Homebuilders climb even as housing outlook remains cloudy

Number of completed new homes projected to largely decline well into 2021

LOS ANGELES, May 26, (AP): The U.S. economy and housing market had set homebuilders up for a strong 2020.

That was before the efforts to stem the spread of the coronavirus pandemic knocked the economy into a skid, dimmed consumer confidence and left a record number of Americans unemployed.

The housing market stalled in March as many would-be buyers held off on purchases. Sales of newly built and previously occupied U.S. homes fell sharply. Home construction slowed. The April data out so far shows the housing slowdown continued last month.

And yet, you wouldn’t know it by looking at homebuilder stocks. While shares in most of the builders are still in the red for the year, the majority of them have notched big gains so far this month that eclipse those of the S&P 500 by a wide margin. An S&P index of homebuilders is up 11.8% in May, versus a 1.2% gain for the broad-market S&P 500 index.

In recent weeks, as builders reported quarterly results, many have said business was going great until mid-March, when the coronavirus shutdowns began. But several also noted that business started to improve by mid-April and has continued to do so into May, said Carl Reichardt, a homebuilding analyst with BTIG.

“The critical question is how much of the improvement we’ve seen was simply the release of pent-up demand from the period of time of four weeks in mid-March to midApril when business was frozen,” Reichardt said. “It’s hard to answer that question right now.”

The builders that have tended to weather the coronavirus slowdown better have been those, such as D.R. Horton and Lennar, that sell lower-priced homes for the entry level segment of the market, especially in the Southeast, and those that build ready-to-sell homes, rather than the built-to-order model, Reichardt said.

The housing market appeared set to extend a solid run-up in sales that began last fall as mortgage rates headed lower. The inventory of U.S. homes for sale had dwindled to the lowest level in more than a decade and a solid job market and low unemployment rate combined with more millennials entering their 30s led economists to forecast strong demand for housing this year.

Homebuilders were in prime position to capitalize on these trends heading into the spring homebuying season, aided by another pullback in mortgage rates. The average rate on a 30-year, fixed-rate mortgage has gradually fallen from an already low 3.72% the first week of January to 3.24% this week.

Sales of new homes jumped 7.5% in January then fell 4.6% the next month. By March, however, the economic fallout from the coronavirus pandemic knocked the housing market activity into a skid.

New homes sales sank 15.4% in March as mounting job losses and mandates to shelter in place in many cities put off many wouldbe buyers. April figures are out next week, and analysts estimate sales skidded 15.5% last month. Housing starts, another barometer for housing and builders, plunged 22.3% in March and cratered 30.2% last month, the lowest level in five years.

The National Association of Realtors said Thursday that sales of previously occupied U.S. homes, a far larger slice of the market than newly built homes, slid to a seasonally adjusted annual rate of 4.33 million units in April, the slowest pace since September 2011.

A forecast issued earlier this month by Zillow economists calls for U.S. home sales to decline as much as 60% this spring and take through the end of the year to recover. Another forecast, this one from Haus, a lender that co-invests with buyers as an alternative to traditional mortgages, projects the number of completed new homes largely declining well into 2021.

While states have begun to relax stay-athome mandates and are clearing the way for businesses that were shut down to reopen, some economists predict U.S. economic growth could take years to fully bounce back. And many expect the unemployment rate to come down slowly over the next couple of years.

“The key, of course, is employment, meaning housing’s big rebound year is looking more as if it occurs in 2021,” Steven Blitz, chief U.S. economist at TS Lombard, wrote in a report this week. “Beyond that, and unlike the expansion just ended, housing will be back as a critical driver of growth.”

Still, even if a sluggish economic and job market recovery ends up delaying some would-be buyers from purchasing a home, the housing market remains largely favorable for big builders.

In addition to low mortgage rates and rising home prices, builders benefit from the chronically thin inventory of homes for sale nationwide, a trend that’s intensified during the pandemic as the pace of new construction slowed and as homebound sellers pulled their homes off the market. The number of previously occupied homes for sale nationally fell to a record-low last month, which drove the median sales price up over 7%.

WASHINGTON, May 26, (AP): A self-driving shuttle service that was ordered to stop carrying passengers in February has been cleared to resume operations with new safety precautions.

The U.S. National Highway Traffic Safety Administration told France-based EasyMile to halt passenger operations on low-speed shuttles in 16 U.S. cities after a mysterious braking problem occurred Feb. 20 in Columbus, Ohio.

In a statement this week, the safety agency said it approved EasyMile’s return-to-service plan. The agency said EasyMile developed six corrective actions that are sufficient to reduce the safety risk of a sudden stop. NHTSA also will review corrective plans for importers that hold permits to run each individual shuttle.

The precautions include a software update to prevent conditions that led to the sudden stop in Columbus. EasyMile and individual shuttle operators also have to install seat belts, stop passengers from standing and warn them that sudden stops are possible. They also agreed to more passenger-safety and emergency-response training for attendants.

EasyMile said it plans to submit reinstatement letters to NHTSA during the next several weeks. But shuttle operators are still looking at how to operate with social distancing guidelines in place due to the novel coronavirus.

“Thus we do not have a firm date for restart of operations,” a company statement said.

To operate without a steering wheel and brake pedals, the shuttles need the agency to grant an exemption from federal motor vehicle safety standards.

The 12-15 passenger shuttles were halted in Columbus as well as Dover, Delaware; West Valley City, Park City, Farmington and Salt Lake City, Utah; Dallas, Houston and Corpus Christi, Texas; Dublin, California; Golden, Colorado; Raleigh, North Carolina; Gainesville, Florida; Farifax, Arlington and Blacksburg, Virginia; and Basking Ridge, New Jersey.

Bank of Japan Gov Haruhiko Kuroda, wearing a face mask, arrives for an extraordinary monetary policy meeting at its headquarters in Tokyo. Japan’s central bank said Friday it will provide some 30 trillion yen ($280 billion) to banks for financing small and medium-size

businesses battling economic hardships brought on by the coronavirus pandemic. (AP)

TOKYO, May 26, (AP): Japan’s central bank said Friday it will provide some 30 trillion yen ($280 billion) to banks for financing small and medium-size businesses battling economic hardships brought on by the coronavrius pandemic.

The Bank of Japan will start providing funding to the banks in June, it said. The offer for zero-interest and unsecured loans comes on top of earlier measures, such as 20 trillion yen ($187 billion) for purchasing corporate bonds and commercial papers.

The Bank of Japan has also announced 25 trillion yen ($234 billion) financing for private debt.

The world’s third-largest economy has sunk into recession, battling stagnant consumption, dwindled tourism and plunging exports.

Central banks around the world, including the U.S. Federal Reserve, have been making similar moves.

The Bank of Japan’s policy board decided unanimously to continue all measures through March next year.

The bank has sought to send a message of financial stability by lifting the ceiling on the purchase of government bonds to maintain financial fluidity.

It said it will continue to monitor the

COVID-19 situation and carry out additional measures, if needed.

“There is little doubt that the BoJ will maintain an unequivocally dovish stance,” said Hayaki Narita of Mizuho Bank.

Narita said Japan is facing “a triple whammy of negative demand shock,” on top of the outbreak, the postponement of the 2020 Tokyo Olympics until next year, a recent tax raise and trade tensions between the U.S. and China, Japan’s main trading partners.

Japan’s long-term interest rates are already at zero. The short-term interest rate is negative 0.1%.

A state of emergency requesting people stay home and work remotely has been lifted in most of the nation, though it remains in place in Tokyo.

Dozens of bankruptcies have been reported as a result of the virus outbreak. But the unemployment rate, although rising slightly, has not shot up so far, unlike the U.S. and some other nations.

Japan has long suffered a labor shortage. Major Japanese companies tend to offer “lifetime employment” in principle and do not resort to layoffs as easily as their Western counterparts. But analysts have said tough times lie ahead.

In this file photo, a paper envelope written with the words ‘Rent Money $’ is left tucked in a lighting pole in the Boyle Heights east

district of the city of Los Angeles. (AP)