The real estate blog.

Hi all,

Sorry I didn’t get this to you earlier. 

Here is the July 2007 real estate market indicators and health of the overall market as reported by John Burns Real Estate Consulting.

Enjoy…

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Economic Growth…………………………………………………………………..C
Wage gains accompanied by a steady job market are helping the consumer as well as the overall U.S. economy move forward from what turned out to be the slowest quarterly GDP expansion rate (0.7%), in more than four years. In addition, year-over-year retail sales and personal income both increased during the month of May, while core inflation moderated, providing the framework for moderate growth in overall economic expansion during Q2-2007.

Leading Indicators…………………………………………………………………C-
A spike in Treasury yields introduced a bout of volatility into the U.S. stock market during the month of June, as the yield curve widened to its highest level since October 2005. As such, aside from the NASDAQ, all of the major stock market indices declined in June. The S&P Super Homebuilding Index - which measures homebuilder stock performance - suffered its worst sequential decline (-17% in June), dating back to September 2001, in which the index dropped 18% sequentially. Currently, the S&P Super Homebuilding Index is down 16% year-over-year. Oil prices continue to climb this summer, approaching the historic levels witnessed one year ago.

Mortgage Rates…………………………………………………………………….C+
The yield on 10-year Treasury notes (a benchmark that influences home mortgage rates), rose significantly in the month of June, driving the 30-year fixed mortgage rate to 6.67%, while one-year adjustable rates increased to 5.65%. Both of these represent levels not seen since July 2006. Troubles are still mounting in the subprime market, as evidenced by a historical low set in June for the ABX 06-2 BBB- series, which has declined roughly 36% YTD.

Consumer Behavior………………………………………………………………C+
Consumers’ perceptions of the overall economy took a leg down this month, as all three of the major consumer gauges declined in June. A drop in the stock market and turmoil surrounding the housing market / subprime industry appear to have heightened consumer uncertainty with overall economic conditions.

Existing Home Market……………………………………………………………C-
The existing home market continues to deteriorate, as May sales declined to 5.99 million annualized units, equating to a year-over-year drop of roughly 10%. Most troubling is the surge in existing home inventory that has resulted in 8.9 months supply, the largest since August 1992. The inventory glut continues to place downward pressure on prices, as evidenced by the -2.4% decline in single-family median home prices over the last year. Existing home sales are likely to decline further in coming months, as the NAR’s Pending Home Sales Index fell to its lowest level in nearly 6 years.

New Home Market…………………………………………………………………D+
Almost all of the new home indicators deteriorated further this month, as the market continues to search for a bottom in this cycle. In May, new home sales decreased roughly 2% sequentially to an annual rate of 915,000, representing a 16% year-over-year decline. In addition, the NAHB index dropped two points sequentially in the month of June, representing a new low for the year, and a low not seen since February 1991.

Housing Supply…………………………………………………………………….D+
During the month of May, starts declined while permits increased. That said, we still foresee both housing construction indicators to continue their respective pullback trend in the coming months. Specifically, total housing starts decreased in May to a seasonally adjusted annual rate of 1.47 million, representing a sequential decrease of roughly 2.1% and a 24% year-over-year decline. Total building permits increased roughly 3% sequentially in May, and are now down 22% year-over-year to a seasonally adjusted annual rate of 1.5 million. U.S. HOUSING MARKET STATISTICSData Current Through June 30, 2007     Grade*Overall Grade        C                 Statistic    Grade*Economic Growth  CThese are the best indicators of how the economy is currently performing.Real GDP (annual rate)0.7% C-Employment Growth (1-year Change)     - Non-ag Payroll, NSA1,982,000 CEmployment Growth Rate     - Non-ag Payroll, NSA1.4% CUnemployment Rate4.5% B-Productivity1.0% CRetail Sales5.0% CInflation (core CPI)2.2% BPersonal Income Growth, nominal6.1% C-Federal Deficit (last 12 mos., $mil curr.)-$174,022 C                                  Statistic    Grade*Leading Indicators    C-These have all proven to be predictable early indicators of the direction of economic growth.Leading Indicators Annual Growth Rate over Last Six MonthsLeading Econ. Index0.6% CECRI Leading Index5.8% CManpower Net Employment Outlook18% CCorporate Profits (pre-tax)6.5% CInterest Rate Spread   10-year Treasury5.09%  2-year Treasury4.90%    Interest Rate Spread0.19% C-Stock Market (Return over last 12 months)     Dow Jones20% C  S&P 50018% C+  NASDAQ20% C  Wilshire 500018% C+  S&P Super Homebuilding-16% DCrude Oil Price (Current $)$67.48 DInst. of Supply Managers Index56.0 C                                  Statistic    Grade*Mortgage Rates    C+These statistics are probably the most important indicators of short-term housing market performance.Conforming Mortgage Rates (contract rate; an additional 0.6 - 1.0 points are also paid up front by the borrower)Mortgage Rates, fixed6.67% B+Mortgage Rates, adjustable5.65% B-  Fixed/Adjustable Spread1.02% D  Fixed/10-year Spread1.58% CFed Funds Rate5.25%  Percentage of Adjust. Loans20.4% CSubprime Index (ABX.HE.BBB-.06-02)60.8 FFed Reserve Loan Officer Survey16.4% D      

                             Statistic    Grade*Consumer Behavior    C+Consumer attitudes correlate well with short-term housing sales performance. Consumer income growth, debt levels and job prospects affect the long-term outlook for housing sales.Consumer Confidence Index103.9 CConsumer Sentiment Index85.3 CConsumer Comfort Index-13.5 CEquity/Owned Home (2003$)$145,850 A+Median Household Income$46,326    - Growth Rate, nominal4.5% CRevolving Cons. Credit per Household$7,664    - Growth Rate5.7% B                                  Statistic    Grade*Existing Home Market    C-Sales volumes correlate well with the Housing Cycle calculations, and boost the trade up New Home sales market.NAR Single-Family Median Home Price$223,000 A+NAR Single-Family Annual Price Appreciation-2.4% FFreddie Mac Annual Price Appreciation4.4% D+Annual Sales Volume, SA5,990,000 B+Months Supply of Unsold Homes, SA8.9 D+Purchase Mort. App. Index, SA428.9 B+Pending Home Sales Index, SA97.7 D-Homeownership Rate68.4% A-Homeowner Vacancy Rate2.8% F                                  Statistic    Grade*New Home Market D+High appreciation and low inventory would mean an excellent short-term outlook for the new home industry.Housing Market Index28 FMultifamily Condo Market Index23.1 FMedian Price, NSA$236,100 AAnnual Appreciation Rate-0.9% D+Sales Volume, SA915,000 B-Months Supply of Unsold Homes, SA7.1 C-  Months of Homes Completed, SA2.3 D+  Months of Homes Under Const., SA3.6 C  Months of Homes Not Started, SA1.2 C-                                  Statistic    Grade*Housing Supply    D+High construction levels are good for the economy. However, if new supply exceeds demand, prices could fall.Housing Starts, SA1,474,000 CSingle-family Permits, SA1,056,000 CMultifamily Permits, SA445,000 C-  Total Permits, SA1,501,000 CManuf. Housing Placements, SA85,000 F  Total Supply, SA1,586,000 C-    

 

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