Looking at the latest NAR Existing Home Sales Report, interesting mortgage statistics, several reports on the economy including another recession prediction, jobless claims, remodeling activity and more!
Existing Home Sales Decline in September
Total US existing-home sales fell 3.4% from August to a seasonally adjusted rate of 5.15 million in September. Sales are now down 4.1% from a year ago.
The median existing-home price for all housing types in September was $258,100, up 4.2 percent% from September 2017 ($247,600). September’s price increase marks the 79th straight month of year-over-year gains.
Lawrence Yun, NAR chief economist, said:
This is the lowest existing home sales level since November 2015. A decade’s high mortgage rates are preventing consumers from making quick decisions on home purchases. All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country.
There is a clear shift in the market with another month of rising inventory on a year over year basis, though seasonal factors are leading to a third straight month of declining inventory. Homes will take a bit longer to sell compared to the super-heated fast pace seen earlier this year.
NAR is talking about the entire US so you really need to focus on what is happening in your local market. For example, home sales during September 2018 in Anderson County SC were UP 6.6% and the median sold price was UP 9.3% compared to September 2017 according to data from the WUAR MLS.
This is talking about ALL types of homes in ALL areas of Anderson County so you must not only look locally but you must only compare apples to apples. There is no sense in comparing a home on Hartwell Lake with a dock to a home that is NOT on the lake for example.
Interesting Mortgage Insights
Highlights from Ellie Mae’s September 2018 Mortgage Origination Insight Report:
- The average time to close a purchase mortgage was 45 days
- Closing rates for all loans held steady at 71.7% for the 2nd consecutive month
- Purchase closing rates increased slightly to 76.4%
- 72% of purchase loans had FICO scores over 700
- 28% of purchase loans had FICO scores below 699
- Over 65% of FHA loans had a FICO score below 699
These are just the averages or statistics so the best thing for anyone looking to by a home is to sit down with several mortgage lenders and discuss their options/possibilities.
Recession in the Next 2 Years? Flip a Coin!
The U.S. economy has a greater than 50-50 chance of tipping into a recession in the next two years, according to a model tracked by JPMorgan Chase & Co.
The probability of a U.S. recession within one year is almost 28 percent, and rises to more than 60 percent over the next two years, researchers wrote in a note this week. Over the next three years, the odds are higher than 80 percent, according to the note.
Forewarned is forearmed…
If you are thinking of selling, waiting until the economy hits the skids probably is not too smart. If you think waiting to buy is a savvy move, the banks could get really restrictive with mortgage lending.
Economy Remains on Strong Growth Trajectory
Contradicting the report from JPMorgan is the latest Conference Board Leading Economic Index for the US:
The Conference Board Leading Economic Index® (LEI)for theU.S. increased 0.5 percent in September to 111.8 (2016 = 100), following a 0.4 percent increase in August, and a 0.7 percent increase in July.
Ataman Ozyildirim, Director and Global Research Chair at The Conference Board said:
The US LEI improved further in September, suggesting the US business cycle remains on a strong growth trajectory heading into 2019. However, the LEI’s growth has slowed somewhat in recent months, suggesting the economy may be facing capacity constraints and increasingly tight labor markets. Economic growth could exceed 3.5 percent in the second half of 2018, but, unless the momentum in housing, orders and stock prices accelerates, that pace is unlikely to be sustained in 2019.
OK so maybe this does contain some hints that could tie into the recession prediction of JPMorgan. However, do NOT panic because…
2018 and 2019 Growth Outlooks Steady
Fannie Mae just released their latest October 2018 Economic and Housing Outlook so let’s look at some of the highlights:
- Housing starts in 2018 will increase 5.3% compared to 2017
- Housing starts in 2018 will increase 7.7% compared to 2018
- Total US home sales in 2018 will decrease 1.3% compared to 2017
- Total US home sales in 2019 will increase 0.8% compared to 2018
- The unemployment rate will wind up being 3.9% for 2018 and decrease to 3.5% in 2019
Fannie also said:
We expect home sales to rise in 2019 as rates stabilize, but annual growth should be muted as existing sales are expected to be flat for the year. In summary, the economy is expected to have grown slightly faster in the third quarter than projected in our September forecast, but our full-year growth expectations for 2018 and 2019 remain unchanged at 3.0 percent and 2.3 percent, respectively.
Fannie Mae Chief Economist Doug Duncan said:
Rising interest rates and declining housing sentiment from both consumers and lenders led us to lower our home sales forecast over the duration of 2018 and through 2019. Meanwhile, affordability, especially for first-time homebuyers, remains atop the list of challenges facing the housing market.
Other than the news about weakness in housing, this prediction does NOT sound quite as scary as the one from JPMorgan.
Jobless Claims Decrease
In the week ending October 13, the advance figure for seasonally adjusted initial claims was 210,000, a decrease of 5,000 from the previous week’s revised level. The 4-week moving average was 211,750, an increase of 2,000 from the previous week’s revised average.
Remember that we need to watch the 4-week moving average since it is less “noisy”. Check out the chart showing the 4-week moving average going back to 1967:
You can see just how impressively low claims are compared to the past…
Remodeling Activity Still Strong
The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) posted a reading of 58 in the third quarter of 2018, remaining stable from the previous quarter. The RMI has been consistently above 50—indicating that more remodelers report market activity is higher compared to the prior quarter than report it is lower—since the second quarter of 2013.
NAHB Remodelers Chair Joanne Theunissen said:
Remodelers across the country are seeing home owner demand remain strong through the midpoint of the year. Both positive home price growth—albeit at a slightly slower rate—and good consumer confidence are supporting the steady remodeling market.
While we want a healthy level of remodeling, this also indicates that many home owners are NOT selling their current home and buying a bigger or nicer home. This makes the tight inventory issue even worse…
Rents Decrease YoY For First Time Since 2012
For the first time in six years, the median rent nationwide is less than it was 12 months earlier. Rents climbed steadily from 2013 through mid-2017. Because of a small decline earlier this year, the median rent nationwide is now down 0.2 percent from September 2017 – about $3 a month.
I am sure some will twist this to say that renting beats owning. But a decrease of $3 a month does not mean much to me…
Buying a home is a serious financial decision and is not always the right choice for every one. Some people simply are not cut out for the financial responsibility of home ownership.
Owning a home has many advantages including the way it helps home owners to build wealth. Zillow said that home values rose 7.6% YoY in September 2018…
It is hard to beat an investment you live in that has returns like that. Even if you can rent for less, will you be able to invest the difference or will you blow the money?
According to Trulia’s Rent Vs Buy Report, it is cheaper to own than rent in the 100 largest metro areas if you use a 30 year fixed rate mortgage. Some people rent because they think they cannot afford to own.
A recent survey of renters found that 34% rent because they cannot afford to buy, 29% cannot afford to buy where they live, and roughly 24% are saving to buy a home. We need more affordable rentals so that renters can save money to buy a home.
Sadly, some renters think they need a huge down payment of 20% to buy a home. This is not true and it is possible to buy a home with a much smaller down payment!
Video Killed the Radio Star, Who Killed Sears?
From Huffington Post:
If you’ve been following the impending bankruptcy of America’s iconic retailer as covered by print, broadcast and digital media, you’ve probably encountered lots of nostalgia and sad clucking about how dinosaurs like Sears can’t compete in the age of Amazon and specialty retail.
But most of the coverage has failed to stress the deeper story. Namely, Sears is a prime example of how hedge funds and private equity companies take over retailers, encumber them with debt in order to pay themselves massive windfall profits, and then leave the retailer without adequate operating capital to compete.
Sad how people make huge amounts of money by destroying a company. And you have to think about the people that work for a company that is the victim of vulture capitalists…
Some will say this is just business or capitalism and it is all legal. But is it ethical or moral?
Would you want someone to do this to you and your employer? Something to think about…
Well that is all I have time for today! Be sure to hit those share buttons and as always, if you have any questions about real estate in the Anderson SC area, Contact Me!