Weak mortgage application and housing starts data

Housing Starts below expectations

Mortgage applications declined 7.1% week-over-week and housing starts declined 5.3% in September, paced in part by a 0.9% decline in starts for single-family units.

September Housing Starts 1.201 M vs Briefing.com consensus of 1.221 M; August was revised to 1.268 M from 1.282 M

September Building Permits 1.241 M vs Briefing.com consensus of 1.273 M; August was revised to 1.249 M from 1.229 M

The key takeaway from the September Housing Starts and Building Permits report is that the supply of new homes isn't picking up fast enough to meet the demand for new homes at more affordable price points. Accordingly, overall home sales activity will continue to be curtailed by affordability constraints.

The soft data surrounding the housing market has contributed to worries about the future pace of economic growth in the U.S. slowing down, which in turn has kept the market attuned to the "peak growth" narrative.

The SPDR S&P Homebuilders ETF (XHB34.71, -0.92, -2.6%) is down 2.6% while the iShares U.S. Home Construction ETF (ITB31.65, -1.04, -3.2%) is down 3.2%, feeling the added pressure of Credit Suisse downgrades for Home Depot (HD185.38, -8.20, -4.2%), Lowe's (LOW101.76, -4.22, -4.0%), and Lennar (LEN42.69, -1.41, -3.2%)

Chicago: Elmhurst a new hub for million-dollar homes

Elmhurst is in the midst of a million-dollar makeover as high-end new construction sprouts all over its leafy neighborhoods. In 2016, the DuPage County town saw 48 sales of homes priced at $1 million or more, according to data from a Re/Max Luxury Report. That's up from 35 sales in 2015 and 14 in 2014.

At the same time, sales of homes at all prices declined in Elmhurst: 681 homes sold in town during the year, down 5 percent from 2015, according to Midwest Real Estate Data.

"I don't mean to sound like a postcard," said Larry Reedy, third-generation head of his family's firm, L.W. Reedy Real Estate in Elmhurst, "but we're seeing a lot of people who grew up in Elmhurst, with excellent schools, easy access to the expressways and O'Hare and a vibrant downtown. They want that and they want a new house with the finishes and room sizes that weren't built here" in the 1950s and 1960s.

More than two-thirds of the million-dollar homes sold in 2016—33 out of 48—were new construction, according to Crain's research in MRED's listings.

The increase in high-priced sales vaulted Elmhurst onto Re/Max's list of the Top 10 Chicago suburbs for million-dollar sales. It landed at No. 8 for 2016 sales, up from 13th place in 2015 and a three-way tie for 23rd two years ago.

Elmhurst had more million-dollar sales last year than Highland Park, an affluent town on the North Shore where 44 homes sold for $1 million and up, according to Re/Max.

Joanne Way is the epicenter of million-dollar sales. The new U-shaped street on the former site of Elmhurst Hospital, which moved to a new $450 million facility 4 miles away in 2011, is the biggest piece of the Berteau Development, which will include 56 new homes on Joanne and on Schiller and Third streets.

Forty homes have been sold, said Berteau principal Joe Nitti, 31 of them for $1 million or more, according to MRED listings. Nitti said this week that five houses in the development have sold in the first six weeks of 2017 alone, none for under $1 million.

"It's all due to the demand that's going around town," Nitti said.

Reedy, too, said that while Nitti's project is thick with million-dollar new construction, "other builders are doing it in every neighborhood around town," most often on single teardown lots. "There's no other site as big as Berteau available," he said. "We're built out."

But he doesn't expect million-dollar sales to slip when Berteau sells out because of the ready supply of smaller vintage homes that builders can replace. Older homes on Elmhurst's typical 50-by-150 lot are teardown candidates up to values of around $300,000, said Patricia DiCianni, managing broker of DiCianni Realty.

Reedy and Coldwell Banker agent Vince Keller said the majority of buyers for new million-dollar homes in Elmhurst are young families from the city whose children are approaching school age. In September, Keller had clients from Chicago who bought a new four-bedroom, 3,600-square-foot house on Cottage Hill Avenue for just under $1.14 million. They declined to comment, but Keller said what drew them was "being relatively close to the city, with excellent schools and parks, and all that goes on in downtown Elmhurst."

Walkable downtown Elmhurst helped put the town on Crain's list of the best places to buy a home in 2017, for its many restaurants, historical movie theater, college campus, central park and museums.

Those factors and the town's high-quality schools drew Sid Chhabra to Elmhurst 25 years ago, when he built a house for his family. A structural engineer at the time, he eventually became a professional homebuilder. His firm, DesignPro Builders, constructs one house a year. The four-bedroom, 4,000-square-foot house he built last year on Berkeley Avenue sold in September for a little more than $1.1 million.

"I was skeptical that I could sell it for that," Chhabra said. "But the way things are going now, I shouldn't have been."

Chicago: Wolf Point apartment tower for sale

• Designed by Chicago-based BKL Architecture, the tower cost $160 million, or about $314,000 per unit, to build.

The Kennedy family and its partners are seeking buyers for a new 48-story apartment tower on Wolf Point as they get ready to break ground on an even bigger high-rise next door.

A joint venture including the Kennedys and Hines Interests has hired the Chicago office of HFF to sell Wolf Point West, the first of three planned buildings on the site at the confluence of the Chicago River's north and south branches. Rents in the 509-unit tower, which offers striking views of the river, are among the highest in Chicago, one reason the property could draw a lofty price.

The developers are selling the building mainly to focus on their next project on the site, a 66-story, $360-million tower called Wolf Point East, said Greg Van Schaack, senior managing director in the Chicago office of Houston-based Hines. They've almost lined up their construction financing for that high-rise, which will have 707 apartments, and plan to break ground in May, he said.

Christopher Kennedy, meanwhile, who oversees his family's real estate holdings, also has another venture that needs some attention: his campaign for Illinois governor, which he launched last month.

Whether the political winds blow in Kennedy's favor, the winds are shifting in the downtown apartment market. The last several years have been some of the best in decades for landlords and developers, as surging demand for apartments has pushed up rents and property values.

WILL​ SUPPLY​ DAMPEN​ ENTHUSIASM?

Yet the market is cooling amid a building boom that's expected to add about 8,000 units to downtown Chicago in 2017 and 2018—a 23 percent increase in supply—and occupancies are already falling. The question is whether the bulging supply will dampen investors' enthusiasm for downtown apartments, pulling prices down.

Wolf Point West is holding up fine so far.

The building at 343 W. Wolf Point Place., southwest of the Merchandise Mart, opened in January 2016 and is 85 percent occupied. Apartments there rent for $3.65 to $3.70 per square foot, making it one of the 10 most expensive buildings in the city.

"The building has had an incredible lease-up and the owners have received unsolicited offers," HFF Executive Managing Direct Matthew Lawton said in an email. "They thought it best to engage HFF to conduct a thorough process to establish the market value."

The Kennedys and Hines own Wolf Point in a joint venture with the AFL-CIO Building Investment Trust and Chicago-based Magellan Development Group. The Kennedys and Hines are teaming up on the Wolf Point East project also with the AFL-CIO trust, which invests in real estate for union workers' pension plans.

Chicago: Nate Berkus-designed condo sells for $6.2 million

A condominium at the Palmolive Building whose interiors were done by celebrity designer Nate Berkus sold this week for $6.2 million, $1 million less than the asking price.

The sale of the 33rd-floor home in the art deco landmark on Michigan Avenue closed Aug. 5, according to sale information posted with Midwest Real Estate Data by listing agent Jennifer Ames of Coldwell Banker. The unit went under contract after less than a month on the market.

It's the second-highest price this month for a listed home in the city. A condo at the Ambassador on North State Parkway sold this week for almost $7 million.

The 5,200-square-foot Palmolive condo, which has three bedrooms and four full baths, was listed June 8 for $7.2 million. Ames marked the listing 'contingent' July 6, 28 days after it was listed.

A contingent listing means the buyers have something to settle first, such as the sale of their prior home.

The sellers were Greg and Ava Vorwaller, according to the Cook County Recorder of Deeds. Neither could be reached. They paid $5.2 million for the home in 2007, according to the recorder. They commissioned Berkus for the design, according to the listing.

Greg Vorwaller is managing director of investments and operations at Trekker Property Management, where a listed phone number did not answer.

Ames has not yet responded to an emailed request for comment sent last night. The buyers are not yet identified in public records. The quick closing—Ames removed the "contingent" label just two days before the sale closed—suggests they paid cash.

The home's 28 days on the market compares with an average time on the market of 86 days for Chicago homes sold in June, the most recent month for which data is available from the Chicago Association of Realtors.

Nine other listed Cook County homes have sold for $10 million or more in the past year, according to MRED listings posted on Redfin. Of those, four weren't listed openly until they were already sold or under contract, making it impossible to know how long they were marketed. The other five took from six weeks to three years to sell, according to records on Redfin.

A 17th-floor Palmolive condo listed in April at $8.9 million by former Zenith Electronics CEO Peter Willmott is still on the market. Its price was cut below $8.5 million in late May.

U.S. homebuilding posts best year since 2007

(AP) — U.S. home construction slowed in December but ended 2013 with the best showing since the housing bubble burst.

Builders broke ground last month at a seasonally annual rate of 999,000, the Commerce Department said today. That's 9.8 percent lower than November's pace of 1.12 million, which was the fastest in five years.
For the year, builders started 923,000 homes and apartments, up 18.3 percent from 2012. It was the fourth straight annual gain and the strongest since 2007, when 1.36 million homes were started.

The housing market has been recovering steadily over the past year, helping to boost economic growth and create jobs. But a rise in mortgage rates from record lows reached a year ago have started to weigh on those gains.

Still, economists said they December's dip in activity followed a huge gain November. They also blamed some of the decline last month on cold weather, which may have disrupted some construction activity.
"Despite really bad weather, builders still managed to keep digging and that is a great indication that the housing market continues to move forward," said Joel Naroff, chief economist at Naroff Economic Advisors.
For December, construction of single-family homes, which makes up roughly two-thirds of homebuilding, fell 7 percent to an annual rate of 667,000. Construction of apartments, which can be more volatile, dropped 14.9 percent to a 332,000 rate.

Applications for building permits, considered a good sign of future activity, fell 3 percent in December to a rate of 986,000. Single-family permits fell 4.8 percent. Permits for apartments were unchanged.

BIG DECEMBER DROP IN MIDWEST
Construction activity in December fell 33.5 percent in the Midwest and 12.3 percent in the South. Construction rose 15 percent in the West and was unchanged in the Northeast.

Mortgage rates are roughly a percentage point higher than in the spring. Still, they remain low by historical standards. The average rate on a 30-year mortgage fell to 4.41 percent this week. That's down from a peak of 4.6 percent in August.

U.S. homebuilders remain generally upbeat ahead of the spring home-buying season.

The National Association of Home Builders/Wells Fargo builder sentiment index slipped to 56 in January, down slightly from a 57 reading in December. Readings above 50 indicate more builders view sales conditions as good rather than poor. Even with the small dip, the overall index remains in positive territory and is nine points higher than it was a year ago.

The spring buying and selling season kicks off next month, traditionally the time of the year that sets the tone for residential hiring and construction. Many builders, particularly smaller firms, sell homes that will take months to build.

Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the homebuilders association.

Foreclosures jump as banks bet on rising home prices

Home repossessions in the U.S. jumped 11% in May after declining for the previous five months as rising prices and limited inventory for sale across the country spurred banks to complete foreclosures.

Lenders took back 38,946 homes, up from 34,997 in April, according to Irvine, California-based data firm RealtyTrac, which tracks notices of default, auction and seizures. Thirty-three states had increases in the number of homes repossessed, RealtyTrac said in a report today.

Banks are more willing to move to the final stage of foreclosure because there is sufficient demand and prices are improving, said Eric Workman of Tinley Park, Illinois-based Mack Cos., which aggregates single-family rental homes and resells them to individuals and institutional investors. U.S. home prices advanced almost 11% in the year through March, the biggest 12-month gain since April 2006, according to the S&P/Case-Shiller index of values in 20 cities.

“For a very long period of time, the market in general and specifically banks were unsure of what these assets were valued at,” Workman, vice president of sales and marketing at Mack, said in a telephone interview. “With increasing stability of the economy and housing prices throughout the U.S., these banks and sellers are getting much more comfortable with the value of their properties.”

Blackstone Buying

Private-equity firms, hedge funds and individuals are all buying foreclosed or distressed homes to turn into rental properties as prices remain 28% below their 2006 peak. Companies including Blackstone Group LP, which has invested more than $5 billion to buy almost 30,000 homes, and Colony American Homes Inc., which owns more than 12,000 properties, are helping to increase prices in areas hit hard by the real estate crash by draining the market of inventory as low borrowing costs and improving employment fuel demand from buyers.

The average rate for a 30-year fixed mortgage climbed to 3.98% from 3.91% last week, McLean, Virginia-based Freddie Mac said in a statement today. While that’s the highest in 14-months, its down from 6.8% almost seven years ago before the housing crash.

“There are plenty of companies out there that will buy assets throughout the range of condition because the demand for finished quality inventory is so high,” Workman said.

Metropolitan areas that experienced the brunt of the housing bust and the most foreclosures have experienced some of the biggest rebounds. Median home prices in Phoenix soared 21% in May from a year earlier to $175,236, followed by Tampa, Florida, which was up 20% to $118,000; Riverside- San Bernardino, California, up 18% to $220,000; and Miami, up 16% to $160,000, according to RealtyTrac.

Inventories Dropping

Inventories have fallen for listings of all types, Seattle based Zillow Inc. said today. The supply of homes listed with the online service is down 12% this month from a year earlier, with inventory tightest for pricier homes, Zillow said. In January the total drop was almost 18%.

Four of the five largest home lenders that signed a nationwide settlement with regulators over alleged abuses in their foreclosure practices increased repossessions in May. Changes in procedures following the two-year investigation and accord, as well as government programs for homeowners, had slowed the rate of seizures.

“Foreclosures have been artificially depressed through government regulation and policy, and are going back to where they should have been,” Michael Krein, president of the National REO Brokers Association, said in a telephone interview. “Prices are rising rapidly in some markets because of the shortage.”

National Settlement

Citigroup Inc. was the only bank among the five that settled last year with U.S. and state officials that didn’t post an increase in repossessions, as Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp. and Ally Financial Inc. all showed gains, RealtyTrac said.

“Given the shortage of inventory and rising home prices, banks have little motivation to hold back on any foreclosures, so homeowners who have not been making payments for several months or even years without a foreclosure notice should expect to see that notice coming,” Craig King, an agent at the Reno, Nevada-based Chase International brokerage, said in RealtyTrac’s report.

The biggest annual jumps in states with more than 1,000 home repossessions occurred in North Carolina, up 60% from the previous month, followed by gains of 44% in both Wisconsin and Illinois, 23% in Colorado and 19% in Michigan, according to RealtyTrac.

Repossession Total

Last month’s repossession total was less than the 42,606 average so far this year and well below 91,110 for the first nine months of 2010, Daren Blomquist, RealtyTrac vice president, said in an e-mail. That peak came just before banks were accused of shoddy foreclosure procedures and record-keeping. Seizure notices have averaged 59,976 since October 2010, he said.

The current pace of home seizures would result in more than a half million repossessions by the end of the year, compared with 671,251 in 2012, RealtyTrac said.

“However, the numbers for 2013 could be higher if the increase in May continues and lenders have a good market to unload distressed inventory,” Blomquist said.

A total of 148,054 foreclosure filings, including default, auction and repossession notices, were sent to U.S. properties last month, an increase of 2% from April and down 28% from a year earlier, according to RealtyTrac. One in 885 U.S. households got a filing.

Florida had the highest rate of filings per household in May at one in 302, followed by Nevada at one in 305 and Ohio at one in 584. Maryland ranked fourth at one in 587 and South Carolina was fifth at one in 600, the data firm said.

More foreclosures are likely as initial filings increased in 26 states from the previous month and in 14 states from a year earlier, RealtyTrac said. First-time default notices more than tripled in Maryland, more than doubled in Connecticut and Hawaii, and rose more than 80% in Arkansas, New Jersey and Nevada.

www.bloomberg.com

Chicago home prices slip after 5 straight gains

A closely watched index of local home prices fell in September, its first decline after five consecutive increases.

The S&P/Case-Shiller index of Chicago-area single-family home prices fell 0.6 percent from August to September, according to a report released this morning.

Chicago-area prices were down 1.5 percent year over year, making the city and New York the two in a 20-city index where September prices were down compared with September 2011.

The 20-city composite price index increased 0.3 percent from August to September and was up 3.0 percent on a year-over-year basis, according to the report. Chicago was one of five cities in the index where prices fell from August to September.

The local index rose 0.7 percent from July to August after jumping 2.7 percent from June to July, 4.6 percent from May to June and 4.5 percent from April to May.

Chicago-area prices are down about 31 percent from their peak in September 2006, according to Case-Shiller data.

Noting that the 20-city index has risen each of the past six months, “it is safe to say that we are now in the midst of a recovery in the housing market,” David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said in a statement.