Sunday, April 29, 2012

Improving Job Market Fuels Houston Housing Boom

From the  Houston Chronicle:

"Houston's economy is bolstering the region's new-home market. Areawide, builders sold 4,990 homes during the first three months of 2012. That's up 34% over the same period a year earlier, according to consulting firm Metrostudy. 

"At the core, it's jobs, jobs, jobs," said David Jarvis, director of Metrostudy in Houston. "It's put tremendous pressure on demand for housing."

Even if they're not all buying, more consumers are out shopping. In March, builders saw 17,681 potential homebuyers pass through new-home sales offices - a 21% improvement over the same period last year and the highest traffic count for a single month since 2008.

The number of homes under construction is as high as it was in early 2010 when the tax credit was encouraging consumers to become homeowners. And inventory is back to pre-downturn levels. Builders had 1,791 homes under construction in March, 20% more than the same month last year."

31 Comments:

At 4/30/2012 5:42 AM, Blogger VangelV said...

Energy prices are going up. Houston is in the energy business.

 
At 4/30/2012 6:02 AM, Blogger Larry G said...

recovering nicely in the DC area .... govt is chugging along as usual

:-)

there are, of course, doomsayers who say it will come to an end as soon as they getting around to cutting the deficit!

:-)

 
At 4/30/2012 6:45 AM, OpenID moneyjihad said...

Show us the way, Texas!

 
At 4/30/2012 9:30 AM, Blogger juandos said...

Well good for Houston...

It makes me wonder though why the 'always questionable' Reuters ran this story: Maybe no housing rebound for a generation: Shiller

 
At 4/30/2012 9:45 AM, Blogger Paul said...

And here in Az, housing inventory has tightened dramatically and prices are up 20% in the past 12 mos. Perhaps even Obama can't kill the American economy.

http://www.azcentral.com/business/realestate/articles/2012/04/26/20120426phoenix-area-homes-prices-up-20-percent.html

 
At 4/30/2012 9:45 AM, Blogger Paul said...

And here in Az, housing inventory has tightened dramatically and prices are up 20% in the past 12 mos. Perhaps even Obama can't kill the American economy.

http://www.azcentral.com/business/realestate/articles/2012/04/26/20120426phoenix-area-homes-prices-up-20-percent.html

 
At 4/30/2012 9:47 AM, Blogger Jon Murphy said...

Well good for Houston...

It makes me wonder though why the 'always questionable' Reuters ran this story: Maybe no housing rebound for a generation: Shiller


I don't think Shiller's completely wrong here. Considering housing starts fell by 73% during the recession and even now is just up about 16%, Housing is in for a long slog. We may see pockets of success, like Houston or North Dakota, but a national rebound is, in my humble opinion, about 10 years away, if not more. Housing will be growing, but the growth will be slow.

 
At 4/30/2012 9:47 AM, Blogger Josh Boyaner said...

Think of Houston's housing market when gas goes up to $20 a gallon. Way to go Houston!

 
At 4/30/2012 10:08 AM, Blogger juandos said...

"I don't think Shiller's completely wrong here"...

You might have something jm...

Last week I was reading the following and it wasn't optimistic either: Nine Cities and Both Composites Hit New Lows in February 2012 According to the S&P/Case-Shiller Home Price Indices
April 24, 2012

I was wondering what other information is available to Schiller that the rest of us don't normally see?

 
At 4/30/2012 10:16 AM, Blogger Jet Beagle said...

VangeIV: "Energy prices are going up. Houston is in the energy business."

Houston is the largest U.S. player in both upstream and downstream energy industries. Upstream certainly benefits when energy demand drives prices higher. For Houston's downstream industries - refining, petrochemicals, synthetic rubber, plastics - high oil prices are usually a challenge.

The last figures I saw showed that Houston's upstream-based economy was about twice as large as the downstream side. So the high oil prices probably helped more than hurt Houston.

 
At 4/30/2012 10:23 AM, Blogger Jon Murphy said...

I was wondering what other information is available to Schiller that the rest of us don't normally see?

No offense, but I think most people don't see the whole story. Shiller is no doubt looking at the same info everyone else is (foreclosures, prices, unemployment, interest rates, etc), but he can see connections that most folks can't. Not because they are unintelligent, but because they haven't been trained.

For example, we keep messing about with the foreclosure system. Banks are being asked/forced to rewrite mortgages, foreclosures are being halted, auctions aren't allowed to take place, etc. Until we get these houses out of the system and they start getting snapped up, then we won't be able to rebound quicker.

Think about this: you want to empty your house's garbage. Every day, you take one bag out of the house, but just one because you don't want to overwhelm the garbage man. The problem with that is, until you remove all the bags from your home, you still have a house full of garbage.

 
At 4/30/2012 10:33 AM, Blogger Jet Beagle said...

Although oil dominates the Houston economy, other industries have been important. Health care and medical research, aerospace, and transportation are three which come to mind. Houston is the largest cotton export city and the third largest wheat exporter.

The looming decline in NASA funding will no doubt hurt the Houston economy. Space-related companies in Greater Houston will likely lay off some of the cities highest-paid workers, if they have not already done so.

 
At 4/30/2012 10:46 AM, Blogger Jet Beagle said...

Josh: "Think of Houston's housing market when gas goes up to $20 a gallon."

If gasoline, diesel, and jet fuel were to quadruple or more, much of Houston's economy would be hurt. Houston is a major transportation hub, and costs to airlines, trucking firms, and railroads would skyrocket. Costs for Houston's downstream industries I mentioned above would also rise to demand-killing levels.

 
At 4/30/2012 10:52 AM, Blogger juandos said...

"but he can see connections that most folks can't. Not because they are unintelligent, but because they haven't been trained"...

Good point jm and regarding the foreclosure situation except for the remodel & repair business (and financing can be problematic here too) the home industry is almost at a standstill...

 
At 4/30/2012 10:56 AM, Blogger Jon Murphy said...

Good point jm and regarding the foreclosure situation except for the remodel & repair business (and financing can be problematic here too) the home industry is almost at a standstill...

Well, that depends on what kind of homes you're looking at. Multi-family homes (homes with more than 2 units in them, so anything bigger than a duplex) are up 42.1% year-over-year. Single family homes are pretty much flat.

 
At 4/30/2012 10:57 AM, Blogger juandos said...

"Space-related companies in Greater Houston will likely lay off some of the cities highest-paid workers, if they have not already done so"...

Yeah jet b, reminds of back in '72 just after the return of Apollo 17 and Nixon had nixed further moon missions there were phds bagging groceries at the HEB chain in Houston the following week...

Ugly days...

 
At 4/30/2012 10:58 AM, Blogger juandos said...

"Well, that depends on what kind of homes you're looking at. Multi-family homes (homes with more than 2 units in them, so anything bigger than a duplex) are up 42.1% year-over-year..."...

Not locally jm, at least not yet...

 
At 4/30/2012 11:04 AM, Blogger Jon Murphy said...

Not locally jm, at least not yet...

Ah yes, you are absolutely correct. I should have specified I was talking a national number.

 
At 4/30/2012 1:11 PM, Blogger VangelV said...

It makes me wonder though why the 'always questionable' Reuters ran this story: Maybe no housing rebound for a generation: Shiller

Could it be that someone actually did a bit of digging and found that the demographics, creditworthiness of individuals, and a huge shadow inventory of homes could hold back a recovery for a very long, long time? Or that the fastest growing cities, that used to be suburbs, are no longer growing much thanks to high costs of gasoline? What happens to all those acres and acres of low density developments when the trend reverses?

 
At 4/30/2012 1:29 PM, Blogger VangelV said...

Let us take a step back and look at the big picture. On the issue of housing Eric Sprott brought up some interesting facts that Mark has overlooked in his search for a nice narrative.

Sprott points out that New Home Sales in March fell to 328,000 units, down from 353,000 in February. The month-over-month decline is the fourth time in a row. In 2006 that number was three times higher. Does that seem to be a sign of recovery?

The news is not better for Existing Home Sales. They declined in March to an annualized rate of 4.5 million units. That compares to 6.92 million units in 2006.

Consider that Fannie and Freddie are trying to help their political friends in Congress by not foreclosing on mortgages that are delinquent and you are looking at a massive overhang that will have to be cleared some time after the election. If the Fed continues its loose monetary policies it will cause the USD to take a huge hit and we will see inflation that even Mark can't ignore. If it sobers up the economy will collapse. Both options are terrible for real prices of housing.

 
At 4/30/2012 1:32 PM, Blogger VangelV said...

Houston is the largest U.S. player in both upstream and downstream energy industries. Upstream certainly benefits when energy demand drives prices higher. For Houston's downstream industries - refining, petrochemicals, synthetic rubber, plastics - high oil prices are usually a challenge.

Refineries will have to produce gasoline and kerosene no matter what the price happens to be. Gasoline is still a lot cheaper than mineral water, beer, pop, etc. It will still be a bargain at five times the price.

 
At 4/30/2012 1:34 PM, Blogger Jon Murphy said...

Sprott points out that New Home Sales in March fell to 328,000 units, down from 353,000 in February. The month-over-month decline is the fourth time in a row.

Be careful here. Each of those declines were just about their historical median.

The news is not better for Existing Home Sales. They declined in March to an annualized rate of 4.5 million units.

But are 3.8% above the same time last year.

 
At 4/30/2012 2:01 PM, Blogger Jet Beagle said...

vangeIV: "Refineries will have to produce gasoline and kerosene no matter what the price happens to be."

What does that mean?

The number and size of today's U.S. refineries are the result of the demand for gasoline in the U.S. And demand for gasoline does vary with the price.

 
At 4/30/2012 2:03 PM, Blogger Jet Beagle said...

VangeIV: "It will still be a bargain at five times the price."

For some consumers, perhaps. But if the inflation-adjusted price of gasoline were five times the current price, the demand would drop - a lot. So it would not be a bargain for everyone.

 
At 4/30/2012 2:20 PM, Blogger VangelV said...

But are 3.8% above the same time last year.

You own a stock. It was purchased at $100. Last moth it went from $30.50 to $32.00. I suggest that it is not time to celebrate about a recovery.

 
At 4/30/2012 2:22 PM, Blogger VangelV said...

The number and size of today's U.S. refineries are the result of the demand for gasoline in the U.S. And demand for gasoline does vary with the price.

I agree. But I doubt that you will see as much of a decline in energy related activity as you think. If you look at history you will find that it has always done well during periods of high energy prices and has done poorly during price collapses. Houston boomed when energy prices were high and suffered when prices fell.

 
At 4/30/2012 2:26 PM, Blogger VangelV said...

For some consumers, perhaps. But if the inflation-adjusted price of gasoline were five times the current price, the demand would drop - a lot. So it would not be a bargain for everyone.

Inflation? What inflation? Mark and the government are telling us that there is no inflation.

And yes, it will still be a bargain. Just compare the cost of a cup of gasoline today with the cost of a cup of Sarbucks coffee. It is cheap. But as you suggest accurately even though it may still be cheap all of the marginal demand will have to be squeezed out of the system. This is inevitable because in a post peak world we will have to adjust until the politicians get out of the way and someone figures out how to get to the other side of the abyss.

 
At 4/30/2012 2:28 PM, Blogger Jon Murphy said...

You own a stock. It was purchased at $100. Last moth it went from $30.50 to $32.00. I suggest that it is not time to celebrate about a recovery.

Considering it fell 69.5%, I'd say it's a signal things are slowly turning about.

 
At 4/30/2012 2:41 PM, Blogger Jon Murphy said...

When looking at economic data such as this, one cannot be Hell-Bent on observing monthly or even quarterly data. It fluctuates wildly. The more important question to ask is "What direction is this heading in? What are the trends?" Right now, the trends for housing starts are saying "The decline is over. We'll slowly, very slowly, start making up lost ground."

Considering how manipulated this market is, comparing it to the 2006 bubble peak is foolish. To say no recovery is taking place simply because we're so below the pre-recession peak, but ignoring the fact that year-over-year gains are occurring is like saying you're not losing weight because you're not back to your teenage weight even though you've dropped 15 pounds.

The housing market is recovering. Is it frustratingly slow? Yes. Will it take a long time to reach the pre-recession peak? Hell yes. But to look at the market (or the economy, for that matter) and do these wild mental gymnastics to say "no growth is occurring" is, all due respect, missing the green shoots of the recovery. The winter is over. Summer is coming, but not here yet. We have a long Spring ahead of us where the weather will fluctuate from day to day and month to month, but it will slowly be getting warmer.

Now is the winter of our discontent made glorious summer by...um...I don't know how to finish that. The pieces are there. Somebody put something together with that.

 
At 4/30/2012 4:19 PM, Blogger VangelV said...

Considering it fell 69.5%, I'd say it's a signal things are slowly turning about.

Perhaps. But considering the general volatility in markets that would be a wild assed guess. The trick to staying solvent and getting rich is to ignore the emotions and not to jump to premature conclusions. It is better to keep an eye on reality and to make a safe bet against the majority when the trend is about to turn. Safe means no leverage. About to turn means within a year or two of the inflection point. Being early or a bit late does not matter. But it does matter understanding the fundamentals.

I would argue that the Dow/Gold ratio will continue its decline until it gets below two. (It is very possible to get to 0.5 before the real recovery begins.) Until then it is better to stay away from making big bets on general equities or real estate. And while bonds could be great over short periods over the long term they are certificates of confiscation.

 
At 4/30/2012 4:25 PM, Blogger VangelV said...

Right now, the trends for housing starts are saying "The decline is over. We'll slowly, very slowly, start making up lost ground."

As I wrote above, I don't see it. Keep in mind that it took a flood of new money and credit to keep the trend from going lower. What do you think happens when the flood dries up? Or if you are betting on it continuing why aren't you making huge bets on inflation?

Considering how manipulated this market is, comparing it to the 2006 bubble peak is foolish. To say no recovery is taking place simply because we're so below the pre-recession peak, but ignoring the fact that year-over-year gains are occurring is like saying you're not losing weight because you're not back to your teenage weight even though you've dropped 15 pounds.

You are missing the point. The lows are still with us even though the CBs have flooded the system with liquidity. The Fed did not allow liquidation to happen; it bailed out the losers. Now you have a lot of losers being given subsidies to compete with the competent. That weakens the system. It does not establish a foundation for a recovery.

Please tell me how the markets recover without the continuation of the QE programs. And if the programs continue how do you keep inflation from distorting the structure of the real economy and causing real prices to decline?

 

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