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Home sales and construction will improve this year, contributing “modestly” to economic expansion after acting as a drag on growth since 2006, according to a Fannie Mae (FNMA) to a forecast released today.

Sales of new and existing homes are likely to increase 3.5 percent and housing starts are projected to rise 16 percent, fueled by improvement in apartment development and a rebound in single-family house construction, according to the report by Douglas Duncan, Fannie Mae’s chief economist, and Orawin Velz, a director in its Economics and Mortgage Market Analysis group.

“With an expected improvement in housing activity in 2012, residential investment should start contributing to growth, albeit only modestly initially,” Duncan and Velz wrote.

The housing market has been held back by weak demand as high unemployment and concerns about job security prevent buyers from taking advantage of falling home prices and borrowing costs, Duncan said in an interview yesterday at Bloomberg’s New York offices.

“We see an incremental increase only in the number of residential units that get moved through sale,” Duncan said. “It’s another sort of holding pattern.”

Mortgage rates will continue to provide support for the market, rising only slightly in 2012, according to the report. The average rate for a 30-year fixed loan fell to 3.89 percent in the week ended yesterday, the lowest in records dating to 1971.

Originations to Decline

Mortgage originations in 2012 are expected to decline to $1.01 trillion from an estimated $1.36 trillion last year as refinancing “declines sharply,” according to the report. The refinancing portion is likely to drop to about 53 percent from about 66 percent last year because many homeowners have already taken advantage of lower rates, Duncan said.

The expansion this year of President Barack Obama’s three- year-old Home Affordable Refinance Program for Fannie Mae and Freddie Mac (FMCC) loans with little or no home equity will add about $200 billion to $300 billion to refinancings, Duncan said. This year’s expected decline in mortgage originations would be steeper without the expansion, he said.

Reported by Bloomberg 01/13/2012

The U.S. apartment sector posted impressive revenue growth of 5.8 percent in calendar 2011, according to MPF Research, an industry-leading market intelligence division of RealPage, Inc. (NASDAQ: RP). National occupancy climbed 1.1 percentage points during the year, and effective rents jumped 4.7 percent.

"While apartment demand has cooled off a bit from 2010's incredibly large volume, it remains very strong," said Greg Willett, MPF Research vice president. "Most of the jobs being formed are going to young adults, who tend to be renters. At the same time, loss of renters to purchase continues to run far below the historical norm. Those factors are combining to produce demand far in excess of the limited deliveries coming on stream right now, especially when today's completions are heavy on niche product such as affordable housing, seniors housing or student properties, rather than conventional, market-rate apartments."

Occupancy registered at 94.6 percent as of the fourth quarter, up from 93.5 percent a year ago and from 91.8 percent when the market's performance bottomed in late 2009.

Rents in U.S. apartments grew 4.7 percent during 2011. The total increase seen since pricing hit its low point in late 2009 is 7 percent.

There's generally a seasonal slowdown in apartment leasing activity specifically during the fourth quarter, so shifts in occupancy and rents tend to be small during the period. Occupancy edged down a slight 0.2 percentage points on a quarterly basis in late 2011, while effective rents inched up a minor 0.2 percent.

The fourth quarter did bring some regional shifts in momentum that look like signs of what's to come in select markets during 2012, most notably across the Pacific Northwest and in Texas.

San Jose and Seattle, previously among the nation's best performers, logged revenues losses late in the year that went well beyond normal seasonality. The quarterly decline in revenues was 1.8 percent in San Jose and 1.5 percent in Seattle. "The backtracking seen during the fourth quarter in parts of the Pacific Northwest likely reflected a correction of pricing that got a little too aggressive earlier in the year," Willett said. "We anticipate substantial rent increases in these markets moving ahead, but the Pacific Northwest metros probably won't outperform other parts of the country to the degree that was seen over the past couple of years."

On the other hand, metros in Texas avoided the mild revenue losses that are normal there during the fourth quarter. Revenues jumped 1.6 percent on a quarterly basis in Houston and 0.3 to 0.9 percent across Dallas/Fort Worth, Austin and San Antonio. Limited new product deliveries played the biggest role in the stronger-than-usual performances across Texas during late 2011, according to MPF Research. "While Texas is experiencing an upturn in construction starts, most of that new supply won't begin hitting the market until the last half of 2012 or in early 2013," Willett said. "Right now, demand is topping deliveries by a big margin, and the Texas markets are positioned for apartment revenue growth at record or near-record levels by local standards during the coming year."

MPF Research is anticipating that overall revenue growth for U.S. apartments in 2012 will nearly match the hefty results posted in 2011. Occupancy is expected to move up another half of a percentage point, and rents are forecast to rise 4.5 percent.

In a shift to the pattern seen since momentum returned to the apartment sector beginning in early 2010, look for middle-market and bottom-tier properties to exhibit the most performance growth during 2012, according to MPF Research. "Top-end communities are already completely full and have rents well above their previous highs in most metros," Willett said. "However, there's still room for occupancy to tighten in older product, and those properties haven't yet fully recovered from the rent losses suffered during 2008-2009 in quite a few areas. Also, we're likely at the point where further rent increases in the best developments will force some households to downgrade in product quality in order to find apartments they can afford."

Northern California's apartment markets ranked as the nation's rent growth leaders during calendar 2011, despite the fact that some weakness registered in the performances recorded in parts of the Pacific Northwest specifically during the fourth quarter. Year-over-year, effective rents for new leases jumped 14.6 percent in San Francisco, 12.3 percent in San Jose, and 9 percent in Oakland.

Elsewhere, the country's strongest annual rent increases were in Boston at 8.3 percent, New York at 7.3 percent, Austin at 7.2 percent, Pittsburgh at 6.8 percent, and Denver at 6.7 percent. Metros posting rent growth just under the mark of 6 percent during 2011 were Seattle at 5.9 percent as well as Charlotte, Chicago and Minneapolis, all at 5.8 percent.

With rents down 0.4 percent, Las Vegas was the nation's only major apartment market that lost pricing power during calendar 2011. Even there, total revenues actually managed to climb at a modest pace, however, since the metro's occupancy rate improved 1.3 percentage points.

A discussion of the nation's latest apartment performance results is available at www.realpage.com/MPFQ4Report.

Reported by PRNewswire 1/5/2012

The National Association of Home Builders (NAHB) concurs with a finding by the Federal Reserve that excessively tight mortgage lending standards are hampering a housing and economic recovery.

“The Federal Reserve’s report to Congress confirms what we have been saying for some time: That extraordinarily tight credit conditions are preventing creditworthy borrowers from obtaining home loans and this is harming the housing market and the broader economy,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev.

Nielsen added that the lack of credit extends to housing construction loans as well, which is crippling the housing industry and preventing construction of new homes in markets that need and want them. “In scores of markets across the country that are exhibiting signs of job growth and where the inventory of new homes is nearly exhausted, builders should be hiring workers to break ground on new housing developments,” he said.

In its message to Congress, the Fed said that “restoring the health of the housing market is a necessary part of a broader strategy for economic recovery.”

Housing can act as a job catalyst if regulators and lending institutions return to prudent underwriting standards that do not exclude creditworthy borrowers and if they move to restore the flow of credit to viable home building projects.

In normal times, housing accounts for more than 17 percent of the nation’s economic output. Constructing 100 new homes creates more than 300 full-time jobs, $23.1 million in wage and business income and $8.9 million in federal, state and local tax revenue.

With cash-strapped municipalities across the land desperately searching for new revenue sources, home building can increase the property tax base that supports local schools and communities.

“Removing the obstacles limiting access to mortgage credit and enabling builders to obtain construction loans to build in markets where demand is firming is imperative to get housing back on track, to put our nation back to work and to keep the economy moving forward,” said Nielsen.

Reported by NAHB Press Release 1/5/2012

(Reuters) - U.S. apartment vacancies fell to a 10-year low in the fourth quarter and rents continued to rise as the economy showed signs of growth, real estate research firm Reis Inc said on Thursday.

Those trends should continue this year, the firm added, with rents increasing sharply as vacancies decline.

Reis said the nationwide vacancy rate fell to 5.2 percent, a level last seen in late 2001. It is also lower than the lowest vacancy rate seen during the last cycle, in 2006, before vacancies started to soar because of the financial crisis.

Asking rents rose 0.4 percent in the quarter, while effective rents -- what the tenant actually pays on an annual basis after discounts -- rose 0.5 percent. Nearly 90 percent of the markets surveyed reported higher effective rents, the firm said.

"The fourth quarter tends to be a weaker leasing period given that most households make moving decisions in the second and third quarters, but the apartment sector exceeded expectations once again, ostensibly due to heightened economic activity in the last three months," Reis's research head, Victor Calanog, said in a commentary.

Apartment supply was tightest in the college town of New Haven, Connecticut, with a vacancy rate of 2.1 percent, followed closely by New York City at 2.4 percent.

Rent growth was highest in San Francisco, where effective rents grew 1.7 percent in the fourth quarter to $1,865.

Over the course of the year, the biggest decline in the vacancy rate was in the cities of Charleston, South Carolina, and Greensboro, North Carolina.

One of the key factors driving the tightening market, Reis said, was a lack of supply. Some 37,678 new apartment units came to market in 2011, the firm said, the lowest total in 31 years of data and nearly 25 percent less than the prior low.

That should change, though, as developers are drawn to what has been the best-performing real estate sector of late.

"By 2013 the influx of new units may begin eroding any benefit the sector derives from tight supply conditions," Calanog said.

Reported by Reuters 1/5/2012

NAR released its latest pending home sales index figure last week and for the second month in a row the index is up. But more than that, the index has broken 100. This is significant because the only time since the housing boom collapsed that the index has broken 100 is when the home owner tax credit was in effect. The fact that the index has returned to that level a year since the credit has been in effect means the housing market is strengthening completely on its own, without any stimulus.

It is the natural, organic power of great affordability conditions and job creating that is bringing the index level up," says NAR Chief Economist Lawrence Yun. "This is a very encouraging sign."

In the weekly report, Yun is upbeat about 2012 because in a number of areas indicators are pointing upward. Not only are home sales up but housing starts are up and home prices are stabilizing in many markets and heading up in some. In areas where they’re still down, the declines aren’t that great. More fundamentally, broader U.S. economic signs are looking positive, including the all-important jobs picture. About 100,000 job are being created a month, and that could rise to 150,000—still not a quick enough pace to get us back to where we were before the downturn but the headwinds are in the right direction.

Reported by National Association of Realtors Weekly Report 1/5/2012

Washington, D.C. - Pending home sales continued to gain in November and reached the highest level in 19 months, according to the National Association of Realtors®.

The Pending Home Sales Index a forward-looking indicator based on contract signings, increased 7.3 percent to 100.1 in November from an upwardly revised 93.3 in October and is 5.9 percent above November 2010 when it stood at 94.5. The October upward revision resulted in a 10.4 percent monthly gain.

The last time the index was higher was in April 2010 when it reached 111.5 as buyers rushed to beat the deadline for the home buyer tax credit. The data reflects contracts but not closings.

Lawrence Yun, NAR chief economist, said the gains may result partially from delayed transactions. “Housing affordability conditions are at a record high and there is a pent-up demand from buyers who’ve been on the sidelines, but contract failures have been running unusually high. Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage,” he said.

“November is doing reasonably well in comparison with the past year. The sustained rise in contract activity suggests that closed existing-home sales, which are the important final economic impact figures, should continue to improve in the months ahead,” Yun added.

Pending home sales are not affected by the recently published rebenchmarking of existing-home sales because the index uses a different methodology based directly on contract signings, and is adjusted for seasonality.

The PHSI in the Northeast rose 8.1 percent to 77.1 in November but is 0.3 percent below November 2010. In the Midwest the index increased 3.3 percent to 91.6 in November and is 9.5 percent above a year ago. Pending home sales in the South rose 4.3 percent in November to an index of 103.8 and remain 8.7 percent above November 2010. In the West the index surged 14.9 percent to 121.2 in November and is 2.9 percent higher than a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

Reported by National Association of Realtors Press Release 12/29/2011

Builders broke ground in November on the most houses in over a year, a sign that the market is stabilizing heading into 2012.

Starts increased 9.3 percent to a 685,000 annual rate, exceeding the highest estimate of economists surveyed by Bloomberg News and the highest level since April 2010, Commerce Department figures showed today in Washington. Building permits, a proxy for future construction, also climbed to a more than one- year high.

The increase in construction last month was led by a jump in work on multifamily units like apartments and townhouses as the rental market improves. The building of single-family homes is beginning to strengthen as falling home prices and borrowing costs hovering near a record low draw in some buyers, even as builders face competition from existing houses as another wave of foreclosures throws more marked-down properties on the market.

“There’s continued demand for custom homes and construction costs are very low now,” John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston, said before the report. At the same time, he said, “housing is still kind of going to bounce along the bottom for a while. There’s at least one more large wave of foreclosures.”

The median estimate of 79 economists surveyed by Bloomberg called for a gain to 635,000 from a previously reported 628,000 annual rate. Estimates ranged from 600,000 to 655,000. The Commerce Department revised the October reading down to 627,000.

Record Low

The November results compare with last year’s overall tally of 587,000 starts, the second-fewest on record. Home construction totaled 554,000 units in 2009, the lowest since record-keeping began in 1959.

Permits increased to a 681,000 annual pace in November, the highest level since March 2010. They were projected to fall to a 635,000 rate from 644,000 the prior month, according to the survey median. Applications for the construction of single-family homes climbed 1.6 percent, and permits for multifamily units jumped 14 percent.

New construction of single-family houses rose 2.3 percent from the prior month. Work on multifamily homes, such as townhouses and apartment buildings, surged 25 percent to an annual rate of 238,000.

Recent gains in homebuilding have been led by gains in construction of apartments and other multifamily dwellings as foreclosures turned more Americans into renters from buyers.

More Renters

“Multifamily construction is experiencing a mini-boom as Americans shift from buying to renting,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “Homebuilders still compete with a glut of cheaply priced foreclosed homes, but their own inventory is nearing historic norms in relation to sales.”

Three of four regions had a November increase in starts, led by a 54 percent jump in the Northeast and a 23 percent gain in the West. Starts fell 18 percent in the Midwest.

Purchases of new houses rose 1.3 percent in October, as discounted prices lured in some buyers, Commerce Department figures show. Sales of previously owned homes, which now make up about 94 percent of the market, increased 1.4 percent that same month, according to the National Association of Realtors.

The Obama administration this month started a new version of the federal Home Affordable Refinance Program, or HARP, after the original program helped less than a quarter of the people targeted to lock in lower mortgage rates.

Fed Policy

Federal Reserve policy makers reiterated at a meeting this month that they will keep the benchmark interest rate near zero until at least 2013. The central bank in September decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.

Some policy efforts may be contributing to signs of improvement in the housing market. A report yesterday showed the National Association of Home Builders/Wells Fargo index of builder confidence rose in December for a third straight month, to 21, the highest level since May 2010. Readings below 50 mean more respondents said conditions were poor.

“November is a time that historically sales slow down,” Larry Sorsby, chief financial officer at Hovnanian Enterprises Inc., said in a Dec. 15 call with analysts. “And this year we’ve not seen as dramatic a slowdown as we have in recent prior years. The market feels a little bit better than we would have expected.”

Reported by Bloomberg Businessweek 12/22/2011

LOS ANGELES (AP) — Luxury homebuilder Toll Brothers Inc. is expanding into a new state for the first time since the days of the housing boom.

The Horsham, Pa.-based company said Monday that it bought privately held Seattle-area builder CamWest Development LLC for an undisclosed amount.

Toll Brothers last made a foray into markets in a new state in 2005, when it entered Minnesota. The builder's last acquisition also was in 2005, when it bought the Orlando, Fla., division of Landstar Homes.

CEO Douglas Yearley Jr. said the CamWest acquisition does not represent the start of a broader expansion push by Toll, which operates in 20 states.

"We have been looking at Seattle for a decade, so this was a bit of a long time coming, and we found the right opportunity," Yearley said.

While Toll had been eyeing the Seattle market for years, it was put off by concerns over how to ramp up operations in a market where land can be hard to find and difficult to clear for new construction.

The CamWest deal not only gains Toll established operations in a new market, but a portfolio of some 1,300 or so land parcels, giving Toll an immediate jump start, Yearly said.

"They have a terrific land position in a difficult land market," he said.

CamWest, based in Kirkland, Wash., develops luxury single-family houses, condominiums and townhouses. The average selling price for homes in CamWest's backlog is about $500,000.

Toll said the acquisition will add to its earnings in fiscal year 2012, which began this month. For the 2011 calendar year, CamWest expects to deliver about 180 homes, generating $90 million in revenue.

Earlier this month, Toll reported home deliveries in the August-to-October quarter rose 8 percent from a year earlier, while net signed contracts grew by 15 percent. The company ended fiscal 2011 with 1 percent fewer home deliveries, but a 7 percent increase in net signed contracts.

Uncertainty over the U.S. economy, high unemployment and concerns that U.S. home prices have yet to hit bottom have kept many home buyers on the sidelines this year. That led to a lackluster spring-and-summer peak homebuying season and has placed U.S. sales of new homes on track to be the worst on records dating to 1963.

Sales of new homes rose in September after four straight monthly declines, but only after builders cut their prices because of depressed demand.

Yearley said he's impressed with how the Seattle market has held up during the housing downturn, and cites employment growth and the presence of large companies such as Boeing Co. and Microsoft Corp. as factors that bode well for home sales.

CamWest founder Eric Campbell said all of the company's home communities are starting to sell out, which prompted the builder to look for financing to build more communities.

Financing has been tough to come by for private builders — a trend that has helped Toll and other publicly traded homebuilders take market share from smaller rivals during the housing downturn. Campbell said he was concerned that any financing he could get would not allow the company to be as aggressive as it would like to be, leaving the builder vulnerable to competition from a larger rival.

Ultimately, he said, a buyout by the nation's largest builder of luxury homes proved the best option.

Reported by Associated Press (11/22/2011)

Single-family housing starts rose 3.9 percent to a seasonally adjusted annual rate of 430,000 units in October, according to newly released data from the U.S. Commerce Department. This improvement was somewhat masked by an 8.3 percent decline in multifamily starts that kept the combined number for nationwide housing production virtually flat at 628,000 units in October.

Meanwhile, single-family permits also posted a measurable gain of 5.1 percent to 434,000 units in the latest report, which is their fastest pace since December of 2010. 

“The government’s numbers for October housing production are very much in keeping with what home builders have been telling us in our recent surveys,” said Bob Nielsen, chairman of the National Association of Home Builders (NAHB) and a home builder from Reno, Nev. “While we still have a long way to go toward a recovery, some signs of hope are emerging in certain markets where economic and job growth is occurring and where foreclosures have not been an overwhelming obstacle.” 

“The three-month moving averages for both housing production and permitting activity have been gradually rising since this spring, which is consistent with our forecast for slow improvement in market conditions through the end of this year and a positive sign that a more solid recovery will begin to take hold in 2012,” said NAHB Chief Economist David Crowe. “That said, the improvements we are seeing are still limited to scattered local markets where economies are improving, and obstacles such as tight credit conditions for builders and buyers, appraisal issues stemming from new homes being compared to distressed properties, and consumer concerns about job security are definitely slowing the progression of both a housing and economic recovery.” 

While combined housing starts in October declined by a barely perceptible 0.3 percent to a rate of 628,000 units, the single-family sector posted a 3.9 percent gain to 430,000 units. Meanwhile, the more volatile multifamily sector posted an 8.3 percent decline to 198,000 units following an unsustainably large gain in the previous month. 

Combined starts activity was up in three out of four regions in October. Gains of 17.2 percent, 9.7 percent and 1.6 percent were registered in the Northeast, Midwest and South, respectively, while the West posted a 16.5 percent decline. 

Permit issuance, which can be an indicator of future building activity, rose 10.9 percent to a seasonally adjusted annual rate of 653,000 units in October on gains in both the single- and multifamily sides. Single-family housing permits rose 5.1 percent to 434,000 units – their highest level since December of 2010 – while multifamily permits rose 24.4 percent to 219,000 units – their highest level since October of 2008. 

On a regional basis, combined permitting activity was down 1.6 percent in the Northeast and 3.7 percent in the Midwest, but up 21.5 percent in the South and 5.4 percent in the West.

Reported by National Association of Home Builders (11/17/11)

The housing market should see a modest recovery in 2012, with a modest rise in sales and home prices, according to a new forecast from the National Association of Realtors (NAR).

Existing-home sales are predicted to rise 4-5 percent from this year's expected total of 4.96 million, according to the NAR, with an unspecified rise in median home prices. Double-digit gains are expected for both new home sales and construction starts, though activity in those areas is still expected to remain weak by historical norms.

 Pent-up demand seen

The NAR expects that underlying forces in the housing market and economy will eventually start to assert themselves, overcoming the negative factors that have held the market in check until now. 

"Tight mortgage credit conditions have been holding back home buyers all year, and consumer confidence has been shaky recently," said Lawrence Yun, NAR chief economists. "Nonetheless, there is a sizeable pent-up demand based on population growth, employment levels and a doubling-up phenomenon that can't continue indefinitely. This demand could quickly stimulate the market when conditions improve."

The forecast is based in part on NAR expectations that gross domestic product will increase by 2.2 percent next year, up from 1.8 percent in 2011, and that unemployment will fall to 8.7 percent, down from 9.0 percent currently, with about 2 million new jobs created.

Prices, mortgage rates expected to rise

A falling inventory in homes available for sale is expected to produce a moderate rise in home prices, according to the NAR, although prices have yet to fully stabilize in most areas.

New home sales are forecast to rise to 372,000, still low by historic standards, but up from 302,000 in 2011, which will be the lowest total in at least 60 years. New home construction is expected to rise to 630,000 units, up from 583,000 this year.

On the downside for consumers, mortgage interest rates are expected to rise to about 4.5 percent on 30-year fixed-rate mortgages, up about half a percentage point from current levels but still well below historical norms.

Reported by MortgageLoan.com (11/14/11)