– Twelve-month home-price growth rate was slowest since August 2012
– Annual average price growth in 2018 was 5.8%, with annual average price growth forecast to slow in 2019 to 3.4%
– After peaking in March, December marked the ninth consecutive month of decelerating annual HPI growth in the United States
CoreLogic released the CoreLogic Home Price Index (HPI™) and HPI Forecast for December 2018, which shows home prices rose both year over year and month over month. Home prices increased nationally by 4.7% year over year from December 2017. On a month-over-month basis, prices increased by 0.1% in December 2018. (November 2018 data was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results each month.)
Looking ahead, the CoreLogic HPI Forecast indicates home prices will increase by 4.6% on a year-over-year basis from December 2018 to December 2019. Comparing the annual average HPI and HPI forecast for 2018 and 2019, average price growth is forecasted to slow from 5.8% to 3.4%. On a month-over-month basis, home prices are expected to decrease by 1% from December 2018 to January 2019. The CoreLogic HPI Forecast is a projection of home prices calculated using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state. “Higher mortgage rates slowed home sales and price growth during the second half of 2018,” said Dr. Frank Nothaft, chief economist for CoreLogic. “Annual price growth peaked in March and averaged 6.4% during the first six months of the year. In the second half of 2018, growth moderated to 5.2%. For 2019, we are forecasting an average annual price growth of 3.4%.”
According to the CoreLogic Market Condition Indicators (MCI), an analysis of housing values in the country’s 100 largest metropolitan areas based on housing stock, 33% of metropolitan areas have an overvalued housing market as of December 2018. The MCI analysis categorizes home prices in individual markets as undervalued, at value or overvalued, by comparing home prices to their long-run, sustainable levels, which are supported by local market fundamentals (such as disposable income). Additionally, as of December 2018, 27% of the top 100 metropolitan areas were undervalued, and 40% were at value. When looking at only the top 50 markets based on housing stock, 40% were overvalued, 18% were undervalued and 42% were at value. The MCI analysis defines an overvalued housing market as one in which home prices are at least 10% above the long-term, sustainable level. An undervalued housing market is one in which home prices are at least 10% below the sustainable level.
In 2018, CoreLogic together with RTi Research of Norwalk, Connecticut, conducted an extensive survey measuring consumer-housing sentiment, combining consumer and property insights. The study assessed attitudes toward homeownership and the driving force behind the decision to buy or rent a home. When renters were asked how interested they were in owning a home or residence, 36% felt homeownership would allow them to fulfill a dream and provide a place to raise a family. Conversely, 45% of those surveyed claimed they could not afford to buy or take on the responsibility of ownership at this time. As home-price increases cool while incomes rise, we expect buyer affordability to improve and home sales to pick up. “The slowdown in the rate of home price appreciation reflects the impact of inventory shortages and growing affordability issues in many markets,” said Frank Martell, president and CEO of CoreLogic. “On the positive side, if home-price growth continues to moderate, interest rates remain stable and household incomes rise in 2019, it could help renters and first-time buyers to take the plunge and realize the dream of owning a home.”
Trump’s SOTU touts juiced job market
President Trump in his State of the Union address said the thriving US economy has enabled women to fill 58% of the new jobs created in the last year.
President Trump Opens a New Window. wants you to know the US jobs recovery Opens a New Window. is real dubbing it part of the “economic boom” Opens a New Window. in his 2019 State of the Union address. To his point, in January, a whopping 304,000 jobs were created, blowing past expectations. Near record low unemployment and robust hiring in sectors that were long depressed, such as manufacturing, are now part of his economic track record and he detailed as much on Tuesday while noting, “We are just getting started”…
Some excerpts of his address:
Record Low Unemployment is Broad:
US unemployment hit 3.7% in late 2018 before ticking up to 4% in January 2019. “Unemployment has reached the lowest rate in half a century” Trump noted. “More people are working now than at any time in our history”… “African-American, Hispanic-American and Asian-American unemployment have all reached their lowest levels ever recorded. Unemployment for Americans with disabilities has also reached an all-time low” he said.
“No one has benefitted more from our thriving economy than women, who have filled 58% of the new jobs created in the last year” said Trump. He also noted in his remarks that more women than ever before are serving in the US Congress. According to the Associated Press, the labor force participation rate is 57.5%, according to the Labor Department. The rate has ticked up recently, but it was higher in 2012 and peaked in 2000 at roughly 60%.
“We have created 5.3 million new jobs and importantly added 600,000 new manufacturing jobs — something which almost everyone said was impossible to do” he said. The numbers are slightly off, based on data from the Bureau of Labor Statistics, which shows there have been about 4.9 million jobs created since January of 2017 of which 436,000 are manufacturing.
Wages are rising at the fastest pace in decades, and growing for blue collar workers. Trump’s top economic advisor Larry Kudlow has also highlighted the recovery for the blue collar workers as being significant. “The Trump economic incentive model has spurred blue-collar job growth at the fastest rate since the Reagan administration, he recently said. In December, wages grew 3.3% from the same period a year ago, the fastest in about a decade.
Miami estate sells for a record $50 million
An estate on Indian Creek Island sold for $50 million, making it the most expensive single-family home ever sold in the Miami area, according to people familiar with the deal. The property, at 3 Indian Creek Island Road, was not officially listed but had sold in 2012 for $47 million. At the time, that marked a record for the most expensive home ever sold in Miami-Date County. So with the current sale, the home will have set the Miami record twice. The sale comes as the real estate market in South Florida has gotten off to a strong start of the year, helped in part by the new tax law that makes it more attractive to live in low-tax states. The names of the buyer and seller of Indian Creek weren’t disclosed. The buyer of the property in 2012 was an LLC, and was purchased by a Russian businessman, according to news reports. The ultra-modern home stretches over 20,000 square feet on 2 acres overlooking Biscayne Bay. It has 10 bedrooms, 14 bathrooms, a 3,000-square-foot master suite, rooftop lawn, chromotherapy spa, a 3D movie theater and two kitchens. It also has a 100-foot swimming pool. The question of whether the sale will officially be the most expensive ever in Miami will remain a source of debate. Ken Griffin, the Chicago-based hedge-fund manager, bought two apartments — a penthouse and unit below — in the Faena House in 2016 for $60 million. But that sale was for a condo, and the Indian Creek home is a record for a single-family home.
GM determined to reallocate factory workers amid job cuts, President Mark Reuss says
General Motors President Mark Reuss on Tuesday told FOX Business that while the automaker takes steps to vacate several US plants, a huge investment in the latest Chevy Silverado at one of its Flint, Michigan, plants will help reallocate some employees impacted by job cuts. “We haven’t actually announced that we are closing any plants — we’ve ‘unallocated’ those plants,” Reuss explained to Jeff Flock in response to putting five plants up for possible closure, and he added that “this plant we’ve put about $1.2 billion in it since ’09, including a new paint shop, new body shop and we’re bringing 1000 employees from some of those unallocated plants to this plant here.” Last year, GM announced plans to slash 15% of its salaried workforce and halt production at plants in Ohio, Michigan, Maryland and Ontario. In addition, they are eliminating several car models in the US, including the Chevrolet Cruz and the Buick LaCrosse. The decision has drawn criticism from President Trump, who threatened to end subsidies for electric vehicles in the near future. However, Reuss remained tight-lipped on whether Trump’s disapproval changed his mind. “These are tough decisions, they affect employees and we take that very seriously,” he said. Reuss’s father Lloyd also served as president in the 1990s and was also criticized at the time for not making some tough decisions. While “those were very different times,” and he had just joined the company at the time of his father’s firing in 1992, dealing with the 2009 bankruptcy during the global financial crisis is motivation to turn the company around. “Mary [Barra] and I take that very, very seriously,” he said. “So we are going to get on the other side of this and make sure that we are healthy and strong and we’ve invested in the right plants and we fill those plants with as many workers and as many products as we can to make this a viable company for the future.”
Olick – weekly mortgage applications fall 2.5% despite a sharp drop in rates
– Mortgage application volume fell 2.5% last week compared with the previous week, according to the Mortgage Bankers Association.
– Volume was also nearly 10% lower than the same week one year ago.
– The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.69% from
Overall mortgage application volume fell 2.5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was nearly 10% lower than a year ago. Purchase volume pulled back the most, with those applications falling 5% for the week and 2% annually. The signals are mixed, as real estate agents are reporting a surge in potential buyer activity through open houses in the past few weeks. Home sales fell at the end of the year, but so did mortgage rates, and agents report seeing higher demand in direct response to lower rates. “I absolutely think it’s the interest rate, especially when they’re getting a 30-year mortgage and they’re going to be stuck with it for a long time,” said Laura Barnett, a Dallas area real estate agent who was surprised by the crowd of house hunters who came to one of her open houses last Sunday. “They have to make a really wise decision. They can always refinance later if it goes down, but they can never get this rate again if it goes back up.”
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.69% from 4.76% last week, with points decreasing to 0.45 from 0.47 (including the origination fee) for loans with a 20% down payment. That rate was the lowest since April and just 19 basis points higher than one year ago. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) decreased to 4.50% from 4.60%. “Despite more favorable borrowing costs, and after a three-week surge in activity, purchase applications have slowed over the past two weeks, and are now almost 2% lower than a year ago,” said Joel Kan, an MBA economist. “However, moderating price gains and the strong job market, including evidence of faster wage growth, should help purchase growth going forward.” Applications to refinance a home loan, which are far more rate-sensitive week to week, increased 0.3 from the previous week but were still 19% lower than a year ago. Many borrowers already refinanced to rates in the 3% range a few years ago, so there is not a lot of incentive now to go through the process. For those who want to take cash out, they are now more likely to take out a second loan or line of credit rather than give up their current rock-bottom rate. Mortgage rates started this week slightly higher, but then stabilized. There is no major economic data expected later this week to cause more volatility, but there is always the potential for political issues at home and abroad to cause major moves in the bond market.
CoreLogic – explaining to homeowners reconstruction costs versus other valuations
According to a recent CoreLogic Natural Hazard Press Release, the 2018 Camp and Woolsey Wildfires in California caused devastating losses between $15 and $19 billon. Because a home is most often a complete loss when it comes to wildfires, the destruction caused by these catastrophic events has been a personal and financial tragedy for many families. These and other natural hazards have forced Insurance Carriers to reevaluate the need for more accurate insurance coverage to better ensure their policyholders can be made whole again if a natural disaster should destroy their property. The consequence of underinsurance can affect the mortgage industry as well. Many times, if a homeowner doesn’t have enough insurance coverage to rebuild, they simply walk away from their mortgages. According to a recent Loan Performance Press Release, Dr. Frank Nothaft, chief economist for CoreLogic said, “The effects of 2018’s natural disasters have begun to show clearly in our delinquency data.” The report shows areas affected by natural disasters have seen an increase in delinquency rates while other parts of the country are experiencing a steady decline. While there is an increased focus within the Insurance and Mortgage industries on making sure ITVs (Insurance to Values) are more accurate, property insurance agents and carriers often receive questions from homeowners who don’t understand the difference between reconstruction cost values (insurance coverage) and market or appraisal values. Below are three of the most common questions property owners ask after receiving a quote from their agent or carrier.
Q: Why is my homeowner’s insurance coverage more than what my house is worth?
A: Many homeowners assume the cost to rebuild a property should be equal to what they paid for the property. However, insurers determine reconstruction cost values (RCVs) using sophisticated residential estimating tools that deliver RCVs at today’s prices. Reconstruction cost value is the cost to replace or rebuild a home to original or like standards at current material and labor costs within a certain geographical area. Meanwhile, a home’s market value is the price a consumer is willing to pay for the home. To illustrate this, Home A and Home B have similar property characteristics. Yet, due to the dilapidated condition of Home A, it has little to no market value. But to an insurer, the cost to rebuild both homes may be about the same (excluding site access, regional differences and land).
HOME A – Distressed Home
Year Built 1930
Square Footage 1300
Market Value $30,000
Reconstruction Cost Value $145,000
HOME B- – Well Kept Home
Year Built 1930
Square Footage 1300
Market Value $130,000
Reconstruction Cost Value $145,000
Q My home is new, so why is the reconstruction cost value higher than what I paid for my home?
A: CoreLogic research has shown that reconstruction cost values average close to 12% more than new construction costs. This is because newly constructed communities can benefit from material discounts and labor efficiencies that a contractor rebuilding a home does not have. These factors can add up and include variables such as:
– Restricted site access
– Restricted utility access
– Site improvements
– Working restrictions
– Delivery access
– Security concerns
– Work interruptions
To be properly covered, a home should be insured for the amount it will cost to rebuild the home at current prices for building materials and labor costs, including constructing it to comply with current building codes.
A: Can I use the appraised or assessed value to determine my insurance coverage limits?
Q: Replacement Cost New (RCN), a term generally used by the assessor and appraisal industry, is not recommended to determine the cost to rebuild a home. This is because RCN is based on the cost to build, at one time, an entire building of equal utility, quality, features, and finishes with neither the contractor nor property owner being under duress to have it done in a shorter time frame. Building codes, as well as the prices used for labor, materials, overhead, profit, and fees are those in practice at the time the valuation was written and may not be current. RCN’s also use modern building methodologies and materials and don’t consider the cost of rebuilding an older home using period specific materials. Additionally, RCNs do not take into consideration the following costs usually associated with rebuilding after a catastrophic event: demolition, salvage of marketable building components, debris removal, extraordinary fees, site accessibility or premiums for materials and labor.