New Home Sales--Remember Local Market Counts

Well...the news can't always be gangbusters.

But don't be too disappointed about New Homes missing the national consensus on housing starts.  No doubt the Housing Market is dictated by the local market.

In Hampton Roads, new home neighborhoods are starting to pop up and are seeing good activity.   In the past week, I had two buyers looking at new homes neighborhoods in Chesapeake and Virginia Beach.  

It was fascinating to see the activity the new home sites were experiencing.  With lots available in present releases still be limited to 10 or fewer, the buyers seemed to want to jump to get preferred lot before that lot was gone.

Kind reminds of The Eagle's song, Hotel California, with that line "We haven't had that spirit here since nineteen sixty nine".  Though it has not been since 1969, this attitude in buyers has been not seen for a few years.

Jim is so right...it is all about the rates right now.  These historic rates won't be here forever.  So sitting on the sidelines is not the way to play the game right now. 

Keeping you updated on the market! For the week of December 3, 2012 MARKET RECAP The news was disappointing, but not terribly so. We are referring to the dip in new-homes sales for October. The Commerce Department reports sales came in at an annual rate of 368,000 units last month, which was 17,000 shy of the consensus estimate for 385,000 units. Pricing was also a minor disappointment. The median price for a new home dipped 4.2% to $237,000. This marked the second-consecutive month of price weakness. Disappointing, yes, but hardly a cause for concern. Year over year, new-home prices are up 5.7%. Given the scant supply of homes, we don't see a backsliding trend developing. The number of new homes for sale is still only 147,000, representing a 4.8-month supply at the current sales pace. The longer-term perspective is another reason to remain optimistic. New-home sales have averaged 361,000 per month on an annual-rate basis through October. In other words, sales are on pace to increase 18% this year. What's more, we have plenty of room left to run. Even with the double-digit sales increase, 2012 will be the third-lowest sales year since the Census Bureau began tracking new home sales in 1963. It's also worth remembering that this year's average sales rate is still below the 375,000 average rate of sales in 2009. Most estimates we've seen (which are likely conservative) expect new-home sales to double within the next couple years. This would put the annual sales pace closer to historical norms, which is around 1 million sales on an annualized rate. Though new-homes sales disappointed in October, the trend in overall pricing – new and existing homes – remains strong. Most private data providers show prices increasing in more markets. This past week, Case-Shiller's home price index showed prices rose 0.4% in the 20 cities it follows. This was the sixth-constrictive month of price gains, with gains sweeping across all 20 cities. The trend in purchase applications is also encouraging. Rising applications point to rising home sales. Rates continue to make new historical lows (albeit by a couple basis points) each week. Low rates contribute to a high-affordability index. Low mortgage lending rates are an important variable in the home-purchase equation, but they are not the overriding variable. The above chart shows brisk sales even with lending rates 300 basis points higher than they are today. In other words, low lending rates have done about all they can do to stimulate sales. At this point, the key variables for a sustained housing recovery are economic growth and more credit-worthy borrowers having access to credit. Economic Indicator Release Date and Time Consensus Estimate Analysis Construction Spending (October) Mon., Dec. 3, 10:00 am, ET 0.4% (Increase) Important. Rising residential real estate construction is spurring overall economic growth. Mortgage Applications Wed., Dec. 5, 7:00 am, ET None Important. Purchase applications continue to point to stronger home sales. Unemployment Situation (November) Fri., Dec. 7, 8:30 am, ET Unemployment Rate: 8.0% Payrolls: 25,000 (Increase) Very Important.Financial markets are looking for a sustained trend in job creation growth. Consumer Credit (October) Fri., Dec. 7, 3:00 pm, ET $12 Billion (Increase) Moderately Important. Expanding credit use reflects higher consumer confidence. An Ode to Diversity When people contemplate what went wrong in the housing bubble, they frequently point to lending: subprime loans, interest-only loans, negative amortization loans, and securitization were the helium that inflated the bubble. That's not really true, nor fair. These products have been around for years and had served the borrowing public well. The problem was really the misguided belief that an asset – housing in this case – can only rise. The chief problem today, and a primary impediment to the housing recovery, is excessive regulation, which is limiting choice. A recent report from FBR Capital Markets points to a regulatory environment that is “plain vanilla” in that it favors the 30-year fixed-rate loan above all others. Now, there is nothing wrong with the standard fixed-rate mortgage products, but other mortgage products have their place. Indeed, you could argue that taking an interest-only loan to purchase a Phoenix-based home late in 2011 was a savvy business move; the buyer would have tied up little of his own capital to purchase a bargain-basement asset that has since appreciated strongly. Many regulators and even more mortgage-industry participants have called for the need for more private mortgage investors to enter the market. For that to occur, though, these investors need the freedom to offer products that will satisfy a wider swath of borrowers needs, while also enabling them to earn a profit. We think 2013 will become the year of diversity: that is, a more diverse, heterogeneous mortgage lending market with more private investors. We say that because economic growth impacts regulation, and we see economic growth in 2013. Generally, the higher the growth, the more accommodating the regulators. We look forward to a strong 2013, and a stronger, more flexible mortgage lending market. If