Walking back the meaning of new housing data

MSNBC reports that the Commerce Department released (pdf) an eye-opening figure: "construction of new homes and apartments jumped 22.2 percent in February compared with January, pushing total activity to a seasonally adjusted annual rate of 583,000 units". The Curious Capitalist wonders:

So what's going on with starts? A big part of the jump came from condos, apartments and townhomes. And a fair amount of that activity flowed from warmer-than-expected weather. If that leads you to think maybe we should give the data another month or two before we start drawing trend lines, I'd be likely to agree with you. As one analyst cautioned, we might be looking at a "weather-related fluke."

It could also be a data-related fluke. Journalists almost never report on statistics precisely, which I'm sure drives all manners of social scientists batty. Here's the actual wording from the press release: "Privately-owned housing starts in February were at a seasonally adjusted annual
rate of 583,000. This is 22.2 percent (±13.8%) above the revised January estimate of 477,000, but is 47.3 percent (±5.3%) below the revised February 2008 rate of 1,107,000."

In other words, housing starts could be up 36%, or they could be up 8.4%. It's a range. And, technically, we're only 90% sure the real figure is in that range.

What about construction-related work? Enter, the American Institute of Architecture:

“Despite a higher [Architecture Billings Index] score than last month, we are likely to see light demand for new construction projects through much of the year,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “There is hope that the stimulus bill will result in more project activity, but that is also dependent on banks easing lending standards in the months ahead." [emphasis mine].

CR tells us what this means, "Since the index is still well below 50 (anything below 50 means contraction in billings), this suggests non-residential investment in structures will decline all year (no surprise!)".

House victory on mortgage relief

Ryan Grim at HufPo writes:

The bill, passed 234-191, largely along party lines, encourages lenders to renegotiate mortgages with troubled homeowners. If they can't, the bill allows bankruptcy judges to modify the mortgages, a reform that bankers have argued undermines the sanctity of a contract and rewards bad behavior.

This is the so-called cramdown legislation. As it stands, the Obama mortgage relief plans give lenders and incentive to alter the interest on existing mortgages. Some question the helpfulness of this. This legislation would allow judges, under certain circumstances, to alter the principal of existing mortgages. Setting aside the "bad behavior" misdirection, the logic of this is that the value of the housing units in question are lower than they were when the original loans were made. By lowering principal amounts, two things occur, 1. the debtor pays less, 2. the debtor does not walk away from the contract.

Anyhow, this wouls still need both Senate support and Obama's support, but it's an interesting development nonetheless.

Do you qualify for mortgage relief?

(via Consumerist)

The Washington Post has an article about Obama's foreclosure prevention program.

It is expected to help up to 9 million homeowners lower their mortgage payments.Lenders can begin modifying troubled loans under the program immediately, the Treasury Department said in a statement. To be eligible for modification, the loans must have originated on or before Jan. 1 of this year. The program will end in December 2012, and loans can be modified only once under that part of the program.

You may qualify for assistance. Click here for an interactive app that will help you determine if this plan can help you.

Home Sales by Home Stock

Dean Baker notes that, "In the last two months, the inventory of existing homes for sale has fallen by 563,000 (13.5 percent) even as home sales have been near 20 year lows." You wouldn't think that these two datapoints would correlate, and Dr. Baker hypothesizes (bold & italics mine):

There are two possible explanations. First, many foreclosed homes don't appear in the realtors' data. It is possible that we are seeing more bank owned properties that are being sold at auction, but are not listed as inventory. In that case, the NAR data is becoming a less accurate measure of
inventory.

The other possibility is that many would be home sellers are holding back in the expectation that the market will improve. This would imply that the market may be flooded with homes at some point in the future, as soon as it shows any sign of an uptick. That is also not a terribly good story for those hoping for prices to stabilize any time soon. It likely also means a rather unhappy story for those opting to wait. They may be looking at much lower prices when they do eventually put their homes on the market.

I wonder what this means for the Miami-area market?

Shiller: Home prices will fall further

via Clusterstock
Professor Robert Shiller (namesake of the Case-Shiller Index) notes that home prices have not reached their bottoms. Click on the link above for a video of Henry Blodgett's discussion with Dr. Shiller, but the graph below is scary enough for me.




Because the data is at the national level, I am left wondering if this means for us in South Florida. Did the rest of the nation's housing stock stay high, while ours dropped? Is this a case where the predicted 50% drop will come from areas other than South Florida, Southern California, etc.?