The Data and Analytics division of Black Knight Financial Services reports the following “first look” at June 2017 month-end mortgage performance statistics derived from its loan-level database representing the majority of the national mortgage market.
– Despite upward seasonal pressure, mortgage delinquencies held steady at 3.8% in June
– While total non-current inventory saw a three% seasonal rise over Q2 2017, the inventory of serious delinquencies (loans 90 or more days past due) and active foreclosures fell by seven%
– In total, serious delinquencies and active foreclosures have declined by 17% (nearly 200,000 loans) this year
– Low interest rates helped push prepayment activity up another 5.3% in June, following May’s 23% rise
– Though hitting calendar-year highs for two consecutive months, the national prepayment rate remains over 20% below last year’s levels
Student loan debt up more than 450% since 2003
While total US household debt in the first quarter of 2017 surpassed its $12.68 trillion peak reached during the recession, according to data from the New York Fed, it’s the astronomical increase in student loan debt that is perhaps the most shocking. Outstanding student loan balances have increased more than 457% since 2003, according to a FOX Business analysis of statistics from the Federal Reserve Bank of New York’s Center for Microeconomic Data. In the first quarter of 2003, $241 billion in student loans were outstanding, compared with the first quarter of 2017, when that number jumped to $1.34 trillion. In the first quarter of 2017 alone, student loan debt jumped 2.6%. The New York Fed notes in a recent report that student loan balances have increased each of the 18 years it has been releasing the analysis, while other household dues have been less consistent. From the first quarter of 2003 to the first quarter of 2017, student loan debt rose the fastest out of all types of household debt. Mortgage debt, for example, increased only 74% to $8.6 trillion. Auto loan debt jumped 82% to more than $1.16 trillion. Overall household debt was up 75% over the same timeframe. Not only that, but student loan delinquencies have also remained high. According to the New York Fed, 11% of total student loan debt was at least 90 days delinquent or in default during the first quarter of this year. The amount of balances transitioning into delinquency has averaged about 10% annually over the past five years. Meanwhile, the price of higher education continues to skyrocket. For the 2016-2017 school year, the average cost for a private, nonprofit four-year degree, including room and board, was more than $45,300, according to data from The College Board Opens a New Window. – a 3.4% increase over the previous year. For a public, four-year in-state education over the same time period, that number increased 2.7% to $20,090.
NAR – foreign US home sales dollar volume surges 49% to record $153 billion
Fueled by a substantial increase in sales dollar volume from Canadian buyers, foreign investment in US residential real estate skyrocketed to a new high, as transactions grew in each of the top five countries where buyers originated. This is according to an annual survey of residential purchases from international buyers released today by the National Association of Realtors (NAR), which also revealed that nearly half of all foreign sales were in three states: Florida, California and Texas. NAR’s 2017 Profile of International Activity in US Residential Real Estate found that between April 2016 and March 2017, foreign buyers and recent immigrants purchased $153.0 billion of residential property, which is a 49% jump from 2016 ($102.6 billion) and surpasses 2015 ($103.9 billion) as the new survey high1. Overall, 284,455 US properties were bought by foreign buyers (up 32% from 2016), and purchases accounted for 10% of the dollar volume of existing-home sales (8% in 2016). “The political and economic uncertainty both here and abroad did not deter foreigners from exponentially ramping up their purchases of US property over the past year,” said Lawrence Yun, NAR chief economist. “While the strengthening of the US dollar in relation to other currencies and steadfast home-price growth made buying a home more expensive in many areas, foreigners increasingly acted on their beliefs that the US is a safe and secure place to live, work and invest.”
Although China maintained its top position in sales dollar volume for the fourth straight year, the significant rise in foreign investment in the survey came from a massive hike in activity from Canadian buyers. After dipping in the 2016 survey to $8.9 billion in sales ($11.2 billion in 2015), transactions from Canadians this year totaled $19.0 billion – a new high for Canada. Yun attributes this notable rise in activity to Canadians opting to buy property in US markets that are expensive but still more affordable than in their native land. While much of the US continues to see fast price growth, home price gains in many cities in Canada have been steeper, especially in Vancouver and Toronto. “Inventory shortages continue to drive up US home values, but prices in five countries, including Canada, experienced even quicker appreciation2,” said Yun. “Some of the acceleration in foreign purchases over the past year appears to come from the combination of more affordable property choices in the US and foreigners deciding to buy now knowing that any further weakening of their local currency against the dollar will make buying more expensive in the future.” Foreign buyers typically paid $302,290, which was a 9.0% increase from the median sales price in the 2016 survey ($277,380) and above the sales price of all existing homes sold during the same period ($235,792). Approximately 10% of foreign buyers paid over $1 million, and 44% of transactions were all-cash purchases (50% in 2016).
Buyers from China exceeded all countries by dollar volume of sales at $31.7 billion, which was up from last year’s survey ($27.3 billion) and topped 2015 ($28.6 billion) as the new survey high. Chinese buyers also purchased the most housing units for the third consecutive year (40,572; up from 29,195 in 2016). Rounding out the top five, the sales dollar volume from buyers in Canada ($19.0 billion), the United Kingdom ($9.5 billion), Mexico ($9.3 billion) and India ($7.8 billion) all increased from their levels one year ago. This year’s survey once again revealed that foreign buying activity is mostly confined to three states, as Florida (22%), California (12%) and Texas (12%) maintained their position as the top destinations for foreigners, followed by New Jersey and Arizona (each at 4%). Florida was the most popular state for Canadian buyers, Chinese buyers mostly chose California, and Texas was the preferred state for Mexican buyers. The upswing in foreign investment came from both recent immigrants and non-resident foreign buyers3 as each increased substantially to new highs. Sales to foreigners residing in the US reached $78.1 billion (up 32% from 2016) and non-resident foreign sales spiked to $74.9 billion (up 72% from 2016).“Although non-resident foreign purchases climbed over the past year, it appears much of the activity occurred during the second half of 2016,” said Yun. “Realtors® in some markets are reporting that the effect of tighter regulations on capital outflows in China and weaker currencies in Canada and the U.K. have somewhat cooled non-resident foreign buyer interest in early 2017.”
Oil dives as consultant sees OPEC crude output rise in July
Oil prices fell about 2% on Friday after a consultant forecast a rise in OPEC production for July despite the group’s pledge to curb output, reigniting concerns the global market will stay awash with crude. Petro-Logistics, which tracks OPEC supply forecasts, said OPEC crude production would rise by 145,000 barrels per day (bpd) this month, taking the group’s combined output above 33 million bpd. Higher supply from Saudi Arabia, the United Arab Emirates (UAE) and Nigeria would drive this month’s gains, it said. Benchmark Brent crude futures were down 92 cents or about 1.9% at $48.38 a barrel at 12:16 p.m. (1616 GMT), while US West Texas Intermediate (WTI) crude futures traded at $45.99 a barrel, down 93 cents or 1.98%. OPEC and some non-OPEC states, such as Russia, pledged to cut production by 1.8 million bpd between January this year and the end of March 2018. The UAE energy minister, whose country’s oil output has been rising, said he was committed to the output cut and he hoped the deal would have a significant impact in the third and fourth quarters. “We have the OPEC meeting in Russia on Monday and that’s going to be top of mind,” said Dan Katzenberg, Senior Exploration and Production analyst at Baird and Company in New York. The meeting gathers several ministers from OPEC and non-OPEC member countries in St. Petersburg. Kuwaiti Oil Minister Essam al-Marzouq, whose country heads the joint ministerial committee, said attendees would discuss steps for continuing the production cuts. The committee, known as the JMMC, can make recommendations to OPEC and other producers to adjust the deal, if necessary. However analysts expressed skepticism that the group will address rising production from Nigeria and Libya, two OPEC members exempted from the cuts.
NAHB – remodeling market indicator remains in positive territory
The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) posted a reading of 55 in the second quarter of 2017, down three points from the first quarter of 2017. For 17 consecutive quarters, the RMI has been at or above 50, which indicates that more remodelers report market activity is higher (compared to the prior quarter) than report it is lower. The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity. “While remodelers continue to see robust demand across the country, the lack of skilled labor continues to be a serious issue,” said NAHB Remodelers Chairman Dan Bawden, CAPS, GMB, CGR, CGP, a remodeler from Houston. “Remodelers are finding they have to decline projects because they can’t hire enough skilled staff to keep up with the demand.” An overwhelming majority of respondents—84%—stated that the cost/availability of labor is the most significant challenge residential remodelers are currently facing. At 55, current market conditions declined three points from the first quarter of 2017. Among its three major components, major additions and alterations waned three points to 54, minor additions and alterations decreased six points to 53, and the home maintenance and repair component fell three points to 57. The future market indicators index stood at 55, also slipping three points from the previous quarter. Calls for bids fell three points to 56, amount of work decreased five points to 53, and the backlog of remodeling jobs dropped four points to 58. Meanwhile, appointments for proposals rose one point to 55. “The RMI has remained above 50 for the past four years, indicating strong demand for remodeling work,” said NAHB Chief Economist Robert Dietz. “However, the challenges posed by rising labor and material costs will constrain remodelers’ ability to increase production at a faster pace.”
Olick – These are the top ZIP codes for rental returns
– HomeUnion is one of several companies helping landlords narrow down the best rental areas for their investments.
– The list considers a range of variables, including nearby school rankings and area job growth.
More Americans are renting homes today than at any time in more than half a century. As a result, more investors are looking to cash in on that trend as landlords of single family rental homes. If you’re one of them, you want to know where you’ll get the most bang for your buck. Try this ZIP code: 33434. That is the finding of HomeUnion, one of several companies that help investors find, purchase, renovate, manage and sell single-family rental homes. With so much real estate data available now, most of these companies are compiling lists of best bets. HomeUnion is offering a list of projections for investors looking to hold and rent properties over the next five years. Its analysts are considering factors beyond just vacancies and rent appreciation, examining permitting activities for both apartments and single-family homes, as well as area job growth and school rankings. HomeUnion updates its data each quarter. “We’re looking at the supply-and-demand factors in each market and all of the neighborhoods within those markets,” said Steve Hovland, director of research. “As we get new information, we apply that to our methodology.” Historically, most mom-and-pop landlords choose homes in their backyards. It’s a practical choice, as they often manage the properties themselves and need to be nearby should a pipe break or a basement flood. With the recent growth of rental management companies to do the dirty work, investors are increasingly looking nationally and don’t necessarily want to have to travel to see the properties they buy. That means statistics are key, and potential investors are hungrier than ever for data. “They know real estate is a good investment, and they want to invest, but to do all the due diligence takes a lot of work, and most of our investors are already busy with other jobs,” said Hovland. So, will every house in each of those Top 20 markets yield top dollar? Not necessarily. There will always be renters who fail to pay and extenuating circumstances that can suddenly cause a local market to turn. As with the other multitude of lists and rankings, this is just a guide.