Talking about the latest Existing Home Sales report, home prices, mortgage rates and application numbers for last week and much more…
A federal judge on Tuesday said investors seeking to hold Deutsche Bank AG liable for causing $3.1 billion of losses by failing to properly monitor 10 trusts backed by toxic residential mortgages cannot pursue their claims as a group.
Surprised as Deutsche Bank seemed to be on a losing streak. I feel for the investors as this means they may have a much harder time recovering any money lost due to Deutsche Bank’s questionable behavior.
Highlights of comments by Boston Fed President Eric Rosengren at a conference on banking supervision:
I would like to share my own views on the sources of financial instability that have, historically, led to widespread economic disruption not only in large economies like the United States, but in many parts of the world as well. I would like to specifically address the problems that arise when the value of commercial or residential real estate fluctuates significantly – a dynamic that often leads to episodes of financial instability. My comments should be placed in some very important context, however.
First, I am not here today to predict problems, but rather to suggest we continue working to head them off. Certainly, one risk to be mindful of has been the acceleration of real estate values in some parts of the world, and I will use the United States as an example in my remarks today.
I would consider the root cause of the financial crisis. I would argue that the root cause of the financial crisis was a significant decline in collateral values of residential and commercial real estate. This was not particularly unusual; in fact, financial crises of the past 70 years have generally been caused by exposures across the banking system that are correlated and sizeable – primarily either exposure to foreign denominated debt that is subject to exchange rate risk, or exposure to real estate that becomes vulnerable when its value declines precipitously.
I would observe that real estate has played an important role in past periods of financial instability. Its use as collateral by leveraged institutions has factored into significant problems in countries that have experienced a significant revaluation of real estate asset values. As I have noted today, in the United States the two most significant recent periods of financial instability were accompanied by declines in real estate values that impacted financial institutions and intensified the business cycle.
Currently, commercial real estate capitalization rates are very low by historical standards, meaning that price increases have been outpacing growth in net operating income. This is occurring despite the gradual tightening of short-term interest rates and the issuance of real estate guidance by bank regulators.
Because real estate holdings are widespread, and the monetary and macroprudential tools for handling valuation concerns are somewhat limited, I believe we must acknowledge that the commercial real estate sector has the potential to amplify whatever problems may emerge when we at some point face an economic downturn. I am not expecting such problems in the near term, but would say that awareness, informed by data and analysis, is a first important step to continued actions that can head off unwelcome problems in the future.
The emphasis is mine. Not ground breaking or a prediction but more of a warning and stating the facts. Not that facts mean much anymore to the idiots in Washington…
Autonomous vehicles are one of the hottest developments in technology. Meanwhile, truckers hold the most common occupation in 29 different states. Unsurprisingly, analysts expect automated trucks to proliferate in the next five to ten years, leading to significant job losses in the process.
On the surface, trucking seems to fit perfectly into this national narrative. Autonomous vehicles are one of the hottest developments in technology across the country, and an automated truck already delivered 50,000 cans of beer within Colorado last fall. Meanwhile, truckers hold the most common occupation in 29 different states. Unsurprisingly, analysts expect automated trucks to proliferate in the next five to ten years, leading to significant job losses in the process.
The only problem? The numbers do not clearly back up the predictions.
I certainly hope they are correct as the elimination of truck drivers would create massive job losses. Especially right here in South Carolina…
The Chemical Activity Barometer (CAB) posted its strongest year-over-year gain in nearly seven years. The 5.5 percent increase over this time last year reflects elevated consumer and business confidence and an overall rising optimism in the U.S. economy. Speaking last week, Federal Reserve Chairwoman Janet Yellen also referenced a “confidence in the robustness of the economy” as a reason to move forward with an interest rate hike.
The barometer posted a 0.5 percent gain in March, following a 0.5 percent gain in February and 0.4 percent gain in January. All data is measured on a three-month moving average (3MMA). Coupled with consecutive monthly gains in the fourth quarter of 2016, the pattern shows consistent, accelerating activity. On an unadjusted basis the CAB climbed 0.4 percent in March, following a 0.4 percent gain in February and a 0.6 percent increase in January.
Awesome news but I also have to think about the problems that many U.S. retail companies are facing. While there are plenty of positive indicators ( like this ), there are also many disturbing stories lately.
From the Mortgage Banker’s Association:
Mortgage applications decreased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 17, 2017.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.46%, with points increasing to 0.41 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) decreased to 4.40% from 4.44%, with points increasing to 0.37 from 0.28 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to 3.68% from 3.66%, with points decreasing to 0.37 from 0.45 (including the origination fee) for 80% LTV loans.
Remember these are the average rates and while mortgage rates have been climbing lately, they are still historically low. If you look back in time, you will see that rates have been 2 or 3 times what they are today.
My advice is if buying a home makes sense for you, don’t drag your feet. Mortgage rates could rise even more since the Federal Reserve seems intent on several more increases this year.
Mark Fleming, chief economist at First American:
Steady income and job growth combined with increased building permit activity has increased the market potential for home sales on an annual basis. Demand from Millennials and first-time homebuyers remains robust despite the strong spring sellers’ market and rising rates, resulting in a shrinking underperformance gap, as the market aligns with its potential.
Yes the U.S. housing market is still under performing it’s potential. I would blame tight inventory levels more than anything else.
Reform of the US housing-finance system centered around Freddie Mac and Fannie Mae, while likely not imminent, could have wide-reaching implications for a range of sectors and entities, says Moody’s Investors Service in a report.
The conservatorship of the two government-sponsored enterprises (GSEs) has run for more than eight years and deciding on a path forward remains one of the largest pieces of unfinished business remaining from the global financial crisis. Officials in the new presidential administration have suggested that addressing their future is a priority, increasing speculation of reforms that could reshape the $11 trillion US residential and multifamily mortgage market.
If we do finally see GSE reform after several years of kicking the can down the road, it will probably mean much higher mortgage rates for home buyers. And maybe even tighter lending conditions.
U.S. Existing-Home Sales Stumble in February
After starting the year at the fastest pace in almost a decade, existing-home sales slid in February but remained above year ago levels both nationally and in all major regions, according to the National Association of Realtors®.
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, retreated 3.7 percent to a seasonally adjusted annual rate of 5.48 million in February from 5.69 million in January. Despite last month’s decline, February’s sales pace is still 5.4 percent above a year ago.
The median existing-home price for all housing types in February was $228,400, up 7.7 percent from February 2016 ($212,100). February’s price increase was the fastest since last January (8.1 percent) and marks the 60th consecutive month of year-over-year gains.
Remain calm as you will read plenty of scary click bait type headlines. And remember this is talking about either the entire country or huge areas such as the South East. The key is and always has been what the market is doing in the area that you are buying or selling in.
Lawrence Yun, NAR chief economist, once again blamed low inventory and weakening affordability. Again, remember to look locally to determine what is happening in your area. For those in the Anderson SC area, you can check out the Anderson County SC Real Estate Market Reports
U.S. house prices remained flat in January according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI). The HPI has reflected positive monthly increases since early 2012, except for November 2013 and January 2017, when house prices were flat on a month-over-month basis. The previously reported 0.4 percent increase in December remains unrevised.
The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. From January 2016 to January 2017, house prices were up 5.7 percent.
While a little dated, it is interesting. Check out the chart:
Cash sales accounted for 33.1 percent of total home sales in December 2016, down 1.3 percentage points year over year from December 2015. For the full-year 2016, the cash sales share was 32.1 percent, 2.2 percentage points below the full-year 2015 share. This is the lowest annual cash sales share since 2007 when it was 27 percent.
The cash sales share peaked in January 2011 when cash transactions accounted for 46.6 percent of total home sales nationally. Prior to the housing crisis, the cash sales share of total home sales averaged approximately 25 percent. If the cash sales share continues to fall at the same rate it did in December 2016, the share should hit 25 percent by mid-2019.
Another national report but do not let that fool you into thinking it isn’t important. While local still matters more, the decrease in cash home sales is good news. It is a signal that we are starting to get back to normal.
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