Talking about the latest housing report from Attom, economic reports from the Richmond Fed, mortgage rates and much more…
Tidbits from the Attom Data Solutions (RealtyTrac) Q1 2017 U.S. Home Sales Report:
Total distressed sales — bank-owned (REO) sales, third-party foreclosure auction sales, and short sales — accounted for 16.9 percent of all single family home and condo sales in Q1 2017, up from 15.5 percent of sales in the previous quarter but still down from 20.3 percent of sales in Q1 2016. The first quarter was the 23rd consecutive quarter with an annual decrease in share of distressed sales.
The median home sales price nationwide was $225,000 in Q1 2017, up 2 percent from the previous quarter and up 13 percent from a year ago to a new post-recession high — although still 1 percent below the pre-recession peak of $227,000 in Q3 2005.
23 consecutive quarters with an annual decrease in share of distressed sales is a very good sign we are still headed in the right direction.
Homeowners who sold in the first quarter realized an average price gain of $44,000 since purchase, representing an average 24 percent return on the purchase price — the highest average price gain for home sellers in terms of both dollars and percent returns since Q3 2007.
A 24% return is nothing to sneeze at. But these people had to sell to realize this return on their investment.
Homeowners who sold in the first quarter had owned an average of 7.97 years, down slightly from a record-high average homeownership tenure of 8.00 years in Q4 2016 but still up from 7.68 years in Q1 2016. Homeownership tenure averaged 4.26 years nationwide between Q1 2000 and Q3 2007, prior to the Great Recession.
People are owning their homes for longer now than before the Great Recession. Some people owed more than they could get if they sold so they were stuck. While that has changed, now some people are hesitant to sell because they are worried about finding their next home before their current home sells.
All-cash sales represented 30.0 percent of all single family and condo sales in Q1 2017, up from 29.1 percent in the previous quarter but down from 32.1 percent in Q1 2016. The 30.0 percent share in the first quarter was well below the peak of 44.7 percent in Q1 2011 but was still above the pre-recession average of 20.4 percent from Q1 2000 to Q3 2007.
The share of single family home and condo sales sold to institutional investors (entities buying at least 10 properties in a calendar year) dropped to 1.7 percent in Q1 2017, down from 3.4 percent in the previous quarter and down from 2.8 percent a year ago to the lowest level as far back as data is available, to Q1 2000.
The decrease in cash sales and sales to institutional investors is a good sign. It means the housing market is starting to return to normal. If there is such a thing as a normal anymore…
Remember, the tidbits I shared from this report is talking about the entire U.S. but we can still be happy about the findings.
Activity in the service sector improved notably in April, according to the latest survey by the Federal Reserve Bank of Richmond. More firms continued to report revenue increases than decreases, with the revenues index for the overall service sector hitting 22 — its highest mark since August 2015. This was driven by an increase in the share of both retail and non-retail services firms to report revenue growth.
In addition to the increase in the revenues index in the overall service sector, the indexes for employment and wages also rose notably, as did the index for expected demand during the next six months.
Meanwhile, price growth in the overall service sector picked up slightly in April, while the expectation for price growth during the next six months moderated. Both current and expected price growth for retail prices moderated, while price growth for non-retail services firms picked up somewhat.
Manufacturers in the Fifth District were upbeat again in April, according to the latest survey by the Federal Reserve Bank of Richmond. The index for shipments rose and the index for new orders remained very strong. Even though the index for employment fell, the composite index for manufacturing remained high, with a reading of 20 in April compared to 22 in March. This was the first time since 1994 that the composite index remained at or above 20 for two consecutive months. The majority of firms continued to report longer workweeks and increased wages.
Looking six months ahead, manufacturing executives remained generally optimistic, although many of the indexes fell slightly from their March readings. The only two indexes that increased were expected capacity utilization and expected capital expenditures. Nonetheless, the expected shipments index had a strong reading of 42 in April and the expected new orders index was 46.
Survey respondents reported that growth in prices paid rose somewhat while growth in prices received moderated slightly.
Another nice report from the Richmond Fed. Not as nice as the Service Sector report but still a positive report.
Should President Donald Trump choose to replace Fed Chair Janet Yellen when her term expires next year, he could well turn to someone close by to fill the void.
Speculation is building on Wall Street that a likely replacement to run the central bank would be Gary Cohn, director of the National Economic Council and Trump’s closest economic advisor. Cohn also is a former chief operating officer of Goldman Sachs.
As they said, this is just speculation. But I hoped draining the swamp included turning away from the influence of Wall Street and the big banks…
America’s working class is falling further behind. The rich-poor gap — the difference in annual income between households in the top 20 percent and those in the bottom 20 percent — ballooned by $29,200 to $189,600 between 2010 and 2015, based on Bloomberg calculations using U.S. Census Bureau data. Computers and robots are taking over many types of tasks, shoving aside some workers while boosting the productivity of specialized employees, contributing to the gap.
Computers and robots are taking over many types of tasks, shoving aside some workers while boosting the productivity of specialized employees, contributing to the gap.
This shift is predicted to continue. About 38 percent of U.S. jobs could be at high risk of automation by the early 2030s, according to a study by PricewaterhouseCoopers LLP. The “most-exposed” industries include retail and wholesale trade, transportation and storage, and manufacturing, with less-educated workers facing the biggest challenges.
Folks, it still isn’t too late to prepare for this by starting to build wealth by owning your home and create an additional income by owning rentals.
We are approaching the 10th year of the conservatorship of Fannie Mae and Freddie Mac, yet Congress continues to struggle to produce a comprehensive reform bill for the government-sponsored enterprises. GSE reform has stalled as Fannie and Freddie — which must sweep their profits to the Treasury — are projected to have zero net worth at the end of this year. The GSEs have repaid their original $185 billion advance to Treasury, plus another $70 billion in funds to taxpayers.
Congressional action to reform housing finance is ultimately needed, but we must confront the risk of continued drift and inaction if Congress is unable to act.
A must read and it is way past time for reform of housing finance!
American economic growth has been a double-edged sword for many Americans. In 2010, households in the U.S. were more economically divided than households in the selected Western European countries analyzed by Pew. The U.S. is the only country in which fewer than 60% of adults were in the middle class. However, compared with those in many Western European countries, a greater share of Americans were either lower income (26%) or upper income (15%). The percentage of people who are middle class ranged from 64% in Spain to 80% in Denmark and Norway.
Another article pointing out that America is changing into something that almost resembles a Third World country. As I said before, you can do something about your future now…
U.S. house prices rose in February, up 0.8 percent from the previous month, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI). From February 2016 to February 2017, house prices were up 6.4 percent.
The average interest rate on all mortgage loans was 4.12 percent, down 13 basis points from 4.25 in February.
The average interest rate on conventional, 30-year, fixed-rate mortgages of $424,100 or less was 4.24 percent, down 17 basis points from 4.41 in February.
The effective interest rate on all mortgage loans was 4.25 percent in March, down 13 basis points from 4.38 in February. The effective interest rate accounts for the addition of initial fees and charges over the life of the mortgage.
The average loan amount for all loans was $312,700 in March, up $11,100 from $301,600 in February.
A little dated but read on…
Mortgage applications increased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 21, 2017.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased to its lowest level since November 2016, 4.20%, from 4.22%, with points increasing to 0.37 from 0.35 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) remained unchanged from 4.15%, with points increasing to 0.27 from 0.23 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to its lowest level since November 2016, 3.46%, from 3.50%, with points increasing to 0.50 from 0.41 (including the origination fee) for 80 percent LTV loans.
Pretty tasty mortgage rates! But wait! There’s more!
Freddie reported that mortgage rates increased for the first time in 5 weeks:
- 30-year fixed-rate mortgages averaged 4.03% with an average 0.5 point
- This is up from last week when it averaged 3.97%
- Last year at this time, 30-year fixed-rate mortgages averaged 3.66%
- 15-year fixed-rate mortgages averaged 3.27% with an average 0.4 point
- This is up from last week when it averaged 3.23%
- Last year at this time, 15-year fixed-rate mortgages averaged 2.89%
Sean Becketti, chief economist, Freddie Mac said:
The 10-year Treasury yield rose about 10 basis points this week. The 30-year mortgage rate moved with Treasury yields, rising 6 basis points to 4.03 percent. Despite recent swings in mortgage rates, the housing market continues to show signs of strength — both existing and new home sales in March exceeded expectations, and the Case-Shiller Home Price Index posted another solid gain.
I must remind you that these are the average rates and that rates are still historically low! Check out the chart:
U.S. Pending Home Sale Dip 0.8% in March
Pending home sales in March maintained their recent high level, but momentum slackened slightly in most of the country as dearth supply weighed on activity, according to the National Association of Realtors®. Only the South saw an uptick in contract signings last month.
The Pending Home Sales Index declined 0.8 percent to 111.4 in March from 112.3 in February. Despite last month’s decrease, the index is 0.8 percent above a year ago.
Lawrence Yun, NAR chief economist said:
Home shoppers are coming out in droves this spring and competing with each other for the meager amount of listings in the affordable price range. In most areas, the lower the price of a home for sale, the more competition there is for it. That’s the reason why first-time buyers have yet to make up a larger share of the market this year, despite there being more sales overall.
We are seeing exactly what Yun mentioned in the Anderson area: a meager amount of affordable listings and plenty of competition.
If you are a serious home buyer, you will get pre-approved and work with a buyers agent.
The Impact of 20% Tariff on Canadian Lumber on Housing
Granger MacDonald, chairman of the National Association of Home Builders said:
If the 20 percent lumber duty remains in effect throughout 2017, NAHB estimates this will result in the loss of nearly $500 million in wages and salaries for U.S. workers, $350 million in taxes and other revenue for the governments in the U.S. and more than 8,200 full-time U.S. jobs. Lumber prices have already jumped 22 percent since the beginning of the year, largely in anticipation of new tariffs, adding nearly $3,600 to the price of a new single-family home.
And Zillow said:
A 5 percent monthly jump in lumber prices – similar to that experienced earlier this year when lumber suppliers began anticipating changes in lumber import policies – results in as much as an additional $2,000 premium on new homes relative to existing homes.
I am not exactly sure this tariff was completely thought through….
In the week ending April 22, the advance figure for seasonally adjusted initial claims was 257,000, an increase of 14,000 from the previous week’s revised level. The previous week’s level was revised down by 1,000 from 244,000 to 243,000. The 4-week moving average was 242,250, a decrease of 500 from the previous week’s revised average. The previous week’s average was revised downby 250 from 243,000 to 242,750.
While this increase isn’t good, remember the number to watch is the 4-week moving average. So as I often say, do not panic!
The U.S. office vacancy ticked up 0.1% in the first three months of 2017 to 10.3% marking the first quarterly increase since 2010. Total net absorption in the US office market slipped approximately 9% from the same period a year ago as developers added an additional 19 million square feet of new office space across the country.
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