Apartments help propel new home construction

A bit of good national housing news from the Associated Press that isn't applicable to much of Florida:

Construction of new homes posted the biggest increase in more than two years in April. While it was a rare spot of good news for the housing market, analysts said it's far too soon to declare an end to the prolonged slump.

The Commerce Department reported Friday that housing construction rose by 8.2 percent in April to a seasonally adjusted annual rate of 1.03 million units. Building of single-family homes continued to weaken, however. The growth came from a big jump in apartment construction.

Analysts predicted the surprising rebound in April would be temporary given the headwinds builders are still confronting, from slumping sales to soaring home foreclosures.

"It is definitely too early to uncork the champagne on the long and winding road to more-healthy housing-market conditions," said Brian Bethune, an economist at Global Insight. He said he did not expect housing activity to stabilize until the end of this year.

The prolonged slump in housing has been a major drag on the overall economy, raising worries that the country is in danger of falling into a recession. A second report Friday showed that consumer confidence as measured by the University of Michigan/Reuters survey fell to a 28-year low of 59.5 in early May, down from 62.6 in April. The drop was blamed in part on rising concerns about higher gas and food prices.

The strength in housing construction in April came entirely from a huge increase in apartment construction, which can be extremely volatile from month to month. Building of apartments, defined as two or more units, jumped by 36 percent to a seasonally adjusted annual rate of 340,000 units.

In the Tampa Bay area, despite a glut of rental condos, apartment construction has been fairly brisk. Hillsborough County has been the focal point, with 11 complexes under construction from Brandon to Tampa's Channelside to the Westshore business district.

Though Pinellas County had no active apartment projects as of the start of the year, 7 projects totaling 2,000 units are in the planning pipeline.

"Demand for rental housing is, in some respects, greater than ever," said Michael Slater, whose Tampa company Triad Research & Consulting specializes in the apartment industry. Thousands of people pushed out of homes by foreclosures often turn to apartments, Slater said.

The larger single-family sector dropped by 1.7 percent to an annual rate of 692,000 units. It was the 12th consecutive monthly decline and pushed single-family building activity to its lowest point in 17 years, since a severe housing slump in the early 1990s.

At least someone's making a real estate killing

From the Palm Beach Post:

Donald Trump on Thursday morning publicly acknowledged he has a contract to sell his Palm Beach mansion for $100 million.

Then, in a roundabout way, the billionaire real estate mogul confirmed what everyone on the island already knows: That he has sold the former Abe Gosman mansion to a Russian.

"I just sold a house in Palm Beach for a number of approximately $100 million," Trump told the hosts of CNBC's Squawk Box during a wide-ranging interview on the economy.

Trump recently signed a contract to sell his 80,000-square-foot estate to an unnamed foreign buyer at the full asking price of $100 million, The Palm Beach Post revealed Thursday. The 6-acre estate is located at 515 N. County Road.

Trump bought the property, the former home of health-care magnate Abe Gosman, for $41.35 million in 2004, following Gosman's bankruptcy filing. Trump then poured $25 million into a renovation. He priced the home at $125 million when he put the estate up for sale in 2006.

This year, however, Trump dropped the price to $100 million.

If the Trump deal closes, it will set a record in Palm Beach. The standing record is $81.5 million, paid in April for the home of billionaire businessman Sidney Kimmel. The buyer of that home, at 1236 S. Ocean Blvd., was former Goldman Sachs partner John Thornton.

Maybe he could reinvest some of the profits into Trump Tower Tampa. It's not looking too good lately, unless you like abandoned lots festooned with tattered banners.

National Realtors group gropes for bargains in Bismarck

Industry groups have the right - nay the duty - to promote their members. But sometimes the search for golden nuggets among the dross goes to extremes.

Take the National Association of Realtors report that came out this week touting housing success stories.

It praised rising condo markets in such locales as Bismarck, N.D., and New Orleans. Winter wheat and Katrina clean-up: We're not talking Key Biscayne here. The report also played up bargains in the Rust Belt. Anyone for Youngstown, Ohio, Decatur, Ill, and Saginaw, Mich?

One of "success stories" stuck in my craw for personal reasons. NAR praised Elmira, N.Y. for its 10 percent home price rise the past year. It was the second biggest price jump in the whole Northeast. That happens to be my hometown. Family and friends live there. Let's make one thing clear: The rise is misleading statistical bunk.

Though its local focus was a bit silly, the report was helpful in one regard: It revealed that 48 of the 149 metropolitan statistical areas monitored by NAR had higher median single family home prices year over year. Even with Elmira-like anomalies in the mix, it's reassuring to know not every market is tanking.

Here's the full report.

Mixed bag: Foreclosures down in Pinellas, up elsewhere

When it comes to foreclosures in April, not all counties in the Tampa Bay area were created equal.

In the past couple weeks we've reported how home prices are dropping more steeply in the suburbs where the building spree was most intense. It's probably no surprise that foreclosures are mirroring that trend.

Here's what the RealtyTrac numbers are saying:

• Pinellas County saw foreclosures dip 19 percent from March to April. About 996 foreclosure filings were counted in April, or one for every 503 households. Year over year, such filings were up 63 percent. Pinellas ranked 29th in the state for mortgage default filings, which places it in the middle somewhere.
• Pasco County reported foreclosures filings were up 13 percent from March to April for a total of 728. That's one in every 292 households. Pasco ranked 15th in the state for homes entering the foreclosure process. Year over year, mortgage default filings were up 94 percent in April.
• Hillsborough County reported 1,889 foreclosure filings in April, a 9 percent increase from March. About 1 in every 268 households was so affected, placing Hillsborough 15th in the state. Foreclosures were up 157 percent from April 2007 to April 2008.
• Hernando County came off the worst. Its 561 filings ranked it 4th in the state, up 226 percent from a year earlier and up 135 percent from March. About 1 in every 138 households were affected.

A few words of warning about the RealtyTrac data: The company tends to double count filings against a single property, so the totals aren't as high as they seem. What's more, that Hernando increase from March to April - 135 percent - seems suspiciously high considering neighboring Pasco's foreclosures were up only 13 percent month to month.

Florida Realtors see hopeful signs in quarterly home report

Can you say more of the same?

The Florida Association of Realtors released it 1st quarter housing report taking in sales for the first three months of 2008.

Needless to say, the details are scarcely different from the individual reports from January, February and March that we've already posted on here.

Here's the Tampa Bay area tallies:

Single family home sales: 4,831 in 1st Q 2008 versus 6,416 in 1st Q 2007, -25 percent

Condo sales: 1,188 in 1st Q 2008 versus 1,289 in 1st Q 2007, -8 percent

Single family median sales price: $179,600 in 1st Q 2008 versus $210,300 in 1st Q 2007, -15 percent

Condo median sales price: $153,000 in 1st Q 2008 versus $171,900 in 1st Q 2007, -11 percent

The state Realtor association sees some positive trends going into the 2nd quarter of this year:

“If we look at what is happening month-over-month for 2008, it appears that the bottom of the housing slowdown may be here,” 2008 President Chuck Bonfiglio said. “We are now seeing more activity, more sales and even prices starting to rise in some markets. So I believe that there are some really good signs in many areas of our state.”

When it came to sales and price declines among single family homes, Tampa and the state paralleled each other pretty closely. Sales statewide dipped 26 percent and the median price fell 15 percent.

It was a different story with condos. Despite a glut of condos for sale in places like Tampa and Clearwater, sales and price declines weren't as steep locally as they were in the rest of Florida.

Two theories why that was true: In the Tampa area, condos remains a relatively affordable option when house prices rise out of reach. Secondly, collapsing condo markets like Miami's probably brought down the state average.

Is the Tampa housing market kissing the bottom?

This could be the turning point we've been waiting for.

The Greater Tampa Association of Realtors (GTAR) reports that 1,235 homes sold in April. That includes houses, town homes and condos.

Here's the encouraging news: Sales are almost unchanged from the 1,249 homes that sold in April 2007. That represents a tiny 1 percent sales decline.

It's a huge shift from the year-over-year declines reported in the first three months of 2008. Take January: Sales in January 2008 were 791, a 29 percent plunge from the 1,121 homes that sold in January 2007.

The average sales price is down 15 percent the past year, so maybe discounted homes are stimulating demand. 

The inventory of homes for sales has dropped only a hair the past year, from 20,409 in April 2007 to 20,117 in April 2008. Measured in months, that's a 16 month supply of homes on the market. Realtors says a balanced market has about 6 months worth of homes for sale.

For more information read this chart: Download gtarapril.pdf

Foreclosures improve nationally/Tampa fails to get message

A bit of good news released Monday.....

The nation’s foreclosure hemorrhage slowed a bit last month. Lenders repossessed 74,570 homes following foreclosure in April, down more than 5% from March. April pre-foreclosures dropped 7.52% from March too, according to California-based ForeclosureS.coms.

“The sky isn’t falling, and the bottom of the housing market is in sight,” says Alexis McGee, foreclosure information expert, educator, and president of ForeclosureS.com.

Followed by a more sober local reality courtesy of the same company....

1. Pinellas County: 5,524 preforeclosures so far this year, 1.33 percent of households
2. Hillsborough County: 9,074 preforeclosures so far this year, 2.32 percent of households
3. Pasco County: 4,936 preforeclosures so far this year, 3.34 percent of households
4. Hernando County: 1,940 preforeclosures so far this year, 3.5 percent of households

Florida as whole has had 162,316 preforeclosure filings, or 2.56 percent of households, so Pinellas and Hillsborough are below the state average and Pasco and Hernando are higher than average.

Conclusions? The nation will heal before Florida does. We had more foreclosure filings than California, though it has about twice our population, according to foreclosures.com.

Also, the higher rates of mortgage default in the newer, northern suburbs highlight once again how speculative over-building caused a lot of our mess.

Here's the press release from the company

And here's another view: Crisis far from over

After the Wall Street Journal columnist's cheery projection (see posting below), here's the ulcer-encouraging outlook from The Economist. The author assumes we're only half way through the housing bust and prices are set to fall much further, particularly in places like Florida. A key quote:

The discrepancy between supply and demand suggests that prices could fall a lot more. By historical standards there is a huge glut of unsold homes on the market. The homeowner-vacancy rate—which includes all vacant homes for sale—has soared to a record level of 2.9%, which means that there are some 1.1m “excess” houses for sale compared with the average between 1985 and 2005. Although the inventory of new homes is falling as builders have slashed their production, the supply of homes for sale is being pushed up by foreclosures even as demand from new homeowners remains weak.

Read the whole thing.

Wall Street Journal: Housing "crisis" over

This article from last week makes some good points about a pending housing recovery. Of course, it uses a broad national brush and isn't specific to Florida:

The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now.

How can this be? For starters, a bottom does not mean that prices are about to return to the heady days of 2005. That probably won't happen for another 15 years. It just means that the trend is no longer getting worse, which is the critical factor.

Most people forget that the current housing bust is nearly three years old. Home sales peaked in July 2005. New home sales are down a staggering 63% from peak levels of 1.4 million. Housing starts have fallen more than 50% and, adjusted for population growth, are back to the trough levels of 1982.

Furthermore, residential construction is close to 15-year lows at 3.8% of GDP; by the fourth quarter of this year, it will probably hit the lowest level ever. So what's going to stop the housing decline? Very simply, the same thing that caused the bust: affordability.

The boom made housing unaffordable for many American families, especially first-time home buyers. During the 1990s and early 2000s, it took 19% of average monthly income to service a conforming mortgage on the average home purchased. By 2005 and 2006, it was absorbing 25% of monthly income. For first time buyers, it went from 29% of income to 37%. That just proved to be too much.

Prices got so high that people who intended to actually live in the houses they purchased (as opposed to speculators) stopped buying. This caused the bubble to burst.

Since then, house prices have fallen 10%-15%, while incomes have kept growing (albeit more slowly recently) and mortgage rates have come down 70 basis points from their highs. As a result, it now takes 19% of monthly income for the average home buyer, and 31% of monthly income for the first-time home buyer, to purchase a house. In other words, homes on average are back to being as affordable as during the best of times in the 1990s. Numerous households that had been priced out of the market can now afford to get in.

The next question is: Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.

In the past five major housing market corrections (and there were some big ones, such as in the early 1980s when home sales also fell by 50%-60% and prices fell 12%-15% in real terms), every time home sales bottomed, the pace of house-price declines halved within one or two months.

The explanation is that by the time home sales stop declining, inventories of unsold homes have usually already started falling in absolute terms and begin to peak out in "months of supply" terms. That's the case right now: New home inventories peaked at 598,000 homes in July 2006, and stand at 482,000 homes as of the end of March. This inventory is equivalent to 11 months of supply, a 25-year high – but it is similar to 1974, 1982 and 1991 levels, which saw a subsequent slowing in home-price declines within the next six months.

Inventories are declining because construction activity has been falling for such a long time that home completions are now just about undershooting new home sales. In a few months, completions of new homes for sale could be undershooting new home sales by 50,000-100,000 annually.

Inventories will drop even faster to 400,000 – or seven months of supply – by the end of 2008. This shift in inventories will have a significant impact on prices, although house prices won't stop falling entirely until inventories reach five months of supply sometime in 2009. A five-month supply has historically signaled tightness in the housing market.

Many pundits claim that house prices need to fall another 30% to bring them back in line with where they've been historically. This is usually based on an analysis of house prices adjusted for inflation: Real house prices are 30% above their 40-year, inflation-adjusted average, so they must fall 30%. This simplistic analysis is appealing on the surface, but is flawed for a variety of reasons.

Most importantly, it neglects the fact that a great majority of Americans buy their houses with mortgages. And if one buys a house with a mortgage, the most important factor in deciding what to pay for the house is how much of one's income is required to be able to make the mortgage payments on the house. Today the rate on a 30-year, fixed-rate mortgage is 5.7%. Back in 1981, the rate hit 18.5%. Comparing today's house prices to the 1970s or 1980s, when mortgage rates were stratospheric, is misguided and misleading.

This is all good news for the broader economy. The housing bust has been subtracting a full percentage point from GDP for almost two years now, which is very large for a sector that represents less than 5% of economic activity.

When the rate of house-price declines halves, there will be a wholesale shift in markets' perceptions. All of a sudden, the expected value of the collateral (i.e. houses) for much of the lending that went on for the past decade will change. Right now, when valuing the collateral, market participants including banks are extrapolating the current pace of house price declines for another two to three years; this has a significant impact on the amount of delinquencies, foreclosures and credit losses that lenders are expected to face.

More home sales and smaller price declines means fewer homeowners will be underwater on their mortgages. They will thus have less incentive to walk away and opt for foreclosure.

A milder house-price decline scenario could lead to increases in the market value of a lot of the securitized mortgages that have been responsible for $300 billion of write-downs in the past year. Even if write-backs do not occur, stabilizing collateral values will have a huge impact on the markets' perception of risk related to housing, the financial system, and the economy.

We are of course experiencing a serious housing bust, with serious economic consequences that are still unfolding. The odds are that the reverberations will lead to subtrend growth for a couple of years. Nonetheless, housing led us into this credit crisis and this recession. It is likely to lead us out. And that process is underway, right now.

"Steep losses" predicted for Tampa housing market

Oh Boy. We've made a Top 10 list for "markets set for steep losses" We're No. 7, behind Miami, Orlando, Lauderdale and host of other Sunbelt underachievers.

Money magazine predicts our prices will drop 17.1 percent in the next year and won't hit bottom until January 2010.

Money provides no obvious supporting documentation for its analysis, at least on its Web link. It seems to base its prediction largely on the region's foreclosure rate.

Equally confusing is its claim that our median home price is $200,000. February's median single family home price in the Tampa region was $178,900, according to the Florida Association of Realtors.

That would affect the 17.1 percent depreciation prediction, wouldn't it? It would bring our median price to $166,000 in the next year, even though Realtors says we're already more than half way there.

Click here for the gory forecast.