Discussing the latest Existing Home Sales report, housing performing below it’s potential, Whole Foods and home values and much more…
The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), was flat in June following a 0.2 percent gain in May, and a 0.3 percent gain in April. This marks a slowing from the average 0.5 percent first quarter monthly gain. Compared to a year earlier, the CAB is up 4.3 percent year-over-year, a modest yet continued slowing. All data is measured on a three-month moving average (3MMA).
While flat or slowing, the CAB is up year-over-year so we should remain optimistic. The Chemical Activity Barometer is a forward looking economic indicator derived from a composite index of chemical industry activity.
The market for existing-home sales is underperforming its potential by 3.8% according to the latest First American’s Potential Home Sales Model. Mark Fleming, chief economist at First American said:
As more and more Millennials marry and have children, among the strongest determinants for the desire to be a homeowner, demand for housing will remain robust. However, the housing market faces a dilemma that is restricting the inventory of homes for sale.
As rates rise and the cost to finance a mortgage increases, existing homeowners are prisoners in their own homes. In addition, the fear of being unable to find a home to purchase hinders homeowners’ decision to sell.
The low inventory of homes for sale is preventing the housing market from reaching its potential and pressuring prices higher. Increasing shortages of homes for sale is a growing problem for potential home buyers, especially potential first-time home buyers today, as it causes affordability to decline.
There is no doubt that the low level of homes for sale is hurting the housing market in many areas of the US. I will discuss the latest Existing Home Sales numbers from NAR later in this post.
The typical home near either Whole Foods or Trader Joe’s both costs more and appreciates faster than the median U.S. home. Homes located near a Trader Joe’s or Whole Foods had a median value of $406,600 and $376,200, respectively, at the end of 2014, while the median U.S. home was worth less than $180,000.
Between 1997 and 2014, homes near a Trader Joe’s or Whole Foods appreciated an average of 148 percent and 140 percent, respectively. The typical U.S. home appreciated by 71 percent over the same period.
Interesting stuff and something to consider if a local government is considering giving some kind of tax cut to Whole Foods or Trader Joe’s. The city may lose money in taxes for the store but wind up getting more because of higher property taxes on the surrounding homes.
And if you were considering 2 homes, it appears the one that is closer to a Whole Food or a Trader Joe’s will increase in value faster. Of course, there are never any guarantees when it comes to home prices…
The Trump Treasury Department’s Dodd-Frank Act report spends more pages on the CFPB (including mortgage regulation) than on any other issue. There’s a whole bunch of blog posts that one could write about the Treasury report, but I want to limit myself here to one item that has long been on the GOP/industry complaint list about the CFPB: that its power to proscribe “abusive” acts and practices is a problem because the term “abusive” is novel and undefined and that this creates uncertainty that is chilling economic growth. Total hooey.
A must read for sure though I am sure some will skip it since it goes against their brain washing…
In what I am sure will prove to be a controversial study, Seattle raising the minimum wage law did not hurt the number of jobs, according to a new report by University of California, Berkeley economists. The report, which analyzes employment data before and after the law went into effect, finds no evidence of job loss in the city’s restaurant industry, even as pay reached $13 for workers in large companies.
I always like to see new or different things tried somewhere else so if they don’t work, we haven’t lost anything. While raising the minimum wage is great for the employees, it probably isn’t too good for the employers.
And the higher wages are going to be paid for by consumers after the business is forced to raise their prices.
Existing-Home Sales Increase and Median Price Hits New High
US existing-home sales increased in May after a scary decrease in April. Total existing-home sales climbed 1.1% in May from the level in April. Homes sales in May 2017 were 2.7% higher than May 2016.
The median existing-home price for all housing types in May was up 5.8% from May 2016. This is the 63rd straight month of year-over-year gains.
The low number of homes for sale caused the the median sales price to hit a new high. Also the lack of homes for sale caused the median days a home is on the market to decrease to a new low.
Properties typically stayed on the market for 27 days in May, which is down from 29 days in April and 32 days a year ago; this is the shortest timeframe since NAR began tracking in May 2011. Fifty-five percent of homes sold in May were on the market for less than a month.
Total housing inventory at the end of May rose 2.1% but is still 8.4% lower than a year ago. Inventory has fallen year-over-year for 24 consecutive months. Currently there is 4.2 months supply of inventory.
Remember that these statistics are for the entire US. That being said, you will see some of the same conditions in the Anderson SC area: rising prices, homes selling quickly and limited inventory (in some price ranges/areas).
The proposed Financial Choice Act recently passed by the House contains many positive reforms that are likely to help community banks and nondepository mortgage lenders. Yet one specific provision poses a major risk to small lenders. Ironically, legislation that supporters say is meant to hold Wall Street accountable could ultimately lead to a market in which smaller lenders cannot compete.
In Title V, the bill contains a provision entitled “Safe Harbor for Certain Loans Held on Portfolio.” This particular section would essentially eliminate the regulatory requirement that lenders evaluate and document borrowers’ “ability to repay” in cases where a bank holds the loan on its books. At first blush, this makes complete sense. If a bank is continuing to hold the loan, then it is assuming all the risk — and the lender would only do that if it was confident in the borrower’s ability to repay the loan. Yet a deeper understanding of the markets and the rules suggests this proposal could threaten the viability of a highly competitive banking system that has an ample number of both community and large banking institutions.
We really do not want the only mortgage lenders to be the big banks. Look at their history and behavior and it becomes obvious that consumers need more choices…
Design services at architecture firms continue to project a healthy disposition on the construction industry as the Architecture Billings Index (ABI) recorded the fourth consecutive month of growth. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending.
Kermit Baker, AIA Chief Economist, said:
The fact that the data surrounding both new project inquiries and design contracts have remained positive every month this year, while reaching their highest scores for the year, is a good indication that both the architecture and construction sectors will remain healthy for the foreseeable future. This growth hasn’t been an overnight escalation, but rather a steady, stable increase.
Very nice and a good sign for the coming months!
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