Ryland 2nd QTR Earnings

Ryland homes reported a net loss of $73 million on Wednesday, the equivalent of $1.70 per share.  This number was actually better than 2QTR 2008 in which the net loss was $241 million.  Their profit margin was up from 6% in the 1st QTR to 7.8%, which probably derives from cost saving measures.  The company also closed a $200 million line of credit saying that it has sufficient cash for the foreseeable future.  Source: shareholder.com

Mixed Responses to June Data

There are a lot of views being thrown around in the blogosphere during the last week or two regarding the new sales data released for June ’09. It seems that there is a lot of “spin” going on depending on which outlet you read. I try to be positive and in general I think that if everyone thought more positively then we would already have our recovery instead of sitting around waiting for it. Having said that I think when statistics are used they should be clear and unfiltered. So I wanted to lay out some facts garnered from lots of different sources, but primarily the NYT, Bloomberg, and WSJ:

· The June gain of 11% was based on an extrapolated annual estimate using seasonally adjusted monthly rate and still represents a significant drop from a year ago.

· The unadjusted numbers still show the slowest June sales since 1982.

· The gain in number of homes sold also comes at the expense of lower prices per home.

· The report in June was stronger than anticipated by most economists and a bit of a good surprise.

· The single family housing starts have been on a four month rising trend.

· Low interest rates and government incentives are spurring home sales, assisted by lower prices on existing homes.

· Sales appear to be strongest in the Midwest and West and leveling off in the South and Northeast regions.

· The length of time that a new home sits before being sold is at an all time high of 11.8 months.

· Homes sales numbers will continue to be sluggish until the unemployment numbers start recovering, which is generally looked for in 2010.

· The inventory of homes is currently low but the sale rate does not yet support a large jump in building. (Low inventory, but also low demand)

· The NAHB housing index bottomed out in January and has risen since. The index is still below 50%, indicating pessimistic outlooks by builders.

Home Sales Up, Inventory Down

Reuters reported that the Commerce Department announced that home sales rose 11% in  June which is the largest monthly increase since 2009, almost 10 years.  In addition the inventory of homes for sale is at the lowest point in 11 years.  With interest rates still fairly low this should be great news for the building sector.  Now if we can curb unemployment so buyer confidence returns we should be on our way to recovery!

Home Pricing Up Slightly In May

Some areas of the country are starting to rebound in pricing within the last few months according to the Federal Housing Finance Agency.  Although prices have declined 5.6% from May 2008 to May 2009 the prices were up 0.9% which is far better than the –0.2% drop expected by a Bloomberg survey of Economists.   Bloomberg.com

Mortgage Rates Going Higher

Rates opened the week of July 20th at a low rate of 4.875%, but quickly climbed again by Friday to 5.25%.  The change in outlook is a sign that investors believe that there will be a quick economic recovery.  The Leading Indicator which is a composite of several data points came in higher than expected, also suggesting that we may be turning a corner.  Read more at: Mortgagenewsdaily

Builder Confidence Index Up

The NAHB index of builder confidence rose to 17, the highest number since September of last year.  Readings below 50 mean that conditions are unfavorable.  Buyer interest has been increasing due to the lower home pricing, low interest mortgages, and tax credits.  Economists are forecasting an economic recovery during the second half of the year, although the article does not say if this means a leveling out or an actual growth trend.  Reuters.com

San Francisco Home Sales at 3yr High

Condo and home sales are up in the Bay Area by 20% versus last year and at a 3 year high, according to Bloomberg.com.  The average price dropped by 27% during the same period.  The drop in available jumbo loans (for purchasing expensive homes) and increase in foreclosure sales likely drove prices down.  I say in any market where the inventory is shrinking, growth is soon to be found!

Record Sales in Buffalo, NY

The month of June seems to have been a good month for many areas of the country, and set a record for the number of homes sold in that month for Buffalo NY.  The area sold 1,169 homes last month which was the highest amount sold in June in the past 15 years.  The number also represents a 29% increase from May.  Prices were steady and the growth is attributed, as usual, to the $8,000 Federal tax credit.  Read more at The Buffalo News.

Home Sales Up in Lubbock, TX

Inventories are down and home sales are up in Lubbock, TX.  Year to date prices have gone up by 11% versus 2008, and monthly June sales have increased by 2% with prices up 5% versus 2008.  Local officials are optimistic that such numbers will soon spawn a revitalization of the construction sector.  With inventory declining and prices rising, it should only be a matter of time.  Via LubbockOnline.com

MO Housing Sales Steadying

Thankfully we are starting to see some reports of housing turning around lately.  This one comes from Cape Girardeau County, Missouri where only 3 less homes closed last month than the same period in 2008.  Especially noteworthy is the fact that the average home price was UP.  The average year to date numbers are still down versus last year, but only by a small amount.  Read more at the SE Missourian.

Get America Working

Richard Slawson, the Executive-Secretary of the Los Angeles & Orange Counties Building and Construction Trades Council (whew!) had a word or two for the officials in government.  He makes a strong argument that nothing will get fixed in the current economy unless people are working.  Start public works projects, open barriers to new developments, and funnel the money to the right communities to get people working again.  Those working people then buy stuff they wouldn’t be buying if they were sitting at home, and they pay sales and income taxes they wouldn’t otherwise pay either.  It’s a giant ball that needs to get going in the right direction but has all kinds of ancillary payoffs if you do get it moving.  Read more at: Building Trade News.com

Home Sales Steady in Des Moines

A little positive news this morning from the Des Moines Register, where home sales appear to be evening out.  Year over year figures are basically steady while prices have dropped slightly.  The good news is that realtors are starting to report that more buyers are coming forward, a good sign indeed.

Housing Freeze in Maryland

In the midst of all the slumping housing markets across the country, apparently there is one market that doesn’t need the business. According to this article from the Washington Post, Montgomery County, MD has halted construction permits due to projected overcrowding of schools. They plan to raise taxes to help pay for the community improvements. Shouldn’t this already be factored in to the taxes, impact fees, and permit fees? Maybe someone should remind the county board that we are, in fact, in a recession.

Stimulus Plan Slow, Easy to Criticize

There are a lot of critics to the stimulus package of late, including these articles from the New York Times and San Francisco Chronicle. Of course only a small part of the stimulus package has been spent. By the end of the year, only 25% of the $787 billion will be paid out. So it is a little early to criticize. Not only that but the economy is a BIG ship and it takes time to get it pointed right again. Keep in mind that this isn’t about dumping a couple of bucks and having people spread it around. The plan is about long term sustainability, building infrastructure and technology that will create jobs years from now.

Utah Housing Nearing the Bottom

Utah has been one of the harder hit states by the housing collapse falling 61 perfect since 2005. However, the new federal incentive programs for home buyers seem to be slowing down the negative slide from the past 4 years. It is too early to tell if the rebound will be sharp or slow and steady but the main bottleneck seems to remain bank financing for new projects. It all comes down to the money, people.

I just have one question, are people from Utah really Utahns?

From the Salt Lake Tribune

AIA Report Forecasts Falling Commercial

According to a new report from the American Institute of Architects, the commercial contruction market is expected to fall by as much as 20-30% this year and 13-17% next year . Chief Guessmaker Kermit Baker says that for new offices and retail space you must first have jobs and consumer spending. You can read more of the gloomy story at Bloomberg.com.

New Appraisal Rules Mean Lower Sales

Beginning May 1st a new regulation was enacted to try to put a buffer on often inflated appraisal reports. You may know that the appraisal is what the banks use to value a home prior to committing to a loan for the property. Most appraisals are honest fair valuations based on similar homes in the area. But appraisers have some leeway in the numbers and unscrupulous ones may even give the bank and realtor whatever they need to get the deal done.

Now the bank and realtor have to deal with a 3rd party who orders the appraisals in order to keep such favors in check. The problem is that now the appraisals take weeks instead of days, requiring longer mortgage rate locks and extensions which are more expensive. Also if the home’s value was questionable the friendly local appraiser could give a quick ‘yes/no’ response to the bank and the deal could be halted without any wasted time or expense. Now an appraisal must actually be ordered (for $300-400) to determine this go/no-go. Then if the deal gets cancelled the customer is out the appraisal fee.

Read more at stltoday.com

New Homes and Prices Up in California Communities

A small nugget of positive news comes from California, in which several metropolitan areas are seeing year over year growth. Of course this is California and who doesn’t want to live there, right? Nevertheless, Vallejo – Fairfield had average home prices increase by 17% which is pretty darn good considering the rest of the economy. Heck it even beats any investment plan that I know of. Read more at Timesheraldonline.com.

Did We Miss the Opportunity to Fix Housing?

Well, only if you consider a complete and instantaneous reverse in the market trends. According to a report from the New York Times, we missed the chance to fix the housing market by 3 years. The downtrend started very sharply in 2006 but a fix wasn't in place until early 2009. Hats off to all the policymakers and economists out there! It also explains that the stimulus money may not go as far toward fixing residential construction as you might hope. Since much of the money is going to public programs (roads, bridges, etc) a lot of residential labor and equipment is still idle because it cannot be used in public projects. If you want to beat yourself over the head some more, read about it at New York Times.

Texas Home Sales Down in 2nd Qtr

Dallasnews.com reports that the Dallas - Fort Worth region is experiencing the lowest quarterly sales data since 1991. The sunny part is that while the sales have been poor, new home starts are even further down which helps lower overall inventory. Not the best news, but the report seems optimistic that the overall market is at least stabilizing. And we have to stabilize before we can start building again!

Existing Home Inventory Hurting New Home Sales

While new home sales continue to be be a thorn in the economy’s side it is the ‘buy used’ mentality that seems to be hurting most. It certainly seems obvious that buyers would shop new homes against what they could potentially buy on the existing market. But if you combine that fact with the slide in home values (also related to the supply side of the equation) and new homes have trouble competing. Read more at CNNMoney.