Discussing new home sales, GDP, mortgage rates, student loans and home ownership, HUD looking at manufactured housing rules and much more!
New Home Sales December 2017
From HUD and Census Bureau:
New Home Sales
Sales of new single-family houses in December 2017 were at a seasonally adjusted annual rate of 625,000. This is 9.3% below the revised November rate of 689,000 but is 14.1% above the December 2016 estimate of 548,000.
An estimated 608,000 new homes were sold in 2017. This is 8.3% above the 2016 figure of 561,000.
The median sales price of new houses sold in December 2017 was $335,400. The average sales price was $398,900.
For Sale Inventory and Months’ Supply
The seasonally adjusted estimate of new houses for sale at the end of December was 295,000. This represents a supply of 5.7 months at the current sales rate.
I specifically choose a chart with the maximum time frame so you can see that new home sales are still historically low ( for the entire US ). The decrease from the previous month was the largest decrease in 1 1/2 years.
Remember the prices reported by HUD are for the entire US and you can new homes in Anderson County that are have more attractively priced.
The number of homes for sale increased from the previous month and is up 15.2% year over year. Which is great IF there are more affordable homes being built…
Do not panic about the decrease from the previous month. The number of homes sold in December 2017 increased compare to December 2016 AND the number of new homes sold in 2017 was higher than 2016.
Real GDP Increased at Annual Rate of 2.6% in Q4 2017
Real gross domestic product (GDP) increased at an annual rate of 2.6 percent in the fourth quarter of 2017 according to the “advance” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.2 percent.
This is the advance and we will get the second estimate in February. It should give us a better idea of where things are…
This is below expectations but remain calm…
The Conference Board Leading Economic Index for the U.S. Increased in December
From the Conference Board:
The Conference Board Leading Economic Index® (LEI)for the U.S. increased 0.6% in December, following a 0.5% increase in November, and a 1.3% increase in October.
3 months of increases is a pretty good sign!
Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board said:
The U.S. LEI continued rising rapidly in December, pointing to a continuation of strong economic growth in the first half of 2018. The passing of the tax plan is likely to provide even more tailwind to the current expansion. The gains among the leading indicators have been widespread, with most of the strength concentrated in new orders in manufacturing, consumers’ outlook on the economy, improving stock markets and financial conditions.
Very good news and hopefully this trend will continue!
Mortgage Rates This Week
Freddie Mac reported:
- 30-year fixed-rate mortgages averaged 4.15% with an average 0.5 point
- This is up from last week when it averaged 4.04%
- Last year at this time, 30-year fixed-rate mortgages averaged 4.19%
- 15-year fixed-rate mortgages averaged 3.62% with an average 0.5 point
- This is up from last week when it averaged 3.49%
- Last year at this time, 15-year fixed-rate mortgages averaged 3.40%
Len Kiefer, Freddie Mac Deputy Chief Economist, said:
Rates keep climbing. The 10-year Treasury yield reached its highest point since 2014 reflecting expectations of broad-based economic growth. Mortgage rates, in turn, followed the surge in Treasury yields. The 30-year fixed rate mortgage jumped 11 basis points to 4.15 percent, its highest level since March of last year.
The release of the December existing home sales data confirms that 2017 was the best year for home sales in over a decade. Will 2018 home sales outpace 2017? Homebuyer affordability will be a challenge, with mortgage rates moving higher and robust house price gains across the country. The FHFA reported that house prices increased 6.5 percent from November 2016 to November 2017, with all regions showing positive 12-month changes.
The Mortgage Bankers Association reported:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to its highest level since March 2017, 4.36%, from 4.33%, with points remaining unchanged at 0.54 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100) increased to its highest level since March 2017, 4.31%, from 4.25%, with points increasing to 0.38 from 0.36 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to its highest level since September 2013, 3.81%, from 3.77%, with points increasing to 0.52 from 0.44 (including the origination fee) for 80 percent LTV loans.
Ouch again! I hate to say anything that might persuade someone to rush their decisions but wasting time could prove to be very expensive…
The Latest Carolinas Survey of Business Activity
From the Federal Reserve Bank of Richmond:
According to the latest survey by the Federal Reserve Bank of Richmond, firms in the Carolinas saw modest growth in January. While the indexes for both general business conditions and sales were lower than in December, they remained positive, indicating expansion, at 19 and 11 respectively, suggesting continued but slowing growth.
Employment continued to increase moderately among Carolina firms. The index for availability of skills needed rose to 0 after being negative the last three months. However, firms expect to see a decrease in the availability of skills in the coming months.
Wages and capital expenditures continued to rise in January, and firms in the Carolinas expect further increases in the next six months. Firms also saw an acceleration in price growth for both inputs and outputs and expect price growth to increase. However, expected price growth was lower than in December.
Good not great but never look a gift horse in the mouth…
Student Loans Are Killing Home Ownership
As you’ve probably heard, Millennials just aren’t buying houses like young people used to.
Many iterations of this story have already been told: They’re living with roommates (parental or otherwise), renting rather than buying, and blowing their paychecks on fancy brunches instead of bungalows. Partly to blame is the fact that housing prices have rapidly outpaced incomes since 1980. But there’s another trend that’s magnified the effects of this: An increase in college attendance. That otherwise positive development has triggered mounting student debt, thanks to a spike in tuition costs. In 2015, students who took out student loans graduated with 70 percent more debt than those just 10 years earlier, racking up an average of $34,000 that some are fated to pay off for decades.
Research released this summer by the New York Fed also found strong correlation between the decline in American homeownership between 2007 and 2015 and high student loan debts: By their estimates, 360,000 fewer Millennials bought homes in 2015 than past data would have predicted. And studies by the National Association of Realtors in 2016 and Pew in 2012 show that students are getting the message: 50 to 75 percent of respondents in each survey said they believed student loan debt was preventing them from buying a home.
The benefit of a college education as well as home ownership cannot be denied. Both can come with a hefty price tag due to the debt you are taking on…
HUD Announces a Wholesale Review of Their Manufactured Housing Rules
The U.S. Department of Housing and Urban Development (HUD) today announced a top-to-bottom review of its manufactured housing rules as part of a broader effort to identify regulations that may be ineffective, overly burdensome, or excessively costly given the critical need for affordable housing. For the next 30 days, HUD is accepting public comments to identify existing or planned manufactured housing regulatory actions to assess their actual and potential compliance costs and whether those costs are justified against the backdrop of the nation’s shortage of affordable housing.
Manufactured housing plays a vital role in meeting the nation’s affordable housing needs, providing nearly 10 percent of the total single-family housing stock. It’s estimated that more than 22 million American households reside in manufactured housing, particularly in rural areas where this form of housing represents an even greater share of occupied homes. The manufactured housing industry is also an important economic engine, accounting for approximately 35,000 jobs nationwide.
The hairs on the back of my neck when someone says anything negative about mobile homes. Yes, there are negatives but for the budget minded home buyer, you can get a lot for the money.
The key thing is if the home has a FHA approved foundation. There has been some talk about changing the rules regarding mortgages for mobile homes but as of today, the options are limited.
While the mobile home dealers can get buyers financing, it is later on that the problems become apparent. Getting a mortgage for a mobile home that is NOT being sold at the dealership can be VERY hard…
If someone wants to sell a mobile home, most buyers will need a mortgage. If they cannot get a mortgage, then it means only cash buyers…
Or if someone wants to tap into their equity years later to pay for improvements or education or whatever… they may find their options are limited.
Hopefully, we will some changes that will benefit mobile home buyers and owners. For now, discussing this subject with the mortgage lender of your choice is my best advice. Especially the topic of being able to sell the home and the availability of mortgages for the next buyer!
The Housing Market Crash and Wealth Inequality in the U.S.
Middle-class households tend to be heavily leveraged, with their homes as primary assets, while the rich tend to have more diverse investments. This made the middle class particularly vulnerable to the housing market crash.
Wealth inequality in the U.S. rose steeply between 2007 to 2010, largely as a result of the sharp decline in house prices during that period, Edward N. Wolff reports in Household Wealth Trends in the United States, 1962 to 2016: Has Middle Class Wealth Recovered? (NBER Working Paper No. 24085). Households with a greater concentration of wealth in their homes — including younger households, African Americans, and Hispanics — fared worse than other groups. The decline in home prices had a far greater percentage impact on the net worth of the middle class than the stock market plunge had on net worth of the top 1 percent.
This is why you cannot put all your eggs in one basket and you must not let your ego get you in over your head when buying a home. Think affordable and as always, hope for the best but plan for the worst!
Strong Demand, Tight Inventory and Unsatisfied Millennials Define Today’s Housing Market
Ahead of next week’s State of the Union address, realtor.com® today released its own “State of the Housing Union,” which shows the strong U.S. economy and unprecedented housing shortage pressuring potential home buyers striving to attain the American Dream. According to the analysis, strong buyer demand, constrained inventory, and ready-to-buy first timers are the key underlying dynamics driving today’s housing market.
They go on to say the economy is growing but home prices and sales are being hurt by low inventory. First time home buyer demand is strong but they are being hurt by the lack of affordable homes.
This is somewhat overly negative as there are plenty of affordable homes in the Anderson SC area. The key is that buyers MUST be pre-approved and working with an experienced Realtor to succeed!
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