Continuing our focus on the multifamily segment in advance of the Multifamily Executive Leadership Conference in March, this week our data feature looks at metropolitan areas across the country that recorded the most attached home closings nominally last year and compare them to the results in 2009.  According to data from Housing IntelligencePro, the New York MSA recorded the most attached home closings in 2010, but was off 13% from 2009.  Miami ranked #4, surpassing Los Angeles, and was the only metro area in the top 8 that saw a year-over-year gain in Attached Closings.  While the Miami housing market has experienced more than its fair share of pain through the housing downturn and undoubtedly has plenty of ground left to make up, the turn-about in volume in 2010 is noteworthy.  Other 2010 ranking trends include Seattle falling out of the top 8, and Philadelphia and Baltimore both leapfrogging San Francisco.

The first housing-related data releases for 2011 months showed that construction activity picked up a bit in January.  The increase in construction activity was fueled by a jump in the multi-family segment while single-family housing starts declined slightly.  However, building permit activity in January posted a significant pullback which suggests that construction activity in the coming months may slow.  Rising mortgage rates over the past several weeks along with higher fuel prices at the pump are stifling housing demand.  The Mortgage Banker’s Association’s Purchase Index has recorded declines in six out of the past seven weeks which suggests that sales activity has been weak.

The Treasury Department laid out preliminary plans to reduce dependency on the government sponsored enterprises which will likely increase mortgage costs for homebuyers over the longer term.  There were 3 long-term options that were set forth along with one short-term option that could take effect as early as April 18.  This new recommendation from the Treasury may cause borrowing costs on FHA loans to increase by about $30/month.  The longer term options will likely take years to implement, and are not expected to immediately impact the fragile housing market any time soon.

In broader economic news, increases in both producer and consumer prices last month increased concerns over inflation that rising food and energy costs may spill over into other segments of the economy.  The national retail price of gasoline is now at its highest levels since October 2008.  Higher prices at the pump may push up the price of good and services for the overall economy while negatively impacting discretionary consumer spending.  Leading economic indicators rose slightly in January which suggests that the economy will continue to grow albeit at a slower and more gradual pace.

The Economy
The Leading Economic Indicator index increased slightly to a reading of 112.3 in January which is a 0.10 point increase from December levels.  The index is up 3.30 points from its levels six months ago when it stood at 109.0 in July.  This is the seventh consecutive month that the leading index has increased.  Gains this month were fueled by increases in vendor performance, stock prices, consumer expectations, and manufacturers' orders for capital goods.  Six out of the ten components experienced monthly gains while seven out of the ten components were higher than they were six months ago.

The Consumer Price Index increased in January due to significant increases in energy, transportation, apparel, and food costs.  Headline consumer prices increased 0.4% from the previous month on a seasonally-adjusted basis while core consumer prices, which exclude food and energy prices, increased 0.2%.  On an unadjusted basis, headline CPI increased 1.6% from its year ago levels while core CPI increased 1.0% year-over-year in January.  This is the largest annual increase for any month in headline consumer prices since May 2010 and the largest annual increase in core consumer prices for any month since March 2010.

First-time unemployment claims increased by 25,000 to a seasonally-adjusted 410,000 in the week ended February 12th.  After reaching their lowest levels since July 2008 in the previous week, initial jobless claims increased back above the key 400,000 mark this past week.  Many are invalidating last week’s decline due to inclement weather conditions around various regions of the country.  However, the trend for first-time unemployment claims remains gradually downward-sloping, which shows that labor market conditions are still steadily improving albeit not nearly at the pace required to get the economy into full recovery mode.

Housing Market
U.S. housing starts reported a higher-than-expected increase in January which is a positive sign for the housing market to begin the year.  Total housing starts jumped 14.6% from December levels to a seasonally-adjusted annual rate of 596,000 units in January.  This is the highest annual rate of construction activity recorded since September.  The gain in housing starts was fueled by a surge in activity in the multi-family segment.  Single-family housing starts eased 1.0% from the previous month to a seasonally-adjusted rate of 413,000 units while multi-family housing starts jumped almost 78% from the previous month to a seasonally-adjusted annual pace of 183,000 units.

Building permits, however, experienced a noticeable decline in January which suggests that construction activity in the coming months will slow.  Total permit activity fell 10.4% from December levels to a seasonally-adjusted annual rate of 562,000 units.  Both the single and multi-family segments experienced declines.  Single-family building permits fell 4.8% from the previous month to a seasonally-adjusted annual rate of 421,000 units while multi-family building permits dropped almost 24% from December to a seasonally-adjusted annual rate of 141,000 units.

National average mortgage rates declined from the previous week to 5.00% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on February 17th.  This is the first week that average rates have recorded a decline in the past five weeks.  After averaging under 5.0% for 39 consecutive weeks, the 30-year fixed rate mortgage has now remained at or above the 5.0% level for the second straight week.

In the week ending February 11th, the MBA’s seasonally-adjusted purchase index declined 5.91% from the previous week and was down 17.52% compared to the same time last year.  This is the second straight week that the purchase index has declined.  The purchase index has posted declines in six out of the past seven weeks.  Rising mortgage rates have weighed on mortgage application activity over the past several weeks.

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