New Home Sales: "Really Good News"

Sales of newly constructed single family homes rose 11% over May, but median price fell 3%. By Les Christie, CNNMoney.com staff writer Last Updated: July 27, 2009: 11:50 AM ET NEW YORK (CNNMoney.com) -- Sales of newly constructed single-family homes spiked 11% in June to an annualized rate of 384,000 homes, according to a report released Monday. The gain over May was much greater than expected. A consensus of housing industry analysts had forecast seasonally adjusted sales of 352,000, according to Breifing.com. However, sales are still 21% below the levels of a year ago, when new homes sold in June at an annualized rate of 488,000, according to the report released by the U.S. Department of Housing and Urban Development. Four years ago, during the height of the housing boom, the sales rate for June was 1,374,000, nearly three-and-a-half times higher than last month. Still, the report was very positive, according to Peter Morici, an economics professor at the University of Maryland who had forecast June sales to be at the 350,000 level. "That is really good news. Considering what's going on in existing home sales, with all the foreclosure activity sending down home prices, for new homes to jump like that is a good indicator that the economy is bottoming out." Builders have been more optimistic about market conditions and this report should further buoy their spirits. An index of builder confidence from the National Association of Home Builders (NAHB) rose to 17 this month after languishing in single-digit territory. In June, they began building single-family housing units at an annualized rate of 470,000, a 14.4% jump over May. Pat Newport, a housing industry analyst for IHS Global Insight, also deemed the report very good news -- but is uncertain how Obama's $8,000 tax credit for first-time homebuyers will affect the longer view. "I only wonder how much of the increase is coming from rising demand from new homebuyers," he said. "The tax credit is boosting demand, but what will happen when it goes away in December?" Prices and inventory The median price paid for a house sold in June 2009 was down about 3% to $206,200; the mean price was $276,900. By the end of the month, the inventory of new homes had dropped to 281,000, an 8.8 month supply at current rates of sale. Last month, there were enough homes on the market to last 10.2 months at that rate. "They have to clean out that stock to get building again," said Morici. "Normal" new home inventory is about 300,000, according to Newport, which we're already below. But ,he added, that the median time to sell a home is at an all-time high of 11.8 months. "That tells you it's still very hard to sell a new home," he said. Much of that struggle is because the housing stock is concentrated in exurbs -- otherwise known as McMansions far away from work. "Inventories are misaligned," said Morici, who likened the situation to the auto industry being overstocked with large trucks and SUVs instead of fuel efficient cars. "There'll be a shift from far-out to closer-in and from bigger to smaller," he said. But builders will have a hard time selling those "white elephants" and they'll languish on the market, he predicted. The excess inventory also tend to be concentrated in just a few markets, such as California, southern Florida, Las Vegas and Arizona, according to Bernard Markstein, a senior vice president and economist with the National Association of Home Builders. "[In most other parts of the country] inventory has been worked down to the point where if you want to buy a new home, it will probably have to be built," he said. Perhaps the best news is that home construction may be ready to once again boost the economy again. "The construction-put-in-place numbers that come out next month will show that housing is starting to add to the GDP," said Newport. "It's been nothing but a drag on growth lately." With new home inventory more in balance, consumers may no longer be able to wring extras, such as high-end appliances and even swimming pools, out of builders. "People are going to find builders are not going to be quick to make concessions," Markstein said. "The time for getting deals is going away." First Published: July 27, 2009: 10:17 AM ET Find mortgage rates in your area

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Housing Starts Rose in June

Treasurys ease on housing data Government bond prices fall after a report showed that housing starts rose in June, a positive sign for the staggering housing market. July 17, 2009: 1:05 PM ET NEW YORK (Reuters) -- U.S. Treasury prices fell Friday after the government said U.S. housing starts rose in June, bolstering prospects for economic recovery and damping demand for safe-haven U.S. government debt. Talk of a buyer for struggling CIT Group Inc (CIT, Fortune 500), a U.S. lender to hundreds of thousands of small- and medium-sized businesses, added to pressure on Treasurys, traders said. "Housing starts, without a doubt, are why the market is down," said William Sullivan, chief economist at JVB Group in Boca Raton, Florida. "We were trading up overseas until 8:30 a.m. (EDT) when we got news of this surprising rebound in housing starts and building permits. That's viewed as a healing process in the economy which in turn reduces the demand for liquidity assets such as Treasury securities." New U.S. housing starts rose a bigger-than-expected 3.6%, propelled by a 14.4% rise in single-family home starts, the Commerce Department said, the latter the biggest rise since December 2004. Benchmark 10-year Treasury notes fell 18/32 in price in mid-morning trade, their yields rising to 3.65% from 3.56% late Thursday. "This is another piece of data for those who see the recession ending soon," said William O'Donnell, head treasury strategist at RBS Securities in Greenwich, Connecticut. An end to the recession would tend to favor riskier investments like stocks and corporate bonds, rather than safe-haven Treasurys. Economists generally view the manufacturing sector as slowly stabilizing so the possibility of an end to the recession in the housing sector would neutralize what has been a big contributor to the steepest downturn in the economy since the Great Depression. "The housing starts rise is very convincing evidence of the potential for the general housing market to improve," Decision Economics senior economist Pierre Ellis in New York. Traders and analysts said speculation about a possible buyer for CIT Group Inc. also weighed. "If there's some deal worked out on CIT that's a mild negative for Treasurys because it reduces that flight to safety and quality," Sullivan said. CIT declined to comment on a report that JPMorgan Chase & Co (JPM, Fortune 500) was a suitor for its factoring unit. John Spinello, senior vice president and chief fixed-income technical strategist at Jefferies & Co. in New York, said the market could be overreacting a bit to the housing data. "(Housing starts) were good. No question. It was the first time we saw multiple months of increase since 2007, but they're still at very low levels," he said. But thin summer, pre-weekend trading could be exaggerating the market's move, Spinello said. "The market is a little bit thin. We expect the 3.63% (level of the 10-year yield) to hold and draw some buyers," Spinello said. "Right now with no supply in the marketplace, we could probably range-trade into supply." The Treasury's next auction of anything other than short-term debt is July 27 when the government sells 20-year TIPS. It will sell two-year notes on July 28. Two-year Treasury notes were down 1/32 in price Friday, their yields rising to 1.01% from 0.98% Thursday. Five-year Treasury notes fell 9/32 in price, their yields rising to 2.51% from 2.44% late Thursday. Thirty-year Treasury bonds fell 28/32, their yields rising to 4.50% from 4.44% Thursday.

Find this article at: http://money.cnn.com/2009/07/17/markets/bondcenter/bonds.reut/index.htm

Fewer than expected file for unemployment

Labor Department says first time jobless claims fell by 52,000 last week to 565,000. But continuing claims rose to another record high.

By Ben Rooney, CNNMoney.com staff writer

Last Updated: July 9, 2009: 1:57 PM ET

NEW YORK (CNNMoney.com) -- The number of Americans filing initial unemployment claims fell sharply last week, while those filing ongoing claims rose to another all-time high, according to government data released Thursday.

There were 565,000 initial jobless claims filed in the week ended July 4, down 52,000 from a revised 617,000 the previous week, the Labor Department said.

It was the lowest number since January and was below the consensus estimate of 603,000 from economists surveyed by Briefing.com.

Analysts said last week's drop was distorted by a change in the pattern of seasonal layoffs in the automotive industry.

Initial claims typically spike in July as automakers idle certain manufacturing plants, and the Labor Department adjusts its data for such seasonal factors.

However, many plant closures occurred early this year, said Mark Vitner, an economist at Wacovia Economics Group.

On a non-seasonally adjusted basis, initial claims were 577,506.

"The improvement in first week of July was exaggerated by the timing of plant closures," Vitner said. "This is something we're going to be dealing with throughout the month."

Meanwhile, the number of people requesting continued jobless benefits rose to a record high, indicating that the labor market remains weak.

The government said continuing claims rose to 6,883,000 in the week ended June 27, the most recent data available.

That's an increase of 159,000 from the previous week's revised total of 6,724,000 and was the highest reading since the Labor Department began keeping records in 1967.

The 4-week moving average of continuing claims rose 12,000 to 6,769,000.

The ongoing rise in continuing claims suggests that more workers are struggling to re-enter the work force.

"While layoffs have topped out, hiring has not picked up," Vitner said. "The increase in unemployment rate going forward will be more a result of lack of hiring rather than layoffs," he said.

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First Published: July 9, 2009: 8:42 AM ET

Mortgage rates slide

The 30-year and 15-year fixed tick down on signs of continued economic weakness.

By Julianne Pepitone, CNNMoney.com contributing writer

Last Updated: July 2, 2009: 11:08 AM ET

NEW YORK (CNNMoney.com) -- Home mortgage rates retreated last week, with the 30-year fixed slipping to 5.7% from 5.8% the week prior, according to a report from a financial data aggregator released Thursday.

The average 15-year mortgage rate also fell, dipping to 5.07% from 5.16%, according to the weekly national survey from Bankrate.com.

Mortgage rates fell to month-ago levels "as evidence mounts of continued economic weakness," the report said, citing troubling recent data on unemployment, GDP and consumer spending.

"Rates are likely to bob up and down as concerns alternate between economic weakness and future inflation," the report said. "Spurts of volatility should be expected, especially given the uncertain economic and financial climate."

A related report this week said home prices fell 18.1% from a year earlier, but the change from March narrowed sharply in a possible sign that housing markets may be starting to turn.

Current rates remain much lower than last year's levels, when the average 30-year fixed mortgage rate was 6.53%, according to Bankrate.com.

At the current rate of 5.7%, the monthly payment on a $200,000 mortgage would be $1,160.80, or about $107 less than the monthly payment at last year's rate of 6.53%.

Other rates: The average jumbo 30-year fixed rate ticked up to 6.67% from 6.96%. Loans are considered "jumbo" when they are too large to be purchased or guaranteed by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).

Adjustable-rate mortgages were mixed, the report said, with the average 1-year ARM ticking up to 5.17% and the 5-year ARM falling to 5.17% from 5.26%.

First Published: July 2, 2009: 10:55 AM ET

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