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American Banker – The warning signs in consumer credit data

US households are borrowing more than ever to buy homes and cars, pay for college and even finance every day purchases. The Federal Reserve Bank of New York said in September that consumer debt hit a record $12.96 trillion in the third quarter of 2017, as student and auto loan totals reached all-time highs and mortgage and credit card debt crept closer to pre-financial-crisis levels. It’s an eye-popping figure to be sure, but should lenders be spooked by it? The New York Fed has noted that its data is not adjusted for inflation, and the cost of goods and services has risen by more than 10% since 2008, the last time total consumer debt neared the $13 trillion mark. Moreover, the US population has increased by about 7% during that span, which means that, on a per capita basis, consumer debt is actually lower than it was a decade ago. Another sign that households are managing their debt reasonably well: Foreclosures hit a new historical low in the third quarter, according to the New York Fed. Still, there are reasons to be concerned about rising debt levels. The personal savings rate hit a 12-year low at the end of 2017, which means that many households likely do not have enough of a financial cushion to weather sudden economic shocks, like a major medical bill or a busted refrigerator. Delinquencies on all types of consumer loans, while nowhere near 2009 and 2010 levels, have started to tick up in recent quarters. Factor in slow wage growth and high housing costs in many urban markets and it is not hard to imagine many households struggling to keep pace with their monthly bills. It’s too soon to say what this all means for banks, but not too soon point out the warning signs. Here they are.

Trump’s $1.5T infrastructure plan shifts funding burden to states, private sector

The White House released the outline for President Donald Trump’s highly-anticipated infrastructure overhaul on Monday, an effort that places a larger burden on states to fund their own projects. As Trump mentioned during his State of the Union address last month, the plan calls for $1.5 trillion over the course of the next decade to overhaul the nation’s roads, bridges, airports and even broadband distribution. The funds are expected to result from a combination of public and private assistances, with the federal government contributing around $200 billion. Of that $200 billion, half will be dedicated to what the administration is calling an “Incentives Program,” where grants will be awarded to states to fund projects that can spur additional outside investment. For these initiatives, federal dollars are to be used to fund a maximum of 20% of the cost, a big policy reversal from the current funding structure where government money can account for as much as 80% of highway repairs. Twenty-billion dollars will be put toward expanding infrastructure financing programs, including an effort to increase the number of credit programs, and another $20 billion is to be allocated toward innovative, “transformative projects.”To address the needs of rural America, where some believe it could be more difficult to raise funds and attract investment, the White House proposes that $50 billion be awarded to those states’ governors in the form of block grants. With the US government committing just $200 billion to the effort, which the White House has said will come from cuts to other programs, it is largely up to states and localities to work with the private sector to raise the rest of the cash to fund needed infrastructure initiatives. The administration is hopeful the revamp will continue to stimulate economic growth. As previously reported by FOX Business, manufacturers are looking to the plan as not only a way to create direct spending and new jobs, but also to increase intra-industry efficiency.

Equifax breach might have been worse than anyone thought

A new revelation shows Equifax’s massive data breach, which occurred last year and affected about 145.5 million consumers, may have been worse than anyone thought. But this isn’t the first time the credit agency revealed the breach was more damaging than initially announced. Back in October, Equifax revealed the data breach was bigger than they first thought, moving the number of victims up from 143 million to 145.5 million. But now, confidential documents Equifax provided to the Senate Banking Committee showed additional information such as tax IDs and driver’s license details were also accessed during the hack. And now, some interest groups are urging Congress to hold Equifax accountable and pass consumer protection bills. US PIRG, a federation of state public interest research groups, is urging Congress to pass pro-consumer privacy and data security bills introduced in the five months since the breach was first reported. “Why did it take Equifax so long to disclose this additional stolen information?” asked Mike Litt, US PIRG consumer campaign director. “And why hasn’t Equifax directly notified consumers about this yet?” “In addition to raising more questions over Equifax’s many failures, these new revelations show the urgent need for action,” Litt said. “For starters, the Consumer Financial Protection Bureau should complete its investigation into the breach. In the meantime, Congress should pass legislation now.”

US PIRG listed several bills introduced in Congress that it supports, and says would support consumers including S. 2289, the Data Breach Prevention and Compensation Act, S. 1816, the Freedom from Equifax Exploitation Act and S. 2362, the Control Your Personal Credit Information Act. “There are already several good bills just sitting there,” Litt said. “Will it take an even worse breach for Congress to pass them?” And it may take an act from Congress to make any meaningful changes for Equifax as CFPB Acting Director Mick Mulvaney said the agency is enforcing the law but not being aggressive under his leadership. “We’re not pushing the envelope,” Mulvaney said Sunday on CBS. “We’re taking a different attitude toward the job, but the priorities have not changed.” Mulvaney explained he is taking this new approach because the CFPB is “perhaps the most unaccountable bureau or agency there is.” “We want to run that place with a good deal of humility and prudence,” Mulvaney said. “This bureau is unlike any other federal bureaucracy. It’s run by one person. Right now me.”

Elon Musk says the new SpaceX Falcon Heavy rocket crushes its competition on cost

–  SpaceX CEO Elon Musk reveals a new detail about the company’s new Falcon Heavy rocket.

–  A maxed-out version of the rocket would cost $150 million per launch, Musk said in a tweet Monday.

–  That is a quarter of a billion dollars less than SpaceX’s next closest competitor.

SpaceX is even further out in front of the rest of the space industry than previously thought, according to CEO Elon Musk, who claimed on Monday that a “fully expendable” Falcon Heavy would cost only $150 million — about $250 million cheaper than the closest competition. The company’s Falcon Heavy rocket became the most powerful commercial rocket in the world after SpaceX successfully completed its first launch on Tuesday. SpaceX has said previously the cost of each launch Falcon Heavy launch starts at $90 million. But that price tag — a fraction of the cost of the next biggest rockets from competitors United Launch Alliance (ULA) and Arianespace — was a best case scenario. It was unclear how much above the $90 million price tag a fully expendable version of Falcon Heavy would cost. Then, on Monday, Musk tweeted: “A fully expendable Falcon Heavy … is $150 [million],” Musk tweeted. That’s about a quarter of a billion dollars less than the next best thing. A fully expendable rocket is the maxed-out version, in which SpaceX would not try to conserve fuel or weight to recover parts of the rocket. The company built Falcon Heavy out of three of the company’s Falcon 9 rockets, which has now completed dozens of successful launches over the last few years. By landing the rocket’s first stage, SpaceX is able to recover and reuse the largest piece of each vehicle, which had traditionally been discarded after a launch. Part of last week’s successful launch was the recovery of two of Falcon Heavy’s three rocket boosters, which landed side-by-side on concrete pads at Cape Canaveral, Florida. It is unclear how ULA, a Boeing and Lockheed Martin joint venture, will respond to Falcon Heavy. ULA’s most powerful rocket, the Delta IV Heavy, costs upward of $400 million per launch. Musk said after Falcon Heavy’s launch that he wants “a new space race,” saying he thinks the rocket’s success will “encourage other companies and countries” to be ambitious in the same way as SpaceX.

MBA – Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 2.6% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 26, 2018. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.6% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 12% compared with the previous week. The Refinance Index decreased 3% from the previous week. The seasonally adjusted Purchase Index decreased 3% from one week earlier. The unadjusted Purchase Index increased 15% compared with the previous week and was 10% higher than the same week one year ago. The refinance share of mortgage activity decreased to 47.8% of total applications, its lowest level since August 2017, from 49.4% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.7% of total applications. The FHA share of total applications decreased to 10.7% from 11.4% the week prior. The VA share of total applications decreased to 10.1% from 10.9% the week prior. The USDA share of total applications remained unchanged at 0.8%. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to its highest level since March 2017, 4.41%, from 4.36%, with points increasing to 0.56 from 0.54 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate increased from last week.

Companies add 234,000 jobs in January, buttressing Trump claim

US companies added 234,000 jobs in January, a report from ADP Research Institute said Wednesday, a day after President Donald Trump touted labor market strength in his first official State of the Union address. Economists surveyed by Thomson Reuters had projected that private payrolls would grow by 185,000. “Since the election, we have created 2.4 million new jobs, including 200,000 new jobs in manufacturing alone,” Trump said Tuesday. The ADP report was published two days before the Labor Department’s payrolls report, which includes data from both the public and private sectors. In addition to pointing to labor market strength, Trump also said in his address that business confidence is high and that the stock market has gained $8 trillion in value. “They are having their best year in their 20-year history,” Trump said in his address. “They are handing out raises.”

Pending Home Sales Tick Up 0.5% in December

Pending home sales were up slightly in December for the third consecutive month, according to the National Association of Realtors®. In 2018, existing-home sales and price growth are forecast to moderate, primarily because of the new tax law’s expected impact in high-cost housing markets. The Pending Home Sales Index moved higher 0.5% to 110.1 in December from an upwardly revised 109.6 in November. With last month’s modest increase, the index is now 0.5% above a year ago. Lawrence Yun, NAR chief economist, says pending sales edged up in December and reached their highest level since last March (111.3). “Another month of modest increases in contract activity is evidence that the housing market has a small trace of momentum at the start of 2018,” he said. “Jobs are plentiful, wages are finally climbing and the prospect of higher mortgage rates are perhaps encouraging more aspiring buyers to begin their search now.” Added Yun, “Sadly, these positive indicators may not lead to a stronger sales pace. Buyers throughout the country continue to be hamstrung by record low supply levels that are pushing up prices — especially at the lower end of the market.” The uninterrupted supply and demand imbalances throughout the country fueled price appreciation to 5.8% in 2017, which was the sixth straight year of gains at or above 5%1. While tight inventories are still expected to put upward pressure on prices in most areas this year, Yun expects overall price growth to shrink, with some states even experiencing a decline, because of the negative effect the changes to the mortgage interest deduction and state and local deductions under the new tax law. See NAR’s 2018 state forecast for a look at home price projections:

“In the short term, the larger paychecks most households will see from the tax cuts may give prospective buyers the ability to save for a larger down payment this year, and the healthy labor economy and job market will continue to boost demand,” said Yun. “However, there’s no doubt the nation’s most expensive markets with high property taxes are going to be adversely impacted by the tax law.” Added Yun, “Just how severe is still uncertain, but with homeownership now less incentivized in the tax code, sellers in the upper end of the market may have to adjust their price expectations if they want to trade down or move to less expensive areas. This could in turn lead to both a decrease in sales and home values.” After expanding 1.1% in 2017 to 5.51 million, Yun does anticipate a slight increase (0.5%) in existing sales this year (5.54 million). Single-family housing starts are forecast to jump 13.3% to 961,000, which will push new home sales up 15.3% to 701,000 (608,000 in 2016). The PHSI in the Northeast dipped 5.1% to 93.9 in December, and is now 2.7% below a year ago. In the Midwest the index decreased 0.3% to 105.0 in December, but is still 0.3% higher than December 2016. Pending home sales in the South grew 2.6% to an index of 126.9 in December and are now 4.0% higher than last December. The index in the West rose 1.5% in December to 101.7, but is still 3.1% below a year ago.

Oil prices fall for 3rd day as US inventory build-up weighs

Oil fell for a third day on Wednesday, but remained on track for its biggest gain in January in five years, in spite of data that showed US crude stocks rose more than expected last week and a broader selloff in other commodities, stocks and bonds. Brent crude, the global benchmark, was down 49 cents at $68.43 a barrel by 1015 GMT, after touching a two-week low earlier in the day. US West Texas Intermediate (WTI) futures were down 39 cents at $64.11. On Tuesday, US crude fell 1.6% to close at $64.50 a barrel, far outpacing a 0.6% drop in the price of Brent. “The extent of the latest pullback in oil prices has taken many by surprise. Whether this weakness will be short-lived or are we witnessing the precursor to a violent downside correction remains to be seen,” PVM Oil Associates strategist Stephen Brennock said. “Still, what is apparent is that positives are increasingly in short supply for skittish buyers and the early-year optimism is hanging by a thread.” Prices of WTI and Brent are still on track for a fifth month of gains and Brent is set for its largest percentage increase in the month of January since 2013, with a rise of 2.7%. But as prices have risen, US producers have increased their rig count. Energy companies added 12 oil rigs last week, the biggest weekly increase since March. “The rig count will only continue to rise and the US system will only become more efficient,” said Matt Stanley, a fuel broker at Freight Services International in Dubai. “I see a correction on the horizon down towards $60 before the inevitable OPEC minister comes out and talks about new cuts,” he added.

Statement from NAHB Chairman Randy Noel on President Trump’s State of the Union Address

Randy Noel, chairman of the National Association of Home Builders and a custom home builder from LaPlace, La., issued the following statement regarding President Trump’s State of the Union address: “President Trump said ‘America is a nation of builders’ and the nation’s home builders wholeheartedly agree. The president knows that housing and homeownership are critical to a strong and prosperous nation. We commend him for working tirelessly to reduce unnecessary regulations that hurt small business owners and impede a more robust housing recovery. And we strongly support the president’s call for more vocational schools to train young workers and prepare them for careers in the construction trades and other industries. Moreover, the landmark tax reform law championed by President Trump will keep housing and the economy moving forward and put more money into the pockets of middle class households. And that’s good for housing. NAHB looks forward to working with the White House to continue to promote policies that will spur job and economic growth and promote homeownership and rental housing opportunities for all Americans.”

CoreLogic – US Economic Observations: January 2018

It is well known that there are affordability issues in the home purchase market, but there is less information on the single-family rental market, which makes up one-half of residential rentals. The CoreLogic Single Family Rental Index reflects rents paid on single-family houses and condos, and using this index we can dissect rent growth by both price tier and metro area. Rents for single-family homes fell during the Great Recession but then bounced back strongly from their low point in mid-2009 and have been trending up, mirroring home price growth. In October 2017, the index measured rent growth of 2.7% from a year ago. We can also show rent changes for the high-end (those rents 25% or more above the median rent in that market) and the low end (those rents 75% or less below the median in that market). The low-end single-family rental tier lagged the high-end tier from mid-2009 to early 2014, but then the low-end began steadily outpacing the high-end and the difference is growing. This mirrors the same high demand, low- supply forces that have caused low-end home prices to outpace high-end prices, as evidenced by shorter days-on-market and tighter inventory for low-end homes. Investors who entered the market to buy up distressed properties during the housing crisis might be exacerbating this trend in the rental market. High-end rents increased 2% in October from a year ago, while low-end rents increased by more than twice as much – 4.2%. We can also look at the difference between low-end and high-end rent growth by metro area. Seattle leads the large metros with the biggest increase in rents at 7.9% in October. Austin had the smallest increase in low-end rents of the large metros. In most of the 20 markets shown in the chart, low-end rents are increasing faster than high-end rents, and the trend is happening all over the country, not just in one region. The one exception is Warren, Mich., where low-end and high-end rents are increasing at about the same rate. The biggest spread in low-end and high-end rent increases was in Charlotte, N.C., where the low-end increased 5.6% and the high-end showed no increase. The single-family rental market is an important and often overlooked segment of the housing market and is affected by rising demand and constrained supply just like the rest of the housing market. The demand and supply pressures are especially apparent for lower-cost homes, for which rents are increasing at a much faster rate than for higher-cost homes.

Tax overhaul means a $4,000-a-year pay raise for the average family, Trump advisor says

About a third of corporate profits from the tax overhaul will eventually go to everyday workers, says Trump advisor Kevin Hassett. Hassett also says he and President Trump were surprised at the speed of the announcements by US companies about employees bonuses and wage increases.

The GOP tax overhaul means a $4,000-a-year pay raise for the average family starting in about 2021, a top economic advisor to President Donald Trump said on Monday. Kevin Hassett, chairman of the Council of Economic Advisers, had projected the $4,000-a-year benefit last October. The tax overhaul was signed into law in late December. “Now we’ve passed the bill, and now we’re expecting in over three to five years, we’ll see the $4,000,” Hassett said. “It’s $4,000 that will be reached in total once the economy reaches [a] steady state, and once you get it, it stays in your pay,” DJ Nordquist, the council’s chief of staff, told CNBC after the interview. Hassett also said Monday he and President Donald Trump were surprised at the speed of the announcements by US companies about employees bonuses and wage increases. “Historically, if you look what happens when after-tax cash flow happens, … then we see about a third of that going to workers,” Hassett said. “It’ll be interesting to come back at the end of the year, watch the wage increases that we’ve seen, watch the profit increases that we’ve seen after tax and compare the two.”

Puerto Ricans face foreclosure wave as post-Maria moratoriums expire

Confusion and panic are spreading across this US territory as the majority of moratorium agreements expire in January, with many people discovering they never qualified for the moratorium in the first place or struggling to obtain extensions because they cannot pay what is owed to the banks. Many Puerto Ricans stopped making payments on their mortgages after the Sept. 20 storm because they thought the moratorium was automatic, though it was not. The storm knocked out power across the island, preventing many from learning that they had to contact their banks to request moratoriums, said Ariadna Godreau, a professor and human rights lawyer. “The big concern now is that mortgage foreclosures are going to spike,” she said. “We’re going to see more homeless people, more homes foreclosed.” Over nearly a decade, the number of repossessed homes in Puerto Rico grew from more than 2,300 in 2008 to above 5,400 in 2016 and an estimated 6,200 or more last year. After the storm, foreclosures were temporarily suspended, and banks in the US territory offered a moratorium on mortgages for those who qualified, as did the federal government. Moratoriums offered by the US government have been extended to March, but banks have ended theirs. Banco Popular — Puerto Rico’s largest bank — said more than 20,500 clients received moratoriums that expired in December and January. Bank executives say they are working with their clients, but emphasize that they still need to collect what is owed. “Those clients that truly are not responding to the bank’s letters are those who really will be at risk of facing a foreclosure,” said Jose Teruel, first vice president of the consumer credit services division at Banco Popular. “The three-month moratorium might have seemed generous at first, but in reality, it’s not,” said Maria Jimenez, director of the legal services clinic at the University of Puerto Rico. “There are still people without power, so the ability to generate revenue is not there.” More than 30,000 jobs were lost after Hurricane Maria, and some 30% of small and medium-size businesses remain closed more than four months after the storm, according to the island’s Treasury Department. Meanwhile, more than 30% of power customers remain in the dark and many struggle to pay utility bills. Puerto Rico’s Office of the Commissioner of Financial Institutions said it is collecting more information to better understand the situation. It recently extended a deadline for all banks on the island to submit data, including exactly how many moratoriums were awarded. It is unclear how banks will handle the mortgages, said Rafael Rodriguez, who oversees a legal aid project involving foreclosures for the nonprofit Legal Services of Puerto Rico. “The expectation we have is that once the moratoriums expire, the massive wave of foreclosures on the island will continue,” he said.

US personal income rose 0.4% in Dec, vs 0.3% increase expected

–  Spending rose solidly in December as demand for goods and services increased.

–  Personal income rose 0.4% last month after advancing 0.3% in November.

The Commerce Department said on Monday consumer spending, which accounts for more than two-thirds of US economic activity, increased 0.4% last month after an upwardly revised 0.8% increase in November. Economists polled by Reuters had forecast consumer spending increasing 0.4% in December after a previously reported 0.6% rise in November. When adjusted for inflation, consumer spending rose 0.3% in December. The figures were included in the advance fourth-quarter gross domestic product report published on Friday. Consumer spending accelerated at a 3.8% annualized rate in the October-December period, the fastest in three years, after rising at a 2.2 pace in the third quarter. Robust consumer spending helped to offset the drag from trade and inventories on the economy, which grew at a 2.6% rate in the fourth quarter. GDP increased at a 3.2% pace in the third quarter. Personal income rose 0.4% last month after advancing 0.3% in November. Wages increased 0.5% last month. Savings fell to $351.6 billion in December, the lowest level since December 2007, from $365.1 billion in the prior month. Last month, spending on long-lasting goods, such as motor vehicles, increased 0.7%. Outlays on services rose 0.5%, reflecting rising demand for utilities. Monthly inflation ticked up in December. The Federal Reserve’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, rose 0.2% in December after gaining 0.1% in November. The so-called core PCE increased 1.5% in the 12 months through December after a similar rise in November.

NAR – existing-home sales fade in december; 2017 sales up 1.1%

Existing-home sales subsided in most of the country in December, but 2017 as a whole edged up 1.1% and ended up being the best year for sales in 11 years, according to the National Association of Realtors.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 1.1% in 2017 to a 5.51 million sales pace and surpassed 2016 (5.45 million) as the highest since 2006 (6.48 million). In December, existing-home sales slipped 3.6% to a seasonally adjusted annual rate of 5.57 million from a downwardly revised 5.78 million in November. After last month’s decline, sales are still 1.1% above a year ago. The median existing-home price for all housing types in December was $246,800, up 5.8% from December 2016 ($233,300). December’s price increase marks the 70th straight month of year-over-year gains. Total housing inventory at the end of December dropped 11.4% to 1.48 million existing homes available for sale, and is now 10.3% lower than a year ago (1.65 million) and has fallen year-over-year for 31 consecutive months. Unsold inventory is at a 3.2-month supply at the current sales pace, which is down from 3.6 months a year ago and is the lowest level since NAR began tracking in 1999. First-time buyers were 32% of sales in December, which is up from 29% in November and unchanged from a year ago. NAR’s 2017 Profile of Home Buyers and Sellers – released in late 20174 – revealed that the annual share of first-time buyers was 34%. According to Freddie Mac, the average commitment rate (link is external) for a 30-year, conventional, fixed-rate mortgage inched higher for the third straight month to 3.95% in December from 3.92% in November. The average commitment rate for all of 2017 was 3.99%.

Properties typically stayed on the market for 40 days in December, which is unchanged from November and down from a year ago (52 days). Forty-four% of homes sold in December were on the market for less than a month.’s Market Hotness Index, measuring time-on-the-market data and listings views per property, revealed that the hottest metro areas in December were San Jose-Sunnyvale-Santa Clara, Calif.; San Francisco-Oakland-Hayward, Calif.; Vallejo-Fairfield, Calif.; Colorado Springs, Colo.; and Stockton-Lodi, Calif. NAR President Elizabeth Mendenhall says improving the new tax law is a top priority for Realtors in 2018. “Especially in high-cost, high-taxed markets, there’s still big concern that the overall structure of the final bill diminishes the tax benefits of homeownership in a way that would adversely affect home values and sales over time,” she said. “As the housing market adjusts to the new law, Realtors® will be listening to their clients and communicating to lawmakers ways to ensure owning a home is truly incentivized in the tax code.” All-cash sales were 20% of transactions in December, which is down from 22% in November and 21% a year ago. Individual investors, who account for many cash sales, purchased 16% of homes in December, up from 14% both last month and a year ago. For the year, all-cash sales averaged 21% of sales (23% in 2016), and investor sales were at 15% (14% in 2016).

Distressed sales – foreclosures and short sales – were 5% of sales in December, up from 4% in November but down from 7% a year ago. Four% of December sales were foreclosures and 1% were short sales. Single-family home sales declined 2.6% to a seasonally adjusted annual rate of 4.96 million in December from 5.09 million in November, but are still 1.0% above the 4.91 million pace a year ago. The median existing single-family home price was $248,100 in December, up 5.8% from December 2016. Existing condominium and co-op sales fell 11.6% to a seasonally adjusted annual rate of 610,000 units in December, but are still 1.7% above a year ago. The median existing condo price was $236,500 in December, which is 6.4% above a year ago. December existing-home sales in the Northeast fell 7.5% to an annual rate of 740,000, and are now 2.6% below a year ago. The median price in the Northeast was $261,400, which is 3.0% above December 2016. In the Midwest, existing-home sales dipped 6.3% to an annual rate of 1.33 million in December, but are still 1.5% above a year ago. The median price in the Midwest was $191,400, up 7.8% from a year ago. Existing-home sales in the South decreased 1.7% to an annual rate of 2.30 million in December, but are still 3.1% higher than a year ago. The median price in the South was $221,200, up 5.8% from a year ago. Existing-home sales in the West declined 1.6% to an annual rate of 1.20 million in December, and are now 0.8% below a year ago. The median price in the West was $367,400, up 7.3% from December 2016.

Trump declares America open for business under his tenure

President Trump says there has never been a better time to hire in America during his speech at the World Economic Forum in Davos, Switzerland.

Declaring that America is open for business under his leadership, President Donald Trump told a gathering of political and business elites on Friday that the economic growth taking place in the US due to his “America first” agenda also benefits the rest of the world. Trump told the World Economic Forum in Davos, an incongruous location for a nationalist president, that American prosperity has created countless jobs around the world, but stressed that his priority would always remain on protecting the interests of within his nation’s own borders. “As president of the United States, I will always put American first just as the leaders of other countries should put their countries first,” said Trump. But the president tried to strike a balance, tempering his nationalist agenda with reassurances to the globalist and cooperation-minded audience that his protectionist vision “does not mean America alone.” “When the United States grows, so does the world,” Trump said. “American prosperity has created countless jobs around the globe and the drive for excellence, creativity and innovation in the United States has led to important discoveries that help people everywhere live more prosperous and healthier lives.” As Forum chairman Klaus Schwab introduced Trump, he drew some hisses when he said that the president could be subject to “misconceptions and biased interpretations.” When Trump took the stage, he received modest applause but some people kept their hands at their sides. The crowd was largely subdued as the president spoke but there were boos when Trump took a swipe at the media.

New home sales rise 8.3% overall in 2017

Sales of newly built, single-family homes fell 9.3% in December to a seasonally adjusted annual rate of 625,000 units, according to newly released data by the US Department of Housing and Urban Development and the US Census Bureau. Despite this monthly decline, new home sales rose 8.3% overall in 2017 to 608,000 units. “The number of consumers planning to buy a new home in the near future is trending upward,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Inventory remains low, but its growth in 2017 is an encouraging sign. Our members are also telling us that market conditions continue to improve.” “Some moderation in sales was expected this month after a strong November reading,” said NAHB Senior Economist Michael Neal. “With ongoing job creation and rising home equity, we should see housing demand continue to grow in the months ahead.” The inventory of new home sales for sale was 295,000 in December, which is a 5.7-month supply at the current sales pace. The median sales price of new houses sold was $335,400. Regionally, new home sales decreased 2.4% in the Northeast, 9.5% in the West, 9.8% in the South and 10% in the Midwest.

US durable goods orders rose 2.9% in Dec, vs 0.8% increase expected

The Commerce Department says that orders for long-lasting manufactured goods rose 2.9% in December, the fastest pace since June and another sign of strength for American industry. Orders were lifted by a 15.9% surge in demand for civilian aircraft and aviation parts, which can bounce around from month to month. Excluding the volatile transportation sector, orders increased 0.6% in December. Overall orders for durable goods, which are meant to last at least three years, have risen in four the last five months. Still, a category that measures business investment — orders for nondefense capital goods excluding aircraft — dipped 0.3% in December. American manufacturers are benefiting from a pickup in global economic growth and a weaker dollar, which makes US goods less expensive in foreign markets.

CoreLogic – wildfires and hurricane-related floods were most destructive natural hazards in 2017

CoreLogic released its annual Natural Hazard Risk Summary and Analysis which shows relatively average activity for most US natural hazards with the exception of wildfires in California and flooding as a result of Hurricanes Harvey and Irma. The annual report reviews hazard activity in the US including events for flooding, earthquake, wildfire, wind, hail, tornado and hurricanes, as well as several international events including Hurricane Maria in Puerto Rico, a Magnitude 7.1 earthquake in Mexico and Cyclone Debbie in Australia. Highlights from the analysis include:


–  Flooding from Hurricanes Harvey and Irma resulted in an estimated $69 billion to $105 billion in residential and commercial damage.

–  Flood damage in Texas from Hurricane Harvey is estimated at $40 billion to $59 billion, of which $25 billion to $37 billion is residential damage and $15 billion to $22 billion is commercial damage

–  Approximately 75% of the flood damage to residential properties from Hurricane Harvey was uninsured

–  Flood damage in Florida, Alabama, Georgia, North Carolina and South Carolina from Hurricane Irma is estimated at $29 billion to $46 billion, of which $25 billion to $38 billion is residential damage and $4 billion to $8 billion is commercial damage

–  Approximately 80% of the flood damage to residential properties from Hurricane Irma was uninsured

–  California and the Midwest also experienced significant rainfall that resulted in flooding. According to the National Centers for Environmental Information (NCEI), total property loss from the California winter floods is estimated at $1.5 billion and total property loss from the Midwest (between Oklahoma and Ohio) April/May flooding is estimated at $1.7 billion.

Atlantic Hurricanes

–  Hurricane activity in the Atlantic was higher than average in 2017 with 17 named storms, 10 hurricanes and six major hurricanes, which are identified as Category 3 or greater.

–  Hurricane Harvey, a Category 4 storm that made landfall in Texas, caused an estimated $1 billion to $2 billion in insured wind and storm surge loss to both residential and commercial properties, and Hurricane Irma, a Category 4 storm that made landfall in South Florida, caused an estimated $14 billion to $19 billion in insured wind and storm surge loss to both residential and commercial properties.


–  Due in large part to the strong winds brought by Hurricanes Harvey and Irma, the land area impacted by severe winds (>80 mph) was more than four times greater than in 2016.

–  Port Aransas, Texas recorded the highest wind speed of the year at 131 mph during Hurricane Harvey

–  Western Nebraska recorded the strongest wind gust associated with severe thunderstorms of the year at 115 mph on June 26

–  At 37%, more than one-third of the continental US experienced wind events of 60 mph or higher in 2017.


–  The total number of acres burned (9,791,062, acres) in 2017 is the third highest in US history, preceded by 2015 (10,125,149 acres) and 2006 (9,873,745 acres).

–  The 10 most destructive wildfires in 2017, in terms of structures destroyed, were in California and include:

–  The Tubbs Fire in northern California which burned 36,807 acres and 5,643 structures

–  Until the Tubbs Fire, the two worst wildfires in California history – Tunnel in 1991 and Cedar in 2003 – destroyed 5,720 structures combined

–  The Nuns Fire in northern California which burned 54,382 acres and 1,355 structures

–  The Thomas Fire in southern California which burned 281,893 acres and 1,063 structures

–  The Atlas Fire in northern California which burned 51,624 acres and 781 structures

–  The Redwood Valley Fire in southern California which burned 36,523 acres and 544 structures

–  The Cascade Fire in northern California which burned 9,989 acres and 398 structures

–  The Lilac Fire in southern California which burned 4,100 acres and 157 structures

–  The Detwiler Fire in Mariposa County, California which burned 81,826 acres and 131 structures

–  The Creek Fire in southern California which burned 15,619 acres and 123 structures

–  The Helena Fire in Trinity County, California which burned 21,846 acres and 123 structures


–  As of December 1, there were 818 identified earthquakes of magnitude 3.0 or greater across the country.

–  In 2016, approximately 60% of the total number of earthquakes occurred in Oklahoma compared with only 28% in 2017

The most notable earthquake events in 2017 include:

–  A Magnitude 5.8 earthquake near Lincoln, Montana on July 6

–  A Magnitude 5.3 earthquake near Soda Springs, Idaho on September 2

–  A Magnitude 4.1 earthquake in Delaware on November 30


–  Hail activity for 2017 was near average with 168,905 square miles, or 5.5%, of the continental US impacted by severe hail, defined as 1” or greater.

–  Denver, Colorado experienced the worst of this natural hazard with estimated losses of $1.4 billion from approximately 150,000 auto insurance claims and approximately 50,000 homeowner insurance claims.


–  The number of tornadoes in 2017 was above average with 1,522 recorded tornadoes, making it the third most active year since 2005.

–  With 81 confirmed tornadoes between Mississippi and Georgia, the month of January experienced the most tornado activity in 2017.

Wage growth, tax-bonuses spark shopping in retail stocks

US fund managers are betting that rising wages and the effects of the Republican-led corporate tax cut will prove a lifeline to middle-market retailers who have struggled to remain relevant in the age of Amazon. Wells Fargo, CM Advisors and Plumb Funds are among those asset management firms that are increasing their positions in companies that focus on shoppers who earn near the average family income of $74,000 annually. These include children’s apparel company Carter’s Inc, department store Big Lots Inc, men’s apparel company Tailored Brands Inc and discount retailer Wal-Mart Stores. With unemployment at 17-year lows, companies are having a hard time filling low to middle-income jobs. As a result, wages for those workers are expected to rise more than 3% this year, the largest increase in the category since April 2009, according to data from the Federal Reserve Bank of Atlanta. Given the expected rise in wages and one-time bonuses resulting from the Republican-led tax cut signed into law on Dec. 22, fund managers are betting that workers will spend more, thus helping drive up share prices of retailers. “As capital comes back to the US, labor demand will be stronger and we will see for the first time in a long time wage growth creeping into the US market,” boosting discretionary income and spending, said Jim Brilliant, portfolio manager of the CM Advisors Fixed Income Fund.

The push toward the middle of the pack retailers is a reversal from the early stages of the bull market that began in 2009, when fund managers packed into the shares of luxury companies such as Tiffany & Co and downmarket retailers such as Dollar General as a play on rising income inequality. Shares of high-end fashion company Tapestry Inc – then trading under the name Coach Inc – rose more than 45% in 2010, more than double the 20% return in middle-market stores like Target. Now, fund managers say they are targeting middle-income shoppers as jobless claims currently at 45-year lows and increased corporate spending push companies to increase wages. As a result, they see more dollars flowing to retailers, some of which suffered declines of 25% in their share prices in 2017 on fears that Inc would move into additional business lines and drain business away from them.

ATTOM – US foreclosure activity drops to 12-year low in 2017

ATTOM Data Solutions, curator of the nation’s largest multi-sourced property database, today released its Year-End 2017 US Foreclosure Market Report, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 676,535 US properties in 2017, down 27% from 2016 and down 76% from a peak of nearly 2.9 million in 2010 to the lowest level since 2005. Those 676,535 properties with foreclosure filings in 2017 represented 0.51% of all US housing units, down from 0.70% in 2016 and down from a peak of 2.23% in 2010 to the lowest level since 2005. “Thanks to a housing boom driven primarily by a scarcity of supply, which has helped to limit home purchases to the most highly qualified — and low-risk — borrowers, the US housing market has the luxury of playing a version of foreclosure limbo in which it searches for how low foreclosures can go,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “There are a few notable local market exceptions playing a different version of foreclosure limbo in which a backlog of legacy foreclosure activity left over from the last housing crisis is still winding its way through a labyrinthine foreclosure process, resulting in incongruous jumps in various stages of foreclosure activity in markets such as New York, New Jersey and DC.” Lenders started the foreclosure process on 383,701 US properties in 2017, down 20% from 2016 and down 82% from a peak of 2,139,005 in 2009 to a new all-time low going back as far as foreclosure start data is available — 2006. “Across Southern California, while foreclosures have maintained historically low levels during much of 2017, housing affordability has become the concern that has many watching the market for a potential shift in the near future,” said Michael Mahon, president of First Team Real Estate, covering the Southern California market, which also posted an 11-year low in foreclosure starts in 2017. “With wage growth not meeting equity growth across many Southern California markets — coupled with rising interest rates — there are some concerns that foreclosures could be on the rise in 2018.”

Counter to the national trend, the District of Columbia and five states posted year-over-year increases in foreclosure starts in 2017, including Illinois (up 2%); Oklahoma (up 23%); Louisiana (up 2%); DC (up 54%); West Virginia (up 32%); and Vermont (up 27%). A total of 318,165 US properties were scheduled for public foreclosure auction (the same as a foreclosure start in some states) in 2017, down 27% from 2016 and down from a peak of 1,600,593 in 2010 to a new all-time low going back as far as foreclosure auction data is available — 2006. “The data for the Seattle market tells a very big story, and that is we are not seeing a housing bubble forming,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market, where scheduled foreclosure auctions in 2017 dropped 47% to an 11-year low. “With foreclosure rates at less than 0.4% of total housing units, the market is remarkably stable.  That said, we are certainly suffering from serious affordability issues, but this is not translating into defaults on loans.” The District of Columbia and seven states posted a year-over-year increase in scheduled foreclosure auctions in 2017, including New York (up 9% to the highest level since 2006); Oklahoma (up 4%); Connecticut (up 7%); and Maine (up 2%). Lenders repossessed 291,579 properties through foreclosure (REO) in 2017, down 23% from 2016 and down 72% from a peak of 1,050,500 in 2010 to the lowest level since 2006 — an 11-year low. Counter to the national trend, the District of Columbia and seven states posted a year-over-year increase in REOs in 217, led by New Jersey (19% increase to the highest level since 2006); Delaware (up 16%); Montana (up 12%); DC (up 10%); and Wyoming (up 10%). States with the highest foreclosure rates in 2017 were New Jersey (1.61% of housing units with a foreclosure filing); Delaware (1.13%); Maryland (0.95%); Illinois (0.86%); and Connecticut (0.78%).Rounding out the top 10 states with the highest foreclosure rates were Florida (0.72%); South Carolina (0.70%); Ohio (0.70%); Nevada (0.67%); and New Mexico (0.63%). Among 217 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in 2017 were Atlantic City, New Jersey (2.72% of housing units with a foreclosure filing); Trenton, New Jersey (1.68%); Philadelphia, Pennsylvania (1.26%); Fayetteville, North Carolina (1.17%); and Rockford, Illinois (1.14%). Rounding out the top 10 were Cleveland, Ohio (1.06%); Columbia, South Carolina (1.05%); Baltimore, Maryland (1.05%); Chicago, Illinois (1.04%); and Albuquerque, New Mexico (0.99%).

US properties foreclosed in the fourth quarter of 2017 had been in the foreclosure process an average of 1,027 days, a 14% jump from the previous quarter and a 28% increase from a year ago to the longest since ATTOM began tracking average foreclosure timelines in Q1 2007. States with the longest average time to foreclose in Q4 2017 were Indiana (2,370 days); Nevada (1,933 days); Florida (1,493 days); New Jersey (1,298 days) and Georgia (1,263 days). Among 233 counties nationwide with sufficient data, those with the longest average time to foreclose in Q4 2017 were Queens County, New York; Marion County (Indianapolis), Indiana (2,810 days); Orange County (Orlando), Florida (2,109 days); Henry County (Atlanta), Georgia (2,075 days); and Cherokee County (Atlanta), Georgia (1,988 days). Nationwide, 50% of all loans actively in foreclosure as of the end of 2017 were originated between 2004 and 2008 — down from 55% a year ago. States with the highest number of legacy foreclosures on loans originated between 2004 and 2008 were New York (25,886), New Jersey (20,172), Florida (19,494), California (9,847), and Illinois (8,732). Legacy foreclosures on loans originated between 2004 and 2008 represented 74% of all active loans in foreclosure in the District of Columbia, higher than any state with at least 100 active loans in foreclosure, followed by Hawaii (67%), New Jersey (58%), Massachusetts (58%), Florida (55%), and Nevada (55%). Counties with the highest total number of legacy foreclosures were Nassau County (Long Island), New York (6,782); Cook County (Chicago), Illinois (5,478); Kings County (Brooklyn), New York (4,677); Miami-Dade County, Florida (3,804); and Suffolk County (Long Island), New York (3,417).

Oil prices fall as US output rise outweighs crude stock falls

Oil prices slid on Friday, putting them on course for the biggest weekly falls since October, as a bounce-back in US production outweighed ongoing declines in crude inventories. Brent crude futures were at $68.70 a barrel at 0949 GMT, down 61 cents from their last close. On Monday, they hit their highest since December 2014 at $70.37. US West Texas Intermediate crude futures were at $63.38 a barrel, down 57 cents from their last settlement. WTI marked a December-2014 peak of $64.89 a barrel on Tuesday. The International Energy Agency (IEA), in its monthly report, said that global oil stocks have tightened substantially, aided by OPEC cuts, demand growth and Venezuelan production hitting near 30-year lows. But it warned that rapidly increasing production in the United States could threaten market balancing. “Explosive growth in the US and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico,” the IEA said of 2018 production. US crude oil production stood at 9.75 million barrels per day (bpd) on Jan. 12, data from the Energy Information Administration showed. The IEA said it expects this to soon exceed 10 million bpd, overtaking OPEC behemoth Saudi Arabia and rivaling Russia.

Analysts also pointed to an expected demand slowdown at the end of winter in the northern hemisphere and excessive long positions in financial oil markets as a likely brake on any upward momentum in prices. ANZ bank said “an upcoming soft patch in demand and extreme investor positioning does open up the possibility of some short-term weakness.” Overall, however, oil prices remain well supported, and most analysts do not expect steep declines. The main price driver has been a production cut by a group of major oil producers around the Organization of the Petroleum Exporting Countries (OPEC) and Russia, who started to withhold output in January last year. The supply cuts by OPEC and its allies, which are scheduled to last throughout 2018, were aimed at tightening the market to prop up prices. In the United States, crude inventories fell 6.9 million barrels in the week to Jan. 12, to 412.65 million barrels. That’s their lowest seasonal level in three years and below the five-year average marker around 420 million barrels.

NAHB – single-family sector boosts housing production in 2017, more gains expected this year

Nationwide housing starts fell 8.2% in December to a seasonally adjusted annual rate of 1.19 million units after an upwardly revised November reading, according to newly released data from the US Department of Housing and Urban Development and the Commerce Department. The December numbers show a return to trend after an especially strong November report, but overall 2017 saw significant gains in housing production. Starts rose 2.4% last year, pushed up by an 8.5% jump in the single-family sector. Multifamily starts dropped 9.8%. Looking at the December 2017 report, single-family starts fell 11.8% to a seasonally adjusted annual rate of 836,000 units. However, the three-month moving average for single-family production reached a post-recession high. Meanwhile, multifamily starts ticked up 1.4% to 356,000 units. “There is a pro-business sentiment in Washington right now, and our builders hope to continue receiving relief from overly burdensome regulations,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “This political climate is boosting their optimism in the housing market.” “A return to normal levels of housing production this month is expected after a very strong fall season,” said NAHB Chief Economist Robert Dietz. “We saw a surge of housing activity in the South after hurricane-related delays, and now that region is returning to its positive growth trend.”

NAHB is forecasting continued growth in housing production this year, led by ongoing single-family gains. Total housing starts are expected to grow 2.7% to 1.25 million units. Single-family production should increase 5% to 893,000 units while the multifamily sector is expected to edge 1.6% lower this year to 354,000. Regionally in December, combined single- and multifamily housing production fell 0.9% in the West, 2.2% in the Midwest, 4.3% in the Northeast and 14.2% in the South.Overall permit issuance in December was essentially flat, inching down 0.1% to a seasonally adjusted annual rate of 1.302 million units. Single-family permits rose 1.8% to 881,000 units while multifamily permits fell 3.9% to 421,000. Permits rose 43% in the Northeast, 8.7% in the Midwest and 1.7% in the West. Permits declined 11.1% in the South, led by a drop on the multifamily front.

Congress likely racing toward a government shutdown

A bitterly divided Congress hurtled toward a government shutdown this weekend in a partisan stare-down over demands by Democrats for a solution on politically fraught legislation to protect about 700,000 younger immigrants from being deported. Democrats in the Senate have served notice they will filibuster a four-week, government-wide funding bill that cleared the House Thursday evening, seeking to shape a subsequent measure but exposing themselves to charges they are responsible for a looming shutdown. Republicans controlling the narrowly split chamber took up the fight, arguing that Democrats were holding the entire government hostage over demands to protect “dreamer” immigrants brought to the country illegally as children. “Democratic senators’ fixation on illegal immigration has already blocked us from making progress on long-term spending talks,” said Senate Majority Leader Mitch McConnell, R-Ky. “That same fixation has them threatening to filibuster funding for the government.” President Donald Trump entered the fray early Friday morning, mentioning the House-approved bill on Twitter, adding: “Democrats are needed if it is to pass in the Senate – but they want illegal immigration and weak borders. Shutdown coming? We need more Republican victories in 2018!” In the House, Republicans muscled the measure through on a mostly party-line 230-197 vote after making modest concessions to chamber conservatives and defense hawks. House Speaker Paul Ryan immediately summoned reporters to try to pin the blame on top Senate Democrat Chuck Schumer of New York.

MBA – statement on FHFA’s perspective on housing finance reform

David H. Stevens, President and CEO of the Mortgage Bankers Association (MBA), released the following statement regarding FHFA’s paper entitled, “Federal Housing Finance Agency Perspectives on Housing Finance Reform”:

“MBA applauds FHFA Director Mel Watt for releasing this important paper which reinforces the need for comprehensive legislative housing finance reform.  There are many similarities between this proposal and MBA’s own plan including the need for a government guarantee behind MBS to support single-family and multifamily finance, two or more competing guarantors, the use of a single security in the single family market, and a level playing field for lenders of all sizes and business models. We look forward to continuing to work with Congressional leaders, the Administration, Director Watt, and other stakeholders to create a secondary mortgage market that provides a more stable system and broad, sustainable access to credit for all qualified borrowers.”

NAHB – remodeling market indicators hit high in fourth quarter

The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) posted a reading of 60 in the fourth quarter of 2017, up three points from the previous quarter and only the second time since 2001 the reading has reached 60. For 19 consecutive quarters, the RMI has been at or above 50, which indicates that more remodelers report market activity is higher compared to the prior quarter than report it is lower. The overall RMI averages ratings of current remodeling activity with indicators of future remodeling activity. “A booming stock market and low unemployment continue to fuel consumers’ investment in their homes,” said NAHB Remodelers Chair Joanne Theunissen, CGP, CGR, a remodeler from Mt. Pleasant, Mich. “Natural disaster-related repairs also caused strong demand for maintenance and repair projects.” Current market conditions increased four points from the third quarter of 2017 to 60. Among its three major components, major additions and alterations jumped seven points to 60, minor additions and alterations increased three points to 59, and the home maintenance and repair component rose three points to 61. The future market indicators index rose one point from the previous quarter to 59. Calls for bids decreased two points to 56, amount of work committed for the next three months rose two points to 58, the backlog of remodeling jobs gained a significant six points to 66 and appointments for proposals fell two points to 57. “At a high of 60, the RMI is consistent with the strong growth in home improvement spending in 2017,” said NAHB Chief Economist Robert Dietz. “However, the surge in the backlog of remodeling jobs likely reflects supply-side challenges remodelers are facing in the form of skilled labor shortages and rising material prices.”

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.

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