New Housing Starts Unexpectedly Down in September

A day after positive news about existing home sales and housing prices, the data on new home sales sent a negative current through the economy. This morning it was reported that new home sales fell unexpectedly after 5 months of consecutive increases. Home sales fell from a seasonally-adjusted 417,000 new home sales in August to 402,000 in September, a decrease of 3.6%. But a survey of economists had predicted that the number of home sales would rise to 440,000 in September, leading to a prediction nearly 10% higher than the actual amount.

This is not the first time we have seen mixed housing data. While it is easy to speculate on the ups and downs of the market, only time can tell whether the bumps are telling of actual trends or merely slight deviations from the mean. This month, all the positive data about home prices and existing home sales, as well as climbing orders for long lasting goods, show that the industry may be beginning to recover, even if that recovery is a slow one with some set backs along the way.

1st Reverse Mortgage Folds

Wilmington Savings Fund Society (WSFS), FSB announced earlier today that effective today they will begin winding down 1st Reverse Mortgage Company’s operations. Starting on July 31st, 1st Reverse will no longer accept any new applications. They remain committed to completing all loans currently in the pipeline (or in the pipeline by July 31st). This includes processing, underwriting and funding the loans.

The news about 1st Reverse Mortgage is slightly disconcerting in light of Senior Lending Network folding earlier this month. While 1st Reverse was not as large of a player as Senior Lending Network, it did complete a significant volume of loans. Although the time seems ripe for the reverse mortgage industry to grow and prosper, the folding of these companies lends some support to the argument that the problems in the real estate market are negatively impacting the reverse mortgage industry, rather than providing the industry with enough business to flourish despite the economy.

Fewer Americans Move in 2008

While this may not come as a large surprise given the state of the economy, the Census Bureau reported today that the rate at which Americans moved in 2008 was lower than in any year since 1962. In terms of the raw numbers, it was the worst year since 1949-50. The 35.2 million people who changed residences is a decline from the 37.8 million who did in 2007. Those who moved were likely to be poor, black, unemployed renters.

Perhaps unsurprisingly, the number of interstate moves is where the decrease was felt the worst. Some predict that local moves will increase in the recession as people search for cheaper housing or move in with family members.

While the moving statistics are not the same as many of the traditional real estate statistics since they include renters, they are an indicator of the health of the market as well as an interesting demography measure. And while, in another report, the number of mortgage applications increased 5.3% last week, mortgage applications to purchase a home were down 4.2% (seasonally adjusted).

It looks like as the recession continues, people appear likely to try to make do with what they have (refinancing their mortgage, taking out a reverse mortgage, or simply staying put) than make a big change.

Housing Market Continues Decline in March

The US Census Bureau and HUD jointly released a report today which noted that the housing market continued to decline in March.

Building permits for privately-owned housing units dropped 9% below the Feburary rate and 45% compared to March of last year. For single family homes, the rate dropped 7.4% compared to February.

Housing starts declined 10.8% from February and 48.4% compared to March of last year. However, for single-family homes, the rate was unchanged from February.

But there is a silver lining– more houses were completed in March than in February. Privately owned homes were completed at a rate that is 3.5% higher than the month before, while single family homes were completed at a rate that is 5.0% higher than in February. The completion of homes is a good sign. It indicates that projects are still being completed and the growth of new homes.

The foreclosure market nonetheless surged during the first quarter. Foreclosures increased 9% over the previous quarter and 17% in March compared to February. Many of the new home sales are of foreclosed properties, especially in weakened markets, up to 70 or 80%.

Continued home sales, even if they are of foreclosures, mean the market has not stalled. Yet, increased foreclosure rates are not a good sign–hopefully the housing market will rebound soon.

Conspicuous Spending or Jump Starting the Economy?

Haute Couture for Kids

And now for a change of pace. My hometown paper, the NY Times, just published a great human interest piece on the changing patterns of consumption in America. I really recommend the piece, as some of the anecdotes provide interesting food for thought.

A few examples:

Sasha and Malia wore J.Crew to their father’s Inauguration instead of designer apparel. The Times chalks this up to Obama’s push for fiscal responsibility. While I did not find anything particularly remarkable about the choice to wear J.Crew (which isn’t that cheap), I had trouble thinking of alternatives (Calvin Klein suits?).

Some economists believe that increased consumer spending is the only way to jolt America out of the recession. Of course, this is the opposite of the behavior that is currently being witnessed. Is there something that can be done to spur more spending, or is the change cultural and/or ethical and therefore on a deeper level than policy?

Is consumer spending an ethical issue? At what point is it considered an excess to spend money? I’m curious as to your thoughts.

NY Times: Even Well-off Consumers Aim to Be Less Conspicuous

Until next time.