Discussing home prices, rents are rising at an extremely fast pace, AI and real estate agents, the economy, Fannie and Freddie getting bailed out and more!
US Home Prices Increase
From Clear Capital:
Nationally, quarter-over-quarter (QoQ) home price growth increased slightly to one percent, up 0.1 percent from February. US home prices increased 6.4% year over year. The South is up slightly to 0.8 percent QoQ growth, improving 0.1 percent from February.
U.S. house prices rose in January, up 0.8 percent from the previous month. From January 2017 to January 2018, house prices were up 7.3 percent.
Check out the chart:
While these reports are national and not local, this is still great news. Well it is great news for sellers and home owners but not such good news for anyone that is wanting to buy a home.
Rent Growth Accelerating at Fastest Pace in 21 Months
From Zillow Research:
Median rent nationwide is accelerating at its fastest annual pace in 21 months, climbing 2.8 percent year-over-year to $1,445 in February.
Rent appreciation slowed between 2015 and mid-2017 but has once again gained speed, in part because for-sale inventory is so tight that it’s becoming harder for renters to find homes they want and can afford to buy. Searching for the “right” home has become a drawn-out affair, and rising prices require more savings for a down payment. Without substantial new apartment construction over the past half decade, rent appreciation would be even stronger.
Also affected by tight inventory, home values rose 7.6 percent year-over-year to a median of $210,200. They’ve grown between 7.2 percent and 7.6 percent for the past nine months.
Going into home shopping season, buyers will have 10.3 percent fewer homes to choose from than a year ago. Inventory has fallen every month beginning in February 2015, with declines accelerating into the double digits in nine of the past 10 months.
Remember that these statistics are national and coming from Zillow. But there is no doubt that rents, mortgage rates and home prices are rising…
If someone is renting, they are going to be paying more. If someone is not working on buying a home ASAP, they are going to pay more.
Owning a home means your monthly housing payment can be set in stone when you use a fixed-rate mortgage.
The Negative Impact of Steel and Aluminum Tariffs
Imposing a 25 percent tariff on imports of steel and a 10 percent tariff on imports of aluminum, even if excludes those imports from Canada and Mexico, will raise the price of newly constructed home.
Construction prices are estimated to increase by 0.2 percent. This means that a new home that cost $300,000 to build is estimated to cost $614 more.
While this doesn’t sound too bad, remember that other countries may retaliate with tariffs against the US. I wrote a post earlier this month that discussed tariffs and again, the tariffs may not be the solution to our trade imbalance.
On the other hand, you do have to question criticisms about the tariffs:
There is also public opposition from advocacy groups outside Congress that not only have financial clout, but hold sway with conservative donors and activists. Two groups backed by conservative and libertarian mega-donors Charles and David Koch, Freedom Partners and Americans for Prosperity, have come out against the announcement, arguing, like Ryan, that it will hurt American consumers and jobs, and jeopardize the successes of the tax reform bill Trump signed into law at the end of last year.“
The Koch Brothers want what is best for the Koch Brothers and not what is best for the majority of Americans. Sill there is plenty of criticism coming from reputable sources to cause me to doubt that the tariffs are a good thing.
Will AI Hurt Real Estate Agents?
Brokerage REX Real Estate Exchange uses artificial intelligence and machine learning instead of real estate agents to sell homes. REX computers crunch over a hundred thousand data points to find the likely buyers for a home and targets them with digital ads.
The weird thing is REX still must rely on real estate agents according to Jack Ryan, co-founder and CEO of REX:
When you’re selling the most important asset of your life, you want to know there’s a person who cares about you in addition to the computer.
This company still admits that agents are needed all of the things that require people skills and experience. The thing is that many of the tools this company is touting are already used by many agents.
So while technology is great, there are some jobs that will always require a human. At least for now…
US Economy in a Snapshot
Highlights from the NY Fed’s latest US Economy in a Snapshot report:
Real consumer spending growth declined slightly in January. Durable goods expenditures largely drove the decline.
Housing indicators generally point to continued gradual improvement in this sector. Tight housing supply and a strong labor market have the potential to provide continuing support to the housing sector.
Payroll growth registered another strong increase in February. The unemployment rate was unchanged, while labor force participation rate and employment-to-population ratio both recorded notable improvements. The latest readings of various measures of labor compensation continued to indicate modest firming.
Core PCE inflation continued to run below the FOMC’s longer-run objective, but near-term momentum has firmed.
Pretty good report over all. And since this coming from one of the Federal Reserve Banks, it is ammo for more rate increases.
Payday Lenders Have a Friend at the CFPB
The top cop for U.S. consumer finance has decided not to sue a payday loan collector and is weighing whether to drop cases against three payday lenders, said five people with direct knowledge of the matter.
The move shows how Mick Mulvaney, named interim head of the Consumer Financial Protection Bureau (CFPB) by U.S. President Donald Trump, is putting his mark on an agency conceived to stamp out abusive lending.
Sad to see these legal loan sharks being given a pass on questionable behavior. But that is to be expected since payday lenders have much deeper pockets for political contributions than the people they are screwing over.
Fannie and Freddie Are Not Getting Bailed Out Again
From American Banker:
In February, as expected, Fannie Mae and Freddie Mac announced that they will require a combined $4 billion “draw” from the U.S. Treasury in order to maintain positive net worth. This is due to their having to write down certain tax assets whose values were negatively impacted by the new tax law.
The answer is simple: Our government has already sucked out all of their profits, leaving them with virtually no equity cushion whatsoever. Thus, when Treasury cuts checks to Fannie and Freddie at the end of this month, those payments should be considered as nothing more than the return of stolen money.
This “draw” will be used by critics of the GSEs as a reason they should be dismantled. Which would have a negative impact on the housing market and hurt many home buyers.
Single Family Rental Market Still Booming
The average annual gross rental yield (annualized gross rent income divided by median purchase price of single family homes) among the 449 counties was 8.9 percent for 2018, down from an average of 9.2 percent in 2017.
Daren Blomquist, senior vice president at ATTOM said:
Despite declining returns in many areas, the single-family rental market continues to grow thanks to more activity by smaller and middle-tier investors. The biggest increase in market share over the past year has come among investors owning six to 10 single family rentals, followed by those owning between 11 and 100 rentals. These smaller to mid-tier investors are benefitting from newfound efficiencies in acquisition, financing and property management that allow them to buy outside their backyard in areas with higher potential returns, and to leverage their money to buy more properties.
Attom reported that the annual rental yield for Anderson County was 10.2% and Anderson County ranked 119 out of 449 counties. There is no doubt that Anderson County has great opportunities for single family rental investors.
Budget Accord Misses the Mark on Affordable Housing
From Randy Noel, chairman of the National Association of Home Builders, on the Low Income Housing Tax Credit component of the $1.3 trillion spending bill:
Bipartisan leaders in the Senate and House fell woefully short by agreeing to a budget compromise that significantly waters down any improvements to the Low Income Housing Tax Credit (LIHTC). The nation is facing a significant affordable housing crisis and the LIHTC is the premier program to help builders produce affordable rental housing units. Unfortunately, the spending bill does not do nearly enough to meet the affordable housing needs of this country, particularly in Texas, Florida and Puerto Rico, which are still struggling to recover from the devastating hurricanes of last year.
NAHB will continue to push Congress to finish the job and quickly pass the Affordable Housing Improvements Act, which enjoys broad, bipartisan support on both sides of the Capitol. It would make a real difference by strengthening the LIHTC program and promoting the construction of hundreds of thousands of sorely needed affordable rental units over the next decade.
It is nice that the NAHB is going to push to ensure the number of affordable rentals increases. The lack of affordable rental housing is a serious issue that must be handled.
Construction Employment Increases
The AGC just reported that thirty-five states and the District of Columbia added construction jobs between February 2017 and February 2018, while 38 states added construction jobs between January and February.
AGC chief economist Ken Simonson said:
The construction industry continues to add employees in most of the nation, despite a shortage of workers with construction experience. But job openings are growing, as contractors encounter a shrinking pool of experienced jobseekers.
Great news other than the lack of workers with construction experience. Which might be a good problem to have as it shows how much construction has increased…
Well that is all the time I have time for today! Be sure to hit those share buttons!