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Black Knight – Mortgage Monitor: homes in lowest price tiers  continue to see greatest appreciation, tightest affordability

–  ​​​​​30-year fixed mortgage interest rates rose by 43 BPS in the first six weeks of 2018, pushing affordability to its lowest point since 2009

–  Properties in the lowest 20% of home prices (Tier 1) have been the fastest-appreciating quintile for 67 consecutive months

–  Such Tier 1 properties are seeing an annual rate of appreciation of 8.5%; 1.9% higher than the market average, and more than 3.6% above that of Tier 5 properties (those in the highest 20% of home prices)

–  Given the disproportionate appreciation of low-priced homes as compared to income growth, affordability at the lower end of the market remains a challenge

–  Recent affordability reductions from higher rates could put more pressure on lower-income buyers by increasing competition for lower-priced homes, as borrowers’ overall buying power is diminished

–  Recent rate increases have put more pressure on a shrinking refinance market as well, cutting the population of potential refi candidates by 40%

The Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based on data as of the end of January 2018. This month, Black Knight looked at the impact of recent interest rate rises on home affordability. While affordability remains better than long-term averages nationally, home prices at the lower end of the market are less affordable than the national average, particularly for those in lower income levels. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, the root of the issue has been the consistently higher-than-market-average rate of home price appreciation among properties in the lowest 20% of home prices nationally. “Prices on Tier 1 properties – those in the lowest 20% of home values – have been appreciating at a faster rate than all other tiers for 67 consecutive months,” said Graboske. “The annual rate of appreciation for these homes is 1.9% higher than the market average, and more than 3.6% higher than that of properties in the top 20% of prices (Tier 5). Larger overall increases in value among lower-priced homes is not just a recent trend, though; the same dynamic is observed when looking back over the past 15 years. While the nearly 50% increase in the median home price over that period has significantly outpaced the approximately 40% growth in the median income, lower interest rates today have more than offset that difference. However, according to Census Bureau data, income growth in the lower quintiles has not kept up with the higher ends of the market. This has clear implications for home affordability in this segment of the population, even more so in light of the 43 BPS increase in interest rates seen in just the first six weeks of 2018.

“Overall affordability remains better than long-term historical averages, even taking the recent rate jump into consideration. Currently, it takes 23% of the median income to purchase the median home nationally, which is still 1.9% below the averages seen from 1995 – 2003. But those in lower income levels are much closer – if not above – such long-term benchmarks. It seems evident that further affordability reductions from rising interest rates could put more pressure on lower-income buyers by increasing competition for lower priced homes, as borrowers’ overall buying power is diminished.” The spike in 30-year fixed mortgage interest rates also had the effect of cutting the population of borrowers with interest rate incentive to refinance by nearly 40% in 40 days. Approximately 1.4 million borrowers lost the interest rate incentive to refinance in just the first six weeks of 2018. This leaves 2.65 million potential candidates who could still both benefit from and likely qualify for a refinance at today’s rates, the smallest that population has been since late 2008, prior to the initial decline in rates during the recession. This represents another challenge to a consistently shrinking refinance market. Refinance lending declined significantly in 2017, with the total number of originations down 29%, and total volume down by $355 billion, a 34% year-over-year decline.

As was reported in Black Knight’s most recent First Look news release, other key results include:

​-  Total US loan delinquency rate: 4.31%

​-  Month-over-month change in delinquency rate -8.57%

​-  Total US foreclosure pre-sale inventory rate: 0.66%

​-  Month-over-month change in foreclosure pre-sale inventory rate: 1.84%

​-  States with highest percentage of non-current loans: MS, LA, FL, AL, WV

​-  States with lowest percentage of non-current loans: ​ID, WA, OR, ND, CO

​-  States with highest percentage of seriously delinquent loans: ​FL, MS, LA, TX, AL

Oil prices climb ahead of OPEC meeting with US shale firms

Oil prices rose on Monday ahead of a meeting between OPEC and US shale firms in Houston, raising expectations that oil producers would discuss further how to clear a global oil glut. International benchmark Brent crude was up 19 cents, or 0.3%, at $64.56 a barrel by 0752 GMT. US West Texas Intermediate (WTI) crude rose 17 cents, or 0.28%, to $61.42 per barrel. Oil ministers from the Organization of the Petroleum Exporting Countries (OPEC) and other global oil players are set to gather in Houston as CERAWeek, the largest energy industry conference, begins on Monday. OPEC Secretary General Mohammad Barkindo and other OPEC officials are expected to hold a dinner on Monday with US shale firms on the sidelines of the conference. “OPEC and Non-OPEC alliance remain at record high compliance, but with Russia continually pressuring for an exit strategy, OPEC will look to offer an olive branch to US shale,” said Stephen Innes, head of trading for the Asia-Pacific region at futures brokerage OANDA in Singapore. “As such, we should interpret any positive developments from the meeting as support for underlying oil price sentiment.”

Suhail Mohamed Al Mazrouel, the United Arab Emirates oil minister and OPEC’s current president, said on Sunday that the oil cartel has not discussed rolling over production cuts until next year. Rising US shale oil production has been a drag on the OPEC’s commitment to erode a prolonged global oil glut and prop up prices. US crude oil production has already risen past that of top exporter Saudi Arabia, to 10.28 million barrels per day (bpd). Only Russia pumps slightly more, but the International Energy Agency (IEA) said last week it expects the United States to take Russia’s seat as the world’s biggest crude oil producer by 2019, at the latest. The number of oil rigs drilling for new production in the United States rose to 800 for the first time since April 2015 in early March, pointing to more increases in output to come.

Trump tariff on steel and aluminum: Winners and losers

President Trump says America’s steel and aluminum industry is at a disadvantage and is considering an import tariff hike. From the beer industry to car makers, here’s a look at the biggest winners and losers of such a proposal.

President Donald Trump reiterated support Friday for steel and aluminum tariffs, saying in a tweet that “trade wars are good, and easy to win.” The message came a day after he announced his plans to impose a tariff of 25% on steel and 10% on aluminum. If president has his way, the effects on business could be widespread. Here are some of the likely winners and losers:

Winners:

–  US steelmakers and aluminum producers

Top steel producers such as AK Steel, US Steel and Nucor  have for years been aggressively lobbying for trade protection against what they say is unfair competition from such countries as China, Russia and South Korea. If the 25% tariff happens, it is expected to drive up US steel prices. Michael Bless, CEO of Century Aluminum,  the second-largest producer of primary aluminum in the US, told FOX Business on Friday that new tariffs would allow the company to invest a $100 million in new technology and add 200 more jobs. “We are immediately going to go and reopen the shut production plant in Hawesville, Kentucky,” he said on FOX Business’ “Mornings with Maria.” “We think this action is a long time in coming.”

Losers:

–  US aluminum users

Companies that use aluminum to make beer cans, airplanes, cars and a slew of other products will likely be on the losing side of the tariffs.

–  Beer companies: MillerCoors

MillerCoors tweeted that it was “disappointed” with Trump’s announcement of a 10% tariff aluminum. “Like most brewers, we are selling an increasing amount of our beers in aluminum cans, and this action will cause aluminum prices to rise,” the company said in its posting. “It is likely to lead to job losses across the beer industry. We buy as much domestic can sheet aluminum as is available, however, there simply isn’t enough supply to satisfy the demands of American beverage makers like us. American workers and American consumers will suffer as a result of this misguided tariff.” The Beer Institute, a lobbyist that represents beer producers and importers, including MillerCoors, said the 10% tariff on aluminum could cost the industry $347.7 million and more than 20,000 jobs.

–  US automakers: Ford, General Motors, Fiat Chrysler and Tesla

The announcement of metal tariffs comes at a tough time for US automakers, which have faced flattening sales in recent months. The tariffs will likely create higher prices for steel that could be passed on to customers.The American Automotive Policy Council, a lobbyist that represents General Motors, Ford and Fiat Chrysler, said in a statement last month that tariffs on steel and and aluminum would lead to higher prices. “This would place the US automotive industry, which supports more than 7 million American jobs, at a competitive disadvantage,” Matt Blunt, the council’s president, said in the statement.

–  Canned-food industry

The canned-food industry makes nearly 20 billion cans of food annually using tinplate steel. It employs tens of thousands of American workers. Companies such as Ardagh, Ball, Bush Brothers, BWAY, Conagra Brands, Del Monte Foods and Faribault Foods have all signed a letter to Trump urging him to exclude tinplate steel from any tariffs or trade restrictions to avoid driving up food costs.

Ford to temporarily lay off 2,000 workers as it retools plant for Ranger and Bronco

–  Ford temporarily lays off 2,000 workers at its Michigan Assembly and Stamping plant.

–  The automaker is retooling the plant for the reintroduction of the Ford Ranger and Bronco models.

Ford is temporarily laying off about 2,000 workers as it retools an assembly and stamping plant in Wayne, Michigan, for the Ford Ranger and Bronco models. The layoffs will take place May 7-Oct. 22, and will affect hourly workers, Ford said. “Ford is not eliminating any jobs; this is a temporary measure as we undertake extensive retooling to transform the plant to build the Ford Ranger, followed by the Ford Bronco,” Ford said in a statement. “Employees who are temporarily affected will receive approximately 75% of their take-home pay if they have one year seniority. The affected employees all will return to work — either at Michigan Assembly or at another Ford facility.” The Ranger, a half-sized pickup, is expected later in 2018 and the Bronco, an SUV, in 2020. Ford produced the Bronco for three decades before pulling the model in 1996. It sold the Ranger in North America until 2011, and has since made the truck for some international markets.

Posted by: pharbuck on March 5, 2018
Posted in: Uncategorized