Talking about the FOMC and the Fed not raising their rate, latest GDP numbers, home buyer and seller traffic, number of cash buyers and more…
Fed Leaves Benchmark Interest Rate Unchanged
There were not any big surprises from the Fed meeting and the decision to leave its benchmark interest rate unchanged.
The Fed said that the labor market had improved but there were signs of a broader economic slowdown. Despite the Fed saying “labor market conditions have improved further” they also admitted that “growth appears to have slowed.”
The Bureau of Economic Analysis just released the initial estimate for U.S. Q1 GDP, so later in today’s post I will discuss how much the economy has slowed.
The Fed seems to think that the global financial situation is better because they did not mention global markets posing a risk to the US economy. However, the Fed did say they will be watching “global economic and financial developments”.
This means the next opportunity for a Fed rate hike is in June. This does NOT mean that mortgage rates will stop changing. I suggest keeping in touch with your mortgage professional for guidance on whether you should lock or not.
Home Buyer and Seller Traffic Weak
NAR asks members to rate the past month’s buyer and seller traffic in the neighborhood or area where they make most of their sales. According to this report from NAR, seller traffic during January‒March 2016 was weak in most states (including South Carolina). Buyer traffic was moderate in most states during the same time period.
I am not sure how accurate these surveys are. What percentage of REALTORS are responding to these surveys? What I DO KNOW is we have been seeing much more activity. 2016 looks to be a good year for real estate in the Anderson SC area.
Q1 2016 GDP Weaker Than Water
We just got the “advance” GDP estimate for Q1 2016 from the Bureau of Economic Analysis:
Real gross domestic product — the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes — increased at an annual rate of 0.5% in the first quarter of 2016. In the fourth quarter, real GDP increased 1.4%.
This is weak and below expectations. This is also the lowest quarterly growth rate since Q1 2014 AND the third consecutive quarter of GDP declines…
Spending on goods stalled and since consumer spending generates more than 2/3 of US economic activity, this is really craptastic.
The silver lining to this gray cloud is that housing helped because fixed residential investment rose 14.8%. This is the best since the fourth quarter of 2012.
Still this weakness helps to explain why the FED did NOT raise their benchmark rate. I think they knew these numbers long before we did…
Latest GDPNow Forecast
The latest Atlanta Fed GDPNow forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 1.8%. The final model nowcast for first-quarter real GDP growth was 0.6%, 0.1 percentage points above the advance estimate of 0.5% released on Thursday by the U.S. Bureau of Economic Analysis.
Chemical Activity Barometer Increased!
The Chemical Activity Barometer increased 0.6% in April following a revised 0.1% increase in March and 0.2% decline in February. Accounting for adjustments, the CAB remains up 1.8 percent over this time last year. On an unadjusted basis the CAB jumped 1.4 percent, following a solid 0.8 percent gain in March.
The Chemical Activity Barometer is a leading economic indicator derived from a composite index of chemical industry activity. The chemical industry has been found to consistently lead the U.S. economy’s business cycle given its early position in the supply chain, and this barometer can be used to determine turning points and likely trends in the wider economy.
That being said, this report should indicate increased US business activity into Q4.
Q1 2016 Percentage of Cash Home Buyers
RealtyTrac just released their latest U.S. Cash & Institutional Investor Housing Market Report. They said that all-cash buyers of single family homes and condos nationwide paid 23% less per square foot than all home buyers. There were a few oddball markets that had cash buyers actually paying a premium price per square foot.
Daren Blomquist, senior vice president at RealtyTrac said:
While large institutional investors and other cash buyers continue to shrink as a share of U.S. home sales, these buyers still typically beat out traditional buyers using financing — in some cases even when they submit a lower offer for a home. Additionally cash buyers are often willing to take on properties in poor condition that may not readily qualify for standard financing, another reason why cash purchases normally sell at a lower price per square foot.
Please read that 2nd sentence in the quote from Blomquist again. He points out that some homes have condition issues that prevent the use of standard financing. In other words, many banks won’t lend on homes that need lots of work. Like some foreclosures or fixer uppers…
You MUST discuss the possibility of buying a fixer upper with your lender BEFORE you waste your time, energy or money looking at homes you CANNOT get a mortgage on.
In our area, RealtyTrac reported that in the Greenville-Anderson-Mauldin MSA, cash buyers paid 29.7% less than all home buyers. Also 39.7% of homes sold were all cash deals.
The Greenville-Anderson-Mauldin MSA that Realtytrac is reporting on is HUGE. This means these numbers may not reflect what is POSSIBLE or REALISTIC for a specific home. Please do NOT think because you are paying cash you should expect a 29.7% discount.
Freddie: Housing Market Shows Positive Trends
This week, Freddie released their latest Multi-Indicator Market Index (MiMi) showing that many of the nation’s housing markets continue to improve.
Freddie Mac Deputy Chief Economist Len Kiefer said:
The U.S. housing market is poised to have its best year in a decade. The National MiMi currently stands at 83, the highest since September of 2008. And the trends are nearly all positive.
Nice! Just remember that Freddie is talking about the entire US and you must always consult with a local REALTOR to ensure your success when buying or selling real estate.
Home Union: Housing Market Flattening
After reading the optimistic report from Freddie, it may be a let down to hear that Home Union is reporting that the median price for owner-occupied homes in the US declined 1.1%. They also said that the median price for non-owner-occupied homes in the US rose 8.5%.
Steve Hovland, director of research for HomeUnion said:
We are seeing a degree of volatility in the traditional housing market, especially on a regional level. We expect price growth for owner-occupied homes to be tempered, even as we enter the typically frenzied spring home-buying season. Housing affordability has pushed beyond incomes in many areas of the country, limiting demand at today’s prices despite low interest rates.
Seeing volatility on a regional level?
That sounds like buyers and sellers need to use a local REALTOR…
More Than 2/3 of US Metro Areas Adding Construction Jobs
Sweet news in a new analysis of federal employment data by the Associated General Contractors of America. They said that construction employment increased in 244 out of 358 metro areas!
Ken Simonson, AGC’s chief economist said:
With more than two-thirds of the nation’s metro areas adding construction jobs it is clear that the demand for construction is broad-based geographically and by project type.
While they are talking about ALL types of construction across the entire US, this is great news for the economy. In some areas, it may mean that much needed homes are being built.
Loan Defect and Fraud Risk Emerging in Southern States
From First American chief economist Mark Fleming:
The cliché, ‘It’s the economy stupid,’ still holds true today, although it may be better applied locally. Southern-state economies face the challenges presented by falling prices in energy and agricultural commodity markets. Economic distress increases the incentive for loan application misrepresentation, if not necessarily outright loan application fraud. In addition to Texas and Florida, Oklahoma and South Carolina are emerging risky states.
Roughly translated, First American is tracking the frequency of defects, fraudulence and misrepresentation in the information submitted in mortgage loan applications. And it appears they are seeing more of this stuff in the South.
Remember that making false statements on a mortgage application is a crime with serious implications…
Well that is all for today. I wish I had more time because I had a bunch of other juicy stuff to share…