Archive for the ‘Investing in Atlanta Real Estate’ Category

Producer Prices in February – Falling Prices, Except for Gypsum

Softwood lumber prices declined 1.6% in February. The Random Lengths Framing Lumber Composite Index points to further declines in March. Analysts point to softer than expected US single family construction in 2014, inventory management on the part of distributors, and softening overseas markets as factors. Additional declines will be tempered going forward by possible log shortages and continuing transportation bottlenecks.

Prices for OSB declined 2.9% after modest upticks in the prior three months. The return of mothballed capacity since 2013 has supply outpacing demand. Random Lengths indicates additional declines in March. The PPI for OSB indicates a 46% decline from the price peak in March 2013.

Prices for gypsum jumped 3.9% in February after a 4.3% increase in January reaching an all-time high. Gypsum prices are now 5.4% higher than their 2006 housing boom peak while single family housing starts remain depressed at roughly half the normal level of production.


Come back tomorrow to  where Kennesaw’s Ashford Capital Partners’ Managing Partners Matt Riedemann brings you news you can use.


blog ppi 2015_03

Cash is Still King in Home Buying

Kennesaw’s Ashford Capital Partners Matthew Riedemann brings you news you can use.

In 17 of the largest U.S. cities, 32 percent of homes purchased so far in 2014 were paid for with all cash. All-cash purchases have been at this level – or even higher – since 2011. The rise in all-cash purchases began in 2007 as the housing bubble popped, and cash purchases accounted for nearly a third of all purchases by 2011. Tighter mortgage lending standards, investor purchases and fewer homes on the market have all contributed to keeping that rate high.

Percentage of all-cash buyers from 2000 to 2014

Percentage of all-cash buyers from 2000 to 2014

The largest percentages of homes purchased without a mortgage are at the low and high ends of the market. As home prices get into the upper echelon, all-cash purchases become more likely. Miami, Las Vegas, Chicago and Phoenix have the highest percentage of all-cash purchases, while Washington, D.C., Denver, Baltimore and Portland have the lowest percentage.

Percentage of all-cash home purchases across U.S. metros, by price range

Percentage of all-cash home purchases across U.S. metros, by price range

All-Cash Purchases Less Common In $200,000 to $600,000 Homes

The good news for homebuyers in large metro areas who don’t have a stash of cash is that these all-cash purchases are less common in the middle price range, from $200,000 to $600,000. With over 50 percent of purchases falling in that range, it means that a large group of homebuyers will be a bit less likely to face all-cash offers. In this middle range of home prices, Washington, D.C. (15%), Denver (16%), Baltimore (14%), Portland, Ore. (18%) and Boston (20%) had the lowest percentage of all-cash buyers.

Financed Purchases Not Back to 2000 Levels

In 2000, across the 17 metros, there were 800,000 home purchases financed with a mortgage. By 2011, that number had plummeted to 440,000 and had only recovered to 520,000 in 2013. And while interest rates today are still appealing, tighter lending standards mean less-qualified buyers who don’t have hundreds of thousands of dollars saved up have not entered or re-entered the housing market. Mel Watt, the overseer of Fannie and Freddie (who back the majority of new mortgage loans), recently said we should be making more credit available to homeowners. But there is a sliver of good news: Financed home purchases have been on the rise since 2011, while all-cash purchases remained flat from 2012 to 2013. If this trend continues, financed buyers will face fewer situations where they are competing against all-cash buyers.

All-cash and financed home purchase volume from 2000 to 2013

All-cash and financed home purchase volume from 2000 to 2013

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Home Builders Are Hiring 300 New Construction Workers a Day

The number of open, unfilled construction sector jobs continued to decline as the unseasonably cold winter ended.

According to the BLS Job Openings and Labor Turnover Survey (JOLTS), the number of open construction sector jobs declined on a seasonally adjusted basis from 127,000 in February to 104,000 in March. While still high relative to the post-recession period, the March level was the lowest since July of last year but the 11th consecutive month above 100,000. Winter conditions slowed the growth of home construction in recent months, and this factor could have slowed the number of jobs offered by builders and remodelers.

On a three-month moving average basis, the open position rate for the construction sector fell to 1.93% for the month of March, continuing a decline begun in December. While the open rate has declined somewhat in recent months, the rate of open jobs in construction remains above any rate witnessed after the recession and prior to 2013.

Jolts_March data_construction

Monthly gross hiring in construction declined somewhat, falling on a seasonally adjusted basis from 289,000 to 260,000 from February to March. Over the same period, the hiring rate, as measured on a 3-month moving average basis, was effectively unchanged at 4.67% for March.

Two trends in the construction sector are worth noting. First, the layoff rate for the sector (graphed above as a 12-month moving average) has continued to fall. Second, the sector hiring rate has fallen noticeably since the fall of 2013. The trend lines over the last two years – a falling hiring rate, an increasing opening rate trend, and a declining layoff rate – are consistent with some construction firms having trouble contracting with workers for specific projects. However, future employment reports will indicate whether recent hiring weakness is mostly due to weather effects or reflects new baselines for construction activity.

Monthly employment data for April 2014 (the employment count data from the BLS establishment survey are published one month ahead of the JOLTS data) indicate that total employment in home building stands at 2.257 million, broken down as 659,000 builders and 1.598 million residential specialty trade contractors.

Res construction employment_Apr

Over the last year the home building sector has added 108,000 jobs. Since the point of peak decline of home building employment, when total job losses for the industry stood at 1.466 million, 273,600 positions have been added to the residential construction sector. As of March, over the last six months the home building and remodeling industry has added on average more than 11,000 jobs per month.

For the economy as a whole, the March JOLTS data indicate that the hiring rate was constant at 3.4% of total employment. The hiring rate has been in the 3.1% to 3.4% range since January 2011. The current overall job openings rate (2.8%) has been in the 2.7% to 2.9% range since the start of 2013.


Source:  Builder Online – May 14, 2014

Twice as Many Consumers Prefer New Homes to Existing

Larger closets, open floor plans, and roomy kitchen islands seen as big draws of new homes.


While twice as many American consumers prefer a newly built home compared to an existing dwelling, many are reluctant to pay extra for new, according to the results of a new survey from Trulia.

Forty-one percent of respondents said they prefer to buy a new home over a previously lived in one, compared to 21 percent who said they would prefer an existing home at the same price. But of those buyers interested in new homes, only 46% were willing to pay the 20% premium that new homes typically require. In fact, only 17% of respondents said they would pay at least 20% more for a new home.

Trulia compared median prices for a new home adjusted for property features and location and found that new homes are typically priced 20% higher than older homes with similar attributes such as square footage and number of bedrooms in the same zip code.

The survey explored consumer preferences for each type of home. The top reasons respondents prefer a new home are for modern features such as bigger closets, a kitchen island, open floor plan, walls pre-wired for flat screen TVs, radiant floor heating, to be able to customize the home before construction is completed, and to spend less on maintenance and repairs.

Fans of existing homes have their reasons, too. The most compelling reason to buy an existing home is to pay less. However, among respondents who strongly prefer an existing home, the top reasons to buy an existing home are for one-of-a-kind finishes such as original wood floors, woodwork, ornate details, or stained/leaded glass windows, and to live in a more established neighborhood.

Interestingly, respondents are much more likely to mention the neighborhood as a reason to prefer an existing home than as a reason to prefer a new home. This suggests that for many Americans, the ideal home might be a new home in an established neighborhood, the survey concludes.

By  – Builder Online – May 5, 2014

The New Math of Renting vs. Buying

Here’s how to figure out which strategy makes the most financial sense.

Buying a home has long been part of the American dream. But rising prices have made renting less expensive in many places.

How They Rank 

See the full rankings for 54 metro areas, and how Deutsche Bank did the math, on Total Return.

People often aspire to own a home for reasons that have little to do with money, and rental options are limited in some communities. Yet owning property can limit your flexibility to move when you want and ties up a lot of your money.

The median sales price of existing single-family homes rose 11.4% in 2013 from the previous year—the highest yearly increase since 2005, according to the National Association of Realtors. Prices in many places, including Los Angeles, Baltimore and Portland, Ore., rose even more last year.

The monthly cost of renting was lower than buying in 20 large metropolitan areas at the end of last year, the most recent period for which data are available, according to figures provided exclusively to The Wall Street Journal by Deutsche Bank.   

The bank calculates the costs in 54 markets based on average local rents and median home-sale prices, which it uses to estimate monthly mortgage payments for a hypothetical buyer in the 25% federal income-tax bracket.

Renting had been less expensive than buying on average across all the areas Deutsche Bank tracks since at least the early 1990s. But that changed during the financial crisis, as home prices plummeted and interest rates on mortgages dropped. The current rally in home prices appears to be pushing the housing market back toward the historical norm.

Where Renters Made Gains

Here are the metro areas where renting made the biggest gains against buying in the fourth quarter of last year compared with a year earlier.


A renter in Orlando paid $1.24 a month for every $1 a buyer spent last year, down from $1.44 in 2012.                


The five markets where renting recently became cheaper than buying include some popular cities and suburbs where home prices are climbing fastest: Sacramento, Calif.; Phoenix; San Bernardino and Riverside, Calif.; Austin, Texas; and Northern Virginia.

Buying is still cheaper in 34 metropolitan areas Deutsche Bank examined, including Cleveland, Chicago and Atlanta, though prices rose last year in those areas, as well.

Renting has become more appealing financially than it was at the end of 2012 in places such as St. Louis; Orlando, Fla.; and Minneapolis, though buyers still pay much less than renters in those areas.

The buying advantage was slight in some places. Miami, San Antonio and Las Vegas are among the hot markets where renters appeared to be on the verge of being better off than buyers at year-end, according to the bank’s figures.

Buyers, of course, can build up equity as they pay down a mortgage, which can compensate for higher monthly costs.

Here is what you need to know to help figure out the most cost-effective way to keep a roof over your head. The first step is to understand the arguments in favor of buying and renting.

The Case for Buying

Many Americans see buying a home as an essential step in a successful life, and owning one can bring significant financial benefits.

The most obvious upside is that a home can significantly increase in value. The median sales price of existing single-family homes rose 81% from 1993 through 2013, according to the NAR.

The potential payoff can loom large in a buyer’s mind when home prices are going up rapidly, as they have recently. “We’ve already seen six to seven years of normal appreciation in the last 12 months” in many markets, says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla.

Many homeowners also can deduct mortgage interest from their income-tax bills along the way.

In addition, homeowners can tap into the equity in their homes for big-ticket expenses, such as college tuition, at interest rates that can be lower than other financing options—though that can backfire by saddling homeowners with debt they can’t easily repay.

Homeowners also don’t have to worry about a spike in rents. Jacquelyn Bilton, who is 34 years old, bought a three-bedroom home with a pool in Margate, Fla., in February for $200,000, after her landlord raised her rent 28% last year. She says her monthly housing costs are now about $300 lower.

“I couldn’t afford to be throwing money down the drain in rent when I could purchase a home,” she says.

As they age, homeowners can enjoy another benefit. If they pay off their mortgages around the time they retire, their housing costs can drop significantly just when they may want extra cash for travel, medical expenses and the like, says Chris Mayer, research director at the Paul Milstein Center for Real Estate at Columbia University.

To be sure, the dream also can turn into a financial nightmare. The collapse of the housing market starting in 2008, which triggered millions of foreclosures, is a vivid recent example of what can go wrong.

Still, owning a home can be well worth it for personal and psychological reasons that go beyond financial calculations.

The Case for Renting

Given the wide array of potential benefits, homeowners are sometimes surprised to learn that buying isn’t always the smartest financial option.

To begin with, the monthly cost of renting can be lower, even for a home of similar size and quality in the same community.


Homeowners are sometimes surprised to learn that buying isn’t always the smartest financial option.             

Renters, for example, don’t pay property taxes, homeowner’s insurance and, in most cases, maintenance costs. These expenses can cost homeowners about 3% of the price of their home annually, experts say.

While those costs can be folded into monthly rent, apartment renters often pay a smaller share as landlords spread the costs among many tenants, says Stijn Van Nieuwerburgh, director of the Center for Real Estate Finance Research at New York University. If a window breaks or the toilet plugs up, your landlord—not you—pays for the repairs.

Renters don’t end up with a valuable asset, as buyers do when they pay off a mortgage. But renters might be able to make more money by investing the monthly savings, as well as the cash they would otherwise use for a down payment, he says.

The value of the average single-family home increased by 3.6% a year in the three decades through 2013, compounded annually, according to mortgage giant Freddie Mac. By contrast, the compound annual return on the S&P 500 over that period was 11.1%, according to Chicago-based investment-research firm Morningstar.

After moving to New York two years ago, Hunter Kearney, 27, looked into buying a condominium worth at least $2 million. But Mr. Kearney, an executive at a firm that sells graphite, concluded that renting a similar apartment was significantly less expensive.

“Your monthly costs end up being lower,” says Mr. Kearney, who says he saves about $2,000 a month over the cost of buying. He is investing some of the savings in the stock market.

Renters often have greater flexibility to move to a different part of the country, which can be important in a weak job market. They may feel freer to look for work in another city, and they don’t have to wait to sell their home if the right opportunity opens up.

Housing prices don’t need to decline as severely as they did during the financial crisis to cost homeowners significant sums, if they need to sell during a downturn. Modest declines in home prices are common.

Even people who want to own a home at some point can benefit from renting for a while to save up for a larger down payment. If the available inventory is thin, they can rent while they wait for a wider variety of homes to be listed for sale.

Handling a Hot Market

To calculate whether buying or renting makes more sense financially, you need to have a sense of your monthly costs in each case, including rent, mortgage payments, taxes, insurance and other related expenses that may apply to each option—as well as whether you would be more likely to spend or invest any savings from renting.

The verdict could differ considerably within a city, suburb or town, based on the location and the style and size of the homes you are exploring.

The Deutsche Bank data reflect an attempt to do that math across metropolitan areas, and essentially function as a general guide to each market.

Would-be buyers should proceed carefully. First, they should try to get a sense of how hot the local real-estate market is and whether buyers generally still have the upper hand, which is often the case far from the coasts and outside large cities.

If you are in a more-competitive market, be alert to the risk that you could end up in a bidding war that could drive up the purchase price. Being patient could pay off if prices cool down. In fact, slight corrections already have occurred in some markets.

In San Francisco’s East Bay area, for example, asking prices of some new homes declined 1% to 5% during the second half of last year, after builders raised prices by 5% to 18% in the prior quarter, according to Metrostudy, a housing research and consulting firm based in Palm Beach Gardens, Fla.

Gene and Erin Lash plan to sell their home in Danville, Calif., and are prepared to spend $1 million to $2 million on a larger house. But the couple has faced as many as 30 competing offers on each of the five homes they bid on and lost out every time, says Mr. Lash, a 48-year-old forensic accountant.

Now, the Lashes are also looking into renting a single-family home or an apartment as a short-term alternative to buying. “Everything is on the table,” Mr. Lash says.

Even in a hot market, the math can be more advantageous for buyers who plan to stay put for a while, typically at least five to seven years. That should be enough time for market corrections to pass, says Landon Nash, a real-estate agent in San Francisco with national brokerage Redfin.

Mr. Nash says he is telling would-be buyers in his area who plan to sell in fewer than five years that they run significant risk of selling at a loss. “We’re at the top of the market,” he says. “They might be better off as renters.”

By:       AnnaMaria Andriotis – Builder Online –    May 2, 2014 6:17 p.m. ET


Home Building Is Back

The latest Builder 100 data shows the country’s biggest builders have more than rebounded from the recession.


BUILDER’s premier list of the top 100 builders in the country, the BUILDER 100, is set to be released next week. In light of that, we are counting down each day with some facts and figures gleaned from the data. 

Based on the results of the Builder 100 survey data, it appears the country’s largest builders have not only weathered the recession, they are stronger and more profitable than ever. In 2013, the top 100 builders in the country had a combined gross revenue of $64 billion, a 25 percent increase from 2012’s $51 billion.

The growth is a welcome sign from the stagnant years of 2010 to 2011, which held fast at $42 billion and $41 billion, respectively.


By  w/ Builder Online Magazine

When Will the Kids Leave?

Why are household formations so low?  Because 1.2 million more adults live with their parents than just 8 years ago!

Nearly 4% of US households had an oldest child aged 25–34 living at home in 2012. Compare this to 2006, when approximately 3% of households fit this category.


While the jump from 3% to 4% may seem small, the net result of this shift is 1.2 million additional households with an adult child in this age group. And it isn’t just confined to those under 35. The share of US households with an oldest child aged 35 or older living at home is approximately 3% and has been rising as well.

This major demographic shift is creating a lot of pent-up demand that someday will be unleashed. Most of these young adults will rent first, except for those who have taken this time living with mom and dad to save up for a down payment. As we showed previously, today’s young adults have achieved homeownership at a lower rate than their parents at the same age, and we believe that they will continue to do so for some time.


Author:  by Chris Porter w/ John Burns Real Estate Consulting

Scarce Lots Make Builder Haves and Have-Nots

A lone carpenter carries plywood flooring at a building site of Mid-Atlantic Builders' 'The Villages of Savannah' in Brandywine, Maryland May 31, 2013. REUTERS/Gary Cameron

A resurgent U.S. housing market has created an unforeseen land shortage that could take the shine off an otherwise promising year for homebuilders.

To keep up with demand, builders who neglected to buy land during the downturn must now pay top dollar for prized city-center locations. Their profit margins are likely to be squeezed this year, even as house prices rise.

“Builders waited so long to buy land that, when the recovery happened, it was very strong and they got caught short,” said Tobias Welo, a portfolio manager at Fidelity Investments.

The quickest solution for the big players, according to some analysts and fund managers, will be to snap up small, privately owned builders facing the opposite problem: plenty of land but limited access to bank finance.

The Dow Jones U.S. Home Construction index .DJUSHB has regained much of the ground lost in the second half of 2013, when rising mortgage rates and wider economic uncertainty broke an 18-month winning streak for homebuilder stocks.

With anecdotal evidence from homebuilders and mortgage brokers suggesting a pick-up in demand for residential housing, analysts are forecasting an average 18 percent jump in the value of the leading U.S. homebuilders this year, according to Thomson Reuters data.

The average forecast covers D.R. Horton Inc (DHI.N), PulteGroup Inc (PHM.N), Lennar Corp (LEN.N), KB Home (KBH.N) and Toll Brothers Inc (TOL.N).

David Crowe, chief economist at the National Association of Home Builders, expects new home construction in the United States to rise by about 25 percent this year, up from 18 percent last year.

But his forecast is conditional on homebuilders buying enough land in sought-after urban areas. If they don’t, he said, the rate of increase could be half his original estimate.

James Krapfel, analyst at Morningstar Inc, forecast new home construction growth at 16 percent this year – a slower rate than last year – due in part to the shortage of developed land.

Not everyone is affected equally. Lennar, the third-largest U.S. homebuilder, and Toll Brothers, the biggest luxury builder, bulked up their land banks with a string of low-cost land acquisitions during the 2008-2010 economic downturn.

Toll Brothers has accumulated a bigger land bank than most – enough to last more than 12 years, compared with an average 7.4 years for the top five U.S. homebuilders, according to data published by Tri Pointe Homes Inc (TPH.N) in November.

Less acquisitive during the downturn, D.R. Horton, the largest U.S. homebuilder, and PulteGroup, its nearest peer, are more likely to feel the shortage, analysts said.

PulteGroup has land supply to last about seven years, the data from Tri Pointe showed.

D.R. Horton and PulteGroup did not respond to requests for comment for this article.


GRAPHIC: U.S. land financing

GRAPHIC: Construction spending



To date, homebuilders have turned the land shortage to their advantage. It has even helped them to raise prices as Americans adjust to higher mortgage rates in a stabilizing economy.

For D.R. Horton, the three-month period ended December 31 was its most profitable first quarter since 2006. Its average sales price rose 10 percent to $275,600, with a “very strong” spring selling season yet to come.

In the same quarter, PulteGroup’s revenue growth was driven by a 13 percent increase in its average sales price, even as the company slowed the pace of new-home building.

But time is running out for ambitious homebuilders short of land, who must typically spend between two and five years readying raw land for development. Land near city centers, known in the industry as ‘A’ lots, is especially hard to come by.

“The run-up in land prices has been huge. What someone paid for land last year may not even work today,” said Scott Laurie, chief executive of privately owned Californian builder Olson Homes, which plans to spend at least 25 percent more on land purchases in 2014 than last year.

Acquiring smaller, private companies with a foothold in urban locations could be the quickest way for big homebuilders to grow their land banks – and the feeling could be mutual.

Private companies have found it more difficult to secure financing since the crisis: U.S. land development financing totaled around $210 billion in the fourth quarter last year, only a third of the level in early 2008, data from the Federal Deposit Insurance Corp showed. (

Ryland Group Inc (RYL.N) has said it wants to buy homebuilders that would add to its land bank, having already acquired Lionsgate Homes in Dallas, which gave it access to 885 developed lots and homes. (

Tri Pointe and Toll Brothers also announced deals late last year that gave them access to developed lots in California.

“The attractiveness of a private builder to a public builder is its land position,” said Hollis Greenlaw, chief executive of United Development Funding, which manages funds holding more than $1 billion for investment in homes.

“They don’t need any more homebuilding talent. What they want is those land positions.”

Article: By Sagarika Jaisinghani

(Editing by Mathew Veedon and Robin Paxton)

Atlanta Still One of Most Affordable Locations to Buy Home

The chart below breaks down affordability across most of the largest cities in the U.S. We’ve indicated the percentage of homes currently on the market that are affordable for each city and occupation, based on BLS salary information. Blue means there are more affordable homes, while red means there are fewer. Not surprisingly, a doctor’s salary can afford most homes in most cities, while one median salary can afford very few homes in any city.


While the overall picture is not great for housing affordability, there are exceptions. More affordable places are scattered throughout the country, although generally not on the coasts. Two middle-class incomes can afford a decent share of homes in Hartford (78%), Richmond (71%), Philadelphia (61%), Atlanta (59%), Minneapolis (56%) and Raleigh (55%).


Source:  Redfin Research Center – Tommy Unger – April 3, 2014

Pending home sales down 10.5% from February 2013

Down 0.8% from January as investor sales dry up


Pending home sales fell for the eighth straight month, down 0.8% from the downwardly revised January report and down 10.5% from February 2013, according to the index from the National Association of Realtors.

NAR’s pending sales index is an indicator of closings that usually happen within three months.

“Contract signings for the past three months have been little changed, implying the market appears to be stabilizing,” said Lawrence Yun, chief economist for NAR. “Moreover, buyer traffic information from our monthly Realtor survey shows a modest turnaround, and some weather delayed transactions should close in the spring.”

Existing home sales have been down since September 2013, with buyers facing the challenges of an increasing affordability gap as investors have driven up prices and lending requirements have tightened.

“Upon first glance, it may seem high that a quarter of all ZipRealty home sales closed without financing in 2012 and 2013,” said ZipRealty CEO and president Lanny Baker. “But based on our own internal analysis and data from the National Association of Realtors, the percentage of all-cash real estate transactions may actually be moderating. Nationwide, the percentage of all-cash real estate transactions reached a five-year high in 2010 at 27%, and the percentage of all-cash property sales has slowly declined or flattened every subsequent year.”

All-cash transactions accounted for 20% of the residential real estate market in 2009, and 25.6% of the market in 2011, NAR reports.

According to ZipRealty’s analysis, in 2013 26% of all the real estate transactions closed by ZipRealty agents were purchased with cash, while 25% of the homes purchased through ZipRealty agents were acquired with cash.

Mortgage applications dropped 3.5% from one week earlier, according to data from the Mortgage Bankers Association’s weekly applications survey for the week ending March 21, 2014. Refinance applications dropped 8%. This is the second week in a row for declines after a spike of almost 10%. Apps fell last week 1.2% but were revised upward to 0.2%.

Regionally, the pending home sales index fell 2.4% in the Northeast month-to-month and is 7.4% below a year ago. In the Midwest the index rose 2.8%, but is 8.5% lower than February 2013.

Pending home sales in the South fell 4%, and are 9.3% below a year ago – in this the largest housing market. The index in the West increased 2.3%, but is 16.5% below February 2013.

Credit:  Trey Garrison with; March 27, 2014