The housing market might experience a downturn, but it won’t affect homeownership as much as the last housing crisis did, according to a study titled Where are We Now with Housing: A Report, by the Florida Atlantic University College of Business. The study investigated and compared the current status of US housing at the national level with that of housing at the peak of the last cycle in July 2006. It revealed that while national housing prices were slightly overheated, residential real estate markets were experiencing minimal downward pressure on the demand for homeownership. “Understanding where housing stands today relative to the last cycle’s peak creates more informed real estate consumers and perhaps a less bumpy ride this time around as the nation enters another housing cycle peak,” said Ken Johnson, the author of the study and co-author of the Beracha, Hardin & Johnson Buy vs. Rent Index (BH&J). To compare home prices and their impact on demand, the study investigated scores of the CoreLogic Case-Shiller Home Price Index and the BH&J. It found that housing prices were at 7.3% above their long-term pricing trend compared to 31% at the peak of the last housing cycle. In terms of downward pressure on housing demand, the study found that at the end of the last cycle the BH&J Index indicated an extreme downward pressure on homeownership with a score of 1.00. Comparatively, this time around, the index reflected a score of 0.039 suggesting only minimal pressure on homeownership demand. “It looks like we’re in for more of a very high tide, as opposed to a tsunami, as residential prices peak in this latest cycle,” Johnson said. “At a minimum, we can expect flatter housing price growth. At worst, we could experience price declines slightly below the long-term pricing trend.”
Oil prices jump on US-China trade hopes, supply cuts
Oil prices rose by more than 1.5% on Monday on hopes that talks in Beijing can resolve a trade war between the United States and China, while supply cuts by major producers also supported crude. Brent crude futures were at $58.04 per barrel at 0751 GMT, up 98 cents, or 1.7%, from their last close. US West Texas Intermediate (WTI) crude oil futures were at $48.85 per barrel, up 89 cents, or 1.9%. Financial markets were riding a relief rally on Monday on expectations that face-to-face trade negotiations between delegates from Washington and Beijing, starting on Monday, would lead to an easing in tensions between the two biggest economies in the world. The United States and Beijing have been locked in an escalating trade spat since early 2018, raising import tariffs on each other’s goods. The dispute has weighed on economic growth.
Goldman Sachs said in a note on Monday that it had downgraded its average Brent crude oil forecast for 2019 to $62.50 a barrel from $70 due to “the strongest macro headwinds since 2015.” French bank Societe Generale also lowered its oil price forecasts, cutting its 2019 average price expectation for Brent by $9 to $64 a barrel and reducing its WTI forecast to $57 a barrel, also a reduction of $9. The bank said it had revised its global oil demand growth forecast to 1.27 million barrels per day (bpd), down from 1.43 million bpd previously. In the latest signs of widespread economic slowdown that could also hit fuel demand, British new car sales in 2018 fell at their fastest rate since the global financial crisis a decade ago, preliminary industry data showed on Monday. Meanwhile, German industrial orders dropped in November, official data showed on Monday, as Germany’s exporters suffer from the trade dispute between China and the United States.
Government shutdown halts reverse mortgage endorsements
With the government shutdown approaching the two-week mark, reverse mortgage endorsements have ground to a halt. The Federal Housing Administration released a notice stating it will not be making insurance endorsements for HECM loans during the shutdown. The FHA also noted that assistance will not be provided for lenders with issues regarding the Collateral Risk Assessment related to the second-appraisal protocol. If the first appraisal was submitted under the interim protocol, a second appraisal must follow the interim processes, the FHA said. If the first appraisal was submitted on or after Nov. 30, 2018, when the process was fully automated, lenders must adhere to guidelines for the automated process. And, apparently, if questions arise, lenders are out of luck. The FHA also said condominium project approvals under HUD review will be unavailable during the shutdown.
But some activities will continue as normal, albeit with “limited staff assistance available and longer wait times for assistance,” the FHA said. HECM payments will continue to be made to borrowers, as well as refunds on mortgage insurance premiums. Submissions of upfront MIP payments for new endorsements are still required, with the FHA specifically noting that lenders are required to submit monthly MIPs during the shutdown. FHA Connection will still be available and will continue to assign case numbers. The Home Equity Reverse Mortgage Information Technology system and Electronic Appraisal Delivery portal will also be available for existing lenders only. “As a result of the Federal Government shutdown due to a lapse in appropriations, until further notice the Federal Housing Administration’s Office of Single Family Housing and its mortgage insurance program will be operating with limited service,” the FHA bulletin said. “Please note that across the board, the services that remain available during the shutdown will have significant impacts to customer service and/or limited functionality.”
Nucor to build $1.35B steel plant in Midwest
US steelmaker Nucor said Monday it will spend $1.35 billion to build a steel production facility in the Midwest, creating approximately 400 full-time jobs. The plate mill is expected to begin production in 2022 and be capable of producing 1.2 million tons of plate products per year, said Nucor, which operates plants in North Carolina, Alabama and Texas. The mill will produce cut-to-length, coiled, heat-treated and discrete plates ranging from 60 to 160 inches wide, and in various gauges. “Tax reform, continued improvements to our regulatory approach and strong trade enforcement are giving businesses like ours the confidence to make long-term capital investments here in the United States,” CEO John Ferriola said in a statement. Nucor said it expects to select a site early this year. “By building this state-of-the-art plate mill in the Midwest – the largest plate-consuming area in the United States – we will enhance our ability to serve our customers in the region while also furthering our goal of meeting all the steel needs of our customers around the country,” Leon Topalian, a Nucor executive vice president, said in a statement.
DSNews – in times of emergency
The current insurance system leaves too many homeowners vulnerable when disaster strikes even with private insurance policies playing a major role. According to a recent report by the Urban Institute, the number of flood insurance policies in force through the National Flood Insurance Program decreasing over the past decade further complicated the issue. In light of these factors, the recent stance by the Federal Emergency Management Agency (FEMA) on federal policies gained importance. Congress had passed legislation that extended the National Flood Insurance Program to May 31, 2019, before the partial shutdown on the December 21. However, on December 26, in a stance that was contrary to the ones it had taken during past shutdowns, FEMA, said that insurers would not be allowed to issue and renew federal policies during the shutdown. Apart from National Association of Realtors (NAR), organizations such as the Property Casualty Insurers Association of America and the Independent Insurance Agents & Brokers of America and the Congress expressed their concerns urging the agency to reevaluate its decision. FEMA was quick to address the concerns and reverse its policy disallowing new or renewal flood insurance policies during the shutdown and announced a reversal of the unexpected ruling the agency released earlier, on December 28.
NAR estimates that the FEMA ruling disallowing insurance could have affected home sales across America, as its research revealed the possibility of up to disruptions in 40,000 closings each month that the NFIP cannot issue flood insurance policies—making flood insurance imperative especially at a time when market disruption would be extremely hard-felt. A recent report by CoreLogic revealed that serious delinquencies have recorded an upward spike in disaster-affected areas. “Lenders, for example, will need to carefully consider whether or not it even makes sense to continue offering mortgage loans in frequently-hit by natural disaster areas, and which may or may not be covered by the battered and bruised Federal Flood Insurance Program. Servicers will need to look closely at their potential losses, particularly when managing loans insured by government agencies. Property insurers will certainly adjust premiums to address increased levels of risk,” Rick Sharga, EVP of Carrington Mortgage said.