Well this morning, I got up at 4:15am to do a live C-Suite interview on Fox Business News at 6:45am. Always fun and I enjoyed meeting Jenna Lee in person after having known her only via telephone when she was a reporter. I must have done ok since they invited me back next friday morning. 😉

Here’s this morning’s clip.

We talked about both housing starts and my appraisal firm, Miller Samuel. I had thought that the April numbers would show further decline. March was the lowest in 17 years and was down by 2/3 from the January ’06 high. Economists surveyed generally thought starts would be down around 1.4%.

Surprisingly, starts were up.

Starts jumped 8.2% but that was due to multi-family starts. Single family starts were actually down 1.7%. Overall starts are down 30.6% from the same time last year.

Bad Stats 101

Check out the Census’ press release quote:

>Privately-owned housing starts in April were at a seasonally adjusted annual rate of 1,032,000. This is 8.2 percent (±14.5%)* above the revised March estimate of 954,000, but is 30.6 percent (±6.7%) below the revised April 2007 rate of 1,487,000.

Translation of up 8.2 percent (±14.5%): Overall housing starts were anywhere from -6.3% to +22.7%. Seems wildly vague, doesn’t it?

>Single-family housing starts in April were at a rate of 692,000; this is 1.7 percent (±11.7%)* below the March figure of 704,000. The April rate for units in buildings with five units or more was 326,000.

Translation of down 1.7 percent (±11.7%): Single-family starts were anywhere from -13.4% to +10%. Seems wildly vague as well.

If you think about it, nothing has really changed since last summer’s credit crunch that would change the direction of the housing market.

* How can we talk about a bottom yet?
* What market force is going to get more people to buy right now?
* What economic force is going to stimulate demand as we approach or are in a recession?

The credit markets are still frozen, mortgage rates have risen, underwriting standards are higher and reduced the buyer power of consumers.

>”The headline increase in starts means nothing; it is all due to a rebound in the hugely volatile, but essentially trendless, multi-family sector,” said Ian Shepherdson of High Frequency Economics.

>Builders have been reluctant to build because demand for new homes has plunged and the supply of unsold property remained high. The latest data show new-home sales, for March, were down 36.6% from a year earlier. On Thursday, the National Association of Home Builders reported its index for sales of new, single-family homes slipped to 19 in May from 20. The gauge is based on a survey of builders asked about prospects for sales.

>”The magnitude of the housing bubble was unprecedented, and the corrective process promises to be a long and painful one,” MFR Inc. Joshua Shapiro said of the NAHB data. “Hence, it is hardly surprising that builder sentiment is still languishing very near its all-time low.”

As far as Miller Samuel (my appraisal firm) goes, we have been booming since February. Fox Business inadvertently inserted a text banner during my interview that referred to our now defunct acquisition by RL from last fall. I had terminated the take-over in March.

Our firm is built for a down housing market because lenders as well as other clients actually want to know what the value is and the nuances of housing markets we cover, rather than only the number needed to make the deal. We did not fare as well as others during the housing boom because of the erosion of underwriting standards and the shift of appraisal work from retail lenders to mortgage brokers.

The current lending environment is encouraging, in a contrarian sort of way, by getting back to basics. Hopefully this will permeate the entire lending process.

The housing boom was tough for appraisers who refused to bow to pressure to push values higher than they should have been and the work was given to those who would.

But the world is changing, and like the IRS, we are here to help…

From the:

Who Cares But
It’s Still Cool

Christine Haughney’s Collateral Foreclosure Damage for Condo Owners in the NYT yesterday that sourced and used us for background, was the most emailed article in the New York Times both yesterday and today. THAT is cool (to me). It was designated to be an A1 story but was bumped for the earthquake in China coverage.


  1. John K May 16, 2008 at 11:30 am

    Let me state the obvious. It’s a good sign to see additional spending at all. So I’m encouraged.

    But, one month does not a trend make, and, of course, we need to see an increase in residential (single-family) housing to actually believe “bottom” has been found.

    I guess I’m just saying what you said. Ha ha!

    Still, I am a bit more optimistic than you are, that things are on the upswing. Actually, not upswing, just a moderation. Maybe I’m putting too much into it, but the fact that we stayed positive in first-quarter GDP (regardless of the reasons!) means we still have strength.

    BTW, Massachusetts’ unemployment dropped last month and our GDP was something like 3.6% (?!). What’s up with that???

  2. Jonathan J. Miller May 16, 2008 at 11:42 am

    Thanks John – great insight. I think because of the seasonality of real estate activity this time of the year, the general outlook tends to be more optimistic than anytime of the year. “Tie goes to the runner”

    I just need to know what economic force is out there that will drive greater demand than we currently have. Buying power is probably down 15 to 20% so we need inventory to fall a lot further to bring more people back into the market.

  3. sean May 16, 2008 at 12:32 pm

    Aren’t month to month figures basically irrelevant? Starts are still down over 30% from April last year, no?

  4. Jonathan J. Miller May 16, 2008 at 12:45 pm

    Thanks Sean. Bingo!

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