Pending home sales rebounded sharply in February to their highest level in nearly a year and second-highest level in over a decade, according to the National Association of Realtors (NAR). All major regions saw a notable hike in contract activity last month. The Pending Home Sales Index (PHSI) jumped 5.5% to 112.3 in February from 106.4 in January. Last month’s index reading is 2.6% above a year ago, is the highest since last April (113.6) and the second highest since May 2006 (112.5). Existing-home sales are forecast to be around 5.57 million this year, an increase of 2.3% from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 4%. In 2016, existing sales increased 3.8% and prices rose 5.1%. The PHSI in the Northeast rose 3.4% to 102.1 in February, and is now 6.6% above a year ago. In the Midwest the index jumped 11.4% to 110.8 in February, but is still 0.6% lower than February 2016. Pending home sales in the South climbed 4.3% to an index of 127.8 in February and are now 4.2% above last February. The index in the West increased 3.1% in February to 97.5, but is still 0.2% higher than a year ago.
Oil prices extended gains on Wednesday despite an increase in US crude inventories, lifted by Libyan supply disruptions and expectations of an OPEC-led output cut being extended. Front-month Brent crude futures rose 25 cents to $51.58 a barrel by 1217 GMT, while West Texas Intermediate (WTI) crude futures were up 22 cents at $48.59 a barrel. Oil production from the western Libyan fields of Sharara and Wafa has been blocked by armed protesters, reducing output by some 250,000 barrels per day (bpd) and prompting the National Oil Corp to declare force majeure on Tuesday. “That (Libya), along with the Iranian oil minister saying there is likely to be an extension to the production cut deal, helped crude oil rally overnight,” Greg McKenna, chief market strategist at futures brokerage AxiTrader, said. OPEC member Libya was excluded from the cuts, agreed late last year, as the country’s oil sector suffered from the unrest that followed the toppling of Muammar Gaddafi in 2011. Iranian Oil Minister Bijan Zanganeh said on Tuesday that the agreement between OPEC and other producers led by Russia to cut output by 1.8 million bpd in the first half of 2017 was likely to be extended. The higher prices came despite US crude stocks rising by 1.9 million barrels to 535.5 million barrels. But fell at the Cushing hub, while gasoline and distillate stocks declined, the American Petroleum Institute said. The US Energy Information Administration (EIA) is due to publish official US crude and fuel product data on Wednesday. “If a similar picture is painted by the official data, the oil price should be able to hold its own at well above the $50 per barrel mark until the OPEC production estimates for March are released,” analysts at Commerzbank said.
Olick – homebuilders struggle to fill jobs ‘Americans don’t want’
At a sprawling construction site barely 15 minutes from downtown Denver, workers move ground, pour foundations and frame walls and windows, but the work goes slowly because of the slim workforce. Homes here take about two months longer than normal to build, and, in some cases, contractors are doubling their wages just to keep workers from skipping to the next site. That’s the backdrop as potential homebuyers in the mile-high city pile up and the supply of homes for sale continues to fall. Fierce competition pushes home prices higher at one of the fastest rates of any local market in the nation. Housing industry veteran Gene Myers says he could be adding 50% more homes if he just had the people to build them. After weathering more than one recession, not to mention the worst housing crash in history, Myers says he has never seen anything like this. “Especially the fact that it seems like we’re at capacity at such a low level of actual absorption [sales],” said Myers, CEO of Thrive Home Builders, a midsized, privately owned builder in Denver. “In previous recessions, when we’ve recovered, we tend to see prices go up and labor starting to get tight after we’ve recovered to at least an average absorption.” He noted that Denver’s average sales rate would normally be about 15,000 homes per year, and the market is now operating at just over half that rate. “We’re feeling so much stress on the capacity of the industry.”
Denver housing starts in 2016 were 22% higher than in 2015, but production is still historically low since the housing crash. Homes with base prices above $400,000 now represent 68% of the market, and homes priced above $500,000 represent 27%, according to Metrostudy, a housing analytics company. Both all-time highs are being fueled by steady demand from move-up buyers coupled with the rising costs of land, labor and materials. Thousands of construction workers left the industry during the recession, many of them heading to the energy sector. The assumption was that they would return when energy lagged and homebuilding recovered. They did not. The labor shortage in building actually worsened in 2016 — a surprise to most analysts. “We thought we’d see a flow back of workers from the energy sector,” said Rob Dietz, chief economist with the National Association of Home Builders. “The labor shortage has basically grown and accelerated. It’s the top challenge in the building industry right now.” Dietz points to both an immigration and a generational challenge. The workforce is aging, with the typical age of a construction worker now 42. More Americans are going to college now, and so they are less likely to pursue a career in construction. Simply put, young Americans don’t want to build houses anymore. That leaves the business to immigrant laborers. “These jobs, Americans don’t want,” Myers said. “We have a hard-working Hispanic labor force here in Denver that really is the foundation for the construction industry.”
Immigrants make up about a quarter of the overall construction workforce, but that share is likely higher for residential homebuilding, partly due to a large number of undocumented workers. Builders say they make sure their contractors are legal to work, but they have less control over the subcontractors who often move from site to site. Even that group is shrinking, as President Donald Trump tries to impose travel bans and threatens to build a wall between the US and Mexico. “There is a fear to get out into the labor force, I think there is an uncertainty,” Myers said. “I had one of our trades who became a citizen last year ask me if that could be taken away from him. Even for the people who are legal and documented, it’s a factor that is holding back the labor force.” And it’s costing builders more money. Wages in the residential building industry are growing at twice the rate of wages in the overall economy. Labor is the top concern among the nation’s builders, according to an NAHB survey, and worry over its cost and availability is growing. “Because the building industry is highly decentralized — there are 40,000 homebuilding companies in the country — you do see poaching. There are situations where you can recruit a worker, and they can work for you for a quarter or two, and then they’re working for another subcontractor down the road,” Dietz said. Myers says he tries to build relationships with subcontractors. He has one-on-one meetings to build brand loyalty, but he admits, it often comes down to cold, hard cash. Some builders will spray paint a piece of plywood offering higher wages and drive it by a competitor’s site. “The crews, we would hope, would be loyal to subcontractors and to builders, but in reality, many of the crews are just going to the highest bidder,” he said. Myers has employed Juan, a Mexican immigrant, for more than a decade as an excavator. Juan, who didn’t want to give his last name, said he became a citizen in 1999, and last year he and his brother-in-law started their own excavation company. Juan said some of his friends in Denver are buying property back in Mexico and planning to move back there.
CoreLogic – potential homebuyers seek affordability and warmth
Labor mobility in the US has declined in recent years. Home owners are staying in their homes longer than in previous years. Corelogic data show homeowner mobility declining gradually over the past three decades. Those homeowners who have wanted to move seem to be driven by economic opportunities, affordability and weather. This blog uses the CoreLogic Loan Application Database to highlight the recent trends in owner-occupant homebuyer mobility and migration for 2016, focusing on the states with the most in- and out-migration of potential homebuyers. According to CoreLogic data, homebuyers from high-cost states, such as California and New York, moved to more affordable states, such as Florida, Texas, Arizona and the Carolinas in 2016. California had the largest number of out-migrants in 2016, followed by New York and Virginia. In contrast, Florida had the largest number of in-migrants in 2016, followed by Texas and North Carolina. New York ranked highest in the ratio of homebuyers moving out to homebuyers moving in (3.9), followed by California (3.4), Illinois (2.3), Virginia (1.3), and Pennsylvania (1.2). On the other hand, Florida ranked the highest in the ratio of homebuyers moving in to homebuyers moving out (2.9), followed by South Carolina (2.6), Arizona (2.3), North Carolina (1.7), Georgia (1.4), and Texas (1.3). A ratio of 3.9 for New York means that for every out-of-state loan applicant moving into New York, there were about four loan applicants moving out of New York. Similarly, a ratio of 2.9 for Florida means that there were almost three out-of-state loan applicants coming to Florida for every one moving out of Florida. The trend shows overall homebuyers were moving to more affordable and warmer states.
Preferences and priorities for location to buy a house to live in vary by age. In 2016, Texas had the largest number of millennial in-migrants, whereas Florida had the largest number of baby boomer in-migrants. Job opportunities, cheaper homes, no income tax and lower cost of living could be the main triggering factors for the millennials’ move to Texas. Better natural amenities (warm weather, proximity to beach, sunny days), lower taxes (no state income tax, no inheritance tax or estate tax), lower cost of living and affordable housing could be the main factors causing baby boomers to move to Florida. Data indicates that millennials were applying for mortgages in bordering states with lower home prices. For instance, millennial applicants from New York applied for home-purchase mortgages mostly in New Jersey and Pennsylvania; from California, they applied for mortgages in Nevada, and from Illinois they applied for mortgages in Indiana and Wisconsin. Millennials seemed to be moving for affordable homes, employment opportunities, lower taxes and open spaces. In contrast to millennials, data show that baby boomers preferred warmer states, along with affordability. Baby boomers from New York, Illinois, Virginia, Pennsylvania, Ohio and Maryland applied for home-purchase mortgages in Florida the most. Baby boomers seemed to be moving for warmer weather, lower taxes and affordable homes.
Fed’s Evans says he supports one or two more rate hikes this year
One of the Federal Reserve’s most consistent supporters of low interest rates on Wednesday said he is with the majority of his colleagues in supporting further rate hikes this year, given progress on the US central bank’s goals of full employment and stable inflation. A drop in the US jobless rate to 4.7%, near what many economists see as full employment, and an improved outlook for inflation help explain “why my current dual mandate outlook allows me to support another one or two increases this year,” Chicago Fed President Charles Evans said in remarks prepared for delivery at the DZ Bank-OMFIF International Capital Markets Conference in Frankfurt. “For the first time in quite a while, I see more notable upside risks to growth,” he said. Evans voted along with all but one of his colleagues earlier this month to raise the Fed’s short-term borrowing rate target a quarter of a percentage point, marking only the third increase since the Great Recession. Most Fed officials see at least two more rate hikes in the cards for this year. For many years Evans argued vigorously for holding off on rate increases in part because he believed that with rates as low as they were the Fed had little scope to ease policy should the economy falter. But with a stronger economy and expectations now in place for further rate hikes, the Fed has more ammunition than it did, he said. If the economy is hit by a shock, the Fed may not even need to cut rates, but could simply signal easier policy by forecasting slower rate hikes, he said. Evans said he expects recent weakness in consumer spending to prove transitory and sees signs that business spending, which has lagged for much of the recovery, is beginning to pick up. And while fiscal policies under President Donald Trump remain uncertain, “the general thinking is that such policies could boost growth for a time.” If growth does pick up and inflation expectations do as well, “a sturdier economy would be able to handle a steeper path of rate increases,” he said. But even inflation of 2.5% “for a time” would be consistent with the Fed’s 2% goal, he said.
NAHB – statement from NAHB Chairman Granger MacDonald on President Trump’s executive order on the Clean Power Plan
Granger MacDonald, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Kerrville, Texas, today issued the following statement regarding President Trump’s new executive order on the Clean Power Plan rule: “NAHB commends President Trump’s executive order calling on the EPA to rework the Clean Power Plan rule. If implemented, it could have resulted in the adoption of rigorous building energy codes that would harm housing affordability while doing little to reduce carbon dioxide emissions from housing.”