– Of total sales in April 2016, distressed sales accounted for 8.8% and real estate-owned (REO) sales accounted for 5.7%
– The REO sales share was 22.2 percentage points below its peak of 27.9% in January 2009
– Distressed sales shares fell in most states, including the oil markets
Distressed sales, which include REO and short sales, accounted for 8.8% of total home sales nationally in April 2016, down 3 percentage points from April 2015 and down 1.7 percentage points from March 2016. Within the distressed category, REO sales accounted for 5.7% and short sales accounted for 3% of total home sales in April 2016. The REO sales share was 2.4 percentage points below the April 2015 share and is the lowest for the month of April since 2007.
The short sales share fell below 4% in mid-2014 and has remained in the 3-4% range since then. At its peak in January 2009, distressed sales totaled 32.4% of all sales, with REO sales representing 27.9% of that share. While distressed sales play an important role in clearing the housing market of foreclosed properties, they sell at a discount to non-distressed sales, and when the share of distressed sales is high, it can pull down the prices of non-distressed sales.
There will always be some level of distress in the housing market, and by comparison, 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-2017.
All but seven states recorded lower distressed sales shares in April 2016 compared with a year earlier. Maryland had the largest share of distressed sales of any state at 19.5% in April 2016, followed by Connecticut (18.6%), Michigan (18.1%), Florida (16.4%) and Illinois (16.3%). North Dakota had the smallest distressed sales share at 2.4%.
Oil states continued to see year-over-year declines in their distressed sales shares in April 2016. Texas saw a 1.3 percentage point decrease and Oklahoma and North Dakota both saw a 0.2 percentage point decrease. Florida had a 5.3 percentage point drop in its distressed sales share from a year earlier, the largest decline of any state.
California had the largest improvement of any state from its peak distressed sales share, falling 60.1 percentage points from its January 2009 peak of 67.5%. 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).
Of the 25 largest Core Based Statistical Areas (CBSAs) based on mortgage loan count, Baltimore-Columbia-Towson, Md. had the largest share of distressed sales at 19.5%, followed by Chicago-Naperville-Arlington Heights, Ill. (18.5%), Tampa-St. Petersburg-Clearwater, Fla. (17.9%), Orlando-Kissimmee-Sanford, Fla. (17.5%) and Newark, N.J. (15.7%).
Denver-Aurora-Lakewood, Colo. had the smallest distressed sales share at 2.5% among this same group of the country’s largest CBSAs. Three of the largest 25 CBSAs had year-over-year increases in their distressed sales share: Nassau County-Suffolk County, N.Y. was up by 1 percentage point, Cambridge-Newton-Framingham, Mass. was up by 0.8 percentage points and Newark, N.J. was up by 0.7 percentage points. Orlando-Kissimmee-Sanford, Fla. had the largest year-over-year drop in its distressed sales share, declining by 7.1 percentage points from 24.6% in April 2015 to 17.5% in April 2016. Riverside-San Bernardino-Ontario, Calif. had the largest overall improvement in its distressed sales share from its peak value, dropping from 76.3% in February 2009 to 10% in April 2016.
Murray Energy CEO: coal industry is virtually destroyed
Murray Energy CEO Robert Murray weighed in on the increasing amount of regulations on the coal industry, President Obama and presumptive Democratic presidential nominee Hillary Clinton’s support of green energies.
According to Murray, the Clinton Foundation and Hillary Clinton’s campaign are benefiting financially from her support of solar and wind energy. “Why she is supporting the elimination of coal is she’s getting millions and millions of dollars from the manufacturers of windmills and solar panels. That electricity costs 26 cents a kilowatt hour, coal-fired electricity costs four cents. It gets four cents a kilowatt hour, the wind and solar, from the government, the taxpayer.
So she is getting a lot of kickback into her campaign and into the Clinton Foundation from the makers of windmills and solar panels – it’s called crony capitalism. Murray then responded to claims that the coal industry is bad for the environment. “You could close down every coal-fired plant in the United States and it wouldn’t affect global temperatures by 0.16%, unmeasurable. So it has nothing to do with the environment.”
Murray explained that it has been difficult keeping up with all the new regulations under the Obama Administration. “The regulations are coming out faster from the Obama Administration than we can read them. In the last five years, the US EPA alone [has published] 38 times the words in our Holy Bible.” Murray says the war on coal has been catastrophic for the industry. “The coal industry is virtually destroyed.
There are 52 bankrupt coal companies, there are only four of us that are not – 140,000 [miners have been let go]. We had 200,000 miners before Obama, we now have 60,000. On whether a Donald Trump Administration could reverse some of the job losses in the coal industry, Murray responded, “I don’t think those jobs can come back, but we can stop the destruction.”
MBA – mortgage applications down
Mortgage applications decreased 1.3% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 15, 2016. The prior week’s results included an adjustment for the July 4th holiday. The Market Composite Index, a measure of mortgage loan application volume, decreased 1.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 24% compared with the previous week. The Refinance Index decreased 1% from the previous week.
The seasonally adjusted Purchase Index decreased 2% from one week earlier. The unadjusted Purchase Index increased 23% compared with the previous week and was 16% higher than the same week one year ago. The refinance share of mortgage activity increased to 64.2% of total applications from 64.0% the previous week.
The adjustable-rate mortgage (ARM) share of activity decreased to 5.1% of total applications. The FHA share of total applications decreased to 9.9% from 10.0% the week prior. The VA share of total applications decreased to 11.2% from 12.1% the week prior. The USDA share of total applications decreased to 0.5% from 0.6% the week prior.
Currency trading executive charged with front-running orders
Mark Johnson, the global head of foreign-exchange cash trading at HSBC, was arrested Tuesday evening at JFK airport and charged with front-running customer orders, The Wall Street Journal reported Wednesday.
Federal prosecutors allege that Johnson and Stuart Scott, the former European head of currency trading, traded ahead of a client’s purchase of $3.4 billion worth of British pounds, WSJ reported. They have been charged with one count of conspiracy to commit wire fraud. Scott, who hasn’t been arrested according to WSJ, was fired by HSBC in December 2014 after the London-based bank paid a $618 million fine to regulators for its role in a foreign-exchange trading scandal.
NAHB – housing starts rise 4.8% in June
Nationwide housing starts rose 4.8% in June to a seasonally adjusted annual rate of 1.19 million units, according to newly released data from the US Department of Housing and Urban Development and the Commerce Department.
Overall permit issuance increased 1.5% to a seasonally adjusted annual rate of 1.15 million. “This month’s uptick in production is an indicator that the housing market continues to move forward,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill. “At the same time, builders are adding inventory at a cautious pace as they face lot shortages and regulatory hurdles.”
“The June report is consistent with our forecast for a gradual but consistent recovery of the housing market,” said NAHB Chief Economist Robert Dietz. “Single-family production should continue to strengthen throughout the year, buoyed by job growth, new household formations and low mortgage interest rates.” Single-family housing starts rose 4.4% to a seasonally adjusted annual rate of 778,000 units in June while multifamily production ticked up 5.4% to 411,000 units.
Regionally in June, combined single- and multifamily starts increased in the Northeast and West, with respective gains of 46.3% and 17.4%. The Midwest registered a 5.2% loss and the South fell 3.4%. However, single-family production rose in all four regions. Both sectors posted permit gains. Single-family permits edged up 1% to a rate of 738,000 while multifamily permits rose 2.5% to 415,000. Permit issuance increased 9.4% in the Northeast and 8.3% in the South. Meanwhile, the Midwest and West registered respective losses of 2.8% and 10.1%.
Zillow – June home sales forecast
Zillow expects existing home sales to fall 1.4% in June from May, to 5.45 million units at a seasonally adjusted annual rate (SAAR), ending a string of three consecutive monthly gains. New home sales should rise 0.5% to 554,000 units (SAAR).
Sales of existing homes drove much of the overall growth in home sales in recent years. But new home sales are contributing more lately, although there remains a big gap. For much of the housing recovery, economists (ourselves included) have puzzled over diverging trends in existing and new home sales: Sales of existing homes were growing strongly, while sales of new homes remained stubbornly low. But now the tables appear to be turning.
Exceptionally tight inventory has held back existing home sales through the first half of 2016, while home builders have begun to increase capacity. For the year ending June 2016, we expect existing home sales to be essentially flat compared to a year earlier. But new home sales should be up more than 17% from last year. Still, there’s a big gap to make up: Existing home sales remain 25% below their bubble-era peak, and new home sales remain 60% below their mid-2000s high.
We expect existing home sales to fall 1.4% month-over-month in June, to 5.45 million units at a seasonally adjusted annual rate (SAAR) from 5.53 million units in May. At the same time, we expect new home sales to increase, rising 0.5% to 554,000 units (SAAR). If so, this would mean that existing home sales will have been essentially constant since the end of last year, while new home sales will have increased 3% over the same time.
The number of existing homes for sale in May was down 5.75% from a year earlier, according to the National Association of Realtors (NAR), and has fallen year-over-year 12 consecutive months. Tight inventory has contributed to rising prices. We expect the median price of existing homes sold in June to rise to $231,000 – just shy of all-time highs recorded earlier this year – up 0.5% from May and 5.7% over the year.
But while existing home sales have stalled, new home sales have been unexpectedly buoyant. Construction permits, starts and homes under construction all rose through the spring. New home sales were particularly strong in April, even after downward revisions to the initial data. This trend should continue in June with steady upward movement in new home sales.