Places for Home Builders to Dig In

Where are the best markets to build and sell new homes these days?

Amid a flurry of housing news this week, including President Barack Obama’s latest mortgage-refinance proposal, comes an interesting piece of real-estate analysis in the building sector. Houston-based Metrostudy has analyzed the strongest markets for home builders. They include: San Diego; Southern California; Texas’s Rio Grande Valley; St. George, Utah; and Orlando.

The research is by Brad Hunter, chief economist at Metrostudy, a company that, among other things, sends observers out each month to hundreds of new-home communities to count how many single-family homes are under construction, occupied and vacant. Metrostudy’s work is a complement to the U.S. Census’s monthly housing starts numbers and vacancy survey.

Mr. Hunter’s analysis of about 80 markets found that most areas saw housing starts fall in the fourth quarter. (Housing starts in November reached a 19-month high, but they were flat the following month.)

There were a few other key points in Metrostudy’s analysis:

1. San Diego, which showed some signs of recovery in home prices earlier this year, showed “significant strength” towards the end of the year. Construction began on 440 new homes there in the fourth quarter of 2011, a 46.7% increase over the previous quarter. Part of this increase comes because the third quarter numbers were abysmal. But San Diego also showed a 72.8% increase in absorption of new homes, meaning more houses are selling and supply is shrinking, making it a good market for builders.

2. A few of the usual suspects are some of the worst new-home markets in the country, including exurban Central California (starts down 8.2% in the fourth quarter compared with the prior quarter) and Las Vegas (32.9% decrease) as demand continues to lag there and inventory remains roughly flat.

3. Northern Virginia, which has stayed relatively strong during the housing downturn because of its proximity to job centers related to the federal government, is starting to falter. Metrostudy found that starts of single-family detached homes there fell 22.1% in the fourth quarter, and at year end, home construction was down 14.7% annually. Fewer people are moving in as well, as absorption fell 10.9% in the quarter, and inventory rose 17.7%, the highest level of any market observed.

Taste for Spanish Property Is Tested

Two cash-strapped Spanish regions are rushing to close sales of more than 100 office buildings to U.K. and U.S. money managers for about $1.17 billion, in this year’s first big test of investor appetite for Spain’s battered property sector.

Momentum Seen for Home Improvement Spending

Spending
on home improvements and remodeling have shown signs of a rebound and the
Remodeling Futures Program at the Harvard Joint Center for Housing Studies is
projecting that sector of the economy will end 2012 on a positive note.

The
Joint Center produces the Leading Indicator of Remodeling Activity (LIRA) each
quarter.  It is designed to estimate
national homeowner spending on improvements for the current quarter and the
following three quarters.  The indicator, measured as an annual rate-of-change
of its components, provides a short-term outlook of homeowner remodeling
activity and is intended to help identify future turning points in the business
cycle of the home improvement industry.

The
figures from the most recent quarter, the fourth quarter of 2011, showed an
estimated four-quarter moving total of $112.4 billion in home improvement
spending compared to $113.8 billion in the third quarter.  This number is expected to dip further in the
first quarter of 2012, to $108.1 billion before starting to build at mid-year.

 “Sales of existing homes have been increasing
in recent months, offering more opportunities for home improvement projects,”
says Kermit Baker, director of the Remodeling Futures Program at the Joint
Center.  “As lending institutions become less fearful of the real estate
sector, financing will become more readily available to owners looking to
undertake remodeling.”

…(read more)

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Homeowners Stop Waiting to Spruce Up

Americans are stepping up spending on home improvements for the first time in years, giving a small lift to the beleaguered construction sector.

Housing Inventory Ends Year Down 22%

There were fewer homes listed for sale at the end of 2011 than in any of the previous four years, a positive sign for the housing sector.

But appearances can be deceiving, and it remains to be seen whether the drop is the beginning of a real recovery or if inventory is being held down by sellers waiting for prices to pick up and banks moving slowly on foreclosures.

The 1.89 million homes on the market at the end of December represented a 6% decline from November and a 22.3% decline from one year ago, according to data compiled by Realtor.com.

Low inventories are an important ingredient for any housing recovery because prices could firm up in markets that have worked through their inventory.

Still, some real-estate agents aren’t celebrating because there’s a large backlog of potential foreclosures that haven’t yet been taken back and listed by banks. The inventory declines are particularly pronounced in certain states where banks have sharply slowed down foreclosures to correct document-handling abuses.

Moreover, some sellers have pulled their homes off the market to wait for a turn in prices, and that “pent up” demand from sellers could keep inventories higher once prices do rise.

Inventories were down for the year in all but one of the 145 markets tracked by Realtor.com, with Springfield, Ill., posting the only year-over-year inventory gain. The largest declines were recorded in Miami (-49.7%), Phoenix (-49.1%), and Bakersfield, Calif. (-46.6%).

The Realtor.com figures include sale listings from more than 900 multiple-listing services across the country. They don’t cover all homes for sale, including those that are “for sale by owner” and newly constructed homes that aren’t always listed by the services.

Nationally, median prices were down by 1% from November but up 5% from one year ago. Asking prices rose by 32.5% in Miami last year, with big increases in other Florida markets that include Naples (21.7%), Fort Myers-Cape Coral (21.5%), and Punta Gorda (19.4%).

Median asking prices fell from year-earlier levels in Detroit (-11%), Chicago (-10%), Las Vegas (-7.6%) and Sacramento, Calif. (-7%).

Inventories traditionally decline in December as sales slow during the holiday season. Listings have declined by 11% in December over the past 29 years, according to research firm Zelman & Associates.

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