Sales Of New U.S. Homes Increased In May To Two-Year High

This “sounds like” good news about the residential housing market and much of what’s pointed to in this article runs contrary to the comments I made in a post on the blog yesterday.

Sales Of New U.S. Homes Increased In May To Two-Year High

By Lorraine Woellert - Jun 25, 2012 10:17 AM ET

Demand for new U.S. homes rose more than forecast in May as mortgage rates dropped, bolstering the residential real-estate market while other parts of the world’s largest economy cool.

Purchases climbed to a 369,000 annual rate, up 7.6 percent from the prior month and the most since April 2010, the Commerce Department reported today in Washington. The median estimate in a Bloomberg News survey of 67 economists was 347,000. The months’ supply dropped to the lowest in more than six years.

Falling borrowing costs and more affordable properties may keep luring buyers, even as a cooling job market and limited access to credit restrain the recovery. In a bid to reduce unemployment, sustain housing and prevent a global slowdown from stalling the expansion, the Federal Reserve last week extended a program to keep long-term interest rates low.

“It’s another sign of life in the housing sector,” said Brian Jones, a senior U.S. economist for Societe Generale SA in New York, who forecast a gain to 362,000. “It’s consistent with a gradual improvement in activity, but we’ve got miles to go before we get back to normal.”

Stocks held earlier losses after the report amid concern that a meeting of European leaders later this week will fail to help contain the region’s debt crisis. The Standard & Poor’s 500 Index dropped 1.5 percent to 1,315.07 at 10:16 a.m. in New York.

Bloomberg survey estimates for new-home sales, which are counted when contracts are signed, ranged from 327,000 to 375,000. The April reading was unrevised at the previously estimated 343,000, while March and February were revised up.

Prices Rise

The median sales price increased 5.6 percent from the same month last year, to $234,500, today’s report showed.

Purchases rose in two of four U.S. regions last month, led by a 37 percent jump in the Northeast, while the South climbed 13 percent. Demand dropped 11 percent in the Midwest and 3.5 percent in the West.

The number of newly constructed houses on the market edged up to 145,000 from a record low of 144,000 reached in April and March. The record high of 572,000 was reached in July 2006. The supply of new houses on the market at the current sales pace dropped to 4.7 months’, the lowest since October 2005, from 5 months in April.

In response to improving demand, builders broke ground on 516,000 single-family houses last month at an annual pace, up 3.2 percent from April and the most this year, the Commerce Department reported last week.

Gaining Confidence

The Washington-based National Association of Home Builders/Wells Fargo sentiment index rose by 1 point this month to 29, the highest since May 2007, another report last week showed.

United Technologies Corp. (UTX) and Lennox International Inc. (LII), makers of heating and air conditioning units, are among companies benefitting from developers’ positive outlook. Lennox, based in Richardson, Texas, had a 40 percent increase in sales to new-home builders in the first quarter. United Technologies, in Hartford, Connecticut, forecasts about 700,000 housing starts this year, Chief Financial Officer Gregory Hayes said.

“The expectation is we’re not going to see a huge recovery in the U.S. residential marketplace, but we should see a steady recovery,” Hayes said at a June 14 conference. “Residential is coming back, but it’s very, very slow.”

The stabilization in housing has boosted builder shares this year. The Standard & Poor’s Supercomposite Homebuilder Index has climbed 33 percent this year through June 22, compared with a 6.2 percent gain for the broader S&P 500.

Builders’ Contribution

Residential construction hasn’t contributed to economic growth over the course of an entire year since 2005, when it accounted for 0.4 percentage point of the 3.1 percent increase in gross domestic product. From 2006 through 2009, the homebuilding slump subtracted 0.8 percent point from growth on average. The declines diminished over the past two years.

Newly constructed houses made up 6.7 percent of the residential market last year, down from a high of 15 percent during the boom of the past decade.

Sales of existing homes declined in May as fewer distressed properties reached the market, the National Association of Realtors reported last week. The decline in transactions involving foreclosures and short sales, where a lender agrees to accept less than the balance of the mortgage, helped push the median price of a previously owned house up 7.9 percent from the same time last year, the biggest 12-month gain since February 2006.

Less competition from existing houses and even lower mortgage rates may keep spurring the market. The average rate on a 30-year fixed loan dropped to 3.66 percent last week, the lowest in data going back to 1972, according to Freddie Mac.

The central bank last week aimed to keep borrowing costs low.

Policy makers announced they will expand the Operation Twist program to extend the maturities of assets on its balance sheet. They said they stood ready to take further action to put unemployed Americans back to work. Fed officials also lowered their outlook for growth and employment.

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

US home sales slipped 1.5 percent in May and Rate on 30-year mortgage falls to record low

This post contains two different articles, but, to me, the articles are very much related to each other.

Early on, not long after I began Reprographics 101, I put forth the opinion that a decline in the housing market (“residential” design / development and construction the housing market) would eventually lead to problems in the commercial (“non-res”) market, and, sadly, that did happen …. leading to a recession (I still refer to it as a “depression”) in the “overall” A/E/C Industry and, of course, that had a very negative impact on firms involved in the reprographics industry. I’ve said before, and I’ll say it again, I don’t think our economy, overall, is going to fully recover unless and until the “housing market” first bottoms out, and I don’t think that we’ve yet bottomed out. And, I say that because of two reasons; #1 – there are still huge numbers of families underwater on their mortgages; there will be another wave of foreclosures, #2 – banks (and others who hold mortgages) have not yet written down (admitted) all of their problem loans. Add to that the fact that getting a loan is now much more difficult than it used to be (and I would add, more difficult than it should be), so even people who have decent credit aren’t finding it easy, or going to find it easy, to mortgages. Rates on mortgages are now at an all-time-low, but that’s because demand for mortgages must also be at an all-time-low.

In my view, we have two choices: (a) continue to let these problems linger, and, if we do that, the recession in the “residential” construction industry may endure for three, four or five more years, or (b) convince the banking industry to very quickly to complete all foreclosures and move quickly to sell all REO properties at whatever prices those properties will bring, even if that means more hits to bank balance sheets. The sooner we get to the bottom, the sooner a real recovery can begin to take shape. Our country's unemployment numbers don't have any chance of significantly improving until the housing market (and all of the business related to that market) begin to improve.

There were two or three articles in the NY Times yesterday (Sunday), in the business section, about mortgages and our anemic economic growth, and I’d encourage you to pick up a copy of yesterday’s Times. The articles that appear below are not from the NY Times, they are articles I found on-line.

1st ARTICLE:

US home sales slipped 1.5 percent in May

Published June 21, 2012, by Associated Press

WASHINGTON – Americans bought fewer homes in May than April, suggesting a sluggish job market could threaten a modest recovery in housing.

The National Association of Realtors said Thursday that sales of previously occupied homes dropped 1.5 percent in May from the previous month to a seasonally adjusted annual rate of 4.55 million.

Sales have risen 9.6 percent from a year ago, evidence that home sales are slowly improving. Still, the pace has fallen since nearly touching a two-year high in April and it remains well below the 6 million that economists consider healthy.

The monthly decline follows a report that employers added the fewest jobs in May in a year. Weaker hiring has slowed the broader economy and could lead some to reconsider buying a home, even with record-low mortgage rates.

"Not a surprise that existing home sales took a step back in May," said Jennifer Lee, a senior economist at BMO Capital Markets. Lee noted that the level of home sales is still "descent." But she said "softening job growth could slow the housing recovery."

First-time buyers, who are critical to a recovery, made up just 34 percent of sales in May. That's down slightly from 35 percent in April. In healthy market, the number is more than 40 percent.

One positive sign: The supply of homes for sale remains low. The inventory of unsold home in May was just 2.49 million, roughly the same level as April. It would take little more than six months to exhaust the supply at the current sales pace, a ratio last seen in 2006 when the housing market was booming.

A low supply typically encourages more people to put homes up for sale. That generally improves the overall quality of the homes on the market, which drives prices higher.

The median price for a home sold in May was $182,600, up 5.1 percent from $173,700 in April. It was the highest median price since June 2010 — when sales benefited from a federal home-buying tax credit.

Home sales neared a two-year high in April, adding to other signs of modest improvement in the industry nearly five years after the housing bubble burst.

Builders are more confident and are starting to build more homes. The government reported Tuesday that builders started work on more single-family homes in May and requested the most permits to build homes and apartments in 3 and a half years.

Sales rose 1 percent in the Midwest, the only region to show an increase. Sales fell 4.8 percent in the Northeast, 3.4 percent in the West and 0.6 percent in the South.

2nd ARTICLE:

Rate on 30-year mortgage falls to record low

By Marcy Gordon, Associated Press (also published on June 21^st)

WASHINGTON – The average rate on a 30-year fixed mortgage fell this week to a record low for the seventh time in eight weeks.

Cheap mortgages have helped drive a modest recovery in the weak housing market this year.

Mortgage buyer Freddie Mac said Thursday that the average on the 30-year loan dropped to 3.66% from 3.71% last week. It's the lowest rate since long-term mortgages began in the 1950s.

The average rate on the 15-year mortgage, a popular refinancing option, declined to 2.95%. That's down from 2.98% last week and just above the record 2.94% of two weeks ago.

The rate on the 30-year loan has been below 4 % since December.

Low rates could provide some help to the economy if more people refinance. When people refinance at lower rates, they pay less on their loans and have more money to spend.

Still, the pace of home sales remains well below healthy levels. Sales of previously occupied homes dipped in May to a seasonally adjusted annual rate of 4.55 million, although they are up from the same month last year.

Many people are still having difficulty qualifying for home loans or can't afford larger down payments required by banks. Some would-be home buyers are holding off because they fear that home prices could keep falling.

Mortgage rates have been dropping because they tend to track the yield on the 10-year Treasury note. Uncertainty about how Europe will resolve its debt crisis has led investors to buy more Treasury securities, which are considered safe investments. As demand for Treasurys increase, the yield falls.

And the yield will likely fall even lower now that the Federal Reserve has said it will continue selling short-term Treasury securities and using the proceeds to buy longer-term Treasurys. That goal of the program is to drive long-term interest rates lower to encourage more borrowing and spending.

To calculate average rates, Freddie Mac surveys lenders across the country Monday through Wednesday each week.

The average does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount.

The average fee for 30-year loans was 0.7 point, unchanged from last week. The fee for 15-year loans was 0.6 point, down from 0.7.

The average rate on one-year adjustable rate mortgages fell to 2.74% from 2.78% last week. The fee for one-year adjustable rate loans was unchanged at 0.5 point.

Swiss manufacturer of large-format print finishing systems goes bankrupt

Today, I received an e-mail - from one of my European reprographer friends –to inform me of the bankruptcy (and, it looks like, closing) of a Swiss company that manufactures and sells “large-format” print finishing equipment (folders, stackers, etc.)

There’s always the chance that you, or your friends in the industry, have previously purchased, or have been considering the purchase of, equipment from this company, so I wanted to bring this news to all reprographers, wherever they may be located.

Here’s a link to the company’s web-site:

http://www.bay.ch

Here’s a link to photos of the equipment this company has been manufacturing:

https://docs.google.com/open?id=0B81al4kFAU9JQTRxbk5EbXFVdWM

First article about this: - in German

Firma Bay AG Subingen im Konkurs

Die Solothurner Firma Bay AG mit Sitz in Subingen geht in Konkurs. Das zuständige Amtsgericht bestätigt eine Meldung der Solothurner Zeitung. Alle 14 Angestellten der Firma verlieren ihre Stelle.

Die Firma Bay AG aus dem solothurnischen Subingen hat die Bilanz deponiert und Konkurs angemeldet. Alle 14 Angestellten der Firma verlieren ihre Stelle. Die Firma hat praktisch alle ihre Produkte exportiert. Aufgrund des starken Frankens sei die Firma nicht mehr konkurrenzfähig gewesen, schreibt die Solothurner Zeitung. Die Bay AG produzierte Papier-Falz-Maschinen.

First article - translated into English, using Google Translate:

Bay Company Ltd Subingen in bankruptcy

The Solothurn Bay Company Ltd, based in Subingen goes bankrupt. The local court confirmed a report in the newspaper Solothurn. All 14 employees of the company to lose their jobs.

The Bay Company AG in Solothurn Subingen has deposited the balance sheet and filed for bankruptcy. All 14 employees of the company to lose their jobs. The company has exported virtually all of their products. Due to the strong Swiss franc, the company had not been competitive, writes the newspaper Solothurn. The Bay AG produced paper-folding machines.

- - - - - - - - -

Second article about this: - in German

14 Beschäftigte der KMU-Firma O. Bay AG in Subingen verlieren den Job

Die O. Bay AG, Herstellerin von Papierfalzmaschinen, aus Subingen, hat am Donnerstag den Betrieb eingestellt. 14 Beschäftigte verlieren die Arbeitsstelle. Inhaber Christian Bay begründet die Schliessung mit dem starken Franken und der Euro-Konkurrenz von Andreas Kaufmann

Die Ankündigung kam zwar nicht aus heiterem Himmel, tränenreich und überraschend war sie dennoch für die Angestellten der Bay AG in Subingen: Am Donnerstagmorgen musste Inhaber Christian Bay der 14-köpfigen Belegschaft (12,5 Vollzeitstellen) die sofortige Stilllegung des Betriebs mitteilen. Die Bilanz musste deponiert werden.

Druck im Euroraum wurde zu gross

«Seit dem Euro-Einbruch Anfang 2011 haben wir diverse Massnahmen zur Kostensenkung eingeleitet. Aber um den Währungsverlust von 20 Prozent aufzufangen, hat es nicht mehr gereicht», sagt Bay. Als Herstellerin von Papierfalzmaschinen sei man in einem Nischenmarkt mit einem Exportanteil von 99 Prozent tätig. «Im Euroraum sind immer mehr Konkurrenten aufgetreten, womit unser Wettbewerbsvorteil als fast alleiniger Anbieter schleichend wegfiel. Und wenn jemand plötzlich 30 Prozent günstiger anbietet, können wir dem nichts mehr entgegenhalten.»

Auch das Internet trägt Mitschuld

Zudem habe im Zeitalter des Internet die Notwendigkeit von Papier als Träger und Transportmittel massgeblich an Bedeutung verloren, fügt er als weiteren Grund für den Niedergang an. Damit geht in Subingen ein KMU zugrunde, das 1953 von Christian Bays Vater Otto Bay gegründet worden war. Um die Frage zu beantworten, was mit der Firmenliegenschaft geschehen soll, ist der Zeitpunkt für Bay noch zu früh.

Familiäres Team hat bis zum Ende gekämpft

Soziale Auffangmassnahmen für die nun arbeitslose Belegschaft wird es keine geben. So gibt Bay auf Anfrage bekannt: «Das ist in einem so kleinen Betrieb gar nicht möglich.» Allerdings betont er, dass man als familiäres Team zusammengespannt habe, um den wirtschaftlichen Schwierigkeiten zu begegnen. «Ich habe mitgekämpft und mitgelitten», so der Geschäftsinhaber, der nun ebenfalls von einem Tag auf den anderen arbeitslos geworden sei. «Letztlich wären wir ohne den Wechselkurseinbruch auf gutem Weg gewesen», so sein Fazit. Schliesslich habe man lange in ein exzellentes Produkt investiert.

Probleme bei Lohnzahlungen

Schwierigkeiten bei der O. Bay AG scheinen sich schon länger abgezeichnet zu haben, wie auch die Schilderungen einer bei der Firma tätigen Person nahelegen: «Seit zwei Jahren wurde der Lohn nicht mehr pünktlich ausgezahlt», erinnert sie sich. Zuguterletzt habe die Belegschaft die Geschäftsleitung auch mit der Möglichkeit einer Betreibung und Arbeitsniederlegung konfrontieren müssen. Nun ist es ironischerweise zwangsläufig dazu gekommen. Doch auch in der Mitarbeiterschaft ortete man den Grund in der Euroschwäche. Bay selbst hat sich nach eigenen Angaben nicht davor gescheut, seinen eigenen Lohn zu kürzen: «Wir haben hier keine Teppichetage, die einfach nur absahnt.»

«Subingen verliert Perle»

Aus Sicht von Subingens Gemeindepräsident Hans Ruedi Ingold geht der Gemeinde mit der Firmenschliessung «eine Perle verloren, die gute Produkte hergestellt hat». Damit falle nicht nur ein Steuerzahler weg, sondern - noch wichtiger - ein Arbeitgeber: «Für ein Dorf wie Subingen mit rund 3000 Einwohnern sind 14 Arbeitsplätze nicht bedeutungslos.»

Second article - translated into English, using Google Translate:

14 employees of the SME company O. Bay AG Subingen lose your job

The O. Bay Ltd., a manufacturer of Papierfalzmaschinen from Subingen, has ceased operations on Thursday. 14 employees lose their jobs. Owner Christian Bay due to the closure of the strong franc and the euro-competition

Article by Andreas Kaufmann, reporting for http://www.solothurnerzeitung.ch

The announcement came not out of the blue, tearful and surprisingly it was still for the employees of Bay AG Subingen: report on Thursday morning had to owner Christian Bay, the 14-member staff (12.5 FTEs) for the immediate cessation of operations. The balance had to be dumped.

Pressures in the euro area was too large

"Since the early 2011 € intrusion, we have initiated various measures to cut costs. But in order to absorb the currency has lost 20 percent, "it is no longer enough, says Bay. As a manufacturer of Papierfalzmaschinen it was operating in a niche market with an export share of 99 percent. "In the euro zone have occurred more and more competitors, making us a competitive edge gradually fell away as almost the sole provider. And when someone suddenly 30 percent cheaper offers, we may argue, however nothing more. "

The Internet also bears the blame

Moreover, in the era of the Internet have the need for paper as a carrier and transport lost significantly more important, he adds that another reason for the decline. This is based in Subingen an SME, which was founded in 1953 by Christian Bay Bay's father, Otto. To answer the question of what to do with the company's property, the date for Bay is still too early.

A family team fought until the end

Social safety measures for the unemployed workers now there will be none. So there known Bay on request:. "This is not possible in such a small operation" However, he stressed that they had as a family team eager to face the economic difficulties. "I have fought and pitied," said the shop owner, who is now also a day to the unemployed. "Ultimately, we would be without the exchange rate collapse was well under way," he concluded. Finally, we have long invested in an excellent product.

Problems with wage payments

Difficulties in O. Bay Ltd seem to have signed off for some time, as well as the descriptions suggest a person working at the company: "For two years, the wage is no longer paid on time," she recalls. Last but not least, the workforce and the management with the possibility of prosecution and work stoppage had to confront. Now, ironically, is inevitably to come. But even in the workforce is pinpointed the reason for the euro weakness. Bay itself has not spared claims to be about to cut his own salary, "We have no carpets days that just skims."

"Subingen lost pearl"

From the perspective of Subingens mayor of the municipality Hansruedi Ingold goes with the business closing "a pearl lost, has made good products." This fall off is not just a tax payer, but - more importantly - an employer: "For a town with 3,000 inhabitants as Subingen 14 workstations are not meaningless."

Kevin Cully leaving AIR Graphics (Boston/Quincy MA)

Press Release: June 20, 2012

Longtime Business Executive leaving AIR Graphics

Boston MA – AIR Graphics co founder and long time Boston business executive Kevin Cully has announced that he will be stepping away from day to day operations effective June 30, 2012. Kevin will remain a shareholder and on the governing board. Mr. Cully has been Executive Vice President since 1987 with responsibility for business development and emerging new products and services.

Mr. Cully cofounded the multiple location reprographic and digital services firm in 1987 and has been instrumental in growing the company to multiple locations in Massachusetts and Maine. AIR Graphics is a digitally based print provider, delivering high quality & quick turn-around. Services include color digital print, wide-format presentation graphics, Managed Print Services (MPS), CADD plotting and equipment.

AIR Graphics operations will continue under the leadership of fellow co founders Mike Cully and Kevin O’Neill.

1-800-734-3373

www.airgraphics.com