Looking at 2 very different reports on affordability, good news about foreclosures and the economy, the shift in the homes for sale, interesting data on recent mortgages, climate change and flood insurance and much more!
Are Homes More Affordable Today?
With rising home prices and increasing mortgage rates, most people will think that homes are out of reach for the majority of Americans. But if we compare affordability today to before the housing crash, things actually look pretty good.
If we look at Black Knight’s April 2018 Mortgage Monitor, we see that it is more affordable to buy a home now compared to what it was between 1995 and 2003. Home prices are higher today but mortgage rates are MUCH lower than 1995 to 2003.
Plus, wages have increased have increased over the last 20 years. It may not be the rate of growth that we want or need, but wages have increased. Black Knight said that the share of median income required to buy the median-priced home today compared to the average between 1995 to 2003, means it is more affordable to purchase a home in 44 of 50 states toady!
Check out this chart showing the change in payment to income from 1995 to 2003 compared to today:
This is just one way to look at affordability and not every report on affordability is quite as encouraging…
Housing Affordability at Worst Level in Almost a Decade
Attom’s Q2 2018 U.S. Home Affordability Report shows that the U.S. home prices in the second quarter were at the least affordable level since Q3 2008. This is very different than the report from Black Knight but affordability is a weird thing to measure or track…
Attom said that home prices are less affordable than the historic average in 59% of local markets and 75% of local markets are NOT affordable for the average person. Obviously this is NOT good!
Now you can see why I keep saying we need more affordable homes!
Daren Blomquist, senior vice president at ATTOM said:
Slowing home price appreciation in the second quarter was not enough to counteract an 11 percent increase in mortgage rates compared to a year ago, resulting in the worst home affordability we’ve seen in nearly 10 years,. Meanwhile home price appreciation continued to outpace wage growth, speeding up the affordability treadmill for prospective homebuyers even without the rise in mortgage rates.
Remember, what is affordable for one person is different than everyone else and it is up to each home buyer to select a home that is very affordable to them!
While mortgage rates have increased, everyone must remember that mortgage rates are still historically low. I will write about the latest mortgage rate reports tomorrow!
Foreclosure Starts Decrease Again!
From Black Knight:
- May 2018 saw the second lowest monthly foreclosure starts in more than 17 years
- Foreclosure starts are down 19.53% YoY
- The national foreclosure rate is now at its lowest point in 15 years
- Foreclosure sales are down 15.83% YoY
- The total U.S. loan delinquency rate is down 4.08% YoY
Great news and hopefully we will not ever see a return to the dark days after the housing market crashed.
The Conference Board Leading Economic Index Increased
From the The Conference Board:
The Conference Board Leading Economic Index® (LEI)for the U.S. increased 0.2 percent in May to 109.5 (2016 = 100), following a 0.4 percent increase in April, and a 0.4 percent increase in March.
Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board said:
While May’s increase in the U.S. LEI was slower than in recent months, the improvements in a majority of its components offset the declines in leading indicators of labor markets and residential construction. The U.S. LEI still points to solid growth but the current trend, which is moderating, indicates that economic activity is not likely to accelerate.
Good news other than the decline in residential construction. Strange to see them reporting a decline in residential construction with demand being so strong.
Weekly Jobless Claims Fall for 4th Straight Week
In the week ending June 16, the advance figure for seasonally adjusted initial claims was 218,000, a decrease of 3,000 from the previous week’s revised level. The previous week’s level was revised up by 3,000 from 218,000 to 221,000. The 4-week moving average was 221,000, a decrease of 4,000 from the previous week’s revised average.
Good news and this was below the Bloomberg consensus. Remember the 4-week moving average is the number to watch and it is at the lowest level since December 1973!
The Shift in the Supply of Homes for Sale
From the St. Louis Federal Reserve:
Statistics on housing inventories indicate shortages for existing homes, while the supply of new homes remains at a relatively healthy level
Over the past several months, the pace of U.S. home sales has shown few signs of growth, and as of February 2018, overall home sales were only slightly higher compared with year-ago levels. Analysts have pointed to a tight housing supply as the key constraint holding back the housing market. However, statistics on housing inventories indicate shortages only for existing homes, while the supply of new homes remains at a relatively healthy level. Existing and new home supplies typically move in sync, which poses an important question: What has changed to prompt this decoupling?
They think it is due to the number or supply of new homes compared to existing homes for sale.Also they point out the how the price of new homes compared to existing homes for sale has widened.
In 2006, the median sales price of new single-family homes was just 10 percent above the median sales price of existing single-family homes. Since 2010, that gap has averaged over 30 percent.
You are probably tired of me saying we need more affordable homes for sale and this research drives home part of the problem. Home builders must do what is profitable and best for their business.
During the recession and after, home builders focused on wealthier buyers since they were not hit as hard. Since the economy and housing market has recovered, home builders have faced higher construction costs, labor shortages and a shortage of buildable/desirable lots.
Check out this chart showing the shift n the supply of new homes for sale compared to existing homes for sale:
Now check out the widening price gap between new homes for sale and existing homes for sale:
We have a serious lack of affordable homes for sale in many areas of the country. Thankfully, it is not as bad in Anderson County as the rest of the country.
The demand for affordably priced homes in our area does mean that competition is very strong. Home buyers must be properly prepared and ready to make an offer when they find a home that fits their budget and needs.
Working with an experienced Realtor that is on the ball is the tried and tested method that will ensure your home buying success! Whether it is in the Anderson SC area or any where else, this is still the best way to buy or sell real estate!
Too Many Not Financially Prepared for Bad Times
Nearly 1 in 4 Americans (23 percent) have no emergency savings, according to a new Bankrate.com survey. Only 18 percent have enough to cover three to five months’ expenses, and 22 percent have savings that would cover fewer than three months’ expenses. Just 29 percent of Americans have enough emergency savings to cover the recommended six months of expenses or more.
A majority of respondents — 62 percent — say they are either very or somewhat comfortable with their level of emergency savings, according to the Bankrate survey. Which means many families are living on a knife’s edge, yet not resolute to do anything about it.
This could be a disaster waiting to happen! I know it may be hard to stash away an emergency fund but this is a must for everyone!
If you take a look at what you are spending your money on, you may find some things can be adjusted or cut out entirely. But as my Grandmother said: “You are never more than a day away from the poor house.”
Living through the Great Depression as my Grandmother did can make you see the advantages of being properly prepared for hard times. Many experts recommend a six month stash of cash for expenses and I suggest very strongly that you do it!
Highlights from Ellie Mae’s May 2018 Mortgage Origination Insights:
- The average time to close for all loans was 41 days for the 3rd consecutive month
- Time to close a purchase loan increased one day in May to 43 days
- The average 30-year rate for all loans was 4.84% in May 2018
- 75% of all purchase mortgages closed in May 2018
- 72% of purchase mortgages had FICO scores over 700
- FHA purchase mortgages had an average FICO score 676
Very encouraging to see that 75% pf purchase mortgage closed! Remember that the statistics are all averages and you may experience better results.
As always, speaking to a real live mortgage lender is the best option to investigate your financing options.
Rising Seas and Flood Insurance
From the Union of Concerned Scientists:
Sea levels are rising. Tides are inching higher. High-tide floods are becoming more frequent and reaching farther inland. And hundreds of US coastal communities will soon face chronic, disruptive flooding that directly affects people’s homes, lives, and properties.
I know that some still insist that the Earth is flat or that global warming is not real or that Santa does not exist. But some things cannot be denied when looked at using scientific data.
And climate change cannot be denied! As far as Santa is concerned, ask your parents…
What did they say about South Carolina? 116,000 South Carolina homes worth $53 Billion will be at risk from tidal flooding!
Obviously this is not good but it is a strange coincidence that this report came to my attention just as the National Flood Insurance Program (NFIP) is set to expire at the end of July. NAR has issued a Call to Action to get members to try to get Congress to reform and extend the NFIP.
I am torn about this program. I hate to see any home owners have their homes damaged or destroyed but should we encourage development in areas that are going to be underwater in a few years?
Should taxpayers be helping rich people to insure their expensive beach homes? What about homes that are further inland that will be hurt by hurricanes?
How do you decide which homes should be covered and which should not? I have no desire to help a rich person rebuild their muti-million dollar beach house…
I have heard horror stories about expensive beach homes being rebuilt multiple times using the NFIP. Does the reform address properties that keep getting damaged by flooding?
Obviously I have too many questions decide at this time whether or not the NFIP is good or bad. Just because NAR says something does mean I will always agree 100%.
Architecture Firm Billings Increase
Good news from the AIA:
Architecture firm billings grew in May, marking the eighth consecutive month of solid growth. Overall, the AIA’s Architecture Billings Index (ABI) score for May was 52.8 (any score over 50 is billings growth), which shows that demand for services from architecture firms continues to be healthy.
AIA Chief Economist Kermit Baker said:
Architecture firms continue to have plenty of work as they enter the busiest part of the design and construction season. This is especially true for firms serving the institutional building sector, which reported their strongest growth in billings in several years.
While this is not an indicator for residential real estate, it IS an important indicator for the economy. And as I always say, we must have a healthy economy for a healthy housing market!
Well that is all I have time for today! Be sure to check back ASAP because I still have lots of juicy real estate, housing and economic news to cover!