Tag Archive for 'single family'

Wells Fargo Reports: Existing home sales increased 4.4 percent in March to a 5.71-million unit pace—a new cycle high.

 Existing home sales increased 4.4 percent in March to a 5.71-million unit pace—a new cycle high. Inventories remain tight and have helped to push prices up 7 percent over the past year, pressuring affordability

Sales Recover in March with a Little Seasonal Help Existing home sales came in even stronger than our above-consensus call in March. Sales of previously owned homes rose 4.4 percent in March to a 5.71 million unit annual pace—a new cycle high. Sales of both single-family and condos/co-ops rose over the month, but single-family sales have demonstrated a clearer uptrend in recent months and are up 6.1 percent over the past year.

We expected sales to rebound in March following February’s strong reading on pending home sales. Pending home sales, which typically lead existing home sales by one to two months, rebounded 5.5 percent in February. That more than reversed the previous month’s drop. While pending home sales tend to exaggerate monthly moves in existing home sales, the recent jump suggests sales are nearly back in line with the trend registered last fall before mortgage rates moved noticeably higher.

A relatively warm January and February, however, likely helped to propel pending home sales early in the year and suggest some risk to sales early in the second quarter. The Northeast saw the largest increase in existing sales in March (up 10.1 percent), but a late season snowstorm will likely have weighed on closings for April. Sales in the Midwest snapped three months of declines and jumped 9.2 percent in March. Meanwhile, the South, which accounts for more than 40 percent of sales, saw March sales rise 3.4 percent, building on a strong run that began last fall.

Tight Inventories Leading to Affordability Challenges

Heading into the key spring buying season, inventories remain exceptionally lean. As is typical for March, inventories rose last month, but are down 6.6 percent over the past year. The stronger pace of sales last month kept the supply of existing homes at 3.8 months, well below the 5.5 month supply considered a balanced market. The average number of days a home spent on the market fell to 34 in March from 45 days in February and 47 days a year earlier.

The low level of inventories continues to put upward pressure on prices and dent affordability. The median price of an existing home is up 6.8 percent from last March, with the South and West seeing prices rise north of 8 percent. Combined with higher mortgage rates, affordability has fallen nearly 9 percent over the past year, and has kept the share of first time buyers stuck around 32 percent. Historically, first-time buyers have accounted for about 40 percent of sales. The share of households that believe now is a good time to sell a home reached a fresh cycle high in the preliminary April University of Michigan Consumer Sentiment Survey whereas the share believing now is a good time to buy has been trending lower over the past two years.

Source: National Association of Realtors and Wells Fargo Securities

Wells Fargo Reports: December Housing Starts Headline Full of Hubris

Housing starts jumped 11.3 percent in December, ending the year at a 1.226 million unit pace. Multifamily starts surged, while single-family posted its second weak monthly reading. Permits fell during the month.

Solid December Report, but Payback Is in the Offing

Thanks to an outsized surge in the volatile multifamily component, housing starts ended 2016 on a solid note, rising to a 1.226 million unit pace in December from an upwardly revised 1.102 million unit rate in November. Although the strong reading is welcome, the level of starts looks to be bit exaggerated, especially as we are in the seasonally slow period of the year and swings in the data due to the seasonal adjustment process and weather distortions play a larger role in the headline reading. The three-month moving average shows starts are up a more moderate 5 percent in December, with single-family activity eking out a 0.6 percent gain and multifamily increasing 16 percent. Permits, which tend to be less volatile, fell 0.2 percent in December but grew 1.9 percent on a year-over-year basis.

With December now in the books, we see that the annual average for permits is running ahead of starts, pointing to a pickup in activity in the coming year. In previous publications, we have written about the shift in construction toward less expensive homes, which is a welcome sign following the dearth of activity in the lower-priced home segment as many investors converted units into rentals. We suspect some of this activity will cool as the recent spike in mortgage rates following the election curtails overall activity. December mortgage purchase applications are already showing some of the strain of higher mortgage rates, declining in December from a two-year high.

The trend in multifamily starts seems to be unrelenting; however, we expect some payback in the coming months. Starts jumped a strong 57.3 percent in December to a 431,000 unit-pace. On the other hand, permits fell 9.0 percent to a 393,000 unit-rate. With lending standards in multifamily tightening and apartment rent growth moderating, we expect the pace of multifamily building to cool in 2017.

Another seemingly hopeful sign is builder sentiment. The NAHB/Wells Fargo Housing Market Index remained at an elevated level in January, suggesting some upside risk to overall starts. Although builder sentiment is typically seen as a forward-looking indicator for starts, the 11-year high in December and still-elevated reading in January seems to be somewhat unbridled and could also reflect some election euphoria. Similar to residential borrowers, developers likely rushed to “lock-in” financing. We see the same pattern in consumer sentiment, which is now at a two-year high. That said, the builder sentiment index declined 2 points to 67 during the month, with all three components including current sales, future sales and prospective buyer traffic retreating.

Looking ahead, the underlying fundamentals and still rising credit availability suggest starts have more room to run. We expect starts to average a 1.17 million unit pace in 2017 and 1.22 million unit rate in 2018.

Wells Fargo Reports: Housing Starts Plunge Unexpectedly in September

e3aadcc2-c3c9-49d6-8b85-87e4ca28edd5_wfs_logo_20_gradientFollowing a sharp decline in August, housing starts fell to its lowest level since early-2015 in September. The decline was concentrated in multifamily, while single-family rebounded. Permits jumped 6.3 percent.

Headline Starts Falter, but Permits Point to Gains

  • Consensus estimates projected a partial reversal in housing starts in September following a sharp decline in August. That said, housing starts tumbled 9.0 percent in September to a 1.047 million-unit rate. However, all of the weakness was concentrated in multifamily, which fell 38.0 percent during the month, while single-family rose 8.1 percent. Strength in purchase applications and permits suggest continued gains.

Builder Sentiment Still on Track

  • Housing permits, which typically lead housing starts and are far less volatile, rose a solid 6.3 percent. With the level of permits running ahead of starts, we expect starts to pick up in the coming months. Although builder confidence retreated in October, the trend still suggests upward momentum in single-family construction. The NAHB/Wells Fargo homebuilders’ survey rose to 62.3 on a three-month moving average basis.

Housing Starts Tumble Unexpectedly in September Housing Starts Tumble Unexpectedly in September Housing Starts Tumble Unexpectedly in September Housing Starts Tumble Unexpectedly in September

Wells Fargo Reports: Housing Starts Pull Back in March

Wells_Fargo_Securities_logoHousing starts tumbled 8.8 percent in March to a 1.09 million-unit rate, led by a 9.2 percent decline in single- family starts. Building permits also slipped on the month and are now running in line with the pace of starts.
Homebuilding Slows in March
• On the heels of February’s unseasonably large 6.9 percent gain, • housing starts fell 8.8 percent in March to a 1.09 million-unit pace. Weakness was broad based as both single and multifamily starts reported declines. Permits also slipped on the month, falling in line with the pace of starts.
• Despite the dip in building activity, on a year-to-date basis, single-family starts are up 22.2 percent.
Completions on the Rise
• The supply of new homes coming to the market has improved, as the number of homes completed and under construction both reported gains in March. This strengthening trend bodes well for new home sales, which have been held back by tight inventories.
• The housing market seems relatively well positioned heading into the spring home buying season. We expect housing starts to gain momentum in the year ahead, and cap 2016 up 11 percent.

Housing Starts Pull Back in March Housing Starts Pull Back in March Housing Starts Pull Back in March Housing Starts Pull Back in March

Wells Fargo Reports: Construction Spending Posts Another Gain in July

Wells_Fargo_Securities_logoConstruction spending rose 0.6 percent in July, which shows consistent improvement. While private residential and nonresidential spending increased on the month, public outlays were down 0.3 percent. Third Quarter Off to a Good Start 

Construction outlays rose 0.6 percent in July to a $900.8 billion annualized pace. Previous months’ data were also solidly upwardly revised. Further confirming upward momentum in the housing market, private residential spending was up 0.6 percent and has posted positive gains since October 2012. Digging into the details of private residential, gains were broad-based with single-family, multifamily and home improvement all increasing on10-Year Treasury Yield the month. Another encouraging component of the report was the gain in private nonresidential, which rebounded from a decline in June. Private nonresidential rose 1.3 percent in July. However, public spending remained weak due to a 0.4 percent decline in state and local outlays. Federal spending rose 1.1 percent in July.

Single-Family Outlays Remain Solid

Gains in private residential spending continue to reaffirm strength in the housing market. Builder sentiment remains solid and has shown consistent increases over the past four months. The level is now the highest since late 2005, with more builders seeing conditions as “good” than “poor”. That said, other monthly housing market indicators appear to be at odds with construction spending and sentiment. Single-family housing starts and permits both declined in July, and new home sales plunged on the month. We suspect that recent weakness in 10-Year Treasury Yieldstarts and new home sales activity is only temporary and not the beginning of a trend. Indeed, while some of the slowdown on the month can be blamed by the rapid increase in mortgage rates, we suspect that extremely damp weather in the South attributed to some of the weakness in new home sales activity. With the housing recovery continuing to be driven by fundamentals, we expect further gains in single-family outlays in the coming months.

Multifamily spending has also seen a string of positive gains. The apartment vacancy rate is now at its lowest level in more than a decade at 4.3 percent, and demand remains fairly robust across the country. Deliveries are expected to pick up in the coming quarters and activity should remain solid.

Nonresidential Construction Outlays Improve10-Year Treasury Yield

Private nonresidential outlays have been somewhat of a moving target in recent quarters with revisions quite sizeable. At last, July’s revision to previous months’ data suggest structures will contribute a little more to real GDP growth in the second quarter, all things equal. The July report also suggests that the third quarter is off to a good start. Lodging, commercial and power were some of the largest contributors to the headline. Looking ahead, architectural billings, which typically lead construction spending by about a year, posted its third monthly increase in July.

Source: U.S. Department of Commerce and Wells Fargo Securities, LLC