Cash sales accounted for 33.9% of total home sales in October 2015, down 2.6 percentage points from 36.4% in October 2014. On a month-over-month basis, the cash sales share increased by 1.4 percentage points in October 2015 compared with September 2015. The cash sales share typically increases month over month in October, and due to seasonality in the housing market, cash sales share comparisons should be made primarily on a year-over-year basis. The cash sales share peaked in January 2011 when cash transactions accounted for 46.6% of total home sales nationally. Prior to the housing crisis, the cash sales share of total home sales averaged approximately 25%. If the cash sales share continues to fall at the same rate it did in October 2015, the share should hit 25% by mid-2018. Real estate-owned (REO) sales had the largest cash sales share in October 2015 at 59.7%. Resales had the next highest cash sales share at 33.2%, followed by short sales at 31.3% and newly constructed homes at 16.7%. While the percentage of REO sales that were all-cash transactions remained high, REO transactions accounted for only 7.3% of all sales in October 2015. In January 2011 when the cash sales share was at its peak, REO sales represented 23.9% of total home sales. Resales typically make up the majority of home sales (about 81% in October 2015), and therefore have the biggest impact on the total cash sales share. Alabama had the largest cash sales share of any state at 51.7%, followed by Florida (46.7%), New York (46.3%), West Virginia (44.4%) and Indiana (40.8%). Of the nation’s largest 100 Core Based Statistical Areas (CBSAs) measured by population, Miami-Miami Beach-Kendall, Fla. had the highest cash sales share at 51.6%, followed by West Palm Beach-Boca Raton-Delray Beach, Fla. (50.9%), Detroit, Mich. (50%), Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla. (49%) and Philadelphia, Pa. (48.9%). Syracuse, N.Y. had the lowest cash sales share at 13.9%.
Obama to propose $10-per-barrel fee on oil
President Barack Obama will propose a $10-per-barrel charge on oil to fund clean transportation projects as part of his final budget request next week, the White House said Thursday. The proposal — which follows the passage of a bipartisan transportation bill last year — would have difficulty clearing the Republican-controlled Congress. In a statement, Rep. Steve Scalise of Louisiana, House majority whip, said the House would quash the “absurd” plan. Oil companies would pay the fee, which would be gradually introduced over five years. The government would use the revenue to help fund high-speed railways, autonomous cars and other travel systems, aiming to reduce emissions from the nation’s transportation system. “By placing a fee on oil, the president’s plan creates a clear incentive for private sector innovation to reduce our reliance on oil and at the same time invests in clean energy technologies that will power our future,” the White House said in a statement. Obama has prioritized reducing carbon emissions and the use of fossil fuels. But some of his administration’s proposals, including the Clean Power Plan, have faced significant opposition at the federal and state level. The proposal comes amid a brutal stretch for the US oil industry. Crude prices have fallen nearly 50% in the last year to just below $32 per barrel, pressuring profits in the sector. Global outplacement firm Challenger, Gray & Christmas attributed more than 104,000 layoffs to falling oil prices in 2015. In January, job cuts in the energy sector hit 20,246, the highest monthly total since the start of the oil price rout in the second half of 2014, according to Challenger. In a statement Thursday, American Petroleum Institute CEO Jack Gerard said the fee would hurt consumers by raising gasoline prices and reducing jobs. “On his way out of office, President Obama has now proposed making the United States less competitive,” he said.
NAR – commercial real estate experts: moderate expansion, easing prices expected in 2016
Despite various global and domestic hurdles hindering economic growth, steady job gains and stable leasing demand should help keep commercial real estate activity expanding in 2016, according to the authors of an annual report published jointly by Situs Real Estate Research Corporation (RERC), Deloitte and the National Association of Realtors (NAR). According to the report, Expectations & Market Realities in Real Estate 2016—Navigating through the Crosscurrents, commercial real estate activity is forecast to gradually grow this year with demand for space holding steady across all commercial sectors. While commercial property values and price gains are expected to flatten after surpassing 2007 peaks in some major markets, investors will still benefit from the strong income flows generated from new and existing leases. The fifth annual release of the joint report draws on the three organizations’ respective research and expert analysis and offers an objective outlook on commercial real estate through forecasts and commentary on the current economy, capital markets and commercial real estate property markets. A research-based assessment of the office, industrial, apartment, retail and hotel property sectors is also provided. “Historically low interest rates, especially in treasuries, combined with commercial real estate’s stable prices and value make this asset an attractive investment,” says Ken Riggs, president of Situs RERC. “Looking into 2016, the commercial real estate market should moderate, which could stabilize prices.”
Vacancies are expected to continue to decline slightly in 2016 for all property types, except in the apartment sector, where they are forecast to increase modestly by the end of the year as more new project completions come onto the market. Continued job growth, demand exceeding supply and limited new construction (outside of multifamily) should lead to rising rents and steady investor returns, which overall will shift away from capital appreciation as price growth levels off in many markets. Continuing on the same slow trajectory seen for many years, the US economy – facing headwinds from a rising dollar, financial market volatility and geopolitical concerns – is forecast to grow at a rate of 2% to 3% in 2016, which is stronger than most global economies and enough to generate around two million net new jobs over the next year. Deflationary pressures related to low gasoline and energy prices are expected to diminish by mid-2016, in part because of robust growth in apartment rents. “Supported by solid hiring in most parts of the country, the demand for ownership and rental housing will continue to increase in 2016 despite another year of meager economic expansion,” says Lawrence Yun, NAR chief economist. “While supply shortages will weigh on housing affordability and push home prices and rents higher, the housing sector will keep the US economy afloat and lead the residential investment component of GDP growth by up to 10% this year.”
US economy adds 151,000 jobs in January
The US added 151,000 jobs in January, weaker than expected and additional fuel for concerns the US economy is slowing down. There were silver linings to be found in the clouds, however, as wages and worker participation rose. The headline unemployment rate was 4.9%, the lowest in eight year. Analysts had predicted the economy would generate 190,000 new jobs and that the unemployment rate would hold steady at 5%. Wages showed signs of growth, rising 2.5% from a year ago, and the labor force participation rate, a key measure of the percentage of Americans working, rose slightly from a month ago to 62.7%. “Hiring continued at a moderate pace last month in the face of a world of trouble. It is good to see the unemployment rate slip, but hiring was a bit shy of expectations,” said Mark Hamrick, Bankrate.com’s senior economic analyst. “We knew that the job gains in the fourth quarter of last year would be tough to match, but even with the modest reassurance we’ve received thanks to this January hiring snapshot, questions remain about the sustainability of the recovery.” The latest numbers fall short of the December report, which was surprisingly strong in terms of new jobs. Although that report was revised downward by 30,000 in the current report. The December report was undermined by weak wage growth data, a longstanding problem that has not gone away despite the relatively large numbers of jobs created each month and a headline unemployment rate currently positioned at an eight year low. “Employment rose in several industries, led by retail trade, food services and drinking places, health care, and manufacturing. Private educational services and transportation and warehousing lost jobs,” the Labor Department reported in a statement. “Mining employment continued to decline. Wages have emerged as perhaps the most important element of the monthly jobs report. Analysts had forecast that wages would climb a tepid 0.3% in January over December.”
Employment in other major industries, including construction, wholesale trade, and government, changed little over the month, the Labor Department said. Federal Reserve policy makers have predicted for months that average hourly wages are bound to start rising as a result of the tightening jobs market, and that when they do increased consumer spending will push prices higher and lift inflation toward the Fed’s 2% target. When the Fed raised rates in December for the first time in nearly a decade they did it essentially under that scenario. In fact, Fed policy makers suggested that labor markets were gaining so much momentum that the central bank would probably be able to raise rates a total of four times in 2016, moving US monetary policy that much closer to ‘normal.’ Perhaps that scenario is starting to slowly materialize, a very positive sign in light of all the recent global turbulence. Shortly after the Fed raised rates on Dec. 16 new concerns emerged out of China that the world’s second largest economy was weakening after years of strong growth. That combined with uncertainty caused by the freefalling price of oil sent US markets into a tailspin in the first weeks of 2016. Mixed-at-best data out of the US hasn’t helped, namely a fourth quarter GDP reading of 0.7%, confirming economists fears that the US economy was dragging toward the end of 2015. All of that turmoil has caused some influential Fed members to backtrack a bit on their December optimism. New York Fed President William Dudley, an influential member of the policy-setting Federal Open Markets Committee, acknowledged earlier this week that global financial markets have grown increasingly turbulent in the seven weeks since the Fed raised rates. The Fed’s rosy forecasts for 2016 now seem premature, and the mixed January jobs report suggests it will be a rocky ride going forward.
NAHB – builder confidence in the 55+ housing market ends year on a positive note
Builder confidence in the single-family 55+ housing market remains strong in the fourth quarter of 2015 with a reading of 61, up one point from the previous quarter, according to the National Association of Home Builders’ (NAHB) 55+ Housing Market Index (HMI) released today. This is the seventh consecutive quarter with a reading above 50. “Builders and developers for the 55+ housing sector continue to report increased optimism in the market,” said Jim Chapman, chairman of NAHB’s 55+ Housing Industry Council and president of Jim Chapman Homes LLC in Atlanta. “We are seeing steady consumer demand for homes and communities that are designed to address the specific needs of the mature homebuyer.” There are separate 55+ HMIs for two segments of the 55+ housing market: single-family homes and multifamily condominiums. Each 55+ HMI measures builder sentiment based on a survey that asks if current sales, prospective buyer traffic and anticipated six-month sales for that market are good, fair or poor (high, average or low for traffic). An index number above 50 indicates that more builders view conditions as good than poor. One of the three index components of the 55+ single-family HMI posted an increase from the previous quarter: traffic of prospective buyers increased six points to 52. Present sales held steady at 65 while expected sales for the next six months decreased four points to 63.
The 55+ multifamily condo HMI dropped eight points to 42, falling back to a range typical of the past year and a half. All three components decreased as well: present sales fell 10 points to 44, expected sales for the next six months fell 10 points to 46 and traffic of prospective buyers edged down three points to 37. Three of the four indices tracking production and demand of 55+ multifamily rentals posted gains in the fourth quarter. Present production and expected future production both rose one point to 56 and 61, respectively, and future demand increased three points to 71, while current demand for existing units fell four points to 66. “This quarter’s 55+ HMI is in line with our forecast for the overall housing market, which shows a gradual, steady recovery,” said NAHB Chief Economist David Crowe. “In addition, the 55+ housing market is benefitting from growing home equity on the balance sheets of 55+ households, an improving economic outlook, historically low mortgage rates and a growing population as baby boomers age.”
Zillow – Q4 2015 breakeven horizon: buying a home pays off for most – but not all – after just two years
– The US breakeven horizon was 1.9 years as of the end of 2015, unchanged from q4 2014.
– Home buyers break even on a home purchase in less than two years in 70% of housing markets, compared to renting the same home.
– Among the largest 35 markets, the longest Breakeven Horizon is in Washington, D.C.: 4.5 years. The shortest is in Dallas: 1.3 years.
A persistent combination of healthy home value growth and low mortgage interest rates, combined with robust growth in rents, is helping to keep the buy vs. rent equation tilted heavily towards buying in most areas for those planning on staying in their homes for longer than just a few years. But local markets vary, and that equation is shifting – if even slightly – in some notable areas. Zillow’s Breakeven Horizon estimates the number of years you would have to live in a home before buying it would become more financially advantageous than renting it. Nationwide, the Breakeven Horizon as of the end of 2015 was a scant 1.9 years – unchanged from a year ago. To calculate the Breakeven Horizon, we make some basic assumptions and bake in common costs associated with renting and buying, including down payments, security deposits, taxes and fees. The result is a comprehensive look at how long you’ll need to stay in a home in a given area before the total costs of renting, offset by investments in stocks or bonds, surpass the costs of owning as equity builds. Among the nation’s largest 35 metro markets, those with the longest Breakeven Horizon as of Q4 2015 were Washington, D.C. (4.5 years), Los Angeles (4.1 years) and San Diego (3.4 years). Large markets with the shortest Breakeven Horizon included Dallas-Fort Worth (1.3 years), Indianapolis (1.3 years) and Detroit (1.4 years). Broadly speaking, markets in the densely populated Northeast Corridor and along the West Coast tend to have longer Breakeven Horizons, while markets in the Southeast and Midwest have shorter Breakeven Horizons.