Discussing new home sales, banker optimism, foreclosures and mortgage delinquencies, jobless claims, mysterious inflation, the Conference Board Leading Economic Index, Freddie Mac’s Outlook for March 2018, HMDA data and discrimination plus more!
New Home Sales in February 2018
From Census Bureau and HUD:
New Home Sales
Sales of new single-family houses in February 2018 were 0.6% below the revised January rate but 0.5% above the February 2017 estimate.
The median sales price of new houses sold in February 2018 was $326,800. The average sales price was $376,700.
For Sale Inventory and Months’ Supply
The seasonally-adjusted estimate of new houses for sale at the end of February was 305,000. This represents a supply of 5.9 months at the current sales rate.
While we did see home sales increase YoY, this is the 3rd consecutive month of MoM decreases. Check out the chart:
I used the long range chart to show where we have been in the past. Things are better than after the Great Recession but we are still not seeing as many new homes sold as we did in the past.
Banker Optimism Surges
Bank leaders began 2017 expressing slight optimism about their institutions’ experiences over the prior 12 months, and their outlook stayed that way for most of 2017. Then, in the final quarter, there was a meaningful surge.
It is not surprising to see banks feeling more confident as the economy is humming along. 63% of bankers said overall economic conditions for their bank had improved over the last 12 months.
Looking forward, 65% of those surveyed see overall economic conditions improving over the next 12 months. This is the highest level ever record by Promontory.
Nearly two-thirds of those surveyed expect the economy to further improve in 2018. Plus, only one in 20 think that that the economy will get worse. This is the highest level of optimism and the lowest level of pessimism for the economy in the survey history!
This is great news for the banks but whether or not it leads to more mortgages or lending to businesses remains to be seen…
Foreclosure Starts and Sales Decrease
From Black Knight:
While this is a national report, it is good to see improvements on a year-over-year basis in most areas. Black Knight is still seeing the impact of the hurricanes on foreclosures and mortgage delinquencies.
I can tell you that the number of foreclosures in Anderson County is much lower than just a few years ago. I know that many buyers think that foreclosures are the best way to get a good deal.
This is not always true and the best way to get a good deal is to work with an experienced Realtor and mortgage lender that is looking out for your best interests. But for those interested, you can check out the foreclosed homes in Anderson County SC.
Jobless Claims Increase Slightly
In the week ending March 17, the advance figure for seasonally adjusted initial claims was 229,000, an increase of 3,000 from the previous week’s unrevised level of 226,000. The 4-week moving average was 223,750, an increase of 2,250 from the previous week’s unrevised average of 221,500.
Claims have been below 300,000 for 159 consecutive weeks. 300,000 is the level associated with a healthy labor market.
Inflation Is a Mystery to the Federal Reserve
The first principle of war is “know thine enemy.” But as Federal Reserve Chairman Jerome Powell and his colleagues raise interest rates to keep the U.S. economy from overheating, there’s a lot they don’t know about the foe they’re trying to contain: inflation.
Here are some of the things about inflation the Fed and other central banks are uncertain of: what causes it; what effects it has; what to count in measuring it (stock prices?); how low, or high, it should be; and how to move it up and down.
The Fed, in other words, is driving blind. Daniel Tarullo, in a tell-all address at the Brookings Institution in October after his resignation from the Fed’s Board of Governors, said, “We do not, at present, have a theory of inflation dynamics that works sufficiently well to be of use for the business of real-time monetary policymaking.”
And yet the Fed is making very important decisions based on inflation? Not very reassuring is it?
The Conference Board Leading Economic Index Increased
From The Conference Board:
The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.6% in February following a 0.8% increase in January, and a 0.7% increase in December.
Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board, said:
The U.S. LEI rose again, despite a sharp downturn in stock markets and weakness in housing construction in February. The LEI points to robust economic growth throughout 2018. Its six-month growth rate has not been this high since the first quarter of 2011. While the Federal Reserve is on track to continue raising its benchmark rate for the rest of the year, the recent weakness in residential construction and stock prices – important leading indicators – should be monitored closely.
It is good but as Ataman points out, housing construction was weak in February. With the problem of limited inventory still hurting many areas, we really need to see more homes being built.
However, we are blessed that there are plenty of new homes being built in Anderson County. And there are plenty of buildable lots for those wanting something custom built.
Freddie’s Outlook March 2018
Highlights from Freddie Mac’s March 2018 Outlook:
While mortgage rates remain historically low, they have been steadily climbing since the start of 2018. We expect that growth to continue, with the 30-year fixed mortgage rate averaging 4.9 percent in the fourth quarter of 2018.
Since the end of the Great Recession in 2009, home prices are up 37 percent nationwide (and seven percent in the last year), helping homeowners rack up record amounts of home equity; about $14.4 trillion in the fourth quarter of 2017. Homeowners with mortgages have a collective $5.5 trillion in equity available to borrow against, according to Black Knight Data & Analytics.
With construction ramping up slowly to meet housing demand, home prices are likely to continue rising above the rate of inflation. We forecast a 5.1 percent increase in 2018.
Len Kiefer, Deputy Chief Economist at Freddie Mac, said:
Overall, U.S. housing markets have been on the upswing. While housing market trends have been generally favorable, not everyone has shared equally in the gains. Existing homeowners have largely seen their properties increase in value, helping to build equity. In many parts of the country, home values have more than recovered from the Great Recession, reaching new (nominal) peaks, and the share of underwater homeowners has dropped significantly.
Check out where Freddie is thinking mortgage rates, home prices and home sales are headed:
While they are predicting that home prices and mortgage rates will continue to increase through 2019, they are not forecasting sales to slow down. As you can see, they are predicting home sales to increase!
Does HMDA Data Prove Lending Discrimination?
From St. Louis Fed:
HMDA data are used by examiners, community groups and consumer advocates to identify potential fair lending risks. Sometimes, HMDA data are cited in the press as evidence of discrimination when, for example, very high interest rates are more common on mortgages to persons of color than those on mortgages to others.
While HMDA data provide a useful start in assessing lending practices, the data alone do not prove discrimination. If HMDA data trigger concern, bank examiners conduct a comprehensive review, including an in-depth statistical analysis. The statistical analysis looks for legitimate credit underwriting factors, such as minimum credit scores and maximum debt-to-income ratios.
Something to consider when we hear accusations of discrimination by lenders. We must always take these types of accusations seriously but also ensure that lenders are not hurt by false claims.
Remember the old saying: There are three kinds of lies: lies, damned lies, and statistics.
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