Discussing NAR’s latest report on pending home sales, the growing gap in the price brackets of homes for sale, good news for the economy in our region, how executives plan to spend money from the tax reform, Freddie reports on mortgage delinquencies, how much home sellers made in 2017 and more
Pending Home Sales Fall Again
Bad news about the number of homes going under contract from NAR:
Pending home sales decreased modestly in May and have now fallen on an annualized basis for the fifth straight month, according to the National Association of Realtors®.
Check out the chart showing the seasonally adjusted annual rate of pending home sales:
Lawrence Yun, NAR chief economist, said:
Pending home sales underperformed once again in May, declining for the second straight month and coming in at the second lowest level over the past year. Realtors® in most of the country continue to describe their markets as highly competitive and fast moving, but without enough new and existing inventory for sale, activity has essentially stalled.
NAR is talking about pending homes sales for the entire country. Remember to check with your favorite local Realtor to find out what is happening in your area.
This is the 2nd consecutive month of decreases and the 5th consecutive month of YoY decreases. This does not look good for the national housing market.
The Lack of Affordable Homes
From the St. Louis Fed:
Growth in the price gaps between housing tiers appears to have reduced for-sale inventories in U.S. residential markets. In recent years, the differences in quality between housing tiers—that is, upper-tier, middle-tier, and lower-tier homes—have widened significantly insofar as price reflects quality.
In 2017, lower-tier homes experienced the strongest price growth (9 percent), followed by middle-tier homes (7 percent), and then upper-tier homes (5 percent), resulting in narrower price gaps between housing tiers. Rising prices of lower-tier and middle-tier homes should draw homebuilders to produce more of those units over time, while a smaller price gap will incentivize owners to trade up, yielding additional inventory. In the near-term, however, it is likely that low- and middle-income homebuyers will suffer as affordability worsens in those market segments.
It would be nice if rising prices of lower tier homes did encourage home builders to produce more affordable homes. Home builders will not want too many homes in the lower and middle tiers to hit the market too quickly since it would affect the demand/supply balance.
The lack of affordable homes is part of the reason why the number of pending home sales has been falling in my opinion.
Fifth District Service Sector Firms Reported Robust Growth
From the Richmond Fed:
Fifth District service sector activity grew robustly in June, according to the results of the latest survey by the Federal Reserve Bank of Richmond. Most service sector survey measures increased, with the revenues index jumping from 11 in May to 21 in June. Firms also reported robust growth in demand and local business conditions as well as increased business expenditures. In addition, they generally expect conditions to improve further in the next six months.
Survey results indicate strong employment growth in June and a notable increase in wages, as the wage index rose from 17 in May to 31 in June. However, firms continued to struggle to find workers with the required skills. Many firms expect this problem to persist in the coming months but anticipate continued growth in employment.
Service sector firms saw faster growth in both prices paid and prices received, although input price growth continued to outpace that of outputs. Firms expect this trend to continue in the coming months.
Great news for the economy in our region!
Fifth District Manufacturing Firms Reported Continued Growth
Also from the Richmond Fed:
Fifth District manufacturing continued to expand in June, according to results of the most recent survey from the Richmond Fed. The composite manufacturing index rose from 16 in May to 20 in June, buoyed by an increase in all three components (shipments, new orders, and employment). Firms also saw an increase in backlog of orders, as the index rose to its highest value of this year. Respondents were optimistic in June, expecting growth to continue across most indicators.
While survey results suggest a rise in employment in June, firms continued to struggle to find employees with the skills they needed, as this indicator fell from −3 in May to −14 in June, indicating further contraction. In spite of expectations of continued shortages, manufacturers expect payrolls to expand further in coming months.
On balance, manufacturers reported that price increases accelerated in June. In fact, the average increase in current prices paid reached its highest level since November 2012. However firms expect growth in both prices paid and prices received to slow in the next six months.
More great news for our region!
US Companies Plan to Spend Tax Savings into Growth
Interesting results in a survey of 403 US executives by PWC:
- 78% say tax reform has made doing business in the US more attractive
- 30% say they’re likely to make geographic changes as a direct result of tax reform
- 80% plan to invest in growth
- 87% plan to spend on their workforce
- 65% plan on hiring and 62% plan on increasing wages
- 55% plan on paying off debt and 54% plan on buying back stocks
- 55% plan on lowering prices
We all heard many different stories about companies paying bonuses as a result of the tax reform. Then we heard most of the money was going to be spent on stock buybacks.
If the results of this survey are true, it should result in strong economic growth. But that is IF the execs spend as they said they would in the survey.
Things may “pop up” in the economy that cause the execs to change their plans. Stuff like a trade war…
Single Family Delinquencies Decrease
From Freddie Mac:
Our single-family seriously delinquent rate decreased from 94 basis points in April to 87 basis points in May. Our multifamily delinquency rate remained flat at 1 basis point in May.
Good news as fewer delinquencies should mean fewer foreclosures. Plus it is a sign that the economy is doing well since it also means fewer people are having a tough time making their mortgage payments.
Home Sellers in 2017 Averaged Roughly $39,000 Profit
Homeowners who sold their homes in 2017 gained $38,856, at the median, for an annualized return of 2.94 percent – slightly below last year’s median gain. The past two years (2016 and 2017) were the highest-gaining years for home sellers since 2007, when the typical gain was $47,500. In general, people who sold their homes in 2017 had owned them for a median of almost eight and a half years.
This sounds pretty impressive. Zillow is defining a gain as the difference between what the owner paid for and what it sold for later on.
Tese numbers are NOT adjusted for inflation. When adjusted for inflation, sellers saw about a $15,000 gain.
Which is still impressive BUT please remember this is talking about the entire US. Zillow found that in eight of the top 35 metro areas, the average homeowner who sold in 2017 actually lost money in inflation-adjusted terms.
If you are wondering what you can expect to gain when selling your home in today’s market, the best way to find out is by consulting with a local experienced Realtor!
31% Think U.S. Civil War Likely Soon
From Rasmussen Reports:
Most voters fear that political violence is coming from opponents of the president’s policies, just as they did in the second year of Barack Obama’s presidency, and nearly one-in-three think a civil war is next.
Democrats (37%) are more fearful than Republicans (32%) and voters not affiliated with either major party (26%) that a second civil war is at hand.
This is ridiculous! And scary!
All I can say is that united we stand and divided we fall…
Well that is it for today! Be sure to hit the subscribe button so you are notified by email of new posts!