ATTOM Data Solutions released its Q1 2017 US Home Affordability Index, which shows that one in every four county housing markets analyzed for the report were less affordable than their historic affordability averages in the first quarter of 2017. A total of 95 counties out of 379 counties analyzed for the report (25%) posted an affordability index below 100 in Q1 2017 — the highest share of markets below the normal affordability index of 100 since Q4 2009. An affordability index below 100 means that the share of averages wages needed to buy a median-priced home is above the historic average for a given market. Nationally the affordability index in the first quarter of 2017 was 103, down from 108 in the previous quarter and down from 119 a year ago to the lowest level since Q4 2008 — a more than eight-year low. The index of 103 translates to 33.6% of average weekly wages needed to buy a median-priced home nationwide, below the historic average of 34.6% but the highest share of wages needed since Q4 2008. “Home affordability continued to worsen in the first quarter, not surprising given the continued strong growth in home prices combined with the recent rise in mortgage rates,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Stronger wage growth is the silver lining in this report, outpacing home price growth in more than half of the markets for the first time since Q1 2012, when median home prices were still falling nationwide. If that pattern continues, it will help turn the tide in the eroding home affordability trend.”
Average wage earners would need to spend more than 43% of their income — the maximum debt-to-income ratio allowed for a “qualified mortgage” under guidelines from the Consumer Financial Protection Bureau (CFPB) — to buy a median-priced home in 97 of the 379 counties (26%) analyzed for the report. Markets above the 43% threshold included Los Angeles, San Diego, Orange, Riverside and San Bernardino counties in Southern California; Kings (Brooklyn), Queens, New York (Manhattan) and Bronx counties in New York City; King and Snohomish counties in the Seattle metro area; Santa Clara, Alameda, Contra Costa, San Francisco, San Mateo and Marin counties in the Bay Area of Northern California; and nine counties in the Washington, D.C. metro area. “Many homebuyers have been priced out of the Seattle housing market, forcing them to buy in other counties and commute,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle housing market, where all three counties in the metro area posted worsening affordability compared to a year ago. “The data also shows that the affordability level in King County has eroded to levels we haven’t seen since 2010. Moreover, I believe that it will get worse before it gets better thanks to our growing population, inadequate infrastructure, and land constraints, which are all driving up home prices in and around the Seattle area.” Average wage earners would need to spend more than 100% of their income to buy a median-priced home in five of the 379 counties analyzed:
– Kings County (Brooklyn), New York (121.4%)
– Santa Cruz County, California (111.9%)
– Marin County, California (109.9%)
– New York County (Manhattan), New York (100.5%)
– Maui County, Hawaii (100.2%).
Average wage earners would need to spend less than 15% of their income to buy a median-priced home in 12 of the 379 counties analyzed:
– Clayton County, Georgia, in the Atlanta metro area (10.8%)
– Baltimore City, Maryland (11.8%)
– Bibb County, Georgia, in the Macon metro area (12.2%)
– Saginaw County, Michigan, in the Saginaw metro area (12.4%)
– Trumbull County, Ohio, in the Youngstown metro area (12.5%)
– Wayne County, Michigan, in the Detroit metro area (12.6%)
– Richmond County, Georgia, in the Augusta metro area (14.2%)
– Cuyahoga County, Ohio in the Cleveland metro area (14.4%)
– Saint Lawrence County, New York, in the Ogdensburg-Massena metro area (14.6%)
– Summit County, Ohio, in the Akron metro area (14.7%)
– Greene County, Ohio, in the Dayton metro area (14.7%)
– Milwaukee County, Wisconsin (14.8%).
“Consumer confidence is increasing, as we are seeing a year-over-year wage increase. The wage increase, coupled with shortage of inventory, is creating a market where we are seeing median home prices increase over historic pricing,” said Matthew Watercutter, senior regional vice president and broker of record for HER Realtors, covering the Dayton, Columbus and Cincinnati markets in Ohio. “This is good news for sellers, but there is still great news for buyers. The percentage of wages needed to buy have decreased, which shows the median wages are growing at a faster pace than the sales prices. This means that Central, Western and Southwestern Ohio are still among the most affordable places to live in the nation.”
Annual wage growth outpaced annual growth in median home prices in 199 of the 379 counties (53%) analyzed in the report. It was the highest percentage of counties with wage growth outpacing home price growth since home prices bottomed out nationwide in Q1 2012. In contrast to the trend over the past year, however, home price growth has consistently outpaced wage growth over the past five years of the housing recovery. A total of 363 of the 379 counties (96%) have seen home prices rise at a faster pace than wages since hitting bottom, and nationwide median home prices have increased 57% since hitting bottom in Q1 2012 while average weekly wages have increased 4% during the same time period. Counter to the national trend, affordability improved compared to a year ago in 35 of the 379 counties (9%) analyzed in the report. Annual wage growth outpaced home price growth in all 35 of the counties with improving affordability.
Counties with improving affordability included Kings County (Brooklyn), New York; Fulton County, Georgia in the Atlanta metro area; San Francisco County, California; Delaware County, Pennsylvania, and New Castle County, Delaware in the Philadelphia metro area; and Summit County, Ohio in the Akron metro area.
US consumers increase spending at weakest pace in 6 months
US consumers increased their spending at the weakest pace in six months, while the 12-month rise in consumer prices was the largest in nearly five years. The Commerce Department says consumer spending edged up a tiny 0.1% in February following a 0.2% increase in January. The small gain supports the view of many economists that overall economic growth probably slowed in the first quarter. Incomes, however, were up a solid 0.4% in February, offering hope for stronger consumer spending in coming quarters. Meanwhile, an inflation gauge closely watched by the Federal Reserve increased 2.1% in February compared to a year ago. It is the sharpest 12-month rise since March 2012 and slightly above the Fed’s 2% inflation target.
MBA – mortgage applications down
Mortgage applications decreased 0.8% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 24, 2017. The Market Composite Index, a measure of mortgage loan application volume, decreased 0.8% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 0.4% compared with the previous week. The Refinance Index decreased 3% from the previous week. The seasonally adjusted Purchase Index increased 1% from one week earlier. The unadjusted Purchase Index increased 2% compared with the previous week and was 4% higher than the same week one year ago. The refinance share of mortgage activity decreased to 44.0% of total applications, its lowest level since October 2008, from 45.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 8.5% of total applications. The FHA share of total applications decreased to 10.8% from 10.9% the week prior. The VA share of total applications increased to 11.0% from 10.1% the week prior. The USDA share of total applications increased to 1.0% from 0.9% the week prior.
US Upper Midwest factory activity at highest since 2014
A measure of factory activity in the US Upper Midwest rose in March to its strongest level in over two years, marking a fifth straight month of manufacturing growth in the region, a private survey released on Friday showed. Marquette University and the Institute for Supply Management-Milwaukee said their seasonally adjusted index on manufacturing in the Milwaukee region climbed to 61.77 in March, the highest since November 2014. It was up from 58.69 in February. A reading above 50 indicates regional factory activity is expanding. The survey’s component on new orders, a proxy on future activity, rebounded to 65.12 from 62.76 last month, but its production gauge fell to 64.94 from 69.83. The overall employment index jumped to 66.91 from 52.48 last month. The survey’s measure on “blue collar employment” surged to 65.3 from 52.5, while its “white collar employment” gauge increased to 55.4 from 50.2. The six-month outlook gauge fell to 68.18 from 72.50 in February, while the survey’s price barometer retreated to 79.55 from 81.82.
NAHB – attention regulators: listen to small businesses
The National Association of Home Builders (NAHB) today called on Congress to work with federal regulators to fix the regulatory rulemaking process by ensuring that effects on small businesses are a primary focus for existing and future regulations. Testifying before the Senate Small Business and Entrepreneurship Committee, NAHB First Vice Chairman Randy Noel, a home builder from LaPlace, La., told lawmakers that builders must navigate an ever-increasing tangle of regulations. “On average, regulations imposed by government at all levels account for nearly 25% of the final price of a new single-family home,” said Noel. This is not just a problem for the small businesses that build them. According to NAHB research, approximately 14 million American households are priced out of the market for a new home by government regulations. “It is therefore imperative that new and existing regulation must address policy objectives while acknowledging the burdens of compliance, particularly for small businesses,” said Noel. While considering the impact of regulations on small businesses is critical to informing balanced rulemaking that achieves statutory objectives while minimizing the burdens of regulation, well-crafted regulations must also consider the challenges of implementing new rules in the field. “This can only happen with direct input from affected small businesses,” said Noel. Compliance with the Regulatory Flexibility Act, which requires federal agencies to review regulations for their impact on small businesses and consider less burdensome alternatives, continues to fall far short of the act’s objective, Noel told lawmakers. As an example, he cited a proposed rule issued by the Occupational Safety and Health Administration (OSHA) to regulate worker exposure to crystalline silica that OSHA said carried a cost estimate to the construction industry of approximately $511 million per year. An independent study found that the true cost would be nearly $5 billion per year.
The study found that the OSHA cost analysis had omitted some 1.5 million workers in the construction industry who routinely perform dusty tasks on silica-containing materials and it failed to account for a variety of indirect costs associated with set-up, clean-up, materials, and productivity penalties. “Complying with the resulting rule is both technologically and economically infeasible for businesses and more importantly, the rule will do little to improve the health and safety of my workers,” said Noel. “Congress must provide some direction to address the problem of poor or non-existent economic impact analyses,” he added. “NAHB believes it is critical to include indirect costs as part of any economic impact analysis. Additionally, economic analysis should be reviewed by a non-partisan, third party. Implementing these changes will undoubtedly improve the analysis and provide a more accurate accounting of the burdens small businesses face in complying with regulations.” The Regulatory Flexibility Act includes a requirement that proposed rules be reviewed by an industry panel. However, agencies sometimes ignore this rule. In 2014, the Environmental Protection Agency proposed a rule changing the definition of “waters of the United States” under the Clean Water Act. The agency certified the rule, and in doing, avoided the initial economic analysis and small business review panel requirements which is so critical to the rulemaking process. “When agencies evade their responsibility to convene review panels, they remove small business input entirely from the process and deny these businesses an opportunity to provide input on the rulemaking as Congress intended,” said Noel. “NAHB believes the Regulatory Flexibility Act should be amended to include judicial review of the panel requirements to ensure that the agencies adhere to the law.”