New home construction rises in April

CNNMoney ^ | May 16, 2008 | Staff

[abb]

Initial construction of U.S. homes rose unexpectedly in April, according to a government report released Friday.

Privately owned housing starts rose to a seasonally adjusted annual rate of 1,032,000 in April, according to the Commerce Department. The rate was up 8.2% from March's revised reading of 954,000 but 30.6% lower than April of 2007.

Economists were expecting housing starts to decline to 940,000, according to consensus estimates compiled by Briefing.com.

Construction of new single-family homes, however, was at a rate of 692,000 in April, or 1.7% below March's number. That is the lowest reading of that measure since January 1991. Single-family homes are considered the core of the housing market.

Applications for building permits, considered a reliable sign of future construction activity, rose to a seasonally adjusted annual rate of 978,000 last month. That's 4.9% above the revised 932,000 rate in March. Economists were expecting permit applications to fall to 912,000.

The sharp drop in starts has been reflected in the plunging revenue and mounting losses of the nation's largest builders. D.R. Horton (DHI, Fortune 500), the nation's largest home builder by revenue, reported a larger than expected loss earlier this month, while two of its rivals, Pulte Homes (PHM, Fortune 500) and Centex (CTX, Fortune 500) both reported losses more than triple estimates late last month.

Earlier this week, luxury home builder Toll Brothers (TOLL) reported preliminary results showing a sharp decline in revenue and orders, as it said many buyers who put down a deposit on a new home are pulling out before they sign a sales contract. Of the nation's largest home builders, only NVR (NVR, Fortune 500) has managed to stay profitable. To top of page

[abb]

WE'RE DOOMED!!!!! no wait.

[abb]

http://www.marketwatch.com/news/story/economic-report-housing-starts-surge/story.aspx?guid={C706F371-4307-423D-891C-A27FF53E6737}&dist=hplatest

Housing starts surge on apartment construction
Single-family starts continue decline to 17-year low
By Rex Nutting, MarketWatch
Last update: 8:30 a.m. EDT May 16, 2008

WASHINGTON (MarketWatch) - U.S. home builders broke ground on 8.2% more homes in April, led by a 36% increase in multi-family units, the Commerce Department estimated Friday.
Housing starts rose to a seasonally adjusted annual rate of 1.032 million, far more than the 954,000 estimated for March or the 939,000 expected by economists surveyed by MarketWatch. It was the third increase in the past four months.

Starts of single-family homes declined for the 12th straight month, falling 1.7% to a seasonally adjusted annual rate of 692,000, the lowest since January 1991.
The increase is certain to bolster the argument of those who see a bottom in the housing slump. Others say that market suffers from a severe oversupply of homes and the last thing the market needs is new construction.

snip

[metesky]

Once again Spring, magical Spring works her wonders on the construction industry.
/s

[abb]

http://www.reuters.com/article/bondsNews/idUSN1531442420080516

April housing starts, permits up more than forecast
Fri May 16, 2008 8:42am EDT

WASHINGTON (Reuters) - Construction starts on new U.S. homes rose by a surprisingly strong 8.2 percent in April and applications for new building permits turned up for the first time in five months, the Commerce Department said on Friday in a report showing that the hard-hit housing sector still had some spring vigor.

Starts in April ran at a 1.032-million-unit annual rate, up from a revised 954,000-unit rate in March, while permits gained 4.9 percent to 978,000 a year from a revised 932,000 in March.

That was a significantly stronger performance than anticipated by economists surveyed by Reuters who had forecast April starts at a 940,000-unit rate and permits at 920,000 a year.

Construction has suffered as the housing industry copes with a wave of foreclosures and with inventories of unsold homes stemming from a subprime mortgage crisis that has made lenders wary and put pressure on builders to curb their inventories.

U.S. Treasury Secretary Henry Paulson and top Federal Reserve policy-makers have identified the housing downturn as the biggest single risk for the economy and Congress has been working feverishly on proposals for guaranteeing shaky mortgage loans to try to save homeowners from losing their homes.

On Thursday night, housing industry sources indicated that leaders of the U.S. Senate Banking Committee had reached a deal on a broad housing rescue plan in which mortgage giants Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research) will support a federal mortgage insurance fund.

The $300 billion fund would be run by the Federal Housing Administration and would offer loan guarantees to help refinance distressed mortgages, with borrowers agreeing to forgive portions of troubled loans.

(Reporting by Glenn Somerville; Editing by Joanne Morrison)

[skipper18]

“March’s revised reading of 954,000 but 30.6% lower than April of 2007”

The only part of the article that matters.

I think we need a financial press version of Newsbusters. The spin that seeps out of the financial MSM is pure sewage.

[lexusppd]

It's only anecdotal but I live in a golfing community in central NJ and within 3 blocks of my home there are presently 16 homes in various stages of construction. The reason IMO is the developer (Lennar) has slashed prices tremendously and people are reacting. WE only moved in in Feb and we enjoyed almost an $88,000 reduction (about 17%) off previous prices which until mid 2007 were not being discounted at all in this community.

As soon as the masses trying to sell their present homes wake up to the reality their place isn't worth what they think it's worth but only what someone will pay them for it, the next housing market cycle will begin. Also, given the depth of this housing pull back I expect when the market turns it will climb sharply due to the "compressed spring" phenomenon that says when a market is pushed down sharply and quickly the rebound is just as quick. And while I do not expect housing prices to immediately climb to 2004-5 levels I do believe they will be much higher in 2 years then they are today.

I don't think there has ever been a better time to buy a new home then now with prices heavily discounted and mortgage rates as low as they are.

[lexusppd]

It isn't that simple. It is the trend that matters and while 1 month is not a trend, housing permits are up.

When a market bottoms it doesn't send out a email to the world. It will slow it's descent then bump along doing not much of anything for some period of time and then will inexorably begin to creep upwards. All market downturns end, every single one of them without exception. This more then any other I can recall has been greatly over done due in part to the hysteria of the lamestream media. Are we at a bottom? I can't call the bottom any better then anyone else but I feel confident we are, if not there, within a super short distance of being there.

[Red Badger]

But...but....the BUBBLE! WHERE’S MY BUBBLE?.........

[taxcontrol]

Bottoming out or dead cat bounce?

[frogjerk]

Welcome to Free Republic, NJ neighbor!

[Buffalo Head]

Breaking news??

[am452]

Construction of new single-family homes, however, was at a rate of 692,000 in April, or 1.7% below March's number. That is the lowest reading of that measure since January 1991. Single-family homes are considered the core of the housing market.

[lexusppd]

Neighbor? LOL, what exit?

[frogjerk]

GSP 114

[Rebelbase]

IMO, This increase reflects local, independent builders taking advantage of the vacuum left by the national volume builders (tract builders) who pulled out of many regional markets.

The tract builders sell off their remaining lots at a discount when they pull out. The local guys build a better, custom quality home that makes the tract guy’s houses look like shipping crates.

In a nicely situated subdivision, which house do you think a buyer would prefer to purchase given that each home was in the buyer’s price range?

[Post-Neolithic]

Building permits for single family homes are down, have been down for the last 12 months. Inventory of unsold single family homes are up. What the media is failing to tell you is that the reason building permits are up is because there was a rise of 36 percent in apartment building permits.

Which should tell you one thing, people can't afford new homes and are moving into apartments. Amazing how the MSM can spin things with a few facts left out.

[lexusppd]

Building permits have always been measured using the same criteria. If multi housing permits are up the single family ones will IMO follow.

[lexusppd]

GSP 69

[Thoreau]

This is not a good thing. Right we need to burn off the housing inventory before prices can start to rise again. Building new homes in a declining market only adds to the inventory supply and works to lower prices further.

[old-and-old]

baffling. One would expect the “old” homes to be sold first, but what do I know and good news are good news.

[Natty Bumppo@frontier.net]

For a variety of reasons, including political bias, ignorance of economics, and a lack of basic analytical/statistical skills, the press has a three to six month lag on major economic issues.

The U.S. economy decidedly turned positive in the first quarter of 2008, even though GDP only grew by 0.6%.

Growth is improving in the current (second) quarter, and absent the usual “stupid human tricks” by the Fed and politicians, the third and fourth quarters could be very, very, good.

However, you won’t see any economic good news in the press until the second Wednesday of November at the earliest, and then only if a dim is elected President.

[dglang]

There is not much incentive to buy an old home when one can get a new home for less with the builder paying closing costs and giving financial incentives to buy from them. A new home is in perfect condition while an older home usually requires some fixup or repair.

We ae closing on a new home next friday after a few delays including one month lost after my wife lost her job. We signed the contract last October and consruction was finally completed a little over a month ago.

When buying a new home, the buyer can order a lot of custom enhancements or ‘options’ to get exactly what they want instead of only settling for what is already built. One can order both inter and exterior paint schemes as desired as well as other finishing touches.

We received $5,000.00 in options from out builder plus the builder is paying $7,000.00 of the closing costs. We were able to purchase with no money down and are getting over $6,000.00 cash back at closing on a 30 year fixed VA mortgate.

We are using the builders mortgage company to secure all the incentives. As it turns out, the builder doesn’t service the mortages themselves but immediately sells them to another underwriter.

[Polybius]

But...but....the BUBBLE! WHERE’S MY BUBBLE?.........

The Bubble is in lexusppd's neighborhood as described in his Post 6 where all those people paid far more for a house than buyers could afford without going bankrupt.

Those people now have mortgage obligations that exceed the market value of their houses and the supply of Greater Fools willing to buy their houses at Bubble prices has run out. They, in effect, bought Honda Accords for Ferrari prices.

In that other development, where the builder is selling brand new houses at sane prices that the buyer CAN afford without going bankrupt, there is no Bubble. That developer is building and selling Honda Accords for Honda Accord prices.

[lexusppd]

"The Bubble is in lexusppd's neighborhood as described in his Post 6 where all those people paid far more for a house than buyers could afford without going bankrupt."

Although the prices have dropped significantly in this particular development (I can't speak for other developments) I don't know that it was a bubble before since we have seen no foreclosures and not many people even have mortgages here since they are all over 55 and retired. Pinning down the definition of a bubble is difficult since a property is worth whatever someone is willing to pay for it. This development is about 5 years old and the price increases over that 5 years are difficult to track because the developer changed his method from selling basic homes and offering upgrades to their "Everything you want, everything you need" method in which no options are available and all homes are fully equipped.

[PghBaldy]

“Total housing starts got a boost from multi-family homes” SIngle-family was at lowest level since 1991. This is not good news.

[Polybius]

"The Bubble is in lexusppd's neighborhood as described in his Post 6 where all those people paid far more for a house than buyers could afford without going bankrupt."

Although the prices have dropped significantly in this particular development (I can't speak for other developments) I don't know that it was a bubble before since we have seen no foreclosures and not many people even have mortgages here since they are all over 55 and retired. Pinning down the definition of a bubble is difficult since a property is worth whatever someone is willing to pay for it.

If your neighborhood is relatively new and populated with buyers that bought before the Bubble madness, then your neighborhood is populated by people that bought houses at prices they could actually afford.

I own a rental property in a nice cul-de-sac in San Diego where I lived in the 1980's. During the Bubble and now during the "Crash", I am sure the alleged "price" of the house fluctuated wildly. I never bothered to find out. However, that did not affect me as the house was paid off long ago and I do not even consider its sale value in my retirement savings calculations any more than I consider Social Security. I also did not use the alleged equity in that house to borrow against it to finance my lifestyle.

I do not have a Bubble.

In the latest Bubble, the problem was not that people bought houses for what they were "willing to pay".

They bought house for what they were "PRETENDING to pay and, never in their wildest dreams, actually COULD pay".

Why?

Because mortgage brokers were churning out mortgages to anybody with a pulse and even 20 people in Ohio without a pulse (loan brokers there actually used the names of 20 dead people to create mortgages) in order to sell those mortgages to gullible, eager investors for a fat mortgage broker commission.

It was a scam no different that printing out counterfeit $10,000 bills.

Thus, some sucker bought a $400,000 house for $800,000 because a burger flipper at McDonald's or a dead corpse was bidding $780,000 for it.

That sucker, across the street in that same San Diego cul-de-sac, HE definitely has a Bubble.

[dangus]

What this is is neither good nor bad news; it’s the market responding to bad news. The need for housing is steadily increasing. Gas prices have made living in the suburbs less desirable, so people are moving to the cities. Houses are faster to start than apartment complexes, so the drop in housing starts predated the increase in apartment complexes, which is OK since there was some vacancy. The sorta bad news is that constructing apartments takes fewer workers than constructing houses. But then again, they’re all illegal aliens anyway ;^)

[stainlessbanner]

Here's something to ponder given your statement about gas prices pushing folks to move into the city....

With a glut of overpriced apartment-to-condo conversions, what happens to those units? Does the inflated condo-price fall to reasonable levels, or do those units go back to rentals?

[lexusppd]

I don’t know if the construction people where I am are illegals but you sure as hell need a Spanish-English dictionary to speak with any of them.

[lexusppd]

I understand what you are saying about mortgages for the dead and buyers living in fantasy land. But when you are talking of retired people, most who aren't even working you seldom get any of that. Ax I said very few of the people I have met even have mortgages and the majority of them sold their homes in northern NJ and NY where prices are much higher then here in central NJ. Therefore because they have lived in their previous homes so long the majority owned them outright and wound up with a nice cash windfall (and no mortgage) when they bought here.

[Polybius]

I understand what you are saying about mortgages for the dead and buyers living in fantasy land. But when you are talking of retired people, most who aren't even working you seldom get any of that. Ax I said very few of the people I have met even have mortgages and the majority of them sold their homes in northern NJ and NY where prices are much higher then here in central NJ. Therefore because they have lived in their previous homes so long the majority owned them outright and wound up with a nice cash windfall (and no mortgage) when they bought here.

Yep. They made money. Real money.

The early investors in the original Ponzi Scheme also made real money.

That is not to say they did an unscrupulous thing. Ponzi's original investors really believed his Scheme was legitimate and so did the early buyers in the housing Bubble.

Those early investors made real money. That attracted thousands of pidgeon. When the Ponzi Scheme unravelled, as it was destined to do, it was those later pidgeons left holding the time bombs that were then roasted alive.

If you downsized early during the housing Bubble, you made a good profit. (Early Ponzi investor who took his profits, got out and didn't get greedy)

If you upsized early during the housing Bubble, you are now in deep kimchee. (Long-haul Ponzi investor who stayed with the Ponzi Scheme to the end)

If you borrowed against your entire phony equity, you are now in deep kimchee as your debt is now greater than the true value of your house. (Long-haul Ponzi investor who stayed with the Ponzi Scheme to the end)

If you were a first time buyer that bought from the people who downsized early during the housing Bubble, you are now in deep kimchee. (Late arriving pidgeon that arrived just in time for the roasting)

If you held on to your old property and neither bought nor sold during the Bubble (my case), you are exactly where you were before as long as you did not believe in the phony increase of your your Bubble real estate wealth and did not spend as if that wealth was real. (Spectator to the Ponzi Scheme that neither gained nor lost real value)

[goodnesswins]

Yep, what you said....we’re going to build (corporate relocation) because everything we’ve looked at is TOO BIG, and, we can get what we want for less. (Except a larger lot.)

[jamndad5]

Just moved into a new tract in Bakersfield, Ca. Empty lots are being filled in short order. I’m stuned, I tell ya!