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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