Silverstein discussed the improving financing conditions. I think we’ll see this work its way to smaller builders in the single-family arena in the next 24 months. This year is going to remain tough.