WSJ -US new-home sales fell sharply in January
Sales of newly built US homes declined last month, a sign the housing market’s recovery remains uneven. Purchases of new single-family homes decreased by 9.2% to a seasonally adjusted annual rate of 494,000 in January, the Commerce Department said Wednesday. It was the lowest pace for sales since October. Economists surveyed by The Wall Street Journal had expected a January sales pace of 525,000. From a year earlier, sales were down 5.2% in January.
December’s sales pace was unrevised at 544,000. Purchases of new homes are only about a tenth of all home sales, and the data are choppy. January’s percentage decline comes with a margin of error of plus or minus 13.5 percentage points. Still, the numbers are closely watched because sales of newly built homes support construction jobs, raw material purchases and other aspects of the economy more than sales of previously owned properties do. Before January’s dip, sales of new homes had been growing at a modest pace. Sales last year reached the highest level since 2007, the year the recession began. But sales remain well below peak levels. The gains in 2015 showed the housing market to be a bright spot for the economy, contrasting with a slowdown in manufacturing, exports and energy production.
Consumer confidence fell in February, the Conference Board said this week, job creation slowed and financial markets have been unsettled much of this year. If Americans grow jittery about the economic expansion’s durability, housing sales could slump. But sales of previously owned homes are growing at a steady rate, increasing 0.4% in January from December, and rising 11% from a year earlier, the National Association of Realtors said Tuesday. Rising incomes, sustained job gains and low interest rates should all support home sales. The interest rate on a 30-year, fixed-rate mortgage was 3.87% in January, according to Freddie Mac. That is a historically low rate that has fallen slightly since last summer, despite the Federal Reserve acting to raise its benchmark interest rate last year. Wednesday’s report showed there was an 5.8 months’ supply of newly built homes in January, based on the current sales pace. That is up from 5.1 months in December. There were 238,000 new homes for sale at the end of January. That is the largest inventory since October 2009. The median sales price of new homes was $278,800 last month, down from $292,000 a year earlier. Price data isn't seasonally adjusted. Sales last month plunged 32.1% in the West and declined 5.9% in theMidwest. Sales grew modestly in the Northeast and the South.
WSJ - oil holds losses as crude stockpiles grow
Oil prices held their losses Wednesday after US inventory data showed a bigger-than-expected increase in crude-oil stockpiles. Prices continued their decline from Tuesday, when Saudi Arabia’s oil minister disappointed some market participants by dismissing the possibility of a coordinated production cut among large producing nations. Light, sweet crude for April delivery recently fell 83 cents, or 2.6%, to $31.04 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 39 cents, or 1.2%, to $32.88 a barrel on ICE Futures Europe. Record-high inventories of crude oil and refined products around the world have weighed on the oil market in recent months and helped send prices to 13-year lows earlier this month. The Energy Information Administration said crude inventories rose by 3.5 million barrels in the week ended Feb. 19. Analysts had expected an increase of 2.4 million barrels, according to a survey of analysts by The Wall Street Journal. Investors were pessimistic ahead of the data as the American Petroleum Institute, an industry group, said late Tuesday that its own data for the same week showed an increase in US crude stockpiles of 7.1 million barrels. “At the moment all signs still suggest that supply is continuing to strongly outstrip demand,” said Dominick Chirichella, analyst at the Energy Management Institute, in a note.
NAR - existing-home sales inch forward in January, price growth accelerates
Existing-home sales crept forward in January to the highest annual rate in six months, and subpar supply levels propelled price growth to the fastest increase since last April, according to the National Association of Realtors (NAR). The West was the only region to see a decline in sales in January. Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, inched 0.4% to a seasonally adjusted annual rate of 5.47 million in January from a downwardly revised 5.45 million in December. Sales are now 11.0% higher than a year ago – the largest year-over-year gain since July 2013 (16.3%). The median existing-home price for all housing types in January was $213,800, up 8.2% from January 2015 ($197,600). Last month's price increase was the largest since April 2015 (8.5%) and marks the 47th consecutive month of year-over-year gains. Total housing inventory at the end of January increased 3.4% to 1.82 million existing homes available for sale, but is still 2.2% lower than a year ago (1.86 million). Unsold inventory is at a 4.0-month supply at the current sales pace, up slightly from 3.9 months in December 2015.
The share of first-time buyers remained at 32% in January for the second consecutive month and is up from 28% a year ago. First-time buyers in all of 2015 represented an average of 30%, up from 29% in both 2014 and 2013. All-cash sales were 26% of transactions in January (24% in December 2015) and are down from 27% a year ago. Individual investors, who account for many cash sales, purchased 17% of homes in January (15% in December 2015), matching the highest share since last January. Sixty-seven% of investors paid cash in January. According to Freddie Mac, the average commitment rate (link is external) for a 30-year, conventional, fixed-rate mortgage stayed below 4% for the sixth consecutive month and declined in January to 3.87 (lowest since October 2015 at 3.80%) from 3.96% in December. The average commitment rate for all of 2015 was 3.85%. Properties typically stayed on the market for 64 days in January, an increase from 58 days in December but below the 69 days in January 2015. Short sales were on the market the longest at a median of 77 days in January, while foreclosures sold in 57 days and non-distressed homes took 61 days. Thirty-two% of homes sold in January were on the market for less than a month. With homebuyers facing a tough market this spring, NAR President Tom Salomone said Realtors overwhelmingly applauded the recent US House of Representatives passage of H.R. 3700, the "Housing Opportunity Through Modernization Act." "This legislation contains a number of initiatives that put homeownership in reach for more families, including several reforms to current Federal Housing Administration restrictions on condominium financing. Now that the House has overwhelmingly voted in support of the bill, we look forward to working with our industry partners to advance it through the Senate."
Distressed sales – foreclosures and short sales – rose slightly to 9% in January, up from 8% in December but down from 11% a year ago. Seven% of January sales were foreclosures and 2% were short sales. Foreclosures sold for an average discount of 13% below market value in January (16% in December), while short sales were discounted 12% (15% in December). Single-family home sales increased 1.0% to a seasonally adjusted annual rate of 4.86 million in January from 4.81 million in December, and are now 11.2% higher than the 4.37 million pace a year ago. The median existing single-family home price was $215,000 in January, up 8.3% from January 2015. Existing condominium and co-op sales fell 4.7% to a seasonally adjusted annual rate of 610,000 units in January from 640,000 in December, but are still 8.9% above January 2015 (560,000 units). The median existing condo price was $203,900 in January, which is 7.4% above a year ago.
January existing-home sales in the Northeast increased 2.7% to an annual rate of 760,000, and are now 20.6% above a year ago. The median price in the Northeast was $247,500, which is 0.9% above January 2015. In theMidwest, existing-home sales rose 4.0% to an annual rate of 1.30 million in January, and are now 18.2% above January 2015. The median price in theMidwestwas $164,300, up 8.7% from a year ago. Existing-home sales in the South were at an annual rate of 2.24 million in January (unchanged from December) and are 5.7% above January 2015. The median price in the South was $184,800, up 8.5% from a year ago. Existing-home sales in the West decreased 4.1% to an annual rate of 1.17 million in January, but are still 8.3% higher than a year ago. The median price in the West was $309,400, which is 7.4% above January 2015.
Zillow - key takeaways from the December existing home sales report
- Existing home sales jumped 14.7% month-over-month in December, to 5.46 million units (SAAR), more than reversing the 10.5% decline reported in November.
- The end-of-year volatility is likely the result of regulatory changes surrounding the implementation of new mortgage disclosure rules, which pushed some closing from November into December.
- The median seasonally adjusted price of existing homes sold reached a new all-time high of $229,000, surpassing its pre-crisis peak for the first time.
Existing home sales increased 14.7% from November to December to 5.46 million units, at a seasonally adjusted annual rate (SAAR), according to the National Association of Realtors. Buoyed by regulatory changes that likely pushed some closings into December from November, existing home sales more than reversed the 10.5% decline reported from October to November. Over the year, existing home sales are up 7.7%. Sales certainly did rise last year: 2015 was the best year for existing home sales since 2006, and even ended up recording slightly more than the number of sales in the relatively stable housing market years of 1999 and 2000. But in 2015, the labors of spring did not necessarily yield a fall harvest: After a strong start to the year, upward momentum puttered out in late summer, and the trend for the second half of the year was decidedly downward. Home sales increased 15.8% from January to July, but then fell 2.2% from July to December. Existing home sales have been particularly volatile over the past year. In eight of the past 12 months, home sales have reversed direction from the previous month – an increase in existing home sales is followed by a decrease, or vice versa. This level of volatility ranks in the top quintile of months ranked by this measure of volatility going back through the history of the series.
Another way to look at the volatility in existing home sales is to consider the standard deviation of the month-over-month% change in sales –essentially, how far away from the average monthly% change each month’s data has gotten. The trailing 12-month moving average of the standard deviation of the month-over-month change in existing home sales is now higher than it has ever been (excluding December 2009 and July 2010, when home sales surged due to expiring homebuyer tax credits). The big swings of the past two months played a large role in this trend. The median seasonally-adjusted price of existing homes sold continued its upward march, rising 2.1% to $229,000 in October from $224,100 in November, up 7.7% from a year earlier. The seasonally adjusted median price of existing homes sold is now at all-time highs, after surpassing its pre-crisis peak of $227,200 reported in November 2005.
MBA - mortgage applications decrease
Mortgage applications decreased 4.3% from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week endingFebruary 19, 2016. This week's results include an adjustment to account for the President's Day holiday. The Market Composite Index, a measure of mortgage loan application volume, decreased 4.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 12% compared with the previous week. The Refinance Index decreased 8% from the previous week. The seasonally adjusted Purchase Index increased 2% from one week earlier. The unadjusted Purchase Index decreased 4% compared with the previous week and was 27% higher than the same week one year ago. The refinance share of mortgage activity decreased to 61.0% of total applications from 64.3% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.8% of total applications. The FHA share of total applications increased to 12.0% from 11.5% the week prior. The VA share of total applications increased to 13.0% from 11.7% the week prior. The USDA share of total applications increased to 0.7% from 0.6% the week prior.
Zillow - January Case-Shiller Forecast: modestly slower growth expected
The December Case-Shiller indices grew at a pace in line with prior months, with all three headline indices showing annual appreciation above 5% per year. Zillow expects all three January Case-Shiller indices to show slower growth, with the 10-City Composite Index expected to register sub-5% annual growth for the first time in months. The January Case-Shiller National Index is expected to gain another 0.6% in January from December, down from 0.8% growth in December from November. We expect the 10-City Index to grow 4.9% year-over-year, and the 20-City Index to grow 5.6% over the same period. The National Index looks set to begin 2016 up 5.6% year-over-year, the only instance in which monthly or annual growth next month is expected to surpass this month’s pace. All SPCS forecasts are shown in the table below. These forecasts are based on today’s December Case-Shiller data release and the January 2016 Zillow Home Value Index (ZHVI), also released today. The January Case-Shiller Composite Home Price Indices will not be officially released until Tuesday, March 29.
CoreLogic - credit risk transfer: making a successful program even better
On February 10, CoreLogic and the Urban Institute hosted a sunset seminar on “Credit Risk Transfer (CRT): Making a Successful Program Even Better." The premise behind this event was thatCRTis an important step forward for the participation of private capital within the housing finance market while lowering risk and cost to the Government Sponsored Enterprises (GSEs) and, thus, taxpayer exposure. The panel of experts consisted of Faith Schwartz, CoreLogic; Andrew Davidson, Andrew Davidson & Co.; Bill Roth, Two Harbors; Howard Altarescu, Orrick; Rohit Gupta, Genworth, and Laurie Goodman, Urban Institute. The discussion began with the existing balance of CRT to date and the potential growth of the CRT based on guidance from the Federal Housing and Finance Agency (FHFA) annual 2016 scorecard. When asked how much more is needed, it was noted that recently coverage amounted to $10-15 billion per year and could easily double to reach the desired state. There was a robust discussion around expanding the credit investors to include greater participation by Mortgage Real Estate Investment Trusts (mREITs). mREITs are very involved with investing in subordinate tranches of mezzanine securities from the private label securitization market; however, as of July 2015, they were only invested in 2% of the current STACR and CAS deals. With higher REIT participation, it was noted that liquidity and depth of the market would improve.
As the general thinking goes, expanding the investor base is attractive to many who desire more depth of liquidity in the housing market. Expanding the types of investors in this market is healthy for bringing back more private capital and reducing government, taxpayer-backed risk in the housing finance system. One of the key constraints to greater mREIT participation rests with the definition of acceptable assets for investment. Because STACR and CAS are debt securities of the GSEs, they are not considered to be “real estate assets” nor representing “interests” in mortgages or other real estate, as defined under today’s securities law and Treasury regulations, thereby limiting mREIT participation. There are conversations going on with the regulatory agencies and members of Congress to modify these definitions so as to allow these types of CRTs to become a good asset for mREIT investment. At this point, this change would require an act of Congress. The CEO and President of Genworth US Mortgage Insurance, Rohit Gupta, spoke about a new and enhanced model of front-end risk share which would define the transaction at the time a mortgage is created. Deeper front-end mortgage insurance would lower the risk to the GSEs and potentially offer a lower all-in fee to the consumer. While there is no one answer to how risk transfer is best utilized, having several options with various structures, offerings and front-end and back-end models shows continued opportunity to innovate. This will continue to expand options for CRT for better evaluation of the policy goal trade-offs. The general consensus of the panel was that good things are happening with CRT and new and evolving approaches to the risk share will continue to be good for deep and sound housing finance marketplace.
Lowe's posts earnings of 59 cents a share, matching expectations
Lowe's, the world's No. 2 home improvement chain by market share, reported a better-than-expected rise in quarterly sales on Wednesday and forecast 2016 sales above estimates as it benefits from a steady improvement in the US housing market. The company, like bigger rival Home Depot, is benefiting from pent-up demand for houses after the 2008 recession, while low interest rates and growth in jobs, wages and credit have spurred spending on renovations. The key data point boosting housing-related retailers is home price appreciation, said Brian Nagel, Oppenheimer & Co. senior equity research analyst. Lowe's said it expects sales for the current fiscal year, which will include an extra week, to rise 6%, to $62.62 billion. That handily beats the 4.8% growth analysts on average had estimated, according to Thomson Reuters I/B/E/S. Besides the housing market improvement, Lowe's was also helped by unseasonably warm weather in the holiday quarter that encouraged customers to continue outdoor activities and home renovations. The company's net sales rose 5.6% to $13.24 billion in the fourth quarter ended Jan. 29 from $12.54 billion a year earlier. Analysts on average were expecting revenue of $13.07 billion, according to Thomson Reuters. Sales at Lowe's established stores rose 5.2% in the fourth quarter.
Chris McLaughlin
Keller Williams
Keller Williams
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