(12-22-10 Release)

                               Nov    Oct   Sep    Aug     Jul     Jun     May     Apr

Total  EHS             4.68   4.43   4.53   4.12   3.84   5.26   5.66    5.79

Months’ Supply      9.5    10.5    10.6   12.0    12.5    8.9     8.3      8.4

 Source: National Association of Realtors; 2010; annualized, seasonally adjusted.

 Highlights

•  Existing home sales rose 5.6 percent to 4.68 annualized units in November from a month earlier.
• November existing home sales pace is 27.9 percent below the pace of a year ago but the year ago number’s were highly biased upward due to the homebuyer tax credit program.
• The months’ supply fell to 9.5 in November from 10.5 in October.
• The median existing-home price increased 0.4% on a year-ago basis.

 Analysis

The relatively healthy monthly rise in existing home sales reinforces the outlook for housing demand in light of the temporary setbacks in foreclosure proceedings. The resale market also experienced a meaningful drop in the inventory of homes available for sale, reflecting the postponements due to the moratoriums on foreclosure proceedings.  However, the drop in inventory will prove temporary when the moratoria are lifted.

Looking ahead, home sales are expected to post modest gains throughout the year. The key drivers of housing demand: jobs, income and confidence, are not expected to break out of last year’s funk anytime soon. And a homebuyer tax credit is not in the offing this year to provide a temporary boost in housing demand like it did in the first half of 2010.

2011 will likely be an improvement over last year, but a full recovery in housing is not in the cards. A less than stellar economy combined with an excessive amount of distressed sales and depressed home values will keep a full fledged recovery at bay.

(12-15-10 Release Date)

Dec    Nov   Oct    Sep    Aug   Jul     Jun    May

16      16      15      13      13      14      16      22

Source: National Association of Homebuilders

Highlights

• The housing market index was unchanged in December at 16 from a month earlier.
• The housing market index was unchanged from a year ago.

Analysis

Homebuilder confidence has been flat since January of 2010. However, a level of 16 is extremely low from a historical perspective, reflecting very low confidence among homebuilders. The good news is low builder confidence has left the homebuilding industry with a relatively lean inventory of new residential construction.

Looking forward, the homebuilding industry is poised for a recovery but it will not occur until the foreclosure situation is settled. According to RealtyTrac, over 2.2 million properties are somewhere in the foreclosure process, contributing to an excessive inventory situation as well as downward pressure on home values. Homebuilders are not expected to gain any meaningful confidence until 2012.

(12-16-10 Release)

                         Nov    Oct       Sep      Aug       Jul       Jun        May      

Starts           0.555  0.534   0.601   0.614    0.550   0.539    0.588  

Single           0.416  0.404   0.402   0.403    0.406    0.421   0.436   

Multi            0.114  0.148   0.145   0.168    0.153    0.162   0.138  

Permits        0.530 0.552    0.547  0.571     0.559     0.583   0.574   

Source: Census Bureau; 2010; annualized, seasonally adjusted.

Highlights

• Housing starts rose 3.9% in November to 555,000 annualized units from October.
• Single family starts in November were up 7%, while multifamily starts declined 9% from a month earlier.
• Total starts are down 5.9% from a year ago.
• Housing permits dropped 4% in November to 530,000 from October; however, the drop in permits is attributed to a 13.8% drop in multifamily permits; single family permits were up 3 percent.

Analysis

It’s good to see new residential construction activity pick up towards the end of 2010. But the drop in housing permits is not an encouraging sign for future new residential construction.

Looking forward, homebuilders remain cautious due to a sluggish labor market; housing starts have been lifeless for the past two years, hovering below a 600,000 unit pace since the beginning of 2009. Residential construction is expected to gain only modest traction in 2011 due to less-than robust job gains expected this year and to a disproportionate amount of distressed sales. Foreclosure moratoriums which created robo-signing problems were a short-term fix; when the robo issues are resolved and the moratoriums are lifted, supply will be in excess once again.

(12-30-10)

Nov   Oct    Sep    Aug   Jul     Jun

PHS Index    92.2   89.1   80.9   82.4   78.9   75.5

Source: National Association of Realtors; Index, 2001=100.

Highlights

• The pending home sales index rose 3.5% in November to 92.2 from an index of 89.1 in October.
• November’s index is 5% below the index from a year ago.

 Analysis

The 3.5% increase in the pending home sales index was expected. Existing home sales hit bottom this summer and have increased since. However, the level of the index remains low compared to 2009, suggesting that housing demand remains relatively weak.

Given that existing home sales hovers well below the 5 million units mark, we expect the pending home sales index to continue its modest ascent throughout 2011.  In fact, affordability conditions have improved markedly over the past two years,  providing a favorable backdrop for home buying in 2011, but only if the economy can expand sufficiently to generate healthy job growth.

In the near term, its possible home sales could slacken due to current loan processing moratoriums that are expected to temporarily reduce the number of foreclosure sales. But in the longer-term, foreclosures will once again flood the market, propping up the home sales numbers.

(1-5-11 Release Date)

                    31Dec         24Dec         17Dec         10Dec         26Nov

Refi Index    2,115.4       2,036.9        2,196.1        2,910.9        2,974.4       

Purchase      199.8          201.4             195.3           200.3            210.9

Index

Source: Mortgage Bankers Association

Highlights

•  The refi index rose by 3.9% to 2,115.4 for the week ending December 31.Ø The purchase index fell by just 0.8% to 199.8 for the week ending December 31.
• The refi index is down 27.9% from four weeks ago, while the purchase index is down 5.3% from four weeks ago.
• 30-year mortgage rates ended the week at 4.82%, down 11 basis points from a week ago and up 16 basis points from four weeks ago.
• One-year adjustable mortgage rates ended the week at 7.08%, down 8 basis points from a week ago and unchanged from four weeks ago.
• Refinance applications accounted for 71% of total applications, while purchase applications accounted for 29%.

Analysis

Improvement in mortgage applications is entirely due to refinancings due historically low mortgage rates.  Unfortunately, mortgage applications to purchase homes have been dreadful for some time now. A modest expansion, sluggish job growth and unsteady consumer confidence have been the primary contributors to weak housing demand.

Looking forward, modest growth in housing demand is expected during the next several quarters; but with a continuing foreclosure problem combined with depressed home values, the nation’s housing sector is far from a healthy recovery. Hopefully, sometime in 2012 signs of health will be seen.

(10 & 20 City Indices)

                                       % chg yr/yr                 %chg mo/mo

Boston                                -0.2                               -1.2

Chicago                             -6.5                                -2.0

Denver                               -1.8                               -0.6

Las Vegas                          -3.6                               -0.2

Los Angeles                       3.3                              -0.7

Miami                                 -3.4                              -1.1

New York                          -1.7                             -1.6

San Diego                           3.0                             -1.5

San Francisco                   2.2                            -1.9

Washington, DC               3.7                            -0.2

Source: Standard & Poor’s/Fiserv

Highlights

•  The 20-city composite index fell 0.8% year over year, while the 10-city index rose by only 0.2%.
• The 0.8% drop was the index’s first decline since January.
• Chicago experienced the largest year over year decline at 6.5%, while Washington, Dc experienced the greatest increase in home values from a year earlier at 3.7%.
• From its peak, the 20-city index is down almost 30%, while the 10-city index is down by the same percentage.

 Analysis

Home values are dropping faster than anticipated since existing home sales actually nudged up a bit during the August to October period. But the foreclosure moratoria in October and beyond, suggests that home values may not fall by as much in the next Case-Shiller home price report. This is merely a timing issue; delaying the inevitable-falling home prices. We expect home values will drop precipitously during the first quarter of this year.

Eventually, towards the end of this year and into 2012, home values will stabilize as foreclosure sales lessen. It is likely that we are now on the downside of the foreclosure pipeline. Expect home values to reach bottom sometime between the second and third quarter of this year.

(12-23-10 Release Date)

 Nov    Oct    Sep    Aug    Jul      Jun     May    Apr

Total NHS              0.29  0.28    0.31  0.27   0.28   0.31    0.28    0.41

Months’ Supply      8.2      8.8      7.9    9.1    8.9     8.2      9.2      6.3

Source: Census Bureau; 2010, annualized, seasonally adjusted.

Highlights

• New home sales rose 5.5 percent to 290,000 annualized units in November from a month earlier.
• November’s new home sales pace is 21 percent below the pace set a year ago.
• The months’ supply of new homes fell slightly to 8.2, reflecting a rise in November’s sales pace but there was also a slight drop in the number of units available for sale during the month.
• The median new home price dropped 2.8 percent in November from a year ago.

Analysis

The new home sales numbers were a bit of a disappointment; the monthly increase was less than expected.  The pace of new home sales remains historically low, reflecting weak and tenuous housing demand. Weak demand for new homes has kept homebuilder confidence levels low. On a positive note, the inventory of new homes available for sale remains lean; homebuilders’ inventory is close to a 40-year low.

Looking ahead, home sales-new and existing-are expected to post modest gains throughout the year. The key drivers of housing demand: jobs, income and confidence, are not expected to break out of last year’s funk anytime soon. And a homebuyer tax credit is not in the offing this year to provide a temporary boost in housing demand like it did in the first half of 2010.

2011 will likely be an improvement over last year, but a full recovery in housing is not in the cards. A less than stellar economy combined with an excessive amount of distressed sales and depressed home values will keep a full fledged recovery at bay.