More Optimistic While March housing data showed that the sales environment for both new and existing home were still quite sluggish, the small increase in housing starts along with a rebound in building permits may suggest that the worst of this housing downturn may be behind us. While it would be premature to declare the bottom reached, April's permits and starts data are positive signs that the market may have finally started to stabilize. Total housing starts have now posted monthly increases in three of the last four months. April was also the first month in over a year which single-family permits posted a monthly gain. We can see the fundamental changes taking place as affordability for housing is the highest it has been in years. Ideally this will be enough to drag any hesitant buyers off the sidelines.

The mood on Wall St. continued to be relatively upbeat. Economic reports showing an improvement in the housing market, contained inflation, and steady economic growth in the near-term has kept buyers active during the past couple of weeks. Crude prices also continued to surge, recently reaching new highs at nearly $128/barrel. Although recent data has caused some enthusiasm in the market, increasing food and energy prices remain a huge inflation concern. Rising prices will also crimp the ability of the U.S. consumer to spend which will continue to drag on economic growth.

The Economy Leading indicators in April increased slightly for the second straight month. The leading index now stands at 102.0, up from a March figure of 101.90. While the slight increase in the leading index in April suggests slow growth, it is positive because it hints that further weakness in the economy may not occur. The continued decline in the index for consumer expectations remains a concern, although the rebound in building permits was a positive sign for both the economy and the housing market.

Total housing starts jumped 8.2% from March levels while building permits increased 4.9% giving hope that the worst in the housing markets may be over. Multi-family starts contributed to April's gains while single-family starts continued to decline. Single-family starts posted a 1.7% decline from the previous month. Both single and multi-family permit activity picked up in April with multi-family permits increasing 6.8% while single-family permits gained 4.0% from the previous month.

April's consumer inflation data continued to show relatively tame upward price pressures in the face of rocketing food prices and record high crude prices. Headline CPI increased 3.9% from its year ago levels while core CPI increased 2.3% year-over-year in April. While both core and headline consumer inflation remain at relatively comfortable levels based on the April report, there still remains the risk that higher food and energy prices will eventually seep through into the overall economy.

Housing Market National average mortgage rates declined slightly to 6.01% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on May 15th. This was the second straight week that average rates have posted slight weekly declines. In the week ending May 9th, the MBA's seasonally-adjusted Purchase Index declined to 378.5 after rebounding to 381.3 in the previous week. Purchase applications have posted a weekly decline in four out of the past five weeks. The latest figure reflects a 0.73 percent decline from last week and a 12.45 percent drop from the same period last year.

Sales activity in March pointed to further declines in the housing market as both new and existing home sales posted drops from the previous month's pace. New home sales plunged 8.5% in March to a seasonally-adjusted 526,000 homes, down from a revised February figure of 575,000. This is the fifth straight month that new home sales have posted declines while sales for the previous three months were revised lower by 10,000 units. New home sales are now at their slowest annual rate since October 1991. At the current sales pace, there are 11.0 months of new homes supply on the market.

The number of new homes for sale continued to decline as builders continue to scale back production. New home inventory declined to 460,000 which is the lowest it has been since July 2005. Weakness in the new homes market caused median new home prices to fall to its lowest levels since September 2006. The median price for a new home dropped 6.8% in March to $227,600. Low mortgage rates and falling new home prices in March have pushed new home affordability to its highest levels since July 2003.

Annualized sales of total existing homes declined 2.0% in March to 4.93 million units. Sales of existing homes are down 19.3% from the 6.11 million units in March 2007. Median existing home prices in March rebounded 2.6% to $200,700 compared to $195,600 in the previous month. Existing home prices were coming off their lowest levels since May 2004 last month. The number of existing homes for sale increased a slight 1.0% to 4.058 million units in March. At the current sales pace, there are 9.9 months of existing homes supply on the market. Existing home affordability declined slightly in March due to increases in both median home prices and mortgage rates.

Market-Level Reports Riverside-San Bernardino--First Quarter Sees Projects Close

At the end of the first quarter there were 748 actively selling projects in the Inland Empire, 24 less since the start of the quarter, and 9 more than the same period as last year. Riverside County had 11 fewer projects while San Bernardino County 13 less active projects during the first quarter. San Bernardino Central and Riverside North West submarket saw the most significant gains in new projects during the quarter, up 1 project, while San Bernardino East had the most significant loss with 6 projects.

Philadelphia--Unsold Inventory Levels Push 4 Years

Total unsold inventory is calculated as the sum of speculative inventory plus future construction in active projects. The Philadelphia Region had 12,018 detached units left to sell in active detached projects at the end of the first quarter of 2008; there was a 46-months supply. Total inventory for the Pennsylvania sector of the market consisted of 6,047 units, a 42 months supply. Southern New Jersey had an inventory of 5,971 units, a 52-months supply.

Orange County--Prices Mostly Decline, Luxury Product Still Moving

The median sales price of single-family homes in Orange County came to $895,995 in the first quarter of 2008, a decrease of 16% from the same period last year. All submarkets posted declines, with the exception of the Coastal North and Inland South submarkets, which posted gains of 21% and 12%, respectively. The Coastal North submarket held the highest detached median sales price in the first quarter at $3,699,990, due to luxury product sold in the community of Newport Coast.

Washington D.C.--Sales Generally Off by Half

During the first quarter of 2008, the total number of new home sales in the Washington, DC market decreased by 50% from the same period in 2007. The first three months of 2008 yielded 2,389 total net sales compared to 4,727 during that time last year. Total net sales dropped by 62% in Washington, 53% in Jefferson, WV, 52% in Virginia, and 44% in Maryland.

Dallas--Regional Prices Stable

The median price of attached homes sold in the region saw a decrease of 1%, dropping from $242,418 in the first quarter of 2007 to $240,990 in the first quarter of 2008. Collin County had the lowest median sales price of $178,740. Dallas County had the highest median sales price for attached homes at $275,847. Tarrant County had the most significant decrease in price from the previous year, decreasing from $333,662 to $242,150, a 28% decrease.

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