Discussing economic confidence, open construction jobs, appraised values versus home owner expectations, mortgage rates and much more!
Americans’ Confidence in the Economy Unmoved
Americans remained slightly optimistic about the state of the economy last week, with Gallup’s U.S. Economic Confidence Index averaging +3 for the week ending July 9. While this is up three points from the previous week of June 26-July 2, last week’s score is on par with the index’s performance throughout May and June.
Taking a broader view, Americans remain far more confident in the economy than they were throughout most of 2008-2016.
Considering the economy is much better than it was during 2008-2016, shouldn’t Americans be more confident in the economy?
Open Construction Jobs Fall in May
From Eye on Housing / NAHB:
The count of unfilled jobs in the construction sector declined in May, falling to level below that recorded a year ago. According to the BLS Job Openings and Labor Turnover Survey (JOLTS) and NAHB analysis, the number of open construction sector jobs (on a seasonally adjusted basis) stood at 154,000 in May. The cycle high was 238,000, set in July of last year.
Overall, the labor market for construction workers remains tight as it continues to expand. Home builders and remodelers added 115,600 job over the last 12 months, and industry employment has increased by almost 713,000 since the low point after the Great Recession. As housing starts continue to increase, more workers will be needed in the residential construction sector.
Considering the high demand and lack of available homes for sale in many areas of the US, you would think there would be more open construction jobs…
Appraised Values Slightly Lower Than Homeowner Expectations
From Quicken Loans:
Owners think their homes are worth an average of 1.70 percent more than appraisers do, according to Quicken Loans’ National Home Price Perception Index (HPPI). This marks the first time in seven months that the gap between the two opinions of value narrowed.
Despite differing opinions in appraisals, home values continue to rise across the country. Quicken Loans’ National Home Value Index (HVI) showed appraisals rose an average of 1.25 percent from May to June and increased 5.35 percent year-over-year.
Not a surprise that home owners overestimate the value of their homes. The key thing in the report is that US home values rose 5.35% YoY.
The Rise of Poverty in Suburban and Outlying Areas
Much of the growth in high-poverty neighborhoods has been in Suburban and Outlying areas. According to the report, from 2000 to 2015, the number of people living below the federal poverty line rose by 41 percent, from about 33.8 million to 47.7 million.
Additionally, the number of high-poverty neighborhoods (census tracts where the poverty rate is 20 percent or more) rose by 59 percent, and the poor population living in these areas increased by 76 percent to 25.4 million.
As a result, 54 percent of the nation’s poor now live in high-poverty neighborhoods, up from 43 percent in 2000.
Is this a sign that many can no longer afford to live in the city? Wouldn’t this mean that people who can hardly afford it, have higher commuting costs?
Cohn is Trump’s Top Candidate to Replace Yellen at Fed
President Donald Trump is increasingly unlikely to nominate Federal Reserve Chair Janet Yellen next year for a second term, four people close to the process said.
National Economic Council Director Gary Cohn is now the leading candidate to succeed Yellen as the world’s most important central banker, these people said. Yellen begins two days of congressional testimony on Wednesday, and her own future in the job may come up in questioning.
If Trump taps Cohn for the Fed, it could enrage economic nationalists in the White House and some staunchly conservative Republicans on Capitol Hill who don’t like the former Goldman Sachs president’s background as a Democrat who generally favors free trade.
Putting the fox in charge of the hen house…
Seems like I remember Trump being critical of Hilary for being chummy with Wall Street. Not that I like Hilary…
Mortgage Applications Decrease and Rates Increase
From the MBA:
Mortgage applications decreased 7.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 7, 2017. This week’s results include an adjustment for the Fourth of July holiday.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) increased to 4.22% from 4.20%, with points increasing to 0.40 from 0.31 (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 4.19% from 4.10%, with points increasing to 0.3 from 0.23 (including the origination fee) for 80 percent LTV loans.
The average contract interest rate for 15-year fixed-rate mortgages increased to 3.50% from 3.43%, with points increasing to 0.45 from 0.32 (including the origination fee) for 80 percent LTV loans.
Ouch! Let’s see what Freddie reported…
Mortgage Rates Jump Again
From Freddie Mac:
- 30-year fixed-rate mortgages averaged 4.03% with an average 0.5 point
- This is up from last week when it averaged 3.96%
- Last year at this time, 30-year fixed-rate mortgages averaged 3.42%
- 15-year fixed-rate mortgages averaged 3.29% with an average 0.5 point
- This is up from last week when it averaged 3.22%
- Last year ago at this time, 15-year fixed-rate mortgages averaged 2.72%
Check out the chart:
84 Percent of Americans See Home Ownership as Good Investment
NAR’s twelfth Housing Pulse Survey shows a vast majority of Americans believe that buying a home is a solid financial decision, and most believe that homeownership helps create safe, secure, and stable environments.
Americans overwhelmingly believe that buying a home is a good financial decision; 84 percent hold that view. Nationally, 44 percent categorize the lack of available housing that is affordable as a very big or fairly big problem.
Check out the infographic:
Needless to say, I am part of the 84%. And I am becoming very concerned about affordable housing. Sadly, I do not think our elected officials care if some people are having a tough time…
Highlights from June 2017 Survey of Consumer Expectations
From the NY Fed:
Results from the June 2017 Survey of Consumer Expectations show that inflation expectations fell slightly at the one-year horizon but increased noticeably at the three-year horizon, reversing to a large extent the 0.4 percentage point drop in the prior month. Consumers’ outlook of the labor market and financial situation generally improved. Spending growth expectations rose sharply, while expected credit access and expected ability to make minimum debt payments improved. Median expected change in gasoline prices dropped to its lowest level since January 2016.
Median one-year ahead home price change expectations remained essentially flat at 3.5%, well above the series average for 2015 (3.2%) and 2016 (3.1%).
Do you think that home prices will rise 3.5% in the coming year? And do you also think that we are going to finally see mortgage rates increase?
Because if home prices and mortgage rates both increase, it will seriously hurt some home buyers. They may find that there are no homes in their area that they can afford comfortably.
Or at all…
Mall Vacancy Increases in Q2 2017
The vacancy rate for U.S. regional malls was 8.1 percent in second quarter 2017, up from 7.9 percent in first quarter, according to Reis. The vacancy rate was up from 7.9 percent in second quarter 2016. The current rate, however, is still lower than the cycle peak of 9.4 percent in third quarter 2011.
Not really surprising as we have all heard the many stories about the impending demise of brick and mortar retail. This year holiday spending should prove to be interesting and tell us what the future holds for malls and retails stores…
QE Unwind May Be More Disruptive Than You Think
From Jamie Dimon in Bloomberg:
We’ve never have had QE like this before, we’ve never had unwinding like this before. Obviously that should say something to you about the risk that might mean, because we’ve never lived with it before.
When that happens of size or substance, it could be a little more disruptive than people think. We act like we know exactly how it’s going to happen and we don’t.
That is a very different world you have to operate in, that’s a big change in the tide. All the main buyers of sovereign debt over the last 10 years — financial institutions, central banks, foreign exchange managers — will become net sellers now.
While I am not a fan of Dimon, he is a pretty smart guy. And we really don’t know what is going to happen as the Fed starts raising their benchmark rate and reducing their holdings.
Royal Bank of Scotland Reaches Settlement With FHFA for RMBS Hanky Panky
The Royal Bank of Scotland Group has reached a settlement with the Federal Housing Finance Agency (“FHFA”) as conservator of Fannie Mae and Freddie Mac, to resolve claims by FHFA in relation to RBS’s issuance and underwriting of approximately $32 billion of residential mortgage-backed securities (“RMBS”) in the US. As part of the settlement, FHFA’s outstanding litigation against RBS will be withdrawn.
Under the settlement, RBS will pay FHFA $5.5 billion, of which $754 million will be reimbursed to RBS under indemnification agreements with third parties.
Just the cost of being evil….
I mean doing business.
Weekly Rail Traffic for the Week Ending July 8, 2017
For this week, total U.S. weekly rail traffic was 453,080 carloads and intermodal units, up 2.4 percent compared with the same week last year.
Total carloads for the week ending July 8 were 229,501 carloads, up 1.1 percent compared with the same week in 2016, while U.S. weekly intermodal volume was 223,579 containers and trailers, up 3.7 percent compared to 2016.
Good news as the continuing YoY increases indicate a strengthening economy.
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