Discussing existing home sales, foreclosure starts, commercial and multifamily delinquencies, housing becoming less affordable, the performance of residential mortgages, rents increase again and more!
Existing Home Sales Decrease
Total existing-home sales decreased 0.4 percent to a seasonally adjusted annual rate of 5.43 million in May from downwardly revised 5.45 million in April. With last month’s decline, sales are now 3.0 percent below a year ago and have fallen year-over-year for three straight months.
The median existing-home price for all housing types in May was $264,800, an all-time high and up 4.9 percent from May 2017 ($252,500). May’s price increase marks the 75th straight month of year-over-year gains.
Total housing inventory at the end of May climbed 2.8 percent to 1.85 million existing homes available for sale, but is still 6.1 percent lower than a year ago (1.97 million) and has fallen year-over-year for 36 consecutive months. Unsold inventory is at a 4.1-month supply at the current sales pace (4.2 months a year ago).
This is talking about the entire country and will not reflect what is happening in every local market! For more information about what is happening in the Anderson area, check out the Weekly Anderson County SC Market Reports
The lack of inventory has caused home prices to rise across the US. More homes for sale would help to slow the pace of home price growth..
Home prices hitting a new high is great news for someone needing to sell or that has already bought. It is not good news for someone looking to buy though…
Rising home prices combined with rising mortgage rates is hurting home buyers. The lack of supply and homes becoming more unaffordable will have negative impact on the number of homes sold nationally.
Mixed Signals on Foreclosure Starts
From Attom Data Solutions:
Foreclosure starts decreased nationwide in May, but 43 percent of local markets posted year-over-year increases in foreclosure starts, counter to the national trend, according to an ATTOM Data Solutions analysis of record-level foreclosure data.
A total of 33,623 U.S. properties started the foreclosure process in May, down 1 percent from the previous month and down 6 percent from a year ago — the 35th consecutive month with a year-over-year decrease.
There were a total of 71,949 U.S. properties with foreclosure filings in May 2018, up 12 percent from the previous month but still down 12 percent from a year ago — the 32nd consecutive month with a year-over-year decrease and a foreclosure rate of one in every 1,863 U.S. housing units with a foreclosure filing for the month.
Excellent example of how local markets can be very different from the national headlines. This is why it is important to work with a local Realtor!
The fact that foreclosure starts and filings have decreased year-over-year for over 30 consecutive months is a very positive sign for the national housing market and the economy.
Commercial/Multifamily Delinquencies Remain Low
From the Mortgage Bankers Association:
Delinquency rates for commercial and multifamily mortgage loans were relatively flat in the first quarter of 2018, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report.
Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research said:
Mortgages backed by commercial and multifamily properties continue to perform extremely well. Delinquency rates are at or near their all-time lows across most capital sources. This continues to be driven by strong property fundamentals, increasing property values, still-low mortgage rates and readily available financing.
While I do not deal with commercial or multifamily real estate, this is an important indicator of the health of the overall economy. If we started seeing more commercial and/or multifamily delinquencies, it could have a similar effect that happened in residential real estate prior to the Great Recession.
Housing Becoming Less Affordable
Sobering news in the 30th Harvard JCHS State of the Nation’s Housing:
Homeownership rates among young adults are even lower than in 1988, and the share of cost-burdened renters is significantly higher, with almost half of all renters paying more than 30 percent of their income for housing. Soaring housing costs are largely to blame.
The national median rent rose 20 percent faster than overall inflation between 1990 and 2016 and the median home price rose 41 percent faster. While better housing quality accounts for some of the increased costs, higher costs for building materials and labor, limited productivity gains, increased land costs, new regulatory barriers, and growing income inequality all played major roles as well.
New construction, home sales, and housing prices ticked up modestly in 2017, but a slowdown in the multifamily sector and the rising costs of residential construction are preventing a stronger upturn in housing markets. Intense competition for the historically low supply of existing homes on the market has pushed up home prices in most metros, raising further concerns about affordability.
Growing income inequality has helped drive the increase in cost-burdened households. According to the report, the real median income of households in the bottom quartile increased only 3 percent between 1988 and 2016, while the median income for adults aged 25 to 34 rose by just 5 percent. Meanwhile, the median home price grew 41 percent faster than inflation between 1990 and 2016, the median rent grew 20 percent faster, and the nation had 2.5 million fewer units renting for less than $800 a month (in real terms).
Daniel McCue, a senior research associate at the Harvard Joint Center for Housing Studies said:
If incomes had kept pace with the economy’s growth over the past 30 years, they would have easily matched the rise in housing costs. But that hasn’t happened.
How many times have you heard me say we need more income growth for ALL Americans over the past decade or so that I have been writing about real estate and the economy?
Chris Herbert, managing director of the Harvard Joint Center for Housing Studies said:
We need strategies to help the private sector produce more moderately-priced housing. Doing so will require new approaches for making effective use of public funding, reducing construction costs, and easing regulatory barriers.
There is no doubt that we need more affordable rental housing if we are ever going to see more Americans achieve the American Dream of home ownership. This is only a very small part of this must read report that you can read here
Good News on Mortgage Performance
From the OCC:
Performance of first-lien mortgages remained unchanged during the first quarter of 2018 compared with a year earlier, according to the Office of the Comptroller of the Currency’s (OCC) quarterly report on mortgages.
The OCC Mortgage Metrics Report, First Quarter 2018, showed 95.6 percent of mortgages included in the report were current and performing at the end of the quarter, the same as a year earlier.
The report also showed that servicers initiated 37,300 new foreclosures during the first quarter of 2018, an 8.1 percent increase from the previous quarter and a 21.5 percent decrease from a year ago. Servicers implemented 23,427 mortgage modifications in the first quarter of 2018, and 78.5 percent of the modifications reduced borrowers’ monthly payments.
While this report only covers about 33% of US mortgages, it is big enough to give us a pretty good idea of how things stand. This is very good indicator for the economy and the housing market.
Lower Default Rates for All Loan Types
S&P Dow Jones Indices and Experian released today data through May 2018 for the S&P/Experian Consumer Credit Default Indices. The indices represent a comprehensive measure of changes in consumer credit defaults and show that the composite rate decreased three basis points from last month to 0.89%. The bank card default rate dropped two basis points to 3.84%, and the auto loan default rate fell six basis points from last month to 0.93%. The first mortgage default rate declined by two basis points, to a level of 0.66%.
This is great news and ties in with the report from the OCC regarding first mortgage defaults.
David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices said:
Consumers continue to pay their bills on time. With the economy turning in good numbers with low unemployment, low inflation and gradually rising wages, consumer credit default rates are flat to down. Consumer borrowing has recovered from the financial crisis. Mortgage debt outstanding fell 12.6% from its early 2008 peak to the bottom in 2014; now it remains roughly 6.1% below the peak.
Looking ahead, there may be some concern about how long the moderate default rates can continue. Savings as a percentage of disposable income is declining. At the current level of 3%, it is near the low point seen in the boom before the financial crisis. While inflation remains low, wage growth is not very high and home prices are rising two to three times faster. Any rapid rise in defaults will wait for the next recession, whenever it comes.
And yet another opportunity for me to say we need more income growth for ALL Americans…
Zillow Hit With Another Lawsuit
Zillow Group and its subsidiary Trulia have been hit with a lawsuit alleging that the real estate tech companies’ mobile home search apps violate a patent for “real estate information search and retrieval system.”
The suit, brought by Virginia-based Corus Realty Holdings in U.S. District Court in Seattle seeks to block Zillow and Trulia from using location-based mobile search apps that display information about homes. Corus said in 2001 it developed and patented a “mobile device that used location technology to identify and obtain relevant information about real estate near a user’s location.” Today, using location services on mobile devices is the basis for many real estate search engines.
This will be interesting to watch as it plays out. Many real estate apps that allow buyers to do something similar to this and it could be that this lawsuit is going after the deepest pocket first.
Single Family Home Rents Increase 2.7%
Single-family rents climbed steadily between 2010 and 2018, as measured by the CoreLogic Single-Family Rental Index (SFRI). However, the index shows year-over-year rent growth has decelerated slowly (Figure 1) since it peaked early last year. In March 2018, single-family rents increased 2.7 percent year over year, a 1.5-percentage-point decline in the growth rate since it hit a high of 4.2 percent in February 2016.
This is a national report and may not reflect how much rents have increased in every local market. The key thing to remember is that while rents have increased, home owners with a fixed-rate mortgage still have the same mortgage payment…
Well that is all I have time for today! Be sure to share on Facebook, Google or Twitter if you enjoyed this article and as always, if you have any questions about real estate in Anderson County SC, Email Me!