Macroeconomic Environment

New Home Sales

Source:U.S. Department of Commerce

New Home Sales Plunge to Lowest Level in Almost 30 Years

New home sales plunged 33% in May after the expiring homebuyer tax credit pushed sales in April to the highest level since August 2008. Most housing analysts expected a decline but not one this significant. "We all knew there would be a housing hangover from the expiration of the tax credit," said Mike Larson of Weiss Research, "but this decline takes your breath away." According to the U.S. Census Bureau, sales of newly constructed single-family homes dropped to a seasonally adjusted annual rate of 300,000 in May from a 446,000 rate in April. The 300,000 sales rate is the lowest rate since September 1981. April sales were revised downward by 58,000 units. The April 30 expiration of the federal homebuyer tax credit hit sales on new homes harder than existing homes because builders have low inventories and the construction must be completed in time to close by June 30. "Today's report was below expectations, but the underlying level of demand will not be apparent until the distortionary effects coming from the tax credit fade," said a report from Barclays Capital. "We expect new home sales to bottom over the next couple of months and to return to a gradual upward trend thereafter." National Association of Home Builders senior economist Bernard Markstein noted that the tax credit pulled sales forward, adding that it will be difficult to get a true reading of where the market is headed until sales settle out in July and August.

( June 23, 2010 )

Existing Home Sales

Source:National Association of Realtors

May Home Sales Disappoint but Some Positives in the Numbers

Sales of existing single-family homes fell 1.6% in May with the expiration of federal tax credits and problems with mortgagors obtaining flood insurance policies. The National Association of Realtors reported that sales of previously owned single-family homes fell to a seasonally adjusted annual rate of 4.98 million units from a 5.06 million rate in April. The homebuyer tax credit expired April 30, but buyers still have until June 30 to close and qualify for the benefit. Legislation is pending in Congress to extend the closing date into the fall. (NAR and other trade groups want a closing deadline of Sept. 30.) NAR chief economist Lawrence Yun noted that many sales are being delayed because of an interruption in the National Flood Insurance Program. "Approximately 180,000 home buyers who have signed a contract in good faith to receive the tax credit may not be able to finalize it by the end of June due to delays in the mortgage process, particularly for short sales," Yun said. NAR economists expect to see one more month of elevated home sales before they start to trail off. The trade group reported that the national median existing-home price for all housing types was $179,600 in May, up 2.7% from a year ago. During the month distressed home sales slipped to 31% of all purchases, compared to 33% in April and 33% in May 2009.

( June 22, 2010 )

Housing Starts

Source:U.S. Department of Commerce

Housing Starts Continue to Weaken

Single-family housing starts leveled off in June, dropping by 0.7%, following a 10% decline in May after the expiration of the federal homebuyer tax credit. The U.S. Census Bureau reported that single-family housing starts fell to a seasonally adjusted annual rate of 454,000 in June from a 457,000 rate in May. It was the lowest reading since October. One bright area of the report was an increase in building permit applications, a sign of future construction activity. They rose 2.1% from a month earlier to an annual rate of 586,000. Construction activity rose 3.6% in the South and 3.1% in the West, but fell 8.9% in the Northeast and 11.3% in the Midwest. "The housing industry remains stuck in a rut, with both sales and construction activity moribund," said Mike Larson, a housing analyst with Weiss Research. "Until we see signs of life in the labor market, we're just not going to see a robust recovery -- only more malaise." Builders broke ground on 88,000 multifamily units in June, down 19.3% from May. The figures were released a day after the National Association of Home Builders said they are confident that home buying will pick up steam in the second half of the year.

( July 20, 2010 )

Mortgage Employment

Source:Bureau of Labor Statistics/MortgageStats.com

Lenders Lay Off 700 As Workforce Reductions Slow

The mortgage companies shed only 700 full-time employees in May despite a gloomy third quarter outlook for originations and home sales. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banker/broker sector fell to 246,900 in May from 247,600 in April. After several years of payroll cutting, the industry's workforce has shrunk by only 7% since May 2009. That may be the good news, however. With the expiration of homebuyer tax credit, home sales and originations are expected to drop in the third quarter. The National Association of Realtors reported Thursday that its gauge of future home sales plunged 30% in May. Friday's job report shows that 22,000 construction workers lost their jobs in June after 35,000 were laid off in May. (There is a one-month lag in BLS' reporting of mortgage industry employment.) Some mortgage industry economists expect single-family originations could drop by 28% in the third quarter from the second quarter. But the recent drop in mortgage rates is sparking some hope for a pickup in refinancings. Mortgage Bankers Association chief economist Jay Brinkmann says the rate on the 15-year mortgage may prompt refinancings by homeowners who want to pay off their mortgage quicker with little increase in their monthly payments. Meanwhile, BLS reported that private sector firms hired 83,000 workers in June, up from 41,000 in May. The nation's unemployment rate edged down to 9.5%.

( July 2, 2010 )