07 December 2010
November Market Trends
Houston, TX – Attractive Mortgage Rates and Home Prices Lead to Modest Increase in Buyer Traffic
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Traffic Home Prices
(22,360 single-family permits in 2009, largest market in the country) Traffic rebounds but uncertainty remains. Buyer traffic improved in November from the depths of October, as our traffic index rebounded to 26 from 3, still indicating weak demand (readings below 50 point to traffic levels below agents’ expectations) but at least slight improvement sequentially. This is the highest level since April. While overall comments continued to highlight the challenges in the market, those agents who saw better traffic relative to last month credited the low rates and better prices. One agent noted the better traffic was due to, “end of year deals.” In addition, several agents said better relocation demand helped this month. However, “People still don’t feel comfortable about the economy and spending their money right now – jobs are insecure, savings funds have been jeopardized, and people just feel they need to hold onto their money,” according to one agent.
Incentives
“Appraisals are on the low side.”
Price pressures ease somewhat, but further declines likely. Home prices remained under pressure in November, although the declines appeared less widespread as our home price index improved to 33 from 18 in November (readings below 50 point to lower prices over the past 30 days). However, incentives increased further, as our incentive index fell to 25 in November from 35 in October, with readings below 50 pointing to higher incentives. Inventory levels increased modestly, as our home listings index came in at 41, up from 35 in October but below a neutral reading of 50 (readings below 50 point to higher inventory). Despite the slightly better traffic, our time to sell index fell to 13 in November from 18 in October, with readings below 50 indicating a longer time needed to sell a home. The longer time needed to sell is typically a negative leading indicator for home prices.
Comments from real estate agents:
■ “Lack of job security, too many people are refinancing rather than purchasing.” ■ “Lack of certainty in jobs and the economy.” Meritage, Lennar, and Hovnanian have the most exposure to Houston with approximately 21%, 17%, and 11%, respectively, of their net sales. Exhibit 11: Buyers Attracted by Rates and Good Deals, but Confidence Remains Weak Traffic Levels Versus Expectations
How Do the Recent 30 Days Compare to the Prior 30 Days...
13% 80% 70% 60% 50% 40% 30% 20% 10% 0%
26% 61%
74% 59%
57% 39%
32%
4%
Home Prices More than expected
Meets expectations
Less than expected
Increased
26% 9% 0%
Incentives
Time to Sell
Remained the same
Decreased
Source: Credit Suisse estimates
Monthly Survey of Real Estate Agents
14