Looking at consumer confidence, the difference between appraiser and home owner opinions of value, GDP growth, a new income source for refinancing mortgages, what rising rates mean for home buyers plus more
Consumer Spending Update: Confidence Rockets to New Four-Year High
From Rasmussen Reports:
The overall Rasmussen Reports Economic Index rose nearly seven points from 139.3 in January to 145.9 for February. Enthusiasm about the economy started to grow immediately following the 2016 presidential election and continues to show the highest level of confidence since this tracking began in 2014. In President Obama’s final years in office, this index reached a high of 121.5 only once in January 2015 and was at 108.1 in his last month in the White House.
Excellent! Hopefully this will translate into an even stronger economy and if we are REALLY lucky, wage growth for more Americans.
Home Owners and Appraisers Difference of Opinion Narrows
There is no doubt that home prices have been increasing rapidly. Some experts are predicting that home prices could increase by 4% or more in the coming year.
Every month, Quicken Loans looks at the difference between what a homeowner thinks their property is worth and what an appraisal of that same home indicates. In their latest look at this data, the difference was the smallest it has been in over two years!
Check out this chart that shows the gap between appraiser and home owner opinions:
Bill Banfield, Executive VP of Capital Markets at Quicken Loans, said:
Appraisers and real estate professionals evaluate their local housing markets daily. Homeowners, on the other hand, may only think about their housing market when they see ‘for sale’ signs hit front yards in the spring or when they think about accessing their equity.
It is so very important that anyone selling a home understand the local market conditions and price their home properly.
Every house must be sold three times:
- Once to the buyer’s agent
- Once to the buyer
- Once to the appraiser
If your home is overpriced, this shows how you are actually shooting yourself in the foot 3 times! If you are planning on selling a home, you MUST correctly price your home!
More on Consumer Optimism
The NY Fed’s January 2018 Survey of Consumer Expectations showed that consumers are still optimistic about their financial situation and where things are headed.
Some of the highlights:
- Median home price change expectations increased from 3.2% in December to 3.5% in January, its highest reading since May 2017 and well above its trailing 12-month average of 3.2%.
- Median one-year ahead earnings growth expectations increased slightly, reaching a new series’ high. Median earnings growth uncertainty increased to a level last seen in August 2016.
- Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—decreased slightly from 33.5% in December to 32.4% in January, a new series’ low.
- Median expected household income growth remained unchanged at 2.8% in January, 0.1% above its trailing 12-month average.
So how are you feeling? Sometimes I fell like a ping pong ball because one day there is good economic news and the next day, I see changes that will hurt the majority of America.
And what really disturbs me is how divided America is and that so many cannot even hold a rational discussion. Solutions to problems are found by discussing the situation and not by arguing…
U.S. GDP Growth Is Not As Rosy As It Seems
From See It Market:
Last Friday, Gross Domestic Product (GDP or the domestic economic growth rate) for the fourth quarter of 2017 was released. Despite being 0.3% short of expectations at 2.6% annual growth, it nonetheless produced enthusiasm as witnessed by the S&P 500 which jumped 25 points.
One of the reasons for the optimism following the release was a strong showing of the consumer which notched 2.80% growth in real personal consumption.
Over the last four quarters, real GDP rose by $421 billion, resulting in a 2.60% annual increase. If we adjust consumption to more normal levels of spending and credit usage, the increase in GDP is a mere 0.71%, hardly robust.
A very interesting look at GDP and consumer spending/saving/debt.
You Can Use Airbnb Income When You Refinance Your Mortgage
Income from your Airbnb rental may soon help you refinance the mortgage on your primary home. A new initiative from Airbnb with Fannie Mae and three major financial institutions will let some mortgage lenders consider income from Airbnbs for applicants looking to refinance their home.
The initiative will allow Airbnb hosts in the US to include their Airbnb Proof of Income, along with their application and other standard financial information when they apply to refinance their mortgage with Quicken Loans, Citizens Bank or Better Mortgage. Banks didn’t previously consider money received for an Airbnb as part of an applicant’s total income.
Nice to see this change and it could help some people to refinance before mortgage rates increase more…
What Do Increasing Mortgage Rates Mean for Home Buyers?
It is estimated that, on a 30-year fixed-rate mortgage for $380,000, each half-point increase adds about $100 to the monthly payment. A homebuyer who wants to purchase a home with a value of $380,000 would pay $1,600 every month for the mortgage payment at a 3.9% mortgage rate. Assuming the mortgage rate increases to 4.4%, the buyer would pay $1,700 per month in order to buy the same home.
First, there are plenty of people buying homes for far less than $380,000 in the Anderson SC area. So this may seem to NOT apply to everyone.
The ugly but honest truth is that increasing mortgage rates will mean that some people will have to lower the price range they are looking in.
Or they will be forced to have a higher monthly payment.
Or the worst possible scenario is that some people will find that they cannot afford to buy a home.
I strongly suggest you read Is the decades-long downtrend in interest rates finally over?
Mortgage Delinquency Rate Up in 4th Quarter
The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 5.17 percent of all loans outstanding at the end of the fourth quarter of 2017.
The delinquency rate was up 29 basis points from the previous quarter, and was 37 basis points higher than one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The percentage of loans on which foreclosure actions were started during the fourth quarter was 0.25 percent, unchanged from the previous quarter, and three basis points lower than one year ago. Mortgage delinquencies increased across all loan types – FHA, VA and conventional – on a seasonally-adjusted basis.
Marina Walsh, MBA’s Vice President of Industry Analysis, said:
The 30-day delinquency rate actually dropped by 15 basis points in the fourth quarter of 2017, as homeowners affected by Hurricanes Harvey, Irma and Maria either became current on their payments or moved to later stages of delinquency. However, while the earliest-stage delinquency rate dropped, the 60-day and 90-day delinquency rates did increase in the fourth quarter of 2017. Despite the hurricanes and these quarter-over-quarter results, most states are seeing overall mortgage delinquency rates at lower levels than a year ago.
While the headline sounds bad, it after we dig into the numbers we see things are improving in most areas.
How and When Workers Will Be Affected by Coming Waves of Automation
Economists at PwC looks at one of my favorite subjects, how technological advancements will fundamentally change society, work and the economy.
From John Hawksworth, chief economist at PwC, said:
We don’t believe that automation will lead to mass technological unemployment by the 2030s, any more than it has done in the decades since the digital revolution began. In the long run, AI, robotics and related technologies should not only make a significant contribution to UK GDP of up to 10%, but should also generate enough new jobs to broadly offset the potential job losses associated with automation.
But we should not be complacent about the coming waves of automation: there will be challenges to many workers to adapt to these changes through enhancing their skills and retraining for new careers in some cases. Governments, businesses, trade unions and educational providers will all have a role to play in helping people through this transition.
Euan Cameron, UK Artificial Intelligence leader at PwC, said:
Our research shows that the impact from automation and AI will be felt in waves, with more routine and data tasks hit first. But just because businesses and people aren’t feeling the impacts right now, there is no excuse not to start planning for the future.
AI technology is getting more sophisticated every day and businesses need to understand how, where and when their people are likely to be affected in the future. Those that understand the risks and opportunities can start upskilling their people and adapting their businesses, rather than simply reacting when it’s too late.
We are living in an age of rapid changes that we must be prepared for. Remember, hope for the best but plan for the worst!
Ten Years After the Crisis, Banks Win Big
As the 10th anniversary of the financial crisis approaches, many of the restrictions put in place to rein in Wall Street risk-taking are quietly being unwound. The Senate is considering legislation that would remove dozens of major banks from stepped-up oversight. The bill has broad Republican support and has been endorsed by 11 Democrats. In recent months a handful of the federal agencies that supervise financial companies have taken steps to revise two complex rules—one restricting trading and one requiring extra capital—that banks have long complained cost them millions of dollars in profits.
Other requirements are also being eased, including the stress tests the government uses to measure banks’ abilities to withstand economic shocks. Conducted by the Fed, the tests were widely credited with restoring public confidence in the financial system after the 2008 meltdown.
Those that forget the past are doomed to repeat it…
Well that is it for today! Be sure to hit those share buttons if you enjoyed this post!