Discussing good new home sales numbers, renting becomes less affordable, Realtor confidence, positive reports from Richmond Fed and much more!
U.S. New Home Sales Hit 10 Year High
NEW HOME SALES
Sales of new single-family houses in September 2017 were 18.9% above the revised August 2017 rate and 17.0% above the September 2016 estimate of 570,000.
The median sales price of new houses sold in September 2017 was $319,700. The average sales price was $385,200.
FOR SALE INVENTORY AND MONTHS’ SUPPLY
The seasonally-adjusted estimate of new houses for sale at the end of September was 279,000. This represents a supply of 5.0 months at the current sales rate.
Remember this is talking about the entire country and not just Anderson County! The chart above doesn’t go back in time far enough to show that we still have a long way to go.
Still, this is really good news because of the low inventory problems in many areas of the U.S. Let’s hope the improvements continue!
If You Think Renting Is Expensive Now, Just Wait
When you are looking at the rent versus buy question, the way that rents are rising has a huge effect on what is best for you. Freddie Mac has just released a study that found that over the past six years, the shortage of affordable rentals has grown considerably.
Steve Guggenmos, vice president of Freddie Mac Multifamily Research and Modeling said:
Our analysis looked at the affordability of the same rental units at two close but different points in time. In a matter of just a few years, we found that a large number of units previously affordable to very-low income families could no longer be considered affordable. This is a trend that is worsening, and Freddie Mac is working to better understand and develop offerings that meet the needs of this market.
Freddie said that he number of affordable apartments fell by more than 60% over the past six years for households making less than 50% of the area median income. They also said there are 2 factors contributing to this problem: rising rents and stagnant incomes.
Freddie concluded the report by saying their research suggest this will get worse unless something changes. If we want to see renters eventually become home owners, then they must be able to find affordable housing so they can improve their finances, save down payment and closing costs, etc etc…
Strange that we are seeing a decrease in the number of affordable rentals. Especially since another study by Freddie found that most renters think renting is more affordable than owning.
David Brickman, executive vice president and head of Freddie Mac Multifamily said:
Our rental survey confirms what we’re seeing in the market — that a growing number of individuals across demographic groups view renting as more affordable and better suited to their current economic situation. These changing perceptions, combined with rising rents and tightening supply of affordable housing, are likely to fuel continued multifamily market growth in the years ahead. More importantly, it makes our role — providing financing to meet the nation’s growing workforce housing need — even more important.
Investors should take this shift in the perception of renters as good news. It should mean that demand for rentals will remain strong.
If renting makes more sense for someone, then that is the best option for them. But I have a feeling that many may look back years from now and wish they had bought a home…
Self-made millionaire David Bach said in a CNBC article:
The single biggest mistake millennials are making” is not purchasing a home because buying real estate is “an escalator to wealth. If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter.
In his top selling book, “The Automatic Millionaire,” Bach shows you the numbers:
As a renter, you can easily spend half a million dollars or more on rent over the years ($1,500 a month for 30 years comes to $540,000), and in the end wind up just where you started — owning nothing. Or you can buy a house and spend the same amount paying down a mortgage, and in the end wind up owning your own home free and clear!
So who is David Bach? Well he has written 9 consecutive NY Times best sellers. He is one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeek and USA Today bestseller lists.
He has been on all kinds of major network news shows as well as big name publications such as New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times, Washington Post, the Wall Street Journal, Working Woman, Glamour, Family Circle, Redbook, Huffington Post, Business Insider, Investors’ Business Daily, and Forbes.
But that is his opinion. What about other BIG name successful people?
Well Warren Buffet also owns his home. And has owned the same home for many many years.
And Mark Zuckerberg of Facebook is also a home owner.
Does this mean that you should buy a home or change your opinion about owning a home?
Well, it is food for thought…
U.S. Economic Confidence Increases
Americans’ assessments of the economy improved last week, lifting Gallup’s U.S. Economic Confidence Index back into positive territory, averaging +4 for the week ending Oct. 22, only one week after the measure recorded the first negative score in 2017.
Last week’s jump in confidence was also the index’s best one-week improvement since the first week of August, when the index also rose five points. The only other week in 2017 where Gallup’s U.S. Economic Confidence Index improved by a similar or better margin occurred in early March, when confidence rose seven points to a nine-year high of +16.
Nice and hopefully we will see more and more Americans feeling positive about the economy! Consumer must have confidence in the economy to make large purchases, such as buying a home. Speaking of confidence…
REALTORS® Confidence Index Survey: September 2017 Highlights
As you can see, confidence about current conditions decreased from the previous month.
This chart shows how Realtors are feeling about the next 6 months. Again we see a decrease BUT anything above 50 indicates that market conditions are expected to improve.
As you can see, home prices are expected to continue increasing. I would agree that we will see home prices continue to increase in the Anderson SC area as long as nothing major happens. Like N. Korea doing something stupid, a natural disaster, terrorist attack, etc…
I am surprised that Realtor confidence was not stronger since home buyer traffic is healthy in most areas of the U.S.
Fifth District Service Sector Firms Reported Strong Growth in October
From Richmond Fed’s latest Survey of Service Sector Activity:
According to the latest survey by the Federal Reserve Bank of Richmond, District firms continued to see growth in October, with a slight increase in the revenues index to 24 from 22 in September. The service sector employment and wage indexes also pointed to growth. Although the overall service sector employment index dipped in October, the retail employment index rose from 20 to 24.
After months of increases, District service sector firms expect to see even more growth in demand in the next six months. Both retail and service firms reported increased price growth in October and expect this trend to continue in coming months.
Excellent news! Remember that South Carolina is in the Fifth District.
Fifth District Manufacturing Activity Remained Positive in October
From Richmond Fed’s latest Survey of Manufacturing Activity:
Reports on Fifth District manufacturing activity remained positive in October, according to the latest survey by the Federal Reserve Bank of Richmond. The composite index dropped, affected by a notable decline in the shipments index, which fell from 22 to 9, but it remained positive across all components, indicating continued growth. While most manufacturing indexes fell in October, the wage index increased from 17 to 24, which is the highest it has been since May of 2000.
Manufacturing firms remained optimistic about growth in the next six months. Most expectations indexes rose, with the exception of employment and average workweek, which both remained positive and were well above current values.
District manufacturing firms reported that prices grew in October, although at a slightly lower rate than during September. They expect price growth to accelerate in the coming six months.
Heck yeah! Good news like this is like Christmas came early!
Chemical Activity Barometer Bounces Back
From the American Chemistry Council:
The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), notched an increase over September’s reading both on a three-month moving average (3MMA) basis and an unadjusted basis. The CAB was up 0.2 percent and 0.7 percent, respectively. The increases reflected a bounce back from the effects of Hurricanes Harvey and Irma. Compared to a year earlier, the CAB is up 3.0 percent on a 3MMA basis, a slower pace than the previous nine months, but one that continues to suggest further gains in U.S. business activity into 2018.
I am glad to see that the bad numbers from last month were just a hurricane induced blip. Also, knowing we should see increases going into 2018 should help to calm anyone NOT feeling positive.
Big Business Wins Again
Banks, credit card issuers and other financial companies will be able to block customers from banding together to sue over disputes, after the U.S. Senate on Tuesday narrowly killed a rule banning the firms from using “forced arbitration” clauses.
After a signature from Trump, expected soon, the resolution will abruptly end a years-long fight that has included multiple federal regulators, consumer advocacy groups, and financial lobbyists.
Critics of the rule had said class actions only benefit trial lawyers and arbitration generally wins larger settlement awards for customers. Supporters said forced arbitration harms customers by putting companies in control of the process and taking away the right to sue enshrined in the U.S. Constitution.
The CFPB created its rule after conducting a five-year study that found customers struggle to have banks open arbitration cases about their complaints, but that those few cases have led to slightly higher individual awards than class actions.
I am not surprised this happened. I do agree that the additional costs of having to conduct business in a honest, ethical and legal manner would be passed on to consumers…
Would this lead to frivolous lawsuits? Probably. I may be crazy but we could rely upon judges to throw these cases out.
When justice is needed, then let justice be served…
Only 2 Republicans voted against this and one was South Carolina’s Lindsey Graham. Not sure what to say about that…
Americans Are Retiring Later, Dying Sooner and Sicker In-Between
The U.S. retirement age is rising, as the government pushes it higher and workers stay in careers longer.
But lifespans aren’t necessarily extending to offer equal time on the beach. Data released last week suggest Americans’ health is declining and millions of middle-age workers face the prospect of shorter, and less active, retirements than their parents enjoyed.
Somewhat depressing but facts are facts. It is up to us to plan and save for our Golden Years. Hopefully, you make the right financial choices…
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