Looking at the latest NAHB First American Leading Markets Index, not all home prices have recovered, distressed sales decrease, how much waiting to buy may cost you and much more…
Based on current price, permit and employment data, markets nationwide are running at an average of 100% normal economic and housing activity, according to the NAHB/First American Leading Markets Index (LMI), released today.
NAHB Chief Economist Robert Dietz said:
Single-family permits have inched up slowly as builders continue to face supply-side headwinds such as ongoing price hikes in building materials, a lack of buildable lots and labor shortages. A proposal by the Department of Commerce to impose a 20- percent duty on Canadian lumber would only exacerbate this problem and slow down the already modest growth in housing permits.
NAHB Chairman Granger MacDonald said:
This is the first time the LMI has reached this key milestone and it shows how much our industry has improved since the depth of the Great Recession. However, we are concerned that single-family permits continue to trail the other components of the LMI and remain at only halfway back to normal.
I am also concerned about the 20% tariff on Canadian lumber and the lack of new homes being built. With tight inventory being a huge problem in many areas, you would think that more homes would be built.
Check out any one of the many national home price reports, and headlines scream of new peaks and growing gains each month. Home prices are rising faster than inflation, faster than incomes and faster than some potential buyers can bear. Those reports are heavily weighted toward large metropolitan housing markets. In fact, most of the U.S. housing market has not recovered from the epic crash of the last decade.
Only about one-third of homes have surpassed their pre-recession peak value, according to a new report from Trulia, a real estate listing and analytics company. Price growth in most markets is so slow that it will take about eight years for the national housing market to fully recover — that is, for all home values either reaching or surpassing their previous peaks. Huge price gains during the last housing boom were juiced almost entirely by an incredibly loose mortgage lending market that no longer exists.
This is why I hate sharing so many national real estate reports. Even if I say this is national and not local, I know some people are going to think this applies to their home or all homes in the Anderson SC area.
While national reports are very interesting, buyers and sellers must rely upon someone with the knowledge and experience in their market to be successful. So if you have any questions about buying or selling real estate in the Anderson SC area, please contact me!
With rising home values, improved economic conditions, and fewer foreclosures, the share of sales of distressed properties has generally continued to decline. Distressed sales accounted for six percent of sales in March 2017 (seven percent in February 2017; eight percent in March 2016), based on the March 2017 REALTORS® Confidence Index Survey Report. Foreclosed properties were five percent of residential sales, while short sales were only one percent of residential sales.
Great news. Home buyers want a bargain and often, foreclosures can be a bargain. Can be but not always…
Plus, you have to remember that every foreclosed home means someone lost their home. Bad things happen to good people…
In what’s become a prevailing trend over the past year, the Trepp CMBS Delinquency Rate was pushed higher again in April as a large amount of loans reached their balloon dates and failed to pay off. The delinquency rate for US commercial real estate loans in CMBS is now 5.52%, an increase of 15 basis points from March. The reading has consistently climbed over the past year as loans from 2006 and 2007 have reached their maturity dates and have not been paid off via refinancing. The rate has increased in 12 of the last 14 months.
Ouch! Not good at all! Let’s hope this trend ends soon or it could really muck up the economy.
Americans remain generally confident in the country’s housing market and the value of homeownership despite recent interest rate hikes, according to ValueInsured’s quarterly Modern Homebuyer Survey.
Prospective first-time and upgrade homebuyers are cautious about rising home prices and interest rates, and are sensing growing risk. More than three-fifths (61 percent) of interested homebuyers believe six months ago was a better time to buy a home. Nearly as many (59 percent) believe six months from now would be a worse time than now to buy a home. More than three-fifths (65 percent) expect more interest rate increases this year, and 61 percent say “the era of affordable mortgages is coming to an end.”
So nice to hear that people are still seeing the value of owning a home. But the belief that it was better to buy at some point in the past may not always be true.
The best time to buy depends on the buyer’s unique situation as well as what is happening with home prices, mortgage rates and the economy. If you decide that waiting is what you want to do…
How Much Does Waiting to Buy a Home Cost?
The “Cost of Waiting to Buy” means the additional money it will take to purchase a house if prices and mortgage rates continue to rise during the coming year.
Freddie Mac forecasts that mortgage rates will rise to 4.8% by this time next year, while house prices are expected to increase by 4.9% as reported by CoreLogic.
This chart shows $250,000 but the logic applies whether you are spending $100,000 or $250,000 or more!
Holding out until next year to purchase a home might cost you a lot of money!
Total nonfarm payroll employment increased by 211,000 in April, and the unemployment rate was little changed at 4.4%.
The labor force participation rate, at 62.9 percent, changed little in April and has shown little movement over the past year.
In April, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $26.19. Over the year, average hourly earnings have risen by 65 cents, or 2.5 percent. In April, average hourly earnings of private-sector production and nonsupervisory employees increased by 6 cents to $21.96.
The unemployment rate hit the lowest level since May 2007! Wages growing is nice but remember that wages have to grow for everyone to really have a truly healthy economy.
Most importantly, is that the U-6 fell to the lowest level since November 2007. The U-6 measures the unemployed plus those that are working part time but want full time work plus those that have given up on finding a job.
This positive report could mean the Fed will continue raising their benchmark rate in 2017.
Through both recession and recovery, the share of young adults living in their parents’ home continues to rise. Today’s young adults are also more likely to be at home for an extended stay compared with previous generations of young adults who resided with their parents.
As of 2016, 15% of 25- to 35-year-old Millennials were living in their parents’ home. This is 5 percentage points higher than the share of Generation Xers who lived in their parents’ home in 2000 when they were the same age (10%), and nearly double the share of the Silent Generation who lived at home in 1964 (8%).
The question is will this change? And if it is going to change, when will it finally start to change? What will it take to get younger people to move out?
The problem is not just affordable housing; it’s that unless homebuilding of all kinds increases back to near its historical norm of above 1.4 million homes a year, we may simply run out of places to live and homes to sell.
We are adding 1.3 million new households per year. This is currently a number expected to grow to nearly 2.0 million per year as Millennial households enter the workforce, leave their parent’s home and get their own place to live.
Homebuilding is averaging slightly above 1.1 million starts a year, most of which is single family starts at about $650,000 to $700,000 per year. Multi-family is slowing somewhat while single family is growing somewhat—but few think this number will advance rapidly in the next few years.
This will put upward pressure on home prices to say the least. If you think we are seeing tight inventory now, just wait a few more years…
VantageScore Solutions, LLC and TransUnion just released the VantageScore Default Risk Index (DRI) for Q4 2016. The VantageScore DRI tracks the amount of default risk assumed by lenders in four U.S. consumer-loan categories: mortgage, bankcard, auto loans, and student loans. Quarter over quarter, mortgages saw a rise in default risk of 3.6 percent BUT if we compare Q4 2016 to Q4 2015, mortgage default risk is down 3.1%
I would not be too concerned about the increase in mortgage default risk from the previous quarter as this isn’t a trend. Yet…
First-time home buyers and Millennials are spending more than ever on home renovation projects, according to the sixth annual Houzz & Home survey of more than 100,000 respondents in the U.S. In one of the largest increases seen this year, renovators who bought their first home in 2016 spent $33,800 on average, 22 percent more than in 2015. Baby Boomers and older generations (55+) continue to spend roughly three times more than Millennial homeowners (25-34), however Millennials invested an average of $26,200 in 2016, seven percent more than they spent in 2015. Investment in home renovation overall remains strong as homeowners spent $60,400 on average on 2016 renovations, in line with 2015 ($59,800 on average).
Nino Sitchinava, Houzz principal economist said:
Recent homebuyers drive a significant share of home renovations today, with repeat buyers investing twice as much in their home as first-time home buyers. Younger and cash-constrained first-time buyers are responding to the low inventory of affordable homes by purchasing properties that require more than just cosmetic upgrades. Not surprisingly, we are seeing their spend on home renovations increasing significantly in 2016 and expect this trend to continue through 2017.
This shows that some home buyers are finally accepting that homes may not be perfect and require a little “sweat equity”. Which is only logical since it isn’t very likely to find a home that suits your tastes 100%.
This does NOT mean that home sellers can expect a home to sell quickly or easily if their home needs work. While it is impossible to please 100% of the home buyers, you can at least make the home beat the competition…
With only the support of Republicans, the House Financial Services Committee voted in favor of the Financial Choice Act, a bill that would gut central financial regulations created in the aftermath of the 2008 financial crisis. The bill is expected to get a vote from the full House in the coming months. But, in its current form, it is not expected to pass in the Senate, where it would need support from Democrats to garner the necessary 60 votes.
The Choice Act would exempt some financial institutions from capital and liquidity requirements, essentially excusing them from the 2010 Dodd-Frank Act if they hold enough cash.
It would replace the Orderly Liquidation Authority, which critics say reinforces the idea that some banks are too big to fail, with a new bankruptcy code provision intended for large financial institutions.
It also would weaken the powers of the Consumer Financial Protection Bureau. Under the proposed law, the president could fire the agency’s director at will.
It is really hard to say whether or not this is a good thing. Some of the regulations are too restrictive and have hurt the economy. Weakening the CFPB could prove to be bad for consumers.
It does not sound like this will pass any way. At least they are trying to fix some of the screwed up crap but sometimes change isn’t an improvement…
With housing deficiencies come poor outcomes. This includes missed opportunities for child-enrichment activities and supportive school environments and direct harms from housing-related hazards and stress. For example, economic distress in the home or neighborhood is connected with increased reports of child maltreatment.
The housing challenges that affect children’s development and schooling are widespread. According to The State of the Nation’s Housing 2016, difficulty affording housing is a nearly universal experience among the nation’s lowest-income households, and 72 percent of lowest-income renter households spent half of their income to maintain housing. In 2014, low-income households with severe housing cost burden had just $500 left to cover everything else for the month, leading to reductions in spending on food and health care, which in turn affect children’s readiness to learn.
The education and early child development systems cannot be forced to tackle the nation’s achievement gaps on their own while gaps in housing access undermine the education field’s hard-fought gains. To yield better outcomes 20 years from now, the nation needs to change its course on housing. The solution could build on the structure already in place or start anew. It just has to be big enough to match the scope of the challenges facing America’s children, their caregivers, and the communities in which they live.
Just a few snippets from a must read article. Affordable housing is a serious issue and I am eager to see what Ben Carson does at HUD.
That’s it for today!