The ongoing supply shortages that are propping up home prices in many metro areas caused pending home sales in May to slump for the third consecutive month, according to the National Association of Realtors (NAR). None of the major regions saw an increase in contract activity last month. The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 0.8% to 108.5 in May from a downwardly revised 109.4 in April. The index is now 1.7% below a year ago, which marks the second straight annual decline and the most recent since November and December of last year. Lawrence Yun, NAR chief economist, says it’s clear the critically low inventory levels in much of the country somewhat sidetracked the housing market this spring. “Monthly closings have recently been oscillating back and forth, but this third consecutive decline in contract activity implies a possible topping off in sales,” he said. “Buyer interest is solid, but there is just not enough supply to satisfy demand. Prospective buyers are being sidelined by both limited choices and home prices that are climbing too fast.” The persistent housing shortages seen in several markets are most severe, according to Yun, in the lower price ranges. That’s very apparent when looking at the% change in closings in May compared to a year ago. Sales of homes under $100,000 last month were down 7.2% from last year and up only 2.0% for those between $100,000 and $250,000. In higher price brackets, sales expanded incrementally all the way up to massive increases of 26.0% for homes priced between $750,000 and $1 million and even more for those $1 million and up (29.1%).
Weaker financial and economic confidence could also be playing a role in the slowdown in contract activity. NAR’s quarterly Housing Opportunities and Market Experience (HOME) survey, released earlier this week, found that fewer renters think it’s a good time to buy a home, and respondents overall are less confident about the economy and their financial situation than earlier this year. “The lack of listings in the affordable price range are creating lopsided conditions in many areas where investors and repeat buyers with larger down payments are making up a bulk of the sales activity,” said Yun. “Meanwhile, many prospective first-time buyers can’t catch a break. Prices are going up and there’s intense competition for the homes they’re financially able to purchase.” Existing-home sales are forecast to be around 5.63 million this year, an increase of 3.2% from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 5%. In 2016, existing sales increased 3.8% and prices rose 5.1%.”A much higher share of homeowners compared to a year ago think now is a good time to sell1, but until they do, sales will likely stay flat and low inventory will keep price growth moving swiftly,” said Yun.The PHSI in the Northeast decreased 0.8% to 96.4 in May, but remains 3.1% above a year ago. In the Midwest the index was 104.5 in May (unchanged from April), and is 2.8% lower than May 2016. Pending home sales in the South declined 1.2% to an index of 123.4 in May and are now 1.4% below last May. The index in the West subsided 1.3% in May to 98.6, and is now 4.5% below a year ago.
ABC News settles ‘pink slime’ food-libel lawsuit
ABC News has settled a defamation lawsuit filed by the maker of a processed-meat product that critics dubbed “pink slime,” bringing to a close a high-profile legal test of so-called food-libel laws intended to shield the food-production industry from bogus food-safety scares. Terms of the settlement weren’t announced. Beef Products Inc. sued ABC News, anchor Diane Sawyer and reporter Jim Avila in 2012 for $1.9 billion, over a series of stories about its lean, finely textured beef product—what critics dubbed “pink slime”—claiming it was the victim of journalistic hit job that harmed its business. A judge dismissed the claims against Ms. Sawyer before the start of the jury trial, which began earlier this month in South Dakota. Due to a South Dakota food-libel law that triples damages against those found to have knowingly lied about the safety of a food product, ABC News was facing, potentially, $6 billion in damages. Beef Products, a family-owned South Dakota meat processor, said in a Wednesday statement the settlement validated that lean, finely textured beef, made from defatted beef trimmings in a process involving ammonium hydroxide, was safe. “While this has not been an easy road to travel, it was necessary to begin rectifying the harm we suffered as a result of what we believed to be biased and baseless reporting in 2012,” Beef Products said. “Through this process, we have again established what we all know to be true about Lean Finely Textured Beef: it is beef, and is safe, wholesome, and nutritious.”
MBA – mortgage applications decrease in latest MBA weekly survey
Mortgage applications decreased 6.2% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 23, 2017. The Market Composite Index, a measure of mortgage loan application volume, decreased 6.2% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 7% compared with the previous week. The Refinance Index decreased 9% from the previous week. The seasonally adjusted Purchase Index decreased 4% from one week earlier. The unadjusted Purchase Index decreased 5% compared with the previous week and was 8% higher than the same week one year ago. The refinance share of mortgage activity decreased to 45.6% of total applications from 46.6% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 7.0% of total applications. The FHA share of total applications increased to 10.3% from 10.1% the week prior. The VA share of total applications decreased to 10.3% from 10.4% the week prior. The USDA share of total applications remained unchanged at 0.7% from the week prior.
Dow surges more than 100 points as bank shares jump
US equities traded higher on Wednesday as bank stocks led the charge. The Dow Jones industrial average jumped 137 points with Goldman Sachs and Disney contributing the most gains.The S&P 500 advanced 0.7% with financials rising 1.3% to lead advancers. The SPDR S&P Bank exchange-traded fund (KBE), which tracks large banks, spiked 1.7% higher as investors braced for the release of the Federal Reserve’s stress test results. Analysts expect several big banks to come out of the test with substantial increases in return to shareholders — potentially using cash reserves to pay out more than 100% of their profits. As a result, higher figures would also reflect banks’ confidence in their own financial health. Shares of JPMorgan Chase and Goldman Sachs both climbed about 1%. Stocks also jumped after the European Central Bank tried to walk back remarks made by ECB President Mario Draghi a day earlier. A source familiar with Draghi’s knowledge told Reuters that Draghi intended to signal tolerance for a period of weaker inflation, not an imminent policy tightening.Draghi said Tuesday “the threat of deflation is gone and reflationary forces are at play,” sending the euro to a one-year high against the dollar. The currency pulled back from those levels on Wednesday following Reuters’ report.
WSJ – labor shortage squeezes real-estate developers
About two-thirds of the contractors who are struggling with the labor shortages gripping the construction industry say it has become a challenge to finish jobs on time, according to a new survey. More than one-third of contractors said they are being forced to turn work down and 58% said they are putting in higher bids, said the survey sponsored by USG Corp. USG 2.80% and the US Chamber of Commerce. Three-quarters of those who said they are having difficulty finding skilled labor said they are simply asking their employees to work harder. “Basically they’re just making people work harder as a way to cope,” said Steve Jones, senior director of Dodge Data & Analytics, which was the research partner of USG and the Chamber on the project. The survey was conducted as part of the development of a new economic indicator launched earlier this month named the USG + US Chamber of Commerce Commercial Construction Index. It was designed to gauge such trends as backlogs, revenue projections, access to financing and labor issues. Two-thirds of the contractors surveyed predicted there would be more workers in the next six months. But 61% of the respondents reported problems finding skilled laborers in such trades as concrete, interior finishes, masonry, electrical and plumbing. “There is reason for concern in the lack of qualified talent,” said Tom Donohue, chief executive of the Chamber in a written statement.
Industry officials are warning that labor shortages will become more acute if the Trump administration moves ahead with its plan to spend $1 trillion on infrastructure. “We couldn’t absorb $1 trillion worth of brand new work,” said Mr. Jones. “We’re already strapped just dealing with the work we already have.”Labor shortages are partly due to the increasing number of construction projects moving forward. During the first four months of this year, construction spending amounted to $359.5 billion, 5.8% more than the same period in 2016, according to the US Census Bureau. Also, tens of thousands of workers left the building trades during the economic downturn. Even before it hit, the construction workforce was aging, Mr. Jones said. “You had an aging workforce in an industry that doesn’t lend itself to long careers because it’s hard, physical work and then you lose a whole bunch of people,” he said. The USG and Chamber survey asked four questions on coping strategies to the 61% of respondents who said they’re having difficulty finding skilled labor.