MBA – applications up
The Mortgage Bankers Association said its seasonally adjusted index of overall mortgage application activity, which includes both refinancing and home purchase demand, fell 2.7% in the week ended March 23. The MBA’s gauge of loan requests for home purchases rose 3.3%, though the measure of refinancing applications dropped 4.6%. The decline in refinancing was driven by a 12.0% drop in government refinance activity, while conventional applications fell just 3.4%, the report said. The refinance share of total mortgage activity slipped to its lowest level since July of last year at 71.9% of applications from 73.4%. Fixed 30-year mortgage rates jumped to their highest level since November to average 4.23%, up 4 basis points from 4.19%. The survey covers over 75% of US retail residential mortgage applications, according to MBA.
As election nears, Obama considers strategic oil
The United States asked France to join it for a possible emergency oil stock release, the French Energy Minister said yesterday. Asked by reporters after the weekly ministers’ meeting whether France would join a US-UK move to release strategic stocks, Eric Besson said: “It is the United States which has asked and France has welcomed favorably this hypothesis.” Le Monde daily said on Wednesday, citing presidential sources, that France was in contact with Britain and the United States on a possible release of strategic oil stocks “in a matter of weeks” to push fuel prices down. France is in contact with Britain and the United States on a possible release of strategic oil stocks “in a matter of weeks” to push fuel prices down, Le Monde daily said on Wednesday, citing presidential sources. France would join a UK-US cooperation on a release of strategic oil stocks that is expected within months, two British sources said earlier this month, in a bid to prevent fuel prices choking economic growth in a US election year.
Olick – remodeling on a roll
“America’s housing market is still struggling to find solid footing amid millions of delinquent loans and foreclosed properties. But as the wider economy begins to strengthen, and Americans start to feel better about their current and future finances, they are dipping their toes back into the housing waters, in the form of remodeling. ‘Residential remodeling this winter is as strong as it has been in more than five years. We expect residential remodeling to continue to grow throughout 2012,’ says Joe Emison of Texas-based BuildFax, a division of BUILDERRadius and creator of the BuildFax remodeling index. Residential remodeling, as measured by building permits in January, were at an annual rate of, up 13% from December and 11% from a year ago, according to BuildFax. The index shows particular strength in the Midwest and the West.
Sales of foreclosed properties may be helping the numbers, as investors have swarmed the market, buying up distressed properties and turning them into rentals. Many of those properties have been either abandoned or vandalized and need at the very least basic refurbishing and at the most full renovations. Great news for US companies that serve the remodeling market, and of course their stocks. Sherwin Williams, which gets 77% of its revenue from the US market, is trading at an all time high, going back to its IPO in 1964. Home Depot is seeing the best levels since April of 2002, and shares of Lowes are at a high not seen since 2007. Both get all of their revenue from US customers. Others poised to profit: Weyerhaeuser, which takes about 65% of its revenue from US sales and of course US Gypsum, whose shares are up 103% in the last three months, United Rentals, which rents construction equipment, shares up 44% this year, and MASCO, which makes all kinds of building products. This entire sector is exceptionally well placed because it can profit off not only distress in the overall housing market, but improvements in it as well. As homebuyers trickle back in this spring, they will fuel further renovations, and as banks work through distressed loans and sell foreclosures off to investors, there will be ever more housework to be done.”
Supreme Court split along ideological lines
Sharp questioning by the Supreme Court’s conservative justices has cast serious doubt on the survival of the individual insurance requirement at the heart of President Barack Obama’s radical health care plan. Arguments at the high court Tuesday focused on whether the insurance requirement “is a step beyond what our cases allow,” in the words of Justice Anthony Kennedy. He and Chief Justice John Roberts are emerging as the seemingly pivotal votes. Justices Antonin Scalia and Samuel Alito appeared likely to join with Justice Clarence Thomas to vote to strike down the key provision. The four Democratic appointees seemed ready to vote to uphold it. “If the government can do that, what else can it” do? asked Scalia, referring to the individual mandate portion of the Patient Protection and Affordable Care Act. The congressional requirement to buy health care insurance is the linchpin of the law’s aim to get medical insurance to an additional 30 million people, at a reasonable cost to private insurers and state governments. Virtually every American will be affected by the court’s decision on the law’s constitutionality, due this summer in the heat of the presidential and congressional election campaigns.
Scalia, as well as Roberts, Alito and Kennedy, pressed Solicitor General Donald Verrilli on whether people can be forced to buy things like cars, broccoli and burial insurance if the government can make them buy health insurance. Kennedy at one point said that allowing the government mandate would “change the relationship” between the government and its citizens. “Do you not have a heavy burden of justification to show authority under the Constitution” for the individual mandate? asked Kennedy, who is often the swing vote on cases that divide the justices along ideological lines. Scalia repeatedly pointed out that the federal government’s powers are limited by the Constitution, with the rest left to the states and the people. “The argument there is that the people were left to decide whether to buy health insurance,” Scalia said. Scalia and Roberts noted that the health care overhaul law would make people get insurance for things they may not need, like heart transplants or pregnancy services. “You can’t say that everybody is going to participate in substance abuse services,” Roberts said. One demonstrator opposing the law wore a striped prison costume and held a sign, “Obama Care is Putting the US Tax Payer in Debtors Prison.” Rep. Michele Bachmann of Minnesota, a former Republican presidential candidate, joined a tea party press conference of opponents of the law. Calling the law “the greatest expansion of federal power in the history of the country,” she said, “We are calling on the court today: Declare this law unconstitutional.”
Toll CEO optimistic
There are “encouraging” signs the high-end housing market is recovering in many US markets, Toll Brothers CEO Douglas Yearley said yesterday. It’s been the “best spring in five years,” he said. In 2012 “our orders are up significantly and continue to be up significantly. I’m optimistic right now.” He said that “25% of our communities have seen a price increase since Jan 1. That’s encouraging. There are places where we don’t have pricing power (but) we’re not dropping prices. We haven’t dropped prices in over a year.” In New York, Toll has “huge pricing power. We’re raising prices every week,” he said, adding the company is diversifying into the urban high-end high-rise market including properties in parts of New York and Brooklyn and Hoboken. In the corridor between Boston and Washington, D.C., which did not have the overhang from foreclosures and where Toll does 60% of its business, the market is strong, land is hard to find and “we have pricing power in many of those local markets.” Phoenix is hot for housing, having gone from 14 to 16 months of supply down to four or five months. “In the last month, Phoenix is back in a big way,” Yearley said. So is California — both the northern and southern parts of the state — where it’s also hard to find land, he said. The Carolinas, including the Raleigh area, are doing quite well as is the second-home market in Florida, which he said is “beginning to come back and we haven’t seen that in five years.” Texas is booming, but the midwest, as well as parts of Nevada such as Las Vegas and Reno, are not, he said. “We’re bumping along the bottom in certain locations but we’re clearly off the bottom in other locations,” Yearley said.
Gas prices up
The price of an average gallon of regular gas surpassed the $3.90 mark Wednesday, moving to within a dime of the $4 threshold. The average price rose 1.3 cents to $3.911 in the latest daily survey conducted for the motorist group AAA. The price has risen for 19 consecutive days. The current price compares to just below $3.70 a month ago, and just below $3.59 a year ago. Gasoline averages more than $4 a gallon in 10 states and the District of Columbia. At $4.55 a gallon, Hawaii has the nation’s highest pump price. Prices are less than a nickel away from $4 a gallon in Nevada and Wisconsin. Wyoming has the nation’s lowest gas prices, averaging nearly $3.51 a gallon. Gas prices have been rising on the back of soaring oil prices, which shot up in early 2012 amid fears that tensions with Iran could lead to an all-out war that causes a disruption in oil supplies. But the latest Lundberg Survey said gas prices may be peaking, as the price of crude oil has remained relatively steady in March.
WSJ – home prices fall, but at a slower pace
Home prices fell to new lows in January, but the rate of decline appeared to be easing, offering the latest hint that prices may be at or near a bottom. Prices dropped 0.8% in the three-month period that ended in January, according to the Standard & Poor’s/Case-Shiller index that tracks 20 US metro areas. While that lowered the index to levels not seen since the end of 2002, the monthly decline improved from a drop of 1.1% in December and 1.3% in November. House prices tend to weaken during the winter months, when sales activity slows and the share of “distressed” home sales, such as foreclosures, rises. After adjusting for seasonal factors, prices were flat in January compared with December. Compared with one year ago, home prices fell 3.8% in January. That also represented an improvement over the 4.1% year-over-year decline for December.
Yesterday’s report “adds to other evidence that the housing market is on the mend,” said Paul Dales, senior US economist for Capital Economics. “We expect that 2012 will go down in history as the year that the most severe house-price crash on record ended.” Home prices fell to new lows in nine cities, led by Atlanta, which was down 14.8% from a year ago. But three cities posted year-over-year increases: Detroit (1.7%), Phoenix (1.3%) and Denver (0.2%). On a seasonally adjusted basis, half of the 20 markets showed flat or increasing prices in January when compared with December.
Housing markets face significant headwinds. Nearly 11 million homeowners owe more on their mortgages than their houses or apartments are worth, and more than one million homes could sell out of foreclosure this year, putting pressure on prices. Credit standards are tight and show few signs of easing, leaving housing markets with fewer buyers at a time when more will be needed to soak up the excess supply. Any stabilization in home prices, however, could offer a big boost to fragile consumer psychology. “When you ask people why are they in the market right now they tell you, ‘Because home prices have stopped falling in some sickening way,’” said Glenn Kelman, chief executive of Redfin Corp., a Seattle-based brokerage. “They worry they could lose a little bit, but there was a time you really had to close your eyes before signing an offer, and hope you weren’t going to lose 10% of your equity in 12 months.” Inventories of homes for sale are down sharply from one year ago and sales of new and existing homes for the first two months of the year have posted sizable increases compared with one year ago. Most economists anticipate total levels of home construction and sales will increase this year, leaving home prices as the last metric that hasn’t yet reached a bottom.
