Discussing the latest construction spending numbers, manufacturing and service sector growing, home prices, buying can be cheaper than renting and much more…
While national and not local, check out the latest construction numbers from the Census Bureau:
Construction spending during May 2017 was estimated to be nearly the same as the revised April estimate. The May figure is 4.5% above the May 2016 estimate. During the first 5 months of this year, construction spending was 6.1% higher than the same period in 2016. Residential construction was down 0.5% from the level in April BUT 10.9% higher than the level in May 2016.
Spending on private construction was 0.6% below the revised April estimate. Residential construction was 0.6% lower than the revised April estimate BUT 11.2% higher than the level in May 2016. Nonresidential construction was 0.7% lower than the revised April estimate.
New single family construction spending was down 0.6% compared to April but 7.9% higher than the level in May 2016.
In May, the estimated seasonally adjusted annual rate of public construction spending was 2.1% higher than the revised April estimate. Educational construction was 5.1% higher than the revised April estimate. Highway construction was 0.9% lower than the revised April estimate.
Some of the headlines I read after this report was released were somewhat negative. However, when you look at the changes Year-over-Year, things look better. And look at the direction of total and private construction spending in the chart above…
Economic activity in the manufacturing sector expanded in June, and the overall economy grew for the 97th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.
Excellent news without a doubt!
Economic activity in the non-manufacturing sector grew in June for the 90th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.
And more excellent news from the ISM. Remember, we need a healthy economy for a strong housing market and a healthy housing market for a strong economy.
US Home Prices Increase 6.6%
Highlights from the latest CoreLogic Home Price Index Report:
- US Home prices, including distressed sales, increased Year-over-Year by 6.6% in May 2017
- US Home prices, including distressed sales, increased Month-over-Month by 1.2% in May 2017
- The CoreLogic HPI Forecast indicates that home prices will increase by 5.3% on a Year-over-Year basis from May 2017 to May 2018
- CoreLogic reported that home prices in South Carolina had increased Year-over-Year by 4.7% in May 2017
- Corelogic is forecasting that South Carolina home prices will increase by 4.2% on a Year-over-Year basis from May 2017 to May 2018
Dr. Frank Nothaft, chief economist for CoreLogic said:
The market remained robust with home sales and prices continuing to increase steadily in May. While the market is consistently generating home price growth, sales activity is being hindered by a lack of inventory across many markets. This tight inventory is also impacting the rental market where overall single-family rent inflation was 3.1 percent on a year-over-year basis in May of this year compared with May of last year. Rents in the affordable single-family rental segment (defined as properties with rents less than 75 percent of the regional median rent) increased 4.7 percent over the same time, well above the pace of overall inflation.
There is no doubt that we need more inventory in many markets. Let’s hope the Year-over-Year improvements in construction sending reported by the Census Bureau continue.
Rents increasing faster than inflation is bad since it means that some renters may not be able to save to buy a home. Which is sad because…
Buying is 33% Cheaper Than Renting
The latest Trulia Rent vs. Buy Report indicates that owning a home continues to be less expensive renting. Despite home prices increasing, they haven’t significantly increased faster than rents.
Right now, rents and home prices are both increasing. This means any change in the ‘rent vs. buy’ argument is primarily influenced by changes in mortgage rates.
Mortgage rates would have to reach 9.1% for renting to beat owning a home. According to Freddie Mac, interest rates haven’t been that high since way back in January of 1995.
It is always tough to decide if renting or buying a home is better for you. Remember, owning a home is a huge financial commitment.
Look at the amount of income you need to rent a median-priced home compared to the income you must have to buy a median-priced home.
Every real estate market is different and these statistics are national not local. But before you sign another lease, why not find out what is possible for you?
More Yelling at Yellen
You may remember me reporting that Fed Reserve Chair Yellen said another financial crisis is unlikely anytime soon. My criticism wasn’t strong enough or long enough but Danielle DiMartino has a much lengthier and better article here
The technocrat and capital-owning class is delighted with the economy, and can’t understand why everyone isn’t prospering. The point is that there is an enormous difference between the average household incomes of the bottom 80% and the top 10%, 5% and 1%. It’s important to separate the various income brackets, as including the top households distorts the average. Here we see the average household income of the bottom 80% of households is around $50,000, while the average income of the top 10% (which includes the wealthy 1% and the super-wealthy .1%) is almost four times greater: $185,000.
Just a snippet from a must read article. This is not healthy and must change…
How is the big question and if I had the answers, I would gladly share them. I do know that we must focus on growth for the bottom 80% instead of repeating the failed policies of the past.
The median FICO score for borrowers approved for agency-originated loans (i.e., those backed by Fannie Mae, Freddie Mac, and Ginnie Mae) has declined from 742 in June 2016 to 725 in April 2017. The present level represents a new low after the 2008 housing crisis (the median FICO score for agency originations briefly touched 726 in November 2015).
While this sounds very encouraging, most of the decline is due to a tremendous drop in the FICO scores for refis. Still, I would not be discouraged from sitting down with a mortgage professional to discuss your options and work on getting your Pre-Approval Letter.
Mounting student debt in the U.K., U.S. and elsewhere, might hold young people back from buying houses and saving for retirement. That would endanger economic growth and asset prices, with the effects made worse by shifting demographics. This should worry everybody.
True, graduates usually earn more than those without a degree. Yet their wages have been held back by the 2008 recession. Demographics also matter because companies have been struggling to fund generous pension promises to retiring baby boomers, and so haven’t raised pay as much. Hence millennials will probably take longer to pay off student debt, making it harder to buy a home or other financial assets.
This ties into the previous article about the average household income for the bottom 80%. Just because the banks and Wall Street are doing OK does not mean our economy is healthy.
Well that is all I have time for today. Trying to catch up after taking some much needed time off for the 4th. I hope you had an excellent holiday and will share or subscribe below!