Thursday, April 26, 2012

US Housing

The latest housing indicators are mixed. I’m inclined to believe that the mild winter weather did exaggerate the strength of the single-family housing market earlier this year. On the other hand, the strength in multi-family housing construction is more fundamental. Let’s have a closer look at the latest data:

(1) There are a few motivated buyers in the housing market. When I visited with our accounts in Toronto last week, I was surprised how often I was asked about the US housing market. Along the way, I realized that Canadians are intensely interested in this subject because many of them have been buying second homes at bargain prices in Florida and Arizona, where they like to spend their vacations during the winter. I’ve also heard that US investors are buying houses in bulk and renting them out because the yield on such investments is very attractive.

(2) However, single-family housing is still struggling to recover. Canadian snowbirds and American landlords have been cherry-picking undervalued properties in the US. They’ve helped to put a floor under the housing market. However, it isn’t obvious yet that the fundamental demand for year-round, owner-occupied, single-family homes by Americans is making a sustainable comeback. Single-family housing starts, building permits, and new home sales remain depressed through March. While single-family existing home sales edged down in March, they remain on a slow uptrend that may be driven by some bargain hunters, landlords, and snowbirds.

(3) Multi-family starts and building permits are leading the housing recovery. Such permits rose in March to the best pace since August 2008, signaling that multi-family starts should continue to recover. The former is up 231% since October 2009, while the latter is up 169% since July 2009.

(6) Home prices are still on the weak side in lots of places. As a result, would-be homebuyers aren’t rushing to buy in advance of price increases as they did so often in the past before the housing bubble burst. According to the S&P/Case-Shiller survey for February, home prices fell to new cyclical lows in Atlanta, Charlotte, Cleveland, Chicago, Las Vegas, Los Angeles, New York, Portland, Seattle, and Tampa. They’ve been flat over the past year in all the other cities monitored by this survey. (See our Analyst’s Handbook: Real Estate.)

Today’s Morning Briefing: Go With the Flow (1) So crude? (2) Doing a world of good. (3) Oil prices sagging despite supply disruptions. (4) All it takes is reversing the flow in a pipeline. (5) Narrowing the spread between Brent and WTI. (6) Firing up some refineries. (7) Hard to be bearish with so many expecting a correction and all the positive earnings surprises. (8) Technology is bearing fruit. (9) Industrials have earnings momentum. (10) Austerity is falling out of fashion in Europe. (11) Moving the goal line in Europe. (12) The Fed’s latest forecast and next meeting. (More for subscribers.)

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