The real estate market looks to be in limbo, but there is optimism that growing pent up demand will prevail as the jobs market improves. Although new-home construction has been stagnant, it hasn’t fallen substantially, while commercial property values are beginning to recover.
Single-family housing starts were virtually unchanged from the previous month at a seasonally adjusted annual rate of 454,000 units in June. Meanwhile, a 21.5 percent decline on the more volatile multifamily side weighed down the overall housing production number, which fell 5 percent to a 549,000-unit rate.
"As our most recent member surveys have indicated, builders remain very cautious in light of the sluggish pace of the economic recovery and the hesitancy they are seeing among potential home buyers," noted Bob Jones, chairman of the National Association of Home Builders (NAHB). "However, today's report is actually somewhat encouraging, because it indicates that single-family production is stabilizing following an expected lull that occurred with the end of the home buyer tax credit program."
Commercial real estate is also showing improvement, according to Moody’s, reaching its low point in January 2010. The Moody’s commercial same-property index has mirrored the Case-Shiller Home price Index improvement, which began its rise in March ‘09, but began its price rise 9 months later, in other words.
U.S. commercial real estate prices increased 3.6 percent in May, the second consecutive monthly increase, as measured by Moody’s/REAL Commercial Property Price Indices CPPI. Commercial real estate prices in April rose 1.7 percent.
“We expect commercial real estate prices to remain choppy in the coming months,” said Moody’s Managing Director Nick Levidy in a release Monday. “The positive news of increasing prices over the past two months is tempered by low transaction volumes, forecasts for slowing macroeconomic growth and the rising risk of a double dip recession.”
Existing-home sales are also stagnant, and may have already experienced a minor double dip. Its future depends on the number of foreclosures still to happen, as a recent study said that in fact banks are selling more homes via REO sales than builders at the moment. Stats show that nationwide, in late 2006 new homes accounted for nearly 20 percent of all transactions, but in early 2009 the new home share was down to 14 percent, and starting in that month there were more REO sales in the preceding 12 month period than new homes sold. So for the last year and a half, banks have sold more houses than home builders, according to Calculated Risk.
Existing-home sales were at a seasonally adjusted annual rate of 5.66 million units in May, down 2.2 percent from an upwardly revised surge of 5.79 million units in April. May closings are 19.2 percent above the 4.75 million-unit level in May 2009, so sales are still positive year-over-year.
The Obama’s Administration’s Comprehensive Housing Initiative has been helping to keep homes out of foreclosure. Its July joint report by HUD and the U.S. Treasury said record low rates have helped more than 7.2 million homeowners to refinance since April of 2009, “resulting in more stable home prices and $12.9 billion in total borrower savings”.
And, HAMP (the Home Affordable Modification Program) has helped over twice as many homeowners compared to foreclosure completions: Nearly three million borrowers have received restructured mortgages since April 2009, outpacing the 1.24 million foreclosure completions for the same period. As more families are able to remain in their homes, household assets continue to rise with $1.1 trillion in home equity gained since April 2009, said the report. A continuation of commercial real estate improvement will be a signal that businesses are recovering, as will job creation, which then will give a boost to residential sales as well.
Harlan Green © 2010
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