California Consumer Sentiment Slides

The California Composite Index of Consumer Confidence declined approximately 10 points to 78.6 in the fourth quarter of 2011 compared with the third quarter's revised reading of 88.2, according to the A. Gary Anderson Center for Economic Research at Chapman University. An index level below 100 reflects a higher percentage of pessimistic consumers versus those who are optimistic. In contrast, the survey of consumer confidence at the national level conducted by the University of Michigan showed a reading of 64.1 in the month of November increasing from August reading of 55.7.

The California Composite Index is generated based on three indices: Consumers' outlook on current and future economic conditions, and an index measuring consumers' spending plan. All three components of the composite index declined over the last three months.

Continued high unemployment rate in California, currently at 11.7 percent, and volatile stock market may be the main factors explaining why the consumer assessment of the current economic conditions has deteriorated so sharply. This index declined to a reading of 60.8 in November of 2011 from 67.1 in August of 2011. The index measuring future economic conditions also decreased to a reading of 95.8 in November from a reading of 106.8 in August 2011. Moreover, the index measuring consumers' planned spending on big-ticket items decreased significantly from the August reading of 93.4. The reading of 79.8 suggests consumers' spending in the early part of 2012 may decline sharply from the current strong pace reported by the retailers.

Builder Confidence Rises for the Third Consecutive Month

Builder confidence in the market for newly built, single-family homes edged up two points to 21 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for December. This marks a third consecutive month in which builder confidence has improved, and brings the index to its highest point since May 2010.

"This is the first time that builder confidence has improved for three consecutive months since mid-2009, which signifies a legitimate though slowly emerging upward trend," said NAHB Chief Economist David Crowe. "While large inventories of foreclosed properties continue to plague the most distressed markets and consumer worries about job security and the challenges of selling an existing home remain significant factors, builders are reporting more inquiries and more interest among potential buyers than they have seen in previous months."

Each of the HMI's three component indexes registered a third consecutive month of improvement in December. The component gauging current sales conditions rose two points to 22, while the component gauging sales expectations in the next six months edged up one point to 26. The component gauging traffic of prospective buyers gained three points to 18, which is its highest level since May 2008.

California Home Sales, Median Price Rise in November

California home sales posted an increase both on a monthly and annual basis in November, marking the fifth consecutive month of year-to-year sales increases, according to figures released by the California Association of Realtors (CAR).

Closed escrow sales of existing, single-family detached homes in California rose to a seasonally adjusted 503,570 units in November, up 2.1 percent from a revised 493,140 in October, according to information collected by CAR from more than 90 local Realtor Associations and MLSs statewide.

The November statewide median price of an existing, single-family detached home sold in California was $280,960, up 1.0 percent from $278,060 in October but down 5.2 percent from the $296,480 median price recorded for November 2010.

Home Remodeling Activity Reaches Record High in October

The BuildFax residential remodeling index reached a record high in October, extending its 23-month climb another month, as homeowners opt to stay put and remodel rather than buy a new home.

The index, which began in 2004, rose to 147.6, up 40 percent from 105.8 in October 2010. The index stood at 141.4 in September, which was also a high.

Joe Emison, vice president of research and development at BuildFax, said while the number of remodeling projects is rising, the average estimated construction cost of each project is falling.

"We see that as an indication that people are doing more comfort remodels, meaning they are modeling to make their homes more comfortable as opposed to flipping it," he said.

The company found the average project cost of a major remodeling project for 2011 was $39,460, down from an index high of $43,808 in 2004. The average project cost of a minor remodeling project in 2011 was $10,968, down from an index high of $12,623 in 2006.

Delinquent Mortgages Rise in November

The number of delinquent mortgages in November rose to 8.15 percent from 7.93 percent in October, according to a report from Lender Processing Services.

That delinquency rate as a percentage of the LPS database of 40 million mortgages declined nearly 10 percent from a year earlier. About 4.14 million homes were 30 or more days past due in November, with about 1.81 million properties more than 90 days past due.

LPS considers a mortgage delinquent when it's at least 30 days in arrears but not in foreclosure. The company recorded 6.26 million homes either delinquent or in foreclosure last month.

NAR to Release Revised Home Sales Stats

This week, the National Association of Realtors (NAR) issued revised estimates for existing home sales going back five years, saying the formula it has been using to adjust the sales data it collects from multiple listing services had drifted and was overestimating sales.

The benchmark revisions to existing home sales data show fewer homes changed hands than NAR had previously reported. However, the revisions show little change in previously reported trends in home sales, and no change in median home price, NAR said.

Also, because NAR is making a comparable downward adjustment to unsold inventory, the revisions won't change the months' supply of homes for sale -- a critical measure of the balance between supply and demand. Many housing analysts consider a six-month supply of homes for sale to be a healthy balance between supply and demand.

FAST FACTS

• California Median Home Price: November 2011 $280,960
• California Highest Median Home price by region/county: November 2011 Marin $736,410
• California Lowest Median Home price by region/county: November 2011 Madera $103,330
• California Pending Home Sales Index: October 2011: 122., an increase of 3.1 percent compared with a prior year.

Source: California Association of Realtors