Talking about the housing market shifting, the new economic normal, number of homes built as rentals decreasing and more…
Amid the carnage in the auto sector, economists have sought solace in the comforts of home, sweet home. A recent Census release suggests that Millennials, long sidelined, have finally started to tiptoe into the home-buying market. The reception to the data was so effusive that other reports, suggesting housing has reached a much different sort of turning point, were lost in the fray.
The good news is that the trend is unequivocal, based purely on supply and demand. The bad news is in the actual message. The May University of Michigan Consumer Sentiment survey showed a six-year low among those who think it’s a good time to buy a house and a 12-year high among those who say it’s a good time to sell. Disparities of this breadth tend to coincide with break points and that’s just where we’ve landed in the cycle.
The beginning of May officially marked the advent of a buyers’ market, defined simply as sellers outnumbering buyers by a wide enough margin to trigger falling prices. Yes, it’s the moment buyers have been waiting for. It is also the moment private equity investors, those who’ve crowded out natural buyers, have been dreading.
Remain calm. While headlines such as this draw your interest, the articles don’t usually have the local real estate market information that buyers and sellers need to make an informed decision.
For example, if we look at the Upstate SC real estate market during April 2017, we see that there is 5.7 months of inventory. 6 months is usually considered a balanced market.
This statistic refers to how long it would take to sell all of the homes that are currently for sale if homes continue to sell at the same pace and no more homes hit the market. But it doesn’t distinguish between areas, types of homes, price ranges etc.
If we start narrowing a search for only homes of certain size/type in a certain price range and area, we will see that supply can be quite limited. This lack of supply means buyers need to be prepared and working with an experienced buyers agent. Failing to do this is only setting yourself up to fail.
The Great Financial Crisis of 2008 deeply scarred the U.S. economy, bringing nine dire years of economic stagnation, high and rising inequalities in income and wealth, steep levels of indebtedness, and mounting uncertainty about jobs and incomes. Big parts of the U.S. were hit by elevated rates of depression, drug addiction and ‘deaths of despair’ (Case and Deaton 2017), as ‘good jobs’ (often in factories and including pension benefits and health care coverage) leading to careers, were destroyed and replaced by insecure, freelance, or precarious ‘gigs’.
All this is evidence that the U.S. is becoming a dual economy—two countries, each with vastly different resources, expectations and potentials, as America’s middle class vanishes (Temin 2015, 2017). The anger and despair crystalized into a ‘groundswell of discontent’ among those left behind, which likely helped to propel Donald Trump into the White House on the promise of ‘making America great again’.
A must read and just confirms that we must work and strive to not fall behind on attaining the life we want. One serious step towards becoming financially secure is owning your home.
Since buying a home is such a serious financial decision, it is not one to rush. The wealth building effect of owning a home cannot be denied. I am not talking about a trophy McMansion home.
I am talking about a home that is very affordable and meets your needs. If a property meets your wants that is nice but being affordable should be your number one concern.
Please read the 4 Critical Questions Home Buyers Must Ask Themselves
The number of single-family homes built-for-rent fell slightly at the start of 2017, falling to 6,000 for the quarter. Over the last four quarters, total production of this type of housing was 33,000 homes.
According to data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design and NAHB analysis, the market share of single-family homes built-for-rent, as measured on a one-year moving average, stood at 4.1% of total starts as of the first quarter of 2017.
Given the small size of the market segment, the quarter-to-quarter movements are not typically statistically significant. The current market share remains higher than the historical average of 2.8% but is down from the 5.8% reading registered at the start of 2013. This class of single-family construction excludes homes that are sold to another party for rental purposes. It only includes homes built and held for rental purposes.
While the number of homes being built to use as rentals is still high, there is a lesson for everyone. Investors are seeing the value of owning rentals because of the good returns on their investment as well as the increasing prices of homes.
Instead of letting an investor enjoy the financial advantages of owning the home you rent, you can reap the benefits by owning the home you live in.
Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.49 in April from +0.07 in March. Two of the four broad categories of indicators that make up the index increased from March, and only one category made a negative contribution to the index in April. The index’s three-month moving average, CFNAI-MA3, increased to +0.23 in April from a neutral reading in March.
Positive news and hopefully none of the current drama in DC will cause any hiccups in the economy.
Economic growth is expected to continue in the U.S. throughout the remainder of 2017 according to the nation’s purchasing and supply executives in their Spring 2017 Semiannual Economic Forecast. Expectations for the remainder of 2017 continue to be positive in both the manufacturing and non-manufacturing sectors.
ISM’s Manufacturing Business Survey respondents forecast that manufacturing employment will increase by 1.3 percent by the end 2017 compared to the end of 2016. ISM’s Non-Manufacturing Business Survey Committee respondents forecast that employment will increase 2.2 percent during the balance of 2017.
Sounds great and let’s hope this forecast is accurate. While there is no mention of increasing wages, we should see wages increase as the labor market tightens.
Thirty-nine states added construction jobs between April 2016 and April 2017 amid growing demand for construction services, yet more than half the states lost construction jobs between March and April amid tight labor market conditions, according to an analysis by the Associated General Contractors of America of Labor Department data released today. Association officials said firms in many parts of the country are having a hard time finding qualified workers, which is likely holding back broader employment gains in some states.
Ken Simonson, chief economist for the AGC said:
Demand for construction remains robust, so it is likely that a number of the monthly employment declines are being caused by a lack of workers instead of a lack of work. If the labor market remains tight, firms may have to adjust their business practices as they shift limited personnel from one project to the next.
It appears the continued difficulty in finding qualified workers is becoming a serious issue. With the dire need for new homes in some areas due to demand and population growth, we really need to see more people becoming employed in construction.
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