A busy week in the housing market included reports on pending home sales, new home sales, home prices and an update on home ownership and vacancy rates. Enjoy!
Pending Home Sales Rise
The National Association of Realtors reported a rise in pending home sales for the month of March. Pending home sales rose 5.1% to a 94.1 in March over 89.5 in February. This is 11.4% below 106.2 in March when the second home buyer tax credit was in full force. The Pending Home Sales Index is now 24% up over the cyclical bottom reached in June (post tax credit).
Pending home sales are improving month-over-month. The year-over-year data is cloudy because of the home buyer credit. Unfortunately these numbers will be skewed until the fall. At this point any increase, especially month-over-month is an improvement for the housing market.
New Home Sales Rise
The Census Bureau reported that new home sales rose 11.1% in March over February to a seasonally adjusted annual rate of 300,000 units. While this number is an improvement over February it is nearly 22% below March of last year. Based on the current rate of sales, there are 7.3 months of supply.
New home sales improved in March over February but are still significantly below last March. Last March was impacted by the home buyer tax credit as new home sales are booked at time of contract versus existing sales booked at time of close. The year-over-year comparisons will be inaccurate until the tax credit is well behind us.
Double-Dip Nears as Case-Shiller Index Slides
Standard & Poor’s reported its Case-Shiller Index for the month ending February 2011. The 10-City Composite Index dropped 2.6% year-over-year while the 20-City Composite fell 3.3% over February 2010. The 20-City Composite is now nearly even with its April 2009 low, while the 10-City treads close at just 1.5% over its cyclical low. Atlanta, Cleveland, Las Vegas, and Detroit now have home prices below 2000 levels. Phoenix is on pace to join them. Washington, D.C. is the outlier with appreciation of 2.7% and its value is 80% above 2000 levels.
Seeing Washington D.C. appreciate because the government is expanding is disappointing. Many markets are still in decline and the US is near an official double-dip using Case-Shiller’s data. It is likely we’ll see this become official by the time Case-Shiller reports March data. This means as of today we’re beyond a double-dip in home prices.
Home Ownership Declines, Vacancy Rises
The Census Bureau reported that the home ownership rate declined to 66.4% at the end of the Q1 2011 from 66.5% in Q4 2010. This is a big drop from 67.1% from Q1, 2010. At the same time the rental vacancy rate rose to 9.7% in Q1 from 9.4% in Q4 2010. Despite this small rise in the quarter-over-quarter vacancy, the vacancy rate is down nearly 1% from 10.6% in Q1, 2010.
The vacancy rate rose by 0.3% in the first quarter. This was unexpected as everyone believes that declining home ownership automatically means declining vacancy. Unfortunately the vacancy rate rose due to excess housing inventory. I suspect this is partially due to the influx of investment into real estate. This has created a significant number of new investment properties in the marketplace. I think this increase in the vacancy rate is temporary as home-building is still at a record low. It’s just a matter of time before vacancy rates drop significantly. However as a landlord, any increase in vacancy is concerning, even if it is short term. Increased vacancy means lower rents.