Discussing new residential construction for July 2017, home prices, home builder confidence, mortgage delinquencies and much more…
New Residential Construction July 2017
From the Census Bureau:
Privately-owned housing units authorized by building permits in July were 4.1% below the revised June level but 4.1% above the July 2016 rate. Single-family authorizations in July were unchanged from the revised June figure.
Privately-owned housing starts in July were 4.8% below the revised June estimate and 5.6% below the July 2016 rate. Single-family housing starts in July were 0.5% below the revised June figure.
This is below expectations, which may have been overly optimistic after June’s strong numbers. And some of the decline can be blamed on multifamily starts hitting their lowest level since 2016.
But we still are suffering from tight inventory so you would think home building would be stronger…
According to NAR, the number of homes for sale decreased 7.1% year-over-year and is down for the 25th consecutive month.
Some home owners could be reluctant to list their houses since they’re concerned they will have trouble finding a new home. This is a real problem since no one wants to sell their home and not have a place to live.
However, there are ways to overcome this situation and a savvy experienced Realtor will be able to advise you properly…
US Home Prices Increase 6.2% in Q2 2017
The national median existing single-family home price in the second quarter was $255,600, which is up 6.2% from the second quarter of 2016 ($240,700) and surpasses the third quarter of last year ($241,300) as the new peak quarterly median sales price. The median price during the first quarter increased 6.9% from the first quarter of 2016.
Single-family home prices last quarter increased in 87% of measured markets, with 154 out of 178 metropolitan statistical areas (MSAs) showing sales price gains in the second quarter compared with the second quarter of 2016. Twenty-three areas (13%) recorded lower median prices from a year earlier.
While this is national and not local, it is pretty impressive growth in home prices. Remember that real estate is, and has always been local…
Home Builder Confidence Increases
Builder confidence in the market for newly-built single-family homes rose four points in August to a level of 68 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
All three HMI components posted gains in August. The component gauging current sales conditions rose four points to 74 while the index charting sales expectations in the next six months jumped five points to 78. Meanwhile, the component measuring buyer traffic increased a single point to 49.
Good to see home builders feeling confident. Now get out there and build more homes…
New Home Purchase Mortgage Applications Increased 5.1 Percent Year over Year
The Mortgage Bankers Association (MBA) Builder Applications Survey (BAS) data for July 2017 shows mortgage applications for new home purchases increased 5.1 percent compared to July 2016. Compared to June 2017, applications decreased by 12 percent. This change does not include any adjustment for typical seasonal patterns.
Good to see this increase as buyers are taking advantage of the still low mortgage rates.
Are We Already in Recession?
From Charles Hugh Smith:
How shocked would you be if it was announced that the U.S. had just entered a recession, that is, a period in which gross domestic product (GDP) declines (when adjusted for inflation) for two or more quarters?
Would you really be surprised to discover that the eight-year long “recovery,” the weakest on record, had finally rolled over into recession?
Anyone with even a passing acquaintance with the statistical pulse of the real-world economy knows the numbers are softening.
Buckle up buttercup…
We’re Still Not Ready for the Next Banking Crisis
The 10th anniversary of the financial crisis has prompted a lot of analysis about what we’ve learned and whether we’re ready for the next one. Pretty much everything you need to know, though, can be found in one chart: the capital ratios of the largest U.S. banks.
Capital, also known as equity, is the money that banks get from shareholders and retained earnings. Unlike debt, it has the advantage of absorbing losses, a feature that makes individual banks and the whole system more resilient. Bank executives typically prefer to use less equity and more debt — that is, more leverage — because this magnifies returns in good times. Hence, capital levels can serve as an indicator of the balance of power between bankers and regulators concerned about financial stability.
In short, whatever lessons we might have learned from the last crisis, they are fading along with memories of how close the world came to financial Armageddon. As a result, we’re still far from prepared for the next one — and we’re likely to become less so.
VERY disturbing. Follow the link to see the chart mentioned in the snippet above.
U.S. Economic Confidence Holds on to Prior Week’s Gains
Americans’ level of confidence in the economy last week continued to be the highest Gallup has measured since mid-March. Gallup’s U.S. Economic Confidence Index averaged +8 for the week ending Aug. 13. This score is similar to the score the week before, when the index climbed five points to hit +7, ending a three-month period in which confidence remained within a tight window of zero to +5.
This poll preceded the craziness of the past weekend. I am not sure if the events in Virginia will affect consumer’s views on the economy.
It certainly should make them think about a lot of stuff…
Whether or not that includes the economy is hard to predict. We shall see.
July Restaurant Sales Tumble
Restaurant sales dropped again in July, dealing a blow to an industry that had shown modest signs of improvement in recent months.
Restaurant sales dropped again in July, dealing a blow to an industry that had shown modest signs of improvement in recent months. Same-store sales were down -2.8 percent, a sharp 1.8 percentage point decline from June. The drop was disappointing in light of the -1.3 percent average comp sales for the first six months of the year and -1.6 percent recorded in the last half of 2016.
Ouch! Not what we want to see…
Remodeling Activity Hits New High
Continued improvements in the U.S. economy drove the latest Residential Remodeling Index (RRI) to its 21st consecutive period of year-over-year quarterly gains since 2011 and an all-time record high of 108.7
Mark Boud, chief economist at Metrostudy said:
Current demand for home-improvement is healthy as U.S. economic growth accelerated in second quarter 2017, boosted in part by a resurgence in consumer spending. Additionally, current shortages of new homes are forcing many would-be homebuyers to choose renovation over purchase.
We expect the Residential Remodeling Index to continue increasing this year and through the three-year forecast. Any easing in project activity would more likely be due to limitations caused by labor shortages in the construction industry and a tight supply of existing homes for sale, rather than any deterioration in consumer-driven demand for home renovation.
We are seeing more buyers looking at homes with remodeling in mind. After all, you can remodel but you can’t change the location…
Highlights from the July 2017 Survey of Consumer Expectations
From NY Fed:
Median inflation expectations remained unchanged at the one-year horizon and fell only slightly at the three-year horizon. Consumers’ outlook for the labor market was largely positive, with unemployment and earnings expectations improving. Household income growth expectations rose to a new series high.
Median expected household income growth increased 0.3 percentage points in July to 3.0%, its highest level since the inception of the survey in June 2013.
Median one-year ahead home price change expectations declined from 3.5% in June to 3.2%.
Will home prices increase 3.2% in the coming year? More importantly, will home prices increase faster than incomes?
Total Household Debt Increases
Also from the NY Fed:
The Federal Reserve Bank of New York today issued its Quarterly Report on Household Debt and Credit,which reported that total household debt increased by $114 billion (0.9%) to $12.84 trillion in the second quarter of 2017.
Mortgage balances increased, originations declined and the median credit scores of borrowers for new mortgages declined slightly.
Mortgage delinquencies improved while foreclosure notations decreased and remained low by historical standards.
Overall, mostly good other than originations declining.
Q2 2017 Apartment Trends
REIS reported that the national Apartment vacancy rate rose by 10 basis points to 4.4% and to expect a moderation in rent growth compared to 2015.
This is talking about apartments and a national report. But I think it is safe to say we can expect to see rents for both SFH and apartments to continue growing.
Why the Single-Family Rental Merger Won’t Hurt Homebuyers or Renters
I wrote about the merger of Invitation and Starwood and discussed how this could be a signal for some to start investing in owning rentals. But renters and home owners may be wondering how this could affect them…
From Urban Institute:
In 2015, there were 17.5 million single-family rentals in the United States, accounting for 40 percent of the country’s rental housing stock. But institutional investors, like the giant company formed by this recent merger, own, at most, 0.7 percent of these 17.5 million units, or less than 300,000 units.
From the renters’ perspective, we see little cause for concern. These investments don’t push rents higher because rent prices remain a product of supply and demand. And there is no credible evidence that institutions make worse landlords than mom-and-pop companies. These investors will, by necessity and competition, bring professional standards and methods to managing these properties, making them more like their larger apartment building brethren.
In some ways, renters may like giving their money to one of these mega landlords. It could become more like renting an apartment.
Buyers looking for a fixer upper will have to compete with these companies as they are usually only looking at homes that need extensive work.
Someone selling a home that needs work could find selling to one of these companies is much better than working the “We Buy Houses” types.
Click over and read the article for deeper analysis. As much as I hate Wall Street, it could be these mega landlords will have some positive benefits.
Mortgage Delinquency Rate Drops to New Low since Recession
The mortgage delinquency rate reached the lowest level since the recession in the second quarter of 2017, dropping below 2% for the first time in almost 10 years. The mortgage delinquency rate was 1.92% in Q2 2017, down 16.5% from 2.30% in Q2 2016.
This is great and they said to anticipate these levels to stay low for the rest of the year.
Well that’s it for today! Still plenty more to discuss but just not enough hours in the day. Please hit the share buttons below!