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CoreLogic – US single-family rents up 2.9% year over year in April

–  While low-end rents are still increasing faster than high-end rents, high-end segment rent growth accelerated and low-end segment decelerated in April 2018 compared with April 2017.

–  Metros in the southwest region showed the highest rent increases over the past year.

Single-family rents climbed steadily between 2010 and 2018, as measured by the CoreLogic Single-Family Rental Index (SFRI). However, year-over-year rent price increases have slowed since February 2016, when they peaked at 4.2%, and have stabilized over the last year with a monthly average of 2.7%.  In April 2018, single-family rents increased 2.9% year over year, a 1.3-percentage-point decline in the growth rate since it hit a high of 4.2% in February 2016. The SFRI index measures rent changes among single-family rental homes, including condominiums, using a repeat-rent analysis to measure the same rental properties over time. Using the index to analyze specific price tiers reveals important differences. The index’s overall growth in April 2018 was propped up by the low-end rentals, defined as properties with rents 75% or less of a region’s median rent.

Rents on lower-priced rental homes increased 4.2% year over year and rents in the higher-priced homes, defined as properties with rents more than 125% of the regional median rent, increased 2.7% year over year. However, rent growth is accelerating for the high end and decelerating for the low end. High-end rent growth was 1.1 percentage points higher than in April 2017, and low-end rent growth was 0.2 percentage points lower than April 2017. Rent growth varies significantly across metro areas. The year-over-year change in the rental index for 20 large metro areas in April 2018. Las Vegas had the highest year-over-year rent growth in April with an increase of 5.9%, followed by Phoenix (+5.5%) and Orlando (+5.3%). Both Phoenix and Orlando had strong year-over-year job growth in April, with job gains of 2.8% and 3.2% respectively. This is compared with national employment growth of 1.6%. Honolulu was the only metro among the 20 analyzed to show a decrease in the rent index, declining 0.3% year over year in April. Rents continue to increase in metro areas such as Houston and Miami that were hit by hurricanes last year and left with tighter rental supplies. Houston rents rose 4.1% year over year in April 2018 and Miami rents increased 2.1%. Prior to the 2017 late-summer hurricanes, rents had been decreasing in those two metro areas.

MBA – mortgage applications decrease

Mortgage applications decreased 2.5% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 13, 2018. Last week’s results included an adjustment for the Fourth of July holiday. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 22% compared with the previous week. The Refinance Index increased 2% from the previous week. The seasonally adjusted Purchase Index decreased 5% from one week earlier. The unadjusted Purchase Index increased 19% compared with the previous week and was 1% higher than the same week one year ago. The refinance share of mortgage activity increased to 36.5% of total applications from 34.8% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.1% of total applications. The FHA share of total applications increased to 10.6% from 10.0% the week prior. The VA share of total applications decreased to 10.2% from 11.3% the week prior. The USDA share of total applications decreased to 0.7% from 0.8% the week prior.

NAHB – builder confidence stays at healthy level in July

Builder confidence in the market for newly-built single-family homes remained unchanged at a solid 68 reading in July on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). “Consumer demand for single-family homes is holding strong this summer, buoyed by steady job growth, income gains and low unemployment in many parts of the country,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Builders are encouraged by growing housing demand, but they continue to be burdened by rising construction material costs,” said NAHB Chief Economist Robert Dietz. “Builders need to manage these cost increases as they strive to provide competitively priced homes, especially as more first-time home buyers enter the housing market.” Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. The HMI index measuring current sales conditions remained unchanged at 74. Meanwhile, the component gauging expectations in the next six months dropped two points to 73 and the metric charting buyer traffic rose two points to 52. Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 57 while the Midwest remained unchanged at 65. The West and South each fell one point to 75 and 70, respectively.

Oil prices fall on rise in US stocks, demand worries

Oil prices fell on Wednesday after news of a rise in US crude inventories last week, defying analysts’ expectations for a big fall, while concerns about weak demand also resurfaced. Brent crude oil was down 60 cents at $71.56 a barrel by 0750 GMT. The benchmark hit a three-month low on Tuesday. US light crude was down 50 cents at $67.58, not far off Tuesday’s one-month low of $67.03 per barrel. Oil markets have fallen over the last week as Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries and Russia have increased production and as some supply disruptions have eased. Investors have also begun to worry about the impact on global economic growth and energy demand of the escalating trade dispute between the United States and its trading partners, including China. The US oil market has been tight in recent months but data on Tuesday from the American Petroleum Institute (API) showed an unexpected a rise of more than 600,000 barrels in national crude inventories. Analysts had forecast a decline of 3.6 million barrels in US crude stocks for the week through July 13. Official numbers from the US Department of Energy’s Energy Information Administration are due at 10:30 a.m. EDT (1430 GMT) on Wednesday.

CoreLogic – For homebuyers in most of 10 largest US metro areas, the “typical mortgage payment” remains below pre-crisis peak

Of the nation’s 10 largest metro areas all but two have posted median home sale prices this year that are within about 10% of an all-time high – a sign of waning affordability. But in most of those markets the inflation-adjusted, principal-and-interest mortgage payments that homebuyers have committed to this year remain much lower than their pre-crisis peaks. One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the “typical mortgage payment.” It’s a mortgage-rate-adjusted monthly payment based on each month’s median home sale price (see recent blog on the US typical mtg payment). It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20% down payment. It does not include taxes or insurance. The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for in order to get a mortgage to buy the median-priced home. Adjusting the historical typical mortgage payments for inflation – meaning they are in 2018 dollars – shows that while the payments have trended higher in all of the top 10 metros in recent years they remained below peak levels this March in all but the Denver and San Francisco areas.

The main reason the typical mortgage payment remains well below record levels in most of the country is that the average mortgage rate back in June 2006, when the US typical mortgage payment peaked, was about 6.7%, compared with an average mortgage rate of about 4.4% in March 2018. Also, the inflation-adjusted US median sale price in June 2006 was $247,110 (or $199,899 in 2006 dollars), compared with $213,400 in March 2018. The March 2018 typical mortgage payments in the Denver and San Francisco regions have risen to record levels because those regions’ prices hit new highs this spring, reflecting strong technology sector job growth that has helped fuel robust housing demand at a time supply has not kept pace. The US typical mortgage payment’s high point in 2006 reflects an abundance of subprime and other risky home financing products back then – products no longer widely available – that allowed homebuyers to stretch to their financial max, creating what some people consider an artificial price peak. An alternative reference point for comparing today’s typical mortgage payments is 2002, before the worst of the risky loans inflated an historic home price bubble. Half of the top 10 metro areas had inflation-adjusted typical mortgage payments in March 2018 that were higher than in March 2002, meaning affordability is worse now.

Google fined record $5B by EU over illegal app practices

The European Commission fined Google $5 billion (4.34 billion euros) for its “illegal practices” of pushing its Android apps on smartphone customers, the governing body said Wednesday. The fine will exceed last year’s then-record 2.4 billion euro penalty following an investigation into Google’s shopping-search service. Despite the eye-popping dollar amount, the fine is less than 1% of the company’s market capitalization which is about $830 billion. Shares rose on Thursday, a sign investors are not concerned at this point. For the year, the stock has gained 15% exceeding the 5% gain of the S&P 500. The commission said the tech giant must end its current conduct within the next 90 days or it will face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, the parent company of Google. It added that market dominance is not illegal under EU antitrust rules, but dominant companies have a “special responsibility” to not abuse their powerful position in the marketplace by restricting competition in markets “where they are dominant or in separate markets.” “Google has used Android as a vehicle to cement the dominance of its search engine,” Commissioner Margrethe Vestager, said in a statement. “These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules.”

Banking analyst predicts next bubble about to burst

The commercial real estate market may be booming, but trouble could be on the horizon for the biggest lenders in the market, according to banking analyst Dick Bove. “Commercial real estate is in a bubble,” Bove said on FOX Business Opens a New Window. ’ “Mornings with Maria Opens a New Window. ” on Tuesday. “I think that you are going to see loan losses coming up in that sector.” The commercial real estate market celebrated its strongest year on record in 2017, according to the Mortgage Bankers Association Opens a New Window. . Mortgage bankers closed a record-high $530 billion in commercial and multifamily property loans. And while 2018 carries much of the momentum forward, economic headwinds could derail loan growth for banks in that market, Bove said. “The fact is that the biggest lenders of the commercial real estate market tend to be the mid-cap banks,” Bove said. “So the net effect is if they are doing extraordinarily well because that sector is doing well, but if that sector pops they are going to get hurt.”

ATTOM – how California housing stacks up split into three states

–  Proposed Northern California State Would Take Highest Share of Property Tax Revenue;

–  Proposed California State Would Absorb Lowest Share of Flood and Wildfire Risk

ATTOM Data Solutions, curator of the nation’s premier property database, today released an analysis showing what the three California housing markets would look like if the state is split into three new states per a proposal that has qualified for the state’s November ballot. For this analysis, ATTOM looked at home values, price appreciation, sales volume and property taxes along with flood risk and wildfire risk for nearly 7.5 million single family homes statewide, broken down by county into the three new proposed states — Northern California (40 counties); Southern California (12 counties); and California (6 counties). Counties comprising the proposed Northern California state took in 41% of the current California’s property tax revenue on single family homes in 2017 while accounting for 38% of homes. Counties comprising the proposed California state took in 27% of the current California’s property tax revenue on single family homes in 2017 while accounting for 25% of the homes. Conversely, counties comprising the proposed Southern California state account for 37% of the current California’s single family homes but took in 32% of the total property tax revenue on those homes in 2017.

Median home prices in the proposed Northern California state are up 120% since the bottom of the market in Q1 2009, while median home prices in the new Southern California are up 106% and median home prices in the new California are up 98% over the same period. The proposed Northern California state is also outperforming when it comes to home price appreciation over the past year — up 9% compared to 8% in the proposed California and 7% in the proposed Southern California — and the last five years — up 64% compared to 59% in the proposed California and 57% in the proposed Southern California. First quarter 2018 home sales in the proposed Southern California state are up 59% compared to 10 years ago, in Q1 2008. That compares to a 52% increase in the proposed California state and a 35% increase in the proposed Northern California over the same period. Single family home sales in the proposed Southern California state also accounted for a disproportionately high share of home sales in Q1 2018 (42%) relative to its share of single family home inventory (37%).

Less than 1% (0.94%) of all single family homes in the proposed California state are in high-risk flood zones compared to 2.26% in the new Southern California and 3.72% in the new Northern California. Additionally, just over 2% (2.02%) of all single family homes in the proposed California state are in high-risk wildfire zones compared to 7.26% in the new Northern California and 9.38% in the new Southern California. “The proposed state of Northern California definitely bears a disproportionate share of real estate related flood risk, which makes sense given the terrain and the waterways present there,” said Clifford A. Lipscomb, vice chairman and co-managing director at Greenfield Advisors, a real estate research firm. “In contrast, the data show that the proposed state of Southern California bears the bulk of the risk when it comes to wildfires. The data suggest that Southern California has almost $30 billion more real estate exposure to wildfire risk than the proposed Northern California. California is in a distant third place for both types of risk in terms of real estate.”

Posted by: pharbuck on July 18, 2018
Posted in: Uncategorized