Discussing economic confidence, affordability, foreclosure starts, mortgage delinquencies, jobs and unemployment claims, mortgage credit availability and more!
U.S. Economic Confidence Unchanged in October
Americans’ confidence in the U.S. economy tilted slightly positive in October, with Gallup’s U.S. Economic Confidence Index at +3 for the month. Though the index’s current reading is on the low end of what Gallup has measured for 2017 so far, it remains well above the mostly negative ratings recorded from 2008 to 2016. Last week, roughly as many Americans said the economy was getting better (47%) as said it was getting worse.
At least it wasn’t negative…
Housing Still Affordable
From Black Knight:
Nationally, it requires 21.4 percent of the median income to purchase the median-priced home as of September 2017 compared to 24.2 percent from 1995-1999 and 26.2 percent from 2000-2003
Interest rates have pulled back by 40 bps over the past six months, but most of that potential savings continues to be offset by accelerating rates of home price appreciation across most of the country
Despite home prices accelerating and affordability remaining near post-recession lows, housing remains much more affordable than longer-term benchmarks (1995-2003)
Foreclosure starts dropped by 17 percent month-over-month to their lowest level since December 2000
The national delinquency rate jumped by nearly 12 percent from one month ago, driven in large part by the impact of the recent hurricanes as well as calendar related factors
The annual rate of home price appreciation continues to accelerate and is now up to 6.24 percent, the highest level since April 2014
The median home nationwide is now worth $16,000 more than it was at the beginning of the year
Ben Graboske, Executive Vice President – Data & Analytics, Black Knight said:
Rising home prices continue to offset the majority of would-be savings from recent interest rate declines, which has kept home affordability near a post-recession low. That being said, when viewing the market through a longer-term lens, affordability across most of the country still remains favorable to long-term benchmarks.
Remember, what is “affordable” changes from one person to the next. When you hear that affordability is good in reports such as this, they are speaking about homes prices and mortgage rates compared to median incomes.
There Are Still Over 6 Million Job Openings in America
From 24/7 Wall St.:
The Bureau of Labor Statistics (BLS) has released its Job Openings and Labor Turnover Summary for the month of September. This so-called JOLTS report never really moves the markets, but it can be used a barometer for measuring just how strong some of the individual payrolls and unemployment reports can be. As a reminder, last week’s lower than expected payrolls disappointment was probably not that disappointing.
While this may not be a market-moving report, economists, employers and those seeking jobs should pay close attention to the JOLTS report each month. This report shows just how strong the underlying trends are in the job market. Note that a strong number of quits and job openings should be seen, because workers leaving a job for greener pastures or a better life fit means that openings have created in their absence.
Tuesday’s BLS report indicated that the number of job openings was little changed at 6.093 million on the last business day of September. This was 6.090 million in August, but it is up from 5.666 million a year earlier. While the BLS JOLTS report uses “little changed” on its numbers, there is a robust jobs market for openings at this time. Hires were 5.3 million and separations were 5.2 million.
Good but we have to think about what types of jobs these are and what the pay is. That being said, this is a positive report!
Construction Job Openings in September
From Eye On Housing:
The count of unfilled jobs in the construction sector declined in September. Given the significant need for repair and restoration work in the wake of Hurricanes Harvey and Irma, we can expect increases in the months ahead.
The overall trend for open construction jobs has been increasing since the end of the Great Recession. This is consistent with survey data indicating that access to labor remains a top business challenge for builders. However, after a spate of data at the start of the year indicate a leveling off of the count of unfilled construction jobs, the count of open positions increased in recent months.
Overall, the labor market for construction workers remains tight as it continues to expand. As single-family housing starts continue to increase and rebuilding efforts in Texas and Florida proceed, more workers will be needed in the residential construction sector.
Strong demand for construction workers is a very good sign for both the economy and housing.
Mortgage Credit Availability Decreases Slightly in October
According to the Mortgage Bankers Association, mortgage credit availability decreased slightly in October.
Lynn Fisher, MBA’s Vice President of Research and Economics Said:
Credit availability decreased only slightly in October and has been relatively flat for the year to date. While government and conforming credit programs saw slight increases in availability in October, a moderate decrease in the number of investor jumbo offerings resulted in a decrease in the total index.
Remain calm as buyers with good credit and income will not have a problem getting a mortgage. There is no reason to be scared about from applying for a mortgage!
Lots of people hesitate starting the home buying process because of uncertainty. One of the biggest causes of their uncertainty is being able to qualify for a mortgage.
To buy a home today, you will need a down payment. Did you know that 73% of all buyers made a down payment of less than 20 percent? Did you know that many people were able to buy a home with as little as 3 percent?
If you are ready to buy a home, check out what Freddie Mac says you should do:
- Find out your current credit history & score – even if you don’t have perfect credit, you may already qualify for a loan. The average FICO® Score of all closed loans in September was 724, according to Ellie Mae.
- Start gathering all your documentation – income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
- Contact a professional – your real estate agent will be able to recommend a loan officer that can help you develop a spending plan, as well as determine how much home you can afford.
- Consult with your lender – he or she will review your income, expenses, and financial goals to determine the type and amount of mortgage you qualify for.
- Talk to your lender about pre-approval – a pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change), and demonstrates to home sellers that you are serious about buying!
While waiting could cost you more, do NOT rush the process! Learn everything you can, use a local experienced Realtor, set your budget and stick to it, and make 110% sure you understand and are ready for the financial obligations of home ownership.
Rising Home Ownership Send a Chill Through Rental Markets
Rising homeownership is adding to the jitters in the residential rental market, which has slumped recently after a long stretch near the top of the commercial real-estate industry. For most of the current economic expansion, declining ownership rates have enabled landlords of apartments and single-family homes to raise rents far faster than the pace of inflation. Demand has been fueled by the millions of people who haven’t had the money, credit or desire to pursue the traditional American dream.
While we did see a rise in the home ownership level, there will always be a need for rentals. Knowing your local market and the type of property/going rents is essential to investing in rentals.
JPMorgan to Pay $75 Million in Settlement Linked to Risky Mortgages
JPMorgan Chase & Co agreed to pay $75 million to settle claims it mismanaged workers’ 401(k) retirement funds by steering money intended for low-risk investments into funds that bought risky mortgages, causing hundreds of millions of dollars of losses.
Shame that we keep hearing the same names over and over again in settlements for various financial schemes…
Consumers Less Confident About Buying and Selling Real Estate
Fannie Mae’s latest Home Purchase Sentiment Index decreased in October from the previous month. Some of the highlights:
- The net share of Americans who say it is a good time to buy a home fell 6 percentage points to 22%
- The net percentage of those who say it is a good time to sell decreased by 8 percentage points to 30%
- The net share of Americans who say that home prices will go up remains at 40%
Doug Duncan, senior vice president and chief economist at Fannie Mae said:
The modest decrease in October’s Home Purchase Sentiment Index is driven in large part by decreases in favorable views of the current home-buying and home-selling climates, a shift we expect at this time of year moving out of the summer home-buying season. Indicators of broader economic and personal financial sentiment remain relatively steady. Overall, these results are consistent with our view that the housing market will continue its slow, upward grind through 2018.
I hate to think of how many people are missing out on the excellent opportunities in today’s real estate market.
Typical Mortgage Payment Up 10% From Last Year
While home prices have risen about 6 percent over the past year, the mortgage payments that recent homebuyers have committed to have risen closer to 10 percent because of the increase in mortgage rates over the past year.
The change in the typical mortgage payment over the past year illustrates how it can be misleading to simply focus on the rise in home prices when assessing affordability. For example, in August this year the median sale price was up 6.3 percent from a year earlier in nominal terms, but the typical mortgage payment was up 10.1 percent because mortgage rates had increased nearly 0.5 percentage points over that 12-month period.
While buying a home is a huge financial decision, it should NOT be rushed. This is an excellent example of how waiting or hesitating can be very costly for home buyers.
AI Could Be ‘Worst Event’ in Civilization
Quote from Stephen Hawking in an article on CNBC:
Success in creating effective AI, could be the biggest event in the history of our civilization. Or the worst. We just don’t know. So we cannot know if we will be infinitely helped by AI, or ignored by it and side-lined, or conceivably destroyed by it.
Unless we learn how to prepare for, and avoid, the potential risks, AI could be the worst event in the history of our civilization. It brings dangers, like powerful autonomous weapons, or new ways for the few to oppress the many. It could bring great disruption to our economy.
I am an optimist and I believe that we can create AI for the good of the world. That it can work in harmony with us. We simply need to be aware of the dangers, identify them, employ the best possible practice and management, and prepare for its consequences well in advance.
I am not an optimist when it comes to the potential for AI being used by a few to oppress the many…
America’s ‘Retail Apocalypse’ Is Really Just Beginning
The so-called retail apocalypse has become so ingrained in the U.S. that it now has the distinction of its own Wikipedia entry.
The industry’s response to that kind of doomsday description has included blaming the media for hyping the troubles of a few well-known chains as proof of a systemic meltdown. There is some truth to that. In the U.S., retailers announced more than 3,000 store openings in the first three quarters of this year.
But chains also said 6,800 would close. And this comes when there’s sky-high consumer confidence, unemployment is historically low and the U.S. economy keeps growing. Those are normally all ingredients for a retail boom, yet more chains are filing for bankruptcy and rated distressed than during the financial crisis. That’s caused an increase in the number of delinquent loan payments by malls and shopping centers.
We are witnessing a huge change and it isn’t going to be pretty. The Industrial Revolution will pale in comparison…
Jobless Claims Increase
In the week ending November 4, the advance figure for seasonally adjusted initial claims was 239,000, an increase of 10,000 from the previous week’s unrevised level of 229,000. The 4-week moving average was 231,250, a decrease of 1,250 from the previous week’s unrevised average of 232,500. This is the lowest level for this average since March 31, 1973 when it was 227,750.
This is lower than forecast and the 139th week that claims were below 300,000. The increase is partially due to Labor Department processing backlogged claims in Puerto Rico after the hurricane.
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