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VOLUME XXI
September 14, 2023
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July 13, 2020
Homebuilders just saw the strongest June sales since the last housing boom, as pandemic pushes more buyers to the suburbs
Published Mon, Jul 13 202011:24 AM EDTUpdated 5 Hours AgoDiana Olick@in/dianaolick@DianaOlickCNBC@DianaOlickwatch nowVIDEO10:03Home prices in urban areas may suffer, economist Robert Shiller saysKey Points
- Sales of newly built homes jumped 55% annually in June, according to a monthly survey by John Burns Real Estate Consulting, which has historically mirrored the U.S. Census report.
- It was the largest annual gain since homebuilding began again following the epic housing crash a decade ago. It is also the highest pace since the height of the unprecedented housing boom in 2005.
A construction worker wearing a protective mask moves bricks to the back of a house as they resume construction on a home in Bloomfield Hills, Michigan, May 7, 2020.Emily Elconin | Bloomberg via Getty Images
It is the perfect storm for the nation’s homebuilders. A sharp decline in the supply of existing homes for sale, increasing consumer preference for brand-new, high-tech homes with all the amenities for working and schooling, as well as an accelerating flight to the suburbs and exurbs made for remarkable housing demand in June.
While the official government count isn’t out until the end of the month, sales of newly built homes jumped 55% annually in June, according to a monthly survey by John Burns Real Estate Consulting, which has historically mirrored the U.S. Census report. It was the largest annual gain since homebuilding began again following the epic housing crash a decade ago.
It is also the highest pace of sales growth since the height of the unprecedented housing boom in 2005. That expansion was driven by negligent lending in the subprime mortgage market. This boom appears to be driven by the coronavirus pandemic.
“The anecdotal evidence is overwhelming. Sales in the distant commuter areas are the most robust,” said John Burns, founder and CEO of JBRC. “I believe a lot of computer-oriented people have proven to their co-workers that they can be productive from home, and have sensed, or officially been given the green light, to work from home at least a significant portion of the time after a vaccine has been found.”
That sentiment was mirrored in a survey by Arizona-based builder Taylor Morrison, which reported a 94% annual jump in June home sales. High-tech homes, and additional rooms for working and home schooling, topped the list of consumer demands.
“There is a bias to new. When I look at the research that our teams have been doing over the last 12 to 14 weeks, people are quoting, they want new, fresh, a place where wellness features will really make sense for them,” said Sheryl Palmer, CEO of Taylor Morrison recently in an interview on CNBC’s “Closing Bell.” “Most recently, we’re really seeing a pickup in folks saying they want more rural or suburban locations. Initially, there was a lot of talk about that, but it’s really coming through our buyers today.”
Sales of new homes were strongest in the Northeast, with an 86% annual jump, and in Florida, where sales popped 84%, according to JBRC. California saw gains, but it was the laggard.
Those sales are allowing builders to raise prices. About 57% of those surveyed said they had bumped prices higher, only in California did prices pull back some. About 14% of Southern California builders reduced net prices in June, the most of any region. Nationally, home prices for new construction in June were 4.5% higher annually.
Builders can raise prices because they are seeing a new buyer today, more serious and more impatient than ever. Buyer traffic is converting into sales at a record rate. In addition, consumers are largely choosing homes already built, even in the luxury segment. That is why the inventory of unsold, newly built homes dropped 20% annually in June to just a 1.5-month supply.
The issue for builders now is how to ramp up production quickly, when they never expected this kind of recovery. Most builders stopped buying land in March and laid off workers. Now they need more communities but are up against all kinds of hurdles, including high prices for finished lots and issues with local permitting offices which are not all open or running normally yet.
Land developers will benefit, as community counts are now 5% lower than a year ago. There is, of course, the Covid-19 wild card: If the economy shuts down yet again, and unemployment rises, the prospects for housing strength continuing into the fall will weaken. Record low mortgage rates are certainly helping, but at some point, buyers will inevitably hit their price limit. Already, in the high-priced existing home market, there are signs that demand is pulling back.
July 10, 2020
Average run rate at China’s PDH plants rises to 85% in June from 81% in May
Highlights
Two plants raise run rates after maintenance
Two plants lower run rates on technical glitches
Processing margin at 8-month high
Singapore — China’s propane dehydrogenation plants operated at an average rate of 85% of capacity in June, up from a revised average rate of 81% in May and also from 81% a year earlier, S&P Global Platts calculations based on data from domestic information provider JLC showed July 10.
The higher run rate in June was attributed mainly to two PDH plants raising run rates after maintenance in the month, although two other PDH plants lowered run rates due to technical glitches, according to JLC data.
Tianjin Bohai’s PDH unit in northern China doubled its run rate to 80% in June from 40% in May, the data showed, after a period of unstable operations in May, sources said.
Yantai Wanhua in eastern Shandong province raised its run rate to 50% in June from 39% in May after restarting from scheduled maintenance June 10, the data showed. The plant was shut over May 14-June 10 for scheduled maintenance, S&P Global Platts reported earlier.
However, Shaoxing Sanyuan and Ningbo Haiyue in eastern Zhejiang provice both lowered their operating rates in June due to technical glitches. Shaoxing Sanyuan experienced glitches over June 18-22 that lowered its average operating rate to 67% in June from 80% in May, while Ningbo Haiyue experienced technical glitches over June 25-27 that lowered its run rate in the month to 90% from 100% in May, the JLC data showed.
Dongguan Juzhengyuan has had its PDH plant shut for maintenance since July 5 that was expected to take around six weeks, sources said.
The JLC monthly survey covered nine Chinese PDH units with a combined propylene production capacity of 5.66 million mt/year, which can use up to 6.79 million mt/year of propane as feedstock at full capacity.
PROCESSING MARGINS WIDEN
Chinese PDH units’ theoretical processing margin was estimated at Yuan 1,708/mt ($241.11/mt) in June, up from Yuan 1,398/mt in May, and the highest since October 2019, Platts calculations showed. Market sources attributed the improving margins in June to a rise in domestic propylene prices in the month.
Saudi Aramco set its June contract price for propane at $350/mt FOB, up $10/mt month on month. Spot refrigerated propane cargoes on a delivered basis to East China averaged $324/mt in June, up from $307/mt inr May, Platts data showed.
Chinese PDH units typically secure half of their propane requirements under term contracts and the rest from the spot market. The average import cost for propane was estimated at Yuan 2,901/mt in June after taxes and fees, up Yuan 39/mt or 1.4% from May, the data showed.
Domestic propylene prices in East China, where most of the country’s PDH units are located, were estimated at Yuan 6,689/mt in June, up Yuan 357/mt or 5.6% from May, according to JLC data.
Downstream polypropylene sales were stable through June, with the run rate at Chinese PP plants remaining healthy at 85%-88% of capacity, according to sources.
Strong global demand for packaging and medical applications, including masks and protective gowns, continues to provide support to China’s PP market, Platts has reported.
July 10, 2020
Average run rate at China’s PDH plants rises to 85% in June from 81% in May
Highlights
Two plants raise run rates after maintenance
Two plants lower run rates on technical glitches
Processing margin at 8-month high
Singapore — China’s propane dehydrogenation plants operated at an average rate of 85% of capacity in June, up from a revised average rate of 81% in May and also from 81% a year earlier, S&P Global Platts calculations based on data from domestic information provider JLC showed July 10.
The higher run rate in June was attributed mainly to two PDH plants raising run rates after maintenance in the month, although two other PDH plants lowered run rates due to technical glitches, according to JLC data.
Tianjin Bohai’s PDH unit in northern China doubled its run rate to 80% in June from 40% in May, the data showed, after a period of unstable operations in May, sources said.
Yantai Wanhua in eastern Shandong province raised its run rate to 50% in June from 39% in May after restarting from scheduled maintenance June 10, the data showed. The plant was shut over May 14-June 10 for scheduled maintenance, S&P Global Platts reported earlier.
However, Shaoxing Sanyuan and Ningbo Haiyue in eastern Zhejiang provice both lowered their operating rates in June due to technical glitches. Shaoxing Sanyuan experienced glitches over June 18-22 that lowered its average operating rate to 67% in June from 80% in May, while Ningbo Haiyue experienced technical glitches over June 25-27 that lowered its run rate in the month to 90% from 100% in May, the JLC data showed.
Dongguan Juzhengyuan has had its PDH plant shut for maintenance since July 5 that was expected to take around six weeks, sources said.
The JLC monthly survey covered nine Chinese PDH units with a combined propylene production capacity of 5.66 million mt/year, which can use up to 6.79 million mt/year of propane as feedstock at full capacity.
PROCESSING MARGINS WIDEN
Chinese PDH units’ theoretical processing margin was estimated at Yuan 1,708/mt ($241.11/mt) in June, up from Yuan 1,398/mt in May, and the highest since October 2019, Platts calculations showed. Market sources attributed the improving margins in June to a rise in domestic propylene prices in the month.
Saudi Aramco set its June contract price for propane at $350/mt FOB, up $10/mt month on month. Spot refrigerated propane cargoes on a delivered basis to East China averaged $324/mt in June, up from $307/mt inr May, Platts data showed.
Chinese PDH units typically secure half of their propane requirements under term contracts and the rest from the spot market. The average import cost for propane was estimated at Yuan 2,901/mt in June after taxes and fees, up Yuan 39/mt or 1.4% from May, the data showed.
Domestic propylene prices in East China, where most of the country’s PDH units are located, were estimated at Yuan 6,689/mt in June, up Yuan 357/mt or 5.6% from May, according to JLC data.
Downstream polypropylene sales were stable through June, with the run rate at Chinese PP plants remaining healthy at 85%-88% of capacity, according to sources.
Strong global demand for packaging and medical applications, including masks and protective gowns, continues to provide support to China’s PP market, Platts has reported.
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