Seasonality Bites Housing
As we warn year after, Housing is extremely seasonal. This part of the calendar is expected to slip straight thru to January — mostly in EHS, but we will also see it in New Homes Sales, Permits and Starts.
Add to this the sunsetting government subsidies — $8,000 tax credit for first-time home buyers, and the eventual removal of ZIRP — and you have a recipe for slowing Permits, Starts, and Sales. Yesterday saw the National Association of Home Builder’s confidence index declined for the month of October.
Commerce Data:
BUILDING PERMITS
Privately-owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 573,000. This is 1.2 percent (±1.8%)* below the revised August rate of 580,000 and is 28.9 percent (±2.2%) below the September 2008 estimate of 806,000.Single-family authorizations in September were at a rate of 450,000; this is 3.0 percent (±1.0%) below the revised August figure of 464,000. Authorizations of units in buildings with five units or more were at a rate of 104,000 in September.
HOUSING STARTS
Privately-owned housing starts in September were at a seasonally adjusted annual rate of 590,000. This is 0.5 percent (±9.9%)* above the revised August estimate of 587,000, but is 28.2 percent (±6.7%) below the September 2008 rate of 822,000. Single-family housing starts in September were at a rate of 501,000; this is 3.9 percent (±9.3%)* above the revised August figure of482,000. The September rate for units in buildings with five units or more was 78,000.HOUSING COMPLETIONS
Privately-owned housing completions in September were at a seasonally adjusted annual rate of 693,000. This is 10.2 percent (±10.4%)* below the revised August estimate of 772,000 and is 39.6 percent (±5.7%) below the September 2008 rate of 1,148,000. Single-family housing completions in September were at a rate of 464,000; this is 8.3 percent (±14.3%)* below the revised August figure of 506,000. The September rate for units in buildings with five units or more was 210,000.
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Source:
NEW RESIDENTIAL CONSTRUCTION IN SEPTEMBER 2009
http://www.census.gov/const/newresconst_200909.pdf
Homebuilder Confidence in U.S. Unexpectedly Decreases
Shobhana Chandra
Bloomberg October 19, 2009
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=atsuzv2LjY8o
October 20th, 2009 at 9:58 am
Speaking of seasonality in housing, I have been noodling over the CRE problem and Xmas. I am coming to be on the side of the “We’ll just walk after Xmas” thinkers that inhabit the blogsphere. Seems to me there is a reasonable chance that retailers who are struggling don’t pay the rent for November and December and walk after January 1st. If I were a retailer who was at the end of my rope, I’d try to get something from Xmas, and then go to plan B….
just my 2 cents…
October 20th, 2009 at 10:18 am
Bruce! that hadn’t occurred to me but perhaps not just in CRE that mentality will prevail. Met a 31 year old single girl yesterday with a fairly solid job (she works for a county in CA) who had attempted to use the 8K tax credit to buy her first “home,” in this case, a mobile home; in any case, she didn’t qualify. As you can imagine, I did not hold back on my opinion/advice to keep renting and not fall prey to any of the government stimulus to chain herself to a depreciating asset and extremely illiquid “asset” as we move down the timeline. Further, I explained that in purchasing real estate, the value is IN THE LAND. The structure is a money suck.
October 20th, 2009 at 10:22 am
Great point, karen. Case in point: the location of our house is fantastic and SHOULD hold its value barring a complete collapse of the economy, but the house (which was originally built in 1921) is an absoulute money pit. The simple upkeep and maintenance alone is ridiculous, not to mention the bigger, unforeseen projects (e.g. a new roof for $18K in ‘07, there goes that bathroom reno $$). All these distortions by the feds are not allowing the market to clear properly, so we will see a malaise in real estate for years. I think the housing market and economy both go sideways (see CR today) at BEST in the coming years, and that’s with all the gov’t intervention. Once the feds take their toe out of the water, both will fall apart again.
October 20th, 2009 at 10:24 am
karen,
I enjoy your posts at Andy’s…along with I-man, left, cvienne and the gang. Since I am not a day trader, I’ll just lurk…but I’m trying to continue to learn from you bubbas.
B in T
October 20th, 2009 at 10:33 am
“This part of the calendar is expected to slip straight thru to January — mostly in EHS, but we will also see it in New Homes Sales, Permits and Starts.’
i will never know why anyone finds this a mystery
October 20th, 2009 at 10:37 am
@ahab: Same here but reality is an unpleasant thing to face. Am seeing many homes here in Minny sit longer on the market. If they haven’t sold by the time November hits, they likely won’t sell at all here (unless they’re marked down in a big way so that bargain hunters snag them) until spring. We barely see human life outside of heated buildings and cars from late December to mid to late March here.
October 20th, 2009 at 10:40 am
Talk about “biting housing”
http://money.cnn.com/2009/10/20/real_estate/home_price_forecast/index.htm?cnn=yes
I don’t think they are right, but they sure are bearish.
October 20th, 2009 at 10:56 am
On a side note – just for my own information, I’m looking at homes in my neighborhood in the $200sK range and there are still a lot of homes on the market (am looking at 5 homes on Wed eve) in this range, with more coming on the market every day probably hoping to get with the help of that tax credit and ultra-low rates. I will NOT be buying anything any time soon (and certainly not while everything is so distorted by gov’t intervention) but wanted to get The Big Picture, so I’m taking the time to poke around a bit for my own information. Will report back later on.
October 20th, 2009 at 10:59 am
Mannwich-
When I was a kid I spent two to three weeks every December in St. Paul for almost twenty years. I recall skating on Como Lake and getting hot chocolate in a shack they would assemble near the pavilion. There was never any place to sit and people were everywhere- and it was colder than a polar bear’s…Sledding in the golf course on Dead Man’s Hill (before they reshaped the place). My mom would kick us of the house at 9:30 let us in for lunch and then back out until the wolves started baying. Of course, I do blame her for the golden prosthesis that I wear at the tip of my nose…
“We barely see human life outside of heated buildings and cars from late December to mid to late March here.”
So are you telling me that they’ve all gone soft up in Minnesota?
October 20th, 2009 at 11:03 am
@MRegan: Yes, they have. Actually, I overstate things a bit. People DO venture out (we try to everday with the dog if it’s above zero, she couldn’t care less if it were 40 below!), but not nearly in the numbers that you see in the other seasons. They DO go to outdoor skating rinks (hockey is huge here) for various tournaments and pick up games. We barely see our next-door neighbors (and they have four kids and homes are close together in this hood) the entire winter.
But homes do NOT tend to move here (nor are many listed) in the winter. That is a FACT.
October 20th, 2009 at 11:04 am
@MRegan: I remember being astonished when we moved here in ‘05 at how little human street traffic there was in the winter in downtown Minneapolis in the winter. Lo and behold, I discovered the indoor “skyway” system and eventually figured out where all that human life was – - INDOORS. I was basically the only idiot walking the streets outdoors like I was back in NYC. What a dumb ass I am!
October 20th, 2009 at 11:14 am
Mannwich-
Don’t be too hard on yourself- one learns the lay of the land and moves on, you can’t know what you don’t know. For example, in downtown Chicago there is an extensive underground Pedway that few people there know about and even fewer use. Go to Cicero and Berwyn and ask around about the Pedway- blank stares…
So enjoy yourself, seems like you all are going to be receiving a real winter this year. Lots of excellent places to go for x-country skiing.
October 20th, 2009 at 11:18 am
Mannwich: A very good friend there has made unbelievable profits this year flipping houses. I thought he was crazy when he first told me about it a year and a half ago. First time credit has helped put big time money in his pocket. But, oddly enough, he was selling strong last Autumn and Winter. He’s smart and works hard and has been able to flip in that market relatively easily.
October 20th, 2009 at 11:19 am
@MRegan: I’d be OK with a bit of snow, but it’s the below zero temps and duration of the winter that gets me. Plan on doing some downhill skiing at Afton Alps (ever been there, not bad for Minny, GREAT during the week, nobody there!) and the wife and I may do some more x-country this year.
October 20th, 2009 at 11:23 am
@Wanger: I’ve heard similar stories here as well. Am very skeptical (as usual!), but I’ve no doubt that some deals can be had for folks who do this and look at homes full-time (and have an inside track on homes that haven’t listed yet). A friend of a friend got a steal of a place from an elderly fellow’s trust after he passed away. Paid cash for it. Less than $100K. Put a little work into it and is now renting it for $1,200/month. It CAN be done but it’s for folks who clearly no what they’re doing, know the lay of the land here, can maybe do some of the work themselves (or know the right people to get it done cheaply), and have some cash to forgo the lending proces to close quickly.
October 20th, 2009 at 11:23 am
Bruce, I am not a day trader, either..
Dedude, thanks for the link, i finally got it to work. Here is something you can bet on: “Hunter also sees a new wave of foreclosure problems coming from higher priced loans and prime mortgages.”
October 20th, 2009 at 11:23 am
that’s “know” what they’re doing…..
October 20th, 2009 at 11:33 am
[...] Seasonality Bites Housing [...]
October 20th, 2009 at 11:49 am
HW – “First time credit has helped put big time money in his pocket.”
Can you explain to us how your “friend” has made “big time profits” using the first time home buyers credit?
October 20th, 2009 at 11:55 am
@Thor: I’m beginning to think Wanger is a fraud or is a big-time liar. Good catch. I just skimmed his post (as I usually do) and didn’t catch that. One has to be a first-time buyer and LIVE in the home for 3 years to get that tax credit, unless Wanger’s friend is breaking the law, like many apparently are doing, according to CR:
http://www.calculatedriskblog.com/2009/10/wsj-irs-examining-many-suspicious-first.html
Big shocker there, right? Fraudulent activities and gaming the system in our economy today? But who cares, right? As long as you get yours and I get mine, all is good right?
October 20th, 2009 at 12:04 pm
Thor: Sometimes the intelligence level on this board amazes me. He’s seeing people rush to buy who are first time home buyers. They get the credit not him. He’s just selling houses rapidly since the credit was announced. Man, sometimes you guys are pretty dim. Just like the clown that was doubting the Industrial Production statement. Had to show him the actual story after he called me a liar. Flat out stupid sometimes.
October 20th, 2009 at 12:16 pm
HarryWanger:
You should find a more intelligent group of people to hang out with.
Immediately.
Please.
Thank You.
October 20th, 2009 at 12:26 pm
my brother bought a house outside seattle 2 1/2 years ago because he had to “get in” before the prices got out of hand and all his friends were in the black on paper. lets forget the fact he put no money down and took out a 10 year interest only. meanwhile he was already $40k in debt and his master plan on buying was to wait a year, extract equity once the house rose in value and pay off the debts and get the interest deduction on 2nd mortgage. brilliant plan. not! now his overtime at the hospital has been cut so his take home is down 20%. he’s paid off none of the principal and the house went from purchase price of $350k to current value of $300k. the lender won’t talk to him about a restructure because he pays on time and is not considered delinquent. there is no end in sight for his debt to income ratio imbalance and he doesn’t know what to do.
i told him what to do. take a walk and don’t look back. he’s pondering it. this situation is occurring all over the USA and until there is some type of supportable resolution this crisis won’t go away anytime soon.
October 20th, 2009 at 12:29 pm
@Rikky: He should RUN, not walk away now.
October 20th, 2009 at 12:35 pm
‘…..after he called me a liar”
If the show fits
October 20th, 2009 at 12:37 pm
Manny, yes, and you see how he’s altered his story (yet again) after he was called out.
October 20th, 2009 at 12:52 pm
Thor: You are a scary stupid. I’m sorry but to keep twisting any post is infantile and moronic. Mannwich I have respect for – at least he reads what I write, will refute or agree but intelligent conversation is commonplace with him. You are just flat out ignorant and a pest. Period.
October 20th, 2009 at 12:52 pm
“Man, sometimes you guys are pretty dim. Just like the clown that was doubting the Industrial Production statement. Had to show him the actual story after he called me a liar. Flat out stupid sometimes.”
It’s me who Wanger is insulting here.
And contrary to what he is claiming in the statement above, here was my reply to his industrial production statement, in which I show that Wanger’s claim about industrial production is totally bogus, using the actual data released by the government instead of some hearsay:
http://www.ritholtz.com/blog/2009/10/monday-reading-3/#comment-227475
Of course, my reply in the other thread is still standing unanswered by him. Instead, Wanger is lying through his teeth in this thread now to save his reputation, although I doubt there is much left that can be saved.
Wanger, who is going to trust that anything of what you are claiming here is true?
rc
October 20th, 2009 at 12:56 pm
Thor – You got you bags packed and already to go?
Hey I hope you have a great time on your vacation and good luck with quiting.
HarryWanger -PTPTHTHTHTHTHTHTPPP!!!!!!!!!!!!!!
October 20th, 2009 at 12:59 pm
rootless: Whom I’m now convinced is actually Thor based upon the dimwitted thick skulled replies:
“WASHINGTON (MarketWatch) — Led by a rebound in autos, metals and high tech, U.S. industrial production increased at an annual rate of 5.2% in the third quarter, the fastest growth in four years and the first quarterly increase since the recession began in late 2007, the Federal Reserve reported Friday.”
Looks pretty straight forward to me. Maybe your parents can help you read it. My god, the stupidity.
October 20th, 2009 at 1:02 pm
Love it!
October 20th, 2009 at 1:02 pm
F420 – Yup, almost all packed, flight leaves tomorrow evening. Can’t wait. Also more than ready to finally quit. Thanks for the encouragement!
October 20th, 2009 at 1:06 pm
Harry: ” You are a scary stupid” WOW what happened to your manners?
Just to be clear what excatly is a “Scary Stupid” is that the word of the day?
Do I have permision to use that sometime?
“You a scary stupid man”
So Thor calls you out, shows you are a liar and he becomes a “Scary Stupid” Well I guess coming from you that is a better then expected insult.
I do not want to answer for anybody, but as far as. “Mannwich I have respect for – at least he reads what I write”
Then how do you explain: “I just skimmed his post (as I usually do)”
Oh wait you wont explain it you will just continue to be the scary stupid you are.
October 20th, 2009 at 1:10 pm
franklin: Thor never showed I was a liar and is a discredit to this forum by spreading lies. Please show me where I lied. I don’t. Never have on this forum. And yes, he is truly scary stupid.
Is Mannwich the only person posting here that is not Thor/rootless/franklin? Seems like you guys all have about the same level of intelligence which is odd that you would find three of you in such a small sample.
October 20th, 2009 at 1:11 pm
@Thor
Good catch. Kudos.
October 20th, 2009 at 1:16 pm
Thor Best of luck with that.
Harry: Sharpen your stick and keep posting your scary stupid stuff – poke, poke, poke, if this was real life someone would have already kicked you out of the house.
Most people do not like being poked with a stick espcially when the are getting poked by a scary stupid like you.
There was a poster on here Harry Wagner, who is currently having his posts monitored, it appears the only reason for this monitoring is because he quoted you saying “Who the fuck cares” at least that is what was in the email he recieved from “The Big Picture”
Tell you what Harry, this Wagner guy has a family, the only reason his family has been kept at bay is out of respect for many of the truely great people who post here. Mr. Ritholts I emplore you to take HarryWangers stick away like you did Harry Wagners, if Wanger keeps poking people with his stick things will get sacry ugly
October 20th, 2009 at 1:19 pm
Harry – you stated “A very good friend there has made unbelievable profits this year flipping houses.”
This is a lie. Even if your friend is a RE agent he cannot be selling homes to flippers using the 8,000 tax credit.
You are a liar, you were caught in your lie and you don’t like it. Be a man and admit that you made that story up.
October 20th, 2009 at 1:22 pm
Once again…people are buying houses to take advantage of the first time credit. He’s flipping houses. He buys them at 100k or so, sells them around 200k to people taking advantage of the credit. Get it? I don’t like to have to be rude but you are truly an idiot. Wherever you’re going to try to recover from something, I hope they don’t have computers with internet access. You seem to have difficulty processing simple information.
October 20th, 2009 at 1:41 pm
Time line:
1. On Friday, September 16, at 19:15 AM the September data of industrial production were released showing a m-o-m increase of 0.7%[1]
2. At 9:24 AM, Harry Wanger sends out a posting saying: “Mini economic boom: Industrial Production best in 4 years! “[2]
In my world of semantics, this statements claims industrial production has had the best value in absolute terms for the last four years.
3. Harry Wanger is challenged by me regarding this statement. He calls me stupid in response to my challenge and says he heard it on TV.[3]
4. I show with official data that neither the absolute industrial production in September was highest in four years, nor the m-o-m increase was largest in four years.[4]
5. Harry Wanger doesn’t reply anymore. Instead, he is calling me stupid again in this thread here today.[5]
6. I post the link to the comment in yesterday’s thread where I presented the official data.[6]
7. Now, Harry Wanger claims he was talking about the annual rate of the quarterly change and he is calling me stupid again.
Who is going to believe any word this guy is saying here? Is calling me stupid over and over again going to help him?
[1] http://tinyurl.com/yfvqewy
[2] http://www.ritholtz.com/blog/2009/10/b-of-a-loses-1b-on-consumers-defaults/#comment-226497
[3] http://www.ritholtz.com/blog/2009/10/monday-reading-3/#comment-227458
[4] http://www.ritholtz.com/blog/2009/10/monday-reading-3/#comment-227475
[5] http://www.ritholtz.com/blog/2009/10/seasonality-bites-housing/#comment-227610
[6] http://www.ritholtz.com/blog/2009/10/seasonality-bites-housing/#comment-227635
rc
October 20th, 2009 at 1:55 pm
Interesting conversation with broker friend of ours who has clients who’ve been with him for years who were near retirement and had found according to him “perfect place to retire” and unfortunately bought either home or property to build on in 2007-through early ‘08 figuring they’d work another year and then sell their original home and retire comfortably. He says with their investments down and the housing market so bad they now are caught paying two mortgages.
What’s interesting about what he said is that they are now caught paying two mortgages. Says to me that these people probably did a HELOC on their original home to buy the second one and now they are underwater on both homes. The quality of clients he has would seem to say that if these people were that close to retirement they probably either had first mortgage paid off or were close to paying it off, but the easy money was a huge temptation to HELOC and buy the second home figuring it they could transition easily. If they were building a new house it allowed them the time to transition and if they were buying and existing home they could do renovations at their leisure. Now they are caught in a really bad circumstance and how long can they hold out paying on two homes?
Then there are other anecdotes I’ve heard in my area of folks using their property appreciation in the 2005-07 years to HELOC and buy vacation properties. My area of NC is close to the beaches and the Mountains and both areas were in building boom. This isn’t like FLA here and so it never got wild, but there are probably places all over the East Coast and up int NJ who weren’t speculators or flippers but seeing the equity in their primary residence going through the roof decided a nice place at the beach or in the Mountains would be great…and that they could always get vacation income to offset the cost.
BIL of ours who is close to retirement has been looking for a place to buy on Hilton Head Island, SC but the prices took their biggest run in 2006-07 (later than the FLA Bubble) and he couldn’t afford it. After holding tight the prices in the gated resorts down there for condo’s and homes have finally started to take a hit. Down about 20% now from 08 and new listings just coming on he says look like they are down another 10% since the season has ended.
How many people who were close to retirement got caught up in this? And, these are careful people who thought they had planned prudently? Lots of IBM and Pharma Executives in our area. These are folks who weren’t making the kind of money the hot shots do today…but made enough and saved enough to live comfortably. But, the opportunity of seeing one’s home jump $200, 000 or more in value and low interest rates for second mortgages, HELOC’s was just too tempting. Then there is the next wave of prudent older boomers who are just behind….caught in the same situation.
Where are the young people who will have a job and be able to even think about buying these homes as a first time purchase or those who would even have the ability to trade up? The Southeast outside Florida is going to have some very deep economic pain in the coming years because so much of the employment was dependent on building the new gated and ungated retirement communities for the “vacation home” market and for what the Chamber of Commerce and Building/Realestate interest told them would be a “wave of retiree’s flooding from all over the country to retire in the Carolinas and Georgia. Folks were told Florida was unsafe because of all the hurricances (remember how many Florida had in the early 2000’s) and that the Carolinas were safer and so much closer for visiting the grandkids in the Northeast and Midwest. “If you build it, they will come” was a mantra. But, if you can’t sell where your primary residence and your net worth is in the crapper then how is this going to work out?
Anyway….just some anecdotes about the “next shoes to drop.”
October 20th, 2009 at 1:56 pm
Rikky; he should just stop paying the mortgage and wait for them to contact him (while saving up money). If he resists eviction he could end up staying for free for a year or more.
October 20th, 2009 at 3:35 pm
@TakBak04
And the next generation, the boomer’s children, cannot afford to buy homes at all. One of my kids, 32 is unemployed living off savings and small jobs until she finds a job, the other is under employed and cannot afford to live without a room mate at age 29. About 1/3 of their friends/peers have married and less than that have bought a home. They can’t afford to! And all of these boomer’s children that I am speaking about have college degrees!
I bought my first home for $14,500 when I was 21. This is certainly a case where the younger generation is living at a lower standard of living than their parents.
October 20th, 2009 at 4:30 pm
TakBak,
OOC, how is this: ” My area of NC is close to the beaches and the Mountains” even possible?
http://www.worldatlas.com/webimage/countrys/namerica/usstates/nc.htm
October 20th, 2009 at 4:33 pm
“Where are the young people who will have a job and be able to even think about buying these homes as a first time purchase or those who would even have the ability to trade up?”
TakBak04,
Of course this is the core of it. However, there are 2 sides: if nobody can afford homes then nobody can sell homes… that’s why the price must always adjust to the market, come what may. There is no alternative. That’s why it is pretty safe to predict that house prices will drop for a long time into the future. There will be statistical noise, but you cannot sell to people who do not have money or credit.
December 1st, 2009 at 2:26 pm
[...] today, we noted that the seasonality effects of Housing were re-asserting [...]