Discussing economic confidence and rising pessimism, rising rents, the cost of lots is stable but high, homeowner’s opinion of home values, where the housing market is headed and more
U.S. Economic Confidence Increases
Americans’ confidence in the U.S. economy improved slightly last week. Gallup’s U.S. Economic Confidence Index was +6 for the week ending Oct. 8 — up four points from the prior week. The index hasn’t moved much over the past several months.
Americans remain slightly negative, however, about the direction in which the economy is headed — 46% say it is getting better and 49% say it is getting worse, resulting in an economic outlook score of -3.
Americans remain about as upbeat as they recently have been in their views of the U.S. economy’s current state, but their cautiousness about the future dampens these relatively positive assessments.
Not good to see so many consumers worrying about the future. This could mean some people will not buy a home because they are worried about the future.
It does take confidence to make a huge purchase such as a home. I hate to imagine how many people could buy a home but will not because they are part of the 49% that thinks the economy is getting worse.
Especially since rents keep on rising…
Speaking of low confidence, check out what the NY Fed said about their latest Survey of Consumers:
Results from the September 2017 Survey of Consumer Expectations show increased pessimism. In particular, expectations about earnings, spending, income growth, home prices, financial situations and the stock market all deteriorated. Inflation expectations at the three-year horizon increased, while one-year ahead inflation expectations remained unchanged.
Median home price change expectations fell from 3.3% in August to 3.0%, its lowest level since March 2016. The decrease was consistent across demographic groups.
Another signal that consumers are feeling uneasy.
US Single-Family Rents Up 2.9 Percent Year Over Year in July
Single-family rents, as measured by the CoreLogic Single-Family Rental Index (SFRI), climbed steadily between 2010 and 2016. However, the index shows year-over-year rent growth has decelerated slowly since February 2016, when it peaked at 4.4 percent. In July 2017, single-family rents increased 2.9 percent year over year, a 1.5 percentage point decline since the growth rate peaked at 4.4 percent in February 2016.
While rents are increasing at a slower rate, they are STILL increasing. Sad to think some will lock themselves into a life time of renting because they will not or cannot buy a home today…
Lot Values Stable at Record High
From Eye On Housing:
Single-family lot prices remained at record high levels in 2016, with half of the lots priced at or above $45,000. According to NAHB’s analysis of the Census Bureau’s Survey of Construction (SOC) data, the median lot value reached $45,000 for the first time in 2015 exceeding the previous record of $43,000 reached in 2006, in the midst of the housing boom when twice as many single-family homes were started.
They go on to point out that despite lots getting smaller and the low number of homes being built, the shortage of lots has meant record high prices.
Home Owner’s Opinion of Home Values Approaching Reality
Homeowners still don’t see eye-to-eye with those who appraise their homes. Appraiser’s valuations were 1.14 percent lower, in September, than what owner’s expected – according to the National Quicken Loans Home Price Perception Index (HPPI).
Even though home values may not have risen to the level owners expected, they kept rising. Quicken Loans’ Home Value Index (HVI), the only measure of home value change based solely on appraisal data, showed home values increased 0.44 percent from August to September, and jumped 3.38 percent since September 2016.
It is good to see home owners getting more realistic about the value of their home. And we see yet another report about home prices increasing…
While this is a national report and does not reflect what is happening in every local market, buyers need to be aware that home prices are still increasing. Always rely on a local experienced Realtor to determine what is happening in your market!
Koch Group Says Realtors Among Those ‘Jeopardizing’ Tax Overhaul
A group backed by billionaire industrialists Charles and David Koch unveiled a television and digital campaign Wednesday that claims “corporate welfare” threatens Republican efforts to dramatically alter the U.S. tax code.
The Freedom Partners Chamber of Commerce is targeting the politically powerful National Association of Realtors for opposing a proposal by the White House and Republican lawmakers to double the standard deduction, as well as several entities that represent renewable and energy efficiency interests advocating other tax incentives. The groups are “jeopardizing tax reform,” the Koch-backed group said in a statement.
NAR is opposed to doubling the standard deduction because the group says it would reduce the value of the mortgage deduction, curbing the incentive to purchase a home and leading to a “a de facto tax increase on homeowners.”
If the Koch brothers oppose something, it’s because it isn’t good for the super rich. Simplifying our income taxes would be great IF it meant everyone paid their fair share.
I am not too sure the Koch Brother want to pay their fair share…
While the Mortgage Interest Deduction is important to home owners, it does not help everyone…
I would prefer absolutely no deductions or loopholes for the rich to use so they can pay less than they should.
Where Housing is Headed
Interesting insights from Mark Boud, chief economist for Metrostudy on BuilderOnline.com. He says housing starts will keep increasing SLOWLY through 2020.
He says we will finally reach the historical average for housing starts in 2020. He also said we can expect the inventory issue to remain a problem until 2020.
Boud also said that homes are somewhat overvalued but not like they were back in 2005-2006. He pointed out that the housing market has too many high end homes and suffers from a severe shortage of starter homes.
Speaking of a shortage of starter homes…
There is no doubt that there is a mismatch with the types of homes for sale and home buyer demand across much of the country.
In the starter and move-up category, there are considerably more buyers than homes for sale. This is producing a seller’s market. At the other end of the spectrum, there are too many high-end homes compared to the number of buyers. In this segment of the housing market, it has resulted in a buyer’s market in some areas.
According to NAR’s most recent Existing Home Sales Report, there is a 4.2 month supply of existing homes for sale. Also, inventory is decreasing! There are 6.5% fewer homes for sale than this time last year. And this is the 27th consecutive month of year-over-year decreases in the number of homes for sale.
If we look at the latest report from Trulia, we can see pretty much the same thing. In fact, the recent hurricanes have made the shortage of homes even more extreme in some areas.
Trulia’s market mismatch score calculates the search interest of home buyers compared to the homes that are for sale. For example: “if 60% of buyers are looking for starter homes but only 40% of the listings are starter homes, [the] market mismatch score for starter homes would be 20.”
Check out Trulia’s latest analysis in this chart:
Across the country, the people looking for starter and move-up homes are finding limited choices and stiff competition. Buyers looking at high end homes are finding less competition and more inventory of homes for sale.
We do see similar conditions in the Anderson area. Whether you are looking at buying a starter home or a higher priced home, you must have unrealistic expectations.
Yellen Admits Misjudging the Strength of the Labor Market
Snippet from a speech Fed Chair Yellen gave to National Association for Business Economics back in September:
My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation. In interpreting incoming data, we will need to stay alert to these possibilities and, in light of incoming information, adjust our views about inflation, the overall economy, and the stance of monetary policy best suited to promoting maximum employment and price stability.
Interesting that Yellen is admitting this…
FOMC Minutes: Another Rate Hike in December?
From the Minutes of the FOMC September 19-20, 2017 (emphasis is mine):
In their discussion of monetary policy, all participants agreed that the economy had evolved broadly as they had anticipated at the time of the June meeting and that the incoming data had not materially altered the medium-term economic outlook. Consistent with those assessments, participants saw it as appropriate, at this meeting, to announce implementation of the plan for reducing the Federal Reserve’s securities holdings that the Committee released in June. Many underscored that the reduction in securities holdings would be gradual and that financial market participants appeared to have a clear understanding of the Committee’s planned approach for a gradual normalization of the size of the Federal Reserve’s balance sheet. Consequently, participants generally expected that any reaction in financial markets to the start of balance sheet normalization would likely be limited.
After assessing current conditions and the outlook for economic activity, the labor market, and inflation, members decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent.
While the Fed held rates steady, they did leave the possibility of an increase in December on the table. They also discussed how inflation isn’t increasing like they think it should be.
Based on Yellen’s comments, maybe some of the member are realizing they really do not truly understand the economy or what is happening with inflation and employment?
There was glimmer of hope as some members are concerned about their actions:
Many participants viewed accommodative financial conditions, which had prevailed even as the Committee raised the federal funds rate, as likely to provide support for the economic expansion. However, a couple of those participants expressed concern that the persistence of highly accommodative financial conditions could, over time, pose risks to financial stability.
Remember, while the Fed does not set mortgage rates, what they do can have an impact! No one knows what the effect of the Fed reducing their securities holdings will be since we are going into uncharted territory.
Job Openings Fall Decreased in August
From the BLS:
The number of job openings was little changed at 6.1 million on the last business day of August. Over the month, hires and separations were also little changed at 5.4 million and 5.2 million, respectively. Within separations, the quits rate and the layoffs and discharges rate were little changed at 2.1 percent and 1.2 percent, respectively.
This is below expectations from a survey of Wall Street economists conducted by Bloomberg. This decrease may be due to the hurricanes and I would not let this decrease concern me.
Optimism About Future Home Values At Record High
For the first time in eight years of tracking, more than half of homeowners see a rising home value in their future. A new Rasmussen Reports national telephone and online survey finds that 53% of American Homeowners think the value of their home is likely to go up over the next year. That’s up from 41% in March and 39% a year ago.
Good to see home owners feeling confident about the value of their home. Especially considering how some are not feeling confident about the economy.
Draining the Swamp: Credit Scores and Housing Finance Reform
From Zero Hedge:
As the mortgage finance industry heads into the last quarter of 2017, we are still running about 30% down in terms of lending volumes compared to last year, the result of the post election pop in yields for US Treasury bonds that killed the declining refinance market. No amount of innovation, quantitative easing from the Federal Open Market Committee, or new, more accommodating credit scores can make up for this sharp decline in production of mortgage loans.
Meanwhile in Washington, the prospects for ending the decade-long conservatorship of Fannie Mae and Freddie Mac are dim at best. In his statement to Congress, Melvin L. Watt, Director of the Federal Housing Finance Authority, said “ that these conservatorships are not sustainable and they need to end as soon as Congress can chart the way forward on housing finance reform.” But nobody on Capitol Hill seems to consider the status quo a problem when it comes to Fannie Mae and Freddie Mac.
It is crazy we still have not seen anything but kicking the can down the road when it comes to the GSEs…
But it isn’t surprising and if we do see any changes, will they be good for the average American or the banks and Wall Street?
I’ll give you one guess who will win this one…
Well that is it for today! Check back as I am planning on sharing the latest on mortgage rates tomorrow!