Discussing why more competition for sellers is coming, climate change and migration, the ADP employment report, jobless claims, how consumers feel about buying or selling a home now, the latest Beige Book, rail traffic and more
More Construction Coming?
The volume of residential construction loans increased by 1.6% during the fourth quarter of 2017, marking 19 consecutive quarters of growth. Furthermore, stabilization for the year-over-year growth rate is an indicator of continued, modest growth for single-family construction.
Tight availability of acquisition, development and construction (AD&C) loans has been a limiting factor for home building growth, but easing credit conditions and a growing loan base have helped expand residential construction activity in a thin inventory environment. According to data from the FDIC and NAHB analysis, the outstanding stock of 1-4 unit residential construction loans made by FDIC-insured institutions rose by $1.2 billion during the fourth quarter of 2017, raising the total stock of outstanding loans to $74.4 billion.
On a year-over-year basis, the stock of residential construction loans is up 7%. Past quarters of slow growth have reduced the year-over-year growth rate, but it has has stabilized during the third and fourth quarters near the recent expansion rate for single-family construction starts. Since the first quarter of 2013, the stock of outstanding home building construction loans has grown by 83%, an increase of $33.6 billion.
We need more homes in many areas of the US. The key thing is whether or not the homes being built are the ones that are truly needed: affordable or starter homes.
Home builders must do what is profitable and best for their business. In some areas, it may not be feasible to build certain types of homes simply because it is not profitable.
As we see more new construction, it means that anyone thinking about selling a home must be aware that more competition is coming! While the increase in volume of residential construction loans is a sign of more competition, it is the number of permits that you must watch as well.
Building permits are up 7.4% from last year according to the latest Census Bureau and HUD Residential Sales Report. More permits means more homes being built.
Which is good for buyers but not good for anyone looking to sell their home! Right now, the number of homes for sale is low in many areas and price ranges!
- Higher home prices
- Homes are selling quickly
When we see more new homes hit the market, this could change. If you’re planning on selling your home, you probably want to list your home BEFORE this new competition hits the market!
You may be thinking that you need to wait for the hot Spring home selling market. Actually, NAR recently reported that the top 10 dates sellers listed their homes in 2017 all fell in April, May, or June.
Buyers are looking and demand is high NOW. More competition is coming so listing ASAP is strongly suggested!
Welcome to the Age of Climate Migration
From Rolling Stone:
Extreme weather due to climate change displaced more than a million people from their homes last year. It could soon reshape the nation.
In 2017, a string of climate disasters – six big hurricanes in the Atlantic, wildfires in the West, horrific mudslides, high-temperature records breaking all over the country – caused $306 billion in damage, killing more than 300 people. After Hurricane Maria, 300,000 Puerto Ricans fled to Florida, and disaster experts estimate that climate and weather events displaced more than 1 million Americans from their homes last year. These statistics don’t begin to capture the emotional and financial toll on survivors who have to dig through ashes and flooded debris to rebuild their lives. Mental-health workers often see spikes in depression, PTSD and suicides in the months that follow a natural disaster. After Harvey, one study found that 30 percent of residents in flooded areas had fallen behind on their rent or mortgage. One in four respondents said they were having problems paying for food.
I know that some people do not believe in climate change but there is no denying that extreme weather was very evident in 2017. One of the predictions in this article is that the Southeast will see higher temps and more flooding.
Pretty scary stuff if the predictions come true…
Private Sector Employment Increased by 235,000 Jobs in February
In the week ending March 3, the advance figure for seasonally adjusted initial claims was 231,000, an increase of 21,000 from the previous week’s unrevised level of 210,000. The 4-week moving average was 222,500, an increase of 2,000 from the previous week’s unrevised average of 220,500.
Despite the increases, this is still a good report. I will cover the BIG Jobs Report in tomorrow’s post!
Housing Confidence Falls
Fannie Mae’s Home Purchase Sentiment Index decreased in February. Check out some of the highlights:
- The net share of Americans who say it is a good time to buy a home decreased to 22%
- The net share of those who say it is a good time to sell fell to 36%
- The net share of Americans who say home prices will go up decreased to 45%
- The net share of Americans who say they are not concerned about losing their job fell to 71%
Doug Duncan, senior vice president and chief economist at Fannie Mae, said:
Volatility in consumer housing sentiment continued into February, with the new tax law beginning to impact respondents’ take-home pay and the stock market creating negative headlines due to early-month turbulence. Additionally, consumers’ expectations for higher mortgage rates suggest that consumers expect the Fed to hike rates a few more times in 2018.
Not good the number of people that think it is a good time to buy or sell fall. With the strong possibility that mortgage rates are going to increase in 2018, waiting to buy or sell may not be a good idea.
Federal Reserve Beige Book
Highlights from the latest Beige Book:
Economic activity expanded at a modest to moderate pace across the 12 Federal Reserve Districts in January and February.
On balance, Districts reported modest growth in home sales and construction, with the latter constrained by shortages of labor and materials. Conditions in the nonresidential real estate market improved moderately since the previous report, with robust construction activity noted in three Districts.
On balance, employment grew at a moderate pace since the previous report. Across the country, contacts observed persistent labor market tightness and brisk demand for qualified workers, as well as increased activity at staffing placement services. Several Districts reported continued worker shortages across most sectors, with contacts often mentioning shortages in the construction, information technology, and manufacturing sectors. In many Districts, wage growth picked up to a moderate pace.
With the economy and employment growing, it is looking like we will see 3 or 4 rates increases by the Fed this year.
While the Fed does NOT set mortgage rates, when they increase their benchmark rate, it usually means we see mortgage rates increase as well. I will cover this week’s reports on mortgage rates in tomorrow’s post!
U.S. railroads originated 1,028,141 carloads in February 2018, down 0.3 percent, or 2,753 carloads, from February 2017. U.S. railroads also originated 1,104,001 containers and trailers in February 2018, up 6.9 percent, or 70,970 units, from the same month last year. Combined U.S. carload and intermodal originations in February 2018 were 2,132,142, up 3.3 percent, or 68,217 carloads and intermodal units from February 2017.
AAR Senior Vice President John T. Gray said:
Rail carloads in February, like in many other recent months, were held back by declines in coal, grain, and motor vehicles. Declines in those categories are unfortunate, but they don’t reflect general weakness in the economy. Excluding them, carloads were up a reasonably solid 2.1% in February. Moreover, February 2018 was the best month ever for carloads of chemicals and the second-best month ever for intermodal. While these are good signs for the broader economy going forward, they are potentially compromised by the uncertainty created by recent developments in trade policy.
So some good signs but the Trump tariffs could cause problems for the economy. Which is exactly the opposite of what they are supposed to do.
I wrote about what the tariffs could do to housing earlier this week here
Life is Good
A new Rasmussen Reports national telephone and online survey finds that 78% of American Adults rate the quality of life where they live as good or excellent, while just five percent (5%) rate their quality of life as poor.
Interesting and I am glad to hear that many people are feeling positive about their quality of life. If you are not happy about something, change it!
That is all I have time for today! Be sure to check back tomorrow since I will be covering the Jobs Report and mortgage rates plus some other juicy tidbits!