Talking about a huge legal decision about Fannie and Freddie, housing market potential, existing home sales and much more…
All too often these days, large U.S. corporations and Wall Street banks seem more interested in tapping overseas markets than in growing a customer base at home. When local communities in America’s heartland suffer, it’s no skin off their backs. By contrast, our nation’s small businesses depend on the health of their communities.
Congress deserves much of the blame. Under pressure from lobbyists, lawmakers have filled the tax code with loopholes that benefit many of our country’s wealthiest individuals and corporations. If we simply eliminated these perverse loopholes, we could raise massive revenues for education and other urgent economic needs.
One of the most extreme examples of tax privilege is the so-called “carried interest” loophole. This allows private equity and hedge fund managers to claim the bulk of their income as capital gains, which is taxed at only 20 percent, instead of the top marginal income tax rate of 39.6 percent.
I wouldn’t hold my breath waiting on this to be changed.
Right Direction or Wrong Track
Forty-six percent (46%) of Likely U.S. Voters think the country is heading in the right direction, according to a new Rasmussen Reports national telephone and online survey for the week ending February 16.
Almost equally divided opinion on which way the country is headed. United we stand, divided we fall.
The combination of inflation and low mortgage rates usually leads to much higher compounded rates of home appreciation. For owners of property, high rates of inflation and appreciation are welcomed and appreciated. For buyers or tenants, however, the skyrocketing purchase and rental prices are not liked much at all.
Rapidly increasing rates of inflation are not very helpful for our consumer purchasing power for basic goods and services like food, utilities, dining at restaurants, or gas or transportation prices. However, the best traditional hedge against inflation is, was, and probably always will be something called Real Estate. This is true partly because home values tend to increase at least as much as the reported annual rates of inflation.
A must read!
Gallup’s U.S. Economic Confidence Index averaged +7 for the week ending Feb. 19, unchanged from the prior week. This is the 14th week in a row that the index has been positive. Americans’ views of the economy have improved significantly since the U.S. presidential election.
While unchanged, the fact that it has been positive for 14 weeks is awesome!
Hedge funds largely failed in their legal challenge to the U.S. government’s capture of billions of dollars in profits generated by Fannie Mae and Freddie Mac after their bailout, sending shares of the mortgage guarantors plunging. Perry Capital LLC, the Fairholme Funds and other big investors lost a bid to overturn a judge’s ruling that said they can’t sue the government over the dividend change. The change known as the “net-worth sweep” forced the companies to send almost all their profits to the U.S. Treasury, leaving shareholders with nothing.
This caused Fannie and Freddie stock to tank. I am unsure how this will play out as the hedge funds can still go after Fannie and Freddie for contractual stuff or appeal this ruling.
For the month of January, First American updated its proprietary Potential Home Sales model to show that the market for existing-home sales is underperforming its potential by 0.2 percent.
Mark Fleming, chief economist at First American said:
While higher mortgage rates did reduce the market’s potential, they also will have the positive effect of moderating house price appreciation. More troubling is the lack of homes for sale, which is causing a ‘matching-trap’ where current homeowners are reluctant to sell because of concerns about the ability to find a home to buy and the likelihood that their new mortgage will have a higher rate than their existing mortgage.
0.2 percent isn’t really much and more importantly, they are talking about the entire U.S. Every market is different and my suggestion is to talk to an experienced local REALTOR about how hard it might be to find a home to buy.
And as far as not buying because your new mortgage may have a higher rate, this may not be true for you! I suggest speaking with your mortgage lender to see what is realistic or possible for you.
Santander Bank – one of the world’s largest banks – has invested billions of dollars in the past eight years in building a massive U.S. fleet. As part of this expansion, its U.S. mortgage lending operations have brought in over $560 million in the last five years, and Santander’s fee income increased to $1.2 billion last year. Yet, analysis of the bank’s Home Mortgage Lending Act data reported each year to federal regulators reveals a disturbing pattern of racial and economic discrimination in Santander’s home mortgage lending.
This assessment finds that Santander’s discriminatory practices are far more pervasive than previously understood. In 2014 and 2015, Santander has struggled to meet its lending requirements to low – income and communities of color in ten metropolitan areas throughout the northeastern U.S, where it serves more than two million people. The assessment also identifies significant disparities in Santander’s lending to Latino, African American and other borrowers of color, as well as to women and low – income borrowers.
While you are innocent until proven guilty, it does sound pretty grim for Santander.
The Chemical Activity Barometer (CAB) posted a strong gain in February of 0.4 percent, following a similar 0.4 percent gain in January. This follows a steady 0.3 percent gain every month during the third quarter of 2016. All data is measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB is now up was up 5.0 percent over this time last year, marking its strongest year-over-year performance since September 2010. On an unadjusted basis the CAB climbed 0.1 percent in February, following a 0.5 percent gain in January.
In February all of the four core categories for the CAB improved, with the diffusion index strengthening to 71 percent. Production-related indicators were positive, with the housing report indicating slipping starts, but improving permits. This was coupled with an improvement in U.S. exports. Equity prices also improved at a robust pace, reflecting an improvement in consumer and business confidence. Overall the barometer continues to hint at gains in U.S. business activity through the third quarter.
Excellent news and good indication that the economy will continue to strengthen in the coming months. Well, barring any nasty surprises such as natural disasters or evil acts by crazy people.
All-Cash Investment Home Prices Jump 18.3%
In the January 2017 HomeUnion Home Sales Report, the data indicates that both investment home and owner-occupied home sales soared to $227,000 last month, marking year-over-year growth of 8.7 percent. All-cash investors led the charge for single-family real estate as they sent the investment median cash price up 18.3 percent to $167,400. Investors who used leverage to acquire single-family rentals (SFRs) also contributed to the growth of the real estate market as the investment median sales price jumped 12.9 percent to nearly $200,000.
Steve Hovland, director of research for HomeUnion said:
Expect pricing to continue to accelerate in the months ahead. Demand for SFRs will remain robust throughout 2017. Vacancy is forecast to tighten, reaching the lowest level of the current cycle. According to the U.S. Census Bureau, 805,000 households were formed in 2016. Of those, 434,000 were renter households. Low inventory, high debt burdens and rising interest rates will limit the number of first-time homebuyers to 35 percent of the market, below the long-term trend of 40 percent.
Whether or not this is good news depends on if you are selling, buying or holding. It is bad that they think the percentage of first time home buyers will remained depressed.
The default rate for first mortgages was 0.72% in January – up from 0.71% in December but down from 0.84% in January 2016. The default rate for second mortgages was 0.48%, up from 0.41% in December but down significantly from 0.65% in January 2016.
David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices said:
While consumer credit default rates on mortgages and auto loans remain low and stable, default rates on bank cards have popped up to the highest level seen since July 2013. Recent data point to consumer optimism: Retail sales rose 5.5 percent in January compared to a year earlier, consumer sentiment measures rose over the last two years, and employment and labor market conditions are favorable.
Current default levels do not present any immediate concerns for the economy. During 2004-2006, a period of strong retail sales and consumer spending, bank card defaults were higher than today. Moreover, even if interest rates were to increase much faster than the Fed or most analysts currently expect, the cost of borrowing money is unlikely to create problems for consumers. The weak spot, if there is one, would come with a rise in unemployment and an economic downturn.
Sounds good unless something bad happens to cause a rise in unemployment or the economy tanks. Since we never know what the future holds, my advice as always is to hope for the best but prepare for the worst.
That being said, I am pretty confident about 2017!
Existing-Home Sales Jump in January
Existing-home sales stepped out to a fast start in 2017, surpassing a recent cyclical high and increasing in January to the fastest pace in almost a decade. All major regions except for the Midwest saw sales gains last month.
Total existing-home sales expanded 3.3% in January from December 2016. January’s sales pace is 3.8% higher than a year ago and surpasses November 2016 as the strongest since February 2007.
The median existing-home price for all housing types in January was $228,900, up 7.1 percent from January 2016 ($213,700). January’s price increase was the fastest since last January (8.1 percent) and marks the 59th consecutive month of year-over-year gains.
Lawrence Yun, NAR chief economist, said:
January’s sales gain signals resilience among consumers even in a rising interest rate environment. Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home. Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions.
Solid report! Remember this is talking about the entire U.S. and may not reflect what is happening in every local market across the U.S.
If we look at the Upstate SC real estate market during January 2017 , home sales were up about 9% from January 2016. The median home price for was up almost 20% from January 2016. This is talking about a HUGE area and does not reflect what is possible or realistic for every home!
For information about market conditions in the Anderson SC area, check out the Weekly Market Reports
That’s all I have time for today! If you have any questions about real estate in the Anderson SC, please contact me!