Sales of newly built, single-family homes remained virtually unchanged, inching down 0.6% in February to a seasonally adjusted annual rate of 618,000 units after upward revisions to the January, December and November reports, according to newly released data by the US Department of Housing and Urban Development and the US Census Bureau. “New home sales are at a steady level, which is consistent with our measures of solid builder confidence in the housing market,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “As housing demand grows, builders need to manage increasing costs for labor, lots and building materials to keep their homes competitively priced.” “The recent upward revisions to the sales numbers reflect our forecast for a gradual strengthening of the single-family housing sector in 2018,” said NAHB Chief Economist Robert Dietz. “Demographic tailwinds point to higher demand for single-family homes in the months ahead. Combined with solid job market data, we expect more consumers to enter the housing market this year.” The inventory of new home sales for sale was 305,000 in February, which is a 5.9-month supply at the current sales pace. The median sales price of new houses sold was $326,800. Regionally, new home sales rose 19.4% in the Northeast and 9% in the South. Sales decreased 3.7% in the Midwest and 17.6% in the West.
China investigation underway by House Intelligence Committee
House Intelligence Committee chair Devin Nunes on Sunday said the committee is investigating “many aspects” of China, due to its growing worldwide military presence and potential threats to global trade. “We believe that they are looking at investing in ports and infrastructure around the globe, not just for military capabilities but also to control those governments, to have the ability to lobby and manipulate governments,” Nunes, R-Calif., told Maria Bartiromo on “Sunday Morning Futures.” President Donald Trump signed an executive memorandum last Thursday, calling it the “first of many,” which would impose tariffs on up to $60 billion in Chinese imports to penalize the country for what the administration calls “unfair” trade practices, and its alleged theft of American intellectual property. “Either it’s through the internet or it’s through investing in educational systems here or think tanks,” Nunes said. “They’re bringing people here. I believe that they are stealing Silicon Valley blind and in just a few years, the American people are gonna possibly be looking to China for new coding and new programs because of everything that the Chinese are stealing from here in America.”
However, the California Republican said he wasn’t sure if recently-imposed tariffs on steel and aluminum would be the best way to take on China, though he suggested the US strike trade deals with other Asian countries. “Japan, possibly Vietnam, the Philippines, other places in Asia so that if China does want to get into a trade war that we can actually begin to open up more trade with their neighbors, where they’ll take some of our products that we grow here in America,” Nunes said. In response to Trump’s actions, China announced retaliatory tariffs last Friday against $3 billion in American products, including steel, aluminum, pork and fruit. As a result, global stocks tumbled, including US markets, where the S&P 500 saw its worst week in more than two years. The S&P 500 fell 55.43 points, or 2.1%, to 2,588.26. The Dow Jones Industrial Average plunged 424.69 points, or 1.77%, to 23,533.20. The Nasdaq Composite closed 174.01 points, or 2.43%, lower at 6,992.67. “I do think it was an overreaction based on incomplete information,” White House National Trade Council Director Peter Navarro told Bartiromo on Sunday. Navarro, a trade hawk known for designing the president’s “America First” economic strategy, told Bartiromo last week that he didn’t expect China to “jeopardize” its trade relationship with the US by reacting with tariffs of its own. However, Navarro on Sunday said the retaliation from China is “muted.” “At the end of the day, China’s a sovereign nation. It has to make a choice about how it wants to proceed in the global economy,” he said.
Home construction crisis: Why builders aren’t building
A decade after a construction bubble produced a massive amount of excess housing supply and helped to precipitate the financial crisis, Americans now face with the opposite problem: a shortage of homes. It’s a crisis – especially in the lower price-point housing market – that’s not expected to go away anytime soon, experts say. Home construction per household is near its lowest level in 60 years, according to the Kansas City Fed, as reported by The Wall Street Journal. The National Association of Home Builders predicts there will be fewer than 900,000 new home starts this year, even though the market could easily absorb 1.2 million to 1.3 million, indicating yet another year of underbuilding. “I think we can expect that inventory of single-family homes will continue to be tight. Prices will continue to go up,” Robert Dietz, chief economist at the National Association of Home Builders, told FOX Business. Here’s a look at the various factors that are contributing to both diminished supply and builder incentives.
The post-financial crisis era
In the aftermath of the Great Recession multi-family construction was the first part of the market to recover, Dietz noted. However, single-family construction did not follow, and the types of homes being built began to change. After the crash in 2007-2008, it was easier for wealthy buyers to qualify for mortgages and it was also easier for builders to pass increased costs along to these individuals. Therefore, the homes that were built catered to this demographic, and were large and expensive. In the years that followed, the Obama administration began to implement a series of regulations that affected builders. From environmental policies to land use and labor policies, Dietz noted that there has been a definitive increase in the regulatory burden for homebuilders and contractors throughout recent years. Dodd-Frank, which aimed to protect taxpayers from another crisis, also made it harder for contractors to get loans from smaller financial institutions. The NAHB estimates that regulatory costs increased 29% between 2011 and 2016. These regulations have not only increased costs, but slowed permitting processes.
The Trump administration has enacted a number of tariffs that have deterred builders from constructing affordable, single-family homes. From the duties imposed on Canadian softwood lumber, a big source of material for US homebuilders, to the more recently announced steel and aluminum tariffs, higher costs have weighed heavy on the industry. “The only thing that makes sense with higher material costs is higher-end [price points],” Lawrence Yun, chief economist and senior vice president of research at the National Association of Realtors (NAR), said. Interest rates are also on the rise as the Federal Reserve continues on the path toward monetary policy normalization. That means mortgage rates will also increase, making the situation especially challenging for buyers who are on the precipice of being able to afford a home.
Why it won’t improve in the near-term
The construction industry is suffering from a shortage of workers, potentially facing a 1.5 million shortfall in personnel by 2020. That is restricting the number and type of jobs that companies are willing to take on. Despite an improving economic picture, diminished inventory means home prices are still rising faster than income. Also complicating the inventory picture is the fact that following the housing bubble burst, a lot of real estate investors jumped in and bought up properties at lower entry points, Yun said. Many of these investors are still sitting on those properties. bWhile both Dietz and Yun agree there are some steps that can be taken in the near-term to alleviate some of these damaging factors, the inventory crunch is unlikely to resolve in the near future.
China’s oil futures: what this means for the US
FBN’s Jeff Flock talks to PRICE Futures Group’s Phil Flynn about the prediction that the US could soon become the largest oil producer in the world.
China made its long-anticipated oil futures debut on Monday, and the yuan-denominated futures surges. The contract was planned as Beijing hopes to have an oil benchmark to rival the US’ West Texas Intermediate crude oil futures as well as Europe’s North Seas Brent crude oil contract. China, the world’s fourth-largest producer, overtook the US last year as the world’s largest oil importer. This contract will be more in-line with local supply and demand fundamentals. Another advancement, the Shanghai oil futures contract will be open to foreign investors, this is the first time China has allowed foreigners to trade domestic commodities this way. The most actively traded futures contract, for September delivery, closed up 3.3% at 429.9 yuan ($68.07) per barrel on the Shanghai International Energy Exchange, having cooled a bit after initially jumping 6%. Over 21 million barrels of oil valued at $2.9 billion changed hands on the first trading day, according to Wind Information Co.
CFPB losing interest in payday lenders?
The Consumer Financial Protection Bureau’s acting director, Mick Mulvaney, has stopped the agency’s pursuit to sue a payday lender and is mulling over dropping the cases against three more payday lenders, according to an exclusive report by Reuters’ Patrick Rucker. The cases, according to the report, are part of about a dozen that Richard Cordray, the bureau’s former director, approved for litigation before his resignation in November. Cordray was ready to sue Kansas-based National Credit Adjusters, which primarily collects debt for online lenders operating on tribal land, according to the article. Cordray’s CFPB concluded that NCA had no right to collect on such online loans, no matter where they were made. A lawyer for NCA, Sarah Auchterlonie, told Reuters this week that Mulvaney has dropped the matter and the case is “dead.” The report also said she noted the agency appeared to be backing off issues involving tribal sovereignty. Meanwhile, Mulvaney is also reviewing three cases against lenders based in southern states, where high-interest loans are permitted. He must eventually decide whether to sue the companies, settle with a fine or scrap the cases, according to the report.
From the article: “Lawyers working for Cordray had concluded that Security Finance, Cash Express LLC and Triton Management Group violated customer rights when attempting to collect, among other lapses. Spokespeople for the companies declined to comment. A spokesman for the CFPB did not respond to a request for comment. None of the sources wished to be identified because they are not authorized to speak about the cases.” The CFPB concluded that debt collectors working for Security Finance, which offers loans at rates that often climb into triple-digits, harassed borrowers at home and work, violating federal laws, and the company had faulty recordkeeping that could hurt borrowers’ credit scores. The CFPB database shows customers complained that Cash Express used high-pressure collection tactics and Cordray was prepared to sue the company on those grounds, sources told Reuters. Mulvaney previously announced that the CFPB would “reconsider” its payday lending rules, as well as quietly dropped a case the agency had against South Carolina-based payday lender World Acceptance Corporation, which has donated at least $4,500 to Mulvaney’s previous congressional campaigns.