Discussing the Existing Home Sales report for April 2018 and looking at local data, GSE reform may be dead, a new commissioner at the FHA, mortgage delinquencies, what will happen to home prices if mortgage rates climb and much more…
Existing Home Sales April 2018
Total existing-home sales in April decreased 2.5% from March. With last month’s decline, sales are now 1.4% below a year ago and have fallen year-over-year for two straight months.
The median existing-home price for all housing types in April was up 5.3% from April 2017. This is the 74th straight month of year-over-year gains.
Total housing inventory at the end of April was 6.3% lower than a year ago and has fallen year-over-year for 35 consecutive months. Unsold inventory is at a 4.0-month supply at the current sales pace.
Properties typically stayed on the market for 26 days in April and 57% of homes sold in April were on the market for less than a month.
First-time buyers were 33% of sales in April. All-cash sales were 21% of transactions in April.
Distressed sales ( foreclosures and short sales ) were 3.5% of sales in April (lowest since NAR began tracking in October 2008), down from 4% last month and 5% a year ago.
Lawrence Yun, NAR chief economist, said:
The root cause of the underperforming sales activity in much of the country so far this year continues to be the utter lack of available listings on the market to meet the strong demand for buying a home. Realtors® say the healthy economy and job market are keeping buyers in the market for now even as they face rising mortgage rates. However, inventory shortages are even worse than in recent years, and home prices keep climbing above what many home shoppers are able to afford.
What is available for sale is going under contract at a rapid pace. Since NAR began tracking this data in May 2011, the median days a listing was on the market was at an all-time low in April, and the share of homes sold in less than a month was at an all-time high.
With mortgage rates and home prices continuing to climb, an increase in housing supply is absolutely crucial to keeping affordability conditions from further deterioration. The current pace of price appreciation far above incomes is not sustainable in the long run.
Remember this is talking about the entire US and may not reflect what is happening in every local market. Check out some of the statistics for Anderson County SC taken from the WUAR MLS:
- Existing home sales in April 2018 were 11.4% higher than March 2018
- Existing home sales in April 2018 were 1.55% higher than April 2017
- The median sold price in April 2018 was down 8% from March 2018
- The median sold price in April 2018 was up 7.33% compared to April 2017
- The average days on market in April 2018 was 15% lower than March 2018
- The average days on market in April 2018 was 22.8% higher than April 2017
Remember this stats are for an entire month and all of the homes sold in Anderson County during that month. They will give you a little insight on local market conditions but will not tell you what a specific home is worth or how long it should take to sell.
GSE Reform Is Dead for Now
Two U.S. senators who have played key roles in trying to advance housing-finance reform are acknowledging the legislative efforts to end government control of Fannie Mae and Freddie Mac are dead, at least for now.
Republican Bob Corker of Tennessee and Democrat Mark Warner of Virginia commented on the status of the two companies Wednesday at a Senate Banking Committee hearing with Federal Housing Finance Agency Director Mel Watt.
Corker and Warner tried to develop a bill that would have largely preserved the operations of Fannie and Freddie while opening the market to new competition. That effort foundered after failing to win support from progressives, who wanted to preserve the companies’ affordable-housing mandates, and Congress has little time left to consider major legislation before November’s mid-term elections.
I have almost given up any hope for the long overdue reform of the GSEs. I can understand that some wanted to preserve the “affordable-housing mandates” but you don’t throw the baby out with the bathwater…
New FHA Commissioner
By a vote of 74-23, the U.S. Senate today confirmed President Donald J. Trump’s nomination of Brian D. Montgomery to serve as Assistant Secretary of Housing at the U.S. Department of Housing and Urban Development (HUD) and Commissioner of the Federal Housing Administration (FHA).
Montgomery’s confirmation marks his second term as Assistant Secretary for Housing and FHA Commissioner at HUD. He previously held the job under President George W. Bush, staying on for six months after President Barack Obama’s inauguration.
Considering his experience at the job, this seems only logical. Time will tell if Montgomery leading the FHA s is a good thing or bad thing.
Mortgage Delinquencies Fall to Second Lowest Point in 12 Years
Really good news from Black Knight in their First Look Report for April 2018. They also said that the number of mortgages in active foreclosure hit its lowest point since August 2006!
Black Knight Executive Vice President Ben Graboske said:
At the national level, home prices rose 1.24 percent since the start of 2018, with both January and February having their strongest respective single-month growth rates in 13 years. As of the end of February, home prices had risen 6.65 percent from a year ago, a metric that continues to increase.
The rate of appreciation has accelerated by 42 basis points over the past six months and by 72 basis points over the past 12 months. This acceleration, combined with a nearly 40 basis point increase in the prevailing 30-year fixed interest rate during that same time frame, is creating a tighter affordability climate.
We have now seen monthly increases in the national median home price for 27 of the past 28 months, and annual gains for 70 consecutive months.
There is no doubt that rising home prices and mortgage rates are causing issues. Combine that with the limited inventory in some areas/price ranges and many home buyers are facing a tough time.
Of course the cure for this is working with a highly experienced local Realtor. That being said…
The Housing Market Continues to Underperform
From Mark Fleming at First American:
In April, the housing market continued to underperform its potential. Existing-home sales were 6.5 percent below the market’s potential for existing-home sales, according to our Potential Home Sales Model. Lack of supply remains the primary culprit. The inventory of homes for sale in most markets remains historically low, yet demand continues to rise as millennials further age into homeownership.
According to our Potential Home Sales Model, if the 30-year, fixed-rate mortgage increases another 25 basis points, market potential for existing-home sales would fall by 11,500 sales. If the mortgage rate increased by 50 basis points, the market potential for existing-home sales would fall by 23,000 sales. While both increased rate scenarios reduce the market potential for existing-home sales, the reduction is small compared with the overall market potential for existing-home sales – almost 6 million sales.
Understanding the resiliency of the housing market in a rising mortgage rate environment puts the likely rise in mortgage rates into perspective – they are unlikely to materially impact the housing market. While interest rates may rise, the driving force behind the increase are healthy economic conditions that are favorable to consumers. The healthy economy encourages more homeownership demand and spurs household income growth, which increases consumer house-buying power. Mortgage rates are on the rise because of a stronger economy and our housing market is well positioned to adapt.
I know that some are predicting home prices will fall if mortgage rates increase. As of now, I do not think that prices will fall as much as the pace they are increasing will slow down as mortgage rates increase.
I also think we may see fewer home sales if mortgage rates keep increasing. Some home buyers will be priced out of the market as rising home prices and mortgage rates mean they simply cannot afford the monthly payment.
Unemployment Claims Increase
In the week ending May 19, the advance figure for seasonally adjusted initial claims was 234,000, an increase of 11,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 222,000 to 223,000. The 4-week moving average was 219,750, an increase of 6,250 from the previous week’s revised average. The previous week’s average was revised up by 250 from 213,250 to 213,500.
While any increase is not a good thing, this is no cause for alarm. Check out the chart showing the 4-week moving average going all the way back to 1967:
As you can see, we are seeing very low levels of unemployment claims compared to the past. And if you consider how many more people there are today, things are actually OK.
White-Collar Prosecutions Fall to 20-Year Low
The number of white-collar prosecutions is on track to hit a 20-year low under President Donald Trump, after reaching a high in 2011 during the Barack Obama administration, according to a nonprofit research center that analyzes government data.
A total of 3,249 cases were brought during the first seven months of the U.S. government’s 2018 fiscal year, which runs from October 2017 to April 2018, according to a case-by-case analysis of government data by Syracuse University’s Transactional Records Access Clearinghouse, or TRAC.
The strange thing is that this same group said that the number of white-collar prosecutions hit a 20-year low during the Obama administration. Trump said he was going to drain the swamp and Obama said he would hold Wall Street accountable.
IF ( mighty big word for only 2 letters ) this data is true, it does not appear that either the Trump or Obama administration has made much of an effort to prosecute white-collar crime. But who knows if this is data is true?
If ( big word again ) this data is true, ask yourself why neither administration has prosecuted white-collar criminals?
Something to think about…
Well that is all for today! Please hit those share buttons and please consider subscribing so you never miss another post!