Looking at the latest home price reports from Case-Shiller and Black Knight, home price expectations, construction employment, new home sales and more…
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.8% annual gain in February, up from 5.6% last month and setting a 32-month high. The 10-City Composite posted a 5.2% annual increase, up from 5.0% the previous month. The 20-City Composite reported a year-over-year gain of 5.9%, up from 5.7% in January.
This is good news until you compare the growth in home prices to YoY earnings growth for Production and Non-supervisory workers is only 2.34%. That is less than half of home price growth.
In other words, it is going to get harder for some people to buy a home because their earnings are not keeping up with the increases in home prices.
It isn’t just mortgage rates and home prices that affect how many people are buying homes. It is also their earnings or incomes being stagnant…
From the latest Black Knight Home Price Index Report:
- Home prices in six of the nation’s 20 largest states and 14 of the 40 largest metros hit new peaks in February
- At $268K, the national-level HPI hit a new post-crisis peak in February
- U.S. Home Prices Increased 0.8 Percent for the Month
- U.S. Home Prices Increased 5.7 Percent Year-Over-Year
Good news and while this is talking about U.S. home prices, it ties in with what you will see in many local markets. Remember, when you are buying or selling a home, it’s whats happening in your local market that really matters!
You can keep track of what is happening in our area by reading the Anderson County SC Real Estate Market Reports
You’ve probably heard the news that the celebrated post-WW II beating heart of America known as the middle class has gone from “burdened,” to “squeezed” to “dying.” But you might have heard less about what exactly is emerging in its place.
In a new book, The Vanishing Middle Class: Prejudice and Power in a Dual Economy, Peter Temin, Professor Emeritus of Economics at MIT, draws a portrait of the new reality in a way that is frighteningly, indelibly clear: America is not one country anymore. It is becoming two, each with vastly different resources, expectations, and fates.
Wow. For a long time, I thought this was our future. I never expected the change to happen so quickly…
If only there was a way for the average American to build wealth. You know, something like owning real estate!
But maybe you think you don’t have enough down payment saved to buy a home…
How Fast Can You Save a Down Payment to Buy a Home?
Saving the money for a down payment is usually the greatest barrier for any first-time home buyer. It varies on your location, your income, the median rent, and home prices in your area. Let’s look at how long it will to save for a down payment in each state.
Working with information from the U.S. Census Bureau and Zillow, we can figure out just how long it will take, nationwide, for a first-time home buyer to save the required down payment to buy a home. There’s a simple long-standing rule that you shouldn’t spend greater than 28% of your income on your monthly housing expenses.
By looking at the share of income used to rent a 2-bedroom apartment in every state, as well as the money required for a 10% down payment, we can find how much time it will take for a typical person to save enough to purchase a house.
According to the data, residents in South Carolina can save for a down payment in 4.4 years. Here is a map made using the information for every state:
What If You Need Only 3% Down Payment to Buy a Home?
What happens if you are going to use one of Freddie Mac’s or Fannie Mae’s 3% down payment mortgages? This means that the time to save a down payment decreases greatly as you can see in the map below:
As you can see, it takes just over a year to save 3% for a down payment in South Carolina according to this data! Of course, it may take you longer or you might be able to do it faster.
If you have recently started saving to buy a home or have been saving for a long time, you could be even closer than you think! Plus I don’t have a map showing the USDA Rural Program that can require even less down payment!
The key thing is to talk to a real live mortgage lender! I know everyone wants to do everything online. Getting face to face for a sit down meeting with a lender is the fastest, smartest and best way to start the home buying process!
Sixty-one percent of U.S. adults predict housing prices in their local area will increase in the next 12 months, up from 55% a year ago and the highest Gallup has measured since 2005.
Americans’ optimism about home values continues to recover from where it was after the housing bust and recession. Between 2008 and 2012, only as many as one-third of Americans, including a low of 22% in 2009, believed local housing prices would increase.
By 2013, a majority again held this view for the first time since 2007. This year, the percentage expecting housing-value gains pushed past 60%.
Good to see that more Americans are thinking that local home prices will continue to rise. I expect home prices in the Anderson SC area will keep increasing due to the strong demand.
Led by slower growth in employment-related indicators, the Chicago Fed National Activity Index (CFNAI) moved down to +0.08 in March from +0.27 in February. Two of the four broad categories of indicators that make up the index decreased from February, and one category made a negative contribution to the index in March. The index’s three-month moving average, CFNAI-MA3, decreased to +0.03 in March from +0.16 in February, but remained positive for the fourth consecutive month.
Not good but too early to panic. Especially since the 3 month moving average has remained positive for 4 consecutive months. Still, this needs to be watched…
From the AGC:
Thirty-nine states added construction jobs between March 2016 and March 2017 while 17 states added construction jobs between February and March, according to an analysis by the Associated General Contractors of America of Labor Department data released today. Association officials noted that contractors in most states remain busy for now but worry about not being able to find enough workers to complete projects in the future.
Good but once again we hear that employers are having a tough time finding qualified employees. Which leads me to wonder why our education system isn’t preparing more students for jobs with high demand? Or is it that most students are not interested in construction jobs?
Mark Fleming, chief economist at First American:
Real, purchasing-power adjusted house prices increased 11 percent in February compared to a year ago. The lack of homes listed for sale is causing unadjusted house price growth to remain strong. Additionally, increasing interest rates are reducing consumer purchasing power. The result is a substantial year-over-year increase in the real price of homes.
You would think the strong demand for homes would cause more homes to be built. Is the shortage of qualified employees mentioned in the AGC report to blame?
Yes, but that is only part of the problem. Home builders have to deal with the high costs of local and state regulations also. Also, in some areas, finding suitable tracts of land to develop is also a problem.
Not that a shortage of land or lots is a problem in our area. We are lucky that there are plenty of new homes being built in our area.
With the federal funding running out on Friday and a potential government shutdown looming, expect to see an impact on the mortgage industry. Access to tax documents and other government paperwork may prove difficult in the event of a shutdown. Furloughs at the IRS and Social Security can cause roadblocks in the application process.
During the last government shutdown, in 2013, three in 10 homebuyers and sellers reported problems in the application process, most reporting a delay in closing. The National Association of Realtors (NAR) found that in 2013, 17 percent of closings were delayed during the shutdown. However, CNBC notes that the housing market is stronger now than it was in 2013, and application volume is greater. This could mean that more buyers may be affected this time.
If Congress and the Trump administration do not reach a decision by Friday, just a day before President Trump’s 100th day in office, a shutdown may be imminent. Government institutions from the Smithsonian to the IRS would be impacted, as their employees are furloughed.
Crap like this disgusts me. Can’t our elected officials work together to find a solution?
New Home Sales Increase
From HUD and the Census Bureau:
NEW HOME SALES
Sales of new single-family houses in March 2017 were at a seasonally adjusted annual rate of 621,000. This is 5.8 percent above the revised February rate of 587,000 and is 15.6 percent above the March 2016 estimate of 537,000.
The median sales price of new houses sold in March 2017 was $315,100. The average sales price was $388,200.
FOR SALE INVENTORY AND MONTHS’ SUPPLY
The seasonally-adjusted estimate of new houses for sale at the end of March was 268,000. This represents a supply of 5.2 months at the current sales rate.
Economist had forecast that new home sales would fall. The increase in new homes could help home buyers looking for affordable houses.
Despite home sales increasing during the past several years, sales are still very low historically. Remember that HUD and the Census Bureau are talking about the entire U.S. and not our area!
The Conference Board Consumer Confidence Index®, which had increased in March, declined in April. The Index now stands at 120.3, down from 124.9 in March. The Present Situation Index decreased from 143.9 to 140.6 and the Expectations Index declined from 112.3 last month to 106.7.
Lynn Franco, Director of Economic Indicators at The Conference Board said:
Consumer confidence declined in April after increasing sharply over the past two months, but still remains at strong levels. Consumers assessed current business conditions and, to a lesser extent, the labor market less favorably than in March. Looking ahead, consumers were somewhat less optimistic about the short-term outlook for business conditions, employment and income prospects. Despite April’s decline, consumers remain confident that the economy will continue to expand in the months ahead.
I guess we should be grateful that consumers still think the economy will expand in the coming months.
The Chemical Activity Barometer (CAB) marked the second quarter by posting a robust 5.6 percent year-over-year gain, suggesting continued growth through year-end 2017. The barometer posted a 0.4 percent gain in April, following three successive months of upward revisions to the monthly data. All data is measured on a three-month moving average. On an unadjusted basis the CAB climbed 0.2 percent in April.
This is really good news as it is a pretty accurate indicator for economic growth in the coming months.
Fannie Mae announced new policies that will help more borrowers with student debt qualify for a home loan. These innovations address challenges and obstacles to homeownership due to a significant increase in student loan debt over the past decade and provide access to credit for qualified borrowers.
The new solutions give homeowners the opportunity to pay down student debt with a mortgage refinance, allow borrowers to exclude non-mortgage debt paid by others as part of the loan application process, and make it more likely for borrowers with student debt to qualify for a mortgage loan by allowing lenders to accept student debt payments included on credit reports.
Because there is rarely a “one size fits all” approach to this issue, the policies announced today provide options to borrowers based on their individual circumstances:
Student Loan Cash-Out Refinance: Offers homeowners the flexibility to pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate.
Debt Paid by Others: Widens borrower eligibility to qualify for a home loan by excluding from the borrower’s debt-to-income ratio non-mortgage debt, such as credit cards, auto loans, and student loans, paid by someone else.
Student Debt Payment Calculation: Makes it more likely for borrowers with student debt to qualify for a loan by allowing lenders to accept student loan payment information on credit reports.
Jonathan Lawless, Vice President of Customer Solutions, Fannie Mae said:
We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage, and we want to be a part of the solution. These new policies provide three flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers.
Maybe this will help those burdened by student debt to buy a home or to pay down debt faster. We will have to wait and see if it is a good idea or helps the housing market.
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