More signs of a weak housing market emerge
More signs of residential real estate weakness landed in the housing reporter’s in-box Thursday morning:
-- The Commerce Department’s latest read on new residential construction got the economists talking.
National housing starts were up 3.9% from October, but down 5.8% from November 2009. Meanwhile, permits, which some economists view as a steadier view of builders' intentions and less influenced by seasonal variations, were down 4% from October and 14.7% below November 2009.
Patrick Newport, U.S. economist for IHS Global Insight, had this to say:
Housing starts remain depressed for three main reasons. First, the jobs recession has sharply reduced the rate of household formation, which has led to "doubling up" and a drop in immigration. Second, financing is hard to get. Third, the housing glut and the wave of foreclosures hitting the market have depressed housing prices, making it hard for builders to make a profit on a new home.
Assuming credit markets continue to improve, the key for housing going forward is employment growth. New jobs will require that new homes be built nearby. More important, the household formation rate will pick up once job growth takes off. Increases in the household formation rate will then reduce the housing glut, which will stimulate new construction.
Here is the take on starts from Michael D. Larson, a housing and interest rate analyst with Weiss Research:
The latest housing report has a little bit for everyone -- Grinches and Santa Claus-types alike. Single family starts rose to a seven-month high, with broad-based regional strength. Permit issuance was relatively healthy as well. But the apartment and condominium market continues to lag, with both starts and permits falling. That leaves the overall construction industry limping into the close of a relatively lousy year.
So what does 2011 have in store for housing? More signs of stabilization. House prices are cheap again, and the labor market is holding steady. Consumer confidence is firming a bit, while lending standards aren't getting tighter anymore. But "stabilization" isn't the same as "improving dramatically." Housing and construction lack the catalysts for a robust recovery. So if you'll pardon the pun, 2011 looks to be another rebuilding year.
-- A separate report released Thursday morning showed Bay Area home sales were well below their year-earlier levels in November, and the median home price took a dip as sales in more expensive locales stalled.
The median price of a home in the Bay Area was $380,000 in November, down 0.8% from October and down 1.8% from November 2009. In San Francisco County, sales fell 17.8%, but the median price of a home jumped 4.6% to $680,000.
-- And a home price index by the Santa Ana research firm CoreLogic declined for the third consecutive month. According to the CoreLogic home price index (which includes sales of foreclosed homes and other distressed properties) prices of single-family homes declined by 3.9% in October 2010 compared with October 2009. In the Los Angeles metro area, prices fell 0.8% in October 2010 compared with October 2009.
-- Alejandro Lazo
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