Skip to content Sitemap

CoreLogic – US Economic Observations: January 2018

It is well known that there are affordability issues in the home purchase market, but there is less information on the single-family rental market, which makes up one-half of residential rentals. The CoreLogic Single Family Rental Index reflects rents paid on single-family houses and condos, and using this index we can dissect rent growth by both price tier and metro area. Rents for single-family homes fell during the Great Recession but then bounced back strongly from their low point in mid-2009 and have been trending up, mirroring home price growth. In October 2017, the index measured rent growth of 2.7% from a year ago. We can also show rent changes for the high-end (those rents 25% or more above the median rent in that market) and the low end (those rents 75% or less below the median in that market). The low-end single-family rental tier lagged the high-end tier from mid-2009 to early 2014, but then the low-end began steadily outpacing the high-end and the difference is growing. This mirrors the same high demand, low- supply forces that have caused low-end home prices to outpace high-end prices, as evidenced by shorter days-on-market and tighter inventory for low-end homes. Investors who entered the market to buy up distressed properties during the housing crisis might be exacerbating this trend in the rental market. High-end rents increased 2% in October from a year ago, while low-end rents increased by more than twice as much – 4.2%. We can also look at the difference between low-end and high-end rent growth by metro area. Seattle leads the large metros with the biggest increase in rents at 7.9% in October. Austin had the smallest increase in low-end rents of the large metros. In most of the 20 markets shown in the chart, low-end rents are increasing faster than high-end rents, and the trend is happening all over the country, not just in one region. The one exception is Warren, Mich., where low-end and high-end rents are increasing at about the same rate. The biggest spread in low-end and high-end rent increases was in Charlotte, N.C., where the low-end increased 5.6% and the high-end showed no increase. The single-family rental market is an important and often overlooked segment of the housing market and is affected by rising demand and constrained supply just like the rest of the housing market. The demand and supply pressures are especially apparent for lower-cost homes, for which rents are increasing at a much faster rate than for higher-cost homes.

Tax overhaul means a $4,000-a-year pay raise for the average family, Trump advisor says

About a third of corporate profits from the tax overhaul will eventually go to everyday workers, says Trump advisor Kevin Hassett. Hassett also says he and President Trump were surprised at the speed of the announcements by US companies about employees bonuses and wage increases.

The GOP tax overhaul means a $4,000-a-year pay raise for the average family starting in about 2021, a top economic advisor to President Donald Trump said on Monday. Kevin Hassett, chairman of the Council of Economic Advisers, had projected the $4,000-a-year benefit last October. The tax overhaul was signed into law in late December. “Now we’ve passed the bill, and now we’re expecting in over three to five years, we’ll see the $4,000,” Hassett said. “It’s $4,000 that will be reached in total once the economy reaches [a] steady state, and once you get it, it stays in your pay,” DJ Nordquist, the council’s chief of staff, told CNBC after the interview. Hassett also said Monday he and President Donald Trump were surprised at the speed of the announcements by US companies about employees bonuses and wage increases. “Historically, if you look what happens when after-tax cash flow happens, … then we see about a third of that going to workers,” Hassett said. “It’ll be interesting to come back at the end of the year, watch the wage increases that we’ve seen, watch the profit increases that we’ve seen after tax and compare the two.”

Puerto Ricans face foreclosure wave as post-Maria moratoriums expire

Confusion and panic are spreading across this US territory as the majority of moratorium agreements expire in January, with many people discovering they never qualified for the moratorium in the first place or struggling to obtain extensions because they cannot pay what is owed to the banks. Many Puerto Ricans stopped making payments on their mortgages after the Sept. 20 storm because they thought the moratorium was automatic, though it was not. The storm knocked out power across the island, preventing many from learning that they had to contact their banks to request moratoriums, said Ariadna Godreau, a professor and human rights lawyer. “The big concern now is that mortgage foreclosures are going to spike,” she said. “We’re going to see more homeless people, more homes foreclosed.” Over nearly a decade, the number of repossessed homes in Puerto Rico grew from more than 2,300 in 2008 to above 5,400 in 2016 and an estimated 6,200 or more last year. After the storm, foreclosures were temporarily suspended, and banks in the US territory offered a moratorium on mortgages for those who qualified, as did the federal government. Moratoriums offered by the US government have been extended to March, but banks have ended theirs. Banco Popular — Puerto Rico’s largest bank — said more than 20,500 clients received moratoriums that expired in December and January. Bank executives say they are working with their clients, but emphasize that they still need to collect what is owed. “Those clients that truly are not responding to the bank’s letters are those who really will be at risk of facing a foreclosure,” said Jose Teruel, first vice president of the consumer credit services division at Banco Popular. “The three-month moratorium might have seemed generous at first, but in reality, it’s not,” said Maria Jimenez, director of the legal services clinic at the University of Puerto Rico. “There are still people without power, so the ability to generate revenue is not there.” More than 30,000 jobs were lost after Hurricane Maria, and some 30% of small and medium-size businesses remain closed more than four months after the storm, according to the island’s Treasury Department. Meanwhile, more than 30% of power customers remain in the dark and many struggle to pay utility bills. Puerto Rico’s Office of the Commissioner of Financial Institutions said it is collecting more information to better understand the situation. It recently extended a deadline for all banks on the island to submit data, including exactly how many moratoriums were awarded. It is unclear how banks will handle the mortgages, said Rafael Rodriguez, who oversees a legal aid project involving foreclosures for the nonprofit Legal Services of Puerto Rico. “The expectation we have is that once the moratoriums expire, the massive wave of foreclosures on the island will continue,” he said.

US personal income rose 0.4% in Dec, vs 0.3% increase expected

–  Spending rose solidly in December as demand for goods and services increased.

–  Personal income rose 0.4% last month after advancing 0.3% in November.

The Commerce Department said on Monday consumer spending, which accounts for more than two-thirds of US economic activity, increased 0.4% last month after an upwardly revised 0.8% increase in November. Economists polled by Reuters had forecast consumer spending increasing 0.4% in December after a previously reported 0.6% rise in November. When adjusted for inflation, consumer spending rose 0.3% in December. The figures were included in the advance fourth-quarter gross domestic product report published on Friday. Consumer spending accelerated at a 3.8% annualized rate in the October-December period, the fastest in three years, after rising at a 2.2 pace in the third quarter. Robust consumer spending helped to offset the drag from trade and inventories on the economy, which grew at a 2.6% rate in the fourth quarter. GDP increased at a 3.2% pace in the third quarter. Personal income rose 0.4% last month after advancing 0.3% in November. Wages increased 0.5% last month. Savings fell to $351.6 billion in December, the lowest level since December 2007, from $365.1 billion in the prior month. Last month, spending on long-lasting goods, such as motor vehicles, increased 0.7%. Outlays on services rose 0.5%, reflecting rising demand for utilities. Monthly inflation ticked up in December. The Federal Reserve’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, rose 0.2% in December after gaining 0.1% in November. The so-called core PCE increased 1.5% in the 12 months through December after a similar rise in November.

Posted by: pharbuck on January 29, 2018
Posted in: Uncategorized