Talking about declining foreclosures, retail businesses hurting, low inventory of homes for sale and much more…
Looking at the Decline in Foreclosures
About a week ago, CoreLogic released a study entitled, United States Residential Foreclosure Crisis: 10 Years Later. Sadly it requires registering to download and I know how many people hate having to do that. Can’t say that I blame you!
I can’t tell you how many times I see something being “free” but it requires my email address. Which means I will then start getting spam even more emails. If you require someone’s email, then it isn’t free! There is a value to my email address! Anyway, enough about that..
CoreLogic looked at the time before the housing meltdown through today. There were 1.2 million foreclosures at the peak back in 2010. 7.7 million home owners lost their houses during the entire foreclosure crisis.
Dr. Frank Nothaft, Chief Economist for CoreLogic, said:
The country experienced a wild ride in the mortgage market between 2008 and 2012, with the foreclosure peak occurring in 2010. As we look back over 10 years of the foreclosure crisis, we cannot ignore the connection between jobs and homeownership. A healthy economy is driven by jobs coupled with consumer confidence that usually leads to homeownership.
Since the peak back in 2010, foreclosures were gradually decreasing by almost 100,000 per year through the end of 2016, as you can see in the chart below:
If this type of pattern continues, the United States is going to be back to 2005 levels by the end of this year!
Since the overall economy continues strengthening, and jobs numbers improve, the total number of completed foreclosures will keep declining. I understand that many people think this means the smoking hot deals are coming to an end.
However, you need to remember that for every foreclosure you see, someone lost their home. Maybe they were deadbeats OR maybe something bad happened to a good person.
Also, you need to remember that foreclosed homes hurt the values of the surrounding homes. Not that you might be able to tell by the way that home prices have been increasing.
Thousands of mall-based stores are shutting down in what’s fast becoming one of the biggest waves of retail closures in decades. More than 3,500 stores are expected to close in the next couple of months.
Department stores like JCPenney, Macy’s, Sears, and Kmart are among the companies shutting down stores, along with middle-of-the-mall chains like Crocs, BCBG, Abercrombie & Fitch, and Guess. Some retailers are exiting the brick-and-mortar business altogether and trying to shift to an all-online model.
The nation’s worst-performing malls — those classified in the industry as C- and D-rated — will be hit the hardest by the store closures.
The real-estate research firm Green Street Advisors estimates that about 30% of all malls fall under those classifications. That means that nearly a third of shopping malls are at risk of dying off as a result of store closures.
Well after that uplifting bit about foreclosures, I had to bring you back to reality. Some trends we have been seeing lately are positive, and some are very very scary.
Nationally, housing inventory hit its lowest level on record in the first three months of 2017. The number of homes on the market dropped for the eighth consecutive quarter, falling 5.1% over the past year. Across different housing segments, starter and trade-up home inventory fell 8.7% and 7.9% year-over-year nationally. Meanwhile, the stock of premium homes remained relatively unchanged since last year, having fallen just 1.7%.
Don’t let this mislead you about the number of starter homes in the Anderson SC area. There are plenty of options for buyers wanting a starter home. You just have to have your act together.
The Architecture Billings Index (ABI) returned to growth mode in February, after a weak showing in January. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending.
The American Institute of Architects (AIA) reported the February ABI score was 50.7, up from a score of 49.5 in the previous month. This score reflects a minor increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 61.5, up from a reading of 60.0 the previous month, while the new design contracts index climbed from 52.1 to 54.7.
The sluggish start to the year in architecture firm billings should give way to stronger design activity as the year progresses,. New project inquiries have been very strong through the first two months of the year, and in February new design contracts at architecture firms posted their largest monthly gain in over two years.
Nice to see a return to positive! As with all economic indicators, it needs to be consistently positive for several months before we can get too excited.
Rail Traffic Increases
For this week, total U.S. weekly rail traffic was 495,281 carloads and intermodal units, up 2.4 percent compared with the same week last year.
Total carloads for the week ending March 18 were 246,465 carloads, up 4.6 percent compared with the same week in 2016, while U.S. weekly intermodal volume was 248,816 containers and trailers, up 0.3 percent compared to 2016.
Researchers have long suspected a connection between falling home values and spikes in arson rates, but they’ve lacked strong supporting evidence. Now a new study in The Journal of Risk and Insurance claims there’s proof that the theory is real.
They found that a 10 percent to 15 percent decrease in local housing prices over a six-month period was associated with 3.8 more fires per 1 million residents a month, according to the study. Further, the drop in prices were attributed to a 2.2 percent increase in probability that an individual fire had been set due to arson or an accident, the researchers note.
Interesting. Obviously, I do not suggest or condone such behavior.
Overall commercial real estate lending growth picked up after a couple slow weeks. Construction and land development lending grew at a 6.0% annualized rate, reversing the negative trend of the previous two weeks. Multifamily mortgage lending posted another strong week with a 16.2% annualized growth rate. Commercial mortgages also accelerated, with a 9.0% annual growth rate.
Excellent! Hopefully this will continue and not just be a short lived blip.
Even the best translation of the word – essence – is hard to get your arms around. Perhaps that is why so many of us were blissfully unaware until recently that the very essence of the American Dream was slipping through our fingers. Though the phrase, which captures the very, yes essence, of the American thirst for adventure, dates back to the hopes and spirit that emboldened prospectors to ‘Go West,’ those who first engaged in California Dreaming, it was James Truslow Adams’ popularization of the term that cemented the ideal into our collective psyche.
Today’s must read!
With the benefit of hindsight, we now have an opportunity tweak Dodd-Frank regulations to keep what works and dump what is overly burdensome. With the housing crisis in the rear-view mirror for most Americans, it’s time for government to take a clear-eyed look at a set of regulations that really protect consumers from another housing recession.
I normally don’t share much stuff from Zillow because of my disrespect for Zillow’s lack of accuracy in both the values of homes for sale and the homes they have on their website that are NOT for sale. However, I will give credit to Stan Humphries for being absolutely correct about tweaking instead of completely removing Dodd-Frank.
Dovetailing with President Trump’s recent Executive Order requiring a reduction in regulatory burden, on March 21, 2017, a CFPB official remarked at the American Bankers Association Government Relations Summit that the CFPB was planning to start its review of significant mortgage regulations, including the ability to repay/qualified mortgage rule.
The Dodd-Frank Act requires the CFPB to use available evidence and data to assess all of its rules five years after they go into effect to ensure they are meeting the purposes and objectives of Dodd-Frank, and the specific goals of the subject rule. January 2018 will mark five years since the ability to repay/ qualified mortgage rule was finalized, as well as other key mortgage regulations, in January 2013.
Since I just shared something about tweaking Dodd-Frank, I thought it was VERY appropriate to share this. Again, common sense changes and not a total repeal is my suggestion for improving mortgage lending regulations.
During the summer of 2013, rising mortgage rates associated with the so-called “taper tantrum” started to pressure the housing markets. While housing starts, home sales and house prices generally grew more slowly or declined through the end of 2013, this did not lead to a full-fledged housing downturn or a significant economic slump. While still historically low, mortgage rates have been on the rise again in recent months.
However, at least so far, they are rising at a somewhat slower pace than they did in the second half of 2013. On the other hand, household income growth has dropped in recent months. In addition, house prices and rents, having increased strongly for several years, now appear more vulnerable to a correction than they did in 2013. Will housing markets weaken in 2017 as they did during the taper tantrum of 2013, and will the economy escape relatively unharmed again this time?
God I hope not. Especially since we have come so far since the shit the fan…
Experian, one of the nation’s largest credit bureaus, was fined $3 million Thursday for providing consumers with “inaccurate” credit scores. The Consumer Financial Protection Bureau (CFPB) accused Experian of deceiving people about their credit scores, a financial measurement lenders use to determine how likely a borrower is to repay everything from their mortgage to their credit card bill.
While not a bank, it is yet another fine or settlement. What has happened that so many businesses think they have to cheat, lie, steal or break the law to succeed?
The Community Mortgage Lenders of America (CMLA), the Community Home Lenders Association, the Corporation for Enterprise Development (CFED), the Leadership Conference on Civil and Human Rights (LULAC), the League of United Latin American Citizens (LULAC), the Leading Builders of America, NAACP and the National Community Reinvestment Coalition (NCRC) all just sent a letter asking for Freddie and Fannie’s dividends to no longer be sent to the Treasury.
In a joint letter to Treasury Secretary Steven Mnuchin and Federal Housing Finance Agency (FHFA) Director Mel Watt, they called for the suspension of the quarterly dividends being paid by Fannie Mae and Freddie Mac to the U.S. Treasury, in order to allow the housing finance entities to begin rebuilding their dwindling capital reserves.
I do not understand why the dividends from the GSE’s are still being sent to the Treasury since they repaid the money they needed to stay solvent after the housing market went to shit. The only explanation I can come up with is the powers that be want to weaken the GSE’s OR they want to somehow use the money for something nefarious.
Since the financial crisis, qualifying for a mortgage has become difficult for people with anything short of perfect credit. The Urban Institute’s Housing Credit Availability Index now stands at 5.1 percent, less than half the level it was in 2001, a period of reasonable credit standards.
Credit is tight in large part because lenders are imposing even more stringent standards than those required by the entities that guarantee or insure these loans: the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac and the Federal Housing Administration (FHA). For example, the FHA may be willing to underwrite a mortgage with a FICO credit score of 620, but the originator might require a 660 FICO score.
To further expand credit availability, the FHA must give lenders greater assurance that they are only liable for their own errors, not subsequent performance. It’s up to the FHA now.
I would say we need to make sure that good, credit worthy people can get a mortgage so they can buy a home. I never ever want a return to the type of lending that helped lead to the housing market crash.
Forty-three states added construction jobs between February 2016 and February 2017 while 39 states added construction jobs between January and February, according to an analysis by the Associated General Contractors of America of Labor Department data released today. Association officials noted that the despite the relatively widespread increase in construction employment, most states are still significantly below peak construction employment levels.
A combination of solid demand and unseasonably mild weather added to construction employment in more states than usual in February. Five states set new records for construction employment, while more than half the states are still at least 10 percent below their all-time highs.
Very nice! Let’s hope we see a rapid return to healthy levels of employment in construction.
That’s it for today! Be sure to subscribe