Looking at the latest report on Pending Home Sales, the projections for home sales from Freddie, Fannie and the MBA, affordability and home sales, why we may see more homes for sale soon, several positive economic reports plus much more
Pending Home Sales Decrease for 7th Consecutive Month
Pending home sales stepped back in July and have now fallen on an annual basis for seven straight months. The Pending Home Sales Index decreased 0.7% to 106.2 in July from 107.0 in June. With last month’s decline, contract signings are now down 2.3% year-over-year.
Lawrence Yun, NAR chief economist, said:
The reason sales are falling off last year’s pace is that multiple years of inadequate supply in markets with strong job growth have finally driven up home prices to a point where an increasing number of prospective buyers are unable to afford it.
7 consecutive months of decreases should not be ignored. I am not saying to panic but this is a seriously disturbing trend…
Is this trend simply because of affordability and the lack of affordable homes?
Affordability Causing Home Sales to Decrease?
From Freddie Mac:
Ongoing supply and demand imbalances and weakening affordability conditions, particularly in markets out West, are expected to keep a lid on home sales growth through the rest of the year. The U.S. economy in the second quarter grew at its fastest pace in nearly four years, but housing activity played a limited role in the expansion.
Freddie Mac Chief Economist Sam Khater said:
The housing market hit some speed bumps this summer, with many prospective homebuyers slowed by not enough moderately-priced homes for sale and higher home prices and mortgage rates. The good news is that the economy and labor market are very healthy right now, and mortgage rates, after surging earlier this year, have stabilized in recent months. These factors should continue to create solid buyer demand, and ultimately an uptick in sales, in most parts of the country in the months ahead.
Check out what Freddie thinks we can expect:
Nothing too scary despite some of the recent indications that the housing market could be shifting. Is Freddie being overly optimistic or is some of the chatter about the housing market cooling being overly negative?
I think Freddie is being overly optimistic on the volume of home sales as the lack of inventory is really hurting the housing market in many areas of the country. I think they are being overly optimistic on US home price growth as I think we will see more historically normal levels of home price growth.
It isn’t just Freddie that is predicting increasing home sales though. Freddie, Fannie, and the Mortgage Bankers Association are all predicting increasing home sales in 2019. Check the chart showing what they think will happen with home sales in 2018 and 2019:
Let’s hope the experts at Fannie, Freddie and the MBA are correct and I am being my normally pessimistic self. The key thing to remember is that every single day, homes are selling both nationally and right here in the Anderson area.
Home prices have increased nicely and the demand from home buyers is very strong in many areas/price ranges. This means that despite the decrease in Pending Home Sales, it is still a good time to sell a home!
Part of the reason it is a good reason it is a good time to sell a home is the lack of competition. But that could be changing…
Could We See More New Homes?
The volume of residential construction loans increased by 1.7% during the second quarter of 2018, marking 21 consecutive quarters of growth. Furthermore, recent stabilization of year-over-year growth rates is an indicator of continued, modest growth for single-family construction.
Tight availability of acquisition, development and construction (AD&C) loans has been a limiting factor for home building growth, but easing credit conditions and a growing loan base have helped expand residential construction activity. According to data from the FDIC and NAHB analysis, the outstanding stock of 1-4 unit residential construction loans made by FDIC-insured institutions rose by $1.3 billion during the second quarter of 2018, raising the total stock of outstanding loans to $77 billion.
There is no doubt that we really need more single family homes for sale. The key thing is that we need more AFFORDABLE homes for sale which is very different than just more homes for sale…
As we see more new homes hit the market, it will increase the competition for anyone selling a home. Which is why NOW may be a better time to list your home than later…
Consumer Confidence at Highest Level Since 2000
From The Conference Board:
The Conference Board Consumer Confidence Index® increased in August, following a modest increase in July. Both the Present Situation Index and the Expectations Index increased this month but consumers’ outlook for the labor market was mixed.
Lynn Franco, Director of Economic Indicators at The Conference Board, said:
Consumer confidence increased to its highest level since October 2000 (Index, 135.8), following a modest improvement in July. Consumers’ assessment of current business and labor market conditions improved further. Expectations, which had declined in June and July, bounced back in August and continue to suggest solid economic growth for the remainder of 2018. Overall, these historically high confidence levels should continue to support healthy consumer spending in the near-term.
Great news other than the mixed feelings about the labor market. Since this is the highest level in 18 years, we could see the economy and housing market improve as consumers buy/spend more.
OCC Looking at Changing the Community Reinvestment Act
The Office of the Comptroller of the Currency today released an Advance Notice of Proposed Rulemaking (ANPR) seeking comment on the best ways to modernize the regulatory framework implementing the Community Reinvestment Act (CRA).
Comptroller of the Currency Joseph M. Otting said:
As a long-time banker, I have seen firsthand the benefit of CRA investment and how it makes communities vibrant. I applaud the effort of community development practitioners and bankers who work together to make an important difference in our nation’s neighborhoods.
I have also seen how limitations in the current CRA regulation can fail to provide consideration to a bank that wants to lend and invest in a community with a need for capital, including many low- and moderate-income areas. Unfortunately, the operation of the current CRA regulation can result in restricted resources. It is time for a national discussion on how we can make the CRA work better.
The CRA is a controversial regulation and has been blamed for forcing banks to make loans that lead to the housing crash. According to a study by Federal Reserve, there is little evidence that the CRA lead to increase in subprime lending and the housing crash.
While it would be great to see more mortgage options for low and middle income home buyers, we do NOT want any changes that could lead to the past false criticisms of the CRA to become true. If we give the banks a way to screw things up, they will since the execs will not be held accountable and the tax payers could be forced to bail the banks out…
Moody’s Pays $15 Million to Settle MBS Ratings Errors
From the SEC:
The Securities and Exchange Commission today announced that Moody’s Investors Service Inc., one of the nation’s largest credit ratings agencies, has agreed to pay a total of $16.25 million in penalties to settle charges involving internal control failures and failing to clearly define and consistently apply credit rating symbols. This marks the first time the SEC has filed an enforcement action involving rating symbol deficiencies.
Moody’s agreed to pay $15 million to settle charges of internal controls failures involving models it used in rating U.S. residential mortgage-backed securities (RMBS) and will retain an independent consultant to assess and improve its internal controls. Moody’s separately agreed to pay $1.25 million and to review its policies, procedures, and internal controls regarding rating symbols. Moody’s did not admit or deny the SEC’s charges.
Interesting how we always hear of companies settling without admitting how they screwed up. Could this be to prevent lawsuits from consumers that were hurt by their negligence?
Fifth District Service Sector Activity Robust in August 2018
From the Federal Reserve Bank of Richmond:
Fifth District service sector activity was robust in August. The revenues index rose from 23 in July to 31 in August, its highest reading since November. While results suggest a slight softening of growth in demand, this measure remained in firmly expansionary territory. Firms were optimistic, expecting growth to continue in the next six months.
Survey respondents reported slowing employment growth, as the index fell from 23 in July to 10 in August, but they expect growth in employment to pick up in the coming months. Service sector firms continued to struggle to find workers with the skills they needed and expect this problem to persist in the near future.
Service sector firms saw smaller increases for both prices paid and prices received in August, as growth of prices paid continued to exceed growth of prices received. Firms expect both prices paid and price received to rise faster in the next six months.
Robust certainly sounds encouraging…
Fifth District Manufacturing Activity Expanded in August 2018
From the Federal Reserve Bank of Richmond:
Fifth District manufacturing activity expanded in August. The composite index rose from 20 in July to 24 in August, as all three components (shipments, new orders, and employment) increased. Respondents remained optimistic in August, expecting growth to continue in the coming months.
Employment and wages continued to rise, yet manufacturing firms continued to struggle to find workers with the skills they needed, as this indicator dropped to −17, its lowest value on record. Firms expect this struggle to continue in the next six months but anticipate sustained employment growth as well.
Respondents reported slower growth in both prices paid and prices received in August as the rise in prices paid continued to outpace growth of prices received. However, firms expect this gap to narrow in coming months, anticipating further slowing of growth in prices paid but accelerated growth of prices received.
More encouraging news for the economy in our region!
4 in 10 Americans Can’t Pay For Their Basic Needs
From CBS News:
Four in 10 Americans are struggling to pay for their basic needs such as groceries or housing, a problem even middle-class households confront, according to a new study from the Urban Institute.
Despite the U.S. economy being near full employment, 39.4 percent of adults between 18 and 64 years old said they experienced at least one type of material hardship in 2017, according to the study, which surveyed more than 7,500 adults about whether they had trouble paying for housing, utilities, food or health care.
Obviously this is not good. How can we expect to have a healthy economy or housing market if this many people are having money problems?
I know the reaction of some is to blame the people having a tough time for their problems. Sadly, bad things happen to good people that are doing everything they can to achieve the American Dream…
Well that is all I have time for today! Be sure to share this post and as always, if you have any questions about real estate in the Anderson SC area, Contact Me!