Rental Housing Boosting Industry

Signs of growing interest by consumers in the housing market can be clearly seen in the multi family rental market, attached housing (small apartment buildings, Town homes etc)  construction has been on the rise because of pent up demand. Prior to 2007 everybody and anybody who could was looking to buy a home  due to low rates and easy qualifying terms. As a result residential home construction boomed and multi family rental construction wained.  However, since then things have drastically changed, as a result of the Great Recession owners lost their jobs, their savings, their homes and their confidence.  With U.S. unemployment at 8.6 percent, home foreclosures rising and property prices under pressure, more and more Americans have given up the dream of owning, opting instead to rent, a shift that is remaking the face of the U.S. housing industry.

 Homeownership in America has dropped from its peak of 69.2 percent in late 2004 to a 13-year low of 65.9 percent in the second quarter and has since edged up to 66.3 percent in the third quarter of this year. Consequently the percentage of rental properties that are empty fell to 9.8 percent in the third quarter from 10.3 percent a year earlier. 

From Morgan Stanley "  In a recent report, Oliver Chang, an analyst at Morgan Stanley, dubbed 2012 "The Year of the Landlord." "Rents are rising, vacancies are falling, household formations are growing and rental supply is limited," the Morgan Stanley report stated"

"We believe the demand for rental properties will continue to grow."  Groundbreaking for new housing jumped 9.3 percent in November to the highest level in 19 months, fueling optimism that the battered housing market was regaining its footing"

As it relates to the housing industry the Architecture Billings Index, a gauge of future construction, picked up last month, breaking above the 50 level to signal growth in billings. The stock of homebuilders, as measured by a Dow Jones index [.DJUSHB  242.86  ---  UNCH    ]has shot up more than 30 percent since early October.

"Residential construction is finally beginning to rise from its post-recession lows," said Joseph Lavorgna, chief U.S. economist for Deutsche Bank. 

So there definitely seems to be some light at the end of the home industry tunnel and its not the train. While it would be more beneficial to see single family home construction rising as well, the industry is such that when one segment (rentals) rises the other (ownership) will stall. Smarting from the past five years of the housing meltdown, it will take consumers a little more time to change their mind set about home ownership. They will need to feel comfortable enough to venture back into home ownership and this will not happen in mass until unemployment starts to fall consistently, drops below 8% as a result of consistent economic improvement.  There are very good signs that this is happening, but one or two months or quarters of positive economic news does not a recovery make. We will need at least three straight quarters of positive economic news before we can call it a trend but we are well on our way there. 

Look for the housing recovery to start in earnest first in those states that were hit the hardest, Florida is one of those, especially the area of South East Florida. From my readings, talks with others in the industry and driving around the local area there are definitely more and more signs of a housing recovery starting to take hold. One of the best signs to look for is site excavation for building of any kind, which we haven't seen in several years but are now seeing at least in South East Florida.  

And the good news keeps on rolling in!

Hot off the National Association of Realtors website today

"Existing-home sales rose again in November and remain above a year ago, according to the National Association of Realtors®. Also released today were periodic benchmark revisions with downward adjustments to sales and inventory data since 2007, led by a decline in for-sale-by-owners."

" The latest monthly data shows total existing-home sales¹, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 4.0 percent to a seasonally adjusted annual rate of 4.42 million in November from 4.25 million in October, and are 12.2 percent above the 3.94 million-unit pace in November 2010."

" NAR chief economist, said more people are taking advantage of the buyer’s market. “Sales reached the highest mark in 10 months and are 34 percent above the cyclical low point in mid-2010 – a genuine sustained sales recovery appears to be developing,” he said. “We’ve seen healthy gains in contract activity, so it looks like more people are realizing the great opportunity that exists in today’s market for buyers with long-term plans."

" NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said housing affordability conditions have set a new record high. “With record low mortgage interest rates and bargain home prices, NAR’s housing affordability index shows that a median-income family can easily afford a median-priced home,” he said."

" Total housing inventory at the end of November fell 5.8 percent to 2.58 million existing homes available for sale, which represents a 7.0-month supply⁴ at the current sales pace, down from a 7.7-month supply in October. “Since setting a record of 4.04 million in July 2007, inventories have trended down and supplies are moving close to price stabilization levels,” Yun said."

So to wrap up, what we have is a market that is definitely stabilizing, sales are increasing, and have increased November over October as well as year over year, which is very important. More homes are being sold by real estate companies then owners, another important fact and another reason sales have increased in volume and price. On a national level housing is more affordable now then it has been in many years, between depressed home prices and super low mortgage interest rates, you have the perfect scenario for buyers to benefit. Housing inventory has been steadily on the decline and is almost at parity now and what that means is we are close to stabilizing. Once this happens we will see home prices start to rise on a more even basis rather then only in specific markets as it already has.

This is definitely good news which just adds more credence to my belief that we are closer to the bottom of the housing market then not, in fact what we may find in retrospect is the bottom in housing was yesterdays news.

Some more good housing news

We've been getting news almost daily that conflicts with other seemlingly good news, but recently each successive weeks news seems better then the last and recent news seems to confirm this positive trend.

For instance yesterday it was reported by Reuters "  U.S. housing starts surged to a 1-1/2 year high in November and permits for future construction were the highest since March 2010 as demand for rental apartments rose, offering hope for the weak housing market."

As a result of this good news the stock market had reason to go higher which was helped by more good news that Germany business confidence levels rose and the auction of Spanish debt went well causing rates to drop. Most of which this good news was noise, meaning only temporary because confidence can change at any moment based on, you guessed it  "more news" and debt auctions move with sentiment and confidence but still its was a nice change from what we have come to expect which is "not so good news"

The only real substantial news out of it all was that our housing permits rose, that is real, hard to dispute, it requires somebody somewhere to have confidence enough to put up real hard cash and to commit to even more debt obligations, so it would seem these housing rumblings are for real.

Anyway back to the housing stats.

From Reuters"The Commerce Department said on Tuesday housing starts jumped 9.3 percent to a seasonally adjusted annual rate of 685,000 units, the highest since April last year."

" Economists polled by Reuters had forecast housing starts rising to a 635,000-unit rate. Compared to November last year, residential construction was up 24.3 percent."

A good gauge to better see into the future is tracking building permits which rose 5.7%, this was due to an increase in permits to build apartments/multi family housing. It seems that the the fallout from the severe decline in home prices coupled with the difficulty in securing home mortgages as well as owners who have lost there homes has pushed more people into renting instead of buying or buying a smaller multi family type home.

No matter, any increase in housing construction is a very good thing for the economy because each home built creates an estimated three additional (3) jobs and better yet results in about 90,000 in additional taxes generated. We still have a long way to go but it looks like we are finally on our way.

Housing is starting to gain some credible traction, builders confidence is at the highest its been in almost 2 years, we have two quarters of positive housing growth, so it appears that housing is becoming less of a drag on the economy and if this is to be taken as an indication of the future, maybe we have really started to turn the corner in our housing markets.

All in all the news was very positive, a few more months are needed to confirm this trend is real and then watch things start to take off. Keep your fingers crossed that this positive housing trend is for real, because rebuilding the housing market is whats needed to rebuild our economy, its a major contributor to our GDP.

Mixed Messages

We've been getting economic news that at times conflicts, just last week the news came in that initial jobless claims declined by 15,000 to 366,000 which is the lowest its been in almost four years, though at face value the news is good we must take into account the seasonality affect. During the holiday season its not unusual to see more hiring only to see more firings after, lets hope most of these jobs stick once the holidays pass.

Other factors that would help us to believe things are getting better is that with jobless claims falling you would like to see both homes sales rising and mortgage applications as confirmation that workers are feeling more confident. But what we have is mortgages applications decreasing by about 8% last week which wiped out the gains of the prior week, so in the past few weeks there was no gains in mortgage applications. What we would like to see is the trend growing not stalling out so we need to see what happens over the next few weeks. Year over year according to the mortgage bankers association we are just about where we 1.5 yrs ago with mortgage applications. Like I said, we need to see steady growth every month, as it stands right now its just not happening.

Though mortgage applications appeared to have stalled, housing seems to be doing some what better. According to Housing Tracker, the median asking price for homes in 54 metropolitan areas was positive three weeks in a row, growing on average 1.1% year over year. With almost half of these areas now posting positive gains in housing prices, that is very encouraging news. These stats confirm my previous posts the homes prices are bottoming and in some cases even rising.

That was the good news, now here is some of the bad news. When you look at the number of sales that the market used to handle in any given year we are still down about 50% from the peak years running from 2000 through 2006. So while we are making headway we still have a long way to go to the good old days of homes sales. In 2000 existing home sales were about 4.5 million and reached a peak of 6.34 million the end of 2005, existing home sales now are about 4.4 million, which is close to the average of the prior two years. So its does appear that both housing sales and prices have found a bottom.

If housing is to turn around the economy needs to not only grow but grow enough so that employers will feel comfortable enough to hire again. Before consumers will venture out and back into the housing market they need to feel confident with their jobs, the economy and the future, unfortunately right now thats not how most feel.

So while certain segments of the real estate market (distress sales, retirement, second home, luxury) have and will continue to show improvement the vast majority of the market will just thread water until the unemployment level starts to drop in earnest and consistently every month.

Breaking News from Florida Realtor News

WASHINGTON – Nov. 30, 2011 – Pending home sales rose strongly in October and remain above year-ago levels, according to the National Association of Realtors® (NAR).

The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, surged 10.4 percent to 93.3 in October from 84.5 in September and is 9.2 percent above October 2010 when it stood at 85.5. The data reflects contracts but not closings.

“Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows, and there is a pent-up demand from buyers who normally would have entered the market in recent years,” says Lawrence Yun, NAR chief economist. “We hope this is indicates more buyers are taking advantage of the excellent afford-ability conditions. Many consumers recognize that homebuyers in the past two years have had one of the lowest default rates in history. Moreover, continued inventory declines are another healthy sign for the housing market.”

This weeks Real Estate Tid Bits

From Florida Realtors News


NATIONALLY


Consumer confidence surges over 15 points
NEW YORK – Nov. 29, 2011 – The Conference Board Consumer Confidence Index, which declined in October, surged almost 15 points in November.

The Index now stands at 56.0, up from 40.9 in October. The Present Situation Index increased 11.2 points to 38.3 from 27.1. The Expectations Index, which gauges attitudes about the economy’s condition six months from now, went up 17.8 points to 67.8 from 50.0.

“Confidence has bounced back to levels last seen during the summer (July 2011, 59.2),” says Lynn Franco, Director of The Conference Board Consumer Research Center. “Consumers’ assessment of current conditions finally improved after six months of steady declines. Consumers’ apprehension regarding the short-term outlook for business conditions, jobs and income prospects eased considerably. Consumers appear to be entering the holiday season in better spirits, though overall readings remain historically weak.”

Survey: Home prices down in most major U.S. cities

WASHINGTON (AP) – Nov. 29, 2011 – U.S. home prices are falling again in most major cities after posting small gains over the summer and spring, the latest evidence that the troubled housing market won’t recover any time soon.

The Standard & Poor’s/Case-Shiller index released Tuesday showed prices dropped in September from August in 17 of the 20 cities tracked. That was the first decline after five straight months in which at least half the cities in the survey showed monthly gains.

From The Wall Street Journal Nov 28

 

By Jeff Bater and Eric Morath

New-home sales rose slightly in October, but the level of demand is historically very weak because of high unemployment in the U.S. and competition from cheaper existing homes.
Sales increased by 1.3% to a seasonally adjusted annual rate of 307,000 from a downwardly revised pace of 303,000 in September, the Commerce Department said Monday.
Economists surveyed by Dow Jones Newswires had forecast sales would slip by 0.3% to an annual rate of 312,000.

Palm Beach County Market From Movoto

West Palm Beach, FL November 1, 2011 - West Palm Beach's home resale inventories decreased slightly, with a 1 percent decrease since October 2011. Distressed properties such as foreclosures and short sales decreased as a percentage of the total market in November. The median listing price in West Palm Beach went up from October to November.

When you compare WPB year over year real estate stats, things do not look as bad as others may have your believe, we are definitely making headway

West Palm Beach: Median listing price +31%, % of distressed sales -36%, Median Days on the market -14%, Median home size +15%, median price per sq ft +3%


Whats the Bottom Line

We have a mixed bag of data. On a national level consumers are feeling better at least in the short term and recent retail sales stats bear this out, with increased spending year over year close to 10% and online sales up more then 2x lat year. But then we have homes sale prices falling during the last quarter though at a slower rate then last year. Oddly enough we also have new homes sales on the rise instead of declining as was expected. Our local market still shows improvement though not as robust as we all would like to see. In any case what matters most is what is going on locally, so even though the last bit of stats were uneven I still feel the Palm Beach County market will have it best year in four.

Real Estate Stats

From the Florida Realtors website as of 11/18/11

The number of homeowners falling behind on their mortgage loans dropped in the third quarter. The Mortgage Bankers Association said the share of mortgage borrowers who have missed at least one payment – but are not yet in foreclosure – fell to 8 percent in the third quarter from 8.4 percent in the second quarter. The share of borrowers more than 30 days behind but less than 60 days late fell the most, to a four-year low of 3.2 percent from 3.5 percent in the second quarter.That drop suggests that fewer borrowers are falling behind for the first time, which will reduce foreclosures years from now.

 “We’re moving in the right direction, but we’re still well above normal” for troubled loans, said Michael Fratantoni, MBA’s vice president of research and economics.

 
Single-family home building permits climbed in October to their highest level in 10 months. Single-family starts were up 3.9 percent from September. Permits, which are a better indicator of future activity, rose 5.1 percent for single-family homes and 24 percent for multifamily units, the Commerce Department said.


The October results point to a single-family market that’s “finally getting off the mat” and a multifamily segment that’s making “small strides,” said Patrick Newport, economist at IHS Global Insight.

So while we are not yet out of the woods it appears that the past two months confirm what we have seen so far this year, that we continue to move in the right direction. In my mind that is definitely very good news and while the last two months do not yet confirm a positive trend has taken hold its better then a stick in the eye. One or two more months of these positive moves and it would then appear we could say that a new trend has developed or at least a discernible bottom in housing has been made. That being the case we might even find that home price declines will start to reverse, something we would all applaud.

Nationally year over year homes sales were up a healthy 13.5%, Statewide year over year existing home and condominium sales are both up 13% & 10% respectively and in Palm Beach County total home sales  were up a nice fat 27% compared to this same time last year.

Keep your fingers crossed that the markets continue to work and do so without government interference because in the end it will be the free market that get us out of the economic morass we find ourselves in.

Whats Happening with Florida Real Estate

September home sale numbers were just over 15,000, a 7% decrease from August sales but up 10% year over year. Part of the month to month decline could be attributed to seasonality, many home buyers want to buy and close before the start of the new school year and often try go to contract and close by August.

When its all said and done the important stat to look at is the year over year number, which is a clear indication the the market is improving. According to National Association of Realtors (NAR) Chief economist Dr. John Tuccillo "One of the most overlooked statistical trends in all of real estate is the growth in home sales, both single family and condo, in the state of Florida" He continued "We've seen an upward trend in sales since January 2011. Even prices, which have been static over the past few months, are well above where they were in January 2011."

Further " fifteen of Florida's metropolitan statisical areas reported higher existing home sales in September, eleven had higher existing condo sales."

Florida's year over year comparison for condo sales, 6666 units sold statewide in September, a 10 percent gain over the units sold in September of last year. Statewide the existing condo median sales price increased 7 percent over this same time last year.

So as I have pointed out in previous posts the Florida real estate market is definitely improving. To make matters even better as opposed to worse, consider that private lenders are starting to work on remedies which will help stem the tide of distressed homes flooding our market.

One program offers buyers approaching or already in default of their mortgage a cash incentive to vacate the premises. This incentive can range anywhere from $5,000 to $35,000 and is working, owners are taking the money and leaving sooner rather then later. As a result these homes are found to be in better shape then usual, need less repair and can be quickly resold at higher prices then in the past.

Another program offered to Florida home owners, has been accepted by almost 80% of those eligible with only about 3% default rate, it's been a great success. It provides the owner with a new first loan that they can afford to pay and the difference between the new first mortgage and then old mortgage is set aside, and will be totally forgiven if the owners keep up their payments on the new loan for a minimum of three years. An interesting twist to this program is when the buyers sell their home and realize a profit their lender will be entitled to receive 5% of the profit, seems a fair trade off and the success of the program proves it.

Both of these programs end up saving the lenders money as well as, help preserve home values, help some owners start over by providing much needed cash and provide others with a new affordable loan so they can remain in their home. This is a win win for both lender and homeowner, we have to hope more lenders get on board and adopt in some form these very successful programs.

So lets take a look at some Real Estate facts !

Check out this chart to see the national housing price statistics from 2007 through September 2011, which only goes to reinforce my belief that the housing market is getting better. Data from housingtracker.net

Year	Monthly Time Frame	% monthly home price decline from start to finish	National Monthly Trend of Home Prices	Yearly home price trend	Rate Year
2007	4/07-12/07	-2.7% to -7.2%	Each month decline worse then the previous month decline	From poor to bad	-
2008	1/08-12/08	-7.5% to -  11.4$	Each month decline worse then the previous month decline	From bad to worse	-
2009	1/09-12/09	-11.5% to -5.6%	Each month decline was less then the previous decline	From worse to bad	+/-
2010	1/10-12/10	-5.8% to -7.8%	Each month decline worse then the previous month decline	From bad to worse	-
2011	1/11-9/11	-8.7% to -1.7%	Each month decline is less then  the previous decline and the smallest declines to date	From bad to much better	+

Update: 11/2- October home prices have come in and the positive trend continues, with October price decline at only -.09% which is the lowest decline to date, the housing bottom may be in site :)

As you can see from this chart, on a national level home price declines have definitely turned a corner at the start of 2011, home prices declines dramatically slowed and show a month on month positive trend.

According to the seasonally adjusted Case Shiller 20 city housing index it appears that in 2011 there was less then a 1% variation in home prices and had not made a new low in the last four reported months. Since there is a few months time lag in these reports we wont know if this positive trend will continue and or hold, in any case based on the information we do have the housing market appears to be finding a bottom.  
Stats courtesy of  Standardandpoors.com

Whats happening in out local market?

From a 10/29/11 Palm Beach Post article in the Money section it was pointed out that the supply of homes for purchase was down 39% in September from the same time last year. For sale inventory is down almost 200% from the 2007 high, so its clear homes are selling and at an accelerated pace. While home sales have definitely picked up the price of homes has not, this is a result of the foreclosures and short sales on the market. However this distress market seems to be getting short on inventory, at least locally because these properties are getting multiple offers and the prices have been bid up above the asking. No matter how you look at it, this its a very good sign, and soon the principle of "supply and demand" will once again drive market prices in the right direction, UP!

Its should not be forgotten that of all the sales that take place only about 40% represent distress sales the remaining 60% are normal resale transactions. So dont think for a minute that our housing market is moribund because its not. Those homes priced fairly based on current market value are the first ones to go, homes priced above market will languish and garner few if any serious offers. 

If you want to sell a home in today's market you have to be ready to accept what the current market value of your home is today! Which might be better then you think, you just have to do your homework to find out!

Introduction

This blog will discuss the general condition of Florida's real estate market, as it relates to new home sales, re-sales, short sales, foreclosures and financing but it will primarily focus on these for the South East area and more specifically the  Palm Beach County markets. Which as of late has been one of the markets showing signs of stabilization, sales have seemed to be leveling off for the past few months with prices still falling but at a slower rate.

In any event I will try to keep this blog as up to date as possible, my goal is to add at least one new post each week or more often as time and or news events permit. I would encourage any readers to participate and help by providing links to relevant online articles, newspaper publications, videos or radio broadcasts.

Florida's real estate market has been severely damaged by our current economic recession but its on the mend but not without great financial as well as mental strain on its home owners. There is no one magic bullet that we can look to for salvation, this will only come through the realization that the market has changed and so buyers and sellers need to change and adjust to fit these new times. Only through the knowledge, education and understanding of your local real estate market will you be able to do this, which in the end is my goal.