Sales of new homes increased sharply for the third consecutive month in March, an indication that demand is picking up as the crucial spring selling season heats up. Purchases of newly built single-family houses, which account for about a 10th of overall U.S. home sales, increased 5.8% last month from February to a seasonally adjusted annual rate 621,000, the Commerce Department said Tuesday. That was the strongest level since July, when sales reached a 9-year high. The data were clouded by a margin of error of 15.5 percentage points that is much larger than the reported increase. Still, momentum appears to be building in the market. New home sales have increased every month so far this year, and were up 15.6% year-over-year in March, slightly more than the margin of error in the report. The median sales price for a newly built home rose just over 1% from a year ago to $315,100. Economists expect new home sales to continue to increase this year as builders step up construction of single-family homes and more first-time buyers come back into the starter-home market. Real-estate consultant John Burns said one reason the market for new homes hasn’t been stronger is that many of the big markets for new construction, such as Las Vegas and Phoenix, are only now starting to boom again. “You need those big construction markets to take off,” Mr. Burns said. “It’s starting to pick back up in those markets, just off of a very low level.”
New construction has been sluggish since the recession, due to labor shortages, a lack of available credit to small home builders and, more recently, the rising cost of raw materials such as lumber. U.S. housing starts decreased 6.8% in March, although the overall trend in recent months has been one of acceleration in the pace of new construction. The existing-home market has been going strong, although a shortage of supply is holding back sales numbers. Purchases of previously owned homes, which account for the vast majority of U.S. sales, increased 4.4% in March to their highest level in a decade, the National Association of Realtors said last week. New-home construction has improved steadily over the past six years but remains well short of levels before and during the housing bubble. Over the past year, for example, builders have started construction on almost 792,000 single-family homes. From 1995 to 2000, a fairly normal stretch for the market, the average was 1.2 million a year. By some measures the supply of inventory of new homes is more robust than that of existing ones. It would take just 3.8 months to exhaust the supply of previously owned homes on the market at the current sales pace, versus 5.2 months for new homes, Commerce said Tuesday. The number of new homes for sale was the highest since July 2009.
Trump tax plan billed as ‘largest tax reform’ in US history
President Donald Trump is proposing “the biggest tax cut” ever even as the government struggles with mounting debt, in an effort to fulfill promises of bringing jobs and prosperity to the middle class. White House officials on Wednesday were to release broad outlines of a tax overhaul that would provide massive tax cuts to businesses big and small. The top tax rate for individuals would drop by a few percentage points, from 39.6 percent to the “mid-30s,” according to an official with knowledge of the plan. Small business owners would see their top tax rate go from 39.6 percent to 15 percent, said the official, who was not authorized to publicly discuss the proposal before the White House announcement and spoke on condition of anonymity. Treasury Secretary Steve Mnuchin, in a Wednesday morning speech, said the proposed overhaul would amount to “the biggest tax cut” and the “largest tax reform” in U.S. history. White House officials already have said the top corporate tax rate would be reduced from 35 percent to 15 percent. The plan will also include child-care benefits, a cause promoted by Trump’s daughter Ivanka. Trump sent his team to Capitol Hill on Tuesday evening to discuss his plan with Republican leaders. “They went into some suggestions that are mere suggestions and we’ll go from there,” said GOP Sen. Orrin Hatch of Utah, chairman of the Senate Finance Committee.
The White House’s presentation will be “pretty broad in the principles,” said Marc Short, Trump’s director of legislative affairs. In the coming weeks, Trump will solicit more ideas on how to improve it, Short said. The specifics should start to come this summer. Short said the administration did not want to set a firm timeline, after demanding a quick House vote on a health care bill and watching it fail. But, Short added, “I don’t see this sliding into 2018.” Republicans who slammed the growing national debt under President Barack Obama have said they are open to Trump’s tax plan, even though it could add trillions of dollars to the deficit over the next decade. Echoing the White House, Republicans argue the cuts would spur economic growth, reducing or even eliminating any drop in tax revenue. “I’m not convinced that cutting taxes is necessarily going to blow a hole in the deficit,” Hatch said. “I actually believe it could stimulate the economy and get the economy moving,” Hatch added. “Now, whether 15 percent is the right figure or not, that’s a matter to be determined.”
NAHB – proposed lumber duties will harm consumers, housing affordability
The National Association of Home Builders (NAHB) today denounced the decision by the U.S. Department of Commerce to impose a 20 percent countervailing duty on Canadian lumber imports, saying it will harm American home buyers, consumers and businesses while failing to resolve the underlying trade dispute between the two nations. “NAHB is deeply disappointed in this short-sighted action by the U.S. Department of Commerce that will ultimately do nothing to resolve issues causing the U.S.-Canadian lumber trade dispute but will negatively harm American consumers and housing affordability,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. Thirty-three percent of the lumber used in the U.S. last year was imported. The bulk of the imported lumber – more than 95 percent – came from Canada. “This means that imports are essential for the construction of affordable new homes and to make improvements on existing homes,” said MacDonald. The trade agreement that has governed Canadian imports of softwood lumber since 2006 effectively expired at the end of 2016. Uncertainty surrounding a new trade pact is the primary catalyst for the 22 percent spike in the Random Lengths Composite Price Index for lumber since the beginning of the year.
These price hikes have negative repercussions for millions of Americans. It takes about 15,000 board feet to build a typical single-family home and the lumber price increase in the first quarter of this year has added almost $3,600 to the price of a new home. NAHB believes the best way to resolve this trade impasse and avoid these negative economic repercussions is to:
– Urge the U.S. and Canada to work cooperatively to achieve a long-term, stable solution in lumber trade that provides for a consistent and fairly priced supply of lumber.
– Increase domestic production by seeking higher targets for timber sales from publicly-owned lands and opening up additional federal forest lands for logging in an environmentally sustainable manner.
– Reduce U.S. lumber exports.
“Taking these steps to meet our nation’s lumber needs is essential because tariffs needlessly increase the volatility of the lumber markets, resulting in higher prices for U.S. home buyers and other consumers and businesses who use lumber,” said MacDonald.
Olick – lowest mortgage rates since election push refinances up 7%
The refinance market came back to life last week, as mortgage rates fell further. Homebuyers, however, were not as easily swayed by rates. Total mortgage application volume rose 2.7 percent, seasonally adjusted, for the week, according to the Mortgage Bankers Association. Volume was 18 percent lower compared with the same week one year ago. Mortgage refinance volume remains far weaker than it was last year, when interest rates were lower, but it did rise 7 percent week to week as rates sank to the lowest level since just after following the presidential election. The size of the average refinance loan also increased, as large-balance borrowers are more rate sensitive. Refinances are still 34 percent below where they were a year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $424,100 or less decreased to 4.20 percent from 4.22 percent, with points increasing to 0.37 from 0.35, including the origination fee, for 80 percent loan-to-value ratio loans. “The drop was driven by continued investor concerns about the French election, though Sunday’s first-round voting results apparently have alleviated some investor fears,” said Lynn Fisher, MBA vice president of research and economics.
Homebuyers were less concerned with mortgage rates and more frustrated with the lack of homes for sale. Mortgage applications to purchase a home fell 1 percent for the week and are just 0.4 percent higher than the same week last year. The supply of homes for sale continues to drop amid strong demand and low production from the nation’s homebuilders. Mortgage rates may eventually become a bigger concern. They began rising again this week, as investors turned from the French election to the possibility of U.S. tax reform. “In general, investors have piled back into riskier assets like stocks because the French election reduces long-term risks to the European Union,” said Matthew Graham, chief operating officer of Mortgage News Daily. “The prospects for tax reform have a similar effect in that they encourage investors to favor riskier assets at the expense of bonds. When demand for bonds decreases relative to supply, rates move higher.”
Oil prices slip ahead of US stock data after surprise API build
Oil prices edged lower on Wednesday ahead of data that will shed light on U.S. crude inventories after an industry report indicated a surprise build in fuel stocks, underscoring the persistence of global oversupply. Brent crude, the international benchmark for oil prices, was down 50 cents to $51.60 per barrel at 1350 GMT. Brent is now around 8.5 percent below its April peak. U.S. West Texas Intermediate (WTI) was down 40 cents at $49.16 per barrel, heading for its eighth fall in nine sessions. U.S. inventory data issued late on Tuesday by the American Petroleum Institute (API) weighed on prices and showed the difficulty OPEC and non-OPEC producers are having in eliminating a supply glut despite output cuts they have made since January. The report showed crude stockpiles rose 897,000 barrels in the week to April 21, defying expectations of a fall of 1.7 million barrels, and also showed a large build in gasoline stocks, unusual for this time of the year. The U.S. Energy Information Administration (EIA) will issue its inventory data at 1430 GMT on Wednesday. “Should these figures be mirrored by the EIA, widespread concerns over stubbornly high OECD oil stocks will have been justified in what would be a setback to the global oil rebalancing process,” analysts at PVM said.