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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.

CoreLogic – current home prices the most stable during the last 40 years

 

Volatility has roiled the US and global financial markets for some time. June’s Brexit vote, for example, was the most volatile day in the history of foreign exchange markets. Likewise, the huge influx of foreign capital drove longer-dated Treasury maturities to record lows. But one market seems to have escaped these gyrations: US housing.

There are several different measures of volatility, but a common metric is the standard deviation in the metric of interest, in this case the year-over-year change in monthly home prices. Sounds intimidating, but it simply measures the degree to which the data fluctuates in relation to its average or mean over a period of time.

While the 2000s were a rocky decade for housing, historically home price volatility had been muted.  Over the last 40 years, home price volatility averaged 60 basis points, but over the last two years it has averaged 20 basis points. Over the past year it’s been even more stable at only 10 basis points.  The last narrow band of years that exhibited such low home price volatility was between 1994 and 1997, but even then it was modestly more volatile then today.

The mid-to-late 1990s was a healthy housing market that exhibited steadily improving sales, home price growth and low defaults. The low-volatility housing market of the mid-to-late 1990s helped anchor the economy through the 2001 recession. That was and still is the mildest post-war recession due, in part, because the real estate market helped buffet declines in economic growth and equities.

 

Which markets have experienced the most stable home prices recently? As of June of this year, Phoenix, AZ was the most stable home price market, followed by Raleigh, NC, Tampa, FL, Denver, CO and Los Angeles, CA. Each of these markets has exhibited stable home prices in 2016 due to a mix of healthy economies, steady demand and low inventories.

By far the most volatile market is San Francisco, where home prices as of this June were up 4% from the prior year, but down 8 percentage points from a 12-percent increase just six months prior in December 2015.  While today many other asset classes remain turbulent, real estate prices have been an oasis of stability, and they are expected to remain stable in the short term due to very tight inventory of unsold homes and rising purchase demand.

This is important because volatility is generally an indicator of risk. Just like the 1990s, a stable home price environment is a very good sign for the housing market and will help anchor the economy if it encounters rough patches in the future.

 

Private companies add 177,000 jobs in August, but…

Job creation at the company level rose about in line with expectations in August, despite weakness in manufacturing and construction, according to the latest report from ADP and Moody’s Analytics.  Companies added 177,000 positions for the month, just above Wall Street expectations for 175,000.

While the headline number appeared solid, the internals were a bit weaker. All of the new jobs came from services, which added 183,000 positions. Goods-producing industries actually lost 6,000 for the month.  “Broadly speaking, the labor market feels really good,” said Mark Zandi, chief economist at Moody’s Analytics. “All of the internals of the labor market are solid.”

The disappointment on the goods side featured a loss of 2,000 construction jobs and a net gain of zero in manufacturing. The goods-producing sector lost 5,000 jobs in July as well.  At an industry level, the biggest gains came from professional and business services, which added 53,000. Trade, transportation and utilities contributed 26,000, while financial activities grew by 15,000. Franchises added 19,200.  As for size, gains were fairly evenly distributed.

Companies with more than 500 workers added 70,000, while those with fewer than 50 employees gained 63,000 and medium-sized companies contributed 44,000.  The July numbers were revised higher, from an initially reported 179,000 to 194,000. Private payrolls have not grown by more than 200,000 since March.

 

MBA – mortgage applications increase in latest MBA weekly survey

Mortgage applications increased 2.8% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 26, 2016.  The Market Composite Index, a measure of mortgage loan application volume, increased 2.8% on a seasonally adjusted basis from one week earlier.

On an unadjusted basis, the Index increased 2% compared with the previous week. The Refinance Index increased 4% 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 5% higher than the same week one year ago.  The refinance share of mortgage activity increased to 63.5% of total applications from 62.4% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4.5% of total applications.

The FHA share of total applications increased to 9.7% from 8.9% the week prior. The VA share of total applications increased to 12.5% from 12.4% the week prior. The USDA share of total applications remained unchanged to 0.6% from 0.6% the week prior.

 

More Americans behind on car payments as sales near peak

Auto sales, though still flirting with the possibility of another annual record, have begun to level off as consumers satisfy much of the pent-up demand that swelled during the recession. Another sign the market may be reaching its peak: more Americans are falling behind on their car payments.  As US sales growth slows in 2016, summer demand is falling short of last year’s blockbuster numbers.

Industry-wide sales ticked 0.7% higher in July compared to the same month a year ago, according to Autodata. In July 2015, automakers reported a 5.3% increase in deliveries. General Motors (GM), Ford (F) and their fellow manufacturers will release August sales results on Thursday.  The slowing pace of sales has come at a time when loan delinquencies are on the rise in the $1 trillion auto-loan market. For subprime auto loans, delinquencies extending beyond 60 days jumped 17% last month,

Fitch Ratings said in a recent report Opens a New Window. . The upswing is more pronounced for prime delinquencies, which were up 21% versus July 2015.  On the positive side, July’s subprime delinquency rate of 4.59% is down from the record level of 5.16% seen earlier in the year. Fitch also holds a stable outlook for the auto subprime sector.  “The summer months typically produce weaker asset performance as consumers head for vacation,” the credit-rating agency said in its report.

 

CoreLogic – distressed sales update: May 2016

–  Of total sales in May 2016, distressed sales accounted for 8.4% and real estate-owned (REO) sales accounted for 5.4%

–  The REO sales share was 22.5 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 8.4% of total home sales nationally in May 2016, down 2.1percentage points from May 2015 and down 1 percentage point from April 2016.

 

Within the distressed category, REO sales accounted for 5.4% and short sales accounted for 3% of total home sales in May 2016. The REO sales share was 1.7 percentage points below the May 2015 share and is the lowest for the month of May 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-2019.

 

All but eight states recorded lower distressed sales shares in May 2016 compared with a year earlier. Maryland had the largest share of distressed sales of any state at 19.4% in May 2016, followed by Connecticut (18.5%), Michigan (17.8%), Illinois (16%) and Florida (15.8%). North Dakota had the smallest distressed sales share at 2.5%. Oil states continued to see year-over-year declines in their distressed sales shares in May 2016.

Texas saw a 1.3 percentage point decrease, and Oklahoma and North Dakota both saw a 0.1 percentage point decrease. Florida had a 5.5 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 60.4 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 19.2%, followed by Chicago-Naperville-Arlington Heights, Ill. (18.1%), Tampa-St. Petersburg-Clearwater, Fla. (17.3%), Orlando-Kissimmee-Sanford, Fla. (16.4%) and St Louis, Mo. (13.6%).

Denver-Aurora-Lakewood, Colo. had the smallest distressed sales share at 2.4% among this same group of the country’s largest CBSAs. Two of the largest 25 CBSAs had year-over-year increases in their distressed sales share: Nassau County-Suffolk County, N.Y. was up by 1.3 percentage points, and New York-Jersey City-White Plains, New York was up by 0.1 percentage points.

Orlando-Kissimmee-Sanford, Fla. had the largest year-over-year drop in its distressed sales share, declining by 7.9 percentage points from 24.4% in May 2015 to 16.4% in May 2016. Riverside-San Bernardino-Ontario, Calif. had the largest overall improvement in its distressed sales share from its peak value, dropping from 76.5% in February 2009 to 9.6% in May 2016.

 

Zillow – July Case-Shiller – July’s growth will be slightly slower than June

After several consecutive months of steady growth, the US National Case-Shiller home price index is within striking distance of reaching its July 2006 peak levels, according to today’s June Case-Shiller data. According to Zillow’s July Case-Shiller forecast, the national index and both smaller 10 and 20-city indices look set to keep growing at a very similar rate, if ever-so-slightly slower, compared to the past few months.

The July Case-Shiller National Index is expected to grow 5% year-over-year and 0.2% month-to-month (seasonally adjusted). We expect the 10-City Index to grow 4.2% year-over-year and to fall 0.1% (SA) from June. The 20-City Index is expected to grow 5% between July 2015 and July 2016, and fall 0.1% (SA) from June.

 

WSJ – real-estate shares to get own sector

On stock markets around the world, real-estate companies have been lumped into a category with banks and insurance firms since 1999.  But property will break free from the financial sector on Thursday into its own dedicated group. Analysts say the move is likely to increase the attention investors pay to real-estate investment trusts.

The Global Industry Classification Standard, since its inception in 1999, has grouped companies into 10 industries, such as energy or health care, allowing investors to see and compare broad trends. Real estate will form group No. 11.

The new classification from MSCI Inc. and S&P Dow Jones Indices LLC, which manage the indexes, is a recognition of the growth of the listed real-estate sector. With a market capitalization of $1.48 trillion, it now accounts for 3.5% of the global equities market, up from a 1.1% share in 2009, according to the European Public Real Estate Association, or EPRA.

The new classification means “there is going to be more money looking at the sector,” said Matthew Norris, executive director for a real-estate fund at London-based property firm Grosvenor Group. “This is going to bring real estate into focus.”

For specialist investors that look only at real-estate stocks, the change isn’t likely to have much influence, analysts said. But it will more likely affect investors with broader portfolios, known as generalists.  “That’s where the biggest change will be,” said Philip Charls, EPRA’s chief executive.

 

REITs have been a top-performing asset class for more than two decades. Total returns for US REITs over the past 25 years are 12%, compared with 9% for the S&P 500, according to Green Street Advisors, a real-estate tracker.  But REITs historically have been played down by generalists, especially in the US and Europe, according to Grosvenor.

REITs account for 4.4% of all US equities, but only make up 2.3% of generalist fund managers’ portfolios, leaving general equity funds under invested in real estate by around 50%, it said.  The separation of REITs from the financial sector could draw attention to investors’ relatively weaker appetite for the real-estate stocks in their broader portfolios, spurring them to increase allocation, said equity analysts at Jefferies International Ltd. in a research note.

One reason REITs have been a tough sell to generalist investors is because they have appeared expensive relative to their earnings, according to Green Street. For instance, REIT share prices are 23 times higher than their earnings per share, compared with 17 times higher for the S&P 500, it said.  Even though REITs post impressive returns, some investors think “those returns have been boosted by an epic bond bull market,” Green Street said.  With out performance deemed a one-off, they have dismissed “the smallish sector as more trouble than it’s worth.”

 

But for investors hunting for returns amid ultra low interest rates, REIT dividend yields are attractive. The dividend yield for global REITs is 3.7%, according to the EPRA. For the financial sector, it is 3.4%.  “If you think bond yields will remain low in the near future, the dividend yield of REITs looks pretty attractive,” Mr. Norris at Grosvenor said.

Another positive of the classification change: extricating REITs from financial companies could lower volatility, which has worried investors in the past.  “A criticism we often get from investors is on the volatility of the asset class,” Mr. Charls at EPRA said.  One reason for volatility is the effect of higher levels of debt, analysts said.

Another reason has been the inclusion of REITs with financial companies, which are “historically one of the most volatile equity sectors in the GICS universe,” the Grosvenor report said.  For instance, if a hedge fund wanted to place a bet that global bank shares were set to fall, they might sell shares in a fund that invests in financial companies.

As things stand, “there would be REITs in there,” Mr. Norris said. “That could have had some negative consequences for a sector you’re not even trying to bet on.” Removing real estate from financial stocks could reduce volatility caused by this link, he said.  “We don’t think things will change dramatically on Sept. 1, or the second, but there will certainly be more people looking at this sector over the long term,” Mr. Charls said.

WSJ – US new home sales rise to highest level since 2007

Sales of newly built homes rose in July to the highest level in nearly a decade, a sign of solid momentum in the US housing market.  Purchases of new single-family homes rose 12.4% in July from a month earlier to a seasonally adjusted annual rate of 654,000, the Commerce Department said Tuesday.

That was the highest level since October 2007.  “New home sales soared again,” said Ralph McLaughlin, economist at real estate website Trulia. “This is a continued sign that demand for new homes remains solid in a low interest rate, low unemployment environment.”  Economists surveyed by The Wall Street Journal had expected home sales in July to slow to a pace of 580,000. Sales in June were revised down to a pace of 582,000 from an initially estimated 592,000.

Through the first seven months of the year, new home sales also rose 12.4%, compared with the same period in 2015.  The housing market has been a bright spot in the economy this year. Historically low mortgage interest rates, improving income growth and steady job creation have supported buying of both new and existing homes.

 

Sales of previously owned homes rose to their strongest pace in nearly a decade in June, according to the National Association of Realtors. The group will release July figures on Wednesday.  Sales of newly built homes account for less than a tenth of total US homebuying activity.

Also, data on such purchases are volatile from month to month and subject to later revision. July’s increase came with a margin of error of plus or minus 12.7 percentage points.  New-home sales in July were up 31.3% from a year earlier. The latest figure brings new-home sales back to the level recorded just before the recession began.

But the pace remains well below the peak level of 1.39 million in July 2005. Last month was the first when the rate exceeded 600,000 since early 2008. Before the recession, the last full year below that mark was 1991.  Tuesday’s report showed there was a 4.3-month supply of newly built homes available at the end of July. That was the smallest supply in three years. The median sale price of a new home sold in July was $294,600, down slightly from $296,000 a year earlier.

 

Oil extends losses after EIA data show US crude supplies up 2.5 mln barrels

Oil futures lost more ground on Wednesday after the US Energy Information Administration reported that domestic crude supplies rose by 2.5 million barrels in the week ended Aug. 19.

That was significantly above the 200,000-barrel climb expected by analysts polled by S&P Global Platts, but the American Petroleum Institute late Tuesday reported a rise of nearly 4.5 million barrels, according to sources. Gasoline supplies were flat for the week, while distillate stockpiles edged up by 100,000 barrels, according to the EIA. October crude fell $1, or 2.1%, from Tuesday’s settlement to $47.10 a barrel on the New York Mercantile Exchange. Prices traded at $47.50 before the data.

 

NAR – existing-home sales lose steam in July

Slowed by frustratingly low inventory levels in many parts of the country, existing-home sales lost momentum in July and decreased year-over-year for the first time since November 2015, according to the National Association of Realtors (NAR).

Only the West region saw a monthly increase in closings in July.  Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 3.2% to a seasonally adjusted annual rate of 5.39 million in July from 5.57 million in June. For only the second time in the last 21 months 2, sales are now below (1.6%) a year ago (5.48 million).

The median existing-home price  for all housing types in July was $244,100, up 5.3% from July 2015 ($231,800). July’s price increase marks the 53rd consecutive month of year-over-year gains.  Total housing inventory at the end of July inched 0.9% higher to 2.13 million existing homes available for sale, but is still 5.8% lower than a year ago (2.26 million) and has now declined year-over-year for 14 straight months. Unsold inventory is at a 4.7-month supply at the current sales pace, which is up from 4.5 months in June.

 

The share of first-time buyers was 32% in July, which is below last month (33%) but up from 28% a year ago. First-time buyers represented 30% of sales in all of 2015.  All-cash sales were 21% of transactions in July, down from 22% in June, 23% a year ago and the lowest share since November 2009 (19%). Individual investors, who account for many cash sales, purchased 11% of homes in July, unchanged from June and down from 13% a year ago. Seventy% of investors paid in cash in July.

According to Freddie Mac, the average commitment rate (link is external) for a 30-year, conventional, fixed-rate mortgage dropped from 3.57% in June to 3.44% in July. Mortgage rates have now fallen five straight months and in July were the lowest since January 2013 (3.41%). The average commitment rate for all of 2015 was 3.85%.

NAR President Tom Salomone says in addition to affordability concerns, an issue seen earlier in the housing recovery may be reemerging. Realtors® are indicating that appraisal complications are appearing more frequently as the reason why a contract signing experienced a delayed settlement.  “Appraisal-related contract issues have notably risen over the past year and were the root cause of over a quarter of contract delays in the past three months,” he said.

“This is likely a combination of sharply growing home prices in some areas, the uptick in home sales this year and the strong refinance market overworking the already reduced number of practicing appraisers. Realtors® are carefully monitoring this trend, and some have already indicated they’re extending closing dates on contracts to allow extra time to accommodate the possibility of appraisal-related delays.”

 

Coming in at the lowest share since NAR began tracking in October 2008, distressed sales – foreclosures and short sales – were 5% of sales in July, down from 6% in June and 7% a year ago. Four% of July sales were foreclosures and 1% were short sales. Foreclosures sold for an average discount of 18% below market value in July (11% in June), while short sales were discounted 16% (18% in June).

Properties typically stayed on the market for 36 days in July, up from 34 days in June but down from 42 days a year ago. Short sales were on the market the longest at a median of 95 days in July, while foreclosures sold in 54 days and non-distressed homes took 34 days. Forty-seven% of homes sold in July were on the market for less than a month.

Inventory data from Realtor.com reveals that the metropolitan statistical areas where listings stayed on the market the shortest amount of time in July were Denver-Aurora-Lakewood, Colo., San Francisco-Oakland-Hayward, Calif., San Jose-Sunnyvale-Santa Clara, Calif., and Seattle-Tacoma-Bellevue, Wash., all at a median of 32 days; and Vallejo-Fairfield, Calif., at a median of 36 days.

Single-family home sales decreased 2.0% to a seasonally adjusted annual rate of 4.82 million in July from 4.92 million in June, and are now 0.8% under the 4.86 million pace a year ago. The median existing single-family home price was $246,000 in July, up 5.4% from July 2015.

Existing condominium and co-op sales dropped 12.3% to a seasonally adjusted annual rate of 570,000 units in July from 650,000 in June, and are now 8.1% below July 2015 (620,000 units). The median existing condo price was $228,400 in July, which is 4.1% above a year ago.

 

July existing-home sales in the Northeast descended 13.2% to an annual rate of 660,000, and are now 5.7% below a year ago. The median price in the Northeast was $284,000, which is 3.3% above July 2015.  In the Midwest, existing-home sales fell 5.2% to an annual rate of 1.28 million in July (unchanged from a year ago). The median price in the Midwest was $194,000, up 5.0% from a year ago.

Existing-home sales in the South in July declined 1.8% to an annual rate of 2.22 million, and are now 1.8% below July 2015. The median price in the South was $214,500, up 6.6% from a year ago.  Existing-home sales in the West rose 2.5% to an annual rate of 1.23 million in July, but are still 0.8% below a year ago. The median price in the West was $346,100, which is 6.4% above July 2015.

 

Foundation donors who met, talked with Clinton

Hillary Clinton met or talked by phone with at least 154 people from private interests, such as corporations, during her time as secretary of the state. More than half those people had donated either personally or through companies or groups to the Clinton Foundation or pledged to donate to specific programs through the charity’s international arm. Among them:

 

— Joseph Duffey, who once worked for Laureate Education, a for-profit education system based in Baltimore, was one of 20 people at a higher education policy dinner with Clinton in August 2009. Weeks earlier, Clinton emailed her staff looking for Duffey’s phone number. Duffey, whom Bill Clinton appointed as director of the US Information Agency, gave between $10,000 and $25,000 to the foundation in 2012. Laureate, which paid Bill Clinton more than $17 million as a consultant between 2010 and 2015, donated between $1 million and $5 million to the Clinton Foundation. Laureate also has seven commitments with the Clinton Global Initiative.

— Jeffrey Skoll, a Canadian engineer and technology investor who was the first president of internet auction site eBay. He cashed out with $2 billion in assets and used the money to finance his foundation, a technology investment firm and a Hollywood production company. The Skoll Foundation contributed between $100,000 and $250,000 to the Clinton Foundation and has partnered in at least 21 commitments to programs through the Clinton Global Initiative. In May 2009 Sally Osberg, CEO of Skoll’s charity, messaged longtime Clinton friend Jan Piercy about “the possibility of Hillary’s speaking at next year’s Skoll Forum” — a message that was relayed to Clinton. Clinton told aides by email she wanted to attend the Skoll event in the U.K. in March 2012 but was unable to attend. Instead, in April 2012, Clinton met privately with Skoll and Osberg during a State Department-sponsored forum on government-business partnerships. The same month, USAID, the State Department’s foreign aid arm, announced a partnership with the Skoll Foundation to invest in health, energy, governance and food security innovations.

— Haim and Cheryl Saban. Haim Saban is an entertainment magnate, long-time Clinton and Democratic Party fundraiser and founder of the Saban Center for Middle East Peace, a Mideast policy think tank based in Washington. His wife, Cheryl Saban, is a psychologist and writer who has been a Clinton Foundation board member since 2013. The Sabans donated between $10 million and $25 million to the Clinton Foundation — among the largest gifts to the charity. Saban met privately with Clinton at least once in September 2009 and also hosted her twice at events put on by his think tank in June 2012 and again in November 2012. Messages from both Sabans were relayed to Clinton during her tenure. In one following Clinton’s appearance at his center luncheon in June 2012, Haim Saban told her: “Very much was looking forward to hangin’. Tx again for today.” Clinton replied: “Not to worry. Loved seeing you and Cheryl and looking forward w Bill to White House tonight. See you then.”

— John Mack, the former chairman and CEO of Morgan Stanley and a political donation bundler for Clinton’s 2008 presidential campaign. In September 2011, as Morgan Stanley chairman, Mack was among a group who met with Clinton on China trade issues. In July 2012, he and his wife were scheduled to have dinner with her. They were again to have dinner with Clinton in September 2012, but Clinton canceled at the last minute, according to her emails and calendars. The Macks’ personal charity has given between $1 million and $5 million to the Clinton Foundation. Other Morgan Stanley organizations, including the bank itself, have given between $360,000 and $775,000. Morgan Stanley has also given money to six different programs through the Clinton Global Initiative.

— Randi Weingarten, president of American Federation of Teachers, a national teachers union that has backed and funded Clinton’s presidential run and allied political action committees. Under Weingarten, the AFT donated between $1 million and $5 million to the Clinton Foundation and pledged partnership commitments with other interests in four separate Clinton Global Initiative programs. Weingarten had two private meetings with Clinton in 2009 and 2012 and also joined her at a photo shoot in 2010. Her union also lobbied federal agencies on education, work, safety and other issues. In emails, Weingarten aide Tina Flournoy — now a top deputy for Bill Clinton — told Hillary Clinton in September 2009 that she and Weingarten “would like to visit you re: child labor issues.” Less than a month later, the two women met with Clinton for a half-hour. A union spokeswoman later told AP that Weingarten spoke with Clinton about refugees, global education and child labor abuses.

 

MBA – mortgage applications decrease in latest MBA weekly survey

Mortgage applications decreased 2.1% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 19, 2016.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.1% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3% compared with the previous week.

The Refinance Index decreased 3% from the previous week. The seasonally adjusted Purchase Index decreased 0.3% from one week earlier. The unadjusted Purchase Index decreased 2% compared with the previous week and was 8% higher than the same week one year ago.  The refinance share of mortgage activity decreased to 62.4% of total applications from 62.6% the previous week.

The adjustable-rate mortgage (ARM) share of activity remained unchanged at 4.6% of total applications.  The FHA share of total applications decreased to 8.9% from 9.6% the week prior. The VA share of total applications decreased to 12.4% from 13.2% the week prior. The USDA share of total applications remained unchanged from 0.6% the week prior.

 

 

Black Knight Financial Services – First Look at July 2016    

The Data and Analytics division of Black Knight Financial Services reports the following “first look” at July 2016 month-end mortgage performance statistics derived from its loan-level database representing the majority of the national mortgage market.

–  Delinquency rate rose to just over 4.5%, though July ending on a Sunday suggests a historically likely August decline

–  Prepayment activity fell in July despite overall growth in the number of refinance candidates and 30-year interest rates remaining at or below 3.45% for much of the month

–  July foreclosure starts fell 12% from last month, marking the second lowest monthly total in 10 years

–  Foreclosure inventory continues to decline as well, now down 20% from the start of 2016 and to its lowest point since July 2007

 

Stocks open slightly lower as oil retreats

US stocks opened slightly lower Monday, with investors taking a cue from a retreat by oil futures as they await a speech by Federal Reserve Chairwoman Janet Yellen at the end of the week. The S&P 500 fell 4 points, or 0.2%, to 2,180, while the Dow industrials declined 69 points, or 0.4%, to 18484. The Nasdaq Composite lost 8 points, or 0.1%, to trade at 5,230.

Oil futures pulled back, with traders citing doubts about a potential production freeze. The week’s main event is expected to be Yellen’s speech Friday at an annual Fed retreat in Jackson Hole, Wyo., which will be watched for clues to the timing of the central bank’s next rate increase.

 

Zillow – July home sales forecast: is the party over?

–  Zillow expects existing home sales to fall 1.9% in July from June, to 5.46 million units at a seasonally adjusted annual rate (SAAR), ending a string of four consecutive monthly gains.

–  New home sales should fall 6.65% to 553,000 units (SAAR) after a stronger than expected June.

–  Given the recent string of home sales beating forecasts, we view risks to the upside and would not be surprised if results are slightly stronger than we expect.

 

Thus far, it has been a pretty sweet ‘16 for home sales. But according to our July home sales forecast, the party looks like it could be coming to an end, at least temporarily and especially for sales of existing homes that must eventually face the harsh reality of tight inventory and rising prices.

Despite tight inventory, existing home sales have been surprisingly buoyant lately, beating or meeting expectations in each of the four months from March to June. We expect that streak to end in July. If nothing else, the odds that home sales continue to rise are increasingly dim.

Since the series began in February 1999, runs of five months or more of consecutive monthly gains have only occurred five times – and only one of those streaks lasted six consecutive months or more.  Shifting seasonal patterns may be behind some of this apparent resiliency. By some reports, the height of the home shopping season – historically most concentrated during the summer months – shifted earlier this year as buyers sought to get ahead of the competition.

But sooner or later, tight supply and rising prices should take their toll.  Our forecast for existing home sales points to a 1.9% decline from June to 5.46 million units at a seasonally adjusted annual rate (SAAR). This would place existing home sales down 0.3% compared to a year earlier.  New home sales have also proven surprisingly strong, beating expectations for the past eight months.

Our forecast suggests that new home sales should fall 6.65% in July to 553,000 units (SAAR), which would be the largest month-over-month decline since last September. That decline, however significant, would still leave new home sales up 11% over the year – a sign of just how strong the new home sales market has been so far in 2016.

And while our forecast points to fewer new home sales in July compared to June, given the recent record of beating expectations, we view forecasts risks to the upside and would not be surprised if new home sales come in slightly above our forecast for July.

 

Morgan Stanley neglected warnings on broker

One of the company’s top financial advisers in Mississippi, Steve Wyatt, was struggling with medications and was “not sleeping, coming in 3 and 4 a.m.,” his assistant said on the call, according to notes taken by the person who answered the phone. Mr. Wyatt, a broker, was also trading client money “erratically,” the assistant said.

Morgan Stanley is one of the top banks on Wall Street, operating one of the most sophisticated financial advisory businesses in the world. But when the call came in, there was little effort to help fix the problems, Mr. Wyatt’s colleagues — and Mr. Wyatt himself — testified in arbitration.

This was not the only time Morgan Stanley did not heed warnings about Mr. Wyatt, who managed tens of millions of dollars of customer money, according to a settlement this week and documents from arbitration cases against him and the company.

During Mr. Wyatt’s five years at the company, supervisors and compliance officers noted his problematic behavior and business patterns many times and failed to step in, documents show. Lawyers for his former clients claim that they lost about half their money, or around $50 million.

 

Mr. Wyatt’s case, while involving just one broker, sheds light on the difficulty that even sophisticated companies can encounter in supervising their far-flung networks of brokers, who manage the retirement savings of millions of people nationwide.

Wall Street companies have been expanding into wealth management and brokerage services, as profits from other businesses have been under pressure from regulations imposed after the 2008 financial crisis. Morgan Stanley now has nearly 16,000 financial advisers, one of the largest such forces of any company.

Mr. Wyatt, who oversaw more than $100 million in client money, was fired in 2012, more than two years after that phone call and after more concerns were raised.  In an interview, Mr. Wyatt, now 44, described falling into depression and having suicidal feelings, set off by the chaos of financial crisis and its aftermath.

He said his supervisors never offered help or expressed concern. “If they thought I was suicidal, if they thought I was depressed, nobody mentioned anything to me — concerned or otherwise,” he said.  This week, the Mississippi secretary of state said in a settlement with Morgan Stanley that it had “failed to reasonably supervise” Mr. Wyatt. “Clearly, they had warning signs — they had indications of personal issues,” Delbert Hosemann, the Mississippi secretary of state, said of Morgan Stanley.

“All of those were either dealt with in a cursory manner or not dealt with at all.”  The settlement barred Mr. Wyatt and his immediate supervisor from the securities industry for life. Morgan Stanley was also instructed to create a $4.2 million fund to reimburse clients, a small part of what customers claim they lost with Mr. Wyatt.  Morgan Stanley did not admit or deny the accusations in the state settlement.

 

WSJ – Lenovo operating profit boosted by property sale

Electronics manufacturer Lenovo Group Ltd. posted fiscal first-quarter earnings Thursday that beat analysts’ estimates, but only because of the sale of a property in Beijing. Its sales of PCs and mobile devices continued to decline.

Lenovo reported operating profit, a metric that investors use to gauge a company’s performance, of US$245 million for the quarter ended June 30, more than doubling from US$96 million a year earlier. Executives, speaking on a conference call, attributed 49% of the latest sum, or US$120 million, to the property sale.

Chief Financial Officer Wong Wai Ming said during the call that the sale of the property, which it will lease back, was part of efforts to “monetize our noncore operating assets” to free up cash to reinvest in the business, according to a transcript provided by the company.  “This transaction resulted in recording over US$120 million in capital gains, which is shown in other operating income in our financial statements,”

Mr. Wong said, according to the transcript. “We will continue to look for such asset-monetization opportunities to fund some of our investments to drive our business growth.”  Some industry analysts questioned the company’s decision to include the property sale in its operating profit, given that real estate isn’t a continuing business for the technology company.

“At my first glance at the numbers, I thought it was great,” said Arthur Hsieh, a tech-sector analyst at UBS. “But the more I dive into the details, the more I think it is really not that great.”  Lenovo said the company has consistently classified property sales as operating income, “as these transactions form an integral part of the operating activities of Lenovo.”

 

The earnings highlight an accounting difference between the US and countries such as China, said Wang Xin, an assistant professor of accounting at the University of Hong Kong. Under the US Generally Accepted Accounting Principles, or GAAP, a property sale by a tech company would be listed as a one-time, nonoperating item, he said.

But companies using International Financial Reporting Standards, or IFRS, have the option to list it as an operating or nonoperating item, he said.  The reported operating-profit figure of US$245 million easily trumped expectations of US$187 million, according to Thomson One Analytics. Lenovo shares jumped sharply early Thursday on the initial earnings report, but gave up some ground to close at 5.47 Hong Kong dollars (71 US cents)—still a 2.2% rise from Wednesday’s close.

The company said its net income rose 64% from a year earlier to US$173 million. Sales fell 5.6% to US$10.1 billion, from US$10.7 billion.  Lenovo said revenue for its PC and smart-device business declined 7%, while mobile sales fell 6% and its data-center business rose 1%.

The company is facing the same stiff winds affecting its industry rivals. World-wide, PC shipments declined 4.5% in the second quarter and growth in the smartphone market slipped to 0.3%, according to market-research firm IDC.  Lenovo said this year that integrating its acquisitions of Motorola Mobility and an IBM server unit has been more challenging than expected.

Lenovo Chief Executive Yang Yuanqing said on a separate call with reporters that the company was investing heavily in marketing and retail channels for its smartphone business.  “We definitely believe we are on track to turn around the business,” he said.

MBA – mortgage applications down

Mortgage applications decreased 4.0% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 12, 2016.

The Market Composite Index, a measure of mortgage loan application volume, decreased 4.0% on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 5% compared with the previous week.

The Refinance Index decreased 4% from the previous week.  The seasonally adjusted Purchase Index decreased 4% from one week earlier to the lowest level since February 2016, but remained 10% higher than the same week last year. The unadjusted Purchase Index decreased 5% compared with the previous week.

The refinance share of mortgage activity increased to 62.6% of total applications from 62.4% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 4.6% of total applications.  The FHA share of total applications decreased to 9.6% from 10.0% the week prior. The VA share of total applications increased to 13.2% from 13.0% the week prior. The USDA share of total applications remained unchanged at 0.6% from the week prior.

 

Ford self-driving cars to ditch pedals, steering wheel by 2021

Ford is getting super serious about self-driving taxis.  The auto maker on Monday said it intends to begin mass producing self-driving vehicles in 2021 for a ride-hailing service. To achieve that goal, the company is investing in or collaborating with four start-ups to bolster its autonomous vehicle development, doubling its Silicon Valley Team and more than doubling its Palo Alto campus.

Ford is going all-in with this plan — the company’s first fully autonomous vehicle will lack several key parts of cars today: a steering wheel and gas and brake pedals. Because the car will be able to drive itself, it won’t need them. The vehicle is being “specifically designed for commercial mobility services … and will be available in high volumes,”

Ford said in its announcement Opens a New Window. In 2014, Google also ditched the steering wheel Opens a New Window.  in its self-driving prototype vehicle, but was required by California to add it back Opens a New Window.  when testing on public roads, so a human driver could intervene in an emergency.

Ford is already testing autonomous vehicles in California, and plans to ramp up these efforts in a big way this year, tripling its fleet to be “the largest test fleet of any automaker.” By the end of the year, the company plans to have about 30 self-driving Fusion Hybrid sedans on the roads in California, Arizona, and Michigan Opens a New Window. , and it plans to triple that number again next year.  “The next decade will be defined by automation of the automobile, and we see autonomous vehicles as having as significant an impact on society as Ford’s moving assembly line did 100 years ago,”

Ford president and CEO Mark Fields said in a statement. “We’re dedicated to putting on the road an autonomous vehicle that can improve safety and solve social and environmental challenges for millions of people — not just those who can afford luxury vehicles.”  To deliver on its plan, Ford has announced new investments in and collaborations with four companies: Silicon Valley LiDAR sensor company Velodyne, Israel-based computer vision and machine learning firm SAIPS, machine vision company Nirenberg Neuroscience, and Berkeley, Calif.-based 3D mapping company Civil Map.

 

NAHB – multifamily uptick pushes overall housing starts up 2.1% in July

 

Nationwide housing starts rose 2.1% in July to a seasonally adjusted annual rate of 1.21 million units, according to newly released data from the US Department of Housing and Urban Development and the Commerce Department. This is the highest reading since February. Multifamily housing was up 5% to a seasonally adjusted annual rate of 441,000 units in July while single-family production edged up 0.5% to 770,000 units.

“New household formations are upping the demand for rental housing, which in turn is spurring the growth of multifamily production,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill. “Meanwhile, single-family housing continues to hold firm.”  “Single-family starts, on a year-to-date basis, are up 10.6% and builders are cautiously optimistic about market conditions,” said NAHB Chief Economist Robert Dietz.

“However, the permit trends indicate that supply-side headwinds, such as shortages of lots and labor, continue to affect the housing sector.”  Regionally in July, combined single- and multifamily starts increased in the Northeast, Midwest and South, with respective gains of 15.5%, 2.3% and 3.5%. The West registered a 5.9% loss.

Overall permit issuance inched down 0.1% to a seasonally adjusted annual rate of 1.15 million. Multifamily permits increased 6.3% to a rate of 441,000, while single-family permits fell 3.7% to 711,000.  Permit issuance increased 10.5% in the Midwest and 2.6% in the South. Meanwhile, the West and Northeast posted respective losses of 8% and 10.2%.

 

Ex-Wall Street banker convicted for giving father insider tips

A former Wall Street investment banker was convicted on Wednesday for engaging in insider trading by tipping his father off to unannounced healthcare mergers, in a victory for prosecutors after an appellate ruling made pursuing such cases harder.

Sean Stewart, who previously worked at Perella Weinberg Partners and JPMorgan Chase, was found guilty by a federal jury in Manhattan on all nine counts he faced, including securities fraud.  Stewart, 35, was one of 107 people accused of insider trading since 2009 by prosecutors under Manhattan US Attorney Preet Bharara. His trial was Bharara’s first since a 2014 appellate ruling narrowed the scope of insider trading laws.

 

Zillow – urban ascendant: home values in and around Washington, D.C.

–  Since the onset of the Great Recession, home value growth within the District of Columbia has outpaced home value growth in the D.C. suburbs.

–  At the start of the Bush Administration, DC homes were worth 14% less than homes in the nearby suburbs; now they are worth 27% more.

–  Since 2012, the historically less affluent Northeast and Southwest quadrants have led the District of Columbia in home value appreciation.

 

The housing market in and around Washington, D.C., has fundamentally transformed over the past decade. Perhaps more than any other US market, the nation’s capital sharply illustrates the extent of urban renaissance experienced in many cities nationwide, and the diverging post-Recession fortunes of the nation’s urban and suburban communities.

Until recently, the Washington, D.C. area was a study of contrasts. Leafy, upscale neighborhoods like Georgetown and gleaming suburbs like Arlington, Virginia and Bethesda, Maryland stood in stark contrast to the majority of the District itself. This “other” D.C. was particularly hard-hit in the 1980s and 1990s by a combination of drugs, crime, AIDS and systematic underinvestment in communities of color.

In January 2000, when George W. Bush first assumed the presidency, the median home in the District of Columbia was worth $136,200. This was 14% less than the typical home in the nearby suburbs inside the Capital Beltway – the 64-mile interstate surrounding the city and its nearest suburbs in Maryland and Virginia – and 17% less than homes in suburbs beyond the Beltway.

Today, homes in the District of Columbia are 27% more expensive than homes inside the Beltway but not in the District, and 44% more expensive than homes outside the Beltway. Per square foot, homes in the District were 6% less expensive than homes in the nearby suburbs at the start of the Bush Administration, but are now 50% more expensive than other homes inside the Beltway.

 

Two periods in particular account for the widening gap between home values in the District of Columbia and its suburbs.  First, the federal government’s first-time home buyer tax credits in 2009 and 2010 had a much larger effect on home values in the District of Columbia than in its suburbs.

Between September 2009 and August 2010, median home values in the District of Columbia rose 5.3%, from $344,900 to $363,200. Over the same time, home values in the close-in suburbs inside the Beltway increased 2% (from $341,900 to $348,700); beyond the Beltway, home values increased 1.1% (from $312,300 to $315,800).

Second, and perhaps more dramatically, home value growth in the District of Columbia has strongly outpaced home value growth in the suburbs over the past three years. The median home value in the District of Columbia rose 19% from the end of 2013 through today. Over the same period, home values in the inner-Beltway suburbs rose 4%; outside the Beltway, the median home value is up 5%.

Since December 2013, home value growth in the suburbs overall – both inside and outside the Beltway – has averaged 4% per year. Inside the District of Columbia, home value growth has averaged 9% per year over the same time, more than double the suburban pace.

 

The District of Columbia itself is organized into four quadrants with sharply different incomes and demographics. Historically, the Northwest (NW) quadrant – which includes the toney neighborhoods of Georgetown, Foggy Bottom, Embassy Row and Kalorama (soon to be the home of President Obama), among others – has been the most affluent. But over the past half-decade, home values have been on the rise elsewhere in the District. The Northeast (NE) quadrant is home to rapidly gentrifying, and rapidly appreciating, neighborhoods including Eckington and NOMA (North of Massachusetts Avenue).

Home values in neighborhoods that straddle the border between the Northwest and Northeast quadrants have appreciated particularly quickly. In spring 2015 the median home value per square foot in the Bloomingdale neighborhood – south of Howard University, bordering the two northern quadrants – surpassed the median home value per square foot in the historically more affluent Northwest neighborhood of Cathedral Heights for the first time.

The Southwest (SW) quadrant, until recently dominated by federal offices, has also experienced strong home value growth in the wake of major redevelopment efforts surrounding the Southwest Waterfront and Nationals Park, home of the city’s Major League Baseball franchise.

The Southeast (SE) quadrant has also experienced rapid home value appreciation in popular neighborhoods such as Capitol Hill and Eastern Market, and surrounding new developments like Navy Yard. But broad swathes of the Southeast quadrant across the Anacostia River have not experienced the same degree of home value appreciation as elsewhere in DC.

 

In January 2000, the median home in the Northwest quadrant was worth $150 per square foot, 52% more than the median home in the Northeast quadrant ($99 per square foot). Today, the gap is much smaller.

The median home in the Northwest quadrant is worth $533 per square foot, 18% more than the median home in the Northeast quadrant ($450 per square foot).  During the housing bust, home values in Northwest DC hardly dropped at all, and have since increased strongly.

More recently, until mid-2013, home values in the Northeast and Southwest quadrants were roughly similar. Since then, home values in the Northeast quadrant have increased by 40% while home values in the Southwest quadrant have increased 19%. Between late 2012 and late 2014, annual home value appreciation in the Northeast quadrant was fastest among the four quadrants – peaking at 22% in May 2014, more than double the pace of appreciation observed elsewhere.

For much of 2015, homes in the Southeast quadrant were appreciating twice as fast as homes in the Northwest, although by early 2016 the pace of appreciation largely converged across quadrants.

 

CoreLogic – a walk down memory lane

On May 26th, 2016, the granddaddy of all equity indexes—the Dow Jones Industrial Average (DJIA)—turned 120. The 30 blue-chip companies that comprise the DJIA have evolved over time –General Electric is the one that has been in the index the longest, since 1907–and today many are no longer in heavy industry.

Nonetheless, the DJIA remains a gauge of equity-market performance.  Few sectors of the economy have indices that trace activity for more than a century. In the housing market, one can merge various metrics and survey data to develop a house-price index that stretches back to 1890, before the inception of the DJIA.

Professor Robert Shiller has done just that, and even though the geographic composition of prices has not been constant over that period, neither has the composition of the DJIA.  By taking the ratio of the DJIA to Prof. Shiller’s house-price series, and setting the ratio to 1 in 1896, we can compare how the DJIA and home prices have compared.

For much of the first half century, equities and home values largely moved together, with the exception of the “roaring ‘20s” that preceded the Great Depression. Even as recently as the early 1980s, equity values had cumulative growth that was only slightly more than home values. Since then, however, equity values have soared relative to home values, increasing several fold compared with home-price indexes.

 

While the valuation gain on equities (rather, on the firms that comprise the DJIA) has exceeded the price gain on houses, equities also have more risk. A general principle is that investments that have more risk should also compensate the investor for holding that risk.

A true investment ‘return’ would reflect both valuation gain and income earned from the asset over time (for example, dividends or rent) and net out any costs (such as home improvements), but for simplicity we can compare the valuation change with volatility over time:While equity values have grown more than house prices since 1896, the annual volatility in the equity market has also been far greater than the volatility of house prices.

That’s not to say that house prices are not volatile; the boom-bust cycle in housing over the past decade has shown that house prices can have significant year-to-year movement, both up and down. And while house prices have not kept up with stock values, homes appear to have held up well relative to general inflation: Since 1913, the inception year for the Consumer Price Index, house prices have grown about 0.5% per year faster than inflation.

Financial advisors caution that past performance should not be used as a gauge of future returns. While the past century cannot foretell the valuation trend of the next, at least two outcomes are likely over the next 120 years: First, equity values will likely grow more than home prices but with more volatility; and second, housing will generally be a good inflation hedge for owners with long holding periods.

NAHB – builder confidence rises two points in August

Builder confidence in the market for newly constructed single-family homes  in August rose two points to 60 from a downward revised reading of 58 in July on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).  “New construction and new home sales are on the rise in most areas of the country, and this is helping to boost builder sentiment,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill.

“Builder confidence remains solid in the aftermath of weak GDP reports that were offset by positive job growth in July,” said NAHB Chief Economist Robert Dietz.  “Historically low mortgage rates, increased household formations and a firming labor market will help keep housing on an upward path during the rest of the year.”

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 gains in August. The component gauging current sales conditions rose two points to 65, while the index charting sales expectations in the next six months increased one point to 67.  The component measuring buyer traffic fell one point to 44.  Looking at the three-month moving averages for regional HMI scores, the South registered a two-point uptick to 63, the Northeast rose two points to 41 while the West was unchanged at 69. The Midwest dropped two points to 55.

 

Empire State manufacturing contracts in August

Factory activity across New York state fell in August and producers signaled layoffs in the months ahead, the latest sign that many US manufacturers are still facing weaker customer demand amid economic and political uncertainty.

The Empire State’s business conditions index declined to -4.2 from 0.6 in July. The gauge has been swinging around the zero mark, which separates expansion from contraction, in recent months.  Economists surveyed by The Wall Street Journal expected the index to edge up to 2.5.  The Empire report is the first in this month’s batch of regional factory surveys conducted by Fed banks, looked to by economists and investors for clues about the state of the nation’s manufacturing sector.

While conditions across the country have improved in recent months, producers are still contending with softer demand from overseas, exacerbated by the strong dollar’s effect on pricing, and with a sharp drop off in business investment. According to the most recent report on gross domestic product, businesses still aren’t spending on capital investments.

Nonresidential fixed investment fell at a 2.2% pace in the quarter, and equipment spending dropped for the fourth time in five quarters. Many firms have expressed caution ahead of the presidential election and Brexit’s effect on exports, in addition to lingering economic headwinds.  In the New York report, firms said new orders rose slightly from July and shipments hit a 12 month high.

But manufacturers reduced head counts, a trend they signaled would accelerate, and inventories continued to contract.  Looking ahead six months, factories across the state expressed ongoing optimism that conditions would pick up, but sentiment was more cautious than in recent months.

A gauge of overall expectations slipped to 23.74 from 29.24 as firms pulled in demand expectations. Meanwhile, an index of future hiring slid seven points to -6.19, and producers reported sharp reductions in capital spending and technology investment plans.  “Actual business activity is OK but firms remain anxious, perhaps waiting to see how the aftermath of the Brexit referendum affects their export business,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

 

Rental demand spurs $4 billion deal

Mid-America Apartment Communities Inc said it would buy Post Properties Inc for about $3.88 billion to create the largest publicly traded multifamily apartment real estate investment trust by units.  The combined company would have a market capitalization of about $17 billion, the companies said on Monday.

Post Properties shareholders will get 0.71 newly issued Mid-America Apartment shares for each share they own, the companies said.  The deal, first reported by the Wall Street Journal, would combine companies buoyed by the rising demand for rental properties, creating an entity with 317 properties and 105,000 multifamily units.

Mid-America Apartment, based in Memphis, Tennessee, owns all or part of 254 multifamily properties and 79,496 units in 15 states, according to its website and Thomson Reuters data.  Atlanta-based Post Proprieties, has about 24,000 apartment units in more than 60 communities in Atlanta, Dallas, Washington, and Tampa, Florida, according to Thomson Reuters data.  Citigroup Global Markets Inc is the financial adviser to Mid-America Apartment, while JP Morgan is advising Post Properties.

 

Crude RISES

Oil prices rose on Monday to their highest in nearly a month, with benchmark Brent crude trading more than 10% above the start of August, as speculation intensified about potential producer action to support prices in an oversupplied market.

Brent crude oil futures rose to a high for the month of $47.67 a barrel on Monday before dipping back to $47.17 per barrel at 1230 GMT, up 20 cents from their last settlement, and more than 11% above the last close in July.  US West Texas Intermediate (WTI) crude futures rose to a high of $45.15 a barrel before dipping to $44.69 a barrel, still up 20 cents from their last close. WTI has gained more than 7% in August.

On Monday, Russian Energy Minister Alexander Novak bolstered hopes that oil producing nations could take action to stabilize prices, telling a Saudi newspaper that his country was consulting with Saudi Arabia and other producers to achieve market stability.  Still, analysts were skeptical that the market could maintain its strength, particularly as the excess of supply that has dogged producers for the past two years showed little sign of quickly abating.

“In our view a renewed price correction cannot be ruled out if market participants start focusing on the supply side again, for the latest drilling activity figures in the US cast doubts that the oversupply is really being eroded,” Commerzbank analyst Carsten Fritsch said in a note.  Baker Hughes data released on Friday showed the number of rigs operating in the US rose by 15 last week to 396.

 

Americans are starting to get worried about the ‘new housing crisis’

Americans are catching on to the rise in home prices.  The gap between the demand for new homes and the supply coming onto the market, which we’ve dubbed “the new housing crisis,” has caused prices to soar and priced out many first-time homebuyers.  In fact, San Jose became the first city in the US to have a median house price of $1 million for a single-family home in the second quarter, according to the National Association of Realtors.

According to Friday’s University of Michigan Consumer Sentiment Survey, people are taking notice of record-low interest rates, which could be a reason for the incredibly high number of people who are planning to buy a new home in the next six months.  “Home buying has become particularly dependent on low interest rates, with net references to low interest rates spontaneously mentioned by 48% — this figure has been exceeded in only two months in the past ten years,” said the release accompanying the survey.

The read through here is that Americans are beginning to see the writing on the wall that record-low mortgage rates may soon begin to rise if the Federal Reserve hikes rates. Therefore, the urgency to buy a home may increase.  While these low rates may spur people to buy houses, they’re also making it less likely for people to move.

This is drying up the stock of existing homes that could help alleviate the supply crisis and rising prices.  The only issue is barely anyone is saying that home prices are low.  “In contrast, low housing prices were cited by just 25%, the lowest figure in ten years,” said the release.

So you’ve got people recognizing that interest rates are incredibly low, and that’s driving them to buy houses. But they’ve also recognized that prices are no longer low.  This isn’t a direct measure on whether Americans recognize the source of the problem, but at some level it appears they are aware.

 

It’s not about race

The Department of Housing and Urban Development needs to shed some delinquent loans from the Federal Housing Administration-backed portfolio, this we know.  A subsidiary of Lone Star Funds wins bids for these NPLs, and others, from time to time.  But all is not well with these deals, according to the New York Times.

Authors Jessica Silver-Greenberg and Michael Corkery write that the practice of selling NPLs to private firms disproportionately impacts blacks; so much so that it reminds us of the days of redlining accusations.  If the comparison isn’t enough to get you scratching your head, the mortgage modification race card will.  The slant of the article is that blacks are being unfairly targeted.

Yet the article states, “from 2012 to 2014, more than 61% of the government-backed mortgages sold to investors were in predominantly black neighborhoods, according to the lawsuit,” hardly a definitive majority.

So unless the new owners of these distressed loans offer horrible mortgage mods only to black homeowners, it stands to reason that what’s happening here is the natural process of tragic foreclosures. And it’s happening to all poor souls involved.  Besides, not long ago, nonprofits argued for HUD to speed up this very solution.  So sorry, NY Times, no one gets to have it both ways in lose-lose situations.

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