Discussing why the home sales decreased in the latest Existing Home Sales Report, how Tax Reform has affected housing, what people will sacrifice to own a home, what the banks learned from the housing market crash and more…
Why Did Existing Home Sales Decrease?
Last week, I shared how the latest Existing Home Sales Report from NAR showed that home sales were down 1.4% compared to the same time last year. This is mainly due to the fact that the inventory of homes for sale has fallen year-over-year for 35 consecutive months!
Check out this chart with statistics from the latest Existing Home Sales Report:
You can see that home prices are still increasing despite the decreasing number of homes for sale. This indicates strong demand despite the decrease in the number of sales.
If demand was weak, we would see home prices start to fall!
Mortgage rates have increased lately but they are still historically low. Anyone interested in buying a home should be aware that rising rates and home prices mean they need to get the lead out!
Anyone interested in selling a home should be encouraged by the strong demand from buyers. Remember that every local market is different so talking to a local experienced Realtor should be your first step!
Private Sector Employment Increased by 178,000 Jobs in May
ADP just reported that private-sector employment increased by 178,000 from April to May, on a seasonally adjusted basis.
Ahu Yildirmaz, vice president and co-head of the ADP Research Institute said:
The hot job market has cooled slightly as the labor market continues to tighten. Healthcare and professional services remain a model of consistency and continue to serve as the main drivers of growth in the services sector and the broader labor market as well.
Mark Zandi, chief economist of Moody’s Analytics, said:
Job growth is strong, but slowing, as businesses are unable to fill a record number of open positions. Wage growth is accelerating in response, most notably for young, new entrants and those changing jobs. Finding workers is increasingly becoming businesses number one problem.
Increasing wages is good and I have been calling for better income growth for ALL Americans for several years. But eventually this could cause problems.
Businesses will either fail OR turn to using robots to replace workers. Which is why no one should depend on their job being there tomorrow.
Consumer Confidence Increased in May
From The Conference Board:
The Conference Board Consumer Confidence Index® increased in May, following a modest decline in April (after a downward revision). The Index now stands at 128.0 (1985=100), up from 125.6 in April. The Present Situation Index increased from 157.5 to 161.7, while the Expectations Index improved from 104.3 last month to 105.6 this month.
Lynn Franco, Director of Economic Indicators at The Conference Board said:
Consumer confidence increased in May after a modest decline in April. Consumers’ assessment of current conditions increased to a 17-year high (March 2001, 167.5), suggesting that the level of economic growth in Q2 is likely to have improved from Q1. Consumers’ short-term expectations improved modestly, suggesting that the pace of growth over the coming months is not likely to gain any significant momentum. Overall, confidence levels remain at historically strong levels and should continue to support solid consumer spending in the near-term.
Very good news! Best in 17 years is nothing to sneeze at!
How Will the Tax Cuts and Jobs Act Impact American Workers?
After 35 years of increasing income inequality, the Tax Cuts and Jobs Act makes our tax system less progressive. The overall package of tax cuts tilts most benefits towards the wealthy.
Very large tax cuts in the Tax Cuts and Jobs Act go to corporations, with most of the provisions being permanent.
The tax cuts granted to individuals are set to expire in 8 years and tend to provide greater benefits to people at higher income levels.
Some of the benefits of the tax cut for corporations may be passed on to workers, but the larger share is expected to go to shareholders.
The tax cuts increase the federal deficit, and the way in which we tackle growing government deficits in the future will also impact workers.
It looks like things are going to get tougher for more Americans. Which is why it is very important that we do everything we can for ourselves.
You need to work hard, cut out frivolous spending and plan for the future. Planning for your future means thinking long long into the future.
You know like 30 years into the future. Which is how long the most popular mortgage is…
What a coincidence!
How Will the Tax Cuts and Jobs Act Impact Housing
Views of the December 2017 tax reform law’s impact on the ease of purchasing a home vary sharply among self-identified Republicans and Democrats, with Republicans (perhaps unsurprisingly) holding a more favorable outlook.
According to the survey, 45 percent of Democrats said the law made it more difficult to buy a home, while 42 percent of Republicans said the law made it easier. It is not necessarily surprising that Republican respondents would be inclined view the law more favorably – it was drafted and passed primarily by the Republican majority in Congress, and signed by a Republican president.
A plurality of both Republicans (42 percent) and Independents (45 percent) said the law will neither make it easier nor more difficult to buy a home.
As of now, I have not seen any change in how hard it is to buy a home due to the Tax Reform. And I am an Independent that tires really hard to not be a buy-a-house-now cheerleader.
If it makes sense for you to buy a home, buy a home. If it does not makes sense for you to buy a home, then work on your long range financial goals.
Don’t let your political beliefs or anything else hinder your progress on living the life you desire and deserve.
While I have not seen it any change in how hard it is to buy a home there have been some changes in housing. Some predicted that the Tax Reform would kill the housing market.
Demand is still strong if we go by the number of people looking at homes. According to the Showing Time Index, buyer demand has increased each month over the last three months and is HIGHER than it was for the same months last year.
Also, Americans still see real estate as the best long-term investment according to a recent Gallup poll:
More Americans name real estate over several other vehicles for growing wealth as the best long-term investment for the fifth year in a row. Just over a third cite real estate for this, while roughly a quarter name stocks or mutual funds.
There is no denying that real estate can be a great wealth building investment. But most people are not interested in investing in real estate and simply want to own a home.
So did the home ownership rate plummet after the Tax Reform? While it is too early to say with 100% certainty, home ownership increased when compared to the first quarter of last year according to the Census Bureau.
One of the biggest claims about the Tax Reform was it would destroy the high end real estate market. But according to NAR:
- Sales between $500,000 and $750,000 were up 4.5% year-over-year
- Sales between $750,000 and $1M were up 15.1% year-over-year
- Sales over $1M were up 17.3% year-over-year
It does not sound like the upper end of the housing market was hurt by Tax Reform. The strange thing is that it was NAR saying high end homes would be hurt by Tax Reform yet their own data shows something different…
We also heard that the Tax Reform would cause home prices to decrease. But just last week I shared that US home prices increased 6.5% YoY in March.
It appears that the reports of Tax Reform hurting the housing market may be exaggerated. It will take years to really know the full impact of Tax Reform on housing and the economy.
Mortgage Delinquencies Decrease
From Freddie Mac:
Our single-family seriously delinquent rate decreased from 97 basis points in March to 94 basis points in April. Our multifamily delinquency rate decreased from 2 basis points in March to 1 basis point in April.
Excellent news! Fewer delinquencies means fewer people facing foreclosure and we all know how bad too many foreclosures are for the housing market.
What Will People Sacrifice to Own a Home?
A new survey of over 1,000 potential U.S. home buyers by Unison Home Ownership Investors and commissioned by Atomik Research revealed the financial challenges of saving for a down payment and what people are willing to sacrifice to make home ownership possible.
Overall, the report found that for a gifted 10% down payment, people would happily forgo their dream car (44%), vacationing for the next five years (38%), eating out for the next five years (35%) and their right to vote (22%). However, not everything is worth the sacrifice. In fact, driving appears to be a non-negotiable, with a mere 9% willing to give up their driver’s license.
So what would you give up to become a home owner? It is possible that you are closer to being able to buy a home than you think!
What Did the Banks Learn From the Housing Market Crash?
From The Great Recession Blog:
They learned they can make vaults full of money off of dumb-ass loans, and then we’ll bail them all out so they don’t fall on us when those loans collapse. They learned that, during a housing collapse, their banks will rapidly become twice as big as they were when they were merely too big to fail. They learned the megamergers they lust after in their late-night dreams are assured because the Federal Reserve won’t merely allow them to merge; it’ll force them to merge … at fire-sale prices!
The banksters even learned that their bonuses will still be paid (by the government), and their salaries will increase because of their glad-handing ability to obtain government funding — the prerequisite for which is that you crash your bank head-on into an economic collapse that anyone can see coming. They learned they will even be given carte blanche to create practically infinite streams of new money and give it all to themselves alone so they can play in the stock market under the pretense that it will somehow trickle down to the mauling masses
And they learned that no one will ever go to jail, even if they engage in little acts of corruption to take advantage of the overhyped market, such as by rigging interest rates or by convincing their clients to buy the things that they, themselves, are selling as fast as they can. Those, in fact, are the banksters that will be looked up to most for advice by the politicians and the media market gurus on how to save the world. They are the Blankenstein monsters that rule the world.
Absolutely correct about the banks but the rest of the article is another prediction that the housing market will collapse because of rising mortgage rates. No one knows what the future holds but I don’t think we will see another crash.
Maybe a slow down in the number of sales and a slowdown in how fast home prices are increasing. But I think it will take a total meltdown of the economy for housing to implode like it did during the Great Recession.
Of course, never say never…
Stating the Obvious on Government Debt
Interesting quotes from Canadian Prime Minister Justin Trudeau on Bloomberg:
I certainly know that I remain focused on the long term. I mean what’s the U.S. debt approaching now, is it a trillion dollars? I mean, we’re talking about something that is not sustainable.
We have to ask the question whether the tax cuts that they’ve brought in in the United States are sustainable in terms of long-term fiscal stability.
How dare a foreigner point out the obvious! Pretty sad that our neighbors to the North see how bad our national debt is but our elected officials cannot…
The Silence of the Bugs
From The New York Times:
Fifty-six years after Rachel Carson’s “Silent Spring” warned of bird die-offs from pesticides, a new biocrisis may be emerging. A study published last fall documented a 76 percent decline in the total seasonal biomass of flying insects netted at 63 locations in Germany over the last three decades. Losses in midsummer, when these insects are most numerous, exceeded 80 percent.
This isn’t the first time I have heard about the decline in the number of bugs. It appears that bees are not the only insect that is dying.
The big question is why and what can or should be done to prevent the entire food chain from collapsing?