5/16/2012
By David Urani, Research Analyst

More from the housing market, as construction starts were up 2.6% in April from March; that included a 2.3% increase in single family units. 717k units were started, which was above the 690k consensus estimate. Single family permits were also up 1.9%. Construction activity still appears to be recovering from the dip we saw earlier in the year, but the good news is that like a couple other housing data points that we've seen, action appears to be back on the rise again in the residential market, if only modestly last month.

Interestingly, even though starts slid a bit in the prior two months, completions of homes were up 10% to 651k. That is the highest amount of completions since June 2010. That's an encouraging sign that home builders are preparing the market for more sales. We've noted among public homebuilders' quarterly reports that the ones who are currently expanding their inventories are enjoying better sales growth and driving profits.

In the meantime, the delinquency rate of mortgages continues to slide, according to MBA. 7.40% of outstanding mortgages were behind on payments in the first quarter, down from 7.58% in the fourth quarter. Fewer and fewer homeowners are going late on payments, as the number of borrowers who have missed just one payment is at the lowest level since mid-2007. That being said, the foreclosure process remains stubbornly slow. The foreclosure rate stood at 7.39%, a slight uptick from 7.38%. Foreclosures continue to be bottlenecked by legal matters, particularly in judicial states which are seeing foreclosure rates at record highs. However, these are largely the old foreclosure cases that still haven't been resolved; the fact remains that newly started foreclosures are at the lowest point since late 2007. So for the long term, the outlook for the mortgage market continues to look increasingly favorable.

David Urani
Wall Street Strategies