Safer Borrowers Says Who?
As part of the overhaul of financial system regulation, a new consumer protection agency for borrowers is taking shape.
The New York Times reports:
The Obama administration sent Congress a detailed proposal on Tuesday to create a consumer protection agency responsible for financial products, a move that is the first shot in a heated battle with banks and other financial institutions over how to regulate home mortgages, credit cards and other forms of lending.
For their part, banks and mortgage lenders are placing top priority on killing the proposal.
The proposal would create a stand-alone agency dedicated entirely to protecting consumers. It would be added to existing bank regulators like the Federal Reserve, the Federal Deposit Insurance Corporation and the Comptroller of the Currency.
Case-Shiller Price by Market Map–Flash Envy
The Wall Street Journal has an enviable Flash infographics group.
Here’s their latest treat, an interactive map of Case-Shiller price data by market.
Click image to access Wall Street Journal interactive map.
San Diego’s False Starts
San Diego residential real estate had an astonishing April and May in the teeth of the worst housing recession in at least three generations. Believe that and we’ll tell you another one.
Actually, when the numbers are accurately tallied, San Diego residential real estate had a pretty good April, up 20% from the same month in 2008, and a moderately good May, up 6.5%.
That’s not 63% better than April 2008, which is what the California Association of Realtors originally reported. And a 6.5% lift in May is no where near the 89% mega quantum leap the association crowed about a month ago.
If it’s their job to count the stuff right, why can’t they do their job? You’d think they were trying to pull one over on people. Fortunately, real estate economist Tom Lawler caught the, ahem, error of CAR’s ways.
The Wall Street Journal reports:
The California Association of Realtors expects to make sharp downward revisions in its recent monthly reports of soaring home sales in the San Diego area, Robert Kleinhenz, deputy chief economist of the trade group, said in an interview. Those revisions will mean modest downward revisions in statewide sales, he added.
The revisions are likely to be announced in late July, when
the Realtor group reports home sales for June. The problem resulted from a glitch in data from a multiple-listing service in San Diego, Mr. Kleinhenz said. He said a change in computer systems used there resulted in incorrect data being sent to the Realtor association over the past year or so.Thomas Lawler, an independent economist in Leesburg, Va., who tracks home sales nationwide, raised questions about the San Diego data in a report last week. Mr. Lawler noted that the numbers reported by the Realtors vastly exceeded those from MDA DataQuick, a research firm in La Jolla, Calif., and other sources.
Nothing like needing to sharply, downwardly revise published data to cultivate trust in an already wary market.
Orange County Green Shoots
Housing recessions don’t end when starts, sales, and pricing data say they’ve ended.
Everybody who’s been through them knows it’s different than that. Bob Toll, Toll Brothers’ patriarch and CEO, has put it this way:
“Somebody gets up on a Saturday or Sunday morning and decides it’s a good day to buy a house, and a reporter for the New York Times finds out and reports in a Monday headline that it’s a good time to buy a house.”
It has gone like that enough times that veterans of residential development and home building swear that’s what happens.
In an isolated number of markets–including ones that were doing nothing good six months ago–people are starting to say, “the light’s back on.”
Here’s a note from the Orange County Register’s real estate writer Marilyn Kalfus.
“Orange County is continually trending to inch up month over month,” said Kristine Thalman, CEO for the Orange County chapter of the California Building Industry Association.
She said the $10,000 tax credit for new home buyers is continuing to spur demand since it went into effect in March.
“As one of my builders called it, somebody turned the light on,” she said.
Statewide, builders pulled permits for 2,203 single-family homes in May, down 7 percent from April but 40 percent lower than in May 2008. On a seasonally adjusted basis, CIRB reported that May’s figures were down just 1.6 percent compared to April.
“This is very good news,” said Robert Rivinius, the California Building Industry Associaton’s president and CEO. “As this continued strength in new-home construction shows, the credit is indeed working.”
The Franchise Tax Board has reported that nearly all of the $100 million for the program is spent. The homebuilding industry is trying to get it extended.
Based on the strength in the single-family market, CIRB for the first time this year has adjusted its annual forecast upward this month. The Board now expects single-family housing starts to total 24,900 and total housing starts to be 40,200 for the year.
Those familiar with the plotline of housing downturns know that recovery isn’t a single event, but a process. It’s the light going back on in multiple markets, when enough prospective buyers believe that the market has made enough prospective sellers capitulate.
The constant flow of policy has slowed down and added complexity to the process. Big, noteworthy players have capitulated, but only in isolated instances. The heavy hand of a corrective market has not driven enough property holders to their knees for potential buyers to believe their moment has come.
The policy game has favored sitting tight in hopes of some form of bail out as opposed to cutting one’s losses and moving on. That’s probably why the bottom, so to speak, is proving to be elusive.
At What Price, Couch Time?
The Housing Crisis has its many forms.
- One in five employed American workers does at least some of their work at home.
- More than 30% of single jobholders work on weekends.
- More educated people are more likely to work at home than those with less than a high school diploma.
- On an average day, 22% more women than men do stuff for the household at home, and they spend 23% more time than men doing it.
- One out of five men do housework, whereas every other woman does.
- 96% of American adults enjoy “leisure” activities. Men average 5.7 hours; women 5.1 hours.
You can find this data and more in the American Time Use Survey, just released by the United States Bureau of Labor Statistics.
Housing Crisis’s takeaway. Males cede 90% + of household decisions to women for a little over a half hour of leisure? That’s just lazy.
Seriously, more people are working at home–employed and self-employed–so home office and work space should not be an extravagance or an afterthought for new home building.
Of course, the Wall Street Journal analysis was all about changes in the way we work.
People in professional, production and service jobs worked less in 2008 than a year earlier. People in management and sales jobs worked quite a bit more in 2008 than in 2007, an increase was much larger than for the general working population.
The BLS isn’t big on explanations, but you don’t need the federal government to tell you that workers at companies that have just had layoffs often end up doing more with less — and work harder for fear that they might be next in the unemployment line. Or that sales calls are a whole lot harder when nobody is spending money.
Average Weekday Hours Worked
| Class of Worker | 2008 | 2007 |
| All Wage and salary workers | 7.58 | 7.51 |
| Management, business, and financial operations | 7.85 | 7.66 |
| Professional and related | 7.16 | 7.27 |
| Services | 6.84 | 6.92 |
| Sales and related | 7.59 | 7.15 |
| Office and administrative support | 7.18 | 7.34 |
| Construction and extraction | 8.05 | 7.99 |
| Installation, maintenance, and repair | 8.38 | 8.11 |
| Production | 7.94 | 8.32 |
| Transportation and material moving | 8.19 | 7.81 |
Stock Building’s Minority Parent Shakes Up Brass
Stock Building Supply’s erstwhile owner and current 49% stakeholder Wolseley Plc has shaken up its top management in the wake of selling 51% of Stock to Los Angelese private equity player the Gores Group in May.
ProSales editor Craig Webb reports:
Chip Hornsby stepped down as group chief executive, effective immediately. The move ends a nearly three-year period at the top in which Wolseley struggled to survive the global recession and ultimately ended up selling a majority stake in Stock, America’s second-biggest LBM dealer.
Ian Meakins, former chief executive of Travelex Holdings Ltd., a foreign exchange and payments business, will take over Wolseley on July 13, U.K.-based Wolseley announced.
This takes an 18-year Wolseley veteran Hornsby out of the strategic mix. Look for Gores to flex its muscle operationally as Stock’s reorg plays out, especially as the financial performance comes to light.
Will Home Prices Bottom Soon?
CNBC’s Diana Olick reports on today’s S&P/Case-Shiller home price data:
The Treasury Department’s stress test scenarios–both baseline and more adverse–call for continued but shallower declines through the end of 2010. Calculated Risk plots actual S&P/Case-Shiller data against the two Treasury Department scenarios.
His conclusion:
So far prices are tracking between the two stress test scenarios.
Position A for Case-Shiller Home Prices Story
It’s the lead story in the Wall Street Journal.
U.S. home prices continued their multiyear tumble in April, according to the S&P Case-Shiller home-price indexes, although the indexes showed their third-straight month of slightly smaller declines.
Seventeen of 20 major metropolitan areas posted price declines of more than 10% from a year earlier, with the Sun Belt continuing to be hit hardest. Nationally, home prices are at levels similar to the middle of 2003.
David M. Blitzer, chairman of S&P’s index committee, said the pace of residential real-estate decline slowed in April. “While one month’s data cannot determine if a turnaround has begun, it seems that some stabilization may be appearing in some of the regions.”
Here’s the Standard & Poors monthly release.
Calculated Risk charts up the data in three ways to get insight. Here’s a dramatic one on peak-to-date declines in the 20 Case-Shiller cities.
Click to access Calculated Risk post on Case-Shiller data.
Importantly for an understanding of the relationship between housing and the broader economy, Calculated Risk will show current home price declines in comparison to the Treasury Department’s stress test scenarios to gauge the relative health of the banks.
Since last month’s home price declines were already at or worse than the the “baseline” scenarios projected by the U.S. Treasury, this month’s will clearly show that the stress test was not stressful enough to reality check banks.
Still, second-derivative improvement may be as good news as we’ll get for some months to come, and we’ll have to learn to make the most of it. At any rate, it beats Madoff day two stories by a longshot.
Here’s S&P’s David Blitzer on CNBC with toplines on Case-Shiller’s April data:
A Case for Dr. Shiller
Big Builder senior online editor Bill Gloede previews tomorrow’s monthly release of the S&P/Case-Shiller index. But Gloede does so in inimitable and unexpected fashion.
In a fit of apparently propitious timing, MacroMarkets, LLC, the developer and seller of structured financial products co-founded by Dr. Robert Shiller, on Tuesday will introduce its new MacroShares Major Metro Housing Shares to trading on the New York Stock Exchange.
Why propitious? Well, in California at least, it looks like prices are starting to firm up and even rise. The early second-quarter view from Lennar and KB Home earnings ;last week also seems to indicate better news, or at least market movement, ahead.
The new housing shares will trade under the symbols UMM, for housing market up, and DMM, for housing market down. The shares will track the S&P/Case Shiller Composite 10 home price index, a value-weighted average of the 10 original Case-Shiller metro area indices, which include Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington.
Dr. Shiller’s aim is to generate liquidity and stability around residential real estate, outcomes he says will occur if there’s a natural futures market for it.
Home Building’s 2Q: Heading to Fourth and Short
The bellwether boys–Lennar’s Stuart Miller and KB Home’s Jeff Mezger–have spoken.
The housing economy has diminished their respective companies’ businesses, their armies of associates, their empires of land holdings, etc. with the ferocity of the Judgment of Solomon. What’s not diminished a shred, though, is their will to win.
Each has spliced flickers of positives into an assessment of what’s been going on lately at their companies, and what the market looks like for the months ahead. Their measured statements echo what we hear far and wide, whether it’s from multi-regional publicly traded companies, or single-market privates. It kind of sounds like one of Mezger’s statements from his 2Q earnings call transcript:
On the brighter side, however, the existing home sales report released by the national association of realtors earlier this week confirms that the combination of historically low prices and low interest rates is having a positive impact and the new home sales data from the U.S. Census Bureau showed a sales pace that is stabilizing, albeit at low levels. Affordability is at an all-time high and inventory of available homes has trended much lower in many key markets despite the steady influx of foreclosures.
Clearly, when you talk about home builders’ will to win in this environment, it’s not head-in-the-clouds talk. They know what they’re competing with: Paralysis brought on by fear of buying before prices have bottomed on the one hand, and foreclosures on the other.
A monthly payment for a new home, and the total cost of homeownership that that monthly payment signifies, appeal to different values in a society that has in the past 24 months increased the likelihood that a home buyer will stay in his/her home for some years longer.
If we’re no longer looking at the four walls and rooftop of the owned home as an income-producing investment that will subsidize gain in ways beyond the household earners’ take-home pay, then a new home, with its warranties, its energy savings, etc. can start to measure up on a practicality scale. Not only against a foreclosure opportunity but vs. equivalent rentals.
In the weeks ahead, earnings and operational performance of a dozen other public companies will come to light. In each case, we expect to hear emphasis on:
- the balance sheet, and the ability to improve or sustain an impressive cash trove;
- a product push, with focus in most cases–save Toll Brothers–on affordability and speed of construction time;
- improved operational disciplines for margin opportunity;
- and, opportunistic land grabs that will yield quicker upsides vs. higher priced dirt in their current lot pipelines.
Knowing as little as they do about the specific quality of lot positions big home builders currently possess–it’s their secret sauce–Wall Street investors and partners can only react with an eye toward managing their fear of risk.
So performance will need to pan out as substantially better for confidence to build up around these stocks.
The united front–actually putting private enterprise home builders, the interests of invidual home buyers and prospects, and Capital Hill on the same team, for once–should be against the brute effect of foreclosures on communities, financially, emotionally, and physically.
No matter what anybody says about home builders having overbuilt–and they did in a finite number of markets in the seven or eight states (Arizona, California, D.C.-metro, Georgia, Florida, Nevada, and Texas)–new home builders are making themselves part of the economy’s way out of a hole.
You’re doing it every time you quicken the pulse of a prospective home buyer with one of your offerings that can actually get somebody out of the waiting game and into the market.
The bellwhether boys have spoken. Stay tuned in the weeks ahead as the rest of the crowd speaks up about where they are and where they’re headed.
Meanwhile, this is our last blast to you before our Independence Day holidays. We wish you and yours a safe, joyful, celebratory official start to Summer 2009. Please keep in mind and heart those men and women in the armed services and other community initiatives who work to safeguard our sacred, one-of-a-kind independence. Here’s to your undying will to win.