The Housing Chronicles Blog: 7/1/13 - 8/1/13

Friday, July 26, 2013

BuilderBytes' MetroIntelligence Economic Update for 7/26/13


Please click here to see the edition of BuilderBytes for 7/26/13 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • New home sales rose to five-year high in June
  • June's strong rise in durable goods orders points to U.S. factory rebound
  • Initial unemployment claims rise by 7,000 in latest report
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Wednesday, July 24, 2013

BuilderBytes' MetroIntelligence Economic Update for 7/24/13

Please click here to see the edition of BuilderBytes for 7/24/13 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • Home sales take a breather, but prices high five-year high
  • FHFA House Price Index up by 0.7% in May
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Monday, July 22, 2013

BuilderBytes' MetroIntelligence Economic Update for 7/22/13

Please click here to see the edition of BuilderBytes for 7/22/13 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:

  • Federal Reserve:  economy growing at modest to moderate pace
  • Initial unemployment claims dip by 24,000 in latest report
  • Philadelphia Fed's Business Outlook Survey improves in July
  • Overall mortgage applications dip as rates rise; purchase loans rise by 1% in latest survey
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Friday, July 19, 2013

BuilderBytes' MetroIntelligence Economic Update for 7/19/13


Please click here to see the edition of BuilderBytes for 7/19/13 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • Building permits dip for second month in June but still remain ahead of starts
  • Housing starts dip in June but blamed on wet weather
  • Empire State Manufacturing Survey suggests economic conditions improving modestly
  • Leading Economic Index unchanged in June after two months of increases
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Thursday, July 18, 2013

July column for Builder & Developer magazine now online

My column for the July issue of Builder & Developer magazine is now posted online.

For this issue, entitled "Market Optimism at PCBC," I recounted the unbridled optimism evident at this year's show and also interviewed two builders, one public (Doug Bauer with TRI Pointe), one private (Tim Kane with MBK Homes).  An excerpt: 

As opposed to the gallows humor and despondent energy of the last several years, the 2013 PCBC — staged for the first time in downtown San Diego — was characterized by a strong optimism, with education sessions now focused on obtaining land, getting financing, growing your organization and building for an increasingly multi-cultural population. At night, besides the Builder's Bash co-hosted by this magazine, there were so many parties being thrown that it would be nearly impossible to hit them all. In summary, the new dawn for which we’ve all been waiting has clearly risen. 

During the show, I had the chance to chat at length with two builders gearing up strongly for what we hope is an extended industry renaissance, but these aren’t huge, public builders with operations in multiple markets. Rather, they include the first builder to go public since 2004 (TRI Pointe Homes) as well as an established niche player with the financial backing of a large Japanese conglomerate (MBK Homes). In both of these cases, growth is forecast to be steady and the ability to build multiple product types. 
 To read the entire column, click here.


To read the entire July 2013 issue in digital format, click here.

Land as the New Currrency

A funny thing happened on the way to the housing rebound:  land – and the ability to buy and hold onto it – has returned as the primary currency in the home building industry.  At least for now, this access to capital will likely have a profound impact as stronger, public builders snap up private builders starved for cash and shut out of the public markets.  As a result, look for even more consolidation as this stage of the revival plays out.

Whereas in 2007 the top 10 public builders sold 24% of new homes built and sold, during the first quarter of 2013 that capture rate had risen by six percentage points to 30%, at least according to an analysis by Deutsche Bank.  That’s in large part due to the $1.5 billion some of these builders spent on eight large acquisitions over the last 18 months.  Argues Lennar’s CEO Stuart Miller in a recent article in the Wall Street Journal, “We have to ways to win now:  We participate in the natural recovery, but additionally, we’re picking up market share form a group of builders that isn’t able to get financing.”

Miller should really thank the bond market for this largesse, which allowed public builders to stay afloat through the Great Recession as long as they remained current on their debt or were able to refinance it.  Meanwhile, the small or regional banks which have been the life blood for private firms not only stopped making construction loans, but forced many builders into bankruptcy by calling in loans early or enforcing personal guarantees.  It also hasn’t helped that close to 500 banks have failed since the beginning of the downturn.

Even the remaining usual suspects who have historically made construction and development loans remain skittish, as the FDIC estimates the value of such outstanding loans fell by nearly 70% since early 2008.  At the same time, all of the nation’s top public builders have remained solvent since 2008, largely by writing down nearly $40 billion in their land portfolios – a trick their private brethren could rarely pull off.

As a special bonus, in 2008 industry lobbyists also convinced Congress to refund nearly $8 billion in taxes paid during the boom years to help them stay afloat when new home demand collapsed.  Without those refunds, we probably wouldn’t be seeing the type of consolidation we’re seeing today.  And, for those private builders not wanting to be snapped up by larger prey, the public market is also an option, with three companies already going public since January 2013 as well as others waiting in the wings for their debuts.

Still, there are already rumblings that an industry known for forgetting its lessons in over-building in cycle after cycle may already be pushing too fast on land purchases.  Throughout 2013, land prices nationally rose by about 13% -- the first annual gain since 2005.   In coastal areas of California such as San Diego, San Francisco and Orange County, land prices have reportedly jumped by 40% over the past year.  For private equity firms such as Paulson & Co., Starwood Capital and other groups which started gobbling up land in the land price trough of 2009, their timing has been prescient, with many lots going for as low as 20% of prices during the previous peak. Eventually, these higher land prices will certainly result in higher-priced homes, which is manageable as long as we remain in a relatively low interest rate environment.

Due both to rising demand and the growing scarcity of buildable lots today, look for new home prices to rise by 10% to 15% in 2013 – and certainly more in popular areas where builders are deliberately hiking prices aggressively between phases in order to slow down absorption and let their construction crews catch up on back orders.

Yet there is still opportunity for smaller builders who are nimble and creative enough to address challenges largely ignored by larger volume builders.  In Los Angeles, there is now a boomlet for new, single-family homes built on small lots.  The idea is that by providing outdoor spaces such as patios and rooftop decks but discarding the traditional backyard, sales prices can stay attainable.  Over the next 18 months, 250 such homes will be offered in existing communities such as Silverlake, Echo Park as well as the eastern San Fernando Valley.  Prices usually range from $500,000 to $800,000 for 1000 to 2000 square feet of living space in two or three stories – on lots as small as 600 square feet.

Wednesday, July 17, 2013

BuilderBytes' MetroIntelligence Economic Update for 7/17/13

Please click here to see the edition of BuilderBytes for 7/17/13 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:

  • Builder confidence in July rose to highest level since January 2006
  • Retail sales rose less than expected in June
  • Higher gas prices pushed up CPI in June as core inflation remains tame
  • Industrial production rose slightly more than expected in June
  • Business inventories remained mostly flat in May
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Monday, July 15, 2013

BuilderBytes' MetroIntelligence Economic Update for 7/15/13

Please click here to see the edition of BuilderBytes for 7/15/13 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • Producer Price Index rose 0.8% in June, up by 2.5% over previous year
  • Durable goods orders rose by 1.6% in May as inventories fall for second month
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Friday, July 12, 2013

BuilderBytes' MetroIntelligence Economic Update for 7/12/13


Please click here to see the edition of BuilderBytes for 7/12/13 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • FOMC Minutes:  Tapering Likely Soon, But More Labor Gains Needed First
  • Initial unemployment claims rise by 16,000 in latest report
  • Mortgage applications dip by 4% in latest survey
  • Consumer credit surged in May by highest amount in a year
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Wednesday, July 10, 2013

BuilderBytes' MetroIntelligence Economic Update for 7/10/13

Please click here to see the edition of BuilderBytes for 7/10/13 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • May construction spending up by 0.5% from April and 5.4% from May 2012
  • Payroll jobs rose by 195,000 in June; total gains for April and May revised up by 70,000
  • Private sector jobs rose by 188,000 from May to June
  • Planned job cuts rose slightly in June but overall pace declining
  • Initial unemployment claims fall by 5,000 in latest report
  • Mortgage applications dip as rates rise, especially for refinances
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Wednesday, July 3, 2013

BuilderBytes' MetroIntelligence Economic Update for 7/3/13

Please click here to see the edition of BuilderBytes for 7/3/13 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • May construction spending up by 0.5% from April and 5.4% from May 2012
  • Manufacturing sector activity expanded in June after May contraction
  • Durable goods orders rose by 2.1% in May, up three of last four months
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Monday, July 1, 2013

BuilderBytes' MetroIntelligence Economic Update for 7/1/13

Please click here to see the edition of BuilderBytes for 7/1/13 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • Consumer confidence remains at high level
  • Chicago Business Barometer plunges in June following May 14-month high
  • Initial unemployment claims fall by 9,000 in latest report
  • Mortgage applications dip by 3% in latest survey, mostly due to fewer refinancings
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.