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%.