Monday, November 21, 2005

Plunging Confidence Levels!

National Association of Homebuilders Index Shows Plunging Confidence Levels

In yet another indication that the big house-building party may be coming to a close, the National Association of Home Builders released its November index of builders' confidence Wednesday.

The index was down 8 points in one month to 60, representing the largest one-month decline since Sept.2001, and the lowest level in more than two and a half years.

Of note is that the component in the index that measures traffic from prospective buyers was down 5 points to 46, adding more weight to the recent decline posted here.

Thursday morning, as this issue was in final edits, PBB noted that the Commerce Department reported new housing starts were down 5.6% in October. Analysts (those who make their money tracking this stuff) had been calling for a drop of 2.8% for the month.

Building permits were also down 6.7%-- the sharpest drop in six years.

Sunday, November 20, 2005

Appraisal Week in Review

I started the week Monday with an appraisal request for a historic Oak Park home. The Prairie style house was built in 1912 and designed by E.E. Roberts architect and contemporary of Frank Lloyd Wright.

Tuesday I was off to the Lakewood Falls subdivision in Plainfield, Il to appraise a modern two story home.

Thursday I appraised an new construction duplex condominium in Chicago's Lakeview neighborhood in the Columbia Place subdivision. Then on to a high rise condo in the Edgewater neighborhood along Sheridan Road.

Friday the job called for market value on a 1950's ranch home in Northbrook. This neighborhood is actively in the teardown phase, and all the old homes are being replaced by new two story mansions.

And I finished up back into the city Saturday morning to appraise a Loft condominium in the Near West Side neighborhood.

All in all a quiet week.

Saturday, November 19, 2005

Slowing housing market and the bond spread

Mortgage market commentary

Big doings this week. The tentative signs last week of a top in long-term mortgage rates this week turned into a brass band blaring the news.

The 10-year T-note fell as low as 4.45 percent yesterday, down from the scary top just short of 4.7 percent only 10 business days ago. Yes, mortgage rates are supposed to follow the 10-year bond, but this time for technical reasons involving hedging of rate risk, fixed-rate mortgages are stuck just north of 6.25 percent.

And, don't confuse a top with the prospects for a decline, the latter not being good.

The change at hand is the shift from fear that the Federal Reserve Board would continue to raise the cost of money from its current 4 percent up to 5 percent or more, open-ended into 2006, to the belief that the Fed is very close to being done. The bond market is telling the Fed that neutral is nigh.

The Fed meets next on Dec. 13, and all still expect 4.25 percent at that meeting, and most expect 4.5 percent at Fed nominee Ben Bernanke's first meeting on Feb. 1. This week's trading has removed thought of the Fed going beyond 4.5 percent, and has called into question the wisdom of going any further at all; the pattern of rates across all maturities suggests that if the Fed does go to 4.5 percent it will not be able to stay so high for long.

Read the entire Inman News article

Monday, November 14, 2005

Real estate rates 'may be nearing a top'

Bond market, Fed hikes paint picture of possible recession

Mortgage rates stayed at their 2005 highs, just below 6.5 percent for the lowest-fee 30-year loans, but trading in the all-important Treasury bond market suggests that long-term rates may be nearing a top.

There were no market-moving economic data last week, but the Treasury had $44 billion in new bonds to sell at auction and the behavior of the bidders tells a tale.

The Treasury borrows constantly to roll over old debt and to raise new cash, but it raises the big money in a few "refunding" weeks. Nobody gets a refund in this misnomer; the ancient term refers to the Treasury re-funding its empty coffers.

Reafe the entire Lou Barnes article at Inman News

Friday, November 04, 2005

Pending Home Sales Index Close to Record

Pending home sales, a leading indicator for the housing sector, eased slightly but is at the second highest level on record, according to the National Association of Realtors®.

The Pending Home Sales Index,* based on contracts signed in September, slipped 0.3 percent to a reading of 128.8 from a record of 129.2 in August, and is 3.3 percent higher than September 2004. The index is derived from pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed; pending home sales typically are finalized within one or two months of signing.

David Lereah, NAR’s chief economist, said the index shows a lot of momentum. “We’re still seeing a post-Katrina boost in home sales activity, where the needs of displaced residents are supplementing a fundamentally strong market,” he said. “Aside from this temporary lift, the market is entering a period of transition in which we will see a somewhat slower but more sustainable pace of home sales–a period that is expected to be historically healthy. This will help to create a better balance between home buyer and sellers, so price appreciation should be cooler as well.”

Read the entire article at RISMedia