Current state of real estate market

1. Weichert Financial Services
Market Monitor
I ssu e 10, V olu me 27 / J u ly 17, 20 09
Housing Starts Provides a Jolt The Week Ahead -> The “Keys”
By: Tim McLaughlin - Housing Data and Fed MBS purchases highlight
Housing starts in the U.S. unexpectedly rose in June as
construction of single family dwellings jumped by the most Date Economic Release Prediction Last
since 2004, signaling the market is stabilizing.
The 3.6 percent increase brought starts to an annual 7/20 Leading Indicators 0.5% 1.2%
rate of 582,000, the highest level since November and
followed a 562,000 pace in May that was higher than 7/21 Chicago Fed Activity Index - -2.3
previously estimated, the Commerce Department said
7/21 ABC Consumer Confidence - -51
today in a Washington. Building permits, a sign of future
construction, rose the most in a year. 7/22 MBA Mortgage Applications - 4.3%
Lower borrowing costs and plunging prices are making
houses more affordable, helping to stem the decline in 7/22 House Price Index (MoM) -0.2% -0.1%
sales and alleviating the worst housing slowdown since the
Great Depression. Stabilization would rid the economy of 7/23 Initial Jobless Claims 555K 522K
the drag from declines in residential construction that have
shaved almost a percentage point off growth over the last 7/23 Continuing Claims 6330K 6273K
three years.
7/23 RPX Composite 28 day (YoY) - -19.69%
“Builders are beginning to see some opportunities to get
back to work,” said Mark Vitner, a senior economist at 7/23 RPX Composite Index - 188.52
Wells Fargo Securities LLC in Charlotte, North Carolina.
While a strong rebound in “not likely for some time,” Vitner 7/23 Existing Home Sales 4.80M 4.77M
said, ‘it seems clear that housing starts bottomed in the
first quarter.” 7/23 Existing Home Sales (MoM) 0.6% 2.4%
Economists forecast starts would fall to a 530,000 pace,
from a previously reported 532,000 in May, according to 7/24 U of Michigan Confidence 65.0 64.6
the median of 73 forecasts in a Bloomberg News survey.
Last month’s reading exceeded the highest estimate, with Secondary Marketing Takeaways: Housing data,
projections ranging from 479,000 to 564,000. corporate earnings, and the amount of MBS the
Construction of single-family homes jumped 14 percent, Treasury/Fed (and others) continue to buy is having the
the biggest gain since Dec 2004, to a 470,000 rate. The biggest impact of all on interest rates, particularly
fourth consecutive increase brought single-family starts to mortgages, over the past week.
the highest level since October. Work on multifamily In terms of housing data (more optimistic than
homes, such as townhouses and apartment buildings, anticipated) and corporate earnings (reported 2Q
dropped 26 percent after surging 66 percent in May. earnings are coming in better than projected in most
The report “quite potentially is signaling the early stages cases), this has caused a run up in equities (the Dow,
of a rebound,” said Richard DeKaser, chief economist at S&P, etc), at the expense of Treasuries and MBS, which
Woodley Park Research in Washington, whose starts have been negatively impacted (money flowing out of
forecast was the highest among economists surveyed. “I safer Treasuries and MBS and into equities, given the
think stabilization would be more assured.” positive news).
The increase in starts adds to signs that the housing Although rates have backed off some degree given
slump is at the bottom. Combined sales of existing and this news over the past week, it has been “controlled”, to
new homes climbed to a 5.1 million annual rate in May, the some degree, by the continuing inflow of purchases by
highest level so far this year. the US Government, in addition to some foreign buyers
U.S. homebuilders are becoming less-gloomy about the jumping back into the fray for the first time in a while.
industry. The National Association of Home Builders/Wells At the end of the day, keep in mind that it is summer
Fargo index of builder confidence gained to 17 in July, the time, and with vacations and less buying/trading volume
highest level in 10 months, the group said yesterday. than usual, the market (and interest rates) always seem
Measures of current single-family sales and buyer traffic to be more volatile than usual this time of year.
increased.
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