The delinquency rate for mortgage loans on one-to-four-unit residential properties fell to a seasonally adjusted rate of 4.36% of all loans outstanding at the end of the second quarter of 2018. The delinquency rate was down 27 basis points from the previous quarter, but was up 12 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The percentage of loans on which foreclosure actions were started dropped four basis points from the last quarter to 0.24%, its lowest level since the second quarter of 1987. “We continue to see improvement in the overall mortgage delinquency rate as the impact of the hurricanes from one year ago lessens, particularly for conventional loans,” according to Marina Walsh, Vice President of Industry Analysis at MBA. “Among the various loan types, the delinquency rate for conventional loans was two basis points lower than one year ago, prior to the hurricanes. While delinquencies for both FHA and VA loans were up from one year ago, they were improved over the previous quarter.” “The economic outlook continues to support good loan performance. Gross domestic product grew at a 4.1% rate, the unemployment rate was at an 18-year low, and job growth is averaging over 210,000 jobs per month, so far this year. This means the economy is close to full employment.” “But even with positive economic news, we continue to monitor factors that may contribute to a rise in delinquencies in future quarters. Like past natural disasters, the wildfires in California may have a negative impact. Other factors include the aging of servicing portfolios as mortgage refinances slow, and the changing credit quality among certain loan types.”
Key findings of MBA’s Quarterly National Delinquency Survey include:
– Mortgage delinquencies dropped across all stages of delinquency in the second quarter of 2018 compared to the first quarter of 2018. The 30-day delinquency rate dropped two basis points from the previous quarter, while the 60-day and 90-day delinquency buckets dropped by eight and 18 basis points respectively.
– The delinquency rate for conventional loans decreased 33 basis points over the previous quarter to 3.45%. The FHA delinquency rate fell by 32 basis points to 8.70% and VA delinquency rate fell by 35 basis points to 3.97% over the previous quarter.
– On a year-over-year basis, the delinquency rate for conventional loans dropped by two basis points, while the FHA delinquency rate increased by 76 basis points and the VA delinquency rate increased by 25 basis points.
– The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 1.05%, down 11 basis points from the first quarter of 2018 and 24 basis points lower than one year ago. This was the lowest foreclosure inventory rate since the third quarter of 2006.
– The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 2.30% in the second quarter of 2018, a decrease of 31 basis points from last quarter, and a decrease of 19 basis points from last year.
– Both Texas and Florida continue to recover from the September 2017 hurricanes. The non-seasonally-adjusted overall mortgage delinquency rate in Texas dropped by 26 basis points to 5.36% in the second quarter. Prior to the hurricane one year ago, the overall delinquency rate for Texas was 5.05%. In Florida, the non-seasonally-adjusted overall mortgage delinquency rate on all loans dropped 139 basis points to 5.20% in the second quarter. Prior to the hurricane one year ago, the overall delinquency rate for Florida was 4.07%.
– The recovery process for FHA borrowers in Texas and Florida is improving at a slower pace. The FHA non-seasonally-adjusted mortgage delinquency rate in Texas was 10.53% in the second quarter, compared to 9.56% one year ago. In Florida, the non-seasonally-adjusted FHA mortgage delinquency rate was 9.01%, compared to 6.16% one year ago.
JPMorgan slashes Tesla stock price target, shares fall
JPMorgan analysts have slashed their stock price target on Tesla to $195 from $308, back where it was before chief executive Elon Musk’s going-private tweet. On Aug. 7, Musk tweeted that he is considering talking Tesla private for $420 – “funding secured.” In communicating the downgrade, JPMorgan’s analysts wrote, “Our interpretation of subsequent events leads us to believe that funding was not secured for a going private transaction, nor was there any formal proposal.” “Tesla does appear to be exploring a going private transaction, but we now believe that such a process appears much less developed than we had earlier presumed, suggesting formal incorporation into our valuation analysis seems premature at this time,” analyst Ryan Brinkman wrote in a client note. JPMorgan analysts upped their forecast on Tesla from $198 to $308 when Tesla’s stock surged following Musk’s tweets. They have an underweight rating on the stock. The media price target of analysts covering Tesla is $336, according to Reuters.
NAHB – housing starts hold their ground in July
Total housing starts inched up 0.9% in July to a seasonally adjusted annual rate of 1.17 million units, according to newly released data from the US Department of Housing and Urban Development and the Commerce Department. The July reading of 1.17 million is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, single-family starts held firm, up 0.9% to 862,000 units. Meanwhile, the multifamily sector—which includes apartment buildings and condos—rose 3% to 306,000. “Builder confidence remains solid, although it has fallen back somewhat in recent months due to rising construction costs in 2018, including lumber,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “As builders grapple with higher costs, one positive development is that lumber prices have shown signs of easing the past two months off their record high levels posted in June.” Some projects are experiencing construction start delays due to cost concerns, with the number of single-family units authorized but not started up 25% since July 2017. “Supply-side challenges including increases in material prices and chronic labor shortages are affecting affordability in many markets,” said NAHB Chief Economist Robert Dietz. “However, consumer demand remains strong due to a growing economy and job market and favorable demographics. Moreover, on a year-to-date basis, single-family construction has shown steady progress, up 7.2%, while 5+ multifamily production is up 3.4% as well.”
Regionally, combined single- and multifamily housing starts in July rose 11.6% in the Midwest and 10.4% in the South. Starts fell 4% in the Northeast and posted a 19.6% decline in the West due to affordability constraints in the coastal markets. Overall permits, which are often a harbinger of future housing production, rose 1.5% to 1.31 million units in July. Single-family permits posted a modest gain of 1.9% to 869,000. Multifamily permits were relatively unchanged, up 1.7% to 410,000. Looking at regional permit data, permits rose 5.9% in the Northeast, 5.8% in the Midwest and 1.2% in the West. Permits edged 0.3% lower in the South.
Small business optimism at 35-year high
Small business owners’ optimism touched a 35-year high in July, with businesses setting records in terms of job creation and hiring, while they cited the availability of qualified workers as their biggest challenge. In another signal of just how good this economy is, the small business owners also noted that they were able to increase prices. In July 2018, the NFIB’s Small Business Optimism Index marked its second highest level in the survey’s 45-year history, at 107.9 – just shy of the July 1983 record-high of 108. Records were set for job creation plans. A seasonally-adjusted net 23% of businesses are planning to create new jobs, while 37% of business owners said they had job openings that they could not fill in July. “Small business owners are leading this economy and expressing optimism rivaling the highest levels in history,” said NFIB President and CEO Juanita Duggan. “Expansion continues to be a priority for small businesses who show no signs of slowing as they anticipate more sales and better business conditions.” A net 35% of owners expect better business conditions, while they said the availability of qualified workers was their No. 1 problem. Owners also reported that they were increasing the compensation they offered workers. Fifty-nine% of firms were hiring or trying to hire, while 52% (88% of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill. Twenty-three% of owners said their biggest business problem was finding qualified workers. “Despite challenges in finding qualified workers to fill a record number of job openings, they’re taking advantage of this economy and pursuing growth,” said NFIB chief economist Bill Dunkelberg. Profits continued to perform, and more firms raised prices in July, a positive signal of demand.
HUD Secretary Carson accuses Facebook of enabling housing discrimination
Housing Secretary Ben Carson accused Facebook on Friday of enabling illegal housing discrimination by giving landlords and developers advertising tools that made it easy to exclude people based on race, gender, Zip code or religion — or whether a potential renter has young children at home or a personal disability. The action, which comes after nearly two years of preliminary investigation, amounts to a formal legal complaint against the company and starts a process that could culminate in a federal lawsuit against Facebook. It stands accused of creating advertising targeting tools — which classified people according to interests such as “English as Second Language” or “Disabled Parking Permit” — that resulted in violations of the Fair Housing Act. The move by the Department of Housing and Urban Development came on the same day the Justice Department targeted Facebook on similar issues. In that action, the government took the side of several fair-housing groups in opposing Facebook’s efforts to have a discrimination lawsuit dismissed, arguing that Facebook can be held liable when its ad-targeting tools allow advertisers to unfairly deprive some categories of people of housing offers. Taken together, the moves mark an escalation of federal scrutiny of how Facebook’s tools may create illegal forms of discrimination, allegations that also are central to separate lawsuits regarding the access to credit and employment opportunities, which, like housing, are subject to federal legal protection. The federal actions also suggests limits on the reach of a key federal law, the Communications Decency Act, that long has been interpreted as offering technology companies broad immunity against many legal claims related to online content. “The Fair Housing Act prohibits housing discrimination, including those who might limit or deny housing options with a click of a mouse,” said Anna María Farías, HUD’s assistant secretary for fair housing and equal opportunity. “When Facebook uses the vast amount of personal data it collects to help advertisers to discriminate, it’s the same as slamming the door in someone’s face.”
Facebook said in a statement Friday afternoon, “There is no place for discrimination on Facebook; it’s strictly prohibited in our policies. Over the past year we’ve strengthened our systems to further protect against misuse. We’re aware of the statement of interest filed and will respond in court; we’ll continue working directly with HUD to address their concerns.” In March, several housing groups, led by the National Fair Housing Alliance, sued Facebook in federal district court in New York for engaging in illegal housing discrimination through its advertising tools. The company asked the court last month to dismiss the case, citing immunity because it was an “interactive computer service” protected by the Communications Decency Act. But Geoffrey S. Berman, the US attorney for the Southern District of New York, sided with the plaintiffs, arguing that Facebook was instead an “Internet content provider” under federal law because it collects and analyzes data and offers user categories that advertisers can choose, “based on demographics, interests, behaviors and other criteria.” That means that Facebook, at least in providing online tools to advertisers, falls beyond the reach of the Communication Decency Act’s immunity provisions, which are cherished by Silicon Valley and frequently portrayed as key to the ability of the technology industry to innovate freely. Berman wrote, “The Complaint sufficiently alleges that, for purposes of housing advertisements, the categorizing of Facebook users based on protected characteristics, and the mechanism that Facebook offers advertisers to target those segments of the potential audience, violated the FHA.” The Justice Department did not take a position on the merits of the legal claim overall, only about the applicability of the Communications Decency Act.
Lisa Rice, president of National Fair Housing Alliance, called the government’s action “a strong statement in support of our claims,” adding, “Facebook is one of the largest adverting companies in the world, and instead of using its vast resources to create more open markets, our claims assert that data is being harnessed in a way that perpetuates systemic bias in housing markets.” After a ProPublica investigation two years ago, Facebook said it would no longer allow advertisers to target ads for housing, credit offers and employment by “ethnic affinities,” a category the social network had created to enable businesses to reach minority groups. But the housing groups have argued that Facebook has not gone far enough. The government statement on Friday quoted this complaint in saying that the platform’s advertising tools still give landlords, developers and others the ability to target some potential renters while excluding others. An HUD news release Friday said that Facebook’s tools, while not explicitly mentioning race, disabilities or family size, allow all of that and more for advertisers interested in targeting certain groups while excluding others from housing offers. Such groups included people interested in “assistance dog,” “mobility scooter” or “deaf culture.” The advertising tools also allowed offers to exclude people interested in “child care” or “parenting,” or to target people based on their stated interest in Christianity, Hinduism or the Bible. Ads could also be tailored based on user Zip codes, the HUD release said. The formal complaint was filed four months after Carson testified on the Hill that he would be reopening HUD’s investigation into Facebook. The initial investigation had begun during the Obama administration following the ProPublica story revealing that Facebook allowed advertisers to target housing and other ads based on race.
But Carson dropped the investigation last fall. After a public outcry, he told senators in April that he had done so because of time pressures and had always intended to revisit the case. “Some of the suits that were being pursued — we didn’t really have time to study them,” Carson said in April. “We wanted to pull them back and have the chance to really study them.” A HUD official said Friday that Carson’s team began taking more time to understand the merits of the Facebook case. “They did not like the perception that they were scaling back on civil rights,” said the official, who is not authorized to speak on the record. “It doesn’t take a genius for anyone looking at Facebook to figure out that’s a problem that denies people housing. It’s hard for Facebook to justify.” The filing of the formal complaint signifies that HUD has found enough during its initial investigation to say the department believes Facebook may have violated federal housing laws. It begins an official process that allows the company to resolve the complaint by working with HUD before the department decides to either file a lawsuit or dismiss the case.