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Jan. 23, 2013

Economy Watch: Multifamily Expansion Slows

By Dees Stribling, Contributing Editor

The National Association of Realtors said on Tuesday that total existing U.S. home sales, which included completed transactions involving single-family homes, townhomes, condominiums and co-ops, declined 1 percent to an annualized rate of 4.94 million in December from 4.99 million in November, but that isn’t the big news. More importantly, the December 2012 rate was 12.8 percent above the level in December 2011.

The preliminary annual total for existing-home sales in 2012 was 4.65 million units, up 9.2 percent from 4.26 million in 2011. The NAR said it was the highest volume since 2007, when total sales reached 5.03 million, and the strongest increase since 2004.

Total housing inventory at the end of December fell 8.5 percent to 1.82 million existing homes available for sale, which represents a 4.4-month supply at the current sales pace, the NAR also reported. That’s down from 4.8 months in November, and is the lowest housing supply since May 2005 (near the peak of the housing boom), when the inventory was 4.3 months.

Multifamily expansion slows

The National Multi Housing Council reported in its January Quarterly Survey of Apartment Market Conditions on Tuesday that after a seven-quarter run, expansion moderated for apartment markets. For the first time since 2010, two of the four indexes—market tightness (coming in at 45) and sales volume (which was 49)—dipped below 50, though just barely.

The 4Q12 decline in market tightness was particularly noticeable, dropping from 56. Fifty-nine percent of respondents said that markets were unchanged, reflecting stable demand conditions. One quarter of respondents saw markets as looser, up from 14 percent in October, while 16 percent viewed markets as tighter.

On the other hand, the two financing indexes show continued improvement for the eighth consecutive quarter, as the equity financing (at 56) and debt financing (at 57) indexes remained above the breakeven level of 50. “The pace of improvement in the apartment industry is moderating, but the expansion remains solid,” Mark Obrinsky, NMHC’s chief economist, noted in a press statement. “New construction has picked up considerably since its 2009 low, but is still playing catch-up with the increase in demand for apartment residences.”

Philly Fed reports coincident indexes up in most states

The Federal Reserve Bank of Philadelphia released its coincident indexes for the 50 states for December 2012 on Tuesday. The indexes increased in 32 states, decreased in 10, and remained stable in eight. Over the past three months, the indexes increased in 41 states, decreased in seven, and remained stable in two (New Mexico and Wisconsin).

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements (U.S. city average).

Wall Street was feeling chipper again on Tuesday after the MLK Jr. holiday, with the Dow Jones Industrial Average up 62.51 points, or 0.46 percent. The S&P 500 gained 0.44 percent and the Nasdaq advanced 0.27 percent.

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