Discussing why Fall is good time to buy a starter home, FHFA looking at the GSE’s capital buffer, home purchase originations increase and much more!
Why Fall Could Be the Best Some Home Buying Season
Here’s some good news for frustrated starter home buyers: if you think you missed out on bagging that trophy starter home during this year’s peak buying season, think again. It turns out that starter home inventory actually increases by about 7% in the fall months compared to the spring. That leads to listing prices that are about 4.8% and 3.1% lower in the winter and spring than in the summer (or third quarter), respectively.
While this sounds very encouraging, remember that Trulia is talking about the largest metros. This means it does not reflect what is happening in each real estate market across the US. Plus, how you define a starter home will not be the same as Trulia ( homes below $232,751 ).
I would define starter homes as being either under $100,000 or $150,000 in our area. A quick check of the MLS shows there are 114 homes under $100,000 and 223 homes under $150,000 in Anderson County as of today.
With home prices rising and the Fed supposedly going to raise rates in December, waiting until Spring might not be the best idea…
Why Does the U.S. Have High Income Inequality?
From St. Louis Fed:
The high income inequality in the U.S. can be explained by several factors. According to a 2013 paper, top tax rates in the U.S. have moved in the opposite direction from top pre-tax income shares for a few decades, supported by the belief that rewarding top earners might spur more growth and entrepreneurship.
Also, technological progress has increased productivity, which, in turn, has led to the relative price of investment falling. As that happens, firms might substitute capital for labor, causing the labor share to fall. The declines in labor share lead to higher inequality.
High income inequality has negative consequences for the political stability of a country and economic growth in the long run. Policies aimed at increasing the quality of the education system, as well policies that improve the redistributive role of the tax system, may help avoid the negative effects of income inequality.
Something to think about since we are hearing so much about tax reform…
White House Says Corporate Tax Cut Would Boost Wages $4,000
Since I mentioned taxes, consider this snippet from Bloomberg:
Cutting the corporate tax rate to 20 percent, as President Donald Trump has proposed, would increase average household income by at least $4,000 a year, according to estimates in a White House study.
The study by Trump’s Council of Economic Advisers, released on Monday, says that kind of wage growth would take several years to go into effect, but it could eventually reach $9,000 a year. Other economists have previously questioned how beneficial such cuts would be for middle-income families.
The projection is based on the assumption that companies will be more inclined to invest in the U.S. with lower taxes, increasing the demand for workers and driving up wages. But some economists suggest that corporate executives would be more inclined to use a tax windfall to increase shareholders’ dividends, or to invest in automation that could limit the need for more workers in some industries.
So this $4000 to $9000 boost in household income is based on an assumption and not facts?
Have we seen corporations invest in wages or shareholder dividends in the recent past?
Congress Nearing Deal to Ease Bank Regulations
From The Hill:
Top White House economic adviser Gary Cohn said Monday that Congress could act to exempt major United States banks from tight Dodd-Frank Act banking rules by the end of 2017.
Cohn, speaking to a banking industry conference in Chicago, said the White House and lawmakers from both parties are nearing an agreement to raise the threshold at which a bank is considered a “systemically important financial institution” (SIFI). Such banks are subject to stricter federal oversight and higher stability standards.
The law creates increasing levels of federal oversight and higher capital requirements for banks. The rules are meant to ensure that banks do not fail and trigger a crisis.
Nice to see the ground work being laid down for another TBTF bailout by the American tax payers…
63% Think U.S. Headed in Wrong Direction
The latest Rasmussen Right or Wrong Track survey showed that 31% of likely U.S. voters think the country is headed in the right direction and 63% think it is headed in the wrong direction.
Do you think someone that thinks the country is headed in the wrong direction is going to buy a home?
That is a damn shame since they could be missing a great opportunity!
An Orgy of Blood
From Clarmond Wealth (emphasis is mine):
Central banks continue to act as the enablers to their respective governments. They provide funding that papers over the underlying social anxiety, delaying our much needed dialogue.
When historians look back and see the cavalier balance sheets of the central banks they would rightly assume there was a world war going on as every central bank balance sheet is now approaching or exceeding levels not seen since 1945. However, the worrying truth is that there are no external enemies to overcome; the central bankers are only maintaining the growth trajectory that we demand.
The current social contract is mired in the quicksand of global finance. It is being kept alive by the corpulent balance sheets of central banks, who do their government’s bidding so that the politicians do not have to put unpleasant choices in front of their electorates. This cowardly behaviour gives rise to slogans and sloganeers, who provide familiar but false checklists of remedies. “Take bank control”…”America First”…”One Belt, One Road”…”Ein Volk, ein Reich, ein Fuhrer”…”One Man – One Kill”.
Central banks are currently furnishing the excess credit that, in the past, has been followed by an orgy of blood.
I would say after the last after the last election, Americans are used to having to make unpleasant choices. Or choosing the lesser of 2 evils?
When you see companies such a Clarmond releasing stuff like this, you know the ultra wealthy are concerned.
Why Have Investigations of Wall Street Disappeared from Corporate Media?
From Wall Street on Parade:
Hurricanes, wildfires, the multiple investigations of Russia’s involvement in the 2016 presidential election and the calamity-du-jour in the Trump White House are gobbling up an outsized share of digital and print news pages at corporate media. What’s gone missing is intrepid, in-depth investigations of Wall Street’s latest scam against the public – even at corporate media outlets purporting to focus on Wall Street.
This is a perfect example of why I share articles such as the previous one.
FHFA and Treasury Exploring Options for GSE Capital Buffer
From ABA Banking Journal:
Declining capital buffers for Fannie Mae and Freddie Mac could leave the government-sponsored enterprises with little ability to absorb losses if allowed to zero out at the end of the year, FHFA Director Mel Watt opined in a letter to ABA and other trade associations last week. Watt’s letter came in response to comments from ABA and other housing and finance trade associations last month, urging FHFA not to give in to advocates for rebuilding Fannie and Freddie’s capital cushions without structural reform.
While Watt reiterated that “it is the role of Congress to determine the future of housing finance reform and any steps FHFA might take should not be misperceived as either an effort to promote recapitalization and release of the enterprises from conservatorship, or as interference with the work of Congress,” he noted that FHFA is working with the Treasury Department to explore “a number of options” for addressing challenges that could arise when the capital buffer drops to zero on Jan. 1, 2018.
I am glad that at least they are still thinking about doing something about the GSEs. They have had YEARS to do something…
Despite the deadline coming soon, I simply don’t have much hope they will do anything good for consumers or tax payers.
Home Purchase Originations Still Below Pre-Housing Crash Level
Amid improving macroeconomic conditions, residential lending continued to increase in 2016, based on the recently released 2016 Home Mortgage Disclosure Act (HMDA) data. The number of first-lien loan originations for the purchase of one-to-four unit properties intended for owner occupancy rose to 3.46 million in 2016, a 10 percent increase from 3.12 million in 2015. Although residential lending has been growing at double-digit rates since 2012, loan originations in 2016 were only at three-fourths of the peak level of 4.83 million in 2005. Lending has not fully recovered due to the interplay of factors relating to the borrower’s capacity to obtain a mortgage, tighter lending standards, and the faster appreciation of housing prices relative to income growth amid a lack of housing supply. An increasing share of originations has gone to high income earners.
Check out this chart:
While the steady increase in purchase originations is great, we still have a long way to go.
Rural Home Prices are Dynamic and Growing in Most of the Country
Nationally, home prices grew significantly over the last half-decade, following years of decline in the aftermath of the housing crisis.
But what about home prices in the largely rural, non-metro areas that are home to about 15 percent of the population? Due to limited data availability, these areas often are ignored in discussion about trends in home prices.
Rather than stagnating, home prices outside the metropolitan areas grew considerably between 2000 and 2016. In nominal terms, non-metro home prices grew 58 percent and real non-metro home prices grew nearly 15 percent. Moreover, by the fourth quarter of 2016, nominal non-metro and rural home prices were two percent above their pre-recession peak—the same as national home prices at the same point. However, when adjusted for inflation, home prices in non-metro areas were still 11 percent below their peak, which again, is somewhat similar to national patterns.
As always, this is NOT going to tell you what is happening in your local real estate market. However, it is good to see someone recognizing that many people do not live in the big metros!
Rents Grew Faster Than Inflation Between 2012 and 2015
From NYU Furman Center:
Median rents grew faster than inflation in virtually every metro between 2012 and 2015, especially in already high rent metros.
Despite rising rents, the share of renters spending more than 30 percent of their income on rent (defined as rent burdened households) fell slightly between 2012 and 2015, as did the share spending more than 50 percent (defined as severely rent burdened households). Still, these shares were higher in 2015 than in 2006, and far higher than in earlier decades.
The recent decline in the share of rent burdened households should be cautiously interpreted. The income of the typical renter household increased as the economy recovered, but part of this increase came from a change in the composition of the renter population as more high socioeconomic status households chose to rent their homes.
Interesting that the typical renter household income has increased. How much of this change is because these higher income renters cannot find a home to buy?
Rising Sea Levels and Lost Homes
From Zillow Research:
Nationally, 1.9 million homes are projected to be literally underwater by the year 2100 if the oceans rise six feet – roughly midway between the high end of what the government (considered a conservative source) says is “very likely” (4.3 feet) and the possibility of an 8-foot or greater rise than “cannot be excluded.” That accounts for 1.8 percent of the country’s total housing stock with a value of $916 billion, up from $882 billion in 2016.
Although 39 percent of homes projected to be underwater are valued in the top third of homes in their metros – representing the potential loss of $597 billion in high-end real estate over the course of a single lifetime –not all of the underwater homes would be waterfront mansions: A third (32 percent) are in the bottom tier of home values in their metros, amounting to a potential $123 billion loss.
We just saw how the terrible destruction from several hurricanes can destroy homes quickly. But rising sea levels will take many years.
I wonder if we should stop building homes in areas that will be underwater in several decades?
Well that is it for today! Please share and subscribe!