Those of you who have been following this e-mail for a while are noticing that many of the grades below have shifted from D’s and F’s to B’s and C’s. That is because the economy is starting to reach its long-term average outlook. Housing, however, is clearly going to lag the recovery rather than lead it. In the meantime, how do you make money in housing?

We have authored two reports to help executive decision makers hone in on the real opportunities in the coming year by focusing on the right submarkets and the best home buyers.

 

1. Focus on the Markets by utilizing our 2011 Forecast and Strategy Reports. This report is for sophisticated executives who want to make a good land play or target the right market in 2011. At a high level, this report still gives you the confidence to plan for market conditions, complete strategic acquisitions, and hone in on the target price points and consumer groups for future demand. Available for 20 major metros, this 60-plus page report addresses:
• Demand by Lifestage and Price Range
• Submarket Analysis, including foreclosures by zip code
• Economic trends and forecasts through 2015

The 2011 Forecast and Strategy Report SAMPLE is available here.

The 2011 Forecast and Strategy Report ORDER FORM is available here.

2. Focus on the Buyers by utilizing our Consumer Survey Reports.

Our survey of 10,000 potential homeowners showed that 88% think now is a good time to buy. They gave us feedback on what they are thinking, wanting and willing to pay for in their next home purchase. As you prepare your future consumer strategy, you’ll know how to plan and what to invest in over the next 2 years. Choose from 11 regions, 19 major metro areas and a national-level report. Each 45-page report addresses:

 

• The segments of the population that are growing, and how to target them.
• Green in their homes versus green in their pockets - what consumers expect regarding green technology and energy efficiency.
• Small-lot alternatives versus conventional lot sizes.
• The most effective marketing tools to reach home buyers.
• The home purchase priorities.
• Strategies for home builders to compete against the resale market.

The Consumer Research and New Home Sales Strategy ORDER FORM is available here.

Questions?? Several members of our team will be meeting with industry decision makers during IBS in Orlando this week, as well as at IMN’s Distressed Real Estate Conference in Laguna Beach CA. Email us if you’d like to speak with them for more information on these Individual Reports, or if you’d like to arrange a meeting.

Economic Growth............................................................................C-
Economic growth trends improved slightly this month, as several key metrics have ticked up recently. The real GDP growth rate was recently revised upward to 2.6%, and productivity is gradually rising again. The employment market improved as year-over-year employment growth increased again this month, and the unemployment rate and initial jobless claims both decreased. Inflation remains low, and capital utilization increased, albeit from extremely low levels.

Leading Indicators...........................................................................C
The leading indicators for the economy are somewhat better this month compared to last month. The Leading Economic Index was up slightly and is still comfortably in positive territory. Also, the ECRI Leading Index has returned to positive year-over-year growth for the first time since May 2010. The Small Business Optimism Index also improved compared to last month. The money supply increased slightly this month, which usually leads to more spending. Stocks have improved this month, as all four major indices that we track gained between 5.19% (Dow Jones) to 6.62% (Wilshire 5000). In addition, the S&P Homebuilding Index has improved month-over-month for the first time since September 2010, climbing 16%. Much of the recent declines are due in part to home builder orders and CEO comments making investors nervous, but also to declining new home sales in the post-tax credit environment. Interest rates have increased, with the 2-year and 10-year Treasuries both climbing. Temporary employment declined this month, but has still increased by 16% year-over-year. The number of postings on Monster.com decreased as well. Both the ISM Manufacturing and Non-Manufacturing Business Activity Indices worsened this month as well.

Affordability......................................................................................D+
Affordability has rarely been better for entry-level buyers, and rarely worse for move-up and move-down buyers, who need to extract equity from their existing home. Mortgage rates remain near historical lows, and home prices have dropped from unrealistic boom levels to entirely sustainable levels, with some markets even heading into “overcorrection” territory. Our housing-cost-to-income ratio remains low, now at 25.2%, and our JBREC Affordability index stands at a remarkable 0.0 (on a scale of 0 to 10, 0 being most affordable). The median-home-price-to-income ratio has declined to 3.2, which is near long-term historical norms and a level conducive to market health. Affordability continues to be bolstered by historically low mortgage rates. The 30-year fixed mortgage rate is currently at 4.86% and adjustable mortgage rates are at 3.26%. The Fed’s overnight lending target rate remained at a range of 0.00% to 0.25%, which is the lowest level on record. The share of ARM applications increased to 6.1% this month but is still far below the peak level of 35% of total applications in early 2005.

Consumer Behavior..........................................................................D+
Consumer behavior improved slightly this month, with many metrics somewhat better than last month. The Consumer Sentiment Index and the Consumer Comfort Index both increased this month, while the Consumer Confidence Index worsened modestly. Consumers are saving more compared to recent history, with the personal savings rate at 5.4% currently, and consumer debt was down a bit with consumer credit per household decreasing to $7,136.

Existing Home Market.......................................................................D+
The existing home market improved somewhat this month, as several metrics ticked up compared to last month. Seasonally adjusted annual resale activity increased to 4.68 million homes this month, and the pending home sales index also increased this month. The median price dropped slightly this month, but is up from year-ago price levels. In addition, existing home inventory and months of supply both dropped, and there are just more than 9 months of supply on the market currently.

New Home Market..............................................................................D+
The new home market improved this month. New home sales increased to 290,000 units on an annualized basis, which is better than the near historical low reached last month. It should be noted, however, that the sample size used by the Census Bureau to calculate new home sales is extremely small and the confidence interval consequently large. The median single-family new home price also increased to $213,000, which is down 3% year-over-year. The months of unsold homes metric decreased to 8.2 months. Builder confidence remained steady this month as the Housing Market Index held steady at 16.

Repairs and Remodeling....................................................................D+
Conditions for residential repairs and remodeling were mixed this month. Private residential construction improved this month and has reduced its negative growth rate, to a -5.3% rate. Residential investment as a % of GDP inched down to 2.2% this quarter. The Remodeling Market Index decreased this quarter to 38.1, below the historical average of 46.5. However, homeowner improvement activity has actually returned to positive territory for the first time since 2Q2007, climbing 1.8% year-over-year, and is much better than the severe declines experienced a couple of years ago.

Housing Supply...................................................................................F
Housing supply indicators are mixed this month. Single-family starts increased to 465,000 units, and single-family permits increased to 416,000 units. Both of these activity levels remain low by historical standards. New housing units completed decreased this month, and manufactured housing placements also declined. Vacancy rates in the U.S. have improved in recent quarters, but the majority of the U.S. remains oversupplied compared to history, with only 5 states and Washington D.C. undersupplied, all with small populations except Texas. The homeowner vacancy rate held steady this quarter at 2.5%.

 

 

(c) John Burns Real Estate