Discussing existing home sales, what is keeping the housing market from it’s potential, the supply of homes for sale and much more!
Existing Home Sales Fall for Second Consecutive Month
NAR just reported that existing-home sales decreased in October on an annual basis for the second straight month because of the low number of homes for sale.
Total U.S. housing inventory at the end of October is now 10.4% lower than a year ago and has fallen for 29 consecutive months YoY. The NAR also said that there is only a 3.9 month supply of unsold inventory. This is down from 4.4 months a year ago.
Total existing-home sales increased 2.0% in October from the downwardly revised September level. Existing home sales are at their strongest pace since June but are 0.9% below the level a year ago.
The median existing-home price for all housing types in the U.S. in October was up 5.5% from October 2016. This is the 68th straight month of year-over-year gains in the median price of U.S homes.
Homes are selling faster and 47% of homes sold in October were on the market for less than a month. Homes averaged only 34 days on the market in October.
While this is the second month of YoY decreases, it is still a strong report. The low inventory is still a major issue and the cause of the weakness.
Lawrence Yun, NAR’s chief economist, said:
Listings—especially those in the affordable price range—continue to go under contract typically a week faster than a year ago, and even quicker in many areas where healthy job markets are driving sustained demand for buying. With the seasonal decline in inventory beginning to occur in most markets, prospective buyers will likely continue to see competitive conditions through the winter.
The number of homes sold was above expectations but we must be concerned that any changes in the tax reform could have a negative impact on housing demand, home prices and the economy. While it may benefit the super rich, it may screw up the economy and hurt the average tax payer.
Please remember this is talking about the entire U.S. and does not tell you what is happening in every local real estate market. You can find more local information by reading the Anderson County SC Real Estate Market Reports!
What’s Keeping the Market Below Potential?
Tight supply and strong first-time home buyer demand continue to be the dominant factors driving the current state of the housing market. Existing homeowners remain reluctant to list their homes for sale for fear of not being able to find a home to buy, keeping supply levels low. At the same time, a healthy number of potential home buyers continue to enter the market, so house prices are increasing and affordability is declining. Historically low rates offer some relief in the form of strong borrowing power, however rates are expected to rise in the months to come, so if you are renting and thinking of buying, now is the time.
While Fleming is speaking about the entire country, you will find some of the same conditions in the Anderson SC area. Home buyers and sellers must be properly prepared, educated and represented by a Realtor to be competitive in today’s market.
While the tight inventory is bad, there is a silver ling to this gray cloud. There is less competition sellers now. Look at the inventory of homes for sale (nationally) compared to the same time last year:
Depending on the price/size/location/etc, you may find a very low number of homes for sale in Anderson County SC.
2017 Best Year for Housing in a Decade
Highlights from Freddie Mac’s November 2017 Outlook:
Macroeconomic conditions remained favorable for housing and mortgage markets in 2017. Despite challenges, the housing markets remain on track for their best year in a decade by a variety of measures. The mortgage market is transitioning from a refinance-dominated market to a purchase-dominated one, but low rates have bolstered refinance volumes this year.
Modest economic growth, robust job gains, and low interest rates make for a favorable economic environment for housing and mortgage markets. But despite the favorable environment, housing markets have stalled a bit through summer and into fall. A lack of available for-sale inventory is helping to contribute to an acceleration in home prices.
The lack of inventory has been a storyline throughout the summer and fall after a good start to the year. We now anticipate 1.2 million housing starts and 6.13 million home sales for 2017. Despite the disappointing latter half of the year, both numbers are still on track for the best year in a decade. We also expect starts and sales to increase in 2018 and 2019 — thanks to housing construction gradually picking up and helping to supply more homes to inventory-starved markets.
Strong demand, low mortgage rates and a lack of for-sale inventory has contributed to accelerating house prices. Nationally, home prices increased at a 6.4 percent annualized rate over the quarter ending September 2017.
Sean Becketti, Chief Economist at Freddie Mac said:
It’s unlikely the economic environment will be much more favorable for housing and mortgage markets in 2018 and 2019. We forecast that interest rates will remain low by historical standards, but gradually creep higher over the next two years. We also forecast that housing construction will gradually pick up, helping to supply more homes to inventory-starved markets. More housing supply and modestly higher rates will lead to a moderation in house price growth. Refinance activity will drop to very low levels and the mortgage market will be dominated by purchase activity.
Check out the chart below showing how Freddie is forecasting both home prices and mortgage rates to keep increasing in the coming 2 years:
They do mention that the tax reform could have a large effect on the economy and this forecast does not take into account whatever changes will occur.
No one can accurately predict the future. It does look like home prices and mortgage rates will keep rising so anyone thinking about buying a home should do so sooner rather than later.
Yellen Resigns from Federal Reserve
Janet Yellen has announced she is submitting her resignation Monday as a Member of the Board of Governors of the Federal Reserve System, effective upon the swearing in of her successor as Chair.
President Trump recently named Federal Reserve Governor Jerome Powell to serve as the next Fed chair. So who is Powell and what can we expect from him?
According to the Washington Post:
He’s a wealthy, mild-mannered Republican businessman who built a reputation in recent years for bipartisan consensus building. In 2011, when Republicans were threatening to force the government to default on its debt if the party’s policies were not adopted, Powell walked around Capitol Hill with a large binder from the Bipartisan Policy Center, urging lawmakers to understand the risks of a default on the economy.
Powell has developed a reputation in Washington as a consensus builder who prefers to operate behind the scenes. Obama felt comfortable enough with Powell to nominate him to the Fed board in 2012, renominating him again in 2014.
It is hard to say if Powell will be a good choice but the fact that he is seen as a consensus builder is very encouraging to me. Plus he has put some thought into Housing Finance Reform:
I see two reasons why this is a good time to address the housing finance system’s shortcomings. First, the economy and the housing sector are healthy. It would be far more disruptive to implement fundamental structural changes during difficult economic times. Second, memories of the crisis are fading. If Congress does not enact reforms over the next few years, we are at risk of settling for the status quo–a government-dominated mortgage market with insufficient private capital to protect taxpayers, and insufficient competition to drive innovation. There is a serious risk, if not a likelihood, that this state of affairs may persist indefinitely, leaving our housing finance system in a semi-permanent limbo. Fortunately, we are blessed with a growing menu of reform options available for public vetting. And there appear to be areas of broad agreement among them. One of those plans, or a combination of different features of various plans, might well suffice to move us to a better system. Housing finance reform will protect taxpayers from another bailout, be good for households and the economy, and go some distance toward mitigating the systemic risk that the GSEs still pose.
Powell will NOT be able to enact housing finance reform as the Fed Chair, But it is good to see a person in this position that understands the dire need for reform.
Construction Employment and Jobs Increase
Forty-one states added construction jobs between October 2016 and October 2017, while 26 states added construction jobs between September and October, continuing a pattern of widespread but uneven growth in industry employment according to the Associated General Contractors.
Ken Simonson, chief economist at the AGC said:
Although construction employment has risen over the past year, many contractors report difficulty finding workers with the right skills,. Last month, construction employment increased in only half the states, a total that would probably have been higher if workers were available.
There is no doubt that the demand for housing is robust. This is increase is good even if it isn’t as strong as it could be.
Construction’s Contribution to U.S. Economy Highest in Seven Years
The Associated Builders and Contractors (ABC) just reported that the private construction industry’s value added as a percentage of the nation’s real gross domestic product (GDP) rose to 4% in 2016. This is the highest level since 2009.
In 2016, South Carolina was one of the top five states for the increase in their real value added from construction. Construction spending in South Carolina was up 9.4%.
Strong Growth in US Single-Family Housing Completions to Bolster Demand
Through 2021, the rapid growth in new single-family housing construction in the US will boost global gains and make the North America region the fastest growing in the world. Growth will be driven in part by demand finally keeping up with new household formation following the precipitous declines in housing construction during the Great Recession.
I would call this very encouraging!
FCC Plans to Repeal Net Neutrality Rules
Federal Communications Commission Chairman Ajit Pai will reveal plans to his fellow commissioners on Tuesday to fully dismantle the agency’s Obama-era net neutrality regulations, people familiar with the plans said, in a major victory for the telecom industry in the long-running policy debate.
The commission will vote on the proposal in December, some seven months after it laid the groundwork for scuttling the rules that require internet service providers like Comcast or AT&T to treat web traffic equally.
This will be bad for consumers and just like some of the changes in the tax reform, it demonstrates who Washington REALLY works for. This will hurt the small independent free press websites that have come into existence as a result of the internet.
You would expect this type of crap to happen in China or North Korea but not in the USA…
Americans’ Confidence in the Economy Falls Slightly
Americans felt slightly less confident in the economy last week, as their perceptions of current conditions dimmed somewhat. Gallup’s U.S. Economic Confidence Index averaged +4 for the week ending Nov. 19, down from the previous reading of +7.
Not good as consumers must be feeling confident about the economy if they are going to make a major purchase such as a home.
Pickup in Economic Growth in October
Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.65 in October from +0.36 in September. One of the four broad categories of indicators that make up the index increased from September, but three of the four categories made positive contributions to the index in October. The index’s three-month moving average, CFNAI-MA3, increased to +0.28 in October from +0.01 in September.
Facebook Still Letting Housing Advertisers Discriminate
In February, Facebook said it would step up enforcement of its prohibition against discrimination in advertising for housing, employment or credit. All of these groups are protected under the federal Fair Housing Act, which makes it illegal to publish any advertisement “with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on race, color, religion, sex, handicap, familial status, or national origin.” Violators can face tens of thousands of dollars in fines. Under its own policies, Facebook should have flagged these ads, and prevented the posting of some of them.
But our tests showed a significant lapse in the company’s monitoring of the rental market.
Does it surprise anyone that a company such as Facebook would do something like this? I would love to see Facebook get slapped with the biggest fine ever levied for a Fair Housing violation.
Goodbye American Dream?
From Michael Snyder:
Once upon a time the United States had the largest and most vibrant middle class in the history of the world, but now the middle class is steadily being eroded. The middle class became a minority of the population for the first time ever in 2015, and just recently I wrote about a new survey that showed that 78 percent of all full-time workers in the United States live paycheck to paycheck at least part of the time. But most people still want to live the American Dream, and so they are going into tremendous amounts of debt in a desperate attempt to live that kind of a lifestyle.
The average American household carries $137,063 in debt, according to the Federal Reserve’s latest numbers.
Yet the U.S. Census Bureau reports that the median household income was just $59,039 last year, suggesting that many Americans are living beyond their means.
My Grandmother used to say that you are never more than a day away from the poor house. She went through the Great Depression and was always concerned about saving money and not spending frivolously.
Remember, hope for the best but always plan for the worst. Do not let your ego cause your financial downfall.
Chemical Activity Barometer Continues Solid Gains Into 3rd Quarter
The American Chemistry Council just announced that the Chemical Activity Barometer increased from October’s level on both on a three-month moving average (3MMA) basis and an unadjusted basis. The Chemical Activity Barometer was up 0.4% and 0.3%, respectively.
Compared to a year earlier, the Chemical Activity Barometer is up 3.3% on a 3MMA basis, a pace that continues to suggest further gains in U.S. commercial and industrial activity into 2nd quarter 2018.
The Chemical Activity Barometer is a leading economic indicator created by the American Chemistry Council and derived from a composite index of chemical industry activity. Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research.
This is a really good sign for the economy in the coming months!
Huge post today as I expect to be busy with the family for Thanksgiving over the next few days. I hope you have a safe and happy Thanksgiving.
Please remember that the best way to celebrate Thanksgiving is with your loved ones and not fighting the crowds on Black Friday! As I often say, the most important things in life are not things!