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Federal Reserve fines five banks to wrap up mortgage servicing charges

The Federal Reserve fined five large US banks a combined $35.1 million to settle cases of mortgage servicing flaws dating back to 2011. The central bank announced the fines against Goldman Sachs, Morgan Stanley, CIT Group, US Bancorp, and PNC Financial as part of a broader effort to terminate enforcement actions begun in 2011 and 2012 against large banks for mortgage servicing shortcomings. Ally Financial, Bank of America, HSBC North America Holdings, JPMorgan Chase and SunTrust Banks had already paid penalties for similar issues. All 10 banks had enforcement actions under the Fed ended on Friday, as the regulator cited “sustainable improvements” in their servicing practices. Goldman is set to pay the largest fine of the five announced today, totalling $14 million. Morgan Stanley agreed to pay $8 million, CIT will pay $5.2 million, US Bancorp will pay $4.4 million, and PNC will pay $3.5 million. All told, the Fed said it had assessed $1.1 billion in fines against 14 banks for mortgage servicing shortcomings, which became widely known in the wake of the 2007-2009 financial crisis as more homeowners struggled to stay current on their loans. At the same time, the Fed announced it was terminating enforcement actions against a pair of mortgage servicers. Lender Processing Services, Inc., succeeded by ServiceLink Holdings LLC, and MERSCORP Holdings, Inc., formerly known as MERSCORP, Inc., both faced enforcement actions from financial regulators for issues tied to foreclosure-related services. In a separate enforcement action, the Fed announced it had fined Goldman Sachs $90,000 for violations tied to the National Flood Insurance Act.

Oil hovers below $70 highs, clouded by rise in US output

Oil hovered near a three-year high of $70 a barrel on Monday on signs that production cuts by OPEC and Russia are tightening supplies, but analysts warned of “red flags” due to surging US production. International benchmark Brent crude futures were trading 3 cents lower at $69.84 by 1522 GMT, having risen above $70 earlier in the session. US West Texas Intermediate (WTI) crude futures were up 22 cents at $64.52 a barrel. Trading was relatively slow due to a national holiday in the United States. A production-cutting pact between the Organization of the Petroleum Exporting Countries, Russia and other producers has given a strong tailwind to oil prices, with both benchmarks last week hitting levels not seen since December 2014. Growing signs of a tightening market after a three-year rout have bolstered confidence among traders and analysts that prices can be sustained near current levels. Bank of America Merrill Lynch on Monday raised its 2018 Brent price forecast to $64 a barrel from $56, forecasting a deficit of 430,000 barrels per day (bpd) in oil production compared to demand this year. Other factors, including political risk, have also supported crude. “Tighter fundamentals are (the) main driver to the rally in prices, but geopolitical risk and currency moves along with speculative money in tandem have exacerbated the move,” US bank JPMorgan said in a note.

Olick – By all measures, a construction boom is shaping up for 2018

–  The construction industry added 30,000 jobs last month, according to the Labor Department.

–  That brings the sector’s 2017 gains to 210,000 positions, a 35% increase over the previous year.

–  Construction spending is also soaring, up to a record $1.257 trillion in November, according to the Commerce Department.

–  Optimism among construction contractors is also at a record high.

All signs and numbers point to a huge year for the construction industry. Even in December, with much of the nation frozen, the construction industry added 30,000 jobs, according to the Bureau of Labor Statistics. For all of 2017, construction added 210,000 jobs, a 35% increase over 2016. Construction spending is also soaring, rising more than expected in November to a record $1.257 trillion, according to the Commerce Department. That was up 2.4% annually. Spending increased across all sectors of real estate, commercial and residential, with particular strength in private construction projects. The only weakness was in government construction spending. Construction firms are clearly looking to hire more workers. Three-quarters of them said they plan to increase payrolls in 2018, according to a new survey from the Associated General Contractors of America. Industry optimism for all types of construction, measured by the ratio of those who expected the market to expand versus those who expected it to contract, hit a record high. “This optimism is likely based on current economic conditions, an increasingly business-friendly regulatory environment and expectations the Trump administration will boost infrastructure investments,” said Stephen Sandherr, the association’s CEO.

Contractors are most optimistic about construction in the office market, which has seen little action since the recession. Transportation, retail, warehouse and lodging were also strong in the survey. Respondents were less encouraged by the multifamily apartment sector, which is just coming off a building boom. The biggest concern for the industry is the severe shortage of labor. This is slowing what could be a far more robust recovery in the residential housing market, which desperately needs more homes. December’s employment report did show the biggest monthly rise in residential construction jobs of 2017, but homebuilders are still looking for skilled labor. Housing starts are increasing slowly, but they are not even close to meeting the strong demand. Construction firms are adding jobs, but workers are also leaving the industry, aging out. In 2017, a net 190,000 new workers entered the construction industry, far lower than the prior three-year average of 284,000 annual additions. The National Association of Realtors, which is essentially begging builders for more homes, points to this as a huge problem and is appealing to Congress for new policies to ease the worker shortage. “There needs to be serious consideration in allowing temporary work visas until American trade schools can adequately crank out much needed, domestic skilled construction workers,” NAR chief economist Lawrence Yun wrote in response to the monthly employment report.

Minimum wage hikes sending restaurants the way of the shopping mall?

Eighteen states raised their minimum wages at the start of 2018, but increasing labor costs are strangling the dining industry so much that restaurants could soon face the same fate as shopping malls. “I think you’re going to see thousands of restaurants close their doors,” Willie Degel, “Restaurant Stakeout” host and CEO of Uncle Jack’s Steakhouse, told FOX Business. “Fine dining is going to go by the wayside.” The downward cycle seems daunting to Degel and other industry insiders. As costs rise, only so much of the burden can be passed along to consumers in the form of price hikes before they decide they cannot afford the expense. “When we increase in prices … we see guest count go down,” Degel noted. “The consumer is not willing to pay for the experience then.” Michael Mabry, president of MOOYAH Burgers, Fries & Shakes, said that throughout recent years he also turned to price increases in order to balance out swelling costs. However, at the first opportunity, he brought menu prices back down by 10%. In addition to raising prices, businesses often cope with minimum wage increases by firing staff. Last week, casual dining chain Red Robin Gourmet Burgers (RRGB) announced it would eliminate busboy positions at 570 restaurant locations. Degel said he got rid of busboys at his New York restaurants two years ago, and has more recently turned to staff cuts “across the board.” “I can’t fire any other people or I can’t even do my business,” he said.

Many business owners have turned to technology to both compensate for the loss of labor and to reduce expenses. Some restaurants, including Chili’s and Applebee’s, have already replaced servers with tableside tablets for placing orders and paying bills. But technology has had another effect. Services like GrubHub (GRUB) are beginning to change the nature of the dining experience for consumers, who can enjoy a meal from their favorite restaurants without ever having to step foot inside. Similar to the way e-commerce triggered a shift in the retail industry, mobile orders and delivery could deepen existing trends for restaurateurs by transforming the traditional, in-house meal. Who suffers from these trends? One answer is low-skilled and entry-level workers, who are often the first layer of staff cut when profits run thin or new technologies are introduced. “I think it’s a real problem for people with low educational attainment and a low basic skills base,” Iain Murray, vice president for strategy at the Competitive Enterprise Institute, told FOX Business. “That sets you in a trend whereby it’s very difficult … to gain the extra skills to [get] a job even at minimum wage. That sets you in for long-term unemployment.” Michael Saltsman, director of the Employment Policies Institute (EPI), said that his first job at age 15 was working as a busboy, where he had “no particular skills” but the business took a “chance” on him. “[It is] drilling down to people who are young, who aren’t enrolled in school … [a demographic with] unemployment rates that are three to four times the overall [national] unemployment rate,” he said

Black Knight – Mortgage Monitor: tappable equity at all-time high, but tax code changes could impact homeowners’ utilization 

–  ​As of Q3 2017, approximately 42 million homeowners with a mortgage have nearly $5.4 trillion in equity available to borrow against, assuming a maximum 80% total loan-to-value ratio

–  Over 80% of all mortgage holders now have available equity to tap via a first-lien cash-out refinance or home equity line of credit (HELOC)

–  Under the recently passed tax reform plan, interest on HELOCs is no longer deductible, increasing the post-tax expense of such products for those who itemize

–  HELOCs have been an attractive option for borrowers to utilize available equity without sacrificing low first- lien interest rates; with interest on these products no longer deductible, the value proposition has changed

–  In many cases, for borrowers with high unpaid principal balances (UPB), taking out low-dollar lines of credit, the math still favors HELOCs

–  However, for low-to-moderate UPB borrowers taking out larger amounts of equity – assuming interest on cash-out refinances remains deductible – the post-tax math may now favor such products instead, even if it results in a slight increase to first lien interest rates

The Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based on data as of the end of November 2017. This month, Black Knight finds that tappable equity – the amount of equity available for homeowners to borrow against before reaching a maximum 80% total loan-to-value (LTV) ratio – is at an all-time high. However, as Black Knight Data & Analytics Executive Vice President Ben Graboske explained, recent changes to the US tax code may have implications for homeowners’ utilization of that equity. “As of the end of Q3 2017, 42 million homeowners with a mortgage now have an aggregate of nearly $5.4 trillion in equity available to borrow against,” said Graboske. “That is an all-time high, and up more than $3 trillion since the bottom of the market in 2012. Over 80% of all mortgage holders now have available equity to tap, whether via first-lien cash-out refinances or home equity lines of credit (HELOCs). We’ve noted in the past that as interest rates rise from historic lows, HELOCs represented an increasingly attractive option for these homeowners to access their available equity without relinquishing interest rates below today’s prevailing rate on their first-lien mortgages. However, with the recently passed tax reform package, interest on these lines of credit will no longer be deductible, which increases the post-tax expense of HELOCs for those who itemize. While there are obviously multiple factors to consider when identifying which method of equity extraction makes more financial sense for a given borrower, in many cases, for those with high unpaid principal balances who are taking out lower line amounts, the math still favors HELOCs. However – assuming interest on cash-out refinances remains deductible – for low-to-moderate UPB borrowers taking out larger amounts of equity, the post-tax math for those who will still itemize under the increased standard deduction may now favor cash-out refinances instead, even if the result is a slight increase to first-lien interest rates.

“As rates continue to rise and the cost associated with increasing the rate on an entire first-lien balance rises as well, the benefit pendulum will likely swing back toward HELOCs. Even so, the change could certainly impact HELOC lending volumes and loan amounts in the coming months and years. To a certain degree, the same question holds true for cash-out refinances, since tax debt for homeowners who will no longer itemize becomes generally more expensive without mortgage interest deduction in the equation. These refinances will likely be an attractive source of secured debt in the future, but increased post-tax costs may have a negative impact on originations. That said, it still remains to be seen whether and to what extent tax costs will impact borrower decisions in terms of either HELOCs or cash-out refinances. At this point, only time will tell.” The increase in equity, driven by rising home prices, has also continued to shrink the population of underwater borrowers who owe more on their mortgages than their homes are worth. The number of underwater borrowers declined by 800,000 over the first nine months of 2017, a 37% decline in negative equity since the start of the year. Only 2.7% of homeowners with a mortgage (approximately 1.36 million borrowers) now owe more than their home is worth, the lowest such rate since 2006. Though still elevated from pre-recession levels, the negative equity rate continues to normalize. Even so, home prices in large portions of the country remain below pre-recession peaks. While 36 states and 70% of Core Based Statistical Areas (CBSAs) have now surpassed pre-recession home price peaks, 43 of the nation’s 100 largest markets still lag behind.

As was reported in Black Knight’s most recent First Look news release, other key results include:

​-  Total US loan delinquency rate: 4.55%

​-  Month-over-month change in delinquency rate: 2.54%

​-  Total US foreclosure pre-sale inventory rate: 0.66%

​-  Month-over-month change in foreclosure pre-sale inventory rate: -3.15%

​-  States with highest percentage of non-current loans: MS, FL, LA, AL, WV

​-  States with lowest percentage of non-current loans: MT, MN, OR, ND, CO

​-  States with highest percentage of seriously delinquent loans: MS, FL, LA, TX, AL

Wall Street new year rally pauses as healthcare, bank stocks weigh

The benchmark S&P 500 opened lower for the first time in 2018 on Monday, as losses in healthcare and financial stocks cut short Wall Street’s strongest start to a year in a decade. The S&P and the Nasdaq last week recorded its strongest first four trading days in a year since 2006, and the Dow industrials posted its best since 2003. “We had a strong market in the past week, and what generally happens in the first week sets the trend for the remainder of the year. Now that it’s established, there could be some profit- taking,” said Peter Cardillo, chief market economist at First Standard Financial in New York. At 9:41 a.m. ET, the S&P 500 was down 2.84 points, or 0.10%, at 2,740.31. The Dow Jones Industrial Average  was down 31.55 points, or 0.12%, at 25,264.32, and the Nasdaq Composite was down 4.19 points, or 0.06%, at 7,132.37. The Dow and the Nasdaq still eked out record highs briefly after open. The dollar inched higher against a basket of major peers with data showing that slower US jobs growth did little to dent expectations for further interest rate increases this year.

Capital Region totals exceed height of subprime crisis

A decade after the subprime mortgage crisis put millions of Americans out of their homes, dozens of houses are still falling into foreclosure each month in the Capital Region. The trend continues despite a much-improved economy, more-careful mortgage industry practices and an infrastructure of support that has been created for borrowers facing the loss of their homes. “We have noticed that the number of foreclosures have not gone back to pre-Great Recession levels,” said James Flacke, executive director of Better Neighborhoods Inc., a Schenectady nonprofit that provides assistance to homeowners facing mortgage foreclosure. Statistics compiled by ATTOM Data Solutions show the following combined foreclosure totals for Albany, Fulton, Montgomery, Saratoga, Schenectady and Schoharie counties:

2006: 156

2007: 386

2008: 495

2009: 451

2010: 554

2011: 211

2012: 330

2013: 377

2014: 625

2015: 902

2016: 1,056

2017: 777

The 2017 total is for 11 months — December numbers were not yet available. The other years count all 12 months. And the totals are only mortgage foreclosures by lenders — foreclosures by municipalities for nonpayment of taxes are not included.

The head of another non-profit that offers housing counseling, the Affordable Housing Partnership in Albany, said the foreclosure rate never really slowed after the subprime crisis. “The basic reasons are still loss of income, primarily, or health reasons, or divorce,” Executive Director Susan Cotner said. “The big economic downturn crisis has passed but still people struggle with their mortgages all the time.” ATTOM found that New York had the 10th highest rate of foreclosure among the 50 states as of September: one foreclosure for every 1,671 housing units. ATTOM also found that foreclosure activity of all types — default notices, repossessions and auctions — in the third quarter of 2017 was at its lowest level in 11 years nationwide. The Capital Region apparently has not been following the downward trend. There were 1,681 such notices issued in the Capital Region from Nov. 21 to Dec. 20, 1,500 one month earlier, and 1,528 two months earlier. They had been averaging about 1,400 a month.

Oil approaches 2015 highs on fewer US rigs, OPEC

Oil prices rose on Monday, coming close to new three-year highs on a slight decline in the number of US rigs drilling for new production and sustained OPEC output cuts. US West Texas Intermediate crude futures had risen to $61.94 a barrel by 1140 GMT, 50 cents above their last settlement. WTI last week reached $62.21, the highest since May 2015. Brent crude futures were at $67.95 a barrel, 33 cents above their last close. Brent hit $68.27 last week, the highest since May 2015. Traders said the gains were due to a slight decline in the number of US rigs drilling for new production. The rig count eased by five in the week to Jan. 5 to 742, according to data from oil services firm Baker Hughes. Despite this, US production is expected soon to rise above 10 million barrels per day, largely thanks to soaring output from shale drillers. Only Russia and Saudi Arabia produce more.

Trump expected to dilute Dodd-Frank in 2018

Analysts at Goldman Sachs think two issues will be the subject of reform in 2018. “First, a few smaller issues stand a good chance of enactment,” said the global analytics team in an email to clients. “Among these are health legislation that would incrementally stabilize the ACA and banking legislation that would make incremental changes to the Dodd-Frank Act. So, say “Adios, Dodd-Frank,” Goldman says the president is coming for you. Here’s the rest of the prediction: “Second, Congress faces new fiscal deadlines. Spending authority expires January 19 and the debt limit must be raised by March. These deadlines could lead to near-term uncertainty but are also likely to lead to some additional fiscal stimulus. We expect spending caps to be lifted and a third round of disaster relief funding to be approved as part of the process.”

Fannie and Freddie regain capital reserves; withhold billions from Treasury

Fannie Mae and Freddie Mac have capital reserves again. As expected, the government-sponsored enterprises on Friday made their quarterly dividend payments to the Department of the Treasury. But, thanks to the new agreement between the Federal Housing Finance Agency and the Treasury, each of the GSEs withheld billions from the Treasury to ensure that each has enough capital on hand to “cover other fluctuations in income in the normal course of each Enterprise’s business.”Under the previous version of the Preferred Stock Purchase Agreements that went into effect when the government took the GSEs into conservatorship, Fannie and Freddie send dividends to the Treasury each quarter that they are profitable. The PSPAs also stipulated that the GSEs were prohibited from rebuilding capital and each of the GSEs’ capital base was required to be reduced, with their capital reserves scheduled to be drawn down to $0 in 2018. But that all changed earlier this month when the FHFA announced a new agreement with the Treasury that allows the GSEs to hold a $3 billion capital reserve. Collectively, the GSEs made dividend payments this week to the Treasury of $2.897 billion. Of that, $2.249 billion came from Freddie Mac and $648 million came from Fannie Mae.

But those amounts are far less than the amount of profit that each GSE made in the third quarter. Freddie Mac’s profit was $4.7 billion, while Fannie Mae’s checked in at $3 billion, but unlike previous quarters, the GSEs did not send all of their profits to the Treasury. Based on some rough calculations, Freddie withheld $2.451 billion from the Treasury, while Fannie withheld $2.352 billion. As the chart from the FHFA states: “As set forth in the Letter Agreement dated December 21, 2017, amending the Certificate of Designation of Terms of Variable Liquidation Preference Senior Preferred Stock, Series 2008-2, the dividend amount is the Net Worth Amount for the dividend period minus the Applicable Capital Reserve Amount. Beginning in 2018, the Capital Reserve Amount is set at $3 billion under most circumstances.” With the $2.897 billion sent to the Treasury for the third quarter, Fannie and Freddie have now paid approximately $278.783 billion to the Treasury in dividend payments since the fourth quarter of 2008.

US steelmakers raise their bets

Steelmakers are betting on the US again, building mills they hope will help them compete against cheap imports as demand rises. Steel companies have complained for years that steel from China, South Korea, Vietnam, Turkey and elsewhere is being sold in the US for less than the cost to make it. While imports are still increasing, steel prices are also on the rise globally. And demand for US steel is starting to rebound, thanks to rising oil prices and a strengthening manufacturing sector, steel executives say. Still, others see expansion as a risky bet. Some steel companies say they can capture more customers with new plants that can make more steel at less cost than older plants, and can deliver it faster to customers. They’re also counting on additional US tariffs to drive out cheap, foreign-made steel, creating more opportunities for domestic producers. Stiff tariffs imposed over the past 18 months have significantly slowed steel imports from China, according to Commerce Department reports. Nucor Corp. is building a $250 million steel mill in Sedalia, Mo. Startup Big River Steel LLC in Osceola, Ark., accelerated production early this year at one of the largest new steel sheet mills built in the US in years. And Tenaris SA started making pipe for oil and gas wells at a new $1.8 billion mill near Houston this month.

California’s record poverty and real-estate bubble are creating a “wheel-estate” boom of people with good jobs living in their cars

Extreme housing prices in California — driven by a combination of speculation, favorable legal/tax positions for landlords, foreclosures after the 2008 crisis, and an unwillingness to build public housing — has created vast homeless encampments, but there’s a less visible side to the crisis: working people in “good jobs” who have to live in their cars. There’s a whole subreddit devoted to these folks, a mix of maker culture (modding cars to make them more comfortable as homes), hobo chalk-marks (where can you park, and for how long?), and generalized anxiety. It’s not just single middle-class people, either — they’re roaming America’s streets in company with a vast nomad army of homeless seniors who drive from town to town looking for seasonal work to replace their busted pensions. What’s striking in California is that many communities already accept people living in vehicles, despite there often being rules or laws against it. This fall, the city of San Diego expanded its Safe Parking Program, which designates lots that can be used by those living out of their cars, and many other cities have similar programs. Under a law passed last year, Los Angeles also allows overnight parking in some commercial districts. In Mountain View, the mayor brags about the services his city provides to those living in more than 330 cars, trucks and RVs. So long as vehicle dwellers aren’t in residential areas, the NIMBY attitudes that have helped spur California’s housing shortage seem to be relatively in check. And given the many huge parking lots that are empty overnight, capacity is not going to be a problem if living in vehicles becomes a California phenomenon — at least if owners of those lots have a compassionate streak or can monetize this use of their property. Given the centrality of Golden State’s car culture to its image and history — reflected in movies like “American Graffiti” and in the once-huge popularity of drive-in restaurants and movie theaters — a redefinition of the car in California as not being about independence and adventurousness but about shelter would be a twist that not many state residents would have seen coming 25 years ago.

Anticipation high as California rolls out retail pot sales

Californians may awake on New Year’s Day to a stronger-than-normal whiff of marijuana as America’s cannabis king lights up to celebrate the state’s first legal retail pot sales. The historic day comes more than two decades after California paved the way for legal weed by passing the nation’s first medical marijuana law, though other states were quicker to allow the drug’s recreational use. From the small town of Shasta Lake just south of Oregon to San Diego on the Mexican border, the first of about 90 shops licensed by the state will open Monday to customers who previously needed a medical reason or a dope dealer to score pot. In November 2016, California voters legalized recreational marijuana for adults 21 and older, making it legal to grow six plants and possess an ounce of pot. The state was given a year to set retail market regulations that are still being formalized and will be phased in over the next year. “We’re thrilled,” said Khalil Moutawakkil, founder of KindPeoples, which grows, manufactures and sells weed in Santa Cruz. “We can talk about the good, the bad and the ugly of the specific regulations, but at the end of the day it’s a giant step forward, and we’ll have to work out the kinks as we go.” The long, strange trip to get here has been a frustrating one for advocates of a drug that in the federal government’s eyes remains illegal and in a class with heroin.

The state banned “loco-weed” in 1913, according to a history by the National Organization for the Reform of Marijuana Laws, the pot advocacy group known as NORML. The first attempt to undo that by voter initiative in 1972 failed, but three years later felony possession of less than an ounce was downgraded to a misdemeanor. In 1996, over objections of law enforcement, the drug czar under President Bill Clinton and three former presidents who warned it was an enormous threat to the public health of “all Americans,” California voters approved marijuana for medicinal purposes. While the rollout of grassroots collectives of growers and dispensaries where marijuana could be sold to patients was at times messy, the law led to wider acceptance of the drug as medicine. “The heavens didn’t fall,” said Dale Gieringer, director of California NORML. “We didn’t see increased youth drug abuse or increased accidents or crazy things happening as our opponents predicted.” Today, 28 other states have adopted similar laws. In 2012, Colorado and Washington became the first states to legalize recreational marijuana. California is one of five states, plus Washington, D.C., that followed suit. Retail sales are scheduled to begin in Massachusetts in July.

Foreclosure rate in Minnesota lowest in a decade

The foreclosure rate in Minnesota is now at the lowest level in more than a decade, and far below the national average.At the end of September, just 0.2% of all Minnesota homeowners with a mortgage lost their homes to foreclosure, according to CoreLogic, which tracks mortgage delinquencies at several intervals. That rate was down from 0.3% last year and was only about a third of the national average. At the same time, far fewer homeowners are having trouble staying current on their mortgage payments. In Minnesota, 2.9% of all homeowners were 30 or more days late on their payment compared with 3.1% last year. “We’re encouraged to see another year of flat or declining delinquency rates for homeowners across Minnesota,” said Julie Gugin, director of the Minnesota Homeownership Center. “It shows people are in the right homes for their families and their wallets.” During the height of the foreclosure crisis, the organization’s counselors were overwhelmed by demand from homeowners who needed help avoiding foreclosure, Gugin said. Today, the need has shifted to providing unbiased information and hands-on financial coaching for low-income families that want to buy a home. “They want to make choices based on solid and factual information,” Gugin said. “Rent prices are on the rise and homeownership is a valuable asset-building alternate for some families.”

Gugin said that while declining foreclosures are clearly a positive sign, underlying problems linger. Namely, the recession and subsequent economic recovery only broadened the homeownership gap in Minnesota. There are more low-income families than before that are unable to own a home. “Our goal is to ensure that homeownership’s benefits are fairly available and sustainable to everyone, no matter their race or where they live,” she said. “Next year — and even 10 years from now — we want the delinquency rate to stay low, and with a closed homeownership gap. Individuals and families, communities and our state would be better off as a result.” Foreclosure rates across the country are also falling. Nationwide, the foreclosure rate fell slightly from 0.8% to 0.6%, and the 30-day plus delinquency rate fell from 5.2% last year to 5.0% in September. There was a slight increase, however, in the number of homeowners who were 30 to 59 days late on their payments, mostly because of hurricane-related troubles in Texas, Florida and Puerto Rico.

NAR – pending home sales inch up 0.2% in November

Pending home sales were mostly unmoved in November, but did squeak out a minor gain both on a monthly and annualized basis, according to the National Association of Realtors (NAR). Heading into 2018, existing-home sales and price growth are forecast to slow, primarily because of the altered tax benefits of homeownership affecting some high-cost areas. The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 0.2% to 109.5 in November from 109.3 in October. With last month’s modest increase, the index remains at its highest reading since June (110.0), and is now 0.8% above a year ago. Lawrence Yun, NAR chief economist, says contract signings mustered a small gain in November and were up annually for the first time since June. “The housing market is closing the year on a stronger note than earlier this summer, backed by solid job creation and an economy that has kicked into a higher gear,” he said. “However, new buyers coming into the market are finding out quickly that their options are limited and competition is robust. Realtors® say many would-be buyers from earlier this year, stifled by tight supply and higher prices, are still trying to buy a home.”

One of the biggest questions heading into 2018, according to Yun, is if the depressed levels of available supply can improve enough to slow price growth and make buying a home more affordable. While last month’s significant boost in existing sales was noteworthy, it did come with some concerns. Sales prices were up 5.8% – more than double wage growth – and the 3.4-month supply of homes on the market was the lowest since NAR began tracking in 1999. “The strengthening economy, and expectation that more millennials will want to buy, serve as promising signs for solid homebuying demand next year, while also putting additional pressure on inventory levels and affordability,” said Yun. “Sales do have room for growth in most areas, but nationally, overall activity could be slightly negative. Markets with high home prices and property taxes will likely feel some impact from the reduced tax benefits of owning a home.” Yun forecasts for existing-home sales to finish 2017 at around 5.54 million, which is an increase of 1.7% from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 6%. In 2018, Yun anticipates essentially no change (a decline of 0.4%) in existing sales (5.52 million), and price growth to moderate to around 2%. The PHSI in the Northeast jumped 4.1% to 98.9 in November, and is now 1.1% above a year ago. In the Midwest the index rose 0.4% to 105.8 in November, and is now 0.8% higher than November 2016. Pending home sales in the South decreased 0.4% to an index of 123.1 in November but are still 2.5% higher than last November. The index in the West declined 1.8% in November to 100.4, and is now 2.3% below a year ago.

Trump targets Amazon in call for postal service to hike prices

US President Donald Trump targeted online retailer Amazon on Friday in a call for the country’s postal service to raise prices of shipments in order to recoup costs. “Why is the United States Post Office, which is losing many billions of dollars a year, while charging Amazon and others so little to deliver their packages, making Amazon richer and the Post Office dumber and poorer? Should be charging MUCH MORE!” Trump wrote on Twitter. The US Postal Service is an independent agency within the federal government and does not receive tax dollars for operating expenses, according to its website. The organization makes up a significant portion of the $1.4 trillion US delivery industry. Other players include Fedex Corp and United Parcel Service Inc. Amazon was founded by Jeff Bezos, who remains the chief executive officer of the retail giant. Bezos also owns the Washington Post, a newspaper that Trump has repeatedly railed against in his criticisms of the news media. Representatives for the White House and Amazon were not immediately available for comment. Shares of Amazon were last down 0.2% to $1,183.50 in premarket trading.

CoreLogic – what caught the attention our readers in 2017

The numbers are in and our readers have spoken. We tallied up the readership on our top 10 most-read CoreLogic Insights blogs and found that top industry executives were very focused on the health of the real estate market, both nationally and in specific markets across the country this year. The most-read blog, by a wide margin, was a text mining analysis of public listing information using word cloud which paired certain listing terms to higher sales prices. Word pairs like “quiet street,” “large backyard,” and “hardwood floors” were among terms which could be tied to higher sales prices. In addition, our audience also engaged with our economic outlooks, credit availability, and mortgage risk as prices continued their upward spiral. And the envelope, please… Here are the top ten most-read blogs (and video blogs) of the year:

–  Public Listing Comments Can Have an Impact on Closing Price

–  Is the Credit Cycle Turning?

–  California Million-Dollar Home Sales Climb to a Q1 Peak as Stocks Soar

–  Highest and Lowest Risk US Housing Marketing as of Q1 2017

–  US Economic Outlook: February 2017

–  Hurricane Matthew Clocks Top Wind Speed for 2016 at 101 MPH

–  Health of the Housing Market as of Q2 2017

–  US Economic Outlook: October 2017

–  Purchase Mortgages, High LTVs May Up Fraud Risk in 2017

–  The Accuracy of Comparable-Property Data in an Appraisal Report

2017 was a very busy blog year for our economists, data research analysts and modelers, product experts and industry SMEs. As we wrap up 2017 we’re proud to have shared over 150 online, audio and video blog postings representing more than 25 CoreLogic contributors. The aim of CoreLogic Insights is to inform, educate and provide perspective on many characteristics of the housing economy and property markets. Our blogs address housing policy and trends, mortgage performance, property valuation, natural hazard risk, insurance and international topics.

Trump’s agenda in 2018: What’s next?

After Republicans scored their first major legislative victory with a tax reform bill passed just before the end of 2017, the Trump administration has started looking ahead to next year’s legislative docket. While President Donald Trump’s aggressive plans to reform health care, infrastructure and the tax system during the first year of his tenure fell short on some accounts, his plans for next year appear equally ambitious, with welfare and infrastructure reform topping the list, according to National Economic Director Gary Cohn. Here’s a look at what the administration and Congress are set to take on as we head into the New Year.

Health care

While the GOP failed to pass multiple efforts to repeal and replace the Affordable Care Act in 2017, the president has not given up on designs to overhaul the former administration’s signature legislative achievement. In a tweet fired off in November, President Trump reiterated that ObamaCare is a “disaster,” adding that Republicans would begin to repeal and replace “right after Tax Cuts.” While different variations of repeal and replace narrowly failed to pass the Senate this year, the president took steps toward dismantling the Affordable Care Act through an executive order issued in October. That order directed the administration to look into allowing employers to form associations and obtain coverage across state lines, expanding the use of short-term limited duration insurance (STLDI) plans and expanding the use of Health Reimbursement Arrangements, or tax-free accounts that allow employers to reimburse employees for medical expenses. The overall goal of these directives, according to the White House, was to provide near-term relief for Americans and to lower costs by increasing competition and choice.

Welfare reform

One of the other items the president has brought up as a priority after Republicans overhaul the tax system is reforming welfare, which includes government programs like Medicaid, Food Stamps and Housing Assistance. “We’re looking very strongly at welfare reform, and that’ll all take place right after taxes, very soon, very shortly after taxes,” Trump said at the White House last month. During an interview with Axios in late-December, Cohn said he expected that welfare reform would receive bipartisan support, with at least 60 votes in the Senate. There are bills currently floating around Congress that aim to strengthen work requirements for welfare programs, something that coincides with the administration’s stated goals of using welfare as an interim strategy to help lift Americans out of unemployment and poverty. Office of Management and Budget (OMB) director and Consumer Financial Protection Bureau (CFPB) interim director Mick Mulvaney, a known deficit hawk, said back in March that the administration was looking to create jobs and put those who want to work, back to work. At the same time, he said the White House would weed out welfare freeloaders and take steps toward making sure Americans aren’t exploiting programs, while assuring that the administration would not deny deserving people services.


Senior White House officials have said President Trump will release the full details of his infrastructure plan early next year. It is expected to require at least $200 billion in direct government funds over the course of a decade, in addition to funding from the private sector. While an infrastructure revamp was widely viewed as a bipartisan proposal at the outset of the president’s tenure, experts believe the outlook may be murkier after the passage of a tax reform bill that could pile on to the deficit. Trump promised a $1 trillion infrastructure overhaul, which was supposed to be detailed within his first 100 days in office. US Transportation Secretary Elaine Chao said in September that states and localities will compete for government funds, with the most innovative projects winning more federal dollars. The infrastructure revamp is expected to address everything from bridges, roads and airports to energy, broadband and even Veterans Affairs hospitals. Cohn told Axios that having broadband in rural areas is a priority. He also said that the government needs to reimagine infrastructure based on the future, adding that the US can’t keep building cities in 2050.

Housing reform

US Treasury Secretary Steven Mnuchin has been a key player in the tax reform discussions, but has his sights set on housing reform for the coming year. “I am determined that we have housing reform and that we come up with a permanent solution for Fannie [Mae] and Freddie [Mac] so that they’re not in the current form, which is essentially owned by the government,” he said during a November speech at the Economic Club of New York. “That’ll be a big focus of mine for next year.” Mnuchin also said this is something he expected housing reform to be completed on a “bipartisan basis.”

ATTOM – the off-market housing market

There’s a strange omission from the long list of industries vanquished, disrupted, and dismantled by the Internet. Retail chains are closing, cabs are not being hailed, and hotel rooms are going empty. But amid the rumble and ruin of traditional commerce, multiple listing services (MLS) remain remarkably impervious to disruption. That isn’t stopping would-be MLS disrupters like REX from trying. “The MLS is an antiquated tool created by real estate brokers to keep buyers dependent on them,” according to REX. “But the Internet changed all that.” The MLS has survived previous declarations of its demise. If such predictions were true we should now see a marketplace filled with broker-less transactions, those selling for-sale-by-owner, so-called FSBOs. In fact, precisely the opposite has happened. Self-sellers are a vanishing species. According to the 2016 edition of the National Association of Realtors (NAR) Profile of Home Buyers and Sellers, “only eight% of recent home sales were FSBO sales again this year. For the second year, this is the lowest share recorded since this report started in 1981.” But the picture is markedly different at the local level in markets where MLS disrupters like REX are operating. Single family home sales listed on the MLS represented 89% of single family home sales deeds recorded in Los Angeles and Orange counties combined, according to an ATTOM Data analysis of public record deed data and MLS data provided by First Team Real Estate, the largest independent brokerage in California. Most off-MLS sales are the result of these so-called pocket listings, according to Michael Mahon, president at First Team Real Estate, which covers the Southern California market. “We have agents who have 50 to 75 buyers sitting there as pent-up demand waiting for listings,” he said. “A lot of these home sellers are willing to entertain an offer that they feel is fair for the asking price they are wanting to get for the property … a ready, willing and able buyer in queue is very appealing.”

The share of off-MLS sales were also much higher than the national average across the country in Dallas and Phoenix. An ATTOM Data Solutions analysis of MLS closed sales counts provided by the Texas A&M Real Estate Center and public record closed sales counts in Dallas County, Texas, shows MLS-closed sales of single family homes in 2016 represented 86% of single family home sales recorded with the county for the year. In Maricopa County, Arizona, home to the city of Phoenix, MLS-closed sales of single family homes represented just 75% of the single family home sales recorded with the county for 2016, up slightly from 74% in 2015, according to an ATTOM analysis. What do Dallas and Phoenix have in common? They are both testing grounds for a quickly growing alternative to listing for sale on the MLS: iBuyers such as Opendoor and Offerpad. Opendoor has been able to assemble $320 million in equity and more than $500 million in debt financing. Such numbers instantly make Opendoor a notable player in the local real estate markets where it is active. Moreover, if it finds success, it will be able to go back to the equity and credit markets for additional funding. “The Opendoor difference is simplicity, convenience and certainty,” said Evan Moore, Opendoor’s head of agent experience. “For sellers, Opendoor makes it easy for homeowners to receive a fair market value offer in a few clicks, eliminating the hassle of home showings and months of uncertainty and giving them the power to close on their timeline. For buyers, Opendoor also provides the ultimate in convenience by providing on-demand access to Opendoor homes all day everyday.”

It’s not just disruptive startups like Opendoor and Offerpad that are expanding off-market purchasing, however. HomeVestors, a 21-year-old company known for the “We Buy Ugly” houses signs has exponentially expanded the markets it operates in since the housing bust, according to CEO David Hicks. “We buy direct from the home owner, without hitting MLS,” Hicks said. “And the people we’re buying them from, they don’t want a Realtor or anyone else traipsing through their house. … They got cats or they got smell. Those are the houses we are buying.” NetWorth Realty is another direct buyer that has been around for several years and is continuing to grow, with 1,726 deals totaling $234 million in 2016, up from 941 deals totaling $88 million in 2013, according to its website. “We’ll find properties. Our properties are off-market, they are not on the MLS,” said Networth Realty president Mark Bloom, adding that the properties are also kept off-market when re-sold to investor clients in an effort to provide those clients with fixed pricing outside of a competitive bidding environment. “We fix our pricing. We keep all of our inventory off market.” The growing number of acquisitions by iBuyers like Opendoor and Offerpad are catching the attention of the Arizona Regional MLS, which in its August STAT report devoted three pages of commentary to an analysis of off-MLS sales in the market, including those by iBuyers. “As an analyst, the number one question I get asked is, ‘What percentage of homes sold are listed on the MLS?’”, writes Tom Ruff, housing analyst with The Information Market, a subsidiary of the ARMLS.

Traditional MLS relationships are being challenged by a growing number of member brokers who believe the fastest and easiest way increase profits is to stop dividing commissions, forget about MLS cooperation, and cut out other brokers. “Off-MLS listings may contribute to the unraveling of the MLS as we know it,” said consultant Stefan Swanepoel in a 2016 report published by NAR called the Definitive Analysis of the Negative Game Changers Emerging In Real Estate  – the DANGER Report. Is there a way that “coming soon” transactions could be made more palatable? “Coming soon can be an issue from many fronts,” said Matthew L. Watercutter, principal broker and senior regional vice president with Ohio-based HER Realtors. “The only way for ‘coming soon’ to be truly a benefit, is you still do not show the home to anyone until it is actively marketed, so all potential buyers have a fair and equal opportunity.”

NAHB – builders confident as market primed to expand in 2018

Builder confidence in the market for newly-built single-family homes increased five points to a level of 74 in December on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) after a downwardly revised November reading. This was the highest report since July 1999, over 18 years ago. “Housing market conditions are improving partially because of new policies aimed at providing regulatory relief to the business community,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas. “The HMI measure of home buyer traffic rose eight points, showing that demand for housing is on the rise,” said NAHB Chief Economist Robert Dietz. “With low unemployment rates, favorable demographics and a tight supply of existing home inventory, we can expect continued upward movement of the single-family construction sector next year.” 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. All three HMI components registered gains in December. The component measuring buyer traffic jumped eight points to 58, the index gauging current sales conditions rose four points to 81 and the index charting sales expectations in the next six months increased three points to 79. Looking at the three-month moving averages for regional HMI scores, the Midwest climbed six points to 69, the South rose three points to 72, the West increased two points to 79 and Northeast inched up a single point to 54.

Wall Street poised for record on tax bill hopes

Wall Street’s main indexes hit new highs on Monday as the long-awaited tax overhaul plan looked set for legislation and buoyed by a flurry of year-end corporate dealmaking that has topped $11 billion so far. More US Republicans Senators on Sunday threw their weight behind the tax bill they expect Congress to pass this week. A Senate vote is set for Tuesday and President Donald Trump is expected to sign the bill into law by the end of the week.US stocks have enjoyed a near year-long rally, of late powered by increasing expectations of the promised tax overhaul, which aims to lower corporate taxes to 21% from 35%, coming to fruition. The benchmark S&P 500 has gained 19.5% so far in 2017, set for its best year since 2013, as investors bet that lower taxes could boost corporate profits and trigger share buybacks and higher dividend payouts. “The market is going to continue its rally based on the belief that we’re going to see the Congress pass tax reform,” said Robert Pavlik, Chief Investment Strategist at SlateStone Wealth in New York. “People are a bit weary about how long the rally will last, but earnings continue to grow, (the) tax package should help and the economy is doing well,” Pavlik said. “I‘m very positive about the overall market. Lower corporate taxes could also trigger cash repatriation, which market analysts say could be used for merger and acquisitions. On Monday, investors were treated to a flood of deals.

CoreLogic – home price winners and losers

Since the US began recovering from the home-price bust in 2006, economists have used the peak-to-current change in prices as a measure of recovery in markets. However, the peak-to-current change hyper-focuses on economic losses for those who bought at the peak. What about consumers who bought homes while prices were at the bottom of the cycle? If someone was lucky enough to buy as a market hit bottom and began to recover, they have seen large home-price gains. Our view of home price changes shows the peak-to-trough and peak-to-current changes in the CoreLogic Home Price Index (HPI) for the US, the four states with the largest peak-to-current declines, and the four states with the largest peak-to-current gains. In the states where the HPI has passed the pre-crisis peak, the peak used to calculate the numbers in Figure 1 is the pre-crisis peak. The US HPI peaked in 2006, and returned to the 2006 peak in September 2017.  Nevada has the largest peak-to-current decline of any state, and had the largest peak-to-trough decrease at 60%. On the other end, North Dakota had a shallow peak-to-trough decline, and has risen 47% above the prior peak seen in 2008. A different view of the HPI illustrates the depths of the most notable state-level price declines and the subsequent upward trajectory in those states, including the peak-to-trough and trough-to-current HPI changes for the US and the seven states that had larger peak-to-trough declines than the US For the nation, from the 2006 peak to the 2011 trough, the loss was 33%, but from the 2011 trough to September 2017 the gain was 50%. The most extreme drop in the HPI was in Nevada, but prices in that state have gained 89% since hitting bottom in 2012. For reference, we can compare the gains in the HPI to gains in the stock market. The S&P 500 fell 51% from peak to trough, but has gained 229% from the trough through September 2017. The large price gains since the home-price bottom translate into large amounts of home equity gained by homeowners, improving their balance sheets. As shown in the CoreLogic Homeowner Equity Report, in the 12 months ending in September 2017, the average homeowner gained nearly $15,000 in equity. Only seven states had equity gains over the past year, but California and Nevada stand out with the largest gains at $37,000 and $23,000, respectively.

Average US gas price drops 3 cents to $2.51 for regular

The average price of a gallon of regular-grade gasoline dropped 3 cents nationally over the past two weeks to $2.51. Industry analyst Trilby Lundberg of the Lundberg Survey said Sunday that further declines are likely because US gas supplies are flush. The current gas price is 25 cents above where it was a year ago. Gas in San Francisco was the highest in the contiguous United States at an average of $3.22 a gallon. The lowest was in Jackson, Mississippi, at $2.14 a gallon. The US average diesel price is $2.88, holding steady from two weeks ago.

US mall owner GGP rejects Brookfield Property’s $14.8 billion offer

–  GGP rejected a $14.8 billion buyout offer from its biggest shareholder, Brookfield Property Partners, people familiar with the matter said on Sunday.

–  GGP is one of the largest owners and operators of US shopping centers.

–  Brookfield Property made a $23-per-share cash and stock offer last month for the 66% of GGP it does not already own.

GGP, one of the largest owners and operators of US shopping centers, has rejected a $14.8 billion buyout offer from its biggest shareholder, Brookfield Property Partners, people familiar with the matter said on Sunday. Brookfield Property made a $23-per-share cash and stock offer last month for the 66% of GGP it does not already own. A combination of Chicago-based GGP and Brookfield Property would create one of the world’s largest publicly traded property companies. Brookfield Property is considering a new offer for GGP after a special committee of GGP’s board directors turned down its Nov. 11 offer as inadequate, and negotiations between the two companies are expected to continue, the sources said. The companies do not plan to make a new announcement unless their negotiations lead to a deal or end unsuccessfully, the sources added, asking not to be identified because the discussions are confidential. GGP and Brookfield Property did not immediately respond to requests for comment. Brookfield Property’s efforts to buy GGP have come as mall owners across the United States are struggling as a result of many retailers losing out to e-commerce firms such as

Brookfield Property, an owner and operator of office and retail properties, said last month the deal would allow it to grow, transform or reposition GGP’s shopping centers. The acquisition would create a company with an ownership interest in almost $100 billion real estate assets globally and annual net operating income of about $5 billion, according to Brookfield Property. It is not the first time Brookfield Property’s attempt to buy out a real estate investment trust in which it already owns a big stake has been rejected. Last year, Rouse Properties, another US mall owner, rejected an offer by Brookfield Property, its largest shareholder, only to subsequently agree to a sweetened $2.8 billion offer. Other GGP peers are also coming under pressure. Rival mall owner Macerich currently is under pressure from activist hedge fund Third Point Management to explore options including a sale.

Currency expert says there’s one fundamental reason behind bitcoin’s runaway rally

–  Valentin Marinov, head of G-10 FX research at Credit Agricole CIB, says that the “inherent imbalance between demand and supply” is the driving force behind bitcoin’s soaring value

–  Bitcoin bulls have frequently referenced the cryptocurrency’s scarcity value as a primary reason for its staying power

–  Billionaire investor Warren Buffet has previously urged traders to “stay away from it,” calling the rally a “mirage”

Bitcoin’s meteoric price rise has stunned critics and enthusiasts alike, leaving investors scrambling to understand the fundamental reason for the digital currency’s runaway rally. Valentin Marinov, head of G-10 FX research at Credit Agricole CIB, told CNBC on Monday that he was hopeful he now understood the reason behind bitcoin’s soaring value. He predicted further gains for the cryptocurrency before the end of the year. Bitcoin was changing hands about 10.7% higher Monday morning at above $16,642.45, according to CoinDesk’s Bitcoin Price Index. The index tracks prices from digital currency exchanges Bitstamp, Coinbase, itBit and Bitfinex. When asked to explain the driving force behind bitcoin’s unprecedented rally, Marinov said: “It is the inherent imbalance between demand and supply. Supply is inherently fixed; it’s very much like gold if you wish? At the same time… demand is based on hopes that its value will continue to grow.” Marinov also pointed to an unwavering hope among investors that the digital currency’s value appears to be “unlimited”. Bitcoin bulls have frequently referenced the cryptocurrency’s scarcity value as a primary reason for its staying power. Somewhat like gold, bitcoin supply grows at glacial and ever-decreasing fixed rates with only 21 million bitcoins set to be in existence.

Rising interest from institutional and retail investors prompted global exchanges, such as the Cboe, to launch futures contracts. This move is likely to encourage even greater institutional investment, market participants said, while at the same time curbing further volatile price swings. A contract from rival CME is poised to go live next week. Trading of the hotly anticipated futures contract began Sunday on the Cboe, representing a significant step in the legitimization of cryptocurrencies. Futures are derivatives, or financial instruments, that obligate a trader to either buy or sell an asset at a specified time and at a specified price. But, while the trading of bitcoin futures on two of the world’s largest exchanges is expected to provide a layer of official oversight that had not previously existed, several leading voices have expressed skepticism. JPMorgan Chase CEO Jamie Dimon called bitcoin a “fraud” that would eventually blow up, while billionaire investor Warren Buffett urged traders to “stay away from it,” calling the rally a “mirage”. On Friday, Stefan Ingves, chairman of global regulators at the Basel Committee and governor of Sweden’s Riksbank, said investing in bitcoin or other similar digital currencies was a “dangerous” prospect. Ingves cited strikingly high volatility levels and the clear lack of support from either central banks or international regulators as reasons for traders to be cautious. Bitcoin has become one of the hottest trades of 2017, surging more than 1,000% since the start of January.

Orlando shopping center owner files for bankruptcy

International Shoppes shopping center in Orlando (Credit:

A company planning to redevelop an Orlando shopping center and facing two foreclosure lawsuits filed for Chapter 11 bankruptcy. International Shoppes LLC declared $20 million of debt and $6.7 million of assets in its bankruptcy petition. The bankruptcy petition may block foreclosures by Delaware-based Elizon DB, which has a $14.3 million loan secured by the shopping center, and Bank of the Ozarks, which has a $4.3 million loan on the property. International Shoppes LLC, led by developer Abdul Mathin, has owned a shopping center called International Shoppes since 2007 and has planned to redevelop the property since 2014, when he proposed demolition of the 1980s-vintage shopping center and an ambitious redevelopment called iSquare Mall, designed to include a luxury retail center and two hotels.

New York explosion: 1 person in custody, several injured

An explosion rocked New York’s Port Authority Bus Terminal, one of the city’s busiest commuter hubs, on Monday morning and police said one suspect was injured and in custody, with three other injuries reported. Police were not yet identifying the device used. Local television channel WABC cited police sources as saying a possible pipe bomb detonated in a passageway below ground and WPIX cited sources as saying a man with a “possible second device” has been detained in the subway tunnel. The fire department tweeted there were four injuries, all non-life threatening. One of the injured was a Port Authority police officer.

LinkedIn invests in Silicon valley housing

LinkedIn recently invested $10 million into an initiative started by Housing Trust Silicon Valley, a nonprofit community loan fund based that works to increase affordable housing options in Silicon Valley. LinkedIn’s money went to the TECH Fund, a program started by Housing Trust Silicon Valley that aims to get more high-tech organizations, large employers and philanthropists involved with creating affordable housing in the Bay Area. According to details provided by Housing Trust Silicon Valley, TECH Fund was created to “help developers with short-term capital needs to compete more effectively with market-rate developers and purchase property faster.” The nonprofit also said LinkedIn is the first company to “use their investment in the TECH Fund to make additional voluntary contributions to benefit their community.” With LinkedIn’s $10 million, the total investment in the TECH Fund is now $30 million, the nonprofit said. “We see TECH Fund and LinkedIn’s investment as new way to lead change in the affordable housing landscape,” said Kevin Zwick, CEO of Housing Trust Silicon Valley. “We’re happy to create a way for affordable housing developers to access land acquisitions funds quickly, and we thank LinkedIn for being a committed ally to do so.” And it appears that some of LinkedIn’s money is already being put to good use. According to Housing Trust Silicon Valley, a portion of LinkedIn’s investment was used to purchase a site in Mountain View, California that is to be used to build 70 new affordable apartments, with 20 homes dedicated to permanent supportive housing. “We must all take ownership of the affordable housing crisis in the Bay Area, and invest in compassionate solutions,” said Katie Ferrick, head of community affairs at LinkedIn. “This partnership with Housing Trust through the TECH Fund is a creative way to make community impact investing a viable way for companies to address the need for housing.”

Farmer Mac fires CEO

The Federal Agricultural Mortgage Corporation, otherwise known as Farmer Mac, which functions as a secondary market for agricultural credit, abruptly fired its president and CEO, Timothy Buzby, late last week. According to an announcement from the company, Buzby was terminated by the company’s board “solely on the basis of violations of company policies.” But, the company did not provide any more information on what those violations actually were. The company also said that Buzby’s termination was not due to the company’s financial or business performance. Taking over on an interim basis is Lowell Junkins, who becomes acting president and chief executive officer. Junkins has served as Farmer Mac’s chairman of the board since late 2010 and has been a board member since 1996. “My job, as acting CEO, is to make sure nothing gets in the way of this organization’s stellar leadership team and staff and the excellent work they do every single day,” Junkins said. “As our third quarter results demonstrate, we have been performing extraordinarily well and look forward to that continuing without a hitch.” The company said that its board will launch an “immediate and thorough” search to find a new president and CEO and will consider both internal and external candidates.

ATTOM – US home flipping returns drop to two-year low in Q3 2017

ATTOM Data Solutions released its Q3 2017 US Home Flipping Report, which shows that single family homes and condos flipped in the third quarter yielded an average gross flipping profit of $66,448 per flip, representing an average 47.7% return on investment for flippers — down from 48.7% in the previous quarter and down from 51.2% in Q3 2016 to the lowest average gross flipping ROI since Q2 2015. The report also shows that 48,685 single family homes and condos were flipped nationwide in the third quarter, a home flipping rate of 5.1% — down from 5.6% in the previous quarter and unchanged from a year ago. Year-to-date through the third quarter of 2017 a total of 153,727 single family homes and condos nationwide have been flipped, nearly equal with the 153,854 flipped through the first three quarters of 2016, when the number of homes flipped increased to a 10-year high. For the report, a home flip is defined as a property that is sold in an arms-length sale for the second time within a 12-month period based on publicly recorded sales deed data collected by ATTOM Data Solutions in more than 950 counties accounting for more than 80% of the US population. “Home flipping profits continue to be squeezed by a dwindling inventory of distressed properties available to purchase at a discount and increasing competition from fair-weather home flippers often willing to operate on thinner margins,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “A more than nine-year low in the ratio of flips per investor is evidence of this increased competition, which is pushing many investors to new metro areas that often have weaker market fundamentals but also come with a bigger supply of discounted distressed properties to flip.”

The Q3 2017 home flipping rate increased from a year ago in 44 of the 93 metropolitan statistical areas analyzed in the report (47%), led by Baton Rouge, Louisiana (up 140%); Winston-Salem, North Carolina (up 58%); Salem, Oregon (up 51%); Indianapolis, Indiana (up 51%); and Buffalo, New York (up 47%). Along with Indianapolis and Buffalo, metro areas with a population of 1 million or more that posted a year-over-year increase in home flipping rates of at least 10% were Louisville, Kentucky (up 22%); San Antonio, Texas (up 22%); New York, New York (up 21%); Cleveland, Ohio (up 17%); Birmingham, Alabama (up 17%); Charlotte, North Carolina (up 15%); Dallas-Fort Worth, Texas (up 14%); Rochester, New York (up 13%); Detroit, Michigan (up 12%); Hartford, Connecticut (up 11%); and Memphis, Tennessee (up 10%). The Q3 2017 home flipping rate decreased from a year ago in 49 of the 93 metropolitan statistical areas analyzed for the report (53%), including Los Angeles (down 6%); Washington, D.C. (down 6%); Miami (down 15%); Boston (down 5%); and San Francisco (down 2%). “Across Southern California, investors are finding home flips for investment purchases to be a challenge due to an aging housing inventory requiring greater repair cost coupled with higher acquisition costs due to low available inventory,” said Michael Mahon, president at First Team Real Estate, covering the Southern California housing market. ‘That equates to increased risk for return on investment that is keeping many potential investors on the sidelines.” Other major markets where the Q3 2017 home flipping rate decreased from a year ago included Seattle (down 8%), Minneapolis-St. Paul (down 18%); Tampa-St. Petersburg (down 9%); Baltimore (down 2%); and Denver (down 2%). “Although the number of flips in the Seattle market dropped back to levels not seen since early 2016, they are still well above the levels seen before the recession. I anticipate that the number of flips will continue to fall as home price growth eats into profits, which have been on the decline since 2013,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “The Seattle region housing market remains very tight in terms of inventory and this has put substantial upward pressure on prices. Flippers can function to exacerbate this issue, so the sooner we see the number of flips drop back to pre-recession levels, the better.”

Counter to the national trend, average gross home flipping ROI in Q3 2017 increased from a year ago in 34 of the 93 metropolitan statistical areas analyzed in the report (37%), led by Baton Rouge, Louisiana (up 116%); Spokane, Washington (up 46%); Indianapolis, Indiana (up 35%); Fresno, California (up 34%); and Greensboro-High Point, North Carolina (up 34%). Metro areas with the highest average gross home flipping ROI for properties flipped in the third quarter were Pittsburgh, Pennsylvania (147.7%); Baton Rouge, Louisiana (122.2%); Philadelphia, Pennsylvania (114.0%); Baltimore, Maryland (101.5%); and Cleveland, Ohio (98.6%). Metro areas with the lowest average gross home flipping ROI for properties flipped in the third quarter were Austin, Texas (18.7%); Reno, Nevada (22.3%); Dallas-Fort Worth, Texas (22.7%); Kansas City (24.0%); and Salt Lake City, Utah (24.9%). With home flips representing 8.3% of all home sales in Q3 2017, the District of Columbia posted a higher home flipping rate than any state, followed by Nevada (7.6%); Tennessee (7.4%); Louisiana (7.4%); Alabama (7.1%); and Arizona (6.9%). Among 93 metropolitan statistical areas analyzed in the report, those with the highest home flipping rates in Q3 2017 were Memphis, Tennessee (12.0%); Baton Rouge, Louisiana (9.3%); York-Hanover, Pennsylvania (8.7%); Lakeland-Winter Haven, Florida (8.5%); and Tampa-St. Petersburg, Florida (8.5%).

Other high-level takeaways from the report:

–  The 48,685 homes flips in Q3 2017 were completed by 38,928 investors, a ratio of 1.251 flips per investor, the lowest ratio of flips per investor since Q2 2008.

–  The share of homes flipped in Q3 2017 that were purchased by the flipper with financing represented 34.6% of all homes flipped in the quarter, down from 35.5% in the previous quarter but still up from 32.3% in Q3 2016.

–  The share of homes flipped in Q3 2017 that were purchased by the flipper in some stage of foreclosure or as bank-owned homes represented 38.8% of all homes flipped during the quarter, down from 40.2% in the previous quarter and down from 43.9% in Q3 2016.

–  The average square footage of homes flipped in Q3 2017 was 1,405, down from 1,412 in the previous quarter to the smallest average square footage on record for the report, going back to Q1 2000.

–  Homes flipped in Q3 2017 were purchased at an average discount of 23.9% below estimated full market “after repair” value, down from an average discount of 24.2% in the previous quarter to the lowest average discount since Q4 2013.

–  Homes flips completed in Q3 2017 took an average of 181 days, down from 185 days in the previous quarter and down from 182 days in Q3 2016.

Jobs jump by 228K, 86th straight month of gains

US employers added 228,000 jobs in November, beating expectations for an increase of 200,000 jobs after several months of hurricane-related volatility from which the economy is still recovering. The unemployment rate remained unchanged at 4.1%, the lowest rate in nearly 17 years, and the labor force participation rate also stayed at 62.7% during the month. Average hourly earnings meanwhile increased from $26.53 to $26.55. The jobs numbers come on the heels of a report Wednesday from payroll processing firm ADP, which revealed that 190,000 private sector jobs were added in November, down from 235,000 in October. According to the report, manufacturing added 40,000 jobs, the most in the ADP series history, which launched more than 15 years ago. Meanwhile, the construction sector shed 4,000.

CoreLogic – homeowner equity increased by almost $871 billion in Q3 2017

–  260,000 Mortgaged Properties Regained Equity Between Q2 2017 and Q3 2017

–  The Number of Underwater Homes Decreased Year Over Year by 0.7 Million

2.5 Million Residential Properties with a Mortgage Still in Negative Equity

CoreLogic released its Q3 2017 home equity analysis which shows that US homeowners with mortgages (roughly 63% of all homeowners) have collectively seen their equity increase 11.8% year over year, representing a gain of $870.6 billion since Q3 2016. Additionally, homeowners gained an average of $14,888 in home equity between Q3 2016 and Q3 2017. Western states led the increase, while no state experienced a decrease. Washington homeowners gaining an average of approximately $40,000 in home equity and California homeowners gaining an average of approximately $37,000 in home equity. On a quarter-over-quarter basis, from Q2 2017 to Q3 2017, the total number of mortgaged homes in negative equity decreased 9% to 2.5 million homes, or 4.9% of all mortgaged properties. Year over year, negative equity decreased 22% from 3.2 million homes, or 6.3% of all mortgaged properties, from Q3 2016 to Q3 2017. “Homeowner equity increased by almost $871 billion over the last 12 months, the largest increase in more than three years,” said Dr. Frank Nothaft, chief economist for CoreLogic. “This increase is primarily a reflection of rising home prices, which drives up home values, leading to an increase in home equity positions and supporting consumer spending.”

Negative equity, often referred to as being “underwater” or “upside down,” applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in a home’s value, an increase in mortgage debt or both. Negative equity peaked at 26% of mortgaged residential properties in Q4 2009 based on CoreLogic equity data analysis, which began in Q3 2009. The national aggregate value of negative equity was approximately $275.7 billion at the end of Q3 2017. This is down quarter over quarter by approximately $9.1 billion, or 3.2%, from $284.8 billion in Q2 2017 and down year over year by approximately $9.5 billion, or 3.3%, from $285.2 billion in Q3 2016. “While homeowner equity is rising nationally, there are wide disparities by geography,” said Frank Martell, president and CEO of CoreLogic. “Hot markets like San Francisco, Seattle and Denver boast very high levels of increased home equity. However, some markets are lagging behind due to weaker economies or lingering effects from the great recession. These include large markets such as Miami, Las Vegas and Chicago, but also many small- and medium-sized markets such as Scranton, Pa. and Akron, Ohio.”

Global banking regulator sends a warning to bitcoin investors

–  Stefan Ingves, chairman of global regulators at the Basel Committee and governor of Sweden’s Riksbank, said investing in bitcoin was a “dangerous” prospect

–  Bitcoin was trading at around $16,029 on Friday morning, according to industry site CoinDesk, after wild price swings in recent days

–  “If you look at what has happened in the past when it comes to reaching those type of heights, being it tulip bulbs or a bunch of other things over the centuries, the odds are against those who actually think that this is going to be the future,” Ingves said

Bitcoin investors could learn a valuable lesson from the Dutch tulip bulb mania of the 1630s, according to a global banking regulator. When asked whether cryptocurrencies, such as bitcoin, had ignited any financial stability concerns, Stefan Ingves, chairman of global regulators at the Basel Committee and governor of Sweden’s Riksbank, told CNBC: “I think it’s wrong to call it a cryptocurrency, it’s crypto-something … Kind of a crypto-asset but definitely not a cryptocurrency.” Ingves said investing in bitcoin — as well as other similar instruments — was a “dangerous” prospect. He urged traders to be cautious because of strikingly high volatility levels and the clear lack of support from either central banks or international regulators. Bitcoin was trading at around $16,029 on Friday morning, according to industry site CoinDesk, after wild price swings in recent days. The digital currency rocketed above $19,000 on Thursday on the Coinbase exchange, before notching a huge decrease. The price on Coinbase, one of the major cryptocurrency exchanges accounting for a third of bitcoin trading volume, is often at a premium over other platforms. “If you look at what has happened in the past when it comes to reaching those type of heights, being it tulip bulbs or a bunch of other things over the centuries, the odds are against those who actually think that this is going to be the future,” Ingves said.

Ingves is not the first to compare bitcoin’s meteoric rise to the tulip craze — widely considered to be one of the first major financial bubbles. In the 17th Century, tulips became such a prized commodity that they were being traded on Dutch stock exchanges. And many people traded or sold possessions in a bid to get in on the action. But it all came to an end as a sudden drop in prices sparked panic selling. Tulips were soon trading at a fraction of what they once had, leaving many investors in financial ruin. Bitcoin’s dramatic uptick in market value means it would currently rank among the 20 largest stocks in the S&P 500 — with an estimated value of more than $250 billion. Meantime, on Thursday, financial regulators reached a long-sought deal to harmonize global banking rules. The Basel Committee — which consists of banking supervisors from the world’s top financial centers — agreed on new regulations to help strengthen banks in the wake of the financial crisis. The rules aim to ensure lenders across the world are consistent with how they manage capital levels and assess the measurement of risk. There is a “very high awareness” among international regulators of developments in the financial technology (fintech) sector “but it is a bit too early to say where that will take us when it comes to regulatory frameworks,” Ingves said. “Let me also stress that sometimes there is a bit of a hype when people talk about fintech, thinking that old fashioned banking is going to go away. But I don’t think that is going to happen because regardless of the technology available, in most countries we have had banks for hundreds and hundreds of years and most likely it is going to continue that way,” he added.

MBA – mortgage applications up

Mortgage applications increased 4.7% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 1, 2017. The prior week’s results included an adjustment for the Thanksgiving holiday. The Market Composite Index, a measure of mortgage loan application volume, increased 4.7% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 47% compared with the previous week. The Refinance Index increased 9% from the previous week. The seasonally adjusted Purchase Index increased 2% from one week earlier. The unadjusted Purchase Index increased 38% compared with the previous week and was 8% higher than the same week one year ago. The refinance share of mortgage activity increased to its highest level since September 2017, 51.6% of total applications, from 48.7% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to its lowest level since January 2017, 5.7% of total applications. The FHA share of total applications increased to 11.1% from 10.8% the week prior. The VA share of total applications decreased to 10.7% from 11.0% the week prior. The USDA share of total applications remained unchanged from the week prior at 0.8%.

CoreLogic – US economic outlook: December 2017

A central theme for the 2018 housing market will be the continuing erosion of housing affordability, an issue that will permeate a growing list of American neighborhoods. Today housing affordability is already a major concern in many high-cost markets, and will spread to more moderate-cost places across the nation. Let’s look at the economic factors that we expect will further weaken affordability in the coming year.One is the projected rise in interest rates. The Federal Reserve has signaled its plan to increase its federal funds target, pushing other short-term interest rates up including initial rates on ARMs, and to reduce its portfolio of long-term Treasury and mortgage-backed securities.  And while fixed-rate mortgage rates remain at historically low levels, they are already up about three-fourths of a percentage point above their record low.  Fixed-rate loans are forecast to rise in 2018 by at least one-half a percentage point to as much as a full percentage point. A second factor is the increasing price of buying a home. CoreLogic’s national Home Price Index has been rising at a 6% or better clip over the past year with less expensive homes rising even faster.  When combined with the rise in mortgage rates, the price increase for lower-priced homes translates into approximately a 15% rise over the last year in the monthly principal and interest payment for a first-time buyer. We expect this trend to continue in 2018, with the CoreLogic Home Price Index for the US up another 5%. Third, we expect the very low for-sale inventory, especially for ‘starter’ homes, to continue.   As low inventory confronts the rising desire for homeownership by a growing number of millennials, home sale conditions will favor the seller with low time-on-market, multiple contracts per home, and more homes that sell at or above list price.  These phenomena will be particularly acute in the first-time buyer segment, where there is already a shortage of for-sale inventory. Declining affordability can be alleviated by new construction and rehabilitation of older housing stock. We expect housing starts to increase 5% in 2018, but more building is necessary to alleviate the affordability challenges in many higher-cost American cities.

CoreLogic – US Home Price Report marks second consecutive month of 7% year-over-year increases in October

– Prices Starting to Out-Pace Value With 50% of the Top 50 Markets Overvalued

–  All States Posted Year-Over-Year Price Gains in October 2017

–  Home Prices Projected to Increase 4.2% by October 2018

CoreLogic released its CoreLogic Home Price Index (HPI) and HPI Forecast for October 2017, which shows home prices are up both year over year and month over month. Home prices nationally increased year over year by 7% from October 2016 to October 2017, and on a month-over-month basis home prices increased by 0.9% in October 2017 compared with September 2017, according to the CoreLogic HPI. Looking ahead, the CoreLogic HPI Forecast indicates that home prices will increase by 4.2% on a year-over-year basis from October 2017 to October 2018, and on a month-over-month basis home prices are expected to decrease by 0.2% from October 2017 to November 2017. The CoreLogic HPI Forecast is a projection of home prices 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. “Single-family residential sales and prices continued to heat up in October,” said Dr. Frank Nothaft, chief economist for CoreLogic. “On a year-over-year basis, home prices grew in excess of 6% for four consecutive months ending in October, the longest such streak since June 2014. This escalation in home prices reflects both the acute lack of supply and the strengthening economy.”

According to CoreLogic Market Condition Indicators (MCI) data, an analysis of housing values in the country’s 100 largest metropolitan areas based on housing stock, 37% of metropolitian areas have an overvalued housing stock as of October 2017. 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. Also, as of October, 26% of the top 100 metropolitan areas were undervalued and 37% were at value. When looking at only the top 50 markets based on housing stock, 50% were overvalued, 14% were undervalued and 36% were at value. The MCI analysis defines an overvalued housing market as one in which home prices are at least 10% higher than the long-term, sustainable level, while an undervalued housing market is one in which home prices are at least 10% below the sustainable level. “The acceleration in home prices is good news for both homeowners and the economy because it leads to higher home equity balances that support consumer spending and is a cushion against mortgage risk,” said Frank Martell, president and CEO of CoreLogic. “However, for entry-level renters and first-time homebuyers, it leads to tougher affordability challenges. According to the CoreLogic Single-Family Rent Index, rents paid by entry-level renters for single-family homes rose by 4.2% from October 2016 to October 2017 compared with overall single-family rent growth of 2.7% over the same time.”

US private sector adds 190,000 jobs in November: ADP

US private employers created 190,000 jobs in November, down sharply from the month before and roughly in line with economists’ expectations, a report by a payrolls processor showed on Wednesday. Economists surveyed by Reuters had forecast the ADP National Employment Report would show a gain of 185,000 jobs, with estimates ranging from 150,000 to 240,000. Private payroll gains in October were unrevised at 235,000. The report is jointly developed with Moody’s Analytics. The ADP figures come ahead of the US Labor Department’s more comprehensive non-farm payrolls report on Friday, which includes both public and private-sector employment. Economists polled by Reuters are looking for US private payroll employment to have grown by 190,000 jobs in November, down from 252,000 the month before. Total non-farm employment is expected to have risen by 200,000.The unemployment rate is forecast to stay steady at the 4.1% recorded a month earlier.

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

–  Riverside-San Bernardino-Ontario Experienced the Highest Year-Over-Year Rent Growth in September

–  Overall Index pulled down by high-end segment

–  Rent prices may be showing some early impacts of Hurricane Harvey

–  Of 20 select metros analyzed, San Francisco and Miami were the only two to experience a decrease in single-family rent prices in September

National single-family rent prices climbed steadily between 2010 and 2017, as measured by the CoreLogic Single-Family Rent Index (SFRI). However, the Index shows year-over-year rent growth has decelerated slowly since it peaked early last year. In September 2017, single-family rents increased 2.9% year over year, a 1.5-percentage point decline since the growth rate hit a high of 4.4% in February 2016. The Index measures rent changes among single-family rental homes, including condominiums, using a repeat-rent analysis to measure the same rental properties over time. Analysis is conducted nationally and for 75 Core Based Statistical Areas (CBSAs). Using the Index to analyze specific price tiers reveals important differences. The Index’s overall growth in September 2017 was pulled down by the high-end rental market, which is defined as properties with rent prices 125% or more of a region’s median rent. Rent prices on higher-priced rental homes increased 2.2% year over year in September 2017, unchanged from September 2016. Rent prices in the low-end market, defined as properties with rents less than 75% of the regional median rent, increased 4.5% year over year in September 2017, down from a gain of 5.3% in September 2016.

Rent growth varies significantly across metro areas. Riverside-San Bernardino-Ontario, CA had the highest year-over-year rent growth with an increase of 5.8%. Only two CBSAs among this group of 20 showed a decrease in rent prices: Miami-Miami Beach-Kendall (-0.7%) and San Francisco-Redwood City-South San Francisco (-0.2%). The September 2017 results for Houston are notable with no change in rent prices from September 2016 to September 2017, and it is likely that rents in this market are showing some early impacts from Hurricane Harvey. The year-over-year rent decrease in Houston stopped in September 2017 after 17 consecutive months of declines as Houston rental transactions increased 63.4% year over year. A more pronounced impact is expected in Houston in future months. Rental vacancy rates are available quarterly from the US Census Bureau Housing Vacancy Survey. Metro areas with limited new construction and strong local economies that attract new employees tend to have low rental vacancy rates and stronger rent growth. Minneapolis experienced 4.2% year-over-year rent growth in Q3 2017, driven by employment growth of 2.9% year over year, which was more than double the national growth of 1.4%. In contrast, Tulsa, which has been hit with energy-related job losses since early 2015, experienced a 1.4% year-over-year decrease in rent prices, according to CoreLogic data.

Consumer bureau’s new leader steers a sudden reversal

The defanging of a federal consumer watchdog agency began last week in a federal courthouse in San Francisco. After a nearly three-year legal skirmish, the Consumer Financial Protection Bureau appeared to have been victorious. A judge agreed in September with the bureau that a financial company had misled more than 100,000 mortgage customers. As punishment, the judge ordered the Ohio company, Nationwide Biweekly Administration, to pay nearly $8 million in penalties. Then Mick Mulvaney was named the consumer bureau’s acting director. Barely 48 hours later, the same lawyers filed a new two-sentence brief. Their request: to withdraw their earlier submission and no longer take a position on whether Nationwide should put up the cash. It was a subtle but unmistakable sign that the consumer bureau under Mr. Mulvaney is headed in a new direction — one that takes a lighter touch to regulating the financial industry. The reversal is part of a broad push by the Trump administration to unfetter companies from Obama-era regulations. Inside the agency, change has been swift. Mr. Mulvaney briefly stopped approval of payments to some victims of financial crime, halted hiring, froze all new rule-making and ordered a review of active investigations and lawsuits. Some, he has indicated, will be abandoned. “This place will be different, under my leadership and under whoever follows me,” Mr. Mulvaney said Monday about an agency that he previously denounced as a “sad, sick” example of bureaucracy gone amok.

Black Knight – October Mortgage Monitor: tax reform could further constrict already tight housing inventory, while increasing net housing expenses for many buyers 

–  The House of Representatives’ tax reform plan proposes doubling the standard deduction while capping the mortgage interest deduction (MID) to the first $500K of mortgage debt

–  All else being equal, as a result of doubling the standard deduction, renters would likely see greater overall tax benefits than homeowners who previously had itemized deductions

–  As part of the plan, current borrowers would be exempt from the $500K MID cap, which may create a disincentive for homeowners to sell their homes and sacrifice the larger existing deduction, further tightening available housing inventory

–  Prospective home buyers with new mortgages over $500K could see costs rise an additional $2,600 – $4,200 per year depending on their tax bracket, even if interest rates stayed flat

–  Proceeds on nearly 15% of existing home sales may also face increased capital gains exposure, which could further constrain for-sale inventory

The Data and Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based on data as of the end of October 2017. Given the significant impact proposed changes to the tax code could have on the housing and mortgage markets, this month Black Knight explored the impact from the Senate and House versions of tax reform as currently written. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, proposed changes to the standard deduction, mortgage interest deduction (MID), and capital gains exemptions in particular could put even more pressure on already limited available housing inventory, with ramifications for both current homeowners and prospective buyers. “Both tax reform proposals double the standard tax deduction, which may, in many cases, provide a greater benefit to renters than to homeowners,” said Graboske.  “It may also reduce the tax incentive to purchase a home and generally make the MID less valuable to borrowers. We’ve observed in the past that positive tax incentives can certainly impact home buying decisions – the Black Knight Home Price Index showed clear evidence of this as a result of 2008’s first-time homebuyer tax credit. However, limited data is available to examine the effects of removing an existing tax incentive on borrowers’ purchase behavior. One thing that seems clear is that a reduction of the MID could further constrain available housing inventory, which itself has helped to push home prices even higher in many places. Almost 3 million active first-lien mortgages – current mortgage holders – have original balances exceeding $500K – the cap proposed in the House version of the tax bill. These borrowers would be exempt from the limit. We’ve already seen signs of ‘interest rate lock’ on the market, as homeowners with low interest rate mortgages have a disincentive to sell in a rising rate environment. The question now becomes whether the proposed tax reform adds another layer of ‘tax deduction lock’ on the market. Do these homeowners now also have a disincentive to sell their home in order to keep their current interest rate deduction of up to $1 million? If so, this would potentially add new supply constraints.

“Lower-priced markets may see little effects from these changes, but the most recent Black Knight Home Price Index shows 22 markets nationwide where the median home price is over $500K. Mortgage originations at or above that point have increased by 350% since the bottom of the housing market. At the current rate of growth, we could see approximately 480,000 purchase originations in 2018 with original balances over $500K, with an estimated 2.9 million over the first five years of the tax plan. If home prices continue to rise and the cap is left in place, more families in the upper-middle income range could be impacted. Even if interest rates stayed steady around four%, a $500K MID cap could cost the average homeowner with a larger mortgage an additional $2,600 – $4,200 per year depending on their tax bracket, representing a 6 to 10% increase in housing-related expenses as compared to the average annual principal and interest payment today.”Black Knight also found that proposed changes to the capital gains exemption on profits from the sale of a home (requiring five years of continuous residence as compared to the current two) could impact approximately 750,000 home sellers per year, also potentially increasing pressure on available inventory. Leveraging the company’s SiteX property records database, Black Knight found that on average, over the past 24 months, more than 14% of property sales were by homeowners falling into that two-to-five-year window and who would no longer be exempt from capital gains taxation. On average, $60 billion in capital gains each year could be impacted, with a worst-case scenario (taxing the full amount under the highest tax bracket) putting the cost to home sellers at approximately $23 billion. If such homeowners choose to forego or delay selling to avoid a tax liability, this may also further reduce the supply of homes for sale.

As was reported in Black Knight’s most recent First Lo​ok release, other key results include:

​-  Total US loan delinquency rate:  44%​

​-  Month-over-month change in delinquency rate:  0.94%

​-  Total US foreclosure pre-sale inventory rate:  0.68%

​-  Month-over-month change in foreclosure pre​-sale inventory rate:  -2.84%

​-  States with highest percentage of non-current loans:  MS, LA, FL, AL, TX

​-  States with the lowest percentage of non-current loans:  MT, MN, OR, ND, CO

​-  States with highest percentage of seriously delinquent loans:  MS, LA, AL, AR, FL

Dow opens at new record high, after Senate green-lights tax bill

US stocks jumped at the opening bell, with the Dow Jones Industrial Average adding 238 points, or 0.98% to reach 24,464 points in the first minutes of trading. Stocks were boosted by optimism over tax reform after Senate Republicans passed an overhaul of the US tax code early Saturday, which shifted investors’ minds away from political tensions in Washington and sent stocks on a wild ride on Friday. The Dow industrials could log a new closing record for Monday if the indicated gains come through. Last Thursday, the Dow posted its biggest one-day gain in a year, surging more than 330 points to close above 24,000 for the first time. It was the fifth 1,000-point milestone for the Dow in 2017, the most ever in a calendar year. Then, on Friday, the Dow had its most turbulent session of the year, plunging after former national security adviser Michael Flynn pled guilty to lying to the FBI about conversations with a Russian ambassador. An incorrect ABC report said Flynn would testify that President Donald Trump directed him to make contact with Russian officials while he was a candidate contributed to a steep fall in socks. ABC later clarified and corrected the story, which was reported on air.The Dow’s steep losses were short lived, with stocks paring their losses during the session. The index closed down 40.76 points after falling as much as 350 points during the session.

CoreLogic – shows more than 20% of us properties at risk of flood are outside of designated special flood hazard areas

– Florida has the most properties with flood risk that are not included in special flood hazard areas, Arizona has the highest percentage

According to new data analysis from CoreLogic, an estimated 23% of residential and commercial properties in the US are at High or Moderate risk of flooding, based on CoreLogic proprietary flood analysis, but are outside of designated Special Flood Hazard Areas (SFHA) as identified by the Federal Emergency Management Agency (FEMA). Property owners living within SFHA zones must have flood insurance if there is a federally insured mortgage while those living outside SFHA zones are not required to have flood insurance. Many property owners choose not to carry flood insurance if it is not required even though their property may still be at risk of flood. Nationally, more than 29 million properties (29,437,151), or 23%, are outside a designated SFHA despite being at High or Moderate risk of flooding, according to CoreLogic analysis. At the state level:

–  Florida has the highest number of properties in this category at 5,055,821, or 54% of total properties

–  Texas has 3,292,082 properties, or 31%, and California has 3,114,462 properties, or 29%

–  Looking at only the percentage of properties outside an SFHA, which are at High or Moderate risk, Arizona has the highest at 68%, followed by Florida at 54% and Louisiana at 49%

Oil prices fall after US drillers add rigs

Oil fell on Monday after US shale drillers added more rigs last week, but prices still held close to their highest since mid-2015, supported by an extension to output cuts agreed last week by OPEC and other producers. Drillers in the United States added two oil rigs in the week to Dec. 1, bringing the total count to 749, the highest since September, energy services company Baker Hughes said in its closely followed report late on Friday. February Brent crude futures were down 54 cents at $63.19 a barrel by 1003 GMT, while US West Texas Intermediate was down 61 cents at $57.75. The Brent price hit a two-year high of $64.65 a month ago and has since attracted record investment by fund managers. The US rig count, an early indicator of future output, has risen sharply from 477 active rigs a year ago after energy companies boosted spending plans for 2017. Drillers were encouraged during 2017 to increase activity as crude prices started recovering from a multi-year price slump after the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers, including Russia, agreed to production cuts a year ago. Last week the producers agreed to extend those cuts of 1.8 million barrels per day (bpd) until the end of next year. “Market reaction has been positive so far. There are only two worrying aspects … one is that Iraq’s indiscipline has not been discussed, at least not publicly,” PVM Oil Associates strategist Tamas Varga said, referring to Iraq’s poor compliance with the deal.

MBA applauds Senate for inclusion of rounds amendment in tax bill

David H. Stevens, CMB, President and CEO of the Mortgage Bankers Association, offered the following statement praising efforts by Senate Leadership, Senator Mike Rounds (R-SD), Senate Finance Committee Chairman Orrin Hatch (R-UT), Senate Banking Committee Chairman Mike Crapo (R-ID) and Senator David Perdue (R-GA), to address language in Section 13221 of the Senate Tax Reform Bill relating to mortgage servicing rights (MSRs). “I want to personally thank Majority Leader McConnell, Chairman Hatch, Senator Rounds, Chairman Crapo, and Senator Perdue for working with us and commend them for their efforts on this important issue. Because of the Rounds Amendment, this package will protect the ability of most Americans to obtain safe, decent shelter and affordable home mortgage credit without disruption. Had this language not been included, the change in tax accounting for MSRs would have had a devastating impact on the flow of capital that supports a robust and competitive real estate finance market, both single-and commercial/multifamily. We thank the Senate for its leadership on this issue.”

NAR – Senate-Passed tax legislation bad news for homeowners

The US Senate today passed tax reform legislation that the National Association of Realtors® believes puts home values at risk and dramatically undercuts the incentive to own a home. NAR President Elizabeth Mendenhall, a sixth-generation Realtor® from Columbia, Missouri and CEO of RE/MAX offered strong concerns over the bill and said Realtors® will continue to work with members of the House and Senate as the process moves forward into a conference committee. “The tax incentives to own a home are baked into the overall value of homes in every state and territory across the country. When those incentives are nullified in the way this bill provides, our estimates show that home values stand to fall by an average of more than 10%, and even greater in high-cost areas. “Realtors® support tax cuts when done in a fiscally responsible way; while there are some winners in this legislation, millions of middle-class homeowners would see very limited benefits, and many will even see a tax increase. In exchange for that, they’ll also see much or all of their home equity evaporate as $1.5 trillion is added to the national debt and piled onto the backs of their children and grandchildren. “That’s a poor foot to put forward, but this isn’t the end of the road. Realtors® will continue to advocate for homeownership and hope members of the House and Senate will listen to the concerns of America’s 75 million homeowners as the tax reform discussion continues.”

ATTOM – markets in Colorado, new Hampshire, Illinois, DC, and Tennessee top list of where homebuyers are most likely to move in Q4 2017

– Top Pre-Mover Markets Post Lower Unemployment Rates, Slightly Weaker Wage Growth

– Hottest Second Home Pre-Mover Markets Myrtle Beach, Asheville, Daytona Beach
ATTOM Data Solutions, curator of the nation’s largest multi-sourced property database, today released its Q3 2017 Pre-Mover Housing Index, which shows that the markets with the highest pre-mover indices during the third quarter — predictive of strong sales activity in the fourth quarter — were Colorado Springs, Colorado; Manchester-Nashua, New Hampshire; Chicago, Illinois; Washington, D.C.; and Nashville, Tennessee. Using data collected from purchase loan applications on residential real estate transactions, the ATTOM Data Solutions Pre-Mover Housing Index is based on the ratio of homes with a “pre-mover” flag during a quarter to total single family homes and condos in a given geography, indexed off the national average. An index above 100 is above the national average and indicates an above-average ratio of homes that will likely be sold in the next 30 to 90 days in a given market. The top five markets — among 123 total metro areas analyzed for the report — all posted a pre-mover index of 196 or higher. Other markets in the top 10 for highest pre-mover index in the third quarter were Reno, Nevada (189); Tampa-St. Petersburg, Florida (188); Las Vegas, Nevada (180); Jacksonville, Florida (179); and Kingsport-Bristol, Tennessee (178). Among the same 123 metro areas analyzed for the report, those with the lowest pre-mover indices in the third quarter were Rochester, New York (35); Akron, Ohio (47); Myrtle Beach, South Carolina (47); Providence, Rhode Island (52); and Cleveland, Ohio (52). “Home buyers are most likely to move — and homeowners are more likely to move up — in markets with plenty of available jobs along with a reasonable supply of homes for sale,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Markets with this enviable and increasingly rare combination of jobs and housing inventory tend to be in secondary and even tertiary markets that are somewhat off the beaten path. Even in more mainstream markets, the counties with the highest pre-mover indices tend to be in outlying areas where more inventory is available or can be built.”

Out of 331 US counties analyzed for the report, 213 posted a pre-mover index above the national average in the third quarter. The average September unemployment rate in those 213 counties was 3.8%, compared to an average unemployment rate of 4.2% in the 118 counties that posted a pre-mover index below the national average in the third quarter. Weekly wages grew 6.4% from a year ago on average in the 213 counties with a Q3 2017 pre-mover index above the national average while average weekly wages grew 6.5% from a year ago on average in the counties with a Q3 2017 pre-mover index below the national average. Among 123 metropolitan statistical areas with at least 100,000 single family homes and condos and at least 100 pre-movers in Q3 2017, those with the highest share of pre-movers indicating interest in second home purchases were in Myrtle Beach, South Carolina (14.2%); Asheville, North Carolina (10.7%); Deltona-Daytona Beach-Ormond Beach, Florida (10.3%); Atlantic City, New Jersey (9.6%); and Cape Coral-Fort Myers, Florida (9.4%). Among 123 metropolitan statistical areas with at least 100,000 single family homes and condos and at least 100 pre-movers in Q3 2017, those with the highest share of pre-movers interested in investment property purchases were Memphis, Tennessee (29.9%); Jackson, Mississippi (13.7%); Boulder, Colorado (12.6%); Indianapolis, Indiana (11.0%); and Kansas City, Missouri (9.2%). Among 331 US counties with at least 50,000 single family homes and condos and at least 50 pre-movers in the third quarter, those with the highest pre-mover index were Loudon County, Virginia in the Washington, D.C. area (304); El Paso County, Colorado in the Colorado Springs metro area (300); Prince William County, Virginia in the Washington, D.C. metro area (298); Will County, Illinois in the Chicago metro area (298); and Champaign County, Illinois (258). Among the 331 counties analyzed for the report, those with the lowest pre-mover index in Q3 2017 were Wayne County, Michigan in the Detroit metro area (32); Queens County, New York (37); San Mateo County, California in the San Francisco metro area (40); Monroe County, New York in the Rochester metro area (42); and Stark County, Ohio in the Canton metro area (44).

Major automakers post mixed November US sales results

Major automakers posted mixed US November new vehicle sales for November on Friday, with General Motors and Fiat Chrysler Automobiles (FCA) down largely on lower fleet sales, while Ford Motor’s sales rose. Automakers are trying to sell down 2017 model year vehicles, offering high discounts to consumers as the year-end nears. Last year the industry hit record annual sales of 17.55 million units and this year analysts expect full-year sales to fall slightly, increasing competition to move vehicles off dealers’ lots. No. 1 US automaker GM said its sales fell 2.9% in November, with sales to consumers flat versus the same month in 2016. Much of the decrease was driven by lower fleet sales to rental agencies, businesses and government agencies. GM said strong SUV and crossover sales pushed its average transaction price for the month above $37,000 for the first time. The company’s level of unsold cars, which has been a concern for analysts and the industry, rose slightly to 83 days supply from 80 days at the end of October. Fleet sales are a low-margin business for automakers. FCA in particular has targeted a significant reduction in this type of sale in 2017. The automaker posted a 4% overall decrease in sales for November, but said fleet sales were down 25% while sales to consumers were up 2% on the year. No. 2 US automaker Ford reported a 6.7% increase in sales in November, with fleet sales up nearly 26% and retail sales 1.3% higher than in November 2016. Ford said SUV sales rose 13.3% in November, while its pickup truck sales were up 4.1%.

NAR – pending home sales strengthen 3.5% in October

Pending home sales rebounded strongly in October following three straight months of diminishing activity, but still continued their recent slide of falling behind year ago levels, according to the National Association of Realtors®. All major regions except for the West saw an increase in contract signings last month. The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 3.5% to 109.3 in October from a downwardly revised 105.6 in September. The index is now at its highest reading since June (110.0), but is still 0.6% below a year ago. Lawrence Yun, NAR chief economist, says pending sales in October were primarily driven higher by a big jump in the South, which saw a nice bounce back after hurricane-related disruptions in September. “Last month’s solid increase in contract signings were still not enough to keep activity from declining on an annual basis for the sixth time in seven months,” he said. “Home shoppers had better luck finding a home to buy in October, but slim pickings and consistently fast price gains continue to frustrate and prevent too many would-be buyers from reaching the market.”

According to Yun, the supply and affordability headwinds seen most of the year have not abated this fall. Although homebuilders are doing their best to ramp up production of single-family homes amidst ongoing labor and cost challenges, overall activity still drastically lags demand. Further exacerbating the inventory scarcity is the fact that homeowners are staying in their homes longer. NAR’s 2017 Profile of Home Buyers and Sellers – released last month – revealed that homeowners typically stayed in their home for 10 years before selling (an all-time survey high). Prior to 2009, sellers consistently lived in their home for a median of six years before selling. “Existing inventory has decreased every month on an annual basis for 29 consecutive months, and the number of homes for sale at the end of October was the lowest for the month since 19991,” said Yun. “Until new home construction climbs even higher and more investors and homeowners put their home on the market, sales will continue to severely trail underlying demand.” With two months of data remaining for the year, Yun forecasts for existing-home sales to finish at around 5.52 million, which is an increase of 1.3% from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 6%. In 2016, existing sales increased 3.8% and prices rose 5.1%. The PHSI in the Northeast inched forward 0.5% to 95.0 in October, but is still 1.9% below a year ago. In the Midwest the index increased 2.8% to 105.8 in October, but remains 0.9% lower than October 2016. Pending home sales in the South jumped 7.4% to an index of 123.6 in October and are now 2.0% higher than last October. The index in the West decreased 0.7% in October to 101.6, and is now 4.4% below a year ago.

Oil prices rise after OPEC extends output curbs

Oil prices rose on Friday, following an agreement by OPEC and other major producers to extend output curbs until the end of 2018 to try to reduce the global oil glut. The Organization of the Petroleum Exporting Countries and some non-OPEC producers led by Russia agreed on Thursday to keep current limits on output in place until the end of next year, although they signaled a possible early exit from the deal should the market overheat and prices rise too far. Brent was trading at $63.22 by 1202 GMT, up 59 cents on the day. US light crude was up 46 cents at $57.86. “OPEC and the cooperating countries have created a very high level of confidence that they are standing behind the oil market, that they’re going to drive the inventories further down,” SEB Markets chief commodities analyst Bjarne Schieldrop said. “They gave a very serious and trustworthy appearance yesterday and that is taking away a lot of the downside in the market,” he said. The deal, which has been in place since January and was due to expire in March, has seen producers reduce output by 1.8 million barrels per day (bpd), helping to halve global oil oversupply over the past year.

CoreLogic – credit characteristics of renters

Mortgage lenders have known for a long time that debt-to-income (DTI) and credit history (based on credit bureau data), among other factors, are critical for sound underwriting and managing credit risk on a mortgage portfolio. Similar analysis can be used to evaluate a prospective tenant’s likelihood of making the rent payments agreed to in the lease or the share of a building’s rent roll that may go delinquent. This has become increasingly important for rental management companies as the renter share of households has risen to its highest in 50 years. The CoreLogic Rental Property Solutions platform evaluates the credit risk of rental applicants. Information from this platform can be used to examine trends in renter credit quality over time. A higher rent-to-income ratio is generally associated with increased credit risk, as renters devote a higher percentage of their income to paying rent. The rent-to-income ratio has trended upward between 2009 and 2017, as the increase in rents has outpaced income growth. At the national level, it has increased from 25.4% in the second quarter of 2009 to 28.1% in the second quarter of 2017, a 10.6% increase over an eight-year period.

Rent to income is one factor affecting renter payment risk. Additional sources of information, such as credit bureau data, public records, and other information in the renter application, can also provide insight into renter performance risk. The CoreLogic ScorePLUS model is a statistical model that brings together multiple sources of information to predict renter applicant’s risk of lease default. Information related to credit bureau history, subprime loan history, eviction and rental collection history, as well as the renter’s application information all factor in to the SafeRent Score risk score. Similar to a FICO score, a higher SafeRent Score is associated with lower risk. Two trends stand out in the average renter risk scores. First, the scores exhibit a seasonal trend. The seasonal trend is supported by seasonal trends in credit bureau characteristics of rent applicants. Second, the average score has been improving (renter applicant risk has been declining) since 2010. This is consistent with the general improvement of credit performance as borrowers continue to recover from the 2008-2009 recession. The improvement in applicants’ credit characteristics has more than offset the upward trend in rent to income, resulting in an improving rental risk score over time.

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