Hovnanian Enterprises

Mortgage Applications in U.S. Increase From 12-Month Low on Refinancing, by Bob Willis, Bloomberg.com

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Mortgage applications in the U.S. rose last week from a 12-month low as refinancing increased for the first time since early November.

The Mortgage Bankers Association’s index of loan applications increased 2.3 percent after dropping 3.9 percent in the prior week to the lowest level since December 2009. The group’s refinancing gauge rose from the lowest level since Jan. 1, while the purchase index declined.

Home-purchase applications fell 31 percent at the end of the year from a 2010 high in April, while an increase in mortgage rates hampers refinancing. Declining home prices, mounting foreclosures and unemployment hovering near 10 percent mean any recovery in housing, the industry that triggered the recession, will probably take years.

“It doesn’t look good,” Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “With rates moving up, it’s going to be a tough hurdle.” On purchases, “we’re still in this sideways, choppy situation.”

The group’s refinancing gauge rose 3.9 percent after dropping 7.2 percent. The purchase index fell 0.8 percent last week after rising 3.1 percent.

The average rate on a 30-year fixed loan dropped to 4.82 percent last week from 4.93 percent the prior week, which was the highest since May, the group said. The rate reached 4.21 percent in October, the lowest since the group’s records began in 1990.

Borrowing Costs

At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $525.87, or about $22 less than the same week the prior year.

The share of applicants seeking to refinance a loan rose to 71 percent last week from 70.3 percent the prior week.

Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, on Dec. 22 reported a fourth-quarter loss bigger than analysts expected as revenue fell 19 percent.

“The year can generally be described as one where we and the industry were bouncing along the bottom,” Chief Executive Officer Ara Hovnanian said on a conference call.

The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Pending Sales of U.S. Existing Homes Rose 3.5% in November, by Bob Willis, Bloomberg.com

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The number of contracts to buy previously owned homes rose more than forecast in November, a sign sales are recovering following a post-tax credit plunge.

The index of pending resales increased 3.5 percent after jumping a record 10 percent in October, the National Association of Realtors said today in Washington. The median forecast in a Bloomberg News survey called for a 0.8 percent rise in November, and the gain was the fourth in five months. The group’s data go back to 2001.

Home demand is stabilizing after sales collapsed to a record low in July, as the effects of a tax incentive worth as much as $8,000 waned. A jobless rate hovering near 10 percent means foreclosures will remain elevated and any recovery in housing, the industry that precipitated the worst recession since the 1930s, will take time to develop.

The figures are “in line with an ongoing gradual pickup in existing-home sales in December,” Yelena Shulyatyeva, an economist at BNP Paribas in New York, said in an e-mail to clients. “Housing demand should continue its uneven recovery entering 2011 as housing oversupply should keep pushing housing prices down.”

A report today from the Labor Department showed claims for jobless benefits fell last week to the lowest level since July 2008, showing the labor market is improving heading into 2011. Filings decreased by 34,000 to 388,000 in the week ended Dec. 25, fewer than the lowest estimate of economists surveyed.

Business Barometer

Other figures showed the economy accelerated at the end of the year. The Institute for Supply Management-Chicago Inc.’sbusiness barometer jumped to 68.6 in December from 62.5 in the prior month. Readings greater than 50 signal expansion and the level was the highest since July 1988.

Stocks fluctuated between gains and losses after the reports. The Standard & Poor’s 500 Indexfell 0.1 percent to 1,258.23 at 11:17 a.m. in New York. The benchmark 10-year Treasury note declined, pushing up the yield to 3.39 percent from 3.35 percent late yesterday.

The projected increase in pending home sales was based on the median of 24 forecasts in the Bloomberg survey. Estimates ranged from a drop of 5 percent to a gain of 5 percent.

Two of four regions saw an increase, today’s report showed, led by an 18 percent jump in the West. Pending sales rose 1.8 percent in the Northeast. They fell 4.2 percent in the Midwest and 1.8 percent in the South.

November 2009

Compared with November 2009, pending sales in the U.S. were down 2.4 percent.

Even as the labor market is improving and manufacturing is growing, housing remains a weak link. NAR chief economist Lawrence Yun last week estimated there were about 4.5 million distressed properties that could potentially reach the market in coming months.

Average home prices as measured by the S&P/Case-Shiller indexes have begun dropping again after rising when the tax incentive was in effect. The group’s 20-city index fell 0.8 percent in October from a year earlier, the biggest year-on-year decline since December. It fell 1 percent from the prior month, and is down 30 percent from its July 2006 peak.

Reports earlier this month showed the housing market is stuck near recession levels. Housing permits fell in November to the third-lowest level on record, while starts rose for the first time in three months, the Commerce Department reported Dec. 16.

Home Sales

Sales of new and existing homes last month rose less than projected by the median forecast of economists surveyed by Bloomberg, reports from the Commerce Department and the National Association of Realtors showed last week. Existing home sales represent closings on the contracts captured by the pending sales gauge.

Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, on Dec. 22 reported a fourth-quarter loss bigger than analysts expected as revenue fell 19 percent.

“The year can generally be described as one where we and the industry were bouncing along the bottom,” Chief Executive Officer Ara Hovnanian said on a conference call.

Even so, economists in the past two weeks have boosted projections for fourth-quarter growth, reflecting a pickup in consumer spending and passage of an $858 billion bill extending all Bush-era tax cuts for two years.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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    Sales of U.S. New Homes Increased Again in September, by Bob Willis, Bloomberg.com

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    Sales of new homes rose in September for a second month to a pace that signals the industry is struggling to overcome the effects of a jobless rate hovering near 10 percent.

    Purchases increased 6.6 percent to a 307,000 annual rate that exceeded the median forecast of economists surveyed by Bloomberg News, figures from the Commerce Department showed today in Washington. Demand is hovering near the record-low 282,000 reached in May.

    A lack of jobs is preventing Americans from gaining the confidence needed to buy, overshadowing declines in borrowing costs and prices that are making houses more affordable. At the same time, foreclosure moratoria at some banks, including JPMorgan Chase & Co., signal the industry will redouble efforts to tighten lending rules, which may depress housing even more.

    “These are still very low levels,” said Jim O’Sullivan, global chief economist at MF Global Ltd. in New York. “Ultimately, a significant recovery in housing will depend on a clear pickup in employment.”

    Another Commerce Department report today showed orders for non-military capital equipment excluding airplanes dropped in September, indicating gains in business investment will cool.

    Capital Goods Demand

    Bookings for such goods, including computers and machinery meant to last at least three years, fell 0.6 percent after a 4.8 percent gain in August that was smaller than previously estimated. Total orders climbed 3.3 percent last month, led by a doubling in aircraft demand.

    Stocks fell, snapping a five-day gain for the Standard & Poor’s 500 Index, on the durable goods report and investor speculation that steps taken by the Federal Reserve to shore up the economy will be gradual. The S&P 500 fell 0.5 percent to 1,179.8 at 10:14 a.m. in New York.

    Economists forecast new home sales would increase to a 300,000 annual pace from a 288,000 rate in August, according to the median of 73 survey projections. Estimates ranged from 270,000 to 330,000.

    The median price increased 3.3 percent from September 2009 to $223,800.

    Purchases rose in three of four regions, led by a 61 percent jump in the Midwest. Purchases dropped 9.9 percent in the West.

    Less Supply

    The supply of homes at the current sales rate fell to 8 months’ worth, down from 8.6 months in August. There were 204,000 new houses on the market at the end of September, the fewest since July 1968.

    Reports earlier this month showed the housing market is hovering at recession levels. Housing starts increased in September to an annual rate of 610,000, the highest since April, while building permits fell to the lowest level in more than a year, signaling construction will probably cool.

    Sales of existing homes, which now make up more than 90 percent of the market, increased by 10 percent to a 4.53 million rate in September, the National Association of Realtors said yesterday. The pace was still the third-lowest on record going back a decade.

    Home resales are tabulated when a contract is closed, while new-home sales are counted at the time an agreement is signed, making them a leading indicator of demand.

    Moratoria’s Influence

    Economists are debating the likely effect on new-home sales from the foreclosure moratoria and regulators’ probes into faulty paperwork. Most agree the moratoria pose a risk to housing sales as a whole.

    Michelle Meyer, a senior economist at Bank of America Merrill Lynch Global Research in New York, is among those who say the moratoria, by limiting the supply of existing homes, may lift demand for newly built houses in coming months.

    “There is a possibility there will be a shift in demand for new construction, at least in the short term,” she said.

    The U.S. central bank and other regulators are “intensively” examining financial firms’ home-foreclosure practices and expect preliminary findings next month, Fed Chairman Ben S. Bernanke said this week at a housing conference in Arlington, Virginia.

    Fed officials have signaled they may start another round of unconventional monetary easing at their next meeting Nov. 2-3 to try to spur the economic recovery.

    Homebuilders say labor-market conditions will be the biggest factor in spurring or delaying a recovery.

    “The U.S. economy needs to improve, and we’ve got to see some improvement in job creation,” Larry Sorsby , chief financial officer at Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, said during an Oct. 7 conference call.

    To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

    To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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