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MBA – December new home purchase mortgage applications decreased 6.1%

The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for December 2018 shows mortgage applications for new home purchases decreased 6.1% from a year ago. Compared to November 2018, applications decreased by 13%. This change does not include any adjustment for typical seasonal patterns. “New home sales declined for the second straight month in December, from 627,000 units to 552,000 units, as factors such as a volatile stock market and economic uncertainty, both here and abroad, likely kept some prospective buyers away,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “This pullback in activity was in spite of falling mortgage rates and a robust job market. Looking ahead, if mortgage rates remain low, housing inventory rises, and home-price growth continues to steady, we expect to see a rebound in purchase activity this spring.” MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 552,000 units in December, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors. The seasonally adjusted estimate for December is a decrease of 12% from the November pace of 627,000 units. On an unadjusted basis, MBA estimates that there were 37,000 new home sales in December 2018, a decrease of 17.8% from 45,000 new home sales in November. By product type, conventional loans composed 69.5% of loan applications, FHA loans composed 17.3%, RHS/USDA loans composed 0.7% and VA loans composed 12.5%. The average loan size of new homes increased from $326,037 in November to $334,944 in December.

Oil climbs 1 pct as OPEC output drop eases glut concerns

Oil prices rose more than 1% on Friday after an OPEC report showed its production fell sharply last month, easing some concerns about prolonged oversupply. Brent crude was up 82 cents, or 1.3%, at $62 a barrel at 1200 GMT. Brent has risen more than 2% this week, its third straight week of gains. US West Texas Intermediate (WTI) crude futures were up 78 cents, or 1.5%, at $52.85 per barrel. The Organization of the Petroleum Exporting Countries along with other producers including Russia agreed last year to output cuts starting from Jan. 1 aimed at averting a glut. OPEC’s monthly report showed it had made a strong start in December even before the pact went into effect, implementing the biggest month-on-month production drop in almost two years. Expectations that the United States may grant waivers on sanctions it imposed on importing Iranian oil to fewer countries could also ease concerns about oversupply. “The combination of production cuts by OPEC+ (especially the Saudis) and tightening sanctions on Iranian oil exports have brought the market close to balance,” US investment bank Jefferies said.

NAHB – remodelers’ confidence holds relatively steady in fourth quarter

The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) posted a reading of 57 in the fourth quarter of 2018, only one point lower than the previous quarter. The RMI has been consistently above 50—indicating that more remodelers report market activity is higher compared to the prior quarter than report it is lower—since the second quarter of 2013. The overall RMI averages current remodeling activity and future indicators. “The overall remodeling market remains strong, but there are signs of concern related to rising labor and input costs,” said NAHB Remodelers Chair Joanne Theunissen, CGP, CGR, a remodeler from Mt. Pleasant, Mich. “Remodelers are battling sticker shock with many home owners who expect lower bids.” Current market conditions fell one point from the previous quarter to 57. Among its three major components, major additions and alterations remained steady at 56, minor additions and alterations decreased one point to 56 and the home maintenance and repair component fell one point to 59. The future market indicators dropped three points from the previous quarter to 56. Calls for bids remained still at 57, the amount of work committed for the next three months decreased seven points to 52, the backlog of remodeling jobs fell three points to 59 and appointments for proposals decreased four points to 55. “Many of the fundamentals for the remodeling market, including demographics and economic and employment growth, remain favorable,” said NAHB Chief Economist Robert Dietz. “However, remodelers continue to face challenges in keeping their prices competitive while dealing with the increasing costs of labor and building materials.”

LA teachers’ strike has cost $97M, district estimates

A strike at the nation’s second-largest school district this week has cost nearly $100 million. Negotiations between the United Teachers Los Angeles (UTLA) and the Los Angeles Unified School District (LAUSD) resumed on Thursday after more than 30,000 educators walked off the job this week. While schools remained open, attendance has been low. On Wednesday, less than one-third of students attended classes, according to preliminary data from the district. Those numbers were expected to have fallen even further as the week carried on. Since state funding is doled out based on daily attendance, the school district has estimated that the strikes cost about $97 million through Thursday – averaging more than $20 million per day. There are more than 600,000 students across the 900 LAUSD schools. On Thursday, only about 84,000 of those children were estimated to have attended. The strike is the union’s first in three decades. Among the group’s demands are higher pay, smaller class sizes, more support staff members, as well as addressing the $600 million worth of resources allegedly drained away to prop up charter schools. The school district – which projects a budget deficit of about $500 million this year – has said the union’s demands could cause it to go bankrupt, according to The Los Angeles Times. The union is said to be seeking a 6.5% raise at the outset of a two-year contract. The Los Angeles teacher’s union has been emboldened by the success of similar movements in other states – including West Virginia, where schools closed for nine days as teachers fought for higher wages and better benefits. In March, they ultimately scored a 5% pay raise. Educators held more strikes in 2018 than at any other time in the past 25 years, according to The Wall Street Journal.

CoreLogic – 2018 is third consecutive year of above-average catastrophe activity

–  Annual natural hazard summary from CoreLogic details another above-average year for wildfire and flood events—

CoreLogic released its annual Natural Hazard Report, which addresses the recent wildfires in California and severe rainfall- and hurricane-induced flooding throughout the nation as the leading catastrophes in 2018. Much like 2017, last year was an above-average year for hurricanes, flooding, wildfires and severe winds. The annual report analyzes hazard activity in the US including events for Atlantic and Pacific hurricanes, flooding, wind, wildfire, earthquake and volcano, hail and tornado, as well as several international events including typhoons and cyclones in Japan, Oman, Hong Kong and the Philippines. “In 2018, the US continued to experience damaging weather and natural catastrophes in high exposure areas, and in some instances, in regions that had been impacted in less than a year prior,” said Howard Botts, chief scientist, CoreLogic. “Hazards will always pose a real threat to homes and businesses and knowing exactly what that risk entails is critical to helping ensure sufficient protection from the financial catastrophes that so often follow natural disasters.” Highlights from the analysis include:


–  In 2018, there were over 1,600 significant flood events that occurred in the US, 59% of which were flash flood-related.

–  Residential and commercial flood damage in North Carolina, South Carolina and Virginia from Hurricane Florence is estimated at $19 billion to $28.5 billion, of which roughly 85% of residential flood losses was in fact, uninsured.

–  Multiple states, including Texas, North and South Carolina, Maryland and Wisconsin experienced 1,000-year floods; several of 2018’s floods occurred less than two years after the same areas’ previous 1,000-year flood events.

–  Six% of properties nationwide are within Special Flood Hazard Areas (SFHA), and approximately one-third of those have flood insurance policies.

Flood Map

Atlantic Hurricanes

–  The 2018 Atlantic Hurricane season saw 15 named storms, eight of which were named hurricanes. Two of these, Hurricanes Florence (Category 1) and Michael (Category 4), made landfall along the US This made 2018 the third back-to-back season of above-average hurricane activity in the Atlantic.

–  Approximately 700,000 residential and commercial properties experienced catastrophic flooding and wind damage from Hurricane Florence, where it is estimated to have caused between $20 to $30 billion in insured and uninsured loss.

–  Michael is the strongest hurricane to make landfall in the Florida Panhandle since 1900 and the strongest hurricane to make landfall in the US since Hurricane Andrew in 1992. It is estimated to have caused $2.5 to $4 billion in residential and commercial insured loss from wind and storm surge.

Natural Hazard Report Table


–  The number of acres that burned in 2018 is the eighth highest in US history as reported through November 30, 2018.

–  A total of 11 western states had at least one wildfire that exceeded 50,000 burned acres; the leading states were California and Oregon, each with seven fires that burned more than 50,000 acres.

–  The November 2018 Camp Fire in Northern California destroyed nearly the entire city of Paradise and brought damage or destruction to 18,804 structures (NIFC, 2018).

–  The Woolsey wildfire in the coastal community of Malibu destroyed more than 1,600 structures (Los Angeles County Fire Dept, 2017).

–  CoreLogic estimates that the combined total insured and uninsured loss for these two wildfires is between $15 billion and $19 billion.

Americans, saddled with student debt, can’t afford a home

While many young Americans aim to own a home one day, most have one massive obstacle to overcome: student loan debt. According to online real estate site Zillow, Americans’ ability to afford a home is meaningfully diminished by student loan debt. A renter earning median income without student loan debt, for example, could afford a home that costs as much as $361,800 – for a renter with debt, the maximum affordable price is $269,400. That pushes nearly half of all homes currently listed for sale across the country out of reach. Outstanding student loan debt surpassed $1.5 trillion in 2018 – second only to mortgage debt – doubling over the past decade. In some metropolitan areas, affordability is much more challenging for young prospective buyers. In Las Vegas, student debt reduces renters’ options by nearly half – to 29.3% from 57%. In Los Angeles, slightly more than 6% of home listings are financially within reach for individuals with student debt, compared to 13.5% without. On the flip side, a renter with debt could afford more than 73% of listings in St. Louis. Earlier this week, researchers from the Federal Reserve found that the homeownership rate among young Americans fell nine percentage points between 2005 and 2014 — and rising student debt accounted for about one-fifth of the overall decline during that time period. If not for those increased student debt burdens, an additional 400,000 young Americans would have owned a home by 2014.

Posted by: pharbuck on January 18, 2019
Posted in: Uncategorized