Discussing the latest on housing starts and building permits, driverless cars and real estate, the economy, home builders reeling but confident and more!
Driverless Cars and Real Estate
I often write about what ifs and the future. While no one knows what the future holds, we must always be looking forward while not forgetting the past.
One particular topic to think about is the effect that driverless cars will have on the future of cars and where people will live. I am not a fan of too much technology and trusting a driverless car still does not seem safe to me.
We have to consider that many people will not be leery of putting their life in the hands of a robot. So let’s look at a recent study from MIT that was sponsored by Capital One:
In this report, we venture into the future of real estate markets and products. Our defnition of ‘real estate’ for this purpose is not limited to buildings –homes, apartments, hotels, retail malls, offce, factories, warehousing. Our defnition also includes the social relationships that are formed and take place therein: how will we live, work, and socialize during the next decades?
It may take some time for self-driving technologies to reach mass-scale adoption. Numerous experimental cars are already on the roads. However, machine learning algorithms will take some time to improve. Likewise, security and regulatory issues will not sort out immediately. Yet there is no doubt that driverless cars represent the future of urban transportation.
What effect will autonomous vehicles have on real estate?
It is also possible that autonomous cars will stimulate a new wave of suburbanization. Passengers will be able to work and even rest during their daily commute. Autonomous vehicles could accelerate sprawl by increasing the distances people are willing to travel.
We thus forecast that AV adoption will have two impacts: it will facilitate densifcation in metros that have strong urban cores, but it will aid in the expansion of decentralized ‘edge cities.’
Will wee see Anderson County become a bedroom community not just for Greenville but also for Atlanta and Charlotte?
This is a very interesting study and a long read. I suggest anyone into housing and enjoys considering what ifs to read it.
Global Financial Centers in a Housing Bubble?
According to the UBS Global Real Estate Bubble Index, the bubble risk in select world cities has increased significantly over the last five years. Real house prices of those metropolises within the bubble-risk zone have climbed by almost 50% on average since 2011. In the other financial centers we looked at, prices have risen by roughly 15%. This gap is grossly out of proportion to the differences in local economic growth and inflation rates.
You have to wonder what the impact would be if the housing markets in financial centers around the world started crashing…
Jonathan Woloshin, one of the authors of the report said despite the using the word “bubble”, it does not mean we are going to see these markets burst. Also, none of the cities that they said are in a housing bubble are in the U.S.
NY Fed on US Economy
The NY Fed just released their latest Economy in a Snapshot report. Some of the highlights:
Real personal consumption expenditures fell slightly in August, suggesting slower consumer spending growth in the third quarter compared to Q2.
Housing indicators still point to continued gradual improvement in this sector. Multi-family starts remained appreciably below their recent peaks, but tight market conditions continued to promote a gradual rise in single-family starts.
Monthly readings on PCE inflation indicated that core inflation continues to run at a level somewhat below the FOMC’s longer-run objective.
Gradual improvement is nice but we still have a long way to go as far as the construction of new homes is concerned…
Powell Likely Next Fed Chief Despite Yellen Being Best Suited
Jerome Powell likely will be the next Federal Reserve chairman, according to a slim majority of economists in a Reuters poll – but most of them said current Fed Chair Janet Yellen would be the best option.
I am not a fan of Yellen but she was handed a flaming bag of poo. The “experts” think Yellen is the best choice so I wonder if replacing her is logical or politically motivated?
Some US Homebuilders Still Reeling Six Years into Recovery
High leverage and a heavy debt burden have left some US homebuilders still struggling six years into the housing recovery, according to Fitch Ratings. Most homebuilders in Fitch’s coverage have improved credit metrics and balance sheets but a few issuers have yet to bounce back amid more favorable operating conditions.
Fitch expects the housing recovery to continue through at least 2018 although rising land, labor and material costs will pressure profits.
Not only are some home builders still reeling, many smaller home builders did not survive the housing market crash.
Home Builder Confidence Rises in October
Builder confidence in the market for newly-built single-family homes rose four points to a level of 68 in October on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This was the highest reading since May.
NAHB Chief Economist Robert Dietz said:
It is encouraging to see builder confidence return to the high 60s levels we saw in the spring and summer. With a tight inventory of existing homes and promising growth in household formation, we can expect the new home market continue to strengthen at a modest rate in the months ahead.
Sounds great that home builder are confident. And there could be a good reason for this confidence…
Housing Starts Increase Year Over Year
From the Census Bureau:
Privately-owned housing units authorized by building permits in September were 4.5% below the revised August rate and 4.3% below the September 2016 rate. Single-family authorizations in September were 2.4% above the revised August level.
Privately-owned housing starts in September were 4.7% below the revised August estimate but 6.1% above the September 2016 rate. Single-family housing starts in September were 4.6% below the revised August figure of 869,000.
This is the lowest level of single family housing starts since May. I wonder if demand is so high why starts would be weak.
Some will say it is due to the hurricanes. And it is up compared to last September. But this is well below expectations and analysts were aware the hurricanes would impact starts.
Check out the chart:
You can see we have been increasing for several years but are still much lower than we should be. Still, we are making progress, even if it is slow!
Don’t Rely on U.S. Consumers to Power Global Growth
U.S. consumers account for 18 percent of global gross domestic product, and it’s tempting to rely on them to continue carrying the aging recovery to support world growth. The data and growing lender anxiety, though, suggest investors should prepare for what is increasingly looking like an inevitable slowdown in economic growth next year.
Although American households managed to maintain their spending levels in the face of dwindling prospects for future economic expansion, they have done so by taking on incremental debts, which could soon prove unsustainable.
Remember, debt is like hot sauce: a little is OK but too much will burn you!
U.S. Economic Confidence Index Decreases
Americans’ confidence in the U.S. economy tilted slightly negative last week for the first time in 2017. Gallup’s U.S. Economic Confidence Index was -1 for the week ending Oct. 15 — down seven points from the previous week.
Though a first for 2017, the index has flirted with negative territory at several points in recent months — with a score of zero in late June, for example. But even with this week’s dip into negative territory, confidence remains higher in 2017 than in any year since Gallup began tracking the index in 2008.
While the decrease is not good, pay attention to that last sentence. Americans in 2017 are still feeling more confident than they have for the last 9 years…
Is the Mortgage Interest Deduction Contributing to Racial Wealth Gap?
The National Low Income Housing Coalition (NLIHC) and the Institute on Assets and Social Policy (IASP) at Brandeis University’s Heller School released today a report, “Misdirected Investments: How the Mortgage Interest Deduction Drives Inequality and the Racial Wealth Gap.” They said that while African Americans and Hispanics each account for 13% of the nation’s households, they receive only 6% and 7% of the tax benefits from the mortgage interest deduction (MID). White households receive nearly 78% of the deduction’s benefits.
Yet another attack on the Mortgage Interest Deduction. NAR is working to defend the Mortgage Interest Deduction but it is going to be a tough battle.
That is all the news I have today!