Discussing construction spending April 2017, ISM manufacturing report, Realtor confidence, job growth and rents, GSE reform and the latest unemployment report…
From the Census Bureau:
Construction spending during April 2017 was 1.4% below the revised March 2017 estimate. The April figure is 6.7% above the April 2016 estimate. During the first 4 months of this year, construction spending was 5.8% higher than the same period in 2016.
Spending on private construction was 0.7% below the revised March 2017 estimate. Residential construction was 0.7% below the revised March 2017 estimate BUT 16% higher than the April 2016 estimate. Nonresidential construction was 0.6% below the revised March estimate.
In April, the estimated seasonally adjusted annual rate of public construction spending was 3.7% below the revised March estimate. Educational construction was 2.0% below the revised March estimate. Highway construction was 3.7% below the revised March estimate.
This is weaker than some had forecast but total construction is higher than the 2016 numbers. Also, private residential construction in April 2017 was much higher than the April 2016 estimate.
Economic activity in the manufacturing sector expanded in May, and the overall economy grew for the 96th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.
Excellent news. Check out the chart with more details:
The REALTORS® Buyer Traffic Index and the REALTORS® Confidence Index remained above 50 in April 2017, indicating that more respondents reported “strong” than “weak” conditions. Both indices were higher than their levels one year ago and in the previous month, except the condominium index which was at the same level as the previous month.
The REALTORS® Seller Traffic Index was unchanged from its level one year ago, but it increased from its level in the previous month. It has remained below 50 since March 2008, indicating that seller activity is still “weak,” based on the April 2017 REALTORS® Confidence Index Survey Report, a monthly survey of REALTORS® about their sales activity and local market conditions
First-time homebuyers accounted for 34 percent of sales. Distressed properties accounted for five percent of sales, purchases for investment purposes made up 15 percent of sales, and cash sales accounted for 21 percent of sales.
Half of the properties that sold in April 2017 were on the market for 29 days or less compared to 39 days in April 2016. The April median days on market measure is a the lowest since they started this index back in 2011.
I am much more confident that I was after the housing market crashed but I am realistic about the difficulties we face today. You know stuff like the tight inventory, political and economic uncertainty, the possibility of a terrorist attack, etc etc.
All these things make me am glad I have a home to get away from the mad mad world…
The apartment market has arguably been the best-performing asset class over the past few years. Apartment rents have climbed 5 percent to 10 percent in some markets, and cap rates are at their lowest with investors pouring billions of dollars into these properties.
Both domestic and global investors have been drawn to gateway markets more so than others, because they are deemed safer markets, but plenty of other cities have grown at similar or faster rates as these larger metropolitan areas. So, what should investors look for?
While it is easy to look at rent growth retroactively and say which markets would have been good investments, it is difficult to look forward to find the best investment opportunities with accurate foresight. The recent success of the apartment market, however, has shown that two key variables drive apartment demand — job growth and tech-related job growth — which implies that these variables are a compelling gauge of future apartment performance.
The job-growth versus rent-price numbers beg the question: Is job growth an accurate predictor for rent growth? The answer is yes, but with some caveats.
Excellent article. We need a strong economy in order for the housing market to be healthy. I guess we also need good job growth to see good rent growth.
In a departure from a trend that has persisted for well over a year, the Trepp CMBS Delinquency Rate fell modestly in May. The delinquency rate for US commercial real estate loans in CMBS is now 5.47%, a decrease of five basis points from April. The rate is now 112 basis points higher than the year-ago level, and 24 basis points higher year-to-date. 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 had moved up in 12 of the last 14 months before the May reading.
Even though the overall delinquency rate decreased in May, readings for four of the five major property types moved higher. Only a strong showing from office loans pulled the delinquency rate lower this month.
While the headline sounds good, the fact that the delinquency rates for 4 out of 5 property types increased is not good. Not good at all…
Paulson & Co. and Blackstone Group LP are among investors backing a proposal that Fannie Mae and Freddie Mac be recapitalized and released from U.S. control without legislation. Taxpayers would receive as much as $100 billion, according to the plan, which could also deliver a windfall for shareholders.
Paulson, Blackstone and the other investors are the latest voices in the renewed debate over the fates of Fannie and Freddie, which have remained critical backstops for the U.S. mortgage market while under government control. Treasury Secretary Steven Mnuchin has said dealing with the companies will be a Trump administration focus in the second half of this year.
The Moelis plan envisions building between $155 billion and $180 billion in capital, through allowing the companies to retain earnings, letting current shareholders contribute new money and raising more through the capital markets. It would also have the government substantially reduce the remaining balance of its outstanding preferred shares.
A must read. The issue of what to do with housing finance has drug on for so long and really truly needs to be addressed.
There have been many different proposals but if we must rely on Congress, I doubt we will ever see anything meaningful or good happen.
Total nonfarm payroll employment increased by 138,000 in May, and the unemployment rate was little changed at 4.3 percent.
The unemployment rate, at 4.3 percent, and the number of unemployed persons, at 6.9 million, changed little in May. Since January, the unemployment rate has declined by 0.5 percentage point, and the number of unemployed has decreased by 774,000.
The labor force participation rate declined by 0.2 percentage point to 62.7 percent in May but has shown no clear trend over the past 12 months.
In May, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.22. Over the year, average hourly earnings have risen by 63 cents, or 2.5 percent.
This is weak but the good news is that unemployment fell to the lowest level since 2001 and the U-6 fell to the lowest since 2007. So while weak, I would still call this a win.
The U-6 counts unemployed workers in the labor force and those that are too discouraged to look for a job and part-time workers who would prefer to work full time.
To me, the U-6 is the most important number to watch. Check out the chart for the U-6:
We need stronger wage growth that outpaces inflation and the increases in home prices. While this report was weak, it probably won’t stop the Fed from raising their benchmark rate.
That is it for today!