Discussing the Case Shiller and Black Knight reports on home prices, housing demand rises, consumer and Realtor confidence plus more…
From Case Shiller:
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.9% annual gain in January, up from 5.7% last month and setting a 31-month high. The 10-City Composite posted a 5.1% annual increase, up from 4.8% the previous month. The 20-City Composite reported a year-over-year gain of 5.7%, up from 5.5% in December.
Before seasonal adjustment, the National Index posted a month-over-month gain of 0.2% in January. The 10-City Composite posted a 0.3% increase and the 20-City Composite reported a 0.2% increase in January. After seasonal adjustment, the National Index recorded a 0.6% month-over-month increase, while both the 10-City and 20-City Composites each reported a 0.9% month-over-month increase. Thirteen of 20 cities reported increases in January before seasonal adjustment; after seasonal adjustment, 19 cities saw prices rise.
David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices:
Housing and home prices continue on a generally positive upward trend. The recent action by the Federal Reserve raising the target for the Fed funds rate by a quarter percentage point is expected to add less than a quarter percentage point to mortgage rates in the near future. Given the market’s current strength and the economy, the small increase in interest rates isn’t expected to dampen home buying.
If we see three or four additional increases this year, rising mortgage rates could become concern. While prices vary month-to-month and across the country, the national price trend has been positive since the first quarter of 2012. In February, the inventory of homes in the market represented 3.7 months of sales, lower than the long-term average of six months.
Tight supplies and rising prices may be deterring some people from trading up to a larger house, further aggravating supplies because fewer people are selling their homes. The prices also hurt affordability as higher prices and mortgage rates shrink the number of households that can afford to buy at current price levels. At some point, this process will force prices to level off and decline – however we don’t appear to be there yet.
Could we see U.S. home prices start to level off this year?
In response to the growing economy, the Federal Reserve Board is cautiously raising interest rates for the first time in years. Voters are slightly less wary of the economic power the Fed chairman has, but most still think the Fed is too cozy with big banking interests.
A new Rasmussen Reports national telephone and online survey finds that 59% of Likely U.S. Voters believe big banks and other major financial institutions have too much insider influence over the actions of the Federal Reserve. This finding has changed little since we first asked it five years ago. Just 20% disagree, while 22% are not sure.
It is pretty obvious to long time readers that I feel this way. What do you think?
A House panel on Tuesday approved legislation that would let a government watchdog audit the Federal Reserve’s monetary policy decisions, a move bitterly opposed by the central bank. The House Committee on oversight and government reform passed the measure by voice vote after roughly 30 minutes of debate.
If the banks and financial institutions have too much influence, can we really expect meaningful changes that will actually help the average American?
From Black Knight:
U.S. home prices at the start of 2017 continued the trend of incremental monthly gains, rising 0.1 percent from December. Home prices in three of the nation’s 20 largest states and nine of the 40 largest metros hit new peaks.
Great news for owners and sellers, not so much for those looking to buy. Remember this is national and not local!
So whether you are buying or selling, contact a local Realtor to discuss what is happening in your area. You can find out what is happening in the Anderson SC area by reading the Weekly Market Reports!
Treasury Secretary Steven Mnuchin said Friday that he wasn’t worried about artificial intelligence taking over American jobs. However, on the same day, a new report by PwC showed that more than a third of U.S. jobs could be at “high risk” of automation by the early 2030s, a percentage that’s greater than in Britain, Germany and Japan.
Maybe Mnuchin isn’t worried since he thinks this won’t affect the wealth or quality of life for people like him…
I suggest you take these reports seriously and plan accordingly. Always plan for the worst and hope for the best!
The national housing market continued its rally in the fourth quarter of 2016. On an annualized basis, 5,810,000 sales transactions were reported, which is up 350,000 transactions, or 6.4%, from 2015. 2015 had already seen demand grow by 340,000 transactions or 7.6% from 2014.
The home purchase market also closed out 2016 with strong growth as transactions increased 9.1% in the fourth quarter compared to a year ago.
Cash sales continued to trend down accounting for only 29% of all transactions in 2016, down from 30% in 2015 and 36% in 2013. Government-backed lending accounted for 55% of all transactions in 2016, up from 53% in 2015 and 50% in 2013.
Over all, positive report. The turd in the punch bowl could be if something happens to muck up government-backed lending. Something like the current batch of idiots in Washington screwing up Fannie and Freddie.
Potential Homebuyers Seek Affordability and Warmth
Labor mobility in the U.S. has declined in recent years. Home owners are staying in their homes longer than in previous years. Corelogic data show homeowner mobility declining gradually over the past three decades. Those homeowners who have wanted to move seem to be driven by economic opportunities, affordability and weather. Home buyers from high-cost states, such as California and New York, moved to more affordable states, such as Florida, Texas, Arizona and the Carolinas in 2016.
South Carolina is both warm and affordable. Just saying…
Murray, president of consulting firm Real Trends, has been tracking for 40 years how U.S. real estate agents do their jobs. And over the past decade, the Internet has disrupted almost every aspect of a transaction that sits at the core of the American Dream. Everyone now has free access to information that used to be impossible to find or required an agent’s help.
While the Internet has pummeled the middlemen in many industries — decimating travel agents, stomping stock-trading fees, cracking open the heavily regulated taxi industry — the average commission paid to real estate agents has gone up slightly since 2005, according to Real Trends. In 2016, it stood at 5.12 percent.
While we keep hearing about robots taking jobs, some jobs require a skill set that a machine cannot duplicate. At least not yet…
While local conditions vary, the REALTORS® Buyer Traffic Index and the REALTORS® Confidence Index indicated that more respondents reported “strong” than “weak” conditions. Both indices were higher than their levels one year ago and in the previous month. The REALTORS® Seller Traffic Index decreased slightly from its levels one year ago and was unchanged from its level in the previous month. It has remained below 50 since January 2008, indicating that seller activity is still “weak,” according to the February 2017 REALTORS® Confidence Index Survey Report.
In February 2017, first-time homebuyers accounted for 32 percent of sales. Amid solid job creation, the share of first-time homebuyers has been on a modest rise, up from 29 percent in 2014. With fewer new foreclosures, distressed properties accounted for seven percent of sales, purchases for investment purposes made up 17 percent of sales, and cash sales accounted for 27 percent of sales. Amid tight supply, half of properties that sold in February 2017 were on the market for 45 days or less compared to 59 days in February 2016.
I admit to being more confident but my confidence is largely based upon how much better things are now compared to how bad things were just a few years ago. I often wonder how accurate these confidence surveys are. Some people see the glass as half full, some see it as half empty.
The increase in the number of first time home buyers is especially good news for both the housing market and the economy. The percentage of cash sales and investment sales is almost back to a normal level.
While properties being on the market for only 45 days is great news, I do wonder how much of this is due to the extremely tight levels of inventory in some areas?
Americans’ confidence in the U.S. economy tumbled along with the Dow Jones industrial average last week. Though still in positive territory, Gallup’s U.S. Economic Confidence Index (ECI) dropped six points to a score of +5 for the week ending March 26. This is the lowest weekly average since the presidential election in November. Americans’ falling confidence in the economy may be tied to events in Washington and on Wall Street.
Let’s hope this is just a blip and will not turn into a trend that hurts the economy or the real estate market.
The Conference Board Consumer Confidence Index®, which had increased in February, improved sharply in March. The Index now stands at 125.6 (1985=100), up from 116.1 in February. The Present Situation Index rose from 134.4 to 143.1 and the Expectations Index increased from 103.9 last month to 113.8.
Consumer confidence increased sharply in March to its highest level since December 2000. Consumers’ assessment of current business and labor market conditions improved considerably. Consumers also expressed much greater optimism regarding the short-term outlook for business, jobs and personal income prospects. Thus, consumers feel current economic conditions have improved over the recent period, and their renewed optimism suggests the possibility of some upside to the prospects for economic growth in the coming months.
Strange how this contradicts the previous report. Not that I am complaining about good news!
The Federal Housing Administration (FHA) played a significant role in maintaining mortgage credit availability following the onset of the subprime mortgage crisis and through the Great Recession. Not surprisingly, the FHA’s expansion during a period of falling home prices and deteriorating economic conditions resulted in material losses to its mortgage insurance fund arising from mortgage defaults and foreclosures. These losses, in turn, have generated increased policy interest in the design of the FHA mortgage insurance program.
The FHA’s policy of allowing borrowers to finance their up-front mortgage insurance premiums acts to reduce the total cost of borrowing during the first year (required cash at closing plus first-year payments), but results in non-defaulters paying a disproportionate share of program costs. Requiring up-front cash premiums improves the balance of program costs between defaulters and non-defaulters, but will reduce affordability on the margin. An FHA pricing structure with only annual premiums would better target premiums toward defaulters with almost no effect on affordability.
I wonder if we finally see changes to the GSEs, would it include changes to their mortgage insurance? If so, will these changes have a negative effect on affordability?
Real purchasing-power adjusted house prices declined 0.1 percent in January, as mortgage rates did not meaningfully change and income growth continued. Despite the monthly increase in affordability and continued strong wage growth, homes are less affordable across the country compared to a year ago.
As I keep saying, waiting could prove to costly for home buyers. Rising mortgage rates and home prices are not to be ignored.
Feeble U.S. economic growth since the Great Recession is due almost entirely to a plunge in homeownership to more-than-50-year lows, according to new data released Monday.
A return to more normal homeownership levels could have added more than $300 billion, or an additional 1.8 percent in growth, to the economy last year, a Rosen Consulting Group study found.
Bolstering homeownership, the report said, could be the “single most important key to returning the United States to a path of robust economic growth.”
Interesting study and I have no doubt that this jewel will be overlooked by the White House and Congress. We do not want to return to giving mortgages to those that are not financially capable but we must do something to ensure that the housing market is firing on all cylinders.
After peaking in 2011, the number of federal criminal prosecutions has declined for five consecutive years and is now at its lowest level in nearly two decades, according to a Pew Research Center analysis of new data from the federal court system. The decline comes as Attorney General Jeff Sessions has indicated that the Justice Department will reverse the trend and ramp up criminal prosecutions in the years ahead.
Federal prosecutors filed criminal charges against 77,152 defendants in fiscal year 2016, according to the Administrative Office of the U.S. Courts. That’s a decline of 25% since fiscal 2011, when 102,617 defendants were charged, and marks the lowest yearly total since 1997. The data count all defendants charged in U.S. district courts with felonies and serious misdemeanors, as well as some defendants charged with petty offenses. They exclude defendants whose cases were handled by magistrate judges.
I must ask, has their budget been slashed by 25 percent? If the number of prosecutions has decreased by 25%, what are they getting paid to do?
If the never ending number of settlements in the financial world were prosecuted, how much of an increase would there be?
Wells Fargo & Co said it agreed to pay $110 million to settle a lawsuit by customers challenging its opening of accounts without their permission, a practice that led to a scandal that cost the bank’s chief executive his job.
I am not sure if anyone could have been prosecuted for this stuff. We can’t expect bad bank behavior to change unless something more than wrist slaps are handed out.
From the Richmond Fed:
Activity in the service sector continued to improve in March although the improvement moderated somewhat from the first two months of the year. More firms continued to report revenue increases than decreases, although the revenues index for the overall service sector did fall from 15 in January and February to 9 in March. This was driven by a decrease in the share of services firms to report revenue growth; the share of retail firms who reported improvement increased from last month.
Despite the slight moderation of the revenues index in the overall service sector, the indexes for employment and wages both increased notably, while the index for expected demand during the next six months remained high, but declined in March.
Meanwhile, firms’ reports of price growth in the overall service sector changed little from February and the expectation for price growth moderated slightly in March.
While they used the word moderate a little too much for my liking, this is still a positive report.
Manufacturing Firms Upbeat in March with Shipments, New Orders, and Employment Indexes Rising
Also from the Richmond Fed:
Manufacturers in the Fifth District were generally upbeat in March, according to the latest survey by the Federal Reserve Bank of Richmond. The index for shipments and new orders both rose and employment gains were more common. This improvement led to a composite index for manufacturing that rose from 17 in February to 22 in March — the strongest reading for that index since April 2010. In addition to improvement in the employment index, more firms reported longer workweeks and wage increases appeared to be more widespread.
Looking six months ahead, manufacturing executives were generally optimistic, although for some indicators, they were less optimistic than in February. For example, the expected shipments index fell from 53 to 44 and the expected new order index fell from 53 to 48. On the other hand, some indexes rose, such as the indexes for expected employment, average workweek, and wages.
Survey respondents reported that growth in both prices paid and prices received moderated slightly, as did expectations for price growth six months ahead.
Solid stuff and good news for the economy in the coming months.
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