by Calculated Risk on 12/19/2012 10:25:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From AIA: Architecture Billings Index Signaling Gains for Fourth Straight Month

Billings at architecture firms across the country continue to increase. As a leading economic indicator of construction activity, the Architecture Billings Index (ABI) reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the November ABI score was 53.2, up from the mark of 52.8 in October. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.6, up slightly from the 59.4 mark of the previous month.

“These are the strongest business conditions we have seen since the end of 2007 before the construction market collapse,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “The real question now is if the federal budget situation gets cleared up which will likely lead to the green lighting of numerous projects currently on hold. If we do end up going off the ‘fiscal cliff’ then we can expect a significant setback for the entire design and construction industry.”

• Regional averages: Northeast (56.3), Midwest (54.4), South (51.1), West (49.6)

• Sector index breakdown: multi-family residential (55.9), mixed practice (53.9), commercial / industrial (52.0), institutional (50.5)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 53.2 in November, up from 52.8 in October. Anything above 50 indicates expansion in demand for architects' services.

This increase is mostly being driven by demand for design of multi-family residential buildings, but every building sector is now expanding. New project inquiries are also increasing. Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. This suggests some increase in CRE investment next year.

by Calculated Risk on 12/19/2012 08:44:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in November were at a seasonally adjusted annual rate of 861,000. This is 3.0 percent below the revised October estimate of 888,000, but is 21.6 percent (±12.5%) above the November 2011 rate of 708,000.

Single-family housing starts in November were at a rate of 565,000; this is 4.1 percent below the revised October figure of 589,000. The November rate for units in buildings with five units or more was 285,000.

Building Permits:
Privately-owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 899,000. This is 3.6 percent above the revised October rate of 868,000 and is 26.8 percent above the November 2011 estimate of 709,000.

Single-family authorizations in November were at a rate of 565,000; this is 0.2 percent below the revised October figure of 566,000. Authorizations of units in buildings with five units or more were at a rate of 307,000 in November.

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) decreased slightly from October.

Single-family starts (blue) decreased to 565,000 thousand in November.

The second graph shows total and single unit starts since 1968.

This shows the huge collapse following the housing bubble, and that total housing starts have been increasing lately after moving sideways for about two years and a half years.

Total housing starts were at 861 thousand (SAAR) in November, down 3.0% from the revised October rate of 888 thousand (SAAR).

Total starts are up about 80% from the bottom start rate, and single family starts are up about 60% from the low.

This was slightly below expectations of 865 thousand starts in November. Starts in November were up 21.6% from November 2011, and right now starts are on pace to be up about 25% from 2011. I'll have more soon ...

All Housing Investment and Construction Graphs

by Calculated Risk on 12/19/2012 07:01:00 AM

From the MBA: Refinance Applications Fall to Lowest Level in Over a Month in Latest MBA Weekly Survey

The Refinance Index decreased 14 percent from the previous week to the lowest level since week ending November 2, 2012. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. ...

“Despite the Federal Reserve’s announcement last week that it would purchase an additional $45 billion in Treasury securities per month as part of its continuing quantitative easing effort, rates increased in the second half of the week,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “As a result, refinance applications dropped sharply to the lowest level in over a month.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.50 percent from 3.47 percent, with points increasing to 0.44 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Click on graph for larger image.

This graph shows the MBA mortgage purchase index.

Although the purchase index declined 5% this week, the 4-week average is up about 25% from the post-bubble low.

by Calculated Risk on 12/18/2012 08:16:00 PM

The following table shows annual starts (total and single family) since 2005, an estimate for 2012, and a 2013 "consensus" based on several forecasts.  I expect another solid growth year for housing starts in 2013 (with the usual Congressional caveats).

Note: from 1959 through 2000, housing starts average 1.5 million per year. The forecasts for 2013 would still be the sixth lowest year since 1959, with only 2008 through 2012 lower.

Housing Starts (000s)
	Total	Change	Single Family	Change
2005	2,068.3	---	1,715.8	---
2006	1,800.9	-12.9%	1,465.4	-14.6%
2007	1,355.0	-24.8%	1,046.0	-28.6%
2008	905.5	-33.2%	622.0	-40.5%
2009	554.0	-38.8%	445.1	-28.4%
2010	586.9	5.9%	471.2	5.9%
2011	608.8	3.7%	430.6	-8.6%
20121	770.0	26%	530.0	23%
20132	960.0	25%	660.0	25%
12012 estimated. 2early 2013 consensus based on several forecasts

Wednesday economic releases:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

• At 8:30 AM, Housing Starts for November will be released. The consensus is for total housing starts to decline to 865,000 Seasonally Adjusted Annual Rate (SAAR) in November, down from 894,000 in October. Note: In November 2011, housing starts were above 700,000 (SAAR) for the first time in several years - it was considered a blow out month. Now expectations are for starts to be up more than 20% from that level.

• During the day: The AIA's Architecture Billings Index for November (a leading indicator for commercial real estate).


Another question for the December economic prediction contest (Note: You can use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 12/18/2012 03:10:00 PM

From Realtor.com: November 2012 Real Estate Data

Flat list prices—a leading indicator of future house price trends—most likely signal a slowdown in the recent rate of house price appreciation. At the same time, historically low inventories suggest that significant price concessions on the part of home sellers may be coming to an end. How these potentially offsetting trends play out in the housing market will depend on a variety of factors, including potential buyers’ optimism regarding the continued strength of the overall economy.

The total U.S. for-sale inventory of single family homes, condos, townhomes and co-ops (SFH/CTHCOPS) dropped to its lowest point since 2007, with 1.674 million units for sale in November, down 16.87 percent compared to a year ago and more than 45 percent below its peak of 3.1 million units in September 2007, when Realtor.com began monitoring these markets. The median age of the inventory was also down by 11.4 percent on a year-over-year basis. However, the median list price in November ($189,900) was the same as it was a year ago despite the significant gains observed earlier in the year.
...
The national for-sale inventory of SFH/CTHCOPS in November (1,674,412) decreased (4.69 percent) from what it was in October and was down by 16.87 percent on an annual basis.

Note: Realtor.com only started tracking inventory in September 2007, but this is probably the lowest level in a decade.  On a month-over-month basis, inventory declined 4.7%, and declined in 133 of 146 markets.

Going forward, I expect to see smaller year-over-year declines simply because inventory is already very low.

The NAR is scheduled to report November existing home sales and inventory on Thursday, December 20th. A key number in the NAR report will be inventory, and inventory will be down sharply again year-over-year in November.