Discussing the home ownership rate, home prices hit a new peak, an embarrassing video of HUD Secretary Carson, rising rents, mortgage delinquencies plus more!
Home Ownership Rate Increases Slightly
The Census Bureau just reported that the home ownership in Q3 2017 increased to 63.9% from 63.7% in Q2 2017. This is the fifth consecutive quarter with an increasing home ownership rate.
If 63.9% of Americans are home owners, then being concerned about a healthy sustainable home ownership rate is not protecting a special interest!
NAR President William E. Brown recently said in the WSJ:
Defending middle-class homeowners isn’t ‘greedy’ because homeownership isn’t a ‘special interest.’ It’s a common interest.
I have written extensively about the wealth building benefits of owning a home. And I have written several times about the social benefits, the most recent being last week.
Being a Realtor does not mean that I always mindlessly repeat or agree with whatever position NAR takes. I am not 100% sold on the end of the Mortgage Interest Deduction being as bad as they say.
It will be bad but…
Will losing the Mortgage Interest Deduction mean home values decrease and taxes increase for home owners as much as we have heard? Maybe but it is also possible that a simpler tax system will be better in the long run.
Will people find buying a home less attractive if the Mortgage Interest Deduction is eliminated? Maybe but no knows for sure what the future holds…
US Home Prices Hit New High
Today we got good news in the latest S&P/Case-Shiller Indices. They said that U.S. home prices have increased for 27 months. They said that their U.S. National Home Price NSA Index increased 6.1% YoY in August 2017 and 5.9% from the previous month.
David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices said:
Home price increases appear to be unstoppable. The ongoing rise in home prices poses questions of why prices are climbing and whether they will continue to outpace most of the economy.
Currently, low mortgage rates combined with an improving economy are supporting home prices. Low interest rates raise the value of both real and financial long-lived assets. The price gains are not simply a rebound from the financial crisis; nationally and in nine of the 20 cities in the report, home prices have reached new all-time highs.
However, home prices will not rise forever. Measures of affordability are beginning to slide, indicating that the pool of buyers is shrinking. The Federal Reserve is pushing short term interest rates upward and mortgage rates are likely to follow over time, removing a key factor supporting rising home prices.
While this is great news for home owners, it does mean anyone looking to buy a home is facing a market with limited inventory and rising home prices. The good news for home buyers is this is a national report and may not reflect what is happening in your local market.
Housing Secretary Carson Cannot Explain Housing Budget Cuts
With the dire need for affordable housing, this is very interesting:
So does Carson not know or is embarrassed to say? Either way it isn’t good or acceptable.
US Single-Family Rents Up 3 Percent Year Over Year in August
Single-family rents climbed steadily between 2010 and 2016, as measured by the CoreLogic Single-Family Rental Index (SFRI). However, the index shows year-over-year rent growth has decelerated slowly (Figure 1) since it peaked early last year. In August 2017, single-family rents increased 3 percent year over year.
Low-end rent growth was almost double high-end rent growth. Rents on higher-priced rental homes increased 2.3 percent year over year in August 2017. Rents in the low-end market, defined as properties with rents less than 75 percent of the regional median rent, increased 4.4 percent year over year in August 2017.
Now you can start to see why Carson being unable to explain HUD budget cuts is so concerning. Affordable housing is very important in helping everyone achieve the American Dream…
Most Say American Dream is Within Reach
From Pew Research Center:
Despite persistently low levels of public satisfaction with the state of the nation, most Americans say they have achieved the “American dream” or are on their way to achieving it. Only about one-in-five (17%) say the American dream is “out of reach” for their family.
The American dream means different things to different people, however. Far fewer Americans say “becoming wealthy” is essential to the American dream than say the same about personal freedom and a good family life.
Are the people that say they are on their way to achieving the American Dream being unrealistically optimistic?
Snippets from post on Imperfect Cognitions:
We know that people have a tendency to expect that their future will be better than that of others or better than seems likely on an objective measure of probability. But are they really expressing a belief that the future will be good, or should we see these expressions of optimism as hopes or possibly even just expression of desires for the future?
By definition, unrealistic optimism is a phenomenon that shows us to be insufficiently in touch with reality. However, establishing that we are in fact making an error when assessing the likelihood of future outcomes is surprisingly difficult. In some cases, whether an expectation is correct or not can only be established post factum.
But the question of whether an individual’s optimistic beliefs are false is in many ways less pressing than the question whether the individual is justified in holding that belief given the evidence available to them. Are unrealistically optimistic beliefs epistemically irrational because they do not take into account available evidence either when the individual forms the belief or when they maintain their belief?
I often say hope for the best but plan for the worst. This article is food for deep thoughts as I stare up at the stars while drinking coffee on my back deck.
Sometimes, I fear I am overly pessimistic. Or maybe I could turn some readers off by clearing up some of their misconceptions about real estate or the economy.
So I wonder if you can be unrealistically pessimistic…
32% Say U.S. Headed in Right Direction
Rasmussen just reported that 32% of likely U.S. voters think the country is on the right track. Compare this to 62% that think the country is headed in the wrong direction.
Now ask yourself how many are missing out on opportunities because of fear, uncertainty and doubt?
World Economy Dangerously Unbalanced
Snippets from a UN paper:
The world economy remains unbalanced in ways that are not only exclusionary, but also destabilizing and dangerous for the political, social and environmental health of the planet. Even when economic growth has been possible, whether through a domestic consumption binge, a housing boom or exports, the gains have disproportionately accrued to the privileged few. At the same time, a combination of too much debt and too little demand at the global level has hampered sustained expansion of the world economy.
Austerity measures adopted in the wake of the global financial crisis nearly a decade ago have compounded this state of affairs. Such measures have hit the world’s poorest communities the hardest, leading to further polarization and heightening people’s anxieties about what the future might hold. Some political elites have been adamant that there is no alternative, which has proved fertile economic ground for xenophobic rhetoric, inward-looking policies and a beggar-thy-neighbour stance. Others have identified technology or trade as the culprits behind exclusionary hyperglobalization, but this too distracts from an obvious point: without significant, sustainable and coordinated efforts to revive global demand by increasing wages and government spending, the global economy will be condemned to continued sluggish growth, or worse.
In today’s challenging and unpredictable global environment, efforts to build inclusive economies and societies will need to accelerate. Ending austerity and harnessing finance to serve society once again, rather than the other way around, are the most urgent challenges.
Reining in endemic rentierism, and the inequalities it generates, requires fixing the power imbalances that allow such behaviour to flourish. This will not be easy, but it is indispensable if the objective of truly inclusive and sustainable growth is to be realized.
This is just a small portion of this very interesting paper. I wrote recently about the IMF warning about income inequality and now there is this paper from the UN.
Obviously, the inequality problem is not limited to just America. Will we start seeing social unrest across the globe if this does not change?
A long must read for sure…
Lowest Mortgage Delinquency Rate Since the Financial Crisis
From the CFPB:
Rates of serious delinquency are at the lowest level since the financial crisis: According to the data, the national rate of seriously delinquent mortgages peaked at 4.9 percent in 2010. As of March 2017, the rate had fallen to 1.1 percent, the lowest level since 2008.
A delinquent mortgage is a home loan for which the borrower has failed to make payments as required in the loan documents. If the borrower can’t bring the payments on a delinquent mortgage current within a certain time period, the lender may begin foreclosure proceedings. Whether consumers can make their mortgage payments is an important sign of the health of the mortgage market and the overall economy. For instance, job growth, higher wages, and higher home values generally lead to fewer missed or late mortgage payments.
Percentage of U.S. Mortgages 90 Plus Days Delinquent
We have come so far from the dark days after the economy and housing market crashed. It is so good to see news such as this!
How Will Fed’s Plan to Shift from Negative Rate Environment Impact Real Estate?
From CoStar Group:
At numerous times over the past several years, rising Treasury yields have prompted commercial real estate investors to speculate how the end of historically low interest rates would influence property values. Invariably the yields reversed course — even after the Federal Reserve began in late 2015 to ‘tighten’ monetary policy — and capitalization rate compression continued.
But investors are once again pondering the question amid the Fed’s announcement earlier this month that it would begin to unwind its nearly $4.5 trillion balance sheet this month. The Fed also indicated that it expected a steady rise in federal funds rate in the coming years, including a possible hike of 25 basis points in December that would take the benchmark rate to a range of 1.25% to 1.5%.
The actions are expected to move real interest rates into positive territory, representing a “significant shift” from the negative rate environment that has fueled the recover.
Yet another article about what may happen as the Fed heads into the uncharted territory of unwinding their holdings. While CoStar looks mainly at the commercial side of real estate, I think we need to look at the big picture sometimes.
Especially when it comes to the Fed, QE and what could happen to the economy…
That is it for today! Please be sure to impress your friends and family by hitting the share buttons!