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MBA – mortgage applications up


Mortgage applications increased 0.6% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 14, 2016. This week’s results included an adjustment for the Columbus Day holiday.

The Market Composite Index, a measure of mortgage loan application volume, increased 0.6% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 9% compared with the previous week.

The Refinance Index decreased 1% from the previous week. The seasonally adjusted Purchase Index increased 3% from one week earlier. The unadjusted Purchase Index decreased 7% compared with the previous week and was 13% higher than the same week one year ago.

The refinance share of mortgage activity decreased to 61.5% of total applications from 62.4% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 4.1% of total applications.  The FHA share of total applications increased to 11.3% from 10.9% the week prior. The VA share of total applications increased to 12.8% from 12.0% the week prior. The USDA share of total applications remained unchanged at 0.7% from the week prior.


Oil Up 2% after surprise draw in US inventories

Oil prices rose about 2% on Wednesday after the US government reported a surprising drop in domestic crude stockpiles, versus analysts expectations for a build.  Brent crude was up $1.12, or 2%, at $52.80 per barrel by 10:33 a.m. EDT (1533 GMT).  US West Texas Intermediate (WTI) crude rose $1.16, or 2.3%, to $51.45.  The Energy Information Administration (EIA) said US crude stocks fell by 5.2 million barrels in the week ended Oct. 14. Analysts polled by Reuters had forecast a 2.7 million-barrel build.


WSJ – US housing starts fell 9% in September

Housing starts fell for the second straight month in September, but builders received more permits, a sign residential construction should pick up in the coming months amid steady demand.  September’s drop in starts was due to an unusually large decline in the volatile multifamily category, but an uptick in permits for multifamily housing indicated the steep fall was likely an aberration.

The more stable category of single-family homes posted monthly gains in both permits and starts.  Building permits issued for privately owned housing units rose 6.3% in September from the prior month to a seasonally adjusted annual rate of 1.225 million, the Commerce Department said Wednesday. Permits for single-family homes, about 60% of all permits, rose to a rate of 739,000, up 0.4% last month.

Housing starts fell 9.0% in September to an annual rate of 1.047 million, as starts on multifamily buildings dropped sharply. But single-family starts continued to climb, rising 8.1% in September to a rate of 783,000.  “Single-family construction is maintaining a steady climb, with permits for single-family structures pointing to continued growth ahead,” said Brittany Baumann, macro strategist at TD Securities USA, Inc. She predicted “upward path in single-family home construction” to continue through the end of the year.


Sales of existing homes, about 90% of the housing market, have grown fairly strongly this year, reaching a post-recession peak in June, according to the National Association of Realtors. Steady job growth, wage gains and low interest rates on mortgages have supported home buying.

But low inventory of new and existing homes is driving up prices, putting a purchase out of reach of some would-be buyers. Realtors are looking to home builders to provide much-needed supply.  Despite strong demand for housing in many parts of the country, fixed residential investment dropped in the second quarter, dragging on overall US growth.

Home builders’ sentiment is still running high, coming in at 63 in October, the second-highest level of the year, the National Association of Home Builders reported earlier this week, but many builders continue to report shortages of lots and labor.

That suggests that “supply constraints will remain an inhibiting factor” to a full bounce back in residential construction, according to Stephen Stanley, chief economist at Amherst Pierpont Securities.  “It is a mystery that in an environment that sounds like it would be very positive for housing, activity fell in real terms at a nearly 8% annual clip in the second quarter and may have declined at close to a 6% pace in the third quarter,” Mr. Stanley said.


Much of the construction growth this year has been in single-family homes. Through the first nine months of the year, permits were up 0.6% compared with the same period in 2015, while single-family permits were up 8.1%, year to date. Starts were up 3.7% through September, and single-family starts were up an even higher 8.6% through the nine months.

Relatively stronger momentum for single-family home construction suggests that builders are responding to rising prices and steady demand for that segment, while construction of larger multifamily projects is slowing.  Both permits and starts fell sharply in the years leading up to the recession, as the housing crisis took hold, and remained near all-time low levels for two years after the recession ended.

The construction gauges have rebounded since 2011, but the pace of gains slowed over the past year.  Monthly housing figures are often choppy and can be subject to large revisions. August permits were revised up to a 1.152 million rate from 1.139 million. August starts were revised to 1.150 million from 1.142 million.

September’s rise in permits, based on a survey of local governments, had a margin of error of 1.9 percentage points. Last month’s decline in starts, based on a survey of builders and homeowners, came with a margin of error of 9.2 percentage points.  Economists surveyed by The Wall Street Journal had expected overall September permits to rise to a 1.17 million annual rate and starts to rebound to a 1.18 million pace. Construction typically begins a month or two after a permit is issued.


Halliburton revenue falls short of estimates

Oil services company Halliburton Co. said Wednesday it had net income of $6 million, or 1 cent a share, in the third quarter, after a loss of $54 million, or 6 cents a share, in the year-earlier period. Revenue fell to $3.833 billion from $5.582 billion.

The FactSet consensus was for a loss per share of 6 cents and revenue of $3.906 billion. “In the near term, we remain cautious around fourth quarter customer activity due to holiday and seasonal weather-related down times,” Chief Executive Dave Lesar said n a statement. “However, it does not change our view that things are getting better for us and our customers.”

He said the company is pleased to have returned to profit “given the devastation our industry has faced over the last two years.” Shares were down 0.9% pre-market, but are up 38% in the year so far, while the S&P 500 has gained 4.5%.


CoreLogic – cash and distressed sales update: July 2016

–  The cash sales share fell 1.9 percentage points from July 2015

–  Of total sales in July 2016, distressed sales accounted for 7.2% and real estate-owned (REO) sales accounted for 4.3%

–  The REO sales share in July was the lowest for any month since July 2007


Cash sales accounted for 29.7% of total home sales in July 2016, down 1.9 percentage points year over year from July 2015. 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 July 2016, the share should hit 25% by mid-2018.  REO sales had the largest cash sales share in July 2016 at 57.6%. Resales had the next highest cash sales share at 29.4%, followed by short sales at 28.1% and newly constructed homes at 15%. While the percentage of REO sales within the all-cash category remained high, REO transactions have declined since peaking in January 2011.

Figure 2 shows the distressed sales share of total home sales, of which REO sales made up 4.3% and short sales made up 2.9% in July 2016. The distressed sales share of 7.2% in July 2016 was the lowest distressed sales share since September 2007. At its peak in January 2009, distressed sales totaled 32.4% of all sales with REO sales representing 27.9% of that share.

The pre-crisis share of distressed sales was traditionally about 2%. If the current year-over-year decrease in the distressed sales share continues, it will reach that “normal” 2-percent mark in mid-2018.  All but eight states recorded lower distressed sales shares in July 2016 compared with a year earlier. Maryland had the largest share of distressed sales of any state at 19.4% in July 2016, followed by Connecticut (18.6%), Michigan (17.8%), New Jersey (15.6%) and Illinois (15.5%).

North Dakota had the smallest distressed sales share at 2.5%. While some states stand out as having high distressed sales shares, only North Dakota and the District of Columbia are close to their pre-crisis levels (each within one percentage point).  New York had the largest cash sales share of any state at 44.6%, followed by Alabama (43.6%), Florida (39.6%), New Jersey (37.3%) and Indiana (37%).


NAHB – builder confidence remains solid in October

Builder confidence in the market for newly constructed single-family homes remained on firm ground in October, down two points to a level of 63 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).  “Even with this month’s drop, builder confidence stands at its second-highest level in 2016, a sign that the housing recovery continues to make solid progress,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill.

“However, builders in many markets continue to express concerns about shortages of lots and labor.”  “The October reading represents a mild pullback from a jump in September, and indicates that the housing market continues to make slow and steady gains,” said NAHB Chief Economist Robert Dietz. “Moreover, mortgage rates remain low and the HMI index measuring future sales expectations has been over 70 for the past two months. These factors will sustain continued growth in the single-family market in the months ahead.”


Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.”

Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.  Two of the three HMI components posted losses in October. The component gauging current sales conditions dropped two points to 69 and the index charting buyer traffic fell one point to 46.

Meanwhile, the index measuring sales expectations in the next six months rose one point to 72.  Looking at the three-month moving averages for regional HMI scores, the West increased two points to 75 while the Northeast, Midwest and South each posted one-point gains to 43, 56 and 65, respectively.


Realtytrac – the foreclosure gender gap

–  Foreclosure Rates Higher For Male Homeowners Than Female Homeowners;

–  Exception is Single/Unmarried Owners: Female Foreclosure Rates Are Higher;

–  Foreclosure Rate Gender Gap Largest For Widowed Homeowners

ATTOM Data Solutions, the nation’s leading source for comprehensive housing data and the new parent company of RealtyTrac, today released an analysis showing homes owned by men had a higher foreclosure rate on average than homes owned by women as of the end of Q3 2016.

ATTOM analyzed tax assessor records and publicly recorded foreclosure filings for more than 5 million single family homes and condos nationwide where the primary homeowner was identified as an individual man or an individual woman. The analysis did not include homes owned by married couples when both were listed as homeowners or other joint home ownership situations.

The analysis found that 73 out of every 10,000 homes with individual male homeowners were in foreclosure as of the end of Q3 2016 while 72 out of every 10,000 homes owned by individual female homeowners were in foreclosure.

The foreclosure rate gap was even bigger between married men and married women homeowners — 83 out of every 10,000 homes with an individual married man listed as the primary homeowner were in foreclosure while 66 out of every 10,000 homes with an individual married woman listed as the primary homeowner were in foreclosure.

The biggest foreclosure rate gender gap was among widowed homeowners. The foreclosure rate for widowers was 112 out of every 10,000 homes while the foreclosure rate for widows was 94 out of every 10,000 homes.  The exception to the rule was among single and unmarried homeowners where homes owned by women had higher foreclosure rates on average (73 out of every 10,000 homes) than those owned by men (70 out of every 10,000 homes).



Ohio dumps Wells Fargo too


In case anyone thought that Wells Fargo’s now-former CEO John Stumpf falling on the sword and “retiring” would stem the tide of bad news for the bank, a former presidential candidate is now calling on his state to suspend business ties to the bank for at least a year.

One-time Republican presidential candidate and current governor of Ohio, John Kasich, announced Friday that he is using his power as governor to bar Wells Fargo from participating in future state debt offerings and financial services contracts initiated by state agencies for one year.

Additionally, Kasich said that he will seek to exclude Wells Fargo from participating in debt offerings initiated by the Ohio Public Facilities Commission.  Kasich’s office notes that Kasich is one of six votes on the OPFC. The remaining members are Ohio’s attorney general, auditor of state, secretary of state, treasurer of state and the director of the office of budget and management.

“It’s clear that Wells Fargo’s culture was compromised by greed and by a desire to make money that was stronger than a commitment to following proper ethical standards,” Kasich said.  “While Wells Fargo only does limited retail banking in Ohio, it does regularly seek state bond business so I have instructed my Administration to seek services from other banks instead, and I’ll cast my votes against Wells Fargo on the Public Facilities Commission,” Kasich continued.  “This company has lost the right to do business with the State of Ohio because its actions have cost it the public’s confidence,” Kasich added.


According to Kasich’s office, he may “revisit the decision” during the next year if Wells Fargo “makes progress in restoring a culture of integrity.”  Ohio’s move by a series of states and municipalities that have taken action to distance themselves from Wells Fargo in the wake of the fake account scandal surrounding the bank, which stems from more than 5,000 of the bank’s former employees opening more than 2 million fake accounts to get sales bonuses.

Previously, the city of Chicago, the state of California, and the state of Oregon suspended ties with Wells Fargo.  “Policymakers’ first instinct in these situations is often to just write another law, but we’ve seen that that doesn’t always make a difference,” Kasich concluded. “We need to send a message to this company—and every other company—that the public must be respected, that ethical standards must be respected and when they’re not it comes with a cost.”


Bank of America 3Q profit rises 6.6%

Bank of America, the second-largest US bank by assets, reported its first rise in profit in three quarters on Monday, boosted by strong results from bond trading.  Net income attributable to shareholders rose 6.6% to $4.45 billion in the third quarter ended Sept. 30, from $4.18 billion a year earlier. Earnings per share rose to 41 cents from 38 cents in the same period of 2015.

Analysts on average had expected earnings of 34 cents per share, according to Thomson Reuters I/B/E/S, although it was not immediately clear if the figures were directly comparable.  Revenue from trading fixed-income securities, currencies and commodities jumped 32% from a year earlier, boosted by Brexit-inspired volatility and changing expectations for monetary policy in the United States, Europe and Japan.  Non-interest expenses fell 3.3% to $13.48 billion.

BofA, like its peers, has been slashing costs to help make up for weak income from lending after years of low interest rates. Chief Executive Brian Moynihan said in July the bank would cut annual costs by another $5 billion by 2018, which would take the total to about $53 billion from about $58 billion in 2015.  The Federal Reserve, which last raised interest rates by 0.25 percentage points in December, has kept rates unchanged since then but has indicated a possible hike in December.


The three other big US banks that have reported third-quarter results all beat profit and revenue forecasts.  However, their net earnings declined – JPMorgan Chase’s by 7.6%, Citigroup’s by 10.5% and Wells Fargo’s by 3.7%.  BofA, whose shares were up 1.6% at $16.25 in premarket trading, said total revenue net of interest expenses rose 3% to $21.64 billion.

Net interest income rose 3% to $10.20 billion, the first increase in three quarters.  BofA said last month it would alter the way it accounts for changes in long-term interest rates from the third quarter as a way to reduce volatility in reported net interest income.  Like JPMorgan and Wells Fargo, BofA set aside more money to cover potential bad loans.

The bank’s provisions rose 5.5% $850 million in the quarter.  Income from investment banking rose 13.3% to $1.46 billion, driven by higher debt and equity issuance activity.  JPMorgan and Citigroup also benefited from a pickup in investment banking activity after a slow first-half of the year.  Adjusted revenue from Bank of America’s wealth and investment management unit, which includes Merrill Lynch, fell 1.7% to $4.38 billion.

The wealth business has played a significant role in the bank’s strategy to grow revenue from more stable businesses that require relatively little capital.  Up to Friday’s close, BofA’s shares had fallen 4.9% this year, compared with a 2.5% decline in the KBW banking index.


Warren calls for Obama to oust SEC chair

In the eyes of Sen. Elizabeth Warren, D-Mass, the chair of the Securities and Exchange Commission has not done nearly enough to prevent the “flood” of money flowing from corporations into the election process and has repeatedly “undermined” the SEC’s mission to protect investors, and therefore needs to replaced immediately.

Warren sent a letter Friday to President Obama, calling on him to replace Mary Jo White as the chair of the SEC due to her “refusal” to develop a political spending disclosure rule and her efforts to permit publicly traded companies to disclose less to investors and the public.  “Corporations are flooding our elections with millions of dollars in secret political contributions, drowning out the voices of working families.

Yet two weeks ago, Republican leaders successfully forced a rider into must-pass legislation to fund our government that prohibited the Securities and Exchange Commission from issuing a final rule requiring public companies to disclose these political contributions,” Warren writes.  “Democrats will continue to fight to remove the rider when Congress considers the next government funding bill in December, and I urge you to make clear in advance that you will veto any bill that includes it,” Warren continues.  “But the rider is not the biggest barrier to making progress on this critical issue.

For years, the Chair of the SEC, Mary Jo White, has refused to develop a political spending disclosure rule despite her clear authority to do so, and despite unprecedented and overwhelming investor and public support for such a rule,” Warren writes.


According to Warren, this “brazen conduct” is the most recent and prominent example of White “undermining” the Obama administration and “ignoring the SEC’s core mission” of investor protection.  Warren says that White has made it clear during her tenure that she feels that companies disclose too much publicly and wants to allow them to disclose less than they do now.

“She has failed to complete disclosure mandates Congress enacted in the wake of the 2008 financial meltdown, while simultaneously devoting the SEC’s limited discretionary resources to a far-reaching, anti-disclosure initiative cooked up by big business lobbyists seeking to reduce the amount of information public companies must make available to their investors,” Warren writes of White.

“Enough is enough,” Warren continues. “To address your concerns on political spending disclosure, and to advance other priorities of your administration and investors, I respectfully urge you to exercise your unilateral authority…to immediately designate another SEC commissioner as Chair of the agency.”  Warren tells Obama that she understands that replacing White would be an “uncommon act,” but feel that it is necessary to make such a move now.

“For the last three years, [Chair White’s anti-disclosure] views have undermined the SEC, your Administration’s priorities, Congressional mandates, and the best interests of investors,” Warren write. “Under a new Chair, the agency can re-direct its limited discretionary resources away from actively undermining the interests of investors and back toward its core purposes.”


Warren tells Obama that White’s “unapologetic anti-disclosure posture” has allowed efforts to “weaken” federal disclosure requirements to move forward.  “I do not make this request lightly. I have tried both publicly and privately to persuade Chair White to direct the agency’s resources toward pressing matters of compelling interest to investors and the public, and toward completing those rules that Congress has required it to implement,” Warren writes.  “But after years of fruitless efforts, it is clear that Chair White is set on her course,” Warren concludes. “The only way to return the SEC to its intended purpose is to change its leadership.”


Manufacturing in New York state slides again in October

Manufacturing in New York state contracted for the third straight month in October.  The Federal Reserve Bank of New York says its Empire State index slid to a reading of minus 6.8 this month, lowest since May and down from a minus 2 reading in September. Anything below zero signals contraction.

Economists had expected the survey to show growth this month.  New orders, shipments and employment all fell this month, but at a slower pace than they did in September.  Prices paid and received by manufacturers grew modestly.  Manufacturers have been struggling with a strong dollar, which makes their goods pricier abroad, and weak investment in machinery by businesses cautious about global economic outlook. But the New York Fed found that manufacturers’ outlook for the next six months is sunnier.


Industrial production flat

US industrial production barely rose in September as a rebound in manufacturing output was offset by a decline in utilities production, suggesting a moderate acceleration in economic growth in the third quarter.  The Federal Reserve said on Monday industrial output edged up 0.1% last month after a downward revised 0.5% decline in August.

Economists polled by Reuters had forecast industrial production gaining 0.1% last month after a previously reported 0.4% fall in August. Industrial production rose at an annual rate of 1.8% in the third quarter, the first quarterly increase since the third quarter of 2015.

The industrial sector continues to be hobbled by the lingering effects of the dollar’s surge and oil price plunge between June 2014 and December 2015. The sector has also been hurt by business efforts to reduce an inventory overhang, which has resulted in fewer orders being placed with factories.

But with the dollar’s rally fading and oil prices stabilizing, the worst of the industrial downturn is probably over. A survey early this month showed an acceleration in factory activity in September, while new orders for manufactured capital goods have increased since June.


Manufacturing output rose 0.2% in September after falling 0.5% in the prior month. Motor vehicle and parts production edged up 0.1%. Manufacturing production rose at a 0.9% rate in the third quarter.  Mining production increased 0.4% as gains in oil and gas well drilling offset a drop in crude oil extraction.

That left mining output rising at a 3.7% rate in the third quarter following six consecutive quarterly declines.  Utilities production dropped 1.0% last month after slipping 0.3% in August.  With output barely rising last month, industrial capacity use edged up 0.1 percentage point to 75.4%. Officials at the Fed tend to look at capacity use as a signal of how much “slack” remains in the economy and how much room there is for growth to accelerate before it becomes inflationary.

CoreLogic – 37,000 completed foreclosures in August 2016


CoreLogic released its August 2016 National Foreclosure Report which shows the foreclosure inventory declined by 29.6% and completed foreclosures declined by 42.4% compared with August 2015. The number of completed foreclosures nationwide decreased year over year from 64,000 in August 2015 to 37,000 in August 2016, representing a decrease of 69% from the peak of 118,221 in September 2010.

The foreclosure inventory represents the number of homes at some stage of the foreclosure process and completed foreclosures reflect the total number of homes lost to foreclosure. Since the financial crisis began in September 2008, there have been approximately 6.4 million completed foreclosures nationally, and since home ownership rates peaked in the second quarter of 2004, there have been approximately 8.5 million homes lost to foreclosure.

As of August 2016, the national foreclosure inventory included approximately 351,000, or 0.9%, of all homes with a mortgage compared with 499,000 homes, or 1.3%, in August 2015. The August 2016 foreclosure inventory rate is the lowest it’s been since July 2007.


CoreLogic also reports that the number of mortgages in serious delinquency (defined as 90 days or more past due including loans in foreclosure or REO) declined by 20.6% from August 2015 to August 2016, with 1.1 million mortgages, or 2.8%, the lowest level since September 2007. The decline was geographically broad with decreases in serious delinquency in 48 states and the District of Columbia.

“Foreclosure inventory fell by 30% from the previous year, the largest year-over-year decline since January 2015,” said Dr. Frank Nothaft, chief economist for CoreLogic. “The large decline in the distressed inventory has been one of the drivers of steady home price growth which helps Americans increase their home equity to support increased spending or cushion future economic risk.”

“Foreclosure rates and serious delinquency continued to trend down in August as real estate markets across many parts of the US exhibit strong demand growth and rising prices,” said Anand Nallathambi, president and CEO of CoreLogic. “With the foreclosure inventory now under 1% nationally, the need to boost single-family housing stocks through new construction will become more acute in the coming months and years.”


Additional August 2016 highlights:

–  On a month-over-month basis, completed foreclosures increased by 7.7% to 37,000 in August 2016 from the 34,000 reported for July 2016. As a basis of comparison, before the decline in the housing market in 2007, completed foreclosures averaged 21,000 per month nationwide between 2000 and 2006.

–  On a month-over-month basis, the August 2016 foreclosure inventory was down 3.2% compared with July 2016.

–  The five states with the highest number of completed foreclosures in the 12 months ending in August 2016 were Florida (55,000), Texas (27,000), Ohio (23,000), California (22,000) and Georgia (21,000).These five states account for about 35% of completed foreclosures nationally.

–  Four states and the District of Columbia had the lowest number of completed foreclosures in the 12 months ending in August 2016: the District of Columbia (212), North Dakota (341), West Virginia (469), Alaska (624) and Montana (717).

–  Four states and the District of Columbia had the highest foreclosure inventory rate in August 2016: New Jersey (3.2%), New York (2.9%), Maine (1.8%), Hawaii (1.8%) and the District of Columbia (1.8%).

–  The five states with the lowest foreclosure inventory rate in August 2016 were Colorado (0.3%), Minnesota (0.3%), Arizona (0.3%), Utah (0.3%) and Michigan (0.3%).


Venture capitalist explains why Silicon Valley will be disappointed by a Clinton presidency

Silicon Valley shouldn’t get too excited about the prospect of Hillary Clinton in the White House, said one well-known venture capitalist.  If she prevails over Donald Trump next month, her cabinet and office appointments are likely to be less concerned with helping tech than pleasing specific democratic constituencies, whose interests often conflict with Silicon Valley, said investor Bradley Tusk, CEO of Tusk Holdings.

Some of the big issues Silicon Valley wants addressed include immigration reform, new regulations for autonomous vehicles, and worker reclassification to jumpstart the so-called gig economy, said Tusk, a former aide to New York City Mayor Michael Bloomberg who now specializes in helping startups navigate regulatory environments.


The first issue — visa reform to allow more high-skilled workers into the US — is unlikely to come quickly, because Democrats in Congress will push for comprehensive immigration reform, Tusk said, a much bigger legislative endeavor that failed when it was last introduced in Congress in 2007.  Companies like Apple, Alphabet, Amazon, Facebook and Microsoft need a lot of engineering talent, and would like to see the government issue more H-1B visas to let more workers into the US and allow them to stay.  “I think they’re going to have trouble on that issue,” said Tusk.

Opposition from trucking industry unions, insurance companies and some auto manufacturers means Clinton will not prioritize new regulations to promote autonomous driving, he said. The last thing many tech companies want is a long drawn-out process to establish new regulations in this area, Tusk said. (Tusk, incidentally, is an investor in Uber, one of the companies working on autonomous cars.)  Union opposition to worker reclassification makes Clinton unlikely to implement changes that would benefit companies that operate in the gig economy, Tusk said.

Both of these areas may yet see regulatory progress on the state level, but tech companies would prefer federal guidance.  Though he expects Clinton to appoint an insider from the technology world to her cabinet, it is unlikely to be to a position with any regulatory authority — like Secretary of Commerce — and thus will result in little meaningful changes for the tech sector, he said.


Some people that are rumored in Silicon Valley to be in the running for a cabinet appointment include Facebook COO Sheryl Sandberg, HP CEO Meg Whitman, and Kleiner Perkins Caufield & Byers partner Mary Meeker, Tusk said. (Sanberg, howeversaid at a conference on Tuesday that she has no plans to work in government.)

Even more, some cabinet appointments could wind up being hostile to tech, Tusk said.  Clinton will almost certainly appoint a left wing Secretary of Labor — to appease Bernie Sanders and Elizabeth Warren supporters — making federal progress on a new worker classification almost impossible, he said. Uber and others would be forced then to negotiate with individual states, which they find much more burdensome, he said.

The Secretary of Transportation will likely become the most important figure in Washington for tech, given both the Federal Aviation Administration’s jurisdiction over drones and autonomous vehicle regulations, said Tusk. That appointment is also likely to be a political one rather than someone from the tech industry, making desired reforms less likely, he said.

Clinton’s support on the campaign trail for some things the tech world cares deeply about — like strong encryption — was likely cultivated to lure tech donors and voters, rather than to reflect strong beliefs, said Tusk. Ultimately, when faced with a crisis in which security and privacy seem to be at odds, she is likely to side with the government over tech companies, he said.  For example, when faced with a similar situation such as the Apple versus FBI case, Clinton is likely to side with the FBI once she is in office, he said.


MBA – mortgage applications down

Mortgage applications decreased 6.0% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 7, 2016.  The Market Composite Index, a measure of mortgage loan application volume, decreased 6.0% on a seasonally adjusted basis from one week earlier.

On an unadjusted basis, the Index decreased 6% compared with the previous week. The Refinance Index decreased 8% from the previous week, to its lowest level since June 2016. The seasonally adjusted Purchase Index decreased 3% from one week earlier. The unadjusted Purchase Index decreased 2% compared with the previous week and was 27% higher than the same week one year ago.

The refinance share of mortgage activity decreased to 62.4% of total applications from 63.8% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4.1% of total applications.  The FHA share of total applications increased to 10.9% from 10.0% the week prior. The VA share of total applications increased to 12.0% from 11.4% the week prior. The USDA share of total applications remained unchanged at 0.7% from the week prior.


Number of job openings fall in August to 5.4 million

Monthly job openings decreased in August to 5.4 million, the Bureau of Labor Statistics said on Wednesday.  That’s a rate of 3.6%, according to the Job Openings and Labor Turnover Summary (JOLTS). Economist expected monthly job openings in August to be 5.72 million, according to estimates by Reuters, down from 5.87 million last month.

The professional and business services industry led the largest decrease at 223,000. Hires and separations changed little at 5.2 million and 5 million, respectively, the department said.  The report from the Labor Department — often closely watched by Fed chair Janet Yellen — is a key barometer of economic conditions, measuring job postings in different sectors, and the number of hires and layoffs.  The quits rate was 2.1% and the layoffs and discharges rate was 1.1%.


PHH wins landmark victory: CFPB ruled unconstitutional

What was once unthinkable actually happened, as the United States Court of Appeals for the District of Columbia Circuit handed an earth-shattering victory to PHH, declaring the Consumer Financial Protection Bureau’s leadership structure unconstitutional and vacating a $103 million fine against PHH.  PHH, a mortgage lender, made national headlines when it challenged CFPB Director Richard Cordray’s $103 million increase to a $6 million fine initially levied against PHH for allegedly illegally referring consumers to mortgage insurers in exchange for kickbacks.

The case was one of the first occasions that a company fought back against the CFPB, the governmental agency that formed after the financial crisis and was a celebrated achievement of the Dodd-Frank Act, at least by those on the left.  In this case, the issue began in June 2015, when Cordray exercised his authority to layer an additional $103 million fine on top of the original $6.4 million penalty from Administrative Law Judge Cameron Elliot.

The fine centered around Cordray saying that PHH violated the Real Estate Settlement Procedures Act every time it accepted a kickback payment on or before July 21, 2008 – going far beyond Elliot’s ruling, which had limited PHH’s violations to kickbacks that were connected with loans that closed on or after July 21, 2008.  Cordray issued a final order that required PHH to disgorge $109 million – all the reinsurance premiums it received on or after July 21, 2008.  PHH challenged Cordray’s authority to levy the additional fine and the constitutionality of the CFPB, and after much deliberation, the court agreed with PHH on all counts.


In a unanimous decision of the three justices of the United States Court of Appeals for the District of Columbia Circuit, the court ruled that the CFPB’s current structure allows the director to wield far too much power, more than any other agency in the government.  “Because the Director alone heads the agency without Presidential supervision, and in light of the CFPB’s broad authority over the US economy, the Director enjoys significantly more unilateral power than any single member of any other independent agency,” the court writes.

And it gets worse for the CFPB from there.  From the court’s decision:  “By “unilateral power,” we mean power that is not checked by the President or by other colleagues. Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power. That is not an overstatement.

What about the Speaker of the House, you might ask? The Speaker can pass legislation only if 218 Members agree. The Senate Majority Leader? The Leader needs 60 Senators to invoke cloture, and needs a majority of Senators (usually 51 Senators or 50 plus the Vice President) to approve a law or nomination. The Chief Justice? The Chief Justice must obtain four other Justices’ votes for his or her position to prevail.

The Chair of the Federal Reserve? The Chair needs the approval of a majority of the Federal Reserve Board. The Secretary of Defense? The Secretary is supervised and directed by the President. On any decision, the Secretary must do as the President says. So too with the Secretary of State, and the Secretary of the Treasury, and the Attorney General.”

In short, the court writes, the director of the CFPB is the “single most powerful official in the entire US Government, other than the President,” in terms of unilateral power.  “It is the Director’s view of consumer protection law that prevails over all others,” the court writes. “In essence, the Director is the President of Consumer Finance. The concentration of massive, unchecked power in a single Director marks a departure from settled historical practice and makes the CFPB unique among traditional independent agencies.”


At issue is the CFPB’s status as an independent agency, which, as the court points out, have typically operated with a different leadership structure than the CFPB.  The court points out that other governmental departments, such as the Department of Justice or the Department of the Treasury, are led by a single director, but notes a significant difference.

The difference, as the court notes, is that those agencies are “executive agencies,” operating within the Executive Branch chain of command under the supervision and direction of the President, and those agency heads are removable at will by the President.  “The President is a check on those agencies,” the court notes. “Those agencies are accountable to the President.

The President in turn is accountable to the people of the United States for the exercise of executive power in the executive agencies.”  That makes the power structure of those agencies constitutional, whereas the CFPB’s leadership structure, with power concentrated with the agency’s director, is unconstitutional because it is an independent agency, rather than an executive agency.

“As an independent agency with just a single Director, the CFPB represents a sharp break from historical practice, lacks the critical internal check on arbitrary decisionmaking, and poses a far greater threat to individual liberty than does a multi-member independent agency,” the court writes. “All of that raises grave constitutional doubts about the CFPB’s single-Director structure.”


But that’s not the case any more.  As a result of the decision, the CFPB now will operate as an executive agency. The President of the United States now has the power to supervise and direct the Director of the CFPB, and may remove the Director at will at any time.  PHH also asked for both the CFPB and the Dodd-Frank Act to be abolished, and while the CFPB will undoubtedly change, the agency is not being shut down.

“With the for-cause provision severed, the President now will have the power to remove the Director at will, and to supervise and direct the Director,” the court writes.  “The CFPB therefore will continue to operate and to perform its many duties, but will do so as an executive agency akin to other executive agencies headed by a single person, such as the Department of Justice and the Department of the Treasury,” the court continues.

“Those executive agencies have traditionally been headed by a single person precisely because the agency head operates within the Executive Branch chain of command under the supervision and direction of the President,” the court continues. “The President is a check on and accountable for the actions of those executive agencies, and the President now will be a check on and accountable for the actions of the CFPB as well.”  Putting aside the foundation-shattering change to the CFPB’s leadership structure, the court was also asked to rule on the fine handed down against PHH.  At issue there was Cordray retroactively applying the law to previous violations, an act that the court did not approve of.


The court explains that decision this way:  “Put aside all the legalese for a moment. Imagine that a police officer tells a pedestrian that the pedestrian can lawfully cross the street at a certain place. The pedestrian carefully and precisely follows the officer’s direction. After the pedestrian arrives at the other side of the street, however, the officer hands the pedestrian a $1,000 jaywalking ticket. No one would seriously contend that the officer had acted fairly or in a manner consistent with basic due process in that situation.

Yet that’s precisely this case. Here, the CFPB is arguing that it has the authority to order PHH to pay $109 million even though PHH acted in reliance upon numerous government pronouncements authorizing precisely the conduct in which PHH engaged.”  “PHH argues that the CFPB violated bedrock due process principles by retroactively applying its new interpretation of the statute against PHH,” the court writes.  “We agree with PHH,” the court continues. “We grant PHH’s petition for review, vacate the CFPB’s order, and remand for further proceedings consistent with this opinion.”


In a statement, a CFPB spokesperson says that the agency “respectfully disagrees” with court’s ruling.  “The Bureau believes that Congress’s decision to make the Director removable only for cause is consistent with Supreme Court precedent and the Bureau is considering options for seeking further review of the Court’s decision,” the CFPB spokesperson said.  “In the meantime, as the court expressly recognized, the Bureau will continue its important work,” the spokesperson continued. “Congress has charged the Bureau with ensuring that the markets for consumer financial products and services are fair, transparent, and competitive and with protecting consumers in these markets from unlawful practices. Today’s decision will not dampen our efforts or affect our focus on the mission of the agency.”

PHH, on the other hand, is “extremely gratified” with the court’s decision.  “We are hopeful that the Court’s opinion will provide greater certainty to the entire mortgage industry regarding the industry’s reliance on long-standing regulation as to how to conduct business consistent with RESPA,” PHH said in a statement.  “Regarding the Court’s decision to remand the case to the CFPB to determine whether any mortgage insurers paid more than reasonable market value to the PHH-affiliated reinsurer, we will continue to present the facts and evidence to demonstrate that we complied with RESPA and other laws applicable to our former mortgage reinsurance activities in all respects,” PHH concluded.

CoreLogic – home price index highlights: August 2016


–  Home prices forecast to rise 5.3% over the next year.

–  The highest appreciation was in the West, with Oregon and Washington growing by double digits in August.

–  The low-price tier showed the fastest appreciation of any price tier.


National home prices increased 6.2% year over year in August 2016, according to the latest CoreLogic Home Price Index (HPI®) Report. While the HPI has increased on a year-over-year basis every month since February 2012, prices are still 5.6% below the April 2006 peak. Home prices have risen 42% since bottoming out in March 2011.

Home prices are expected to increase by 5.3% from August 2016 to August 2017, and are projected to return to the April 2006 peak in mid-2017. Adjusting for inflation, US home prices increased 6.3% year over year in August 2016, and are 19.2% below their peak.

Oregon showed the largest HPI gain of all states in August 2016 with a 10.3% year-over-year increase, followed closely by Washington (+10.2%) and Colorado (+9.1%). Nevada home prices were the farthest below their all-time HPI high, still 31.4% below the March 2006 peak.

In addition to the overall indices, CoreLogic analyzes four individual home-price tiers that are calculated relative to the median national home price.  The low-price tier has shown the most price growth in recent months, increasing 9% year over year in August 2016. This price tier also recovered 59.9% from its lowest point in March 2011 and is the only price tier to pass its pre-housing-crisis peak.

Although the low-to-middle tier has recovered 50.4% from its lowest point in March 2011, and has grown by 7.5% year over year, it is still the farthest from its peak of all the price tiers, down 7.1%. The middle- to moderate-price tier increased 6.6% year over year in August 2016, but remains 6.7% below its peak. The high-price tier, which fell the least during the housing crisis, increased by 5% year over year in August 2016, the slowest increase of all the price tiers. The high-price tier remains 5% below its peak.


US service sector hits highest level in nearly a year

A gauge of US service-sector activity rose to the highest level in nearly a year in September, a sign of steady growth for a key segment of the economy.  The Institute for Supply Management on Wednesday said its nonmanufacturing index jumped to 57.1 in September from 51.4 in August.

That was the highest level since October 2015.  Economists surveyed by The Wall Street Journal had expected a September reading of 53.0. A reading above 50 signals expansion while a reading below 50 indicates contraction.  The service sector — ranging from restaurants to real estate — covers the bulk of economic activity in the US Consumer spending on services makes up about two-thirds of all personal expenditures.


MBA – mortgage applications increase

Mortgage applications increased 2.9% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 30, 2016.  The Market Composite Index, a measure of mortgage loan application volume, increased 2.9% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 3% compared with the previous week.

The Refinance Index increased 5% from the previous week. The seasonally adjusted Purchase Index decreased 0.1% from one week earlier. The unadjusted Purchase Index decreased 0.2% compared with the previous week and was 14% lower than the same week one year ago.  The refinance share of mortgage activity increased to 63.8% of total applications from 62.7% the previous week.

The adjustable-rate mortgage (ARM) share of activity increased to 4.5% of total applications.  The FHA share of total applications decreased to 10.0% from 10.2% the week prior. The VA share of total applications decreased to 11.4% from 11.9% the week prior. The USDA share of total applications increased to 0.7% from 0.6% the week prior.


Private sector added 154,000 jobs in September

US private employers added 154,000 jobs in September, below economists’ expectations, a report by a payrolls processor showed on Wednesday.  Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 166,000 jobs, with estimates for the gain ranging from 140,000 to 181,000.  Private payroll gains in the month earlier were revised down to 175,000 from an originally reported 177,000 increase.  The report is jointly developed with Moody’s Analytics.

The ADP figures come ahead of the US Labor Department’s more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment.  Economists polled by Reuters are looking for US private payroll employment to have grown by 170,000 jobs in September, up from a gain of 126,000 the month before. Total non-farm employment is expected to have risen by 175,000.  The unemployment rate is forecast to stay steady at the 4.9% recorded a month earlier.


PHH takes another hit as Bank of America Merrill Lynch pulls mortgage servicing portfolio

It only took a little more than six months for Bank of America Merrill Lynch to decide to pull the rest of its mortgage servicing business from PHH Mortgage Corporation, marking another devastating blow for the company.  PHH Mortgage, a wholly-owned subsidiary of PHH Corp., announced in an 8-K filing with the Securities and Exchange Commission that it received written notice from Bank of America that it is terminating its agreement with PHH, meaning the company will no longer provide private label origination services on behalf of Merrill Lynch, effective March 31, 2017.

Less than a year ago, PHH and Bank of America announced a new agreement for PHH to continue providing mortgage origination services to Merrill Lynch clients.  The agreement renewed a deal that was set to expire on Dec. 31, 2015, and announced a new deal that would begin on Jan. 1, 2016.  However, at the time, the terms of the deal were not disclosed. And according to the latest 8-K filing, Bank of America was allowed to terminate without cause.


The first sign of trouble came just three months after Bank of America and PHH renewed their agreement. PHH disclosed to its investors that BofA decided to pull the origination of new applications for certain mortgages in April 2016.  At the time, the change represented about 20% of Merrill Lynch’s closing dollar volume, and about 5% of PHH’s closing dollar volume. Merrill Lynch’s closing volume accounted for about 26% of PHH’s total volume for 2015.

The news in April came with the potential threat of Merrill Lynch pulling the rest of its serving since PHH received no assurances regarding the remainder of the Merrill Lynch origination activity, which could also be subject to change at any time during 2016 or beyond.  In the most recent 8-K filing, PHH reiterated that earlier this year Bank of America disclosed its intent to insource an estimated 60% of Merrill Lynch’s volume based on closing dollar volume for the year ended Dec. 31, 2015, and BofA expressed its belief this in-sourcing trend from Merrill Lynch would continue.

PHH president and CEO Glen Messina said at the time in a note to investors disclosing the news, “While we are disappointed with these changes, we intend to take appropriate measures to adjust our operations and incorporate these developments in our review of strategic options.”  “We believe these decisions reflect the broader dynamics in our industry, including higher compliance and other costs associated with a more onerous regulatory environment,” he added.


Due to the first time Merrill Lynch pulled its business, PHH became unsure of its earnings, and retracted its previously disclosed earnings guidance for 2016. PHH said it had no intentions of providing new earnings guidance until its comprehensive review of strategic options.  But before PHH could even get to this point, it had to go through a few more hurdles, announcing in August 2016 that it was about to lose another large portion of its mortgage-subservicing portfolio.

PHH disclosed that it received notice from HSBC Bank that it plans to sell the mortgage servicing rights on approximately 139,000 mortgage loans currently subserviced by PHH Mortgage Corporation on behalf of HSBC.  PHH said that HSBC informed the company that the purchaser of the mortgage servicing rights does not plan to continue using PHH as a subservicer.  It wasn’t too long after the HSBC news that PHH said it would cut one-third of its local workforce in Amherst, New York, where it employed 294 people.

Due to this latest termination, PHH said it estimates Merrill Lynch originations will contribute approximately $45 million of pre-tax earnings for fiscal year 2016 based on PHH’s estimate of Merrill Lynch loan closing volume for 2016.  As a result, PHH said in the 8-K filing that it is “taking actions to reduce its facilities footprint and intends to take actions to realign operating costs in response to the loss of Merrill Lynch production volume, including by re-allocating excess originations capacity to portfolio retention efforts and to clients other than Merrill Lynch.”


Trade deficit widened to $40.73 billion in August

The US trade deficit rose more than expected in August as a rise in imports offset higher exports.  The Commerce Department said on Wednesday the trade gap widened 3% to $40.73 billion. Imports hit their highest level since September 2015 while exports were the highest since July of last year. The July trade deficit was revised to $39.55 billion from a previous $39.47 billion.

Economists polled by Reuters had forecast the trade gap decreasing to $39.3 billion in August. When adjusted for inflation, the deficit fell to $57.48 billion from a revised $58.23 billion in July.  Exports have begun to slowly shake off the lingering effects of the dollar’s strength for much of the past two years against the currencies of the United States’ major trading partners.  Exports of goods and services edged up 0.8% to $187.85 billion in August.

Exports to China rose 2.6% and were up 1.2% to the European Union. Exports to the United Kingdom rose 2.4%.  Imports of goods and services increased 1.2% to $228.58 billion in August. Oil prices averaged $39.38 per barrel in August, down 20.2% from a year ago. Imports from China increased 9.5% while the politically sensitive US-China trade deficit widened 11.6% to $33.85 billion in August.



Black Knight Home Price Index Report: July 2016 Transactions 



Black Knight – US home prices up

The Data and Analytics division of Black Knight Financial Services, Inc. released its latest Home Price Index (HPI) report, based on July 2016 residential real estate transactions. The Black Knight HPI utilizes repeat sales data from the nation’s largest public records data set, as well as its market-leading, loan-level mortgage performance data, to produce one of the most complete and accurate measures of home prices available for both disclosure and non-disclosure states.

Non-disclosure states do not include property sales price information as part of their publicly available county recorder data. Black Knight is able to obtain the sales price information for these states by combining and matching records across its unique data assets.

September 26, 2016


– At $266K, the US HPI has risen over 33% from the market’s bottom and is now within just 0.8% of a new national peak

– New York and Minnesota led home price gains among the states, seeing 1.1 and 1% growth for the month, respectively, while Missouri was the only state to see home prices decline (falling 0.1%)

– Albany, Ore., led metro-area growth at 1.3% appreciation. However, New York state metro areas accounted for six of the top 10 biggest monthly movers.

San Jose, Calif., continued to back away from its May 2016 peak, with prices falling another -0.5% in July

– Seeing the fastest rate of appreciation among the 40 largest metros, home prices in Portland, Ore., and Seattle have increased over 10% since the start of the year

– Home prices in nine of the nation’s 20 largest states and 14 of the 40 largest metros hit new peaks in July


Stocks fall ahead of Clinton-Trump debate

Wall Street stocks slumped in early trade Monday as a risk-averse atmosphere gripped investors ahead of the first US presidential debate while worries over Germany’s Deutsche Bank AG weighed on financials.  Heavy losses for Deutsche Bank took a toll on European markets and put pressure on US financial shares.

US-listed shares of Deutsche Bank fell 5.7%, after Germany’s Focus Magazine reported over the weekend that Chancellor Angela Merkel wouldn’t support state aid for the bank. The bank denied it had asked for any support, according to a report from Dow Jones Newswires, and the government also dismissed the report.

The S&P 500 index dropped 12 points, or 0.5%, to 2,153 with financials leading losses down nearly 1%.  The Dow Jones Industrial Average was down 124 points, or 0.7%, to 18,134 with nearly all 30 blue-chip stocks trading lower. Pfizer Inc. was leading decliners, down 1.7%, but losses in Goldman Sachs Group, Inc. and J.P. Morgan Chase & Co contributed heavily to the Dow’s drop.  Meanwhile the Nasdaq Composite Index declined 35 points, or 0.7%, to 5,270.


WSJ – US new home sales fell 7.6% in August

Sales of newly built homes pulled back in August after surging the prior month, a possible sign of weakening momentum across the US housing sector.  Purchases of new single-family homes declined 7.6% in August from the prior month to a seasonally adjusted annual rate of 609,000, the Commerce Department said Monday. It was the largest one-month drop since September 2015.

Economists surveyed by The Wall Street Journal had expected sales would fall 8.0% to a 602,000 pace in August.  July sales were revised up to a 659,000 rate from an earlier estimate of 654,000, a jump of 13.8% from June to the strongest monthly sales pace since October 2007.

New-home sales account for a fairly small slice of US home-buying activity, and sales data can be extremely volatile from month to month. August’s 7.6% fall in sales from the prior month came with a margin of error of 10.7 percentage points.  More broadly, through the first eight months of 2016, new-home sales were up 13.3% compared with the same period in 2015.


The US housing market has appeared to slow in recent months, despite continued low borrowing costs. The average interest rate on a 30-year fixed-rate mortgage in August was 3.44%, unchanged from July and down from 3.57% in June, according to Freddie Mac.  Sales of previously owned homes slipped in August for the second straight month, squeezed by tight inventory and high prices.

Existing-home sales were up just 0.8% last month compared with a year earlier, according to the National Association of Realtors.  Also, Residential building permits and housing starts both fell in August from the prior month, according to Commerce Department data. Strength in single-family home construction this year has been offset by weakness in the multifamily sector.

News Corp, owner of The Wall Street Journal, also operates under license from the National Association of Realtors.  Monday’s report showed there was a 4.6-month supply of newly built homes available at the end of August, given the current sales pace. The median price of new homes sold in August was $284,000, down 5.4% compared with a year earlier.


Gas prices up 4 cents to $2.25 a gallon

The average price of gasoline in the US has risen four cents over the past two weeks to $2.25 a gallon for regular grade. Industry analyst Trilby Lundberg said Sunday that retailers and refiners have upped their prices in response to a rise in the cost of crude oil.

Still, the average price per gallon is a dime less than it was a year ago.  The Lundberg Survey found the average price of mid-grade gasoline was $2.53 a gallon while premium was $2.74 a gallon.  The average price for diesel in Friday’s survey was $2.40 a gallon.  The highest average price for regular gas in the contiguous US was $2.80 in San Francisco. The lowest was $1.91 in Baton Rouge, Louisiana.


WSJ – homeowners are choosing more affordable states

Homeowners making moves out of state are increasingly selling out of expensive markets like California, where price escalation is steep, and buying into lower-cost markets such as Texas and Arizona, according to an analysis by data company CoreLogic.

Overall between 2000 and 2015, 2½ home sellers left California for every out-of-state buyer coming into the state, the study found, whereas in Texas, Arizona and North Carolina there have been more buyers coming than sellers leaving.

That trend has accelerated as the housing recovery has progressed, with out-migration increasing among homeowners in fast-appreciating markets like California and Colorado, and decreasing in more affordable markets such as Texas.  “When most people move, they’re either moving for opportunity or affordability,” said Sam Khater, deputy chief economist at CoreLogic, who analyzed the data. “Moving across state lines you get a little bit of both.

I can leave a place that’s expensive and rapidly appreciating, and I can get a job that pays the same or is better, but the cost of living is lower.”   Californians moving to Texas, the median purchase price in the markets they moved to was 40% cheaper than the median sale price of the home they left.


The study drew on public records data that tracks and matches those selling homes in one state and buying in another over time, providing a window into regional patterns in mobility and price disparity. Though more owners are moving out of states like California than moving in, the overall percentage of sellers that move to another state has declined since 2008 across the US, according to CoreLogic.

For all homeowners who moved across state lines between 2000 and 2015, prices were appreciating significantly faster in the markets where they sold homes than where they ended up buying, the data showed. Prices increased 62% on average over that time in areas where movers sold homes, compared with a 37% price increase in markets where they moved.

California offers a prime example. The median sale price for homeowners leaving the state was $495,000, compared with a median purchase price of $315,000 in the markets where they moved—a 36% decrease.  For Californians moving to Texas, the gap was even wider: a $510,000 median selling price in California compared with a $307,663 purchase price in Texas—a drop of 40%.


Wells Fargo employees file class action lawsuit

Wells Fargo, which is already facing investigations from the Department of Justice over its cross-selling practices and subpoenas from attorneys from New York, San Francisco and North Carolina, faced a new challenge on Saturday, as two former employees filed a class action suit against the bank on behalf of all the employees who were penalized for not meeting aggressive sales quotas.

Trying to meet those quotas led some employees to open more than 2 million fake accounts for customers who did not know or consent to the accounts. The employees filing suit against Wells Fargo allege that their reluctance to commit fraud to reach sales goals led them to be penalized.

From Reuters:  “Wells Fargo fired or demoted employees who failed to meet unrealistic quotas while at the same time providing promotions to employees who met these quotas by opening fraudulent accounts,” the lawsuit filed on Thursday in California Superior Court in Los Angeles County said.  If last Tuesday’s hearing is any indication, an especially sore point for the bank will be the fact that low-level employees were punished, while their superiors were rewarded.


While executives at the top benefited from the activity, the blame landed on thousands of $12-per-hour employees who tried to meet the quotas and were often required to work off the clock to do so, the lawsuit said.

In last week’s hearing, Carrie Tolstedt, the former head of Wells banking unit responsible for the fraud, was roundly criticized for being allowed to “retire” in the midst of the scandal with $124 million in compensation. Efforts to pressure the company to “clawback” her compensation grew louder in the last few days, and now attention is also focused on Stumpf’s compensation.

From the LA Times on Saturday:  “A review of the bank’s regulatory filings shows that Stumpf could receive as many as 1.15 million additional shares of stock over the next three years, though the number could be lower depending on the bank’s financial performance.  Those shares, which have been granted but have not vested — meaning Stumpf does not own them yet — were worth $52.8 million at Friday’s closing price. That’s a substantial figure even for an executive whose annual compensation has totaled about $20 million for the last several years.”

MBA – mortgage applications down


Mortgage applications decreased 7.3% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 16, 2016. The prior week’s results included an adjustment for the Labor Day holiday.

The Market Composite Index, a measure of mortgage loan application volume, decreased 7.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 15% compared with the previous week.

The Refinance Index decreased 8% from the previous week to the lowest level since June 2016. The seasonally adjusted Purchase Index decreased 7% from one week earlier. The unadjusted Purchase Index increased 15% compared with the previous week and was 3% higher than the same week one year ago.

The refinance share of mortgage activity increased to 63.1% of total applications from 62.9% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4.4% of total applications.  The FHA share of total applications increased to 10.2% from 9.6% the week prior. The VA share of total applications decreased to 11.6% from 12.0% the week prior. The USDA share of total applications remained unchanged from 0.7% the week prior.


US extends overtime pay to 4.2 million salaried workers

The Obama administration on Tuesday unveiled the final version of a long-awaited and controversial rule to extend overtime pay to 4.2 million US workers, which marks one of the administration’s most significant moves to address stagnant wages.

The rule, which has drawn intense criticism from business groups and Republicans, doubles the maximum annual income a salaried worker can earn and still be automatically eligible for overtime pay from $23,660 to $47,476 and requires that threshold to be updated every three years.

It takes effect Dec. 1.  Officials said many workers will earn more money, an estimated total of $12 billion over the next decade, while others will work fewer hours for the same pay.  The rule will likely touch nearly every sector of the US economy but is expected to have the greatest impact on nonprofit groups, retail companies, hotels and restaurants, which have many management workers whose salaries are below the new threshold.

Business groups, which lobbied heavily against the changes, say companies will be forced to cut wages and hours and may slow hiring.  The rule will likely face legal challenges, including claims that the US Labor Department flouted legal requirements for creating new regulations. Republicans in Congress have said they will move to block the rule, but they would need to overcome a veto from President Barack Obama.

Any federal standard above the $35,100 overtime threshold in New York, which has a high cost of living, will inhibit economic growth in more rural states in the South and Midwest, Tammy McCutchen, a Washington D.C. lawyer who works with the US Chamber of Commerce, said on Tuesday before the final rule was announced.

The threshold also disappointed proponents of the new rule, including Ross Eisenbrey of the left-leaning Economic Policy Institute, who first pitched an overhaul to the White House in 2013.  It means a million fewer employees will be helped,” he said before the rule was released.


NAR – top 10 markets in dire need of more single-family housing starts

Single-family home construction is currently lacking in 80% of measured metro areas despite steady job creation and the low activity is creating a housing shortage crisis that is curtailing affordability and threatening to hold back prospective buyers in many of the largest cities in the country, according to new research from the National Association of Realtors (NAR).

NAR’s study reviewed new home construction relative to job gains over a three-year period (2013-2015) in 171 metropolitan statistical areas (MSAs) throughout the US to determine the markets with the greatest shortage of single-family housing starts. The findings reveal that single-family construction is startlingly underperforming in most of the US, with markets in the West making up half of the top ten areas with the largest deficit of newly built homes.

Lawrence Yun, NAR chief economist, says a large swath of the country continues to be plagued by inventory shortages exasperated by critically low homebuilding activity. “Inadequate single-family home construction since the Great Recession has had a detrimental impact on the housing market by accelerating price growth and making it very difficult for prospective buyers to find an affordable home – especially young adults,” he said. “Without the expected pick-up in building as job gains rose in recent years, new and existing inventory has shrunk, prices have shot up and affordability has eroded despite mortgage rates at or near historic lows.”


NAR analyzed employment growth in relation to single-family housing starts in the three-year period from 2012 through 2015. Historically, the average ratio for the annual change in total jobs to permits is 1.6 for single-family homes. The research found that 80% of measured markets had a ratio above 1.6, which indicates inadequate new construction in most of the country.

The average ratio for areas examined was 3.4.  Using each metro area’s jobs-to-permits ratio, NAR then calculated the amount of permits needed in each metro area to balance the ratio back to its historical average of 1.6. The higher the number of permits required, the more severe the shortage was in each market.  The top 10 metro areas with the biggest need for more single-family housing starts to get back to the historical average ratio are:

–  New York (218,541 permits required)

–  Dallas (132,482 permits required)

–  San Francisco (127,412 permits required)

–  Miami (118,937 permits required)

–  Chicago (94,457 permits required)

–  Atlanta (93,627 permits required)

–  Seattle (73,135 permits required)

–  San Jose, California (69,042 permits required)

–  Denver (67,403 permits required)

–  San Diego (55,825 permits required)


According to Yun, most of the metro areas with the biggest need for increased construction have strong appetites for buying, home-price growth that outpaces incomes and common instances where homes sell very quickly.

Their healthy job markets continue to attract an influx of potential homeowners, only fueling the need for more housing.  “Although a few small cities with high ratios did not make the national rank for absolute permit shortages, their supply shortages are still meaningful at the local level and could become a bigger issue if job gains hold steady and the current pace of construction remains at its nearly non-existent level,” adds Yun.

Single-family housing starts are seen as adequate to local job growth (at a ratio of 1.6) in Pensacola, Florida; Huntsville, Alabama; Columbia, South Carolina; and Virginia Beach, Virginia.  “The limited number of listings in several markets means that many available homes are receiving multiple offers and going under contract rather quickly,” says NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Florida. “It’s important in this situation to remain patient and not get caught up offering more than your budget allows. Find a Realtor® with experience serving clients in your desired area and rely on them to deploy a negotiation strategy that ensures success while sticking within budget.”


Looking ahead, Yun says the good news is that the ratio in many areas slightly moved downward in 2015 compared to 2014 as builders started to respond accordingly to local supply shortages. However, it’ll likely be multiple years before inventory rebounds in many of the markets because homebuilders continue to face a plethora of hurdles, including permit delays, higher construction, regulatory and labor costs, difficulty finding skilled workers and the exhausting process many smaller builders go through to obtain financing.

“Recent NAR survey data show an overwhelming consumer preference towards single-family homes, including among millennials, who are increasingly buying them in suburban areas,” concludes Yun. “A mix of new starter-homes for first-time buyers and larger homes for families looking to trade up is needed at this moment to ensure homeownership opportunities remain in reach to qualified prospective buyers at all ages and income levels.”


Target to buy back $5B shares

Target on Wednesday announced a new $5 billion share buyback plan.  The retailer said it would begin repurchasing shares under the new plan upon completion of its current $10 billion program, which is expected before the end of fiscal 2016 in January.  Target also declared a dividend of 60 cents per common share for the fourth quarter, unchanged from the third quarter.


NAHB – housing production hits a mild speed bump in August

Nationwide housing starts fell 5.8% to a seasonally adjusted annual rate of 1.14 million units in August, according to newly released data from the US Housing and Urban Development and the Commerce Department. Overall permit issuance edged 0.4% lower.  “After two months of gains, the housing market gave back a bit in August,” said Ed Brady, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Bloomington, Ill.

“However, with builders reporting low inventory levels and rising confidence, we expect more consumers will return to the market in the months ahead.”  “The August reading represents a one-month blip in what has been a long-term, gradual recovery,” said NAHB Chief Economist Robert Dietz. “On a year-over-year basis, single-family starts are up 9% while multifamily construction continues to level off at a solid level as that sector seeks to find a balance between supply and demand.”

Both housing sectors posted production declines in August. Single-family housing starts fell 6% to a seasonally adjusted annual rate of 722,000 units while multifamily production declined 5.4% to 420,000 units.  Combined single- and multifamily starts increased in three of the four regions in August. The Northeast, Midwest and West posted respective gains of 7.6%, 5.6% and 1.8%, respectively. The South registered a 14.8% decline.  Single-family permits rose 3.7% in August to a rate of 737,000 while multifamily permits dropped 7.2% to 402,000.  Permit issuance increased 5.1% in the Northeast, 4.2% in the Midwest and 0.7% in the West. Meanwhile, the South posted a loss of 3.4%.


Zillow – August home sales forecast: steady into Autumn

–  Zillow expects existing home sales to rise 2.25% in August from July, to 5.51 million units at a seasonally adjusted annual rate (SAAR), roughly reversing last month’s surprisingly large decline.

–  New home sales should fall 0.9% to 648,000 units (SAAR), up 28.4% over the year and holding near their highest levels since fall 2007.

–  The median price of existing homes sold is expected to rise 1.4%, and the median price of new homes sold should rise 4.2%.

As the summer winds to a close, August existing home sales are expected to make up some of the ground lost earlier in July, while sales of new homes largely keep chugging upward, according to Zillow’s August home sales forecast.

Tight inventory finally caught up with existing home sales in July with sales falling 3.2% after meeting or beating expectations for much of the spring. The August home sales forecast predicts a slight recovery in existing home sales, only bringing them back in line with the range that has prevailed since March.  Our forecast for existing home sales points to a 2.25% increase from July to August and a 4.2% rise from a year ago, bringing sales to 5.51 million units at a seasonally adjusted annual rate (SAAR).


New home sales have also proven surprisingly strong, beating expectations for the past eight months. During the early years of the economic recovery, existing home sales recovered and new home sales remained stubbornly low. But in 2016, this narrative has reversed: Existing home sales have stagnated – weighed down, in part, by tight inventory – while new home sales have jumped sharply upward. In July, new home sales surged 12.4% to their highest level since fall 2007.

The August home sales forecast suggests new home sales will hold roughly steady near these nine-year highs, edging down only 0.9% to 648,000 units (SAAR). This would leave new home sales up 28.4% compared to August 2015. Given July’s exceptionally strong results, it would also not be a surprise to see a downward revision to July’s new home sales numbers.  We expect the median price of existing homes sold to grow 1.4% to $232,400 (up 6.15% over the year) and the median price of new homes sold to rise 4.2% to $310,700 (up 3.0% over the year).


NAR – real estate firms have positive outlook, despite sales volume decrease

The vast majority of real estate firms have an optimistic outlook for the future of the industry’s profitability and growth, according to the National Association of Realtors (NAR) 2016 Profile of Real Estate Firms. Profitability expectations have declined from the 2015 survey, mainly due to inventory shortages and home-price growth, but real estate firms remain confident about their overall future profitability.

The report is based on a survey of firm executives who are members of the National Association of Realtors and provides insight into the business characteristics and activity of firms, benefits and education provided to agents and outlook for the future.

For a second year in a row, a majority of real estate firms have a positive outlook on profitability, with 91% of all firms expecting their net income to increase or remain the same over the next year,” said NAR President Tom Salomone, broker-owner of Real Estate II, Inc. in Coral Springs, Florida. “Although there is an overwhelmingly positive outlook, low inventory and high prices have led to an overall decrease in real estate firm’s sales volume since last year’s report. High home prices are holding back first-time buyers and low inventory means fewer sales at a time of increased Realtor membership.”


In 2016, 64% of firms expect profitability (net income) from all real estate activities to increase in the next year, down from 68% in 2015. Sixty-seven% of commercial real estate firms expect profitability to improve (down from 75% in 2015), as well as 70% of large firms with four or more offices expect profitability to improve (down from 79% in the previous year).

Residential firms are a little less optimistic as 65% expect to see an increase in their net income.  According to the report, the typical residential real estate firm’s brokerage sales volume was $6.3 million, while the typical commercial real estate firm’s brokerage sales volume was $4.5 million. The size of the firm has a large impact on its sales volume; firms with one office had median brokerage sales of $4.5 million in 2015, while those with four or more offices had median brokerage sales of $203.8 million in 2015.

Forty-three% of real estate firms expect competition to increase in the next year from non-traditional firms, down from 45% in 2015. Forty-six% of firms see competition from virtual firms increasing (up from 41% in 2015), while only 17% expect competition increasing from traditional brick-and-mortar firms.


The sense of competition has fueled more recruitment since the 2015 survey. Forty-seven% of firms reported they are actively recruiting sales agents in 2016, up from 44% in 2015. This is more common with residential firms (51%) than commercial firms (32%) and more common among offices with four offices or more (88%) than firms with one office (39%).

Real estate firms are also seeing a growth in agents. Seventy-eight% of real estate firms have a single office; these offices typically include three full-time real estate licensees, up from two in 2015. This growth mirrors the growth in membership data found in NAR’s 2016 Member Profile, which found that 20% of members had one year or less experience, rising from 11% in 2015.

The study also found that firms had 30% of their customer inquiries from past client referrals, 30% from repeat business from past clients, 10% from their websites, 7% through social media and 2% from open houses.


When asked what they see as the biggest challenges in the next two years, firms cited profitability (49%), keeping up with technology (48%), maintaining sufficient inventory (48%) and recruiting younger agents (36%).

Firms also predicted the effect different generations of homebuyers will have on the industry.  According to the study, 48% of firms are concerned with Generation Y’s ability to buy a home due to stagnant growth, the job market and their debt to income ratios.  Forty-six% of firms are concerned about the recruitment of Gen Y and Gen X real estate professionals.  The study also asked about professional volunteer work and supporting the local community.

Eighty-two% of firms encourage their agents to volunteer in the local community, 48% at the local association of Realtors®, 28% at the state association of Realtors and 19% with NAR. According to the study, residential firms are more likely than commercial firms to encourage agents to volunteer.  The NAR 2016 Profile of Real Estate Firms was based on an online survey sent in July 2016 to a national sample of 147,835 executives at real estate firms. This generated 4,567 useable responses with a response rate of 3.1%.


–  The foreclosure inventory fell 29% year over year in July 2016.

–  The inventory of mortgages in serious delinquency fell 17% year over year in July 2016.

–  All states except North Dakota and Wyoming had a year-over-year decrease in the serious delinquency rate.

The national foreclosure inventory – the number of loans in the foreclosure process – fell 29.1% year over year in July 2016, according to the latest CoreLogic Foreclosure Report. The foreclosure inventory has fallen on a year-over-year basis every month since November 2011, and in July 2016 it was 77% below the January 2011 peak.

The foreclosure rate – the share of all loans in the foreclosure process – fell to 0.9% in July 2016, down from 1.3% in July 2015. While the foreclosure rate is back to 2007 levels, it is still above the pre-housing-crisis average foreclosure rate of 0.6% between 2000 and 2006. Judicial foreclosure states continued to have a much higher average foreclosure rate (1.5%) in July 2016 than non-judicial states (0.5%).

The collective foreclosure rate in non-judicial states is close to the pre-crisis rate of 0.4%, while the foreclosure rate in judicial states is almost double the pre-crisis rate of 0.8%.  As of July 2016, judicial states had 42% of the nation’s outstanding mortgages but 70% of all loans in foreclosure.

North Dakota was the only state to post a year-over-year increase in foreclosure inventory, increasing by 5.8% year over year. Despite the increase in the number of foreclosures, the foreclosure rate in North Dakota remained low at 0.4%.

The serious delinquency rate – the share of loans 90 or more days overdue – was 2.9% in July 2016, down from 3.6% in July 2015. The July 2016 inventory of mortgages in serious delinquency fell 17.3% year over year and was 68.6% below its 2010 peak. The serious delinquency rate fell year over year in all states except North Dakota and Wyoming, where it rose slightly – 0.1% – in each.


Wells Fargo’s unit to sell fund administration business

Wells Fargo & Co said it agreed to sell its fund administration business – Wells Fargo Global Fund Services (GFS) – to SS&C Technologies Holdings Inc.  The terms of the transaction were not disclosed, Wells Fargo said in a statement.

The fund administration business is part of Well Fargo’s investment banking and capital markets business.  The announcement comes amid a gathering public storm over a fake account scandal at the bank that has led to $190 million in fines and the firing of 5,300 employees.  Well Fargo’s shares have lost about 6% of their value since last week, when US regulators unveiled the fines.

As a result, the bank has ceded its position as the largest US bank by market capitalization to rival JPMorgan Chase & Co .  Politicians are calling for an investigation, and Wells Fargo and regulators are expected to testify in the Senate next week.  Fund administrator SS&C Technologies said the deal would add 250 employees serving more than 130 fund relationships in United States, UK, Singapore and Hong Kong.  The deal is expected to close in the fourth quarter of 2016.


MBA – mortgage applications increase in latest MBA weekly survey

Mortgage applications increased 4.2% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 9, 2016. This week’s results included an adjustment for the Labor Day holiday.

The Market Composite Index, a measure of mortgage loan application volume, increased 4.2% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 17% compared with the previous week. The Refinance Index increased 2% from the previous week. The seasonally adjusted Purchase Index increased 9% from one week earlier.

The unadjusted Purchase Index decreased 15% compared with the previous week and was 8% higher than the same week one year ago.  The refinance share of mortgage activity decreased to 62.9% of total applications from 64.0% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 4.6% of total applications.  The FHA share of total applications increased to 9.6% from 9.5% the week prior. The VA share of total applications increased to 12.0% from 11.9% the week prior. The USDA share of total applications increased to 0.7% from 0.6% the week prior.


US import prices post first drop in six months

US import prices fell for the first time in six months in August on declining petroleum and food costs, pointing to a tame inflation environment that could encourage the Federal Reserve to keep interest rates steady next week.

The Labor Department said on Wednesday import prices decreased 0.2% in August after an unrevised 0.1% gain in July. Last month’s drop was the first since February.  Economists polled by Reuters had forecast import prices slipping 0.1% in August. In the 12 months through August, import prices fell 2.2%, the smallest decrease since October 2014, after declining 3.7% in July.

Import prices have been constrained by a strong dollar and cheap oil. That, together with sluggish wage growth have left inflation persistently running below the Fed’s 2% target.  August’s weak inflation reading added to a slowdown in job growth and soft manufacturing and services sectors surveys in reducing the likelihood of an interest rate hike at the Fed’s Sept. 20-21 policy meeting.  Fed Governor Lael Brainard said on Monday she wanted to see stronger consumer spending data and signs of rising inflation before raising interest rates.


Republican plan to abolish Dodd-Frank passes committee, full House vote coming

The Republican-crafted plan to repeal the Dodd-Frank Wall Street Reform and Consumer Protection Act is one step closer to reality after the House Financial Services Committee voted Tuesday to pass the Financial CHOICE Act.

The Financial CHOICE Act, introduced earlier this year by House Financial Services Committee Chairman Rep. Jeb Hensarling, R-TX, would replace Dodd-Frank with a “pro-growth, pro-consumer” alternative that would end “too-big-to-fail bailouts, bring significant reforms to the Consumer Financial Protection Bureau, and provide some regulatory relief for certain financial institutions.

The bill passed out of the House Financial Services Committee Tuesday by a vote of 30-26 and will now move to a full vote in the House of Representatives.  An article on the subject from the Wall Street Journal suggests that the bill is “likely” to pass a full House vote but “isn’t likely to get traction” in the Senate.

And even if it does, President Obama would certainly veto the bill, but that didn’t stop the Republican arm of the House Financial Services Committee from celebrating the narrow passage of the bill.  “The Financial CHOICE Act will help grow the economy for all Americans, not just those at the top,” Hensarling said of the vote. “It promotes strong and transparent markets to revitalize job creation in our poorest communities and ensures every American has the opportunity achieve financial independence, no matter where they start out in life.”  The bill passed out of committee without extensive discussion, negotiation, or any added amendments, which can either be a sign of a legislative slam dunk or an absolute non-starter.


It appears that the latter is the case here, as the Democrats chose not to offer any amendments to the bill.  “Mr. Chairman, this bill is so bad that it simply cannot be fixed,” Rep. Maxine Waters, D-CA, the ranking member of the House Financial Services Committee, said during the hearing.  “This markup is not a serious attempt to move thoughtful legislation, evidenced by the fact that we only had one hearing on one portion of the bill,” Waters continued.  “It’s clear that this is a rushed, partisan messaging tool, though why anyone would want to push legislation to deregulate Wall Street at a time like this is beyond me,” Waters added. “So let’s not waste any more time on this. Democrats will not offer any amendments, and we move to dispense with this political theater.”

The bill then moved to a vote, and passed 30-26.  The Republicans, unsurprisingly, held a different view of how the events of the day unfolded, noting that the Democrats on the committee, “despite having spent months criticizing the Financial CHOICE Act, refused to offer a single amendment to the bill.”

The Republicans also noted that the Financial CHOICE Act received “strong support” from community banks and credit unions, small business groups and conservative organizations, but not from “large” financial institutions.  “Democrats just voted against a bill that increases penalties against those who commit financial fraud,” Hensarling said of the vote.  “They just voted against a bill that ends taxpayer-funded bailouts, and they just voted against legislation that provides relief from Washington’s crushing regulatory burden for small banks, credit unions and consumers,” Hensarling continued.  “The bill holds Wall Street accountable with the toughest, strongest, strictest penalties ever – far greater than those in Dodd-Frank,” Hensarling added. “And as recent headlines attest, obviously stronger penalties are needed. It requires banks to be well capitalized to prevent another financial crisis and puts in place the toughest penalties in history to protect consumers from fraud and deception.”


Obama administration reportedly spawns new goal to accept 110,000 refugees

As conflicts in Syria and other parts of the world prompt people to find asylum elsewhere, the Obama administration has a new goal to accept at least 110,000 refugees in fiscal year 2017, according to The Washington Post.  The Post said Secretary of State John Kerry told lawmakers about the new target Tuesday.

If established, the goal would represent a 57% increase in refugee arrivals since 2015, said the report, which cited a senior administration official.  The question on whether to allow more refugees to enter has been a hot issue in the presidential election. Democrat Hillary Clinton has said the United States should welcome Syrian refugees. Republican Donald Trump has said the US should stop the flow of Syrian refugees and, if elected, said he would ban immigration from areas with terrorism ties.

Fannie Mae sets official date for using trended credit data

The launch date is finally official after much talk and hype surrounding when Fannie Mae would release its update to Desktop Underwriter program that will open up the credit box to potential borrowers previously deemed unworthy.

According to Fannie Mae, during the weekend of Sept. 24, 2016 Fannie Mae will implement Desktop Underwriter Version 10.0. The changes included in this release will apply to new loan casefiles submitted to DU Version 10.0 on or after the release weekend.  The launch date was unexpectedly delayed in mid-June only days before it was supposed to be released on the weekend of June 25.  But this isn’t just any update, and the delay in implementation meant a longer wait time for those eager borrowers on the edge of eligibility.

So why is this one such a big deal? The update is notable and significant because it includes the requirement that lenders must begin using trended credit data when underwriting single-family borrowers.

Fannie Mae is working with Equifax and TransUnion to provide the data.  As it stands, credit reports used in mortgage lending only indicate the outstanding balance and if a borrower has been on time or delinquent on existing credit accounts such as credit cards, mortgages or student loans.

Through trended credit data, lenders can access the monthly payment amounts that a consumer has made on these accounts over time.  Equifax explained that trended data expands the credit information used for evaluating a home loan applicant, adding a more dynamic two-year picture of the applicant’s history managing revolving accounts.

As to how the amount a borrower pays on their credit card account demonstrate how they will pay their mortgage, Fannie Mae explained:  “The trended credit data will be used by the DU risk assessment to evaluate how the borrower manages his/her revolving credit card accounts. A borrower who uses revolving accounts conservatively (low revolving credit utilization and/or regular payoff of revolving balance) will be considered a lower risk. A borrower whose revolving credit utilization is high and/or who makes only the minimum monthly payment each month will be considered higher risk.”


Clinton’s pneumonia jolts the presidential race

Hillary Clinton’s campaign said Sunday she had been diagnosed with pneumonia and would cancel a planned two-day swing through California, hours after the Democratic presidential nominee abruptly left a 9/11 memorial ceremony in New York for what her aides described as her feeling “overheated.”

The diagnosis, coupled with a remark by Mrs. Clinton late Friday criticizing some Trump supporters as a “basket of deplorables,” is an unwelcome distraction for a campaign facing a tightening of polls in recent weeks.   Amateur video taken Sunday near Ground Zero in New York showed Mrs. Clinton looking wobbly as she got into her motorcade with an assist from staff and Secret Service agents.

The 68-year-old went to her daughter’s apartment and emerged about two hours later, waving at the waiting cameras.  “I’m feeling great,” she said. “It’s a beautiful day in New York.”  Her Republican challenger, businessman Donald Trump, has sought to fan concerns about Mrs. Clinton’s health, questioning her stamina and chiding her for keeping what he says is a light campaign schedule.

Mrs. Clinton’s doctor examined the candidate at her home in Chappaqua, N.Y., later Sunday and said in a written statement that she had been diagnosed two days earlier with pneumonia. The doctor on Sunday said she had been dehydrated and overheated and was “recovering nicely.”  The Clinton campaign didn’t respond to a request for comment about why they didn’t reveal the diagnosis earlier. Mr. Trump hadn’t commented on the matter as of Sunday night.


The campaign said Mrs. Clinton was canceling a planned trip to California on Monday and Tuesday. She had planned to attend fundraisers and tape an appearance on Ellen DeGeneres’s talk show.  Mr. Trump, who is 70, has called on Mrs. Clinton to release more detailed medical records. In December 2012, Mrs. Clinton fainted and suffered a concussion.

She was hospitalized and treated for a blood clot in her head.  In July 2015, her personal physician wrote a letter saying Mrs. Clinton was in “excellent physical condition and fit to serve” as president. The letter said Mrs. Clinton suffered from hypothyroidism and seasonal pollen allergies.

With polls showing voters question Mrs. Clinton’s honesty, the delay in revealing her condition after Sunday’s incident could further damage her credibility, critics said.  “I can’t understand the Clinton operation. You have to frankly tell people what happened and do so right away,” said Ari Fleischer, White House press secretary under President George. W. Bush. “If you do that, these things really are not big deals.

They only become big if it doesn’t appear you’re dealing straight.”   The Clinton campaign’s recent difficulties stand in contrast to a summer in which its allies saw a position so commanding they didn’t think Mrs. Clinton needed to do much in the way of campaigning. She spent parts of August holed up in private fundraising events.


The release in recent weeks of new documents on Mrs. Clinton’s use of private email while secretary of state, as well as news coverage about Mrs. Clinton’s ties to her family foundation’s donors, have weighed on her poll numbers. An average of polls by Real Clear Politics shows Mr. Trump down by just 3 points.

Whit Ayres, a Republican pollster, said polls showing that so many voters view Mrs. Clinton as unlikable and untrustworthy are “all you’ve got to know to figure out why this race is reasonably close.” Polls have shown Mr. Trump regarded even more unfavorably.  A fresh round of polls shows the race tightening in important battleground states. A pair of Democratic states in the last two presidential races—Nevada and New Hampshire—are now too close to call, according to a new Wall Street Journal/NBC News/Marist poll.

Another potential problem for the campaign was the remark Friday night. Assessing some of Mr. Trump’s voters at a fundraiser, Mrs. Clinton said about half fall into what she called “the basket of deplorables.”  The next day, Mrs. Clinton had put out a statement saying she was “wrong” to have demeaned some Trump voters in this fashion.  “There’s no value in attacking a candidate’s voters for how they vote,” said Chris Kofinis, a Democratic strategist. A better strategy, he said, is to keep the focus squarely on one’s opponent.


WSJ – stretch of Chicago river to get $1.5 billion makeover

A once-gritty stretch along the Chicago River across from an industrial sprawl of concrete and train tracks is headed for transformation as a $1.5 billion development of high-rises, townhomes and a public river walk breaks ground Monday.

The project, known as Riverline, is part of a monumental facelift as developers drawn to the Chicago River build up empty banks along the waterway’s southern stretch. It will eventually bring more than 3,600 new residences to a rare undeveloped plot just south of the downtown Loop.  “The open space was the major initial driver of the development,” said Tom Weeks, general manager of development at Lendlease in Chicago, a co-developer on the project. “We wanted a place where people would play or just sit and contemplate or walk.”

Eight high-rises, a complex of townhouses and several acres of public green, including kayak rental and a continuous river walk longer than five football fields, will replace overgrown brush when it is complete in about a decade, the developers say.

Despite rising violence on the city’s south and west sides, Chicago is among a number of US cities seeing an influx of young, educated workers to their downtown cores.  Riverline adds to a frenzy of construction and revitalization that has taken hold on the Chicago River, despite a continued struggle against odor and pollution problems after decades of channeling the city’s sewage and industrial waste from Chicago’s factories and once-notorious meat-packing plants.  “In a lot of ways, Chicago turned its back on the river,” said Colin Kihnke, president of CMK Companies Ltd., a co-developer of Riverline.


The city has pushed for 15 years to enliven the neglected waterway—including new stretches of walkway at the water level. Developers have transformed riverside factories and old cold-storage facilities into posh loft apartments, and built new glittering skyscrapers, including a tryptich of high-rises being developed by the Kennedys.

Riverline isn’t the only project changing the face of the river in the South Loop. Related Midwest is planning to invest billions to build up an even bigger plot of overgrown riverfront directly south of Riverline, the company said in an e-mail.  The 62-acre site will unite Riverline with Chinatown in the south and is expected to be complete in around 15 years, though Related Midwest hasn’t yet released specifics.

Josh Ellis, a South Loop resident and board member for the Greater South Loop Association, said the neighborhood is eager to have the stretch of river including Riverline to Chinatown in the south developed.  “People want the South Loop to be a riverfront neighborhood,” Mr. Ellis said. Residents hope the projects will spur infrastructure improvements, including an additional high school and a reconfiguration of roads to prevent bottlenecks, he said.

The first phase of Riverline, designed by Perkins + Will with landscape architects Hoerr Schaudt, will include a 29-story rental building, an 18-story building of condos, and a community of 62 townhomes.  “People want energy and enthusiasm and a place to interact with the water,” said Mr. Ellis, who is also director at the Metropolitan Planning Council. “They want the rivers to be part of the urban fabric.”


Gas prices up 4 cents cent to $2.21 a gallon

The average price of gasoline in the US is up four cents over the past three weeks to $2.21 a gallon for regular grade.  Industry analyst Trilby Lundberg said Sunday that higher crude oil costs caused refiners and retailers to bump up their prices.

The average price is 23 cents lower than a year ago.  The Lundberg Survey found the average price of midgrade unleaded is $2.49 a gallon, and the average price of premium is $2.71 a gallon.  The highest average price for regular gas in the contiguous US is $2.71 a gallon in San Francisco. The lowest is $1.91 in Jackson, Mississippi.  The US average diesel price is $2.39 per gallon, up about four cents from three weeks ago.


WSJ – stock selloff resumes amid concerns about tighter monetary policy

-mining and energy shares fall as crude oil drops

Stocks, bonds and oil prices continued to fall Monday amid concerns about tighter monetary policy, extending a rout that halted two months of calm summer trading.  The Dow Jones Industrial Average dropped 44 points, or 0.3%, to 18041 shortly after the opening bell. The S&P 500 declined 0.2%, and the Nasdaq Composite fell 0.1%.

The Stoxx Europe 600 shed 1.6%, while Hong Kong’s Hang Seng Index fell 3.4% in its worst day since February. Markets in Shanghai, Japan and Australia all closed with losses of about 2%.  The selloff in stocks and long-dated government bonds began Friday after comments from Federal Reserve Bank of Boston President Eric Rosengren heightened expectations for an interest rate rise later this year.  “Central banks get most of the credit for the calm and upward-moving market over the summer, but I don’t think we can depend on that going forward,” said Jeff Layman, chief investment officer at BKD Wealth Advisors.

The CBOE Volatility Index, or VIX, which tracks investors’ expectations for volatility in stocks, surged 40% on Friday.  A speech by Fed official Lael Brainard, known to oppose rate rises, is scheduled for later Monday, just ahead of the blackout period before the bank’s September meeting.

Any positive comments from Ms. Brainard on the US economy could heighten expectations for higher rates and deepen the pain for stock and bond markets after a steady summer climb.  “We had a stable period simply because it was clear from central bankers what would be delivered,” said Theologis Chapsalis, rates strategist at HSBC. “The message we get now is even a September rate hike cannot be excluded,” he said, adding what happens next is very much dependent on the Bank of Japan and the Fed on Sept. 21, when both conclude monetary policy meetings.



Black Knight – July mortgage monitor: Q2 originations hit three-year high 


–  $518 billion in first-lien mortgage originations marked highest volume in a single quarter since Q2 2013

–  At $297 billion, purchase loan originations saw a 52% ($102 billion) seasonal increase from Q1 and hit their highest level in terms of both volume and dollar amount since 2007

–  Two-thirds of Q2 purchase lending went to 740+ credit score borrowers, but largest growth (13% year-over-year) was seen in moderate credit borrowers (700-739)

–  Refinance lending has risen for three consecutive quarters, but year-to-date remains below 2015 levels despite lower interest rates and a larger population of refinance candidates


The Data and Analytics division of Black Knight Financial Services, Inc. released its latest Mortgage Monitor Report, based on data as of the end of July 2016. This month, Black Knight looked at first-lien mortgage originations through Q2 2016.

As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, the data showed significant growth in origination volume; however, refinance volume was not as strong as the current low interest rate environment might suggest.  “Mortgage originations posted their strongest quarter in three years in Q2 2016,” said Graboske. “In total, we saw $518 billion in first-lien mortgage originations in Q2, driven by a combination of continued purchase origination growth and refinance activity spurred by low interest rates. Interestingly however, with interest rates 15 basis points lower than in Q1, and even lower than in early 2015, refinance activity wasn’t nearly as strong as one might have expected.

While purchase originations jumped more than 50% from Q1, refinances saw only an eight% increase over that period, and were actually down from the same time last year, despite the number of potential refinance candidates outpacing 2015 by over one million in every month since March. That said, refinance lending has risen for three consecutive quarters and accounted for $221 billion in originations in Q2.  “It was a particularly strong month for purchase originations, which made up 57% of all first-lien lending in the quarter,” Graboske continued. “At $297 billion, Q2 purchase originations marked the highest level – in terms of both volume and dollar amount – seen since 2007. Although the purchase lending credit box remains tight, there is increasing participation among ‘moderate’ credit borrowers as well.

Two-thirds of Q2 purchase loans went to borrowers with credit scores of 740 or higher – on par with what we saw during the same period last year – but there was a 13% year-over-year increase in lending to borrowers with credit scores between 700 and 739. This segment has seen the highest rate of growth over the last three quarters, and now makes up 19% of all purchase originations.

On the other end of the spectrum, sub-700 score borrowers now account for only 15% of originations, with less than five% going to borrowers with scores of 660 or below. Both of these mark the lowest share of low credit purchase lending seen dating back to at least 2000.”


Black Knight also looked at recent trends in distressed sale activity (REO and short sales), and found that such sales accounted for seven% of all residential transactions in Q2 2016. Though this represented the lowest such share in nine years, it still remains more than twice the ‘normal’ market level of just over three%.

The majority of distressed sales taking place in the market today – roughly two-thirds – are REO sales. The average 21% discount purchasers are reaping on short sales is on the decline nationally, while the 27% REO discount is actually slightly deeper than it was a year ago. The trend toward deepening REO discounts is likely due to the geographic shift in transactions from areas where discounts are lower – such as Florida, with an average REO discount of 23% – to areas where they are steeper.

The largest REO discounts over the past six months have been seen in the Northeast and Rust Belt states. Ohio leads the nation with a 44% average discount on an REO over a traditional sale, followed by New Hampshire and New York with 41% discounts. The smallest REO discounts were found in the Southwest, with Texas (14%) and Nevada (16%) seeing the lowest of all.  As was reported in Black Knight’s most recent First Look release, other key results include:

–  Total US loan delinquency rate:  4.51%

–  Month-over-month change in delinquency rate:  4.78%

–  Total US foreclosure pre-sale inventory rate:  1.09%

–  Month-over-month change in foreclosure pre-sale inventory rate:  -1.68%

–  States with highest percentage of non-current loans:  MS, LA, NJ, WV, AL

–  States with the lowest percentage of non-current loans:  SD, MT, MN, CO, ND

–  States with highest percentage of seriously delinquent loans:  MS, LA, AL, AR, TN


Goldman just did a quick about-face on its Fed rate hike call

Goldman Sachs economists stepped back from their bold call for a Fed rate hike this month after a surprisingly weak report on the service sector and a lack of clear signals from Fed officials.  The economists lowered the odds Wednesday morning for a September rate hike to 40%. On Friday, they gave 55% odds even after the tepid August jobs report convinced many that the Fed was not likely to move soon.

Goldman Sachs economists had said they believed Fed officials were intentionally sending a strong signal about raising interest rates in September during their recent meeting at Jackson Hole, Wyoming.  Goldman’s call for a September hike did go against the herd, as most economists believed then, as they do now, that the weakish jobs report for August ruled out a rise in rates.  Goldman viewed the jobs report as a close call but just strong enough for the Fed to move — until the August ISM non-manufacturing data Tuesday fell sharply to 51.4, a level last seen in 2010.


Over the weekend,Goldman economists said in a note that the next metric they would be watching are the words of Fed speakers themselves.  San Francisco Fed President John Williams was the first to speak, at an event in Nevada on Tuesday night. He repeated his call for gradual interest rate hikes. Two other Fed presidents — Richmond Fed President Jeffrey Lacker and Kansas City Fed President Esther George — give testimony about on Capitol Hill on Wednesday.  “San Francisco John Williams advocated for raising rates ‘sooner rather than later,'” the economists wrote in a note Wednesday.

But Williams “did not stress the need to hike at the September FOMC meeting specifically,” they wrote.  Goldman Sachs Chief Economist Jan Hatzius and his team had disputed the view by many that the Fed would be tentative about hiking in September because of the US presidential election, since there is a precedent of Fed actions before elections in the Greenspan and Bernanke eras.

After Friday’s jobs report, the market odds for a September rate hike fell to about 1 in 3, and after the ISM data it was even lower at 1 in 4. The disappointing 151,000 non-farm payrolls for August was about 30,000 below expectations and not seen as strong enough to force the Fed’s hand.  But Goldman economists had said Fed Chair Janet Yellen set a low bar for the jobs report in her Jackson Hold speech on Aug. 26. She specifically said given the “continued solid performance of the labor market and our outlook for economic activity and inflation” that she believed the case for increasing the federal funds rate “strengthened in recent months.”


CoreLogic – US home price report shows prices up 6% year over year in July 2016

CoreLogic released its CoreLogic Home Price Index (HPI) and HPI Forecast for July 2016 which shows home prices are up both year over year and month over month.  Home prices nationwide, including distressed sales, increased year over year by 6% in July 2016 compared with July 2015 and increased month over month by 1.1% in July 2016 compared with June 2016, according to the CoreLogic HPI.

The CoreLogic HPI Forecast indicates that home prices will increase by 5.4% on a year-over-year basis from July 2016 to July 2017, and on a month-over-month basis home prices are expected to increase by 0.4% from July 2016 to August 2016. The CoreLogic HPI Forecast is a projection of home prices using the CoreLogic HPI and other economic variables.

Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state.  “If mortgage rates continue to remain relatively low and job growth continues, as most forecasters expect, then home purchases are likely to rise in the coming year,” said Dr. Frank Nothaft, chief economist for CoreLogic.

“The increased sales will support further price appreciation, and according to the CoreLogic Home Price Index, home prices are projected to rise about 5% over the next year.”  “The strongest home price gains continue to be in the western region,” said Anand Nallathambi, president and CEO of CoreLogic. “As evidence, the Denver, Portland and Seattle metropolitan areas all recorded double-digit appreciation over the past year.”


MBA – mortgage applications slightly increase in latest MBA weekly survey

Mortgage applications increased 0.9% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 2, 2016.

The Market Composite Index, a measure of mortgage loan application volume, increased 0.9% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 0.1% compared with the previous week.

The Refinance Index increased 1% from the previous week. The seasonally adjusted Purchase Index increased 1% from one week earlier. The unadjusted Purchase Index decreased 1% compared with the previous week and was 7% higher than the same week one year ago.  The refinance share of mortgage activity increased to 64.0% of total applications from 63.5% the previous week.

The adjustable-rate mortgage (ARM) share of activity decreased to 4.3% of total applications.  The FHA share of total applications decreased to 9.5% from 9.7% the week prior. The VA share of total applications decreased to 11.9% from 12.5% the week prior. The USDA share of total applications remained unchanged at 0.6% from the week prior.


US job openings at record high in July; hiring lags

US job openings surged to a record high in July, but a lag in hiring suggested employers were struggling to find qualified workers to fill the positions.  Job openings, a measure of labor demand, increased 228,000 to a seasonally adjusted 5.9 million, the Labor Department said on Wednesday. That was the highest level since the series started in December 2000 and pushed the jobs openings rate to 3.9% in July from 3.8% in June.  Hiring was little changed at 5.2 million in July, keeping the hiring rate steady at 3.6% for a second straight month.

CoreLogic – US economic outlook: September 2016

A comparison of the rental apartment industry with the single-family home sector is like a tale of two cities. The rental market continues to show historic strength while single-family housing activity remains subpar. Rental vacancy rates are at 30-year lows, rents are up, and apartment property values are at new highs.

These robust fundamentals, coupled with low financing costs, have helped to propel mortgage lending on apartment buildings.  The drop in financing costs has been an especially important ingredient to the surge in new lending. Multifamily fixed-rate lending, similar to other commercial mortgage loans, tends to be priced relative to movements in 10-year US Treasury yields.

In July, 10-year Treasury yields recorded the lowest monthly average since the Federal Reserve began to track these in 1953. The very low yields currently in the capital market have also enabled commercial mortgage rates to ease. In the second quarter of this year, interest rates on multifamily mortgage commitments made be Life Insurance companies had already fallen to the lowest recorded in more than 50 years, an average of 3.6% for 10-year, fixed-rate loans.


Using the CoreLogic public records data, we tabulated the volume of new lending and found that 2016 is on track to surpass last year’s record volume of new originations. Last year multifamily originations totaled more than $200 billion. During the first six months of 2016, originations were up 5% relative to the same period last year, and with the even lower interest rates in recent months, we could see multifamily lending post an increase of closer to 10% relative to 2015.

The increase in lending has occurred both for building acquisition and for refinance of existing properties. Purchase-money lending was up more than 10% year over year in the first half of 2016. And with loans made a decade ago reaching the end of their yield maintenance periods and valuation gains increasing equity, refinance of first liens or placement of mezzanine debt continue to supplement originations.

Looking at lending by location, multifamily dollar originations are generally concentrated in the largest metropolitan areas. The New York city metropolitan area tops the list on a perennial basis, followed by the Los Angeles metropolitan area; these two locales accounted for roughly 20% of dollar lending in 2015.

The Chicago, Dallas, Anaheim and Washington, DC metropolitan areas were the next four in volume, with the top six accounting for about one-third of dollar originations last year.  With rental market fundamentals remaining strong and commercial mortgage rates at or near record lows, 2016 is on track to set a new record for multifamily originations.


US trade deficit narrowed sharply in July

The US trade deficit narrowed in July as American exports picked up, a sign of strengthening global demand.  The trade gap narrowed 11.6% from a month earlier to a seasonally adjusted $39.47 billion, the Commerce Department said Friday. Imports fell 0.8% while exports rose 1.9%.  Economists surveyed by The Wall Street Journal expected the deficit to narrow to $40.3 billion in July. The June deficit was revised to $44.66 billion from $44.51 billion.

July’s 1.9% rise in exports was the largest increase in more than two years. It came despite a surge in the dollar’s value against other currencies in late June following the Brexit vote, a rise that lasted through most of July. A strong dollar makes US goods and services more expensive for overseas buyers and makes imports cheaper for US consumers.

Both exports and imports have fallen since the end of 2014 amid economic turmoil and lackluster growth in many overseas economies.  A rise in exports supports economic growth in the US because it means overseas customers are spending more money on American goods and services. In July, exports of foods, feeds and beverages—especially soybeans —rose to the highest level on record.

Friday’s report showed 2016 has still been a slow year for international trade. Through the first seven months of this year, exports fell 4.8% compared with the same period a year earlier, and imports decreased 4.0%. The deficit was roughly the same, down just 0.2% over the period.  Imports of crude oil fell in July as the per-barrel price rose for the fifth straight month to its highest level since September 2015.


MBA – commercial/multifamily delinquencies remain low in second quarter

Delinquency rates for commercial and multifamily mortgage loans remained low in the second quarter of 2016, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report.  “For most capital sources, commercial and multifamily mortgage delinquency rates are near the lowest levels seen during the past 20 years,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research.  “Strong property fundamentals, rising property values and solid mortgage availability are all supporting these rates.”

The MBA analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae, and Freddie Mac.  Together these groups hold more than 80% of commercial/multifamily mortgage debt outstanding.  Based on the unpaid principal balance (UPB) of loans, delinquency rates for each group at the end of the second quarter were as follows:

–  Banks and thrifts (90 or more days delinquent or in non-accrual): 0.66%, a decrease of 0.07 from the first quarter of 2016;

–  Life company portfolios (60 or more days delinquent): 0.11%, an increase of 0.05 from the first quarter of 2016;

–  Fannie Mae (60 or more days delinquent): 0.07%, an increase of 0.01 percentage points from the first quarter of 2016;

–  Freddie Mac (60 or more days delinquent): 0.02%, a decrease of 0.02 percentage points from first quarter of 2016;

–  CMBS (30 or more days delinquent or in REO): 4.04%, an increase of 0.17 percentage points from the first quarter of 2016.


WSJ – US payroll growth slowed in august; jobless rate held steady

Hiring cooled in August but remained consistent with steady US job growth capable of holding down unemployment and producing decent wage gains.  Nonfarm payrolls rose by a seasonally adjusted 151,000 last month, the Labor Department said Friday. Revisions showed US employers added 1,000 fewer jobs in June and July than previously estimated.

The unemployment rate, calculated from a separate survey of American households, was 4.9% in August, unchanged from July.  Economists surveyed by The Wall Street Journal had expected employers would add 180,000 jobs in August and forecast an unemployment rate of 4.8%. Average hourly earnings for private-sector workers rose by 3 cents, or 0.1%, in August from July to $25.73. From a year earlier, average hourly earnings were up 2.4%.

That is a slight slowdown from the prior month’s annual gain, but still well outpaces mild inflation.  The latest data is the last broad measure of the labor market Federal Reserve officials will see before meeting on Sept. 20-21. The figures could spark a vigorous discussion between policy makers who see the economy as healthy enough to absorb a rate increase and those concerned about low inflation, middling economic growth and uncertainty from the presidential election and global turmoil.


US employers have added jobs at a 182,000 monthly pace so far this year. That is down from average gains in 2015 and 2014—the best two years for employment growth since 1999—but is more than adequate in the view of many economists to absorb new entrants to the job market and keep the unemployment rate in check.

Some policy makers and economists expect hiring to moderate as the labor market tightens. Economists surveyed by the Journal earlier this year on average estimated the US only needed to add 145,000 jobs each month to keep up with growth in the workforce.  “As the labor market is close to full employment, a slowdown may very well be needed to avoid overheating and cause the Fed to tighten policy faster than expected,”

Wells Fargo economist John Silvia wrote in a research note earlier this week.  The August jobless rate is just above a post recession low touched in May and in the range most Fed policy makers view as the longer-term average.


Job gains in August were led by the service sector and government. The health-care and social-services sector added 36,100 jobs. Leisure and hospitality added 29,000 jobs. All levels of government added 25,000 employees. The manufacturing sector shed 14,000 jobs. Employment in both the mining sector, which includes the oil and gas industry, and in the construction sector, shrank last month.  The labor-force participation rate held steady at 62.8% in August.

The figure has been hovering near the lowest levels in almost 40 years, partly because the Baby-Boom generation is retiring, but also because some younger workers have given up on finding a job.  Another measure of unemployment and underemployment, including Americans who are working part time because they can’t find full-time jobs, also held steady at 9.7% in August.

The average workweek last month decreased by 0.1 hour to 34.3 hours.  The health of the labor market is sure to be at issue in the US presidential election.  Democratic nominee Hillary Clinton’s campaign in part is based on President Barack Obama’s record, which includes consistent job creation since late 2010, after the economy emerged from a deep recession.

Mrs. Clinton said last month she would boost jobs though investment in infrastructure and green technology.  Republican Donald Trump points out the current expansion features the weakest average annual growth of any since World War II. He says his trade and tax policies will lead to more high-paying jobs for Americans.


RealtyTrac – US home loan originations decrease 4% in Q2 2016

ATTOM Data Solutions, the nation’s leading source for comprehensive housing data and the new parent company of RealtyTrac, today released its Q2 2016 US Residential Property Loan Origination Report, which shows nearly 1.9 million (1,868,187) loans were originated on US residential properties (1 to 4 units) in the second quarter of 2016, up 26% from the a two-year low in the previous quarter quarter but down 4% from a year ago.

The loan origination report is derived from publicly recorded mortgages and deeds of trust collected by ATTOM Data Solutions in more than 950 counties accounting for more than 80% of the US population.  The 4% year-over-year decrease in total originations was driven by a 12% year-over-year decrease in refinance originations — the second consecutive quarter with an annual decrease. Conversely, purchase originations increased 1% from a year ago — the eighth consecutive quarter with an annual increase — and Home Equity Line of Credit (HELOC) originations increased 5% from a year ago — the 17th consecutive quarter with an annual increase.

“Homeowners are increasingly tapping the home equity that many have built up during the last four years of rapidly rising home prices,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Meanwhile those rapidly rising prices are also locking some non-cash buyers out of red-hot but high-priced markets, resulting in weaker purchase loan originations in places like Denver, San Francisco, Portland and Dallas. On the other hand, more affordable markets such as Cleveland, Kansas City and Boise are posting double-digit increases in purchase loan originations.”


Among the 73 metropolitan statistical areas with a population of at least 500,000 and at least 5,000 total loan originations in Q2 2016, those with the biggest year-over-year increases in HELOC originations were Dallas (up 36%); Birmingham, Alabama (up 30%); Phoenix (up 28%); Sacramento (up 27%); and Seattle (up 25%).  “The combination of rapidly rising home prices and historically low interest rates has resulted in a substantial increase in the number of homeowners taking out a home equity line of credit (HELOC) in the greater Seattle area,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market.

“I believe the popularity of HELOCs compared to cash-out refinances is likely due to the fact that interest rates are traditionally lower for HELOCs. Additionally, if equity is withdrawn during a refinance, homeowners must begin paying back the funds immediately, whereas a HELOC allows you to use the funds as needed.”

Other markets among the top 10 for biggest year-over-year increase in HELOC originations were and Columbus, Ohio (up 25%); Provo-Orem, Utah (up 24%); Denver (up 24%); Orlando (up 24%); and Cleveland, Ohio (up 23%).  “With an aging housing inventory across Ohio, we are seeing a resurgence of consumers electing to invest in their current homes, and utilize the increased availability of HELOCS for funding such needed repairs as new roofs, remodeling, and home addition projects,” said Michael Mahon, president at HER Realtors, covering the Ohio housing markets of Dayton, Columbus and Cincinnati.

HELOC originations increased 21% in Dayton and 17% in Cincinnati compared to a year ago.  “With our strong appreciation in South Florida over the past few years, many property owners are hedging their bets and locking in a low-rate HELOC that gives them flexibility and options in the coming years,” said Mike Pappas, CEO and president at the Keyes Company, covering South Florida, where HELOC originations increased 19% in Q2 2016 compared to a year ago.


Among the 73 metro areas analyzed in the report, those with the biggest year-over-year increases in purchase loan originations in Q2 2016 were Cleveland, Ohio (up 31%); Kansas City (up 21%); Boise, Idaho (up 20%); Dayton, Ohio (up 17%); and Rochester, New York (up 15%).

Other markets among the top 10 for biggest year-over-year increases in purchase loan originations were Columbia, South Carolina (up 13%); Atlanta (up 13%); Milwaukee (up 12%); Deltona-Daytona Beach-Ormond Beach, Florida (up 11%); and Colorado Springs (up 11%).  Among the 73 metro areas analyzed in the report, those with the biggest year-over-year decreases in purchase loan originations in Q2 2016 were Honolulu, Hawaii (down 16%); Denver (down 8%); Louisville, Kentucky (down 7%); Houston (down 7%); and San Francisco (down 6%).  Other markets among the top 10 for biggest year-over-year declines in purchase loan originations were Bakersfield, California (down 6%); Portland (down 5%); Oxnard-Thousand Oaks-Ventura, California (down 5%); Dallas (down 5%); and Detroit (down 4%).

Among the 73 metro areas analyzed in the report, those with the biggest year-over-year decreases in refinance loan originations were Philadelphia (down 26%); Cincinnati (down 25%); Madison, Wisconsin (down 24%); Baltimore (down 23%); and New York (down 23%).  Other markets among the top 10 for biggest year-over-year declines in refi originations were Louisville, Kentucky (down 20%); Washington, D.C. (down 20%); Allentown, Pennsylvania (down 19%); Chicago (down 18%); and Fresno, California (down 17%).


A total of 136,248 loans backed by the US Department of Veterans Affairs (VA) were originated in Q2 2016, up 35% from the previous quarter and up 14% from a year ago to the highest level for any quarter included in the scope of the report — going back to Q1 2006.  VA loans accounted for 8.7% of all purchase and refi originations in the second quarter, the highest share also going back to Q1 2006.

A total of 273,356 loans backed by the Federal Housing Administration (FHA) were originated in Q2 2016, up 29% from the previous quarter but down 17% from a year ago. FHA loans accounted for 17.5% of all purchase and refi loan originations in the second quarter, unchanged from the previous quarter but down from 19.9% in the second quarter of 2015.  A total of 11,377 residential construction loans were originated in Q2 2016, up 16% from the previous quarter and up 1% from a year ago. Construction loans — which are loans that finance improvements to real estate — accounted for less than 1% of all purchase and refi loan originations in the second quarter.


MBA – 2016 mid-year commercial/multifamily servicer rankings

The Mortgage Bankers Association (MBA) today released its mid-year ranking of commercial and multifamily mortgage servicers’ volume as of June 30, 2016.  At the top of the list is Wells Fargo Bank N.A. with $502.2 billion in US master and primary servicing, followed by PNC Real Estate/Midland Loan Services with $499.1 billion, Berkadia Commercial Mortgage LLC with $220.6 billion, KeyBank N.A. with $195.4 billion, and CBRE Loan Services with $108.3 billion.  Wells Fargo, PNC/Midland, KeyBank, and Berkadia are the largest master and primary servicers of commercial/multifamily loans in US commercial mortgage backed securities (CMBS), collateralized debt obligations (CDO) and other asset-backed securities (ABS); PNC/Midland, CBRE Loan Services, Prudential Asset Resources, and MetLife are the largest servicers for life companies; PNC/Midland, Wells Fargo, Walker & Dunlop, LLC, and Berkeley Point Capital, LLC are the largest Fannie Mae servicers; Wells Fargo, PNC/Midland, KeyBank, and CBRE Loan Services are the largest Freddie Mac servicers.

PNC/Midland ranks as the top master and primary servicer of commercial bank and savings institution loans; of loans for the credit companies, pension funds, real estate investment trusts (REITs), and investment funds; and of loans for FHA and Ginnie Mae.  Wells Fargo is the top servicer for loans held in warehouse facilities.  Berkadia is the top for other investor type loans.  A primary servicer is generally responsible for collecting loan payments from borrowers, performing property inspections and other property-related activities.  A master servicer is typically responsible for collecting cash and data from primary servicers and then providing that cash and data, through trustees, to investors.  Unless otherwise noted, MBA tabulations that combine different roles do not double-count loans for which a single servicer performs multiple roles. The tabulations can and do double-count across servicers loans for which multiple servicers each fulfill a role.


Specific breakouts in the MBA survey include:

–  Total US Master and Primary Servicing Volume

–  US Commercial Mortgage-backed Securities, Collateralized Debt Obligations and Other Asset-Backed Securities Master and Primary Servicing Volume

–  US Commercial Banks and Savings Institution Volume

–  US Credit Company, Pension Funds, REITs, and Investment Funds Volume

–  Fannie Mae Servicing Volume

–  Freddie Mac Servicing Volume

–  Federal Housing Administration (FHA) Servicing Volume

–  US Life Company Servicing Volume

–  US Warehouse Volume

–  US Other Investor Volume

–  US CMBS Named Special Servicing Volume

–  US Named Special Servicing Volumes Across All Investor Groups

–  Total Non-US Master and Primary Servicing Volume


Zillow – housing confidence index: homeowners got swagger, but buyers increasingly discouraged

–  Homeowners are confident about the current state of the housing market, and the majority believe now is a good time to sell a home.

–  Renters are less confident than homeowners, with only 37% confident that they will be able to afford a home in the future.

–  The most confident homeowners are concentrated in Western and Southwestern cities, like Seattle and Dallas, which also have the least confident renters.

–  Overall US housing confidence inched up in July to 67.3, up 0.4 from January 2016.


Homeowners have a lot of swagger in today’s market, and for good reason – home values are rising, demand is high and homes are selling very quickly. But the same trends helping to buoy homeowner confidence are also proving increasingly discouraging for potential buyers, particularly among current renters, a critical imbalance that could have important impacts on the market going forward.

Additionally, while overall confidence in the housing market is up nationwide, several indicators point to fading confidence in a number of large markets – particularly the most expensive and/or fastest-growing markets, according to the July 2016 Zillow Housing Confidence Index.  The semi-annual Zillow Housing Confidence Index, sponsored by Zillow and calculated by Pulsenomics LLC, is calculated for the US as a whole and 20 large metro markets nationwide.

It is based on a national survey of 10,000 American renters and homeowners.[1] Overall US housing confidence inched up in July to 67.3, up 0.4 from January 2016 and up 0.8% from the same time a year ago.  The ZHCI is composed of three sub-indexes: The Housing Market Conditions Index summarizes homeowner and renter assessments of current market conditions; the Housing Expectations Index measures their expectations regarding future home values and affordability; and the Homeownership Aspirations Index that gauges aspirations and attitudes regarding homeownership. In July, all three sub-indexes rose from a year ago, helping push headline confidence higher.


But while confidence in general was up, that optimism was not shared equally between the roughly 63% of American households that own a home, versus the remainder that rent their home. US homeowner confidence rose to an index level of 71.3 in July, up 1 point from January and 1.7 points from a year ago. At the same time, confidence among American renters fell to a level of 61.2 in July, down 0.3 points from January and 0.6 points from last summer.

The 10.1-point gap between homeowners’ confidence levels and renters’ confidence levels is the largest recorded since publication of ZHCI began in January 2014.  At the metro level, the gap in confidence between homeowners and renters was smallest in Miami and largest in Seattle – the market with the highest year-over-year rent appreciation of the 35 largest US metros and very rapidly rising home values, up 11% over the past year.

This confidence gap can be clearly seen in the share of homeowners who say it’s a good time to sell, and renters saying it’s a good (or, in this case, bad) time to buy. At the beginning of 2014, the share of homeowners saying it was a good time to sell (50%) was roughly on par with the share of renters saying it was a good time to buy (48%). Fast-forward to today, and 70% of homeowners say it’s a good time to sell, compared to just 38% of renters saying it’s a good time to buy.


Of the 20 metro areas analyzed as part of the ZHCI, this gap is widest in San Francisco (73% of homeowners think it’s a good time to sell, versus 13% of renters saying it’s a good time to buy), and narrowest in Chicago (52% of owners say it’s a good time to sell, 47% of renters say it’s a good time to buy).

That these two markets in particular show the largest and narrowest gaps is telling: San Francisco has been among the fastest-growing markets in the country over the past few years. Local homeowners have likely seen big gains in wealth as their homes have appreciated – to the detriment of renters that may feel as though they can’t catch up to the market and save enough to buy.

Chicago has been one of the slower-growing markets nationwide, and has a large amount of negative equity left over from the recession – and negative equity can prevent homeowners from selling, even if they want to. But the slower-moving market may be leading more renters to feel they could buy a home if they want to – while it hasn’t grown much, the share of renters saying it’s a good time to buy also hasn’t fallen much in Chicago, either, staying largely flat for the past year.

Finally, a reason that many renters may be signaling it’s a tough time to buy is because of rising prices themselves and the impact that is having on affordability – an issue only likely to get worse if and when today’s ultra-low mortgage interest rates begin rising. Home values are currently at or past peak levels in roughly a quarter of US markets.

In other words, homes have never been more expensive in those places. This is hurting renter confidence in a number of larger markets. About half of current renters in San Francisco and New York expressed a lack of confidence in their ability to afford a home in the future. Almost half of the renters surveyed in Seattle, San Jose and Boston had similar feelings.


But not every would-be buyer is currently renting – current homeowners also represent a good source of buyers. And while this group thinks it’s a great time to sell, increasingly these homeowners, too, don’t think it’s a good time to buy. Currently, 63% of homeowners surveyed said now is a good time to buy – a large portion, yes, but a number that’s been declining steadily for the past two years.

This trend is important, of course, because for any home transaction to occur there needs to be both a buyer and a seller. And if buyers don’t think it’s a particularly good time to buy, they may decide to hold off on entering the market altogether until they see buying conditions improve.  Interestingly, many of these current homeowners may actually be contributing to some of the very conditions leading so many Americans to say it’s a bad time to buy. A big driver of the rapid price gains and fast-moving markets we’re seeing is incredibly low inventory of homes for sale.

Fairly anemic building activity is contributing to a lot of this inventory shortage, but there’s also a “musical chairs” aspect at play. A large majority of homeowners think it’s a great time to sell, but for whatever reason, are not actually listing their home for sale. Looking at the data, we can infer that this may be related to the shrinking share who think it’s a good time to buy.

A growing number of homeowners may be worried that once they sell, they’ll need to turn around and buy again – and buying in a low-inventory, fast-moving, rapidly appreciating market isn’t much fun. Essentially, they’re reluctant to stand up from the chair/home they’re in, lest they find themselves without a different one to sit back down on/move into once the music stops.


The overall health of the housing market looks great at first glance – over the past two years, overall housing confidence has increased in all but two of the metro areas studied. But dig a bit deeper and you’ll find inequality between renters and homeowners.

Even though the majority of homeowners are confident and believe now is a good time to sell, they’re holding off because they expect home values to continue to appreciate and want to ride the wave. They also don’t want to turn around and become buyers in a competitive market.

On the flip side, renters aren’t nearly as confident as homeowners – they’re discouraged by the shrinking number of homes for sale and rapidly rising prices. As housing gets more expensive, these trends are not sustainable in the long-run, especially once mortgage rates start to rise. We’re likely to start seeing weakening confidence and/or faltering home value appreciation if these imbalances persist.

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