Discussing the Conference Board Consumer Confidence Index, big banks pass their stress testing, the housing market continues to surge, affordability and much more…
The Conference Board Consumer Confidence Index®, which had decreased in May, increased moderately in June. Consumers’ appraisal of current conditions improved in June. Consumers, however, were less optimistic about the short-term outlook in June. The percentage of consumers expecting business conditions to improve over the next six months decreased. Consumers’ outlook for the labor market remained mixed.
Lynn Franco, Director of Economic Indicators at The Conference Board said:
Consumer confidence increased moderately in June following a small decline in May. Consumers’ assessment of current conditions improved to a nearly 16-year high. Expectations for the short-term have eased somewhat, but are still upbeat. Overall, consumers anticipate the economy will continue expanding in the months ahead, but they do not foresee the pace of growth accelerating.
While it is not strong, at least it did increase!
On Friday, the Fed gave a passing grade to all 34 banks in the first round of its stress testing for large banks. This first round, referred to as the “DFAST” portion of stress testing, gave the Fed’s estimates of how large bank earnings, loan losses and capital would perform under two stress scenarios. The focus is mainly on the Severely Adverse scenario, as that scenario puts the greatest stresses on banks’ capital and capital ratios.
Good news but can we trust these stress tests to prevent another bank bailout? More importantly, can we trust our elected officials and the Fed to not bail out the banks again?
Some highlights from the National Housing Market Index for Q1 2017:
Sales transactions increased 13.0 percent in the first quarter compared to a year ago marking the 10th consecutive quarter of such increases.
Looser lending, lower mortgage rates, and a decline of international buyers has tilted the home purchase market over the last years from cash sales towards institutional financed sales.
The increase in cash sales has caused its share of the purchase transaction market to stabilize at approximately one third of the market.
Good to see the increase in sales and more traditional sales to people using mortgages increasing.
Real estate is blistering hot. It is fully disconnected from incomes or any sane measure of valuation. The only thing beer belly house lusters can say is that “well comps are selling for this so therefore the market has spoken!” Cult chasers were also buying tulip bulbs, beanie babies, and itching to get a piece of Bernie Madoff’s investment sauce. Now the hot thing of the day is buying a crap shack at all cost even if it means you are living on rice and beans to pay the mortgage.
Your home is NOT an ATM. You do NOT want to be House Poor. Those that cannot remember the past are doomed to repeat it…
Highlights from the First American Real House Price Index for April 2017:
- Real house prices decreased 1.6% between March and April.
- Real house prices increased by 11.0% YoY
- Consumer house-buying power increased 0.4% between March and April BUT fell 4.5% YoY
- Real house prices are 33.6% below their housing-boom peak in July 2006 and 10.8% below the level of prices in January 2000
- Unadjusted house prices increased by 5.7% in April on a year-over-year basis and are 2.6% above the housing boom peak in 2007
Mark Fleming, chief economist at First American said:
Despite the monetary tightening policies of the Federal Reserve, a dip in the average rate for a 30-year, fixed-rate mortgage and wage gains increased consumer house-buying power sufficiently to offset the gain in unadjusted house prices.
The decline in real, purchasing-power adjusted house prices between March and April was the largest month-over-month decline since July 2016. While this is welcome news for home buyers, the number of homes listed for sale is not meeting consumer demand and markets are getting tighter.
As a result, affordability declined 11 percent on a year-over-year basis. That’s a bigger drop in affordability than the 5.7 percent caused by unadjusted house-price appreciation alone and reflects the impact of rising interest rates and tightening supply.
You should notice that affordability decreased on compared to last year. Which means if you could have bought a home last year, it would have been more affordable according to their data…
ATTOM Data Solutions just released their Q2 2017 U.S. Home Affordability Index and it shows that the U.S. median home price in the second quarter of 2017 was at the least affordable level since Q3 2008.
The report also shows that 45% of U.S. counties were less affordable than their historic affordability norms in the second quarter of 2017. This is the highest share of housing markets that are less affordable than their historic norms since Q4 2009.
The thing to remember is that “affordability” reports don’t always reflect what is possible for everyone. You need to determine what is affordable for you…
Activity in the service sector improved at a more moderate pace in June. The overall service sector revenues index fell to 19 in June from 34 in May. Still, any reading above 0 indicates that more firms reported an increase in revenues than reported a decrease. The revenues index for retail firms changed little from its high level in May, while the index for non-retail services firms declined from 31 in May to 13 in June.
Labor market readings from services firms were somewhat mixed. The index for employment in the overall service sector declined to 13 in June, although the average wage index rose to 31 in June from 24 in May. The index for expected demand during the next six months inched up from 40 in May to 41 in June.
Survey results suggest that both current and expected price growth in the overall service sector moderated somewhat from May to June.
While not great, at least it is good instead of bad.
Reports from Fifth District manufacturers improved in June. The composite manufacturing index rose from 1 in May to 7 in June, as the indexes for shipments and new orders increased. The employment index was relatively flat. Most firms continued to report steady or higher wages; although the index for wages did fall in June, it remained above 0. Meanwhile, more firms reported a decline in the average workweek than reported an increase.
Looking six months ahead, manufacturing executives were more optimistic in June than in May, although even the May readings were very positive. Among the indexes for expected activity, only two fell: the capital expenditures index declined from 34 in May to 26 in June and the expected shipments metric inched down from 39 to 38.
Survey responses pointed toward more moderate growth in both prices paid and prices received. Expected growth in prices received also moderated, although expected growth in prices paid picked up somewhat.
Will a so-called “inclusionary zoning” bill making its way through the South Carolina Senate help make housing more affordable in the Lowcountry?
The bill’s sponsor says it will, but at least one researcher says otherwise. It would empower cities and towns to force developers to set aside a certain percent of land for affordable housing. The bill is with the sub-committee of the judiciary committee, and Kimpson said he will be working over the summer to drum up support to move it to the floor of the legislature.
Most of the effort to force this crap down our throats is coming from the lower part of the state. But I am sure if this bill gets passed we will see this stuff start working it’s way into the Upstate.
While there is a dire need for affordable housing, I just don’t see this working out for the best for home builders, home buyers, renters, consumers etc.
More regulations and restrictions are not the cure for every problem…
Mortgage applications decreased 6.2% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 23, 2017.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.13%, with points decreasing to 0.32 from 0.34 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) increased to 4.09% from 4.08%, with points decreasing to 0.20 from 0.30 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.39% from 3.40%, with points decreasing to 0.33 from 0.38 (including the origination fee) for 80 percent LTV loans.
Remember, these are the average rates. Let’s see what Freddie had to say…
Freddie Mac: 30- Year Mortgage Hits New Low
- 30-year fixed-rate mortgages averaged 3.88% with an average 0.5 point
- This is down from last week when it averaged 3.90%
- Last year at this time, 30-year fixed-rate mortgages averaged 3.48%
- 15-year fixed-rate mortgages averaged 3.17% with an average 0.5 point
- This is the same as last week
- A year ago at this time, 30-year fixed-rate mortgages averaged 2.78%
Sean Becketti, chief economist, Freddie Mac said:
The 30-year mortgage rate fell 2 basis points to 3.88 percent this week. However, the majority of our survey was conducted prior to Tuesday’s sell-off in the bond market which drove Treasury yields higher. Mortgage rates may increase in next week’s survey if Treasury yields continue to rise.
Despite the tight inventory, it could be a good time for many to buy a home because of the low mortgage rates. Buyers just need to be ready by having a Pre-Approval Letter before they find a home they like.
The time it takes you to get a Pre-Approval Letter could be long enough for another buyer to snatch up the home you like…
Pending Home Sales Decrease for Third Straight Month
The ongoing supply shortages that are propping up home prices in many metro areas caused pending home sales in May to slump for the third consecutive month, according to the National Association of Realtors®. None of the major regions saw an increase in contract activity last month.
The Pending Home Sales Index decreased 0.8 percent in May. The index is now 1.7 percent below a year ago, which marks the second straight annual decline and the most recent since November and December of last year.
Lawrence Yun, NAR chief economist, said:
It’s clear the critically low inventory levels in much of the country somewhat sidetracked the housing market this spring. Monthly closings have recently been oscillating back and forth, but this third consecutive decline in contract activity implies a possible topping off in sales. Buyer interest is solid, but there is just not enough supply to satisfy demand. Prospective buyers are being sidelined by both limited choices and home prices that are climbing too fast.
There is no doubt that we need more homes for sale in many areas of the US. This is very true for some price ranges/areas around the Upstate…
Fed Chair Janet Yellen said Tuesday that banks are “very much stronger” and another financial crisis is unlikely anytime soon.
Speaking during an exchange in London with British Academy President Lord Nicholas Stern, the central bank chief said the Fed has learned lessons from the financial crisis and has brought stability to the banking system.
I hope we don’t have to test her opinion on how strong the banks are and that another financial crisis is unlikely. I prefer writing about good news instead of bad…
Falling Inventory Has Led To Hurried Homebuying
Trulia just released the findings from the Trulia® Inventory and Price Watch. This quarterly look at the supply of starter, trade-up and premium homes on the market nationally and in the 100 largest U.S. metros found that falling inventory is strongly correlated with how long homes stay on the market.
They said that the inventory of homes for sale has declined 8.9% nationally YoY. Inventory has now fallen for a record nine consecutive quarters. Inventory today is 20% lower than it was five years ago with the current number of starter and trade-up homes on the market decreasing 15.6% and 13.1% respectively, during the past year. Meanwhile inventory of premium homes has fallen by just 3.9%.
Falling inventory has also pushed affordability of homes across all segments to new post-recession lows. A typical starter-homebuyer would need to dedicate 39.1% of their monthly income to buy a starter home – a 3.1-point increase from last year – while trade-up homebuyers need 26.0% more than this time last year. Premium homebuyers fared the best as they need to shell out 14.3% more of their income.
Despite the demand for starter homes, we are NOT seeing more being built in the numbers you would think we should. Or could. While this is a national report, many of the trends are mirrored by what is happening in our area.
Starter or affordable homes that are move in ready and in a decent location are in high demand in the Anderson area. If you are thinking about selling a home in the Anderson SC are, please contact me!
How can we reverse growing wealth inequality? Well, for starters, we need to know how unequal we’ve become, and that’s getting increasingly difficult. The super rich worldwide are hiding more and more of their wealth from taxation and accountability.
New research suggests that the top 0.01 percent — households with over $40 million in wealth — are manipulating trusts, offshore bank accounts, and various other opaque mechanisms that mask ownership to evade 25 to 30 percent of what they owe in personal income and wealth taxes.
I don’t like paying taxes anymore than the next person. But I just think everyone should be paying their fair share. I am not talking about taxing the wealthy at a higher rate but just the same exact rate everyone else is paying.
But what is a “fair” share? And how can we stop people from hiding money?
If you borrowed to buy your home, chances are TheNumber knows a good deal about you.
The New York-based startup sucks in data from marketing firms, public loan filings, courthouses and dozens of other sources, and sells it to mortgage bond and loan traders. The vivid detail the company turns up — the types of stores borrowers tend to shop at and whether they rent out their homes on Airbnb Inc., for example — may unsettle privacy advocates, but it’s a boon for investors trying to figure out how likely homeowners are to pay their obligations.
But giving so much mortgage information to investors so quickly is raising fresh concerns among consumer-rights watchdogs that borrowers could suffer a loss of privacy, or even discrimination.
Well that sounds pretty creepy!
Well that is all I have time for today. You can expect less posting from me over the next few days as I plan on celebrating the 4th in style this year! Fireworks, cooking out and spending time with family and friends!
God Bless America and Happy 4th of July to you!