Discussing why homes don’t feel affordable, a tiny house victory, unemployment claims, remodeling activity, mortgage delinquencies and foreclosures plus more…
If Housing Is So Affordable, Why Doesn’t It Feel That Way?
Interesting stuff from Sean Becketti, Chief Economist, at Freddie Mac:
Thanks to very low mortgage rates, monthly mortgage payments are affordable for the average household despite currently-high house prices. Nevertheless, hurdles to homeownership arise from the difficulty of finding a house. The supply of homes for sale is very tight, especially starter homes. And underwriting requirements are more rigorous than they were in the past. Many potential first-time borrowers are stymied by variable employment and income histories and the challenge of accumulating a down payment while simultaneously paying down their student loans. In fact, a high level of household debt, particularly student debt, poses perhaps the largest obstacle to first-time homebuyers.
They go on to talk more about why housing feels expensive:
House prices nationally now stand higher than their previous peak at the end of the housing boom and have risen an average of just over six percent per year since the house price trough in 2012. Whereas, per capita income increased only 2.4 percent on average per year.
Hmmm… who has been talking about the need for income growth for years?
The contrast between affordable and unaffordable areas is even more pronounced at the local level.
Real estate is always local. While I share many national statistics, surveys, stories etc… the truth is you MUST always rely upon the guidance of a local experienced Realtor when buying or selling.
You may be able to find answers or information online but there is a HUGE difference between having info and having experience and knowledge.
The limited supply of available homes increases the perception that homes are unaffordable. This imbalance between the demand for and supply of homes boosts house prices further and can transform the perception of unaffordability into actual unaffordability.
Yes, when homes are selling quickly it can cause some to act in ways that are not… logical or emotional. Again, this is why having a Realtor is a must.
Many first-time homebuyers are surprised by the ongoing costs of ownership. Property taxes and homeowner’s insurance represent significant costs.
It amazes me how many people do not consider the complete and total cost of owning a home. Taxes, insurance, maintenance, improvements all add up. Remember, failing to plan is planning to fail…
Railroad Traffic Continues to Increase
Total U.S. weekly rail traffic was 540,005 carloads and intermodal units, up 3.8 percent compared with the same week last year.
Total carloads for the week ending July 15 were 262,869 carloads, up 0.3 percent compared with the same week in 2016, while U.S. weekly intermodal volume was 277,136 containers and trailers, up 7.4 percent compared to 2016.
Another week with increasing rail road traffic is a great sign for the economy.
IRC’s Addendum for Tiny House Building Code
From Timber Trails:
Tiny houses on wheels still remain unregulated, but tiny house advocates are paving the way with the newly adopted Tiny House addendum to IRC 2018.
There are many things that are MONUMENTAL in the adoption of Tiny House construction codes by the IRC. Among them, that architects, designers, builders, community developers, and (maybe most importantly) zoning officials have a means of recognizing Tiny Houses as an official form of permissible dwelling. This provides an opportunity for tiny house advocates to introduce statutory and municipal adoption of the new Tiny House Appendix during regional Code Change meetings.
While not a victory for ALL types of tiny homes, it is a step in the right direction. Before you get hung up on the idea of buying or building a tiny home, you MUST contact ALL of the local relevant government agencies to ensure you can build one. And the property must be zoned correctly.
Also, there is the issue of financing a tiny home, which can be difficult at this time for some buyers.
The End of Cash; The End of Freedom
From Ian Welsh:
In many countries there is a push to move away from cash, towards electronic payments. Electronic payments are, of course, easier for governments to track.
The obvious point is about taxation; you can tax money you know about. But the less obvious point is about control and surveillance: if everything is done electronically you can know who is doing what, because spending is doing. Nothing meaningful can be done in the modern world without money following it: people need money to live and money must be used to buy any goods involved.
Big Brother wants his cut of your pie…
Weekly Initial Unemployment Claims Decrease
In the week ending July 15, the advance figure for seasonally adjusted initial claims was 233,000, a decrease of 15,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 247,000 to 248,000. The 4-week moving average was 243,750, a decrease of 2,250 from the previous week’s revised average. The previous week’s average was revised up by 250 from 245,750 to 246,000.
Economists polled by Reuters had forecast claims falling to 245,000. It was the 124th straight week that claims remained below 300,000, a threshold associated with a robust labor market. That is the longest such stretch since 1970, when the labor market was smaller.
Remember the 4-week moving average is the number to watch since it is less “noisy”. That being said this is good news BUT it should mean the Fed will continue with their plans to raise rates and start reducing their holdings.
As the Fed starts reducing their holdings, we do NOT know what will happen since this is uncharted territory. You may remember I shared some news about this last week…
When Does a Home Become a Prison?
The housing market is suffering from a supply shortage, not a demand dilemma. As Millennial first-time homebuyer demand continues to increase, the inventory of homes for sale tightens. At the same time, prices are increasing, so why aren’t there more homeowners selling their homes?
It’s widely expected that mortgage rates will rise further. This is more important than we may even realize because the housing market has not experienced a rising rate environment in almost three decades! No longer is there a financial incentive to refinance for most homeowners, and there’s more to consider when moving. Why move when it will cost more each month to borrow the same amount from the bank?
A homeowner can re-extend the mortgage term another 30 years to increase the amount one can borrow at the higher rate, but the mortgage has to be paid off at some point. Hopefully before or soon after retirement. Existing homeowners are increasingly financially imprisoned in their own home by their historically low mortgage rate. It makes choosing a kitchen renovation seem more appealing than moving.
Very true but there are many buyers that are scared they will not be able to find a home before their current home is sold. In a housing market with extremely limited inventory, this fear is well justified.
However, nothing ventured nothing gained. Besides, the low mortgage rates that imprison some are also the key to buying a new home…
Steady Gains in Remodeling Activity Moving into 2018
From the Harvard Joint Center for Housing Studies:
The remodeling market continues to benefit from a stronger housing market and, in particular, solid gains in house prices, which are encouraging owners to make larger investments in their homes.
Yet, weak gains in home sales activity due to tight inventories in many parts of the country is constraining opportunities for more robust remodeling growth given that significant investments often occur around the time of a sale.
Even with some easing this year, the remodeling market is still expected to grow above its long-term average. Over the coming 12 months, national spending on improvements and repairs to the owner-occupied housing stock is projected to reach fully $324 billion.
Good news as the economic impact from remodeling projects will be significant.
Serious Delinquencies and Active Foreclosures Decreased 17% This Year
From Black Knight:
Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure): 3.80%
Month-over-month change: 0.12%
Year-over-year change: -11.84%
Total U.S. foreclosure pre-sale inventory rate: 0.81%
Month-over-month change: -2.71%
Year-over-year change: -27.01%
Total U.S. foreclosure starts: 56,500
Month-over-month change: 1.25%
Year-over-year change: -18.47%
Foreclosure Sales as % of 90+: 2.20%
Month-over-month change: 1.57%
Year-over-year change: -4.58%
Overall, a positive report on foreclosures and mortgage delinquencies. I tend to look at YoY instead of MoM numbers unless there is some HUGE change.
Americans’ Economic Expectations Decline to an Eight-Month Low
Americans’ expectations about the economy deteriorated in July to an eight-month low as fewer households viewed conditions as improving, according to figures from the Bloomberg Consumer Comfort Index released Thursday.
The pickup in optimism about the economy in the months after the presidential election has faded. For the first time since November, more Americans said they thought the economy was getting worse rather than improving. However, expectations were influenced by partisanship, as 13 percent of respondents who are Democrats said the economy was strengthening compared with 48 percent of Republicans who said so. What’s more, negative views on the economy historically have been more prevalent than positive ones, according to the survey. The weekly consumer comfort gauge reflected slightly improved sentiment about personal finances and a modest rise in views about the buying climate.
This is NOT good! We cannot expect most consumers that expect the economy to get worse to make large purchases…
The Conference Board Leading Economic Index for the U.S. Increased
Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board said:
The U.S. LEI rose sharply in June, pointing to continued growth in the U.S. economy and perhaps even a moderate improvement in GDP growth in the second half of the year. The broad-based gain in the U.S. LEI was led by a large contribution from housing permits, which improved after several months of weakness.
Maybe the people that think the economy is declining should be shown this?
HUD Will ‘Reinterpret’ Obama Housing Discrimination Rule
From the Washington Examiner:
Housing and Urban Development Secretary Ben Carson said Wednesday that his agency will “reinterpret” the landmark Obama housing rule meant to address housing discrimination, a regulation that conservatives have criticized as tantamount to a national zoning board.
The rule in question is the Affirmatively Furthering Fair Housing rule, which was finalized in 2015. It is meant to implement part of the civil rights-era Fair Housing Act by requiring local governments to spell out plans for reducing segregation or risk eventually losing out on federal bock grants.
I am not a fan of this rule but my contempt for discrimination is much bigger. Both personally and as a Realtor, I firmly support and believe in Fair Housing.
Still, couldn’t some local governments make plans for reducing segregation while never intending to actually implement or enforce them?
This could prove to be interesting…
Well that is all I have time for today! Please share or subscribe!