Discussing new home sales, home price reports from Clear Capital and the FHFA, good news from the American Institute of Architects, Dodd-Frank being rolled back, the latest from the Federal Reserve and more!
New Home Sales April 2018
New Home Sales
Sales of new single-family houses in April 2018 were at a seasonally adjusted annual rate of 662,000. This is 1.5% below the revised March rate of 672,000 but 11.6% above the April 2017 estimate of 593,000.
You can see the number of homes sold is much better than after the housing market crashed but is still historically low.
The median sales price of new houses sold in April 2018 was $312,400. The average sales price was $407,300.
You can see that new home prices have steadily climbed and are much higher than before the housing market rash. The median price fell but the average price hit a new all time high.
For Sale Inventory and Months’ Supply
The seasonally adjusted estimate of new houses for sale at the end of April was 300,000. This represents a supply of 5.4 months at the current sales rate.
As you can see, the number of homes for sale is still low compared to the past. This is an excellent illustration of how limited the supply of homes for sale really is.
First, you must remember this is talking about the entire US and doesn’t reflect what is happening in every local market.
Home Prices Increase 6.8% YoY
Clear Capital just reported that US home prices increased 1% quarter over quarter and 68% year-over-year. Clear Capital uses a unique quarter-over-quarter measurement that helps to reduce some of the noise and lag that you will see with other indices of US home prices.
FHFA Reports Home Prices Up 0.1%
U.S. house prices rose 1.7 percent in the first quarter of 2018 according to the Federal Housing Finance Agency House Price Index. House prices rose 6.9 percent from the first quarter of 2017 to the first quarter of 2018. FHFA’s seasonally adjusted monthly index for March was up 0.1 percent from February.
Dr. William Doerner, FHFA Senior Economist, said:
Home prices continue to rise across the U.S. but there are signs of tapering. Since housing markets began to rebound in 2012, house price appreciation has been positive because demand has outpaced supply. In the last month, however, some regions reflect a slowing or even flattening of house price growth.
Another national report so my advice is to talk to a local Realtor to determine what is happening in your market.
Parents Evict Their Son
A New York state judge has backed a couple’s battle to kick their 30-year-old son out of their home because he has not contributed toward household expenses or helped with chores and they wanted him to get a job.
Maybe the son has drug or mental health issues but I know many will say the parents are to blame. There is probably a lot more to this story than we will ever know so I would not be too quick to pass judgement on anyone involved.
Architecture Billings Index Increased in April
The American Institute of Architects (AIA) is reporting today that architecture firm billings rose for the seventh consecutive month, with the pace of growth in April increasing modestly from March.
Overall, the AIA’s Architecture Billings Index (ABI) score for April was 52.0 (any score over 50 is billings growth), which indicates the business environment continues to be healthy for architecture firms despite continued labor shortages, growing inflation in building materials costs and rising interest rates.
AIA Chief Economist Kermit Baker said:
While there was slower growth in April for new project work coming into architecture firms, business conditions have remained healthy for the first four months of the year. Although growth in regional design activity was concentrated at firms in the sunbelt, there was balanced growth so far this year across all major construction sectors.
The Architecture Billings Index provides an approximately nine to twelve month glimpse into the future of nonresidential construction spending activity. While this is good news for the economy, do not confuse it to track residential construction spending or activity.
Dodd-Frank Restrictions Could Be Reduced on Small Banks
From Washington Post:
The House on Tuesday passed a plan to roll back banking regulations passed in response to the 2008 financial crisis, sending the bill to President Trump to sign.
The measure leaves the central structure of the post-financial-crisis rules in place, but it would make the most significant changes to weaken the Dodd-Frank banking regulations since they were passed in 2010. It would exempt some small and regional banks from the most stringent regulations, and would also loosen rules aimed at protecting the biggest banks from sudden collapse.
While this sounds good, we have to wonder what it actually means. There is no doubt that many of the regulations enacted after the economy crashed hurt smaller banks.
NAR President Elizabeth Mendenhall said:
We commend members of Congress for passing this bipartisan legislation to level the lending playing field for community banks and credit unions. This bill provides appropriate consumer protections while going a long way toward removing undue regulatory burdens on small lenders, which will help keep them strong, so they can help keep communities strong.
David H. Stevens, President and CEO of the Mortgage Bankers Association said:
I want to commend the House of Representatives for joining the Senate and passing this bill which will protect consumers and provide greater access to mortgage credit. Specifically, this legislation includes: SAFE Act amendments which provide mortgage loan originators with 120 days of transitional authority to originate when moving from a federal depository to a non-bank (or across state lines), subjecting Property Assessed Clean Lending (PACE) or property retrofit loans to Truth In Lending Act consumer protections, critical consumer protections to U.S. veterans who use the VA Home Loan program, clarifying the High Volatility Commercial Real Estate rule to help promote sustainable construction and development, and targeted TILA/RESPA Integrated Disclosure fixes.
So far what I have read sounds pretty good. But only time will tell if the big banks slipped something sneaky into it that we will pay for later…
The Fed Speaks
Highlights from the FOMC Minutes for the May 1-2 Meeting:
The information reviewed for the May 1-2 meeting indicated that labor market conditions continued to strengthen in the first quarter, while real gross domestic product (GDP) rose at a moderate pace. Consumer price inflation, as measured by the 12‑month percentage change in the price index for personal consumption expenditures (PCE), was 2 percent in March. Survey-based measures of longer-run inflation expectations were, on balance, little changed.
Real residential investment was unchanged in the first quarter after a strong increase in the fourth quarter. Starts for new single-family homes decreased in March, but the average pace in the first quarter was little changed from the fourth quarter. In contrast, starts of multifamily units moved up in March after contracting in February, and they were higher in the first quarter than in the fourth. Sales of both new and existing homes increased in February and March.
Financing conditions in the residential mortgage market remained accommodative for most borrowers in March and April. For borrowers with low credit scores, conditions continued to ease, but credit remained relatively tight and the volume of mortgage loans extended to this group remained low.
The staff projection for U.S. economic activity prepared for the May FOMC meeting continued to suggest that the economy was expanding at an above-trend pace. Real GDP growth, which slowed in the first quarter, was expected to pick up in the second quarter and to outpace potential output growth through 2020. The unemployment rate was projected to decline further over the next few years and to continue to run below the staff’s estimate of its longer-run natural rate over this period.
The near-term projection for consumer price inflation was revised up slightly in response to incoming data on prices. Beyond the near term, the forecast for inflation was a bit lower than in the previous projection, reflecting the slightly higher unemployment rate in the new forecast.
Participants generally agreed with the assessment that continuing to raise the target range for the federal funds rate gradually would likely be appropriate if the economy evolves about as expected. These participants commented that this gradual approach was most likely to be conducive to maintaining strong labor market conditions and achieving the symmetric 2 percent inflation objective on a sustained basis without resulting in conditions that would eventually require an abrupt policy tightening. A few participants commented that recent news on inflation, against a background of continued prospects for a solid pace of economic growth, supported the view that inflation on a 12-month basis would likely move slightly above the Committee’s 2 percent objective for a time. It was also noted that a temporary period of inflation modestly above 2 percent would be consistent with the Committee’s symmetric inflation objective and could be helpful in anchoring longer-run inflation expectations at a level consistent with that objective.
All participants expressed the view that it would be appropriate for the Committee to leave the target range for the federal funds rate unchanged at the May meeting.
So we can expect the Fed to let inflation to go above their target and that they are planning to continue raising their benchmark rate as long as the economy does not go haywire. It is very interesting that they would say this about inflation…
Well that is all I have time for today! Be sure to hit the share buttons and subscribe so you will be notified by email of new posts!