Housing permits offer glimmer of hope: CreditSights
The news has been pretty grim lately for the housing market, but CreditSights notes a 3% rise in single-family housing permits in August that could be cause for a small sign of hope. In its monthly housing monitor report, the independent research firm said housing "continues to hover on the sidelines with minor shifts up and down." The firm doesn't expect meaningful upticks until the country sees improved employment, more consumer confidence and mortgage market changes. Construction activity remains anemic with starts slipping 5% to a seasonably adjusted and annualized rate of 571,000 in August. The decline was driven by a 12% drop in multifamily units, but single-family home construction also slowed by one percentage point. The rise in building permits — a forward-looking economic indicator — gives a glimmer of hope that more construction activity is on the way. Still, the big national homebuilders have been reticent to add to the housing stock with most stepping away from any aggressive building. Lennar Corp. (LEN) recently said weak demand coupled with tight lending puts the housing market in a holding pattern. KB Home (KBH) on Friday reported a wider third-quarter loss on fewer deliveries, but also noted orders are up. In August, homebuyers closed on a seasonally adjusted annualized rate of 5.03 million homes. Existing homes sales rose 7.7% for the month. CreditSights said some home purchases may have been pulled forward as buyers seek to close purchases before flood insurance and conforming loan limits expire at the end of September. Investors remain a key part of the market with 22% of transactions in August, and 29% of all transactions were cash deals that avoided the mortgage market altogether. Investors looking for good deals in the distressed market helped push the median price of homes down for the second consecutive month to $168,000, the CreditSights report said. The firm predicts more housing price declines, but notes "the fact that sales were up at all is surprising against a back drop of extreme weakness in the financial markets during the month of August." The cancellation rate jumped to 18% from 16% as appraisals coming in below the agreed selling price and mortgage qualification issues become typical. Write to Kerry Curry. Follow her on Twitter @communicatorKLC.