Discussing the latest construction spending report, manufacturing activity, underwater home owners, foreclosures, mortgage delinquencies and much more!
Construction Spending Increased in August
From the Census Bureau:
Construction spending during August 2017 was 0.5% above the revised July estimate. The August 2017 figure is 2.5% above the August 2016 estimate. Construction spending during the first 8 months of 2017 was 4.7% above the same period in 2016.
Spending on private construction was 0.4% above the revised July estimate. Residential construction was 0.4% above the revised July estimate. Nonresidential construction was 0.5% above the revised July estimate.
This is the 4th consecutive increase in private residential construction spending. New private single family construction spending increased only 0.3% from the previous month but increased 11.1% from the August 2016 level.
This is a good report but private residential spending is still 23% below the peak. 2017 has been the worst year for construction spending growth since 2010.
ISM Manufacturing Index Increased
Economic activity in the manufacturing sector expanded in September, and the overall economy grew for the 100th consecutive month according to the latest Manufacturing ISM® Report On Business.
Good report. The September PMI was up 2 percentage points from the August level. This indicates growth in manufacturing for the 13th consecutive month and is the highest reading since May 2004.
Only 2.8% of Home Owners With a Mortgage Underwater
From Black Knight latest Mortgage Monitor:
The national delinquency rate rose slightly from July but the inventory of loans in active foreclosure continues to decline. Foreclosure starts increased 2.6% month-over-month but remain extremely low. This is the 3d lowest number of foreclosure starts since the beginning of the housing crisis.
The average home price in America rose by nearly $15k over the first half of 2017, significantly improving borrowers’ equity positions. Since the bottom of the market, the median home nationally has risen in value by more than 40%, resulting in 95% of 2012 originations having tappable equity available in their home.
42M homeowners with a mortgage now have at least 20 percent equity available in their home, the most ever recorded. In total, $8.85T in equity is held by mortgage holders in the US, with $5.3T of that equity available to borrow against before hitting a conservative 80 percent LTV cap. Tappable (lendable) equity exceeding $5T for the first time in Q2 2017 and total equity edging just above the $8.4T seen at the prior peak in home prices in 2006.
Along with increasing the amount of lendable equity, strong home price gains so far in 2017 have helped to continue to shrink the population of borrowers who owe more on their mortgages than their homes are worth. Today, just 1.4M borrowers remain underwater, representing 2.8% of all homeowners with a mortgage.
The rise in home prices and the increase in tappable equity means that more home owners can sell their home! Not only that. more people are feeling that NOW is a good time to sell a home!
The latest Fannie Mae National Housing Survey said that climbing house prices were the reason for the dramatic increase in the number of respondents who said now is a good time to sell. The index is 21 points greater than it was at this time last year.
Overall, 62% of Americans said that now is a good time to sell compared to the 26% that said that now is not a good time to sell.
CoreLogic recently reported that home prices increased 6.7% YoY and 78.8% of homeowners with a mortgage in the US now have significant equity. You just read the latest report from Black Knight that also said the number of underwater home owners is very low.
Doug Duncan, Vice President & Chief Economist at Fannie Mae, said:
In the early stages of the economic expansion, home selling sentiment trailed home buying sentiment by a significant margin. The reverse is true today.
The net good time to sell share is now double the net good time to buy share, with record high percentages of consumers citing home prices as the primary reason for both perceptions. Such a sizable gap between selling and buying sentiment, if it persists, could weigh on the housing market through the rest of the year.
The demand by home buyers remains larger than the inventory of homes for sale. This is why home prices have been increasing dramatically in most areas of the U.S.
Unless we see the number of homes for sale increase substantially, it will remain a seller’s market. As Duncan pointed out, the gap between home buying and selling sentiment is large and could shift the market towards buyers!
If you are thinking of selling your home, now is the time! To find out why read on…
Considering Selling Your Home? Act Quickly!
The latest Census Bureau and HUD Residential Sales Report revealed that the number of permits for single family home is up 7.7% over last year. This is the best indication of how many new homes will be built and hit the market in the coming months.
Danielle Hale, Realtor.com’s Chief Economist, said:
It’s not spectacular construction growth, but it’s slow and steady in the right direction. Eventually, the pickup in single-family home construction will mean [buyers] will have more options. Especially with the limited number of sales right now, more options are really needed.
The increase in the number of homes for sale is going to great for home buyers. But it will be bad for sellers as it means there will be more competition!
Because of the low number of homes for sale, sellers can expect:
- A great price
- A faster sale
- Fewer lowball offers and outrageous buyer requests
If we see more homes hit the market, sellers may not see these same advantages. Hale also said:
As new construction continues to increase, home shoppers will eventually have more [choices] and a bit more time to make purchase decisions compared to today’s quick-moving housing market.
I know that many people will want to wait until Spring or after the Holidays to list their home. It might be a better idea to sell your home BEFORE these new homes become available!
Demand in Housing Market Continues to Surge
The national home purchase market continued its rally in the second quarter of 2017. Sales transactions increased 10.1 percent in the first quarter compared to a year ago marking the 11th consecutive quarter of such increases.
For the four quarters ending June 30, 2017, sales were up 8.6% from the four quarters ending June 30, 2016. Compared to the Q2 2013, sales have grown by 26%!
Looser lending, lower mortgage rates, and a decline in international buyers has shifted from cash sales to traditional home buyers using a mortgage ( institutional financed ).
Lending continues to increase. Compared to Q2 2013, loan counts are up by 38% and the dollar volume is up by 53%.
Nice! Remember this is talking about the entire U.S. You must always use accurate local information such as the guidance of an experienced Realtor when buying or selling!
Realtors Expect Continued Home Price Growth
Home prices have been on the rise as demand continues to outstrip supply. At the end of August 2017, the inventory of homes for sale stood at 1.88 million homes, which is equivalent to 4.2 months of the current monthly sales pace. Month’s supply has been falling since January 2015, 27 consecutive months now.
With falling inventory, home prices have increased. As of August 2017, the median price of existing homes sold was $253,500, surpassing the peak median price of $229,500 in June 2006. Since January 2012, the year which can be considered as a breakout year for the housing market, home prices have increased by 68 percent as of July 2017, a four-fold increase compared to the 15 percent gain in median household income.
Housing starts, although improving, have not kept pace with the 1.5 million estimated demand for units coming from net household formation (about 1.2 million) and units needed to replace obsolete or destroyed homes.
The map below shows the median expected price change of the respondents in the next 12 months at the state level, according to respondents in the August 2017 REALTORS® Confidence Index Survey.
This is a not exactly a scientific report but more of a survey of opinions from the Realtors with their boots on the ground. That being said, it is quite encouraging!
As you can see, they are predicting that home prices in South Carolina will rise 3.01 to 4% in the next 12 months. If we also see mortgage rates increase as many recent predictions say they will, it will hurt some buyers…
Change in Mandatory Arbitration Rule to Raise Cost of Credit 25%
From ABA Banking Journal:
The OCC has conducted a study finding that the Consumer Financial Protection Bureau’s arbitration rule is likely to increase the cost of credit by about 25 percent once lenders factor in the cost of class action litigation, Acting Comptroller Keith Noreika said today at a fintech conference hosted by the Federal Reserve Bank of Philadelphia.
“What we found is that there could be as high as a three-and-a-half percent annual percentage rate increase for consumers who would be subject to the rule,” Noreika said. “That’s a 25 percent increase in credit costs for people who may live week to week. There’s a real, tangible economic effect that it may have on consumers.”
I have no doubt that the banks will pass on the cost of not screwing over consumers to… consumers!
From the Hamilton Project:
The expectation of rising living standards, with each generation doing better than the one before, has long been a given. More recently, that expectation has diminished—and with good reason. One of the best measures economists use to determine Americans’ economic advancement is whether wages are rising, broadly and consistently.
After adjusting for inflation, wages are only 10 percent higher in 2017 than they were in 1973, with annual real wage growth just below 0.2 percent. The U.S. economy has experienced long-term real wage stagnation and a persistent lack of economic progress for many workers.
Here is the thing to remember: You, and only you, can do something about your life. If you are not happy about your life, then it is up to you to change it.
That being said, I know it can seem impossible to overcome the challenges. But we do not have to look too far to find success stories about others that have faced tough times.
I am not saying it will be easy but if you truly want a better life, you must work every day as hard as you can to reach your goals!
The US Economy is Failing
Snippets from a must read article on Counter Punch:
How is the labor market tight when the labor force participation rate is at historical lows. When jobs are available, the participation rate rises as people enter the work force to take the jobs.
The Wall Street Journal editorial asserts that the young are not in the work force because they are on drugs, or on disability, or because of their poor education. However, all over the country there are college graduates with good educations who cannot find jobs because the jobs have been offshored.
In America Government is not in the hands of its people. Government is in the hands of a ruling oligarchy. Oligarchic rule prevails regardless of electoral outcomes. The American people are entering a world of slavery more severe than anything that previously existed. Without jobs, dependent on their masters for trickle-down benefits that are always subject to being cut, and without voice or representation, Americans, except for the One Percent, are becoming the most enslaved people in history.
Americans carry on by accumulating debt and becoming debt slaves. Many can only make the minimum payment on their credit card and thus accumulate debt. The Federal Reserve’s policy has exploded the prices of financial assets. The result is that the bulk of the population lacks discretionary income, and those with financial assets are wealthy until values adjust to reality.
This ties in perfectly with the previous story. Buying a home is one of the very few kinds of good debt. Going into debt to buy stuff to impress those that that don’t give a crap about you is no way to live!
Buying a home can be a great way to build wealth and set yourself up for a bright financial future. You just need to buy right, buy smart and buy the right home!
Personal Income and Spending Increased
Personal income increased $28.6 billion (0.2 percent) in August according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $14.9 billion (0.1 percent) and personal consumption expenditures (PCE) increased $18.0 billion (0.1 percent).
Real DPI decreased 0.1 percent in August and Real PCE decreased 0.1 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.1 percent.
Weak and we must have increases in wages/incomes for all Americans to see a truly healthy economy. Consumer spending makes up 2/3 of U.S. economic activity so it is important that we see stronger gains in consumer spending.
That is it for today! Share to impress your friends and subscribe so you never miss another post!