–NOAA Scientist: December-January Has Been 4th Warmest On Record

By Ian McKendry

WASHINGTON (MNI) – The U.S. Census Bureau will release housing
starts data for the month of January on Thursday and economists are
largely anticipating the barometers by which they measure the housing
market will show slight improvement.

Stephen Stanley, chief economist at Pierpont Securities, is
forecasting that construction of new homes on a seasonally adjusted
annual rate were 690,000 in January which would be the fastest pace
since October 2008 when there were 777,000 homes built on a seasonally
adjusted annualized rate.

Construction on new homes were started at a 657,000 seasonally
adjusted annualized rate in December and 685,000 in November.

“We are seeing fundamental strength and we have seen some firming
in the last few months, certainly in the housing starts and the
construction data,” Stanley told Market News International.

Stanley said inventories of new homes have gotten “extremely low”
and despite competition from large inventories of existing-homes which
can often be had at a discount, buyers who prefer to buy new homes are
driving housing starts.

Stanley also noted the strength seen in the multifamily category as
home builders are starting to adjust to higher demand for rental
properties.

Anika Khan, an economist with Wells Fargo also spoke with MNI and
said they are anticipating multifamily housing starts to increase as a
proportion of overall housing starts in 2012 and 2013 as more people are
moving into the rental market.

The Mortgage Bankers Association last Monday reported that
commercial/multifamily mortgage originations were up 13% in the fourth
quarter in 2011 compared to the fourth quarter of 2010.

The MBA said over the past year the GSEs, life insurance companies
and many bank portfolios have increased their appetite for commercial
and multifamily loans while the commercial mortgage backed securities
market has been constrained by uncertainty in the capital markets.

“MBA’s Commercial/Multifamily Mortgage Bankers Origination Index
hit record levels for life insurance companies in the second and third
quarters of 2011,” MBA vice president Jamie Woodwell said in a
statement, adding “In the fourth quarter, multifamily originations for
Fannie Mae and Freddie Mac hit a new all-time high.”

Khan said Wells Fargo is forecasting housing starts in January to
be 671,000 on a seasonally adjusted annualized rate which would be a
little bit lower than the MNI survey median of 680,000 but said “clearly
we are making progress.”

“There is an actual improvement, but because it is coming from such
a low base and we have these anomalies like weather in the seasonal
adjustment process, they make the trend hard to see,” Khan said.

Stanley also noted that an unseasonably warm winter could impact
January’s housing starts data.

Jake Crouch, a climatologist at the National Oceanic Atmosphere
Administration told MNI that the December to January period for the
contiguous U.S. has been the fourth warmest and has had the third
smallest snow coverage on record.

Crouch said only 2006, 2002 and 1934 were warmer and that 2006 was
the warmest on record.

This year, the average temperature in December and January was four
degrees warmer than normal while the average temperature for December to
January was four to five degrees colder in 2011 and six degrees colder
in 2010.

“There is a couple of things that is going on — there is a La Nina
that is going on in the Equatorial Pacific and that tends to cause a lot
of the Southern U.S. and Southeast U.S. to be warmer than average and
also we have seen a storm tracker that has setup consistently north of
the U.S. border, so when that happens it tends to block the arctic air
masses from coming into the U.S,” Crouch said, adding that a storm
tracker is a jet stream which storms tend to follow.

Crouch also said the NOAA is forecasting the next one to three
months to be consistent with the milder weather the U.S. has had so far.

Another beacon that could give an idea of what the housing starts
data might look like is the Wells Fargo/National Association of Home
Builders Index.

The NAHB index, which is a sentiment survey of home builders has
increased four months in a row and was up 19% in January.

“We have seen some very consistent increases overall with builder
sentiment, but it is still well below its long run average,” Khan said.

Some of the largest home builders have also enjoyed a recent boon
in their stock price.

Home builder KB Homes stock has risen 40.32% over the last month as
of this writing, Toll Brothers stock has risen 2.0% and Pulte Homes as
risen 13.52%

“Favorable long-term demographic drivers and improvements in a
number of underlying housing data reports provide reasons for optimism
heading into 2012,” Pulte Homes said in their fourth quarter earnings
report.

Stanley agreed that some fundamentals are starting to look better,
but said in order for a real housing recovery to take root, home prices
will need to increase.

“If home prices start to pick up as well — I think you would have
all the ingredients for a much more robust recovery but for the moment
it feels like just gradual improvement from what ultimately were
disastrously low levels,” Stanley said.

** Market News International Washington Bureau: 202-371-2121 **

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