Discussing new home sales, home prices, are we seeing another housing bubble, wage growth and affordability, consumer confidence plus much more!
New Home Sales Decrease Again
From HUD and Census Bureau:
New Home Sales
Sales of new single-family houses in January 2018 were 7.8% below the revised December rate and 1.0% below the January 2017 estimate.
The median sales price of new houses sold in January 2018 was $323,000. The average sales price was $382,700.
For Sale Inventory and Months’ Supply
The seasonally adjusted estimate of new houses for sale at the end of January was 301,000. This represents a supply of 6.1 months at the current sales rate.
Remember that they are talking about the entire country and you must always focus on what is happening locally before worrying about national statistics.
This is the second consecutive month of declines and could indicate that the national housing market is losing steam. We could blame rising mortgage rates and the lack of affordable homes in many areas for this decrease.
January is one of the weakest months for home sales historically. And we are not really seeing a trend yet since it has been only 2 months of decreases.
We just need to watch the numbers for February and IF we see another decrease, then we might start to become concerned.
Inventory was 6.1 months and 6 months is considered by many to a balanced market. However, this does not take into consideration how much of the inventory is starter homes and how much is in the upper end of the market.
For now, remain calm.
Public Split on Basic Income for Workers Replaced by Robots
Americans are split in their support for a hypothetical universal basic income (UBI) program that would guarantee a minimum income for workers who lose their jobs because of advances in artificial intelligence (AI). Forty-eight percent support and 52% oppose a UBI program for workers who are displaced by technology.
I am not sold on the concept of a universal basic income. Especially since we have not yet discovered a forest of trees that have money for leaves…
On the other hand, what would be the cost to society due to many people being out of work due to robots?
68 Consecutive Months of Annual Home Price Appreciation
Black Knight just reported in their December 2017 Home Price Report that U.S. home prices increased 6.6% YoY and 0.1% MoM in December. This is the 68 consecutive month of year over year home price appreciation.
Check out the chart for the entire US:
Again, this is talking about the entire country and not the local market info that you MUST use to make an informed decision when buying or selling. Consulting with a local Realtor is strongly advised!
In Anderson County, there were 182 homes reported sold in the WUAR MLS during December 2017 and the median price was $160,500. In December 2016, there were 175 homes reported sold and the median price was $140,000.
But this if talking about a bunch of different homes across all of Anderson County and does not reflect what is realistic for each home. It is more of a general direction of the market: more homes are selling and the homes that are selling are in a slightly higher price range.
Case-Shiller Reports Home Prices Increased 6.3%
Home prices continued their rise across the country over the last 12 months. The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index reported a 6.3% annual gain in December, up from 6.1% in the previous month. The 10-City Composite annual increase came in at 6.0%, no change from the previous month. The 20-City Composite posted a 6.3% year-over-year gain, down from 6.4% in the previous month.
Another national report and very similar to the one from Black Knight.
David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices said:
Within the last few months, there are beginning to be some signs that gains in housing may be leveling off. Sales of existing homes fell in December and January after seasonal adjustment and are now as low as any month in 2017. Pending sales of existing homes are roughly flat over the last several months. New home sales appear to be following the same trend as existing home sales. While the price increases do not suggest any weakening of demand, mortgage rates rose from 4% to 4.4% since the start of the year. It is too early to tell if the housing recovery is slowing. If it is, some moderation in price gains could be seen later this year.
Please do not think that Blitzer saying “a moderation in price gains” means that home prices will decrease. It just means that the rate that home prices are increasing could slow down.
We are seeing home prices increase at a dramatic pace as the chart shows:
The way home prices are increasing is leading some to say we are in another bubble…
Are We Seeing Another Bubble in Home Prices?
The way the stock market recently went nuts reminded us that investments can lose value. Because the biggest investment for many Americans is their home, this can be especially concerning.
Especially since home prices have been increasing at a blistering pace…
Lets look at what 3 experts recently said about the housing market!
Ralph DeFranco, Chief Economist, Arch Capital Services, said:
It’s premature to worry about a housing bubble. The typical warning signs – excessive debt levels, poor quality loans, exponentially increasing home prices, rising vacancy rates and/or poor affordability compared to the past, and a high number of internet searches on house flipping – are not present.
Liu-Down, Genworth Chief Economist, said:
My thoughts on many recent discussions of ‘housing bubble’ – the bar for a housing bubble is higher than just prices being above some fundamental value. There must be widespread behavior change as well such as higher levels of fraud and speculation.
The Fitch Report said:
US home prices are on track for a 5% nominal gain for the 4th consecutive year, returning national prices to their highest level since 2007. The growth has been driven by historically low mortgage rates and unemployment plus solid population and personal income growth rates…a meaningful correction should only be triggered by an unexpected economic shock.
The way that home prices have been increasing is mainly due to strong demand and limited supply. Not speculation and the risky lending that preceded the housing market crash.
While no one can predict the future, it does NOT appear we are in a housing bubble. But no one knows what the future holds.
You can live in fear or you can make decision that benefits you. Owning a home can be a great wealth builder that helps you to secure your financial future.
Chicago Fed National Activity Index Points to Little Change in Economic Growth
From Chicago Fed:
The Chicago Fed National Activity Index (CFNAI) ticked down to +0.12 in January from +0.14 in December. Two of the four broad categories of indicators that make up the index decreased from December, and two of the four categories made negative contributions to the index in January. The index’s three-month moving average, CFNAI-MA3, decreased to +0.17 in January from +0.43 in December.
Not really great but not bad so we will call it a win…
Why Aren’t Businesses Doing More to Save American Manufacturing?
In a time when no one agrees on anything, some vague consensus can be found around the idea that more American manufacturing would be good. Rarely does someone say publicly, “Actually, I think there should be less American manufacturing.” (Although it happens.)
And yet, there is less. Twelve-and-a-half million Americans worked in manufacturing in 2017, down from 14.1 million 11 years earlier. There’s been some growth since the sector dipped to its lowest point in 2010, as a result of the Great Recession, but American businesses are rarely moved by the common public sentiment to make the change and bring their supply chains (and all the jobs they represent) to the US.
I worked in manufacturing for many years before I got into real estate. It is possible to make good money BUT the days of working for one company for your entire life are long gone.
What can be done to increase the number of good paying manufacturing jobs? I know buying goods made in America is a start.
But with so many Americans just getting by, they can’t afford to be choosey.
How Wage Growth Both Helps and Hurts Housing Affordability
From First American:
Rising wages mean home buyers can borrow more. In other words, consumer house-buying power — how much one can buy based on changes in income and interest rates — is growing, which is a boon to the housing market.
However, the larger than expected increase in wage growth set off a chain reaction. It increased concerns among investors that inflation will rise and the Federal Reserve will increase rates at a faster pace than previously expected. Consequently, the 30-year, fixed-rate mortgage rate increased to 4.4 percent last week. The consensus among economists is that 30-year, fixed-rate mortgage rates will approach 5 percent by the end of the year. Rising interest rates increase borrowing costs for home buyers, thereby decreasing consumer house-buying power.
So, on the one hand, rising mortgage rates reduce the affordability of housing, as the cost of borrowing increases. But, on the other hand, rates are increasing because wages are rising faster than expected. Wage growth simultaneously helped and hurt housing affordability.
While I am not going to disagree with Fleming, I like seeing wage growth.
Consumer Confidence Increased in February
From the Conference Board:
The Conference Board Consumer Confidence Index® increased in February, following a modest increase in January. The Conference Board Consumer Confidence Index increased to it’s highest level since 2000!
Lynn Franco, Director of Economic Indicators at The Conference Board said:
Consumers’ assessment of current conditions was more favorable this month, with the labor force the main driver. Despite the recent stock market volatility, consumers expressed greater optimism about short-term prospects for business and labor market conditions, as well as their financial prospects. Overall, consumers remain quite confident that the economy will continue expanding at a strong pace in the months ahead.
Good news and we can hope this will translate into more translate into more economic growth. And dare I say it, more homes selling?
Fifth District Manufacturing Firms Saw Robust Growth in February
From Richmond Fed:
Fifth District manufacturing firms saw robust growth in February, according to the results from the latest survey by the Federal Reserve Bank of Richmond. The composite manufacturing index jumped from 14 in January to 28 in February, the second highest value on record, driven by increases in shipments, orders, and employment. The wages index remained in positive territory at 23, while the available skills metric dropped from −10 in January to −17 in February. Despite greater difficulty finding skilled workers, District manufacturing firms saw strong growth in employment and the average workweek in February. Survey results show that manufacturers expect to see continued growth in the coming months.
Manufacturing firms saw growth accelerate for both prices paid and prices received, with each increasing at the highest rate since April 2017. Firms expect prices to continue to grow at a faster rate in the near future.
Since we are in the Fifth District, this is especially good news for the economy in our area.
HUD Chief Ben Carson Spends $31,000 on Dining Set for His Office
From NY Times:
Department of Housing and Urban Development officials spent $31,000 on a new dining room set for Secretary Ben Carson’s office in late 2017 — just as the White House circulated its plans to slash HUD’s programs for the homeless, elderly and poor, according to federal procurement records.
The purchase of the custom hardwood table, chairs and hutch came a month after a top agency staff member filed a whistle-blower complaint charging Mr. Carson’s wife, Candy Carson, with pressuring department officials to find money for the expensive redecoration of his offices, even if it meant circumventing the law.
This disgust me as this money should be spent on what HUD is meant to do. Of course, we will have to wait and see how this plays out…
Well that is it for today! Be sure to hit the like buttons and subscribe so you never miss another post!