Discussing the number of multigenerational households increasing, foreclosure activity improves, the latest FOMC minutes, housing share of GDP and much more
Multigenerational Households Hit New High
From Pew Research:
The number and share of Americans living in multigenerational family households have continued to rise, despite improvements in the U.S. economy since the Great Recession. In 2016, a record 64 million people, or 20% of the U.S. population, lived with multiple generations under one roof, according to a new Pew Research Center analysis of census data.
I have noticed more articles and interest in this type of property. In the past, this was something that was very common and I think the demand for this type of property will continue to increase.
Is this something you would like or have thought about? There are positives and negatives to any situation and this may not work for every household.
Foreclosure Activity Below Pre-Recession Levels for 6th Consecutive Quarter
From ATTOM Data Solutions:
ATTOM Data Solutions, curator of the nation’s premier property database, today released its Q1 2018 U.S. Foreclosure Market Report, which shows a total of 189,870 U.S. properties with a foreclosure filing during the first quarter of 2018, up 4 percent from the previous quarter but still down 19 percent from a year ago and 32 percent below the pre-recession average of 278,912 per quarter from Q1 2006 to Q3 2007 — the sixth consecutive quarter where U.S. foreclosure activity has been below its pre-recession quarterly average.
The report also shows a total of 74,341 U.S. properties with foreclosure filings in March 2018, up 21 percent from an all-time low in the previous month but still down 11 percent from a year ago — the 30th consecutive month with a year-over-year decrease in U.S. foreclosure activity.
An analysis of foreclosure activity by loan origination year shows that 45 percent of all properties in foreclosure as of the end of the first quarter were tied to loans originated between 2004 and 2008, down from 50 percent as of the end of Q4 2017 and down from 51 percent as of the end of Q1 2017.
A total of 92,703 U.S. properties started the foreclosure process in Q1 2018, up 8 percent from the previous quarter but still down 10 percent from a year ago — the 11th consecutive quarter with a year-over-year decrease in U.S. foreclosure starts.
While this is talking about the entire US, it is a good report overall. It appears that we are seeing the end of the massive amounts of foreclosures that occurred when the housing market crashed.
Differences Between Home Buyers Of Different Ethnic Backgrounds
From Zillow Research:
April 11, 2018 marks the 50th anniversary of President Lyndon B. Johnson’s signing of the landmark Fair Housing Act, which now prohibits discrimination in housing on the basis of race, color, national origin, religion, sex, familial status and/or disability. The housing market has changed a great deal since then, as have social and cultural attitudes toward race and discrimination — but while a lot has improved, there is still much progress to be made toward ensuring true equality in housing.
A white American household could reasonably afford a home almost two-thirds more expensive than a black household in 2017, giving them significantly more flexibility to find an affordable home last year in an incredibly competitive housing market marked by low inventory.
America has made a lot of progress from where we were in the past but there is still a long way to go. The question is what can be done to ensure that all credit worthy home buyers can achieve the American Dream of home ownership?
Highlights from the FOMC Minutes
The information reviewed for the March 20-21 meeting indicated that labor market conditions continued to strengthen through February and suggested that real gross domestic product (GDP) was rising at a moderate pace in the first quarter. Consumer price inflation, as measured by the 12‑month percentage change in the price index for personal consumption expenditures (PCE), remained below 2 percent in January. Survey‑based measures of longer-run inflation expectations were little changed on balance.
Gains in total nonfarm payroll employment were strong over the two months ending in February. The labor force participation rate held steady in January and then stepped up markedly in February, with the participation rates for prime-age (defined as ages 25 to 54) women and men moving up on net. The national unemployment rate remained at 4.1 percent.
Real residential investment looked to be slowing in the first quarter after rising briskly in the fourth quarter. Starts of new single-family homes increased in January and February, although building permit issuance moved down somewhat. Starts of multifamily units jumped in January but fell back in February. Sales of both new and existing homes declined in January.
Total U.S. consumer prices, as measured by the PCE price index, increased 1-3/4 percent over the 12 months ending in January. Core PCE price inflation, which excludes changes in consumer food and energy prices, was 1-1/2 percent over that same period. The consumer price index (CPI) rose 2-1/4 percent over the 12 months ending in February, while core CPI inflation was 1-3/4 percent.
The staff projection for U.S. economic activity prepared for the March FOMC meeting was somewhat stronger, on balance, than the forecast at the time of the January meeting. The near-term forecast for real GDP growth was revised down a little; the incoming spending data were a bit softer than the staff had expected, and the staff judged that the softness was not associated with residual seasonality in the data. However, the slowing in the pace of spending in the first quarter was expected to be transitory, and the medium-term projection for GDP growth was revised up modestly, largely reflecting the expected boost to GDP from the federal budget agreement enacted in February. Real GDP was projected to increase at a faster pace than potential output through 2020. The unemployment rate was projected to decline further over the next few years and to continue to run below the staff’s estimate of its longer-run natural rate over this period.
In their discussion of economic conditions and the outlook, meeting participants agreed that information received since the FOMC met in January indicated that economic activity had been rising at a moderate rate and that the labor market had continued to strengthen. Job gains had been strong in recent months, and the unemployment rate had stayed low. On a 12-month basis, both overall inflation and inflation for items other than food and energy continued to run below 2 percent. Market-based measures of inflation compensation had increased in recent months but remained low; survey-based measures of longer-term inflation expectations were little changed, on balance.
A number of participants reported concern among their business contacts about the possible ramifications of the recent imposition of tariffs on imported steel and aluminum. Participants did not see the steel and aluminum tariffs, by themselves, as likely to have a significant effect on the national economic outlook, but a strong majority of participants viewed the prospect of retaliatory trade actions by other countries, as well as other issues and uncertainties associated with trade policies, as downside risks for the U.S. economy. Contacts in the agricultural sector reported feeling particularly vulnerable to retaliation.
In their consideration of monetary policy, participants discussed the implications of recent economic and financial developments for the appropriate path of the federal funds rate. All participants agreed that the outlook for the economy beyond the current quarter had strengthened in recent months. In addition, all participants expected inflation on a 12-month basis to move up in coming months.
Based on their current assessments, almost all participants expressed the view that it would be appropriate for the Committee to raise the target range for the federal funds rate 25 basis points at this meeting.
It appears that the Fed thinks that the economy will get stronger and that inflation will rise. However, it appears that they are concerned about Trump’s trade and economic policies.
Something else to be concerned about is the Treasury Yield Curve according to a recent Bloomberg article:
When it comes to the Treasury yield curve, going inverted isn’t the “great move” that Tom Cruise boasted about pulling off when piloting his F-14 Tomcat jet in the cult classic movie Top Gun.
After widening in early February, the trend has reversed with yields on two-year notes approaching those on 10-year securities again.
The shape of the curve is not just a bond wonk matter either, given it has implications for the longevity of America’s economic recovery, bank earnings, consumer behavior and share prices. An inverted curve has preceded the majority of all U.S. recessions over recent decades.
While the Fed is feeling pretty confident, we must be concerned about this signal. I am not saying to freak out yet but just be aware of the possibility of a downturn.
Retail Defaults Reach All-Time High in Q1
From 24/7 Wall St.:
In another sign that the traditional retail industry is falling apart, research firm Moody’s reported that retailer defaults reached an all-time high in the first quarter of 2018.
The news is also a sign that many retailers became overleveraged as they tried to expand, only to hit a sea change in the foot traffic to their locations and low traffic to their e-commerce sites as well.
The corporate sector saw nine retail defaults in the first quarter, reflecting the fallout of changing consumer behavior and advancing e-commerce for traditional brick-and-mortar retail. In total, the corporate sector saw 28 defaults in the first quarter, compared with 23 in the same period a year ago. After retail, oil & gas was the biggest contributor with five defaults.
This is another distressing signal. Should we be concerned?
Maybe BUT the key thing is that you cannot live in fear. You must always hope for the best while planning for the worst.
Housing Share of GDP Improves But Still Low
From Eye On Housing:
With the release of the final estimate of fourth quarter 2017 GDP growth (a 2.5% annual growth rate), housing’s share of gross domestic product (GDP) rose slightly to 15.4%. The home building and remodeling component – residential fixed investment – also increased slightly, rising to 3.5%.
Historically, RFI has averaged roughly 5% of GDP while housing services have averaged between 12% and 13%, for a combined 17% to 18% of GDP. These shares tend to vary over the business cycle.
If we saw more affordable homes being built, would it cause the housing share of GDP to reach the historically normal levels?
Hard to say and we certainly do not want the government mucking things up in an attempt to “fix” or “improve” things.
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