Archive for the ‘Fed and Economy Watch’ Category

The May edition of Freddie Mac's monthly Outlook, produced by its Economic & Housing Research Group, is focused on the resiliency of the American homebuyer. It notes that, "Through the first five months of 2018, home shoppers have battled the trifecta of climbing home prices, higher mortgage rates and low supply."   One entry in the trifecta is interest rates, and Freddie Mac's economists see firming inflation continuing to put upward pressure on rates in general, including mortgage rates. They continued to climb during May, reaching 4.66 percent by the middle of the month.  Rates, according to their forecast, will average 4.9 percent in the fourth quarter of this year and 5.4 percent by the same quarter in 2019.

CoreLogic says flipping is back.  The term applies to the act of buying, renovating and/or repairing a house, then reselling it, all within a short timeframe.  Investors who specialize in flipping are always out there, but when prices are rising, or appear about to, lots more people join in the game. Bin He, writing in CoreLogic's Insights blog, looked at the current levels of flipping, using as the criteria a house that is bought then sold in under 12 months. He found that 6.2 percent of home sales in the first quarter appeared to be flips.  This matches the previous post-crash high in the first quarter of 2013.

Home prices in the first quarter of 2018 were 1.7 percent higher than at the end of the fourth quarter of last year.  The Federal Housing Finance Agency said its Housing Price Index (HPI) gained 6.9 percent when compared to the level at the end of March 2017.  On a monthly basis prices were 0.1 percent higher than in February. The month over month rate of increase in March was significantly higher than the 0.6 percent gain from January to February, but the annual increase slowed compared to the previous month.  The rate of appreciation from February 2017 to February 2018 was 7.2 percent.

Loan performance continued to improve in April, even though Black Knight says mortgage delinquencies have a historic pattern of increasing during that month.  The overall delinquency rate declined 1.6 percent from March to a national rate of 3.67 percent.  That rate is down by 10.17 percent from the previous April.  Black Knight notes, in its "first look" at the month's loan performance data, that not only did April's improvement buck a trend that has affected the month's numbers 85 percent of the time, it also ended seven months of annual increases, behavior that started with last fall's hurricanes.

The House of Representatives passed a sweeping overhaul of regulations included in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act on Tuesday.  Senate Bill 2155, which passed the upper house in March, received a 258 to 259 vote in the House.  It now goes to the White House for what is expected to be certain presidential approval. The bill did not go nearly as far as the House had hoped in rolling back Dodd-Frank.  Leadership agreed to vote on the compromise bill negotiated in the Senate between Republicans and Democrats only after a promise of a vote latter this year on other changes House members, especially House Financial Services Chair Jeb Hensarling (R-TX) were demanding.

New home sales dipped in April, a reversal that was expected by many analysts. The U.S. Census Bureau and the Department of Housing and Urban Development said sales of newly constructed homes during the month were at a seasonally adjusted annual rate of 662,000 units.  This is 1.5 percent below the revised rate of 672,000 units in March.  The March estimate was revised down from 694,000 units, erasing much of that month's reported 4 percent gain. Despite the downturn, sales are now running 11.6 percent above the April 2017 estimate of 593,000 sales.  

Reams of data have been gathered about what appear to be significant changes in the profile of younger homebuyers and consequently mortgage borrowers.  This usually means the Millennial generation, but recently Gen Z, those born in 1995 and later have begun moving into homeownership as well.  A recent report by Freddie Mac says the Millennials came of age after the housing crisis and since home prices bottomed out, rents have increased an average of 20 percent.  "It's not easy to save up for a down payment when you're pouring you money into rapidly escalating rents."

As if the new home inventory wasn't tight enough, the National Association of Home Builders (NAHB) say a higher proportion of those homes are being built as rentals rather than owner occupancy.  Robert Dietz, writing in NAHB's Eye on Housing blog says the numbers are small, but the increase has continued for several recent quarters. From the first quarter of 2017 through the first three months of 2018, construction starts for homes built specifically as rental property rose from 33,000 to 37,000.  Seven thousand of those starts were in the first quarter of this year.

It only impacts auto lending, but if Mick Mulvaney, acting director of the Consumer Financial Protection Agency (CFPB) keeps his word, a Congressional resolution signed by the President on Monday is likely to have an eventual impact on mortgage and other lending as well.  The Joint Resolution, S.J. Res. 57, sponsored by Senator Jerry Moral (R-KS) and Rep Lee Zeldin (R-N.Y.) used the Congressional Review Act (CRA) to formally disapprove a rule from CFPB relating to "Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act"(ECOA).  This causes that rule to "have no force or effect."

Last week the National Association of Home Builders (NAHB) reported that severe shortages of construction tradespeople were slowing homebuilding and increasing costs. The shortages, as reported by NAHB's new home builder members, affected all trades from rough carpenters to plumbers and masons.  Now, from Australia, comes news that brick masons at least may not have as much job security as that NAHB report would suggest.

The Hadrian X, developed by Perth-based Fastbrick Robotics, can lay more than 1,000 bricks an hour and, in tests, has framed a small home in two days.  Hadrian, essentially a long robotic arm that can be mounted on a track, crane, or barge, uses a 3-D model of the house, cuts its own bricks, applies adhesive, then conveys them to the arm which puts them in place.  The plumbing and electrical systems, windows, doors, and other finish work is performed by human hands.

The machine grinds and mills its own bricks so the building is not constrained by standard sizing. Leanne Garfield, writing in Business Insider, says it can handle bricks up to 2,000 cubic inches while a standard brick, at least in Australia, is 115 cubic inches.

She quotes Fastrbrick's director of corporate affairs, Kiel Chivers, that the company's machine, which is not yet commercially available, could shake up the global construction market as it promises to build houses and other structures faster than any human can.  While there is already a shortage of brick layers, the U.S. Bureau of Labor Statistics forecasts that those jobs will increase 15 percent by 2025.

The Hadrian X will build its first house later this year.  It will include three bedrooms and two bathrooms.