– Price Appreciation Outstripping Income Growth in Many Markets
– Many Markets Still Lack Adequate Inventory
– Tight Inventory Impacting Rental Markets
CoreLogic released its CoreLogic Home Price Index (HPI™) and HPI Forecast™ for May 2017 which shows home prices are up strongly both year over year and month over month. Home prices nationally increased year over year by 6.6% from May 2016 to May 2017, and on a month-over-month basis, home prices increased by 1.2% in May 2017 compared with April 2017,* according to the CoreLogic HPI. Looking ahead, the CoreLogic HPI Forecast indicates that home prices will increase by 5.3% on a year-over-year basis from May 2017 to May 2018, and on a month-over-month basis home prices are expected to increase by 0.9% from May 2017 to June 2017. 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. “The market remained robust with home sales and prices continuing to increase steadily in May,” said Dr. Frank Nothaft, chief economist for CoreLogic. “While the market is consistently generating home price growth, sales activity is being hindered by a lack of inventory across many markets. This tight inventory is also impacting the rental market where overall single-family rent inflation was 3.1% on a year-over-year basis in May of this year compared with May of last year. Rents in the affordable single-family rental segment (defined as properties with rents less than 75% of the regional median rent) increased 4.7% over the same time, well above the pace of overall inflation.” “For current homeowners, the strong run-up in prices has boosted home equity and, in some cases, spending,” said Frank Martell, president and CEO of CoreLogic. “For renters and potential first-time homebuyers, it is not such a pretty picture. With price appreciation and rental inflation outstripping income growth, affordability is destined to become a bigger issue in most markets.”
US factory orders fall; core capital goods orders revised up
New orders for US-made goods fell more than expected in May, but orders for capital equipment were a bit stronger than previously reported, suggesting the manufacturing sector remained on a moderate growth path. Factory goods orders dropped 0.8%, the Commerce Department said on Wednesday after a revised 0.3% decline in April. It was the second straight monthly decrease in orders. Economists had forecast factory orders falling 0.5% in May after a previously reported 0.2% drop in April. Factory orders were up 4.8% from a year ago. Manufacturing, which accounts for about 12% of the US economy, is losing momentum after gaining steam since mid-2016 amid a recovery in the energy sector that led to demand for oil and gas drilling equipment. Activity is slowing against the backdrop of a moderation in oil prices and declining motor vehicle sales. Motor vehicle manufacturers reported on Monday that auto sales fell in June for a fourth straight month, leading to a further increase in inventories, which could weigh on vehicle production. The dollar held steady against a basket of currencies as investors awaited the release of minutes of the Federal Reserve’s June 13-14 policy meeting later in the day.US stocks were trading slightly lower while prices for US Treasuries rose.
Wednesday’s report from the Commerce Department also showed orders for non-defense capital goods excluding aircraft – seen as a measure of business spending plans – rising 0.2% instead of slipping 0.2% as reported last month. Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, nudged up 0.1% instead of the previously reported 0.2% decrease. Moderate capital expenditure comes despite relatively strong business confidence. A survey this week showed a measure of factory activity rising to a near three-year high in June. In May, orders for machinery jumped 1.1%. Mining, oilfield and gas field machinery orders surged 8.5%. Orders for electrical equipment, appliances and components increased 1.0% and orders for primary metals advanced 0.6%. Orders for transportation equipment fell 3.0%. That was the biggest drop since last November and reflected an 11.6% tumble in nondefense aircraft orders. Motor vehicle orders gained 0.1% after rising 0.9% in April. Unfilled orders at factories fell 0.2% after two straight monthly increases. Manufacturing inventories slipped 0.1% after rising for six consecutive months, while shipments gained 0.1%. The inventories-to-shipments ratio was unchanged at 1.38
Olick – Two major lending changes mean it’s suddenly easier to get a mortgage
– The nation’s three major credit rating agencies, Equifax, TransUnion and Experian, will drop tax liens and civil judgments from some consumers’ profiles if the information isn’t complete.
– Mortgage giants Fannie Mae and Freddie Mac are allowing borrowers to have higher levels of debt and still qualify for a home loan.
– These changes come at a time when lenders are competing for a shrinking market of borrowers.
Two major changes in the mortgage market go into effect this month, and both could help millions more borrowers qualify for a home loan. The changes will also add more risk to the mortgage market. First, the nation’s three major credit rating agencies, Equifax, TransUnion and Experian, will drop tax liens and civil judgments from some consumers’ profiles if the information isn’t complete. Specifically, the data must include the person’s name, address, and either date of birth or Social Security number. A sizeable number of liens and judgments do not include this information and have subsequently caused some misrepresentations and mistakes.Of about 220 million Americans with a credit profile, approximately 7% have liens or civil judgments against them. With these hits to their credit removed, their scores could go up by as much as 20 points, according to a study by credit rating firm Fair Isaac Corp. (FICO). “It’s a significant impact for still a very large number of people,” said Thomas Brown, senior vice president of financial services at LexisNexis, who is concerned that the move will add significant risk to the mortgage system. “If you look at someone that has a tax lien or a civil judgment, they can be anywhere from two to more than five times more risky just because of the presence of that information,” he said. “That’s very, very significant.” Credit reports, however, can have mistakes on them that end up sidelining consumers from qualifying for loans. Twenty% of consumers have at least one mistake on one of their three credit reports, according to a Federal Trade Commission study. The concern is that those who do have legitimate liens and judgments against them will get credit that is undeserved. “It doesn’t really do a consumer well to be extended credit that they can’t afford, they can’t reasonably service,” said Brown.
In addition to the FICO changes, mortgage giants Fannie Mae and Freddie Mac are allowing borrowers to have higher levels of debt and still qualify for a home loan. The two are raising their debt-to-income ratio limit to 50% of pretax income from 45%. That is designed to help those with high levels of student debt. That means consumers could be saddled with even more debt, heightening the risk of default, but the argument for it appears to be that risk in the market now is unnecessarily low. “In this case, we’re changing the underwriting criteria, and we think the additional increment of risk for making that change is very small,” said Doug Duncan, Fannie Mae’s chief economist. “Given how pristine credit has been post-crisis, we don’t feel that is an unreasonable risk to take.” During the last housing boom, anyone with a pulse could get a mortgage, but after the financial crisis, underwriting rules tightened significantly. As a result, current default rates on loans made in the last eight years are lower than historical norms. At the same time, younger borrowers with high levels of student loan debt are being left out of the housing recovery, unable to qualify for a home loan. Duncan said a consumer’s debt level is just one of many factors considered by lenders when underwriting a mortgage. “We look at all the other criteria that are information rich, in terms of assessing that individual’s risk profile, and they have to look good in all those other areas,” he added. The level of risk to the mortgage marketplace, banks and nonbank lenders alike, will rise. Fannie Mae and Freddie Mac are still under government conservatorship, which means losses would be incurred by taxpayers. “Is Fannie taking on more risk than they should by going up to a 50% DTI limit? Those are legitimate questions that the [Consumer Financial Protection Bureau] or Congress should be answering,” said Guy Cecala, CEO of real estate trade publication Inside Mortgage Finance.
And all these changes come at a time when lenders are competing for a shrinking market of borrowers. Higher interest rates have meant far fewer mortgage refinances, and high home prices have resulted in fewer homebuyers. In response, lenders expect to ease other credit standards further. In fact, those expectations reached a record in the second quarter of this year on a Fannie Mae lender survey. The study noted that easing credit standards might be due in part to increased pressure to compete for declining mortgage volume. “For the third consecutive quarter, the share of lenders expecting a decrease in profit margin over the next three months exceeded the share with a positive profit margin outlook. For the former, the percentage citing competition from other lenders as a reason for their negative outlook reached a survey high,” Duncan wrote in the report. Fannie Mae also noted in its announcement of the DTI changes that its appetite for risk remains the same. That may mean a shift in other parts of a borrower’s risk profile. “There is the belief that there is this windfall for consumers, that consumers will just be able to get more credit,” said Brown of LexisNexis. “Well, the reality is the risk in the marketplace has not changed. The information that’s used to assess risk is what’s changing, and so for banks and others extending credit, if they want to maintain the same loss rates, they have to tighten credit somewhere else. It’s just pure math.”
Amazon.com to create 1,500 full-time jobs at its first Utah fulfillment center
Amazon announced it will be creating 1,500 full-time jobs at its Salt Lake City, Utah fulfillment center on Wednesday.”We are excited to continue growing our team with the first fulfillment center in Utah,” said Akash Chauhan, Amazon’s Vice President of North American operations. The hourly associates will receive a competitive salary and a comprehensive benefits package, according to a press release from the company. “We consider this a perfect pairing, as Amazon and Salt Lake City are both known for our customer service and ease of doing business. We are very excited for the 1,500 new full-time jobs Amazon will create in our community, and look forward to a long future of working together,” said Salt Lake City Mayor Jackie Biskupski. The company’s expansion in the beehive state comes after a patent revealed that Amazon wants to create beehive drone delivery centers.