Real estate housing and economic news round up for March 11 2017…
Rising rents and narrowing spreads between the cost of ownership and the cost of renting are making this a good time to buy a home in most cities in the U.S., according to the latest national index produced by Florida Atlantic University and Florida International University faculty.
Based on numbers from the end of the fourth quarter of 2016, the latest Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index comes on the heels of the latest S&P/Case-Shiller Home Price Index, which found that home prices rose 5.8 percent year over year, the highest annual increase since June 2014.
Both indexes incorporate property appreciation from housing markets around the country, but unlike Case-Shiller, the BH&J Index adds additional rental, maintenance and alternative investment data streams, among others, to indicate when and why housing markets might be changing direction.
What is best for you? Just because this well respected indicator is pointing towards buy does not change what is best for you. Buying a home is a very serious financial commitment.
The nation’s roads, bridges, airports, water and transit systems are in pretty bad shape, according to the civil engineers who plan and design such infrastructure. The new report card from the American Society of Civil Engineers gives the infrastructure of the United States a D-plus.
Getting all of the nation’s infrastructure into relatively good shape by the year 2025 would cost $4.59 trillion, according to the ASCE report; that’s $2 trillion more than is budgeted by local, state and federal governments to address infrastructure needs.
ASCE Executive Director Tom Smith says the chronic failure to invest in infrastructure is a huge drain on the nation’s economy, putting American jobs and lives at risk.
There are No Free Lunches…
If this is the long awaited “return-to-normal” for housing demand (and prices) — when 37% of all purchases are NOT by investors and speculators, and historically high vacancies are liquidated in exchange for growth assets — get ready to buy houses at much lower prices.
BOTTOM LINE: A lift in fundamental, end-user, jobs-driven, PRICE-SENSITIVE, housing demand (Average-Joe) is a notable “DOWNSHIFT” compared to how the greatest Central Bank monetary policy experiment and Gov’t debt creation cycle in the history of the world drove the housing sector over the past 6-years.
Ouch! But is Hanson correct? Maybe but I am not worried at this point. Then again, I am also not irrationally optimistic or confidently delusional simply so I can bullshit someone into buying a home…
The Effect of Higher Interest Rates on the Housing and Mortgage Markets
This February, CoreLogic partnered with the Urban Institute to co-host a seminar highlighting the effect of higher interest rates on the housing and mortgage markets. Some comments from 2 of the speakers:
Since resell rates tend to be higher when mortgage rates are lower, an increase in mortgage rates may be a large hurdle for the resell market to overcome in 2017. Additionally, higher mortgage rates should lead to a significant decrease in single-family refinances.
The market is taking very, very little credit risk relative to what it has historically taken… credit has become way too tight. Therefore, with an increase in mortgage rates, we should expect some loosening of the credit box.
Yes credit is tight.
But will higher mortgage rates actually mean lowering of credit standards?
And even if standards were lowered, would demand plummet because of the lower rates? Would prices fall?
For 45 years – until Alan Greenspan in 1994 – the average wealth-to-income of American households had held steady around 4.9x – but as of Q4 2016, for the first time in US history, household wealth has reached a point where it is 6.5 times large than inflation-adjusted household disposable income in America.
As Bloomberg reports, the surge – driven by higher stock prices and property values, according to The Fed – pushed this measure of relative exuberance (think of it as the country’s price-to-earnings ratio) above the housing boom peak of mid-2000s and well above the dot-com bubble driven highs of the last 1990s.
While Zero Hedge find doom and gloom as usual, I must remind you to not look a gift horse in the mouth.
Not saying to be stupid or over extend yourself.
Remember, hope for the best but plan for the worst.
The U.S. housing market remains in healthy condition as purchase and rental affordability improve marginally despite a drop in the number of homes for sale, according to the Housing Tides Index. Data compiled also reveals that the U.S. housing and homebuilding industry resumed its strengthening trend with the Index increasing to a value of 73.6, after falling slightly to 72.4 in February. The Index scores increased in 33 of the top 41 local markets this month.
Overall, the data offered in the Housing Tides Index for March seem to confirm that the U.S. housing market is on an upswing despite rising interest rates and lack of inventory.
Fantastic news BUT this report does NOT appear to be talking about the Anderson SC area. Remember, real estate is and always will be local! For more information about our neck of the woods, check out the Weekly Market Reports.
Today’s report of 235,000 jobs created in February removes the final barrier to a March rate increase by the Federal Reserve and could pave the way for two additional hikes later in the year. After an unexpected slowdown in January, wage growth picked up in February to 2.8 percent, driven by still tight labor markets and minimum wage increases that went into effect in 19 states at the beginning of the year.
Low unemployment rates provide further evidence of a tight labor market and as a result inflation expectations may continue to increase. So far, possible delays in the arrival of fiscal stimulus measures have not dented either business or consumer confidence. Barring downside first quarter GDP surprises, the Fed should have ample evidence to pursue a more aggressive normalization policy.
This is coming from an unbiased source that doesn’t really have anything to gain by trying to motivate people to buy homes sooner rather than later.
That being said, we could be finally seeing an end to the very long run of super low mortgage rates.
That’s it for today! I will be posting this week’s Market Report Monday night. Check back or join the ultra elite super cool people and subscribe…