Residential Real Estate Analysis
Published May 29, 2013
Timothy Sullivan, Principal at Meyers, LLC, spoke at the Sims Conference about “Looking Deep into the Evolving Residential Real Estate Markets”. His message has three overarching themes:
- The economy and housing are improving.
- The “Senior Space” has upside.
- Be bullish on real estate long term.
Housing Market Conditions
The recovery is gaining momentum. Excess supply is being sold while new construction has been minimal over the last five years. Job growth is rising, and housing vacancies are being filled. The next step is for demand to exceed supply. Then, rents and home prices will rise. Construction will return to normal, which in turn will accelerate job growth.
Job growth and housing permits are already booming in some cities. Job growth in Austin tripled and housing permits doubled in 2012 compared to 2011. In Phoenix, job losses in 2011 turned to job gains in 2012 while housing permits doubled. In Orlando, jobs grew in both 2011 and 2012 while housing permits doubled.
In 2012, prices rose the most in the following markets:
New home sales rose 2.3% in April to a seasonally adjusted annual rate of 454,000 units from a rate of 444,000 units in March. On a year-over-year basis, new home sales were 29% higher than April 2012. At the current sales pace, there is a 4.1-month supply of new homes on the market.
Retail sales rose 0.2% for the week ending May 18, according to the ICSC-Goldman Sachs index. On a year-over-year basis, retailers saw sales increase 3.1%.
The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending May 17 fell 9.8%. Purchase volume fell 3%. Refinancing applications decreased 12%.
Dear Readers; We noted with interest legislation planned with support from Governor Perry, to request that the Federal Reserve Bank send $1 BILLION worth of gold bars held in New York, back to Texas. Texas believes keeping it's gold in Texas, offers a perception of financial stability, during times of crisis. This could pave the way for state sponsored PUBLIC BANKS or "Texas banks" that keep investments, loans and assets in Texas and out of national or international markets. While pondering this, we have been watching Cyprus, and their spooky idea of taking 10% of bank deposits out of people's accounts to help cover budget problems. Yes, a national government, including the USA has the right to take your bank and your money. So...read this article with interest.
Ben B. Boothe, Sr.
The giant banks make Genghis Khan, look like an angel. JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon hid losses that surpassed $6.2 billion by misleading investors and regulators. Genghis Khan captured nations with the bow, the giant banks destroy them financially with fraud and abuse.
The largest U.S. bank “mis-characterized high-risk trading as hedging,” and withheld key information from its primary regulator, according to a report today by the Senate Permanent Subcommittee on Investigations. Managers manipulated numbers and pressured traders to overvalue their positions in an effort to hide losses in a “monstrous” credit derivatives portfolio in London.
“We found a trading operation that piled on risk, ignored limits on risk taking, hid losses, dodged oversight and misinformed the public,” Chairman Carl Levin, a Michigan Democrat, told reporters today after his investigators spent nine months researching J.P. Morgan.
See You tube: http://youtu.be/luop0X01LMs
Global Perspectives sees two things that you should know. George Soros is selling gold, and housing prices are going up.
1. Soros is a genius in trend analysis, and he sees recovery. Gold is the investment of fear and panic when investors believe that real estate and economies are poor investments. To sell gold is to be bullish. Soros, one of the worlds most significant investors believes the days of panic defensive investing are being replaced by other investments. His actions suggest that he is optimistic about other investments.
2. Housing prices are increasing. Even prices of foreclosed houses are increasing. The number of people who own homes that are worth less than people owe on their homes is declining, every time home values tick up another percentage point. Therefore, as Global Perspectives has reported repeatedly, housing is now a desired "investment play" for smart investors. The days when "bottom feeders" were the only ones in the market are gone.
large investment groups now see homes as a solid investment for growth and are predicting short and long term housing value increases. Demand for housing is increasing while at the same time new construction is significantly below high levels of years past. Watch construction companies and construction suppliers, because both will see business increases.
Supply and demand now indicate that new housing is attractive. This will not only increase jobs but have multiple positive impacts on bank balance sheets and likely improve the attitude of your banker the next time you request a loan.
Timing is important.
"The ongoing price appreciation is significant, because we expect housing wealth effects to be an important factor driving economic growth in 2013, possibly matching the direct impact on economic output from the rebound in homebuilding," said Joseph LaVorgna, chief U.S. economist for Deutsche Bank.
Related: Housing to drive economic growth
Michael Gapen, senior U.S. economist for Barclays, said the fundamentals for the housing market are now strong enough that his firm is forecasting another 6% to 7% rise in prices in 2013, and a 5% to 6% rise again next year. He said the tight supply of homes for sale on the market should support continued price increases, and that the decline in foreclosed homes for sale is reducing the drag that those distressed properties had on overall prices.