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× Like us and you'll find top breaking news in your Facebook newsfeed. Sign up for our daily email newsletter and get top stories and breaking news delivered to your inbox. Monday, April 30, 2012, by Sarah Firshein
A Tale of Two Housing Markets: Single and Multi Family
The numbers are in, the analysts are out, and given the volatility of this particular economic indicator, the spin is at full speed: 
“Good News on Housing Permits More Than Offsets the Bad News on Starts”— HIS Global Insight “Housing Starts Decline Again” – Capital Economics “March Multifamily Starts Down; Permits Continue Upward Trend”— KBW “March Construction Numbers Aren’t As Bad as They Look”— Trulia.com “Housing Starts Lacking Consumer Confidence” — Sageworks Inc. Here’s the problem: We are living a tale of two housing markets, single and multi-family. Depending on what kind of builder or investor you are, you’re going to see the housing starts numbers differently. Let’s weed through it first: Total starts fell 5.8 percent, driven by a nearly 20 percent drop in multi-family. Single family was essentially flat month-to-month. But remember, multi-family is a very volatile number and can swing 20-30 percent monthly due to large local projects. Yes, they are both ahead from last year, but 2011 was the worst year in the history of U.S. home building. “The further fall in housing starts in March means that about a third of the past year’s improvement in homebuilding has now been undone. But the continued rise in building permits is an encouraging sign which suggests that housing starts will improve again later this year,” writes Paul Diggle at Capital Economics. Building permits are always seen as a better indicator of construction, or at least more dependable and less influenced by weather. Single family permits dropped 3.5 percent month to month, but multi-family surged ahead 24 percent to the highest level in four years. “The pickup in multifamily construction is taking place most noticeably in the South and West—again, not a big surprise—since 46 of the 50 fastest-growing metro-area populations from 2010 to 2011 were in the South or West, according to the Census Bureau,” writes IHS Global Insight’s Patrick Newport. Clearly we’re still seeing big demand in the multi-family sector, but single family is still faltering. “Single family is more of a restocking issue,” said Morgan Stanley’s Oliver Chang on CNBC. “In order to meet baseline demand, they [builders] have to build.” Chang says real growth in single family demand just isn’t there, due to a still tightening credit market. On the flip side, he claims that distressed housing has stabilized and distressed home prices have bottomed; that’s because investors largely use cash. So if there’s all this demand for single family rentals, and investors are rushing to get in, is there still enough demand for all this multi-family construction? “Bottom line, with the secular decline in home ownership, multi-family construction will be where it’s at for a few years but still only make up about 30 percent of total starts. Single family starts still have the intense competition with foreclosures and now rent seekers,” writes Peter Boockvar of Miller Tabak. So why, as we asked yesterday after the disappointing builder sentiment report, did single family starts, permits and sentiment rise through the fall and the winter only to slam on the breaks? Newport calls that one a “head scratcher,” and adds, “If the builders have gotten ahead of the game, single-family construction will go through a demoralizing slowdown later this year.” Questions? Comments? document.write("");document.write("RealtyCheck"+"@"+"cnbc.com");document.write('');And follow me on Twitter @Diana_Olick![]()
“Good News on Housing Permits More Than Offsets the Bad News on Starts”— HIS Global Insight “Housing Starts Decline Again” – Capital Economics “March Multifamily Starts Down; Permits Continue Upward Trend”— KBW “March Construction Numbers Aren’t As Bad as They Look”— Trulia.com “Housing Starts Lacking Consumer Confidence” — Sageworks Inc. Here’s the problem: We are living a tale of two housing markets, single and multi-family. Depending on what kind of builder or investor you are, you’re going to see the housing starts numbers differently. Let’s weed through it first: Total starts fell 5.8 percent, driven by a nearly 20 percent drop in multi-family. Single family was essentially flat month-to-month. But remember, multi-family is a very volatile number and can swing 20-30 percent monthly due to large local projects. Yes, they are both ahead from last year, but 2011 was the worst year in the history of U.S. home building. “The further fall in housing starts in March means that about a third of the past year’s improvement in homebuilding has now been undone. But the continued rise in building permits is an encouraging sign which suggests that housing starts will improve again later this year,” writes Paul Diggle at Capital Economics. Building permits are always seen as a better indicator of construction, or at least more dependable and less influenced by weather. Single family permits dropped 3.5 percent month to month, but multi-family surged ahead 24 percent to the highest level in four years. “The pickup in multifamily construction is taking place most noticeably in the South and West—again, not a big surprise—since 46 of the 50 fastest-growing metro-area populations from 2010 to 2011 were in the South or West, according to the Census Bureau,” writes IHS Global Insight’s Patrick Newport. Clearly we’re still seeing big demand in the multi-family sector, but single family is still faltering. “Single family is more of a restocking issue,” said Morgan Stanley’s Oliver Chang on CNBC. “In order to meet baseline demand, they [builders] have to build.” Chang says real growth in single family demand just isn’t there, due to a still tightening credit market. On the flip side, he claims that distressed housing has stabilized and distressed home prices have bottomed; that’s because investors largely use cash. So if there’s all this demand for single family rentals, and investors are rushing to get in, is there still enough demand for all this multi-family construction? “Bottom line, with the secular decline in home ownership, multi-family construction will be where it’s at for a few years but still only make up about 30 percent of total starts. Single family starts still have the intense competition with foreclosures and now rent seekers,” writes Peter Boockvar of Miller Tabak. So why, as we asked yesterday after the disappointing builder sentiment report, did single family starts, permits and sentiment rise through the fall and the winter only to slam on the breaks? Newport calls that one a “head scratcher,” and adds, “If the builders have gotten ahead of the game, single-family construction will go through a demoralizing slowdown later this year.” Questions? Comments? document.write("");document.write("RealtyCheck"+"@"+"cnbc.com");document.write('');And follow me on Twitter @Diana_OlickShort Sales Higher, Prices Lower
Buyer traffic is strong, supply of homes for sale is low, and yet home prices continue to defy the usual formula, falling again in March. Prices usually rise as supply shrinks, but demand is still too low to make those historical “norms” compute, not to mention that the type of supply available is largely distressed. Foreclosures and short sales (when the home is sold for less than the value of the mortgage) accounted for 47.7 percent of sales, in a three month running average measured by Campbell/Inside Mortgage Finance. That’s the 25th month in a row that distressed sales have topped 40 percent of the market. “With nearly half of the market being distressed, we’re a long way from a return to a normal market,” said Thomas Popik, research director at Campbell Surveys. “Agents responding to our survey say that homeowners with well-maintained properties in good locations are very reluctant to list at today’s prices. That’s why inventory is low—and also why forced REO and short sales are such a big proportion of the remaining market.” Home prices for non-distressed properties fell 5.7 percent in March year-over-year, according to the survey. Prices for “damaged” REO (bank-owned properties) fell 5.7 percent and for move-in ready REO fell 2.5 percent during the same period. The real sticker shock is in short sales. Prices of those homes fell 14.3 percent from March of 2011. Short sales have been ramping up of late, as banks attempt to comply with the so-called “robo-signing” mortgage settlement. Those are part of the losses the banks are required to take in the $25 billion deal. Over the past six months, short sales have moved from 17.8 percent of all sales to 19.9 percent, according to the Campbell/IMF survey. They now represent the number one segment for distressed properties. That share is likely to grow, as the conservator of Fannie Mae and Freddie Mac, the Federal Housing Finance Agency (FHFA), last week announced it was directing the two mortgage giants to “develop enhanced and aligned strategies for facilitating short sales, deeds-in-lieu and deeds-for-lease in order to help more homeowners avoid foreclosure.” It includes a requirement that mortgage servicers review and respond to short sale requests within thirty days. Lengthy timelines have long been the biggest complaint in the short sale sector. Fannie Mae and Freddie Mac hold hundreds of thousands of distressed loans, and accelerating the process will surely move the numbers up quickly, although the rules don’t go into effect until June 1. The FHFA is requiring the two make final decisions on these sales within 60 days. Previously, short sales could take up to a year and even beyond, with buyers often dropping out in frustration. “This could put short-term downward pressure on home prices, as short sales by their nature occur more quickly than foreclosures,” writes Jaret Seiberg, analyst at Guggenheim Partners. “That could raise questions about the status of the housing recovery, which could be negative for those with housing exposure. That would include homebuilders, mortgage lenders and mortgage insurers.” On the plus side, short sales tend to sell at higher prices than foreclosures. It appear, however, that regardless of the FHFA edict, banks are already ramping up the short sales. Some began doing so in the aftermath of the robo-signing scandal, as foreclosures stalled. Even now, foreclosures falling as short sales rise. The good news is that sales of distressed properties are rising, but the headlines will likely focus more on the falling prices, than the much-needed clearing of these homes.Questions? Comments? document.write("");document.write("RealtyCheck"+"@"+"cnbc.com");document.write('');And follow me on Twitter @Diana_Olick[Special Report] RBI Pending Home Sales Index – February 2011 [Baltimore Metro]
Posted by Jonathan Miller -Thursday, March 10, 2011, 1:47 PM
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This podcast is an overview of the RBI Pending Home Sales Index – February 2011 covering the Baltimore Metro market just released for RealEstate Business Intelligence (RBI), the data, research and analytics arm of MRIS.
Thursday, May 10, 2012
[Special Report] RBI 2010 Year End Housing Market Summary [Washington, DC Metro]
Posted by Jonathan Miller -Thursday, March 3, 2011, 3:36 PM
1 Comment
Here’s a brief recap of the 2010 annual data just released by RealEstate Business Intelligence (RBI) covering the Washington, DC metro housing market.
[Special Report] 2Q 2010 Manhattan Rental Market Overview
Posted by Jonathan Miller -Thursday, July 15, 2010, 11:01 PM
1 Comment
Here’s a brief, ok not so brief, recap of the Manhattan Rental Market Overview I authored a last week for Prudential Douglas Elliman.
[Special Report] RBI Pending Home Sales Index – February 2011 [Washington, DC Metro]
Posted by Jonathan Miller -Thursday, March 10, 2011, 1:51 PM
Comments Off
This podcast is an overview of the RBI Pending Home Sales Index – February 2011 covering the Washington, DC Metro area just released for RealEstate Business Intelligence (RBI), the data, research and analytics arm of MRIS.
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