Discussing the latest on personal income and spending, increasing rents, consumer confidence, home owners thinking their home’s value will increase and more…
Personal Income Increased 0.4% But Spending Increased Only 0.1% in February 2017
From the Bureau of Economic Analysis:
Personal income increased 0.4% and and personal consumption expenditures increased 0.1% in February.
Wages and salaries, the largest component of personal income, increased 0.5 percent in February after increasing 0.4 percent in January. The increase in personal income in February primarily reflected increases in wages and salaries and rental income.
Real consumer spending decreased 0.1 percent in February after decreasing 0.2 percent in January. Spending on durable goods decreased 0.1 percent in February after decreasing 1.1 percent in January.
Income increasing is great and I should point out they mention rental income. The decrease in spending, however, is disturbing as much of our economy depends on spending.
A new Rasmussen Reports national telephone and online survey finds that 41% of American homeowners now think the value of their home is likely to go up over the next year. That’s up just slightly from 39% in October just before the presidential election but is up five points from 36% a year ago.
I am surprised this isn’t higher and wonder why it is low? If consumer confidence is as high as the recent reports suggest, then it stands to reason that more home owners would be confident about the value of their house.
Surprise! Regulatory Burden Continues to Restrict Mortgage Lending
From the ABA’s 24th Real Estate Lending Survey:
- The percentage of single family mortgages made to first time home buyers increased from 15% in 2015 to 16% in 2016
- The percentage of Non-Qualified Mortgages (non-QM) fell from 14% in 2015 to 9% in 2016
- Approximately 44% of respondents cite “loans exceeding the debt-to-income ratio” as the most frequent reason loans do not meet QM standards
- Approximately 55% of respondents state that regulations are having a moderately negative impact on business
- 22% of respondents state that regulations are having a extremely negative impact on business
- Mortgage-specific compliance costs have increased for 97% of institutions as a result of recent regulatory reforms
- 75% of institutions have had to hire additional staff to cope with these new regulations
This is only a few of the highlights and you can find charts, graphs and a bunch more in the report.
From the Richmond Fed (emphasis is mine):
Indexes reflecting current economic conditions improved again in March, according to the results of the monthly Carolinas Survey of Business Activity, and respondents remained mostly optimistic about the near term. The current general business conditions measure increased for the fourth month in a row, reaching its highest level in nearly five years. The current sales indicator eased back a bit from February’s reading, but remained in clear positive territory. Looking forward, measures reflecting expectations for general business conditions and sales six months from now moved lower in March, but from extraordinarily high levels a month earlier.
Labor demand appeared to increase in March, but labor availability remained a challenge according to the survey results. The current number of workers index jumped in the latest reading, to the highest level in the history of the series, and the current average weekly hours indicator increased for the second month in a row. However, the current availability of skills measure moved further into negative territory, suggesting that workers were more difficult to find, and the current wages metric jumped.
In spite of increases in the indicators reflecting general business conditions, each of the three current business spending indexes (business services, total capital expenditures, and equipment or software) moved lower in March, although each remained positive. The same is true for all of the corresponding expectations metrics.
Inflation pressures remained modest but appeared to increase in March. Both of the survey’s measures of current price increases (paid and received) moved up modestly, to their highest averages in at least two and a half years, as did the corresponding expectations measures.
Overall, positive except for the business spending indexes decreasing.
Time is ticking for the National Flood Insurance Program. In just six months—on Sept. 30—the NFIP is set to expire, and REALTORS® are warning that could pose a major threat to home owners and property sales.
The National Association of REALTORS® is working with lawmakers to strengthen the program and also create a path for a private market to take hold ahead of the Sept. 30 expiration.
I hate to think that some people are facing this threat. I fear the private market may prove to be very costly…
From the Zumper National Rent Rent Report:
The top rental markets showed a loose trend of upward prices while mid tier and lower tier markets showed mixed changes. Overall, the Zumper National Rent Index showed that one bedroom median rent increased 1.92%, while two bedroom median rent increased 1.84%.
Here is something not included in this very interesting report: people with fixed rate mortgages did NOT have their monthly housing costs increase during the same time period.
Also, landlords saw their profits and the values of their properties increase during this time. Renters, however, have NOTHING to show from the money they spent for housing during this time period.
A federal judge on Thursday said Wells Fargo & Co (WFC.N) must face litigation seeking to hold it responsible for billions of dollars of claimed investor losses stemming from its alleged failures as a trustee overseeing risky residential mortgage-backed securities.
When karma decides to hit you, it can be relentless. I just wonder when karma will hit the other banks for their part in the housing meltdown?
From UofM Survey of Consumers:
The continued strength in consumer sentiment has been due to optimistic views on three critical components: higher incomes and wealth, more favorable job prospects, and low inflation expectations. All of these factors, however, have been influenced by partisanship.Democrats expect an imminent recession, higher unemployment, lower income gains, and more rapid inflation, while Republicans anticipate a new era of robust growth in incomes, job prospects, and lower inflation.
It is a rare situation that combines increasing optimism, which promotes spending, and rising uncertainty which makes consumers more cautious spenders. The high prevailing level of sentiment reflects the use of changed evaluative criteria. Like economists who have lowered growth prospects, consumers have done the same, and have thus judged lower rates of growth more favorably than they would have in an earlier era.
While the partisan divide will likely recede in the months ahead, consumers’ new evaluative standards will resist change. In an earlier era, growth of 3.0% was below average and a cause for concern, now growth above 2.5% represents an optimistic outlook. Overall, the data indicate both rising optimism as well as rising uncertainty due to the partisan divide. The data indicate that real consumer spending will advance by 2.7% in 2017, but those gains will be uneven over time and across products.
Awesome news! Hopefully this will translate into more people buying a home.
There are lots of people who not bought a house since they’re uneasy having a home loan. Everyone needs to understand that, unless you are living rent free, you’re paying a home loan – either your mortgage or the landlord’s.
Check out this snippet from the article “12 Practical Steps to Getting Rich”:
While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances. It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.
Christina Boyle, Senior VP and head of the Single-Family Sales & Relationship Management at Freddie Mac, explains another reason why a mortgage beats paying rent:
With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.
When you own your home, your house payment is really a type of ‘forced savings’ which enables you to build up equity in your house that you could use later. When you rent, your landlord will be the person with that equity.
Mortgage rates remain at historic lows. This means NOW is still a great time to get a home loan and buy a house. Freddie Mac’s latest mortgage rates report confirms that now is a good time for home buyers since rates were only 4.23% last week.
If you have reached the point in your life that buying a home makes sense both financially and where you are in your personal life, it is still a great time to be a home buyer. There are challenges due to the tight inventory but this is easily dealt with when you work with an experienced buyer’s agent.
If you would like to learn more about buying a home in the Anderson SC area, shoot me an email and one of the excellent buyer’s agents I work with will contact you!