Discussing the GSE’s foreclosure prevention efforts, new home sales and some of the problems faced by home builders today, Freddie’s Outlook for the Economy and Housing and much more…
The FHFA released their Foreclosure Prevention Report for Q1 2017 and here are some of the highlights:
The GSEs completed 49,104 foreclosure prevention actions in the first quarter of 2017, bringing the total to 3,882,464 since the start of conservatorships in September 2008. Of these actions, 3,211,462 have helped troubled homeowners stay in their homes including 2,054,248 permanent loan modifications.
29% of loan modifications in Q1 2017 reduced borrowers’ monthly payments by over 30%
The serious delinquency rate decreased to 1% in Q1 2017.
REO inventory decreased 8% in Q1 2017.
The number of foreclosures in Q1 2017 increased 5% compared to Q1 2016 but foreclosure starts decreased 4%.
Check out some of the charts:
Freddie reported this week that their single family serious delinquency rate decreased from .09% in April to 0.87% in May. We are still headed in the right direction and hopefully nothing will stop the progress!
New Home Sales
Sales of new single-family houses in May 2017 were at a seasonally adjusted annual rate of 610,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.9% above the revised April rate of 593,000 and is 8.9% above the May 2016 estimate.
Nationally, the median sales price of new houses sold in May 2017 was $345,800. Remember this is talking about the entire US and you can find new homes in our area at much lower prices.
For Sale Inventory and Months’ Supply
The seasonally-adjusted estimate of new houses for sale at the end of May was 268,000. This represents a supply of 5.3 months at the current sales rate. Remember 6 months is a balanced market and less than 6 months is considered a seller’s market.
While this is a good report, compare where we are to the distant past. Yes we are better than we were but we still are not where we should be.
But there are some pretty good reasons for the low level of new home construction!
Recently at the National Association of Real Estate Editors 51st Annual Conference, CoreLogic’s Chief Economist Frank Nothaft discussed the 4 ‘L’s of New Home Construction: Lots, Labor, Lumber, and Lending.
The new home construction industry does not escape the economic rule of supply and demand. The 4 ‘L’s of new home building are all battling a supply problem. This means that home builders are forced to pay more. Let’s look a little deeper at this issue:
Lots – While not as big an issue in our area, it is causing problems in some areas of the US. In some places, there is a lack of property at an low price. This causes homes to be built even farther from metropolitan areas to help keep expenses lower. But this means that homes are located in areas in areas the may be too far away from where people work.
Labor – After the housing market imploded, many construction workers had to take jobs outside of their field of work. Despite the real estate market recovering, construction workers haven’t come back. You have heard me repeatedly mention that home builders are having a hard time finding qualified workers.
Lumber – How much it costs to build a house can be directly linked with the cost of the lot and the building supplies. Lumber keeps getting more expensive due to policies constraining the importation of Canadian lumber.
Check out the chart below that shows the increase in cost of 1,000 board feet of framing lumber:
Year-over-year, lumber costs are up 13%. And you thought mortgage rates were the only thing that home buyers need to consider…
Lending – During the Great Recession, many of the banks that home builder used for financing their projects closed. Also, the tougher lending standards of today have made it more expensive and difficult for builders to find financing.
These increased costs have made home builders focus on properties with larger profits. Which are big luxury homes. However, the real demand today is for affordable homes. So until home builders see better conditions with these 4 L’s, we can expect to see fewer affordable homes and more McMansions…
Housing Remains a Bright Spot for the Economy
Freddie Mac released its monthly Outlook for June this week They said that despite some recent bumps, the U.S. housing market remains on track to exceed last year’s best-in-a-decade levels for housing starts and home sales.
Sean Becketti, Chief Economist, Freddie Mac said:
After a strong March, the housing market, from housing starts to new and existing home sales, took a hit in April. The recent declines are likely to reverse as low mortgage interest rates and solid job gains boost the housing market. We expect housing starts and home sales to firm in the coming months and for 2017 to exceed 2016’s best-in-a-decade levels.
They pointed out that home ownership is low despite the attractive mortgage rates:
Check out the details and their predictions:
As any market veteran can tell you, those on the sell-side are the second-to-last to concede to a slowdown in economic activity. It’s unseemly to make negative calls when a firm’s main objective is keeping its clients fully invested in risky assets; the two aims naturally conflict.
Central bank policy makers’ expectations for future growth indicate the current economic recovery will unseat the record holder, the expansion that finally flamed out in 2001 after enjoying a life of exactly 10 years. But then it is the Fed that’s the very last to capitulate, to say nothing of forecast, a slowdown in economic activity.
A must read for sure!
Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) moved down to –0.26 in May from +0.57 in April. Three of the four broad categories of indicators that make up the index decreased from April, and three of the four categories made negative contributions to the index in May. The index’s three-month moving average, CFNAI-MA3, declined to +0.04 in May from +0.21 in April.
Ouch! Will the Fed ignore stuff like this and charge ahead with raising their rate?
Global Uncertainty and Political Polarization lead the list of current and emerging issues that are expected to have the most significant impact on real estate in 2017 and 2018, according to The Counselors of Real Estate®, which today released its annual list of the Top Ten Issues Affecting Real Estate.
The other issues earning a position on this year’s list are Technology, Generational Disruptions, Retail Disruptions, Infrastructure Investment, Housing: The Big Mismatch, Lost Decades of the Middle Class, Real Estate’s Emerging Role in Health Care, Immigration and Climate Change.
You will recognize many of these as subjects that I talk about on a regular basis. This another must read so be sure to check it out!
Well that’s it for today! Be sure to hit those share buttons below to show the world just how awesome you are!