Discussing the latest new home construction numbers, insights on mortgages in April, changes in how home equity is being used, rents increase again, weekly unemployment claims, many cannot afford middle class basics, the Conference Board Economic Index and the Bloomberg Consumer Comfort Index…
Housing Starts and Building Permits April 2018
Privately owned housing units authorized by building permits in April were 1.8% below the revised March rate but 7.7% above the April 2017 rate. Single-family authorizations in April were 0.9% above the revised March figure.
Privately owned housing starts in April were 3.7% below the revised March estimate but 10.5% above the April 2017 rate. Single-family housing starts in April were 0.1% above the revised March figure.
While the decreases from the previous month are not good, it is the year-over-year changes that I usually look at. And the increases from last April are very good news since we need more homes for sale!
Check out this chart showing housing starts and building permits all the way back to 1960:
Now think about how many more people there are living in the US today compared to the past. We may be much better than we were back after the housing market hit the skids…
But we are still too low if we look back at the levels reached between now and 1960. We are still at a historically low level of new home construction…
Insights from Ellie Mae
Highlights from Ellie Mae’s April 2018 Mortgage Origination Insights:
- The time to close all loans averaged 41 days for the second consecutive month
- The average 30-year rate for all loans increased to 4.79%
- 73.9% of purchase mortgages closed
- The average FHA purchase FICO scores dropped to 676
- Conventional purchase FICO scores held steady at 752 for the second month
Remember these are just averages and exactly what is possible for you depends on your credit, the type of mortgage you are using and much more. All serious buyers need to speak to the mortgage lender of their choice to discuss their options and possibilities!
Changes in Home Equity and How It’s Used
From the NY Fed:
Home equity—the difference between house value and the debt it secures—is an important asset for households of all types. After a long and pronounced decline beginning in 2006, both home equity (in early 2017) and home prices (in late 2017) have recently recovered their previous nominal peaks.
But there have been significant changes in the ownership of this form of wealth over this period. In addition, tight lending standards have made it difficult for younger and less seasoned borrowers to obtain mortgages, which has contributed to a large decline in homeownership among younger borrowers and those with lower credit scores.
As a result, housing wealth has shifted toward older, higher-credit-score borrowers. Since a key function of housing equity is to serve as collateral, this pattern has meant that for those likely to have the highest demand for debt (younger borrowers and those with a need to smooth their consumption or invest in their education) slower equity accumulation means that collateralized credit has been less available.
This has been compounded by even tighter underwriting on home equity extraction; even if they have some housing wealth, collateralized credit has been harder to get for younger, less-than-superprime borrowers. We see clear evidence of this in a dramatic reduction in the issuance of cash-out refinances and HELOCs in comparison with the last time households held this much equity.
So the household sector is holding a lot of housing wealth that could conceivably serve as a cushion against labor market or other aggregate shocks. But that wealth is less likely to be held by those most exposed to such shocks, pointing (again) to the complex connections between financial conditions and macroeconomic stability.
Abusing the equity in your home is bad since your home’s equity is not an ATM. But not being able to access the equity in your home is also bad.
The problem is how to help more people sensibly use the equity in their homes without repeating the mistakes of the past. Easier said than done…
Single-Family Rents Up 2.8 Percent Year Over Year
Single-family rents climbed steadily between 2010 and 2018, as measured by the CoreLogic Single-Family Rental Index (SFRI). However, the index shows year-over-year rent growth has decelerated slowly since it peaked early last year. In February 2018, single-family rents increased 2.8 percent year over year, a 1.4-percentage-point decline since the growth rate hit a high of 4.2 percent in February 2016. The index measures rent changes among single-family rental homes, including condominiums, using a repeat-rent analysis to measure the same rental properties over time.
Renters can expect rents to continue to increase but it appears that the rate of increases could slow some. This could help some renters to save money so they can become a home owner.
Weekly Unemployment Claims
In the week ending May 12, the advance figure for seasonally adjusted initial claims was 222,000, an increase of 11,000 from the previous week’s unrevised level of 211,000. The 4-week moving average was 213,250, a decrease of 2,750 from the previous week’s unrevised average of 216,000. This is the lowest level for this average since December 13, 1969 when it was 210,750.
Remember, it it the 4-week moving average that we should watch as it is less “noisy”. Hopefully, the tight labor market will help to increase wages for average Americans…
40% Can’t Afford Middle-Class Basics
At a time of rock-bottom joblessness, high corporate profits and a booming stock market, more than 40% of U.S. households cannot pay the basics of a middle-class lifestyle — rent, transportation, child care and a cellphone, according to a new study.
The study, conducted by United Way, found a wide band of working U.S. households that live above the official poverty line, but below the cost of paying ordinary expenses. Based on 2016 data, there were 34.7 million households in that group — double the 16.1 million that are in actual poverty
One of the middle-class basics would be owning a home…
I wonder what our Founding Fathers would think about stuff like this?
Conference Board Leading Economic Index Increased
From the Conference Board:
The Conference Board Leading Economic Index for the U.S. increased 0.4 percent in April, following a 0.4 percent increase in March, and a 0.7 percent increase in February.
Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board, said:
April’s increase and continued uptrend in the U.S. LEI suggest solid growth should continue in the second half of 2018. However, the LEI’s six-month growth rate has recently moderated somewhat, suggesting growth is unlikely to strongly accelerate. In April, stock prices and housing permits were the only negative contributors, whereas the labor market components, which made negative contributions in March, improved.
Good news but as they point out, we may be entering a period of moderate economic growth. But growth is better than seeing the economy shrink…
Consumer Comfort Index Decreases
Americans’ sentiment fell for a fourth straight week as still-rising gasoline prices drove a measure of the buying climate down by the most in eight months, the Bloomberg Consumer Comfort Index showed Thursday.
Not good but as they point out retail sales numbers were good in April. They found that 26% of those surveyed think the economy is getting worse compared to 36% that think it is getting better.