Discussing the latest Pending Home Sales Report from NAR, Wall Street screws up being a landlord, construction employment increases, the latest Beige Book, the number of underwater home owners decreases, jobless claims and a possible change to the Volcker Rule…
Pending Home Sales Decrease
After two straight months of modest increases, pending home sales dipped in April to their third-lowest level over the past year, according to the National Association of Realtors®. All major regions saw no gain in contract activity last month.
The Pending Home Sales Index declined 1.3 percent to 106.4 in April from an upwardly revised 107.8 in March. With last month’s decrease, the index is down on an annualized basis (2.1 percent) for the fourth straight month.
4 straight months of YoY decreases is not good, no matter how you try to spin it. This is a national and not local report, this is not good!
Lawrence Yun, NAR chief economist, said:
Pending sales slipped in April and continued to stay within the same narrow range with little signs of breaking out. Feedback from Realtors®, as well as the underlying sales data, reveal that the demand for buying a home is very robust. Listings are typically going under contract in under a month, and instances of multiple offers are increasingly common and pushing prices higher.
For now, the economy is very healthy, job growth is holding steady and wages are slowly rising. However, it all comes down to overall supply. If more new and existing homes are listed for sale, it would allow home prices to moderate enough to stave off inflationary pressures and higher rates.
Once again, tight inventory is blamed for the weak numbers. Check out the chart showing pending home sales for the entire US:
While there is no doubt that many areas are experiencing very tight inventory, how much of the decrease is due to increasing mortgage rates?
The thing for sellers to remember is that home prices are still increasing and homes are selling quickly (when priced correctly and marketed properly).
Wall Street Screws Up Being a Landlord
Single-family rental giant Invitation Homes was hit with a potential class-action lawsuit in California on Friday over what the plaintiffs claim are excessive and illegal late fees charged to tenants who fall behind on rent.
According to the lawsuit, Invitation Homes charges a late fee of $95, even in cases when rent is only an hour late. In addition to those late fees, the lawsuit alleges that Invitation Homes stacks additional late fees of $95 or more on any accrued balance of late fees, even even if the tenant paid their most recent rent on time.
With 82,570 single-family units across the country, Invitation Homes is the largest single-family rental company. The rise of corporate single-family landlords came after the 2008 financial crisis, as private equity firms and institutional investors bought single-family homes in bulk out of foreclosure in the years following the housing bust.
I was afraid that Wall Street would try to squeeze every penny they could out of renters. And it looks like I may be correct.
On the other hand, if you are late on your rent, you can expect to be hit with a late fee. And if you signed the lease, you should know what the terms of the lease are.
So while the business methods used by Invitation Homes may not be good when it comes to retaining tenants, they are probably legal. We will have to wait to see how this plays out…
Construction Employment Increases in Over 70% of Metro Areas
Construction employment increased in 256 out of 358 metro areas between April 2017 and April 2018, declined in 63 and was unchanged in 39, according to a new analysis of federal employment data released today by the Associated General Contractors of America.
AGC’s chief economist Ken Simonson said:
Industry demand is still showing strength, as construction employment reached a new high in 54 metro areas. However, despite these signs, further growth in the industry may increasingly be stymied by a lack of qualified workers.
It is good to see strong demand but the lack of qualified workers continues! It isn’t just the construction companies having a tough time finding quality employees.
I have read many reports about how companies are having a tough time finding employees. This could lead to more wage growth but we will have to wait until Friday’s Jobs Report to see how wages are growing.
Federal Reserve Beige Book May 30 2018
Some highlights from the latest Beige Book:
Economic activity expanded moderately in late April and early May with few shifts in the pattern of growth.
Manufacturing shifted into higher gear with more than half of the Districts reporting a pickup in industrial activity and a third of the Districts classifying activity as “strong.”
Homebuilding and home sales increased modestly, on net, and nonresidential construction continued at a moderate pace.
Contacts noted some concern about the uncertainty of international trade policy. Still, outlooks for near term growth were generally upbeat.
Employment rose at a modest to moderate rate across most Districts.
Labor market conditions remained tight across the country, and contacts continued to report difficulty filling positions across skill levels.
Many firms responded to talent shortages by increasing wages as well as the generosity of their compensation packages. In the aggregate, however, wage increases remained modest in most Districts.
This report came out before the latest news that Trump is hitting some of our closest allies with tariffs on metals. If people were concerned about international trade policy before, you can imagine they are even more concerned today.
Plus I read this morning that Trump wants a ban on German luxury cars. I wonder what this means for BMW’s plant in South Carolina?
Underwater Home Owners at Lowest Level in a Decade
The share of American homeowners who owe more on their mortgages than their homes are worth is less than a third what it used to be. In the depths of the housing crisis – late 2011 and early 2012 – the share was 31 percent of homeowners with a mortgage. In the fourth quarter 2017, it dropped to 9.1 percent, the first time it’s fallen below 10 percent since the bottom of the market.
This good news but remember this is talking about the entire US. This is so much better than it was after the housing market crashed.
While this news comes from Zillow, I must remind you that finding out the true market value of your home means talking to a local experienced Realtor!
Jobless Claims Fall
In the week ending May 26, the advance figure for seasonally adjusted initial claims was 221,000, a decrease of 13,000 from the previous week’s unrevised level of 234,000. The 4-week moving average was 222,250, an increase of 2,500 from the previous week’s unrevised average of 219,750.
This is a good report despite the small increase in the 4-week moving average. We will have to wait until tomorrow’s Jobs Report to get a better idea of where the labor market really is.
How Soon They Forget
From the WSJ:
The Federal Reserve proposed on Wednesday easing a rule designed to curb risky trading in the wake of the financial crisis, one of the most significant deregulatory measures for banks since President Donald Trump took office.
It appears that Washington is forgetting why the Volcker rule was created. But letting the banks gamble again may prove to be a mistake.
Do the banks REALLY need to be allowed to make speculative investments with their own capital? Maybe but what happens when FDIC banks start failing?
And we know how hard it is to get Congress to get anything done. This is not a complete repeal of the Volcker Rule since that would require an act of Congress.
The good news is that just revising the Volcker Rule will require the approval of several different agencies. Plus the regulators usually give the public a chance to weigh in on how they feel about the proposed changes.
Well that is all I have time for today! As always, if you have questions about real estate in the Anderson SC area, Contact Me!