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DSNews – the week ahead: economic activity’s growth measured

On Wednesday, the Federal Reserve will release its latest Beige Book , a publication about current economic conditions across the 12 Federal Reserve Districts. The Book is published eight times per year, and summarizes key economic conditions by each of the Fed districts. The last Book revealed increased economic activity across the U.S. Eight of the 12 Federal Reserve Districts reported modest to moderate growth. The majority of Districts indicated that manufacturing expanded, but that growth had slowed, particularly in the auto and energy sectors. New home construction and existing home sales were little changed, with several Districts reporting that sales were limited by rising prices and low inventory. Commercial real estate activity was also little changed on balance. Most Districts reported modest to moderate growth in activity in the nonfinancial services sector, though a few Districts noted that growth there had slowed. According to the Book, residential real estate markets saw ongoing price increases and mixed sales results; contacts in a couple of markets cited greater “balance” as local shortages of housing inventory eased somewhat. While retailers (including an auto dealer) and manufacturers said sizable tariff increases would pose significant problems if they occurred and many respondents cited uncertainty, outlooks remained mostly positive. Closed single-family sales were up year-over-year from November 2017 to November 2018 in Rhode Island, Boston, and Maine, and down in Massachusetts and New Hampshire. Residential markets in Rhode Island and Boston became more balanced in recent months, with growing supplies of homes for sale and moderation in the pace of home price appreciation. Despite a seller’s market environment, contacts said real estate was a preferred investment choice, given the volatile U.S. stock market. Here’s what else is happening in The Week Ahead:

–  Eighth Annual AEI-CRN Housing Conference (October 16-17)

–  Affinity Consulting 2019 Management Symposium (October 16-17)

–  Census Bureau Housing Starts (October 17)

–  Census Bureau Building Permits Survey (October 17)

–  The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress (October 17)

China warns to keep ‘champagne’ on ice after ‘phase one’ trade deal

The United States and China still have some work to do before finalizing their “phase one” trade deal. Beijing wants to send Vice Premier Liu He, China’s top trade negotiator, to Washington as soon as the end of October to finalize a deal that can be signed next month at the Asia-Pacific Economic Cooperation conference next month in Chile. “While the negotiations do appear to have produced a fundamental understanding on the key issues and the broader benefits of friendly relations, the Champagne should probably be kept on ice, at least until the two presidents put pen to paper,” wrote the state-owned China Daily. Stocks futures are pointing to a modestly lower open following the report. Last week, the major averages rallied sharply in anticipation of a deal. “The outline of the agreement is quite similar to what was reached in late 2018 after the first trade summit between Presidents Trump and Xi,” wrote a global markets research team at the Tokyo-based investment bank Nomura, adding that the deal does little to materially reduce “fundamental uncertainties regarding the US-China economic relationship.” The “phase one” agreement came days before customs data released Monday by Beijing showed Chinese exports to the U.S. fell 17.8 percent to $36.5 billion in September, evidence the trade war is taking a toll on the world’s second-largest economy. The U.S. is the biggest buyer of Chinese goods. Trade negotiators from the U.S. and China on Friday agreed to a deal in principle that is expected to take three to five weeks to complete. As part of the deal, China agreed to increase its purchases of U.S. agricultural products and Boeing aircraft, in addition to making reforms on intellectual property and financial services. The U.S. has agreed to not raise tariffs from 25 percent to 30 percent on Oct. 15. A decision has not yet been made on the tariff increase scheduled for Dec. 15. Trump touted the agreement as a big win for U.S. industrial companies and farmers. “There will be more tractors sold, they’re going to be bigger and better and more powerful and they’re going to be made by John Deere and Case [IH] and Caterpillar,” Trump said Friday during a rally in Lake Charles, Louisiana. On Sunday, he tweeted, “My deal with China is that they will IMMEDIATELY start buying very large quantities of our Agricultural Product, not wait until the deal is signed over the next 3 or 4 weeks.”

Citibank fined $30 million for holding onto foreclosures for too long

Citibank was fined $30 million by federal banking regulators after an investigation found that the bank was not selling foreclosed homes back into the market fast enough. The Office of the Comptroller of the Currency announced Friday that it fined Citibank $30 million for “violations related to the holding period of other real estate owned.” Under federal banking regulations, there is a two-year limit on banks maintaining possession of a foreclosed property. The rules stipulate that banks can apply for an annual exemption that can push their ownership of a property to as much as five years. But after that, the bank is supposed to sell the property back into the market to prevent available housing inventory from being kept away from would-be homebuyers. And according to the OCC, Citibank violated that rule by holding onto hundreds of foreclosures for longer than the five-year limit. “The OCC found the bank engaged in repeated violations of the statutory holding period for OREO,” the OCC said in a statement. “These violations resulted from the bank’s deficient processes and controls in the identification and monitoring of the OREO holding period. In assessing this civil money penalty, the OCC found the bank failed to meet its commitment to implement corrective actions, resulting in additional violations.” A quick note of explanation on the use of the term “OREO” by the OCC: Most in the housing industry refer to foreclosures as REOs, for real-estate owned, but federal regulators like the OCC and the Federal Reserve refer to them as OREO, for other real estate owned. According to the OCC order, an investigation found more than 200 violations of the foreclosure sale time limit rule between April 4, 2017 and Aug. 14, 2019. But, Citibank states that the problem was limited to those 200 properties. “The maximum holding period for foreclosed properties by a national bank may not exceed five years. In some instances, we did not meet the requirement,” the bank said in a statement. “The issue, involving approximately 200 properties, was identified in 2015 and there was no impact on our customers,” the bank continued. “Since identifying the issue, we have strengthened controls, processes and procedures to ensure the timely disposition of these assets,” the bank added. “Most importantly, we consistently worked to ensure the responsible disposition of the properties to avoid negatively affecting the real estate market in those communities.” As Citibank noted, the problem began in 2015.

According to the OCC, in 2015, the bank found its own processes to be “deficient.” More specifically, the bank “lacked adequate policies, procedures, and processes to effectively identify and monitor the holding period for OREO assets,” the OCC said. The OCC stated that at that time, Citibank “committed to developing and implementing corrective actions to address these deficiencies.” But, the bank later submitted multiple requests to extend the holding period for REO properties that were “not made timely and resulted in numerous additional violations,” the OCC said. Then, in April 2017, the OCC told Citibank that its internal controls on REOs remained “decentralized, ineffective, and inadequate.” After that, Citibank continued to submit “untimely requests” to extend the REO holding period, the OCC said. And things didn’t get much better from there. “Following additional efforts to correct the root cause of the continued OREO holding period violations, the Bank recommitted to implementing corrective actions by August 31, 2018,” the OCC said. “The Bank failed to meet its commitment, resulting in additional violations.” According to the OCC, the bank has made progress in dealing the REOs in question. In fact, the regulator states that Citibank has “significantly reduced” its REO holdings in the last year. “The OCC continues to monitor the Bank’s progress to implement the required corrective actions to attain effective policies, procedures, and processes to identify and monitor the holding period for OREO assets in compliance with the law and regulation,” the OCC stated. “As part of these efforts the Bank has, over the last twelve months, significantly reduced its inventory of OREO assets.” According to the OCC, Citibank has already paid the penalty to the Department of the Treasury.

Ross Stores expanding, announces dozens of new stores

Ross Stores is growing, the California-based retailer expanding its national footprint. And the discount clothing store’s brand shows no sign of slowing growth. The new stores – 30 Ross Dress for Less locations (“Ross”) and 12 dd’s DISCOUNTS stores – will be added to 19 states. This is part of a national burst in openings for the brand, the new additions giving a total of 98 openings for Ross this year. These additions add to the 1,811 Ross Dress for Less and dd’s DISCOUNTS locations as well. Noticeable among the announced locations are nine stores in the Midwest where Ross has been actively seeking to expand its presence. This summer, Ross went into Ohio for the first time with two new stores. “This fall, we continued to expand our Ross and dd’s footprints across our existing markets as well as expansion in our newer market — the Midwest. The 42 locations we added this fall included nine stores in our newer Midwest markets of Illinois, Indiana, Kentucky, Nebraska, and Ohio. In addition, dd’s DISCOUNTS entered the state of Virginia with the opening of one new store and now operates in 19 states,” said Jim Fassio, president and chief development officer. “Looking ahead, we remain confident in our ability to grow to 2,400 Ross Dress for Less and 600 dd’s DISCOUNTS locations over time.” According to their website, Ross offers “name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day.”

CoreLogic – California home sales dip to a four-year low for an August

California home sales edged moderately lower in August, marking the twelfth month out of the last 13 in which sales were lower than a year earlier as some would-be buyers remained priced out and others stayed on the sideline, hesitant to buy near a potential price peak. The statewide median sale price remained 1% higher than August 2018 but in Southern California the median was flat year over year and in the San Francisco Bay Area it fell slightly for the fourth consecutive month. An estimated 42,440 new and existing houses and condos sold statewide in August 2019, down 0.2% from July 2019 and down 2.8% from August 2018, CoreLogic public records data show. Activity normally edges higher between July and August, and since 2000 the average change in sales between those two months is a gain of 2.8%. Statewide sales have fallen on a year-over-year basis since August 2018, with the only annual gain – 2.1% – in July this year. Last month’s 2.8% annual sales decline was likely tempered by this summer’s downward trend in mortgage rates. During the first half of this year sales fell nearly 9% from the same period last year, and the annual declines during the first three months of this year were double-digit. The significant drop in mortgage rates in recent months has helped stoke sales by enabling many buyers to purchase homes with at least modestly lower payments than they would have faced last year. While California’s median sale price was up 1% year over year this August, the state’s “typical mortgage payment” – the monthly principal and interest payment on the median priced home – fell almost 11% because of a roughly 1 percentage point decline in mortgage rates over that 12-month period. Compared with a year earlier, August 2019 sales declined across the price spectrum. Deals below $300,000 fell 13.1% year over year, while sales under $500,000 fell 7.9% and sales of $500,000 or more fell 4.9%. Sales of $1 million-plus fell 6% year over year and $2 million-plus deals fell 2.6%. Through the first seven months of this year sales of $1 million or more have fallen 8.1% compared with the same period last year, while $2 million-plus sales are down 7.3%. Stock market volatility has likely played a role in this year’s decline in high-end sales.

The median price paid for all new and existing houses and condos sold statewide in August 2019 was $499,000, down 0.2% from $500,000 in July 2019 and up 1% from $494,000 in August 2018. On average since 2000 the median hasn’t changed at all between July and August. This August’s 1% year-over-year gain in the median was down from an annual increase of 6.2% in August last year and an 8.1% gain in August 2017. Other August 2019 highlights:

–  Adjusted for inflation, California’s August 2019 median sale price remained 14.6% below its March 2007 peak.

–  In the six-county Southern California region, 22,025 new and existing houses and condos sold in August 2019, down 1.2% year over year. August’s median sale price was $535,000, unchanged year over year. Four of the counties posted annual gains in their medians of between 0.7% and 5.3%, while Orange and San Diego counties logged annual declines of 1.0% and 0.1%, respectively.

–  Counties in the relatively affordable Central Valley and Inland Empire (Riverside-San Bernardino counties) recorded some of the state’s largest annual increases in home sales this August, including the following: Butte (+13.9%); Sutter (+12.7%); Solano (+8.6%); Riverside (6.7%); and Kern (+6.2%).

Dow jumps over 400 points on US-China trade progress

U.S. stocks kicked off the final day of the week on a high note as the U.S. and China begin day two of trade talks. This after President Trump signaled that thus far the talks are going well. He tweeted as much on Friday after the opening bell. Trump is set to meet with Chinese Vice Premier Liu He at the White House later today. The Dow rose by more than 400 points in early trading. Also providing a boost was a rebound in consumer sentiment, which in October climbed to a three-month high of 96, up from 93.2 the prior month, according to preliminary data released by the University of Michigan. In stock news, General Motors shares were higher after the automaker provided fresh details on negotiations with the United Auto Workers union. GM, in a letter, outlined some revised points on its offer to the union. Investors are also eyeing Apple which hit an all-time high after a Wall Street analyst raised his price target. Wendy’s also saw a nice pop after disclosing that sales in the third-quarter were stronger than expected. In commodities, oil prices spiked around 1 percent after a rocket attack on an Iranian tanker. Global investors are also expecting to hear from Saudi oil giant Aramco as it prepares for its initial public offering. Early reports indicate the company’s valuation may around $1.5 trillion, slightly below the $2 trillion Crown Prince Mohammed bin Salman was aiming for. In Europe, London’s FTSE gained 0.3 percent, Germany’s DAX added 1.9 percent and France CAC was higher by 1.2 percent. In Asia, China’s Shanghai Composite finished higher by 0.9 percent on Friday and 2.4 percent for the week. Tokyo’s Nikkei closed up 1.2 percent and 1.8 percent for the week. Hong Kong’s Hang Seng ended the session higher 2.3 percent and 1.9 percent for the week.

NAR – rising financial wealth boosts demand for vacation homes

Increased financial wealth and low mortgage rates boosted the demand for and price of vacation homes, according to the National Association of Realtors® 2019 U.S. Vacation Home Counties Report. Between 2013 to 2018, the median sales price in vacation home counties increased at a slightly higher pace of 36% compared to the pace of increase of all existing and new homes sold, at 31%. Median price increases occurred across both expensive and inexpensive areas. The counties with the highest price increases during this five-year span were in three states: Pennsylvania, which includes Pike and Monroe counties; Wisconsin, which contains Price and Washburn counties; and Massachusetts, which includes Nantucket. Lawrence Yun, NAR’s chief economist, says the present figures are telling, especially when compared to data from 10 years prior. “As of 2018, household net worth reached an all-time high of $100.3 trillion – that’s nearly double from a decade ago when wealth declined during the recession. Some of this tremendous growth in wealth, although concentrated, increased demand for vacation homes.” Although most homebuyers purchase their residence with an intent to use the property as a primary home, that is not the case for all buyers. In fact, a portion of homeowners purchase a second home expecting to use it as a general family vacation spot, as a tenant rental, a means to gain equity, or – upon retirement – a future primary residence. The NAR report uses the U.S. Census Bureau’s American Community Survey data to examine “vacation home counties.” These areas are counties where the vacant housing for seasonal, recreational or occasional use, made up 20% or more of the county’s total housing stock. Of 3,141 counties, 206 counties (6.6%) were identified as vacation home counties. Additionally, NAR identified the most and least expensive and affordable vacation home counties, and exactly who is able to afford to purchase a second home.

According to the NAR report, the top 26 vacation home counties – the counties with the largest percentages of vacant seasonal, recreational, or occasional use housing units – include those with nationally-known sites, as well as local destinations. Though less populated, this group includes a large number of counties along northern Michigan, Wisconsin, and Minnesota. Leading the list are counties in Massachusetts (Nantucket and Dukes, 56%; Barnstable, 41%), New Jersey (Cape May, 51%), Colorado (Grand, Summit Eagle, Jackson and Pitkin, 51%), Wisconsin (Vilas, Lincoln, Langlade, Forest and Oneida, 43%), and Michigan (Roscommon, Ogemaw, Gladwin, Iosco and Arenac, 42%). “Some people may visualize the common popular vacation destinations in the U.S. when considering a vacation home, such as counties in Florida or California,” says Yun. “And although those locations have their share of vacation properties, we see that some homeowners prefer some of the other counties, including those in Massachusetts and New Jersey. These areas are often known for harsh weather conditions, but are popular nonetheless.” Some other notable vacation home counties are found in Maine, Pennsylvania, New York, New Hampshire, Maryland, Delaware, North Carolina, Vermont, Florida, California, Georgia, South Carolina, Arizona, Idaho and Oregon. The areas identified as the top 25 most expensive vacation home counties included many well-known summer and winter getaways. Using Black Knight property records data, Nantucket, Mass. emerged as the most expensive vacation home county in 2018, with the median sales price at $1 million. Following were other counties in Massachusetts, including Dukes, a portion of which includes Martha’s Vineyard. Other places of note were Colorado, which contains counties like Pitkin, Eagle, Summit and Grand that are popular Rocky Mountain summer and winter destinations; Florida, which includes Monroe and Collier, known respectively for the Florida Keys and Naples; California, which contains the counties of Mono, Alpine and Inyo, among others, all of which are near Yosemite National Park; and Arizona, which includes Coconino county, home of part of the Grand Canyon. Taking into account the 2018 median sales price and the income of a typical family in the top 25 most expensive areas, the typical family – that is, a family earning the median income only – would be unable to afford to purchase a home in these counties.

Data from Black Knight property records showed that the median price for a vacation home was usually less than $100,000. The most inexpensive vacation home counties were found in Maine (Aroostook, Piscataquis, Somerset, Franklin, Oxford, Washington and Waldo), New York (Chenango and Franklin), Pennsylvania (McKean, Venango, Clarion, Elk, Potter, Clearfield and Jefferson), Missouri (Miller), and Michigan (Gogebic, Lake, Arenac, Iosco and Cheboygan). The expected annual mortgage on a 30-year mortgage with a 20% down payment for a home purchased at the median sales price is less than $5,000. Under such a scenario, the mortgage payment would account for less than 10% of the income of a typical family that purchased a vacation home in one of the top least expensive vacation destination locations. Owning a second home is more affordable for families living in these particular areas. Buyers purchasing a vacation home usually pay all-cash or opt to obtain a mortgage, and typically make a 20% down payment. Recent low mortgage rates made it more affordable to borrow to purchase a second home. Cape May, New Jersey, topped the list of vacation home counties where second home mortgages accounted for the largest share of home purchase loans. Also on that list, among other areas, was California, which has Alpine and Mono counties; New York, which has Hamilton and Delaware counties; and, among others, Colorado, which is the location of Grand and Summit counties. Most of the borrowers who obtained mortgages for second homes earned around $100,000 or more. Among borrowers for second homes, the estimated mortgage payment to income ratio ranged from 4% to 12% in the vacation home counties.

Amazon takes a stand: Company releases “Our Positions” paper

Amazon took the extraordinary step of laying out its positions on nearly every hot-button topic in the world in a web page that unveiled Thursday, bringing new clarity to the tech company’s public policy agenda. The page, which is simply titled “Our Positions,” states where the Seattle tech giant stands on eleven issues — several of which have a direct impact on business in America. “We created this page to provide customers, investors, policymakers, employees, and others our views on certain issues,” the company states on the new page. “While our positions are carefully considered and deeply held, there is much room for healthy debate and differing opinions. We hope being clear about our positions is helpful.” Amazon starts off the “Our Positions” missive by saying “the federal minimum wage in the U.S. is too low and should be raised.” An issue that will become a topic during the 2020 election. This section states that federal minimum wage is $7.25 and has not gone up since 2009, and declares that “raising the minimum wage would have a profound impact on the lives of tens of millions of individuals and families across the nation and help address growing income inequality.” The company then states that it pays a minimum wage of $15 an hour to all full-time, part-time, temporary, and seasonal employees across the United States, and then says they offer the best benefits that are “egalitarian, regardless of level or seniority.” Amazon supports and lobbies for reforms to the immigration system, which includes a legal pathway to citizenship for Dreamers, reforms to the green card and high-skilled visa programs, and their active participation in legal challenges to the Trump administation’s travel ban.

The tech giant feels that counterfeiters should be given stronger penalties under federal law. It claims that counterfeiters are “undeterred and continue to push their products through online and physical stores, harming both consumers and the retail companies who serve them.” In 2018, Amazon invested more than $400 million in personnel and preventative tools built on machine learning and data science, and employed more than 4,000 employees to fight fraud and counterfeiting in our stores. Last year alone, our proactive efforts prevented more than 1 million suspected bad actors from opening Amazon seller accounts and blocked more than 3 billion suspected bad listings. “While our positions are carefully considered and deeply held, there is much room for healthy debate and differing opinions. We hope being clear about our positions is helpful” Amazon supports U.S. federal policies that make intellectual property violations crimes with meaningful penalties, which includes a requirement that every package imported into the U.S. clearly identify who is responsible for shipping the product. “Consumer data privacy should be protected under federal law,” the policy paper states. Amazon claims it has built privacy into our services from the ground up, and it never sells data of its individual customers. Amazon discloses in their privacy notice the types of data collected and the limited circumstances in which we share customer data with third parties. Amazon also feels that “corporate tax codes in any country should incentivize investment in the economy and job creation.” It also goes into how they feel tax codes – particularly those between countries – should be coordinated to have neither loopholes to create lower taxes or overlaps that lead to higher tax rates “because these distort company behavior in ways that don’t benefit consumers or the economy. It also declared support for the Organisation for Economic Co-operation and Development (OECD) and its efforts with governments around the world to review the international tax system.

Black Knight – August 2019 Mortgage Monitor

The Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based upon the company’s industry-leading mortgage performance, housing and public records datasets. This month, Black Knight’s analysts examined the impact of recent interest rate declines on home affordability, finding yet another situation where rate shifts in either direction have profound impact. As Black Knight Data & Analytics President Ben Graboske explained, the current lower interest rate environment has provided a boost to potential homebuyers. “Back in November 2018, we were reporting on home affordability hitting a nine-year low,” said Graboske. “Interest rates were nearing 5%, pushing the share of national median income required to make the principal and interest (P&I) payments on the purchase of the average-priced home to 23.7%. While still below long-term averages, that made housing the least affordable it had been since 2009, spurring a noticeable and extended slowdown in home price growth. In the time since, rates have tumbled and the affordability outlook has improved significantly. That payment-to-income ratio is now 20.7%, which is the second lowest it has been in 20 months, behind only August of this year, and about 4.5% below the long-term, pre-crisis norm. To help quantify the boost this has given to homebuyers, consider that today’s prevailing 30-year rate has cut the monthly P&I payment to purchase the average-priced home by 10% – about $124 per month – from November. Put another way, the decline in rates since November has been enough to boost buying power by $46,000 while keeping monthly P&I payments the same.

“Despite falling interest rates and steadily improving affordability over the preceding eight months, annual home price growth held flat in August at 3.8% after rising for the first time in 17 months in July. It remains to be seen if this is merely a lull in what could be a reheating housing market, or a sign that low interest rates and stronger affordability may not be enough to muster another meaningful rise in home price growth across the U.S. That the strongest gains in – and strongest levels of – affordability were in August and early September could bode well for September/October housing numbers. As such, we’ll be keeping a close eye on the numbers coming out of the Black Knight Home Price Index over the coming months.” The month’s analysis also shows that while falling interest rates have improved affordability across the country, pockets of tight affordability remain, especially along the western coast of the U.S. In fact, California accounts for seven of the 10 least affordable markets. In Los Angeles for example, even with rates at 3.64%, purchasing the average-priced home requires nearly 43% of the median household income — more than twice the national average. While down from more than 48% near the end of 2018, that payment-to-income ratio still makes Los Angeles the country’s least affordable market. Tight affordability on the West Coast was likely a key driver in the strong deceleration in home price growth that began as interest rates rose in late 2018. Interest rate movements have become a key determining factor of housing affordability and significant shifts in either direction can change the landscape quickly.

–  As of the end of September 2019 – with the average 30-year interest rate at 3.64% – it now requires 20.7% of the national median income to make monthly principal and interest (P&I) payments on the average-priced home

–  That marks the second lowest national payment-to-income ratio in 20 months, behind only August 2019

–  Home affordability briefly hit a 32-month high in early September, when interest rates dipped below 3.5% for a single week

–  The $1,122 in monthly P&I required to purchase the average-priced home is down 10% from November – when interest rates peaked near 5% – despite home prices rising more than 4% from that point

–  Home affordability had hit a nine-year low back in November when the national payment-to-income ratio rose to 23.7%, spurring a noticeable and extended slowdown in home price growth

–  Despite strengthening home affordability as a result of recent interest rate declines, home price growth held flat in August after rising for the first time in 17 months in July

–  While prospective homebuyers continue to benefit from strong rate-driven buying power, interest rate movements are a key determining factor of housing affordability; significant shifts in either direction can change the landscape quickly

US to tackle these trade issues with China in Washington Thursday

Trade talks between the U.S. and China are set to resume this week, as the two sides continue to work toward an agreement on a multitude of issues, the White House announced Monday. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will host a delegation led by China’s top trade negotiator Liu He in Washington on Thursday. The two parties will discuss outstanding issues that have kept the two sides from agreeing on a deal. These include forced technology transfer, intellectual property rights, services, non-tariff barriers, agriculture and enforcement, according to the White House. The Chinese delegation reportedly won’t be looking to include commitments on reforming Chinese industrial policy or the government subsidies, according to Bloomberg. That offer would take one of the Trump administration’s core demands off the table. People close to the Trump administration say the impeachment inquiry isn’t affecting trade talks with China. China’s markets will return to trading on Tuesday following a weeklong holiday.

FTC claims house flipping seminars featuring HGTV stars are total scams

Did you ever think those celebrity-endorsed “get rich quick by using other people’s money to flip houses” real estate seminars seemed too good to be true? Well, it turns out you may have been right. The Federal Trade Commission and the Utah Division of Consumer Protection announced this week that they are charging a Utah-based company with allegedly lying to consumers to convince them to attend the company’s supposedly free real estate seminars. The company promised to give away the secrets to making money flipping houses at the event, but actually charged thousands or tens of thousands of dollars for said “secrets.” According to the FTC, Zurixx entices people to attend its “free” real estate seminars by using HGTV stars and other TV personalities as celebrity endorsers and claims that attendees can learn how to flip houses to make money. But the agency claims that the entire operation is a scam, with the company allegedly using “deceptive promises of big profits to lure consumers into real estate seminars costing thousands of dollars.” The FTC claims that Zurixx uses celebrities in its advertisements to lend credibility to the seminars, including endorsements from Tarek and Christina El Moussa from HGTV’s “Flip or Flop,” Hilary Farr from HGTV’s “Love It or List It,” and Peter Souhleris and Dave Seymour from A&E’s “Flipping Boston.” According to the FTC, the ads convinced consumers to attend free events that would teach consumers how to make large profits by flipping “using other people’s money.” But the agency claims that the free events are actually a sales presentation for Zurixx’s three-day workshops that cost $1,997.

According to the FTC, during the free events, Zurixx repeatedly tells consumers who sign up for its three-day workshop that they are likely to earn thousands of dollars in profit, often with little risk, time or effort. “Zurixx also represents that consumers who purchase the workshop will receive 100% funding for their real estate investments regardless of their credit history,” the FTC said in its complaint. “It backs up these representations with a money-back guarantee – consumers who do not make ‘a minimum of three times’ the price of the three-day workshop within six months will receive their money back.” According to the FTC, Zurixx presenters have told attendees at these free events that the three-day workshop would “teach them everything they need to know to make substantial income from real estate.” If that pitch is successful in getting someone to fork over the nearly $2,000 for the three-day workshop, the selling allegedly doesn’t stop there. According to the FTC, presenters at the three-day workshop often claim that the workshop is “merely a beginner course,” then upselling consumers additional products and services that can cost as much as $41,297. But according to the FTC, many of Zurrix’s claims about its system are “false or unsubstantiated.” From the complaint:  “Consumers are unlikely to earn thousands of dollars in profit from real estate investments by using Zurixx’s products. Consumers are unlikely to receive 100% funding for real estate deals through Zurixx or its partners and affiliates. Moreover, Zurixx’s six-month money-back guarantee contains substantial limitations that Zurixx fails to disclose adequately until after consumers have paid for the three-day workshop.”

The agency also states that Zurixx presenters “generously” include supposed success stories into their sales pitches. According to the FTC, presenters also allegedly “routinely” directed workshop attendees to obtain new credit cards or increase the credit limits on their existing cards, supposedly to help finance their house flips. Beyond that, the presenters allegedly told attendees to provide the credit card companies with income information that was “significantly higher” than their current income, basing that inflation on the supposed increase in the attendees’ income from investing in real estate. But, instead of using that increased credit flexibility obtained under questionable circumstances to invest in real estate, Zurixx presenters allegedly often suggested that attendees actually use the new credit to pay for “advanced training” from Zurixx itself. Zurixx’s business model has come under fire in recent years, with many customers accusing the company of using false advertising to entice them to attend the company’s events. According to a 2016 article from the Orange Country Register, Zurixx seemingly claimed in an ad that Tarek and Christina El Moussa would attend one of the company’s real estate seminars, and would teach their flipping strategy to the attendees. But when the seminar occured, the “Flip or Flop” stars were nowhere to be found. Others had similar experiences, leading to hundreds of complaints being filed with the FTC. Eventually, Christina El Moussa ended up going on ABC to defend the Zurixx seminars, claiming that she does attend the seminars, if they are held close to her house. From ABC:  “Christina El Moussa said that she does attend seminars, when the events are close to her home. ‘If it’s going to be within 45 minutes from my house I’m definitely going to come,’ she said. ‘It gets harder to travel all around, especially [because] we have two kids.”

Christina recently attended seminars in St. Louis and Miami, but Zurixx said even those appearances are uncommon, adding that “nowhere on any other marketing does it state the El Moussas will be live and in-person at any event.” According to the FTC, some of Zurixx’s unsatisfied customers have tried to obtain a refund from the company, but the company allegedly required some consumers who received a refund to sign an agreement barring them from speaking with the FTC, state attorneys general and other regulators; submitting complaints to the Better Business Bureau; or posting negative reviews about Zurixx. The complaint alleges that Zurixx has violated the FTC Act’s prohibitions on misleading and deceptive conduct and the Consumer Review Fairness Act, as well as the Utah Consumer Sales Practices Act and the Utah Business Opportunity Disclosure Act. “From start to finish, these defendants used the promise of easy money and in-depth information to lure consumers down a path that could cost them thousands of dollars and put them in serious debt,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “When a company tells consumers they have the secret to get rich with little work, we encourage consumers to take a hard look at what’s really being offered.”

GE freezes pension plan for 20,000 employees

General Electric is making sweeping changes to its pension plan for approximately 20,000 employees, sending shares higher ahead of Monday’s opening bell. Seven hundred employees who became executives before 2011 will have their supplementary benefits frozen, and no changes will be made for retired employees. The changes will reduce GE’s pension deficit by about $5 billion – $8 billion and net debt by approximately $4 billion – $6 billion. “Returning GE to a position of strength has required us to make several difficult decisions, and today’s decision to freeze the pension is no exception,” Kevin Cox, chief human resources officer at GE, said in a press release. “We carefully weighed market trends and our strategic priority to improve our financial position with the impact to our employees. We are committed to helping our employees through this transition.” The company said it will use some of the money it has received from the sale of its BioPharma, BHGE and Wabtec transactions to pre-fund up to $5 billion of its Employee Retirement Income Security Act payments for 2021 and 20212. Retired employees who have not started receiving monthly payments will have the option to receive a one-time lump-sum payout. General Electric, once an industrial icon, is in the midst of trying to engineer a turnaround after shares lost more than half their value amid a slew of problems last year. The battered company has undertaken a massive restructuring plan aimed at reducing debt by selling off non-core assets. In August, the company was accused by whistleblower Harry Markopolos, who alerted authorities about Bernie Madoff’s Ponzi scheme, of hiding its problems through fraudulent accounting.

CoreLogic – August home prices increased by 3.6% year over year

–  The CoreLogic HPI Forecast indicates annual price growth will increase 5.8% by August 2020

–  About three-fourths of millennial renters indicate they are likely to purchase a home in the future

–  Connecticut was the only state to post an annual decline in home prices this August

CoreLogic released the CoreLogic Home Price Index (HPI™) and HPI Forecast™ for August 2019, which shows home prices rose both year over year and month over month. Home prices increased nationally by 3.6% from August 2018. On a month-over-month basis, prices increased by 0.4% in August 2019. (July 2019 data was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results each month.) Home prices continue to increase on an annual basis with the CoreLogic HPI Forecast indicating annual price growth will increase 5.8% by August 2020. On a month-over-month basis, the forecast calls for home prices to increase by 0.3% from August 2019 to September 2019. The CoreLogic HPI Forecast is a projection of home prices calculated using the CoreLogic HPI and other economic variables. Values are derived from state-level forecasts by weighting indices according to the number of owner-occupied households for each state. “The 3.6% increase in annual home price growth this August marked a big slowdown from a year earlier when the U.S. index was up 5.5%,” said Dr. Frank Nothaft, chief economist at CoreLogic. “While the slowdown in appreciation occurred across the country at all price points, it was most pronounced at the lower end of the market. Prices for the lowest-priced homes increased by 5.5%, compared with August 2018, when prices increased by 8.4%. This moderation in home-price growth should be welcome news to entry-level buyers.”

According to the CoreLogic Market Condition Indicators (MCI), an analysis of housing values in the country’s 100 largest metropolitan areas based on housing stock, 37% of metropolitan areas have an overvalued housing market as of August 2019. The MCI analysis categorizes home prices in individual markets as undervalued, at value or overvalued, by comparing home prices to their long-run, sustainable levels, which are supported by local market fundamentals such as disposable income. As of August 2019, 23% of the top 100 metropolitan areas were undervalued, and 40% were at value. When looking at only the top 50 markets based on housing stock, 40% were overvalued, 16% were undervalued and 44% were at value. The MCI analysis defines an overvalued housing market as one in which home prices are at least 10% above the long-term, sustainable level. An undervalued housing market is one in which home prices are at least 10% below the sustainable level. During the second quarter of 2019, CoreLogic, together with RTi Research of Norwalk, Connecticut, conducted an extensive survey measuring consumer-housing sentiment among millennials. The survey found that approximately 75% of millennial renters indicate they will likely purchase a home in the future. However, despite a desire from the entire millennial cohort to purchase a home, there is a clear difference between older and younger millennials’ living situation preferences. Generally, older millennials (30-38) aspire to own a single, stand-alone home in the suburbs that is somewhat secluded. Meanwhile, younger millennials (21-29) lean towards modern apartment rentals in urban settings, with 55% of younger millennials saying they prefer to also live in lively neighborhoods. Still, 79% of younger millennials are confident that they will be homeowners in the future. “The millennial cohort has now entered the housing market in force and is already driving major changes in buying and selling patterns. Almost half of the millennials over 30 years old have bought a house in the last three years. These folks are increasingly looking to move out of urban centers in favor of the suburbs, which offers more privacy and a greener environment,” said Frank Martell, president and CEO, CoreLogic. “Perhaps most significantly, almost 80% of all millennials are confident they will become homeowners in the future.”

Dow tumbles over 500 points on global economic slowdown fears

Stocks tumbled on Wednesday on concerns the U.S. economy is slowing mirroring the pattern in Europe and other global nations. The Dow Jones Industrial Average fell over 500 points or more than 2 percent. The S&P 500 and the Nasdaq also dropped over 1 percent mid-morning. Selling accelerated after the Energy Department reported an inventory build of 3.1 million barrels, almost double the estimate, stoking fears of a slowdown and driving energy stocks lower. The latest read on America’s job market also signaled a pullback. Private-sector employers added 135,000 jobs in August, according to the latest ADP National Employment Report, missing the 140,000 that economists surveyed by Refinitiv were expecting. On Tuesday, the ISM September Manufacturing Index fell to 47.8, its weakest reading since June 2009. Construction spending also was little changed in August. Financials also took a beating for a second day. Brokerage firms remained under pressure after TD Ameritrade on Tuesday evening said it would match Charles Schwab’s commission-free trading. Schwab earlier on Tuesday said it would eliminate its $4.95 per trade fee on stock, exchange-traded funds and options trades. Sanofi shares were lower after Walmart suspended sales of its drug Zantac and all forms of heartburn medication containing ranitidine after the Food and Drug Administration warned of potential cancer risks. On the earnings front, Lennar gained after reporting better than expected third-quarter profits and sales while United Foods was sharply lower after reporting its first annual loss in more than a decade. European markets were sharply lower. London’s FTSE fell 2 percent, Germany’s DAX is down 1.3 percent and France’s CAC is down 1.6 percent. In Asia, Japan’s Nikkei closed down 0.5 percent and Hong Kong’s Hang Seng slid 0.3 percent. Markets in mainland China were closed for National Day holidays. They reopen on Oct. 8.

MBA – mortgage applications increase

Mortgage applications increased 8.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 27, 2019. The Market Composite Index, a measure of mortgage loan application volume, increased 8.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 8 percent compared with the previous week. The Refinance Index increased 14 percent from the previous week and was 133 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 10 percent higher than the same week one year ago. “Mortgage rates mostly decreased last week, with the 30-year fixed rate dropping below 4 percent for the sixth time in the past nine weeks. Borrowers responded to these lower rates, leading to a 14 percent increase in refinance applications,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Although refinance activity slowed in September compared to August, the months together were the strongest since October 2016. The slight changes in rates are still causing large swings in refinance volume, and we expect this sensitivity to persist.” Added Kan, “Purchase applications also increased and remained more than 9 percent higher than a year ago. Low rates and healthy housing market fundamentals continue to support solid levels of purchase activity.”

The refinance share of mortgage activity increased to 58.0 percent of total applications from 54.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.5 percent of total applications. The FHA share of total applications decreased to 10.4 percent from 11.4 percent the week prior. The VA share of total applications decreased to 12.4 percent from 13.1 percent the week prior. The USDA share of total applications decreased to 0.5 percent from 0.6 percent the week prior. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 3.99 percent from 4.02 percent, with points remaining unchanged at 0.38 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) decreased to 3.98 percent from 4.00 percent, with points increasing to 0.28 from 0.26 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.79 percent from 3.90 percent, with points remaining unchanged at 0.23 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.43 percent from 3.46 percent, with points increasing to 0.37 from 0.36 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week. The average contract interest rate for 5/1 ARMs increased to 3.42 percent from 3.39 percent, with points increasing to 0.37 from 0.29 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

NYC housing prices in near ‘free fall,’ conditions mirror recession era following tax hikes

The Manhattan real estate market stumbled in the third quarter of 2019, new reports show, as prices plunged and fewer buyers were willing to purchase higher-priced properties in the wake of two recent tax increases. The median sales price for properties fell 17 percent from the same quarter last year, to $999,950, according to new data from CORE. The average sales price dropped 12 percent, to $1.64 million. Condo sales fell 8 percent, logging 946 transactions. Co-op sales, on the other hand, were up a modest 2 percent year over year. “The third quarter of 2019 was undoubtedly the most challenging quarter in recent memory, especially for condo sales,” Garrett Derderian, managing director of market analysis at CORE, said in a statement. “Market prices have gone from what was once described as the kindest, gentlest correction to a near free fall. The last time conditions were described in such a way was in the height of the recession.” Only 9.7 percent of sales were above $3 million, down 14.8 percent from last year. The last time sales above $3 million were that low was in 2012. Consequently, nearly 30 percent of inventory on the market was priced above $3 million. It’s worth noting that many buyers rushed to purchase properties before an increase in the city’s mansion tax and transfer tax took effect in July. “Third quarter data reflects a more accurate snapshot of the current market – continued price correction,” Diane M. Ramirez, Chairman & CEO of Halstead, said in a statement.

Halstead’s own report released on Wednesday showed Manhattan apartment sales fell 16 percent in the third quarter – with sales above $5 million dropping nearly 50 percent. Properties, meanwhile, spent an average of 192 days on the market – the highest quarterly total since the final quarter of 2012. In July, New York City increased its mansion tax – a progressive tax that applies to home sales of more than $1 million – to a maximum of 3.9 percent, up from a flat-rate of 1 percent. The tax rates vary from 1.25 percent for $2 million sales, to 3.9 percent for sales of $25 million and higher. The city also increased a one-time charge on properties worth more than $2 million – known as the transfer tax. That fee, typically paid by a seller, varies from 0.4 percent for transactions under $3 million, to 0.65 percent for anything above $3 million. As previously reported by FOX Business, more than 25 percent of new condos that have been built in New York City since 2013 remain unsold. In terms of units – of the 16,242 condos built since 2013, about 12,133 have sold. That means more than 4,100 have not. Experts have said the trend could be indicative of a potential future recession. Falling real estate prices come as concerns mount over the new tax law’s impact on high-tax states – particularly a $10,000 cap on state and local tax (SALT) deductions. Some people have begun fleeing states like New York and New Jersey, headed for lower-tax areas like Florida and Texas. New York was one of a handful of states dealt a blow in its bid to challenge the SALT cap this week, after a judge dismissed its lawsuit.

NAR – NAR commends Administration for pushing GSE reform conversations forward

National Association of Realtors® President John Smaby commended the administration for taking steps to further Fannie Mae and Freddie Mac reform this week. The U.S. Department of the Treasury and the Federal Housing Finance Agency on Monday announced that they will permit the Government Sponsored Enterprises to retain additional earnings in excess of the $3 billion capital reserves currently permitted, a proposal outlined in the Treasury Housing Reform Plan released in early September. “NAR appreciates the Treasury Department and FHFA’s work to advance housing finance reform and protect taxpayers by increasing available capital within the system,” said Smaby, a second-generation Realtor® from Edina, Minnesota. “While Realtors® eye GSE reforms that ensure responsible, creditworthy Americans can secure a mortgage in all types of markets, we urge Congress and the administration to work together toward a consensus that will create a housing finance system that protects taxpayers, supports homeownership and maximizes competition. The private utility model Realtors® proposed earlier this year(link is external) outlines the best possible path forward for the GSEs, and we will continue to work closely with policymakers to shape positive, pragmatic system reforms.”

CoreLogic – most EPIQ attendees expect little change in rates and slower price growth

EPIQ 2019 attendees represented a broad cross-section of industry professionals, think tank researchers, and government policy makers who have a view on the interest rate, home-price and loan performance outlook.  These are three of the economic variables that affect housing activity and portfolio risk management.  During my outlook session, I polled the attendees to learn their expectations for one year from now.

–  What will fixed-rate mortgage rates be at EPIQ 2020?

Mortgage rates had moved more than a percentage point lower from November 2018 to late July when EPIQ 2019, CoreLogic’s annual client conference, was held.  Attendees were asked what they expect the level of mortgage rates would be in one year, at the time of EPIQ 2020.

–  Most EPIQ Attendees Expect Little Change in Mortgage Rates

The majority, 51%, expect mortgage rates to be very close to where they were during our conference. (Figure 1) The remaining respondents were nearly equally split between mortgage rates dropping or rising by 0.5 percentage points.

–  How much will the CoreLogic HPI change by EPIQ 2020?

Nationally, home-price appreciation has decelerated over the last year.  Comparing the 12-month change in the national index, growth measured by the CoreLogic Home Price Index (HPI) had slowed by nearly 3 percentage points between May 2018 and May 2019.  The attendees were polled on what they expected the one-year price change would be with the release of the May 2020 HPI, the latest that would be available as of EPIQ 2020.

–  Most EPIQ Attendees Expect Slower Home-Price Growth

A majority, 55%, expect home-price growth to continue to slow in the coming year. (Figure 2)  Even so, 11% of attendees expect an acceleration in single-family price growth next year to more than 5% appreciation.

–  What Will the Delinquency Rate Be by EPIQ 2020?

The total past due rate for home mortgages peaked at 12.0% in January 2010 and has steadily moved lower on a year-over-year basis.  As of May 2019 the 30-day-plus delinquency rate had dipped to 3.6%, the lowest in more than 20 years.  EPIQ attendees were divided on how the delinquency rate would evolve over the next year: 32% expected further declines while 43% foresaw a rise. The median response was for little change in the overall delinquency rate in the coming year.

–  EPIQ Attendees Were Split on Delinquency Rate Direction

Attendees’ projections were affected by a variety of assumptions each had for how the economy and the housing market may evolve, reflected in the forecast distribution.  Nonetheless, a majority of attendees expect interest rates on 30-year fixed-rate loans to remain close to where they were during EPIQ and expect further slowing in home-price growth during the next year.

MBA – commercial/multifamily mortgage debt increased $51.9 billion in the second quarter of 2019

The level of commercial/multifamily mortgage debt outstanding rose by $51.9 billion (1.5 percent) in the second quarter of 2019, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Mortgage Debt Outstanding quarterly report. At the end of the first half of 2019, total commercial/multifamily debt outstanding was at$3.50 trillion. Multifamily mortgage debt alone increased $24.4 billion (1.7 percent) to $1.5 trillion from the first quarter. “Strong borrowing and lending, coupled with relatively low levels of loan maturities, are helping to boost the amount of commercial and multifamily mortgage debt outstanding,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research. “All four major capital sources increased their holdings during the quarter. With strong demand expected to continue, debt levels are likely to climb even more and end the year at a new high.” The four major investor groups in MBA’s report are: banks and thrifts; federal agency and government sponsored enterprise (GSE) portfolios and mortgage backed securities (MBS); life insurance companies; and commercial mortgage backed securities (CMBS), collateralized debt obligation (CDO) and other asset backed securities (ABS) issues. Commercial banks continue to hold the largest share (39 percent) of commercial/multifamily mortgages at $1.4 trillion. Agency and GSE portfolios and MBS are the second largest holders of commercial/multifamily mortgages (20 percent) at $703 billion. Life insurance companies hold $539 billion (15 percent), and CMBS, CDO and other ABS issues hold $471 billion (13 percent). Many life insurance companies, banks and the GSEs purchase and hold CMBS, CDO and other ABS issues. These loans appear in the”CMBS, CDO and other ABS” category of the the report.

Looking solely at multifamily mortgages, agency and GSE portfolios and MBS hold the largest share of total multifamily debt outstanding at $703 billion (48 percent), followed by banks and thrifts with $445 billion (31 percent), life insurance companies with $143 billion (10 percent), state and local government with $82 billion (6 percent), and CMBS, CDO and other ABS issues holding $42 billion (3 percent). Nonfarm non-corporate businesses hold $16 billion (1 percent). In the second quarter, commercial banks saw the largest gains in dollar terms in their holdings of commercial/multifamily mortgage debt – an increase of $22.4 billion (1.7 percent). Agency and GSE portfolios and MBS increased their holdings by $15.9 billion (2.3 percent), life insurance companies increased their holdings by $7.4 billion (1.4 percent), and CMBS, CDO and other ABS issues increased their holdings by $4.8 billion (1.0 percent). In percentage terms, state and local government retirement funds saw the largest gain – 8.8 percent – in their holdings of commercial/multifamily mortgages. Conversely, the federal government saw their holdings decrease 3.4 percent. The $24.4 billion increase in multifamily mortgage debt outstanding from the first quarter represents a 1.7 percent increase. In dollar terms, agency and GSE portfolios and MBS saw the largest gain – $15.9 billion (2.3 percent) – in their holdings of multifamily mortgage debt. Commercial banks increased their holdings by $9.0 billion (2.1 percent), and life insurance companies increased by $3.3 billion (2.3 percent). Federal government saw the largest decline in their holdings of multifamily mortgage debt at $3.6 billion (28.4 percent). In percentage terms, real estate investment trusts (REITs) recorded the largest increase in holdings of multifamily mortgages, at 13 percent, and federal government saw the biggest decrease at 28.4 percent.

ATTOM – top 10 U.S. counties with worst and best home affordability

As cited in ATTOM Data Solutions’ just released Q3 2019 U.S. Home Affordability Report, the largest populated counties where a median-priced home in Q3 2019 was not affordable for average wage earners included Los Angeles County, CA; Cook County (Chicago), IL; Maricopa County (Phoenix), AZ; San Diego County, CA and Orange County, CA. Those same counties were in the top five in Q2 2019 as well. Rounding out the Top 10 largest populated counties where a median-priced home in Q3 2019 was not affordable, were King County, WA; Tarrant County, TX; Santa Clara County, CA; New York County, NY; and Alameda County, CA. The report determined affordability for average wage earners by calculating the amount of income needed to make monthly house payments — including mortgage, property taxes and insurance — on a median-priced home, assuming a 3 percent down payment and a 28 percent maximum “front-end” debt-to-income ratio. That required income was then compared to annualized average weekly wage data from the Bureau of Labor Statistics. According to ATTOM’s report, 26 percent of the counties analyzed, or 127 of 498, where a median-priced home in Q3 2019 was still affordable for average wage earners, included Harris County (Houston), TX; Wayne County (Detroit), MI; Philadelphia County, PA; Cuyahoga County (Cleveland), OH; and Allegany County (Columbus), OH. In addition to Harris County, Wayne County, Philadelphia County and Cuyahoga County, the other counties included in the Top 10 where buying a median-priced home was still affordable, were Mecklenburg County, NC; Fulton County, GA; Saint Louis County, MO; Milwaukee County, WI; and Marion County, IN.

The report also showed that 67 percent of the counties analyzed in the report, or 335 of 498, require at least 30 percent of their annualized weekly wages to buy a home in Q3 2019. Those counties that required the greatest percent included Kings County (Brooklyn), NY (110.4 percent of annualized weekly wages needed to buy a home); Santa Cruz County, CA (105 percent); Marin County (San Francisco), CA (102.4 percent); Maui County, HI (87.9 percent); and Monterey County, CA (87.5 percent). Also, 33 percent of the counties analyzed, or 163 of 498, required less than 30 percent of their annualized weekly wages to buy a home in Q3 2019. Those counties that required the smallest percent included Calhoun County (Battle Creek), MI (14.4 percent of annualized weekly wages needed to buy a home); Wayne County (Detroit), MI (14.9 percent); Clayton County (Atlanta), GA (15.2 percent); Rock Island County (Davenport), IL (15.5 percent); and Montgomery County, AL (16.2 percent).

US trade war hamstrings China’s economic juggernaut

China will likely see slowing economic growth over the next few years as trade issues between the U.S. and the world’s next-largest economy keep bubbling to the surface Depending on how Beijing handles the challenge, its credit rating may be lowered, S&P Global Ratings predicted, which might increase borrowing costs for the President Xi Jinping’s government. “A downgrade could ensue if we see a higher likelihood that China will ease its efforts to stem rising financial risk and allow higher credit growth to support economic expansion in an unsustainable manner,” the financial services company said. “We expect such a trend would weaken the Chinese economy’s resilience to shocks, limit the government’s policy options, and increase the likelihood of a sharper decline in the trend GDP growth rate.” The report comes ahead of high-level U.S.-China trade talks scheduled for October. The Treasury Department clarified on Saturday that it will not block Chinese companies from listing shares on U.S. exchanges, something that could have given the Trump administration leverage in a standoff with Beijing over tariffs imposed by the White House on billions of dollars in Chinese goods. China Foreign Ministry spokesman Geng Shuang described the decision as “win-win.” “Engaging in extreme pressure and even attempting to ‘decoupling’ [sic] the Sino-US economy will inevitably harm the interests of Chinese and American companies and the public, trigger financial market turmoil, and endanger international trade and the growth of the world economy,” Geng said. China will likely be able to keep its real gross domestic growth per capita above 5% annually, which is still slower than in years past, S&P said.

Appraisals will no longer be required on certain home sales of $400,000 and under

For the first time since 1994, certain home sales of $400,000 and under will soon not need an appraisal after federal regulators approved a proposal to increase the threshold at which residential home sales require an appraisal. Last November, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve released a proposal that would increase the appraisal requirement from $250,000 to $400,000, meaning that certain home sales of $400,000 and below would no longer require an appraisal. The agencies deliberated the rule for nearly a year, taking into consideration the more than 560 comments the agencies received about the rule change. Last month, the FDIC and OCC signed off on the rule, but were still waiting on the Fed to approve the rule change as well. Now, the Fed has also given the rule change its stamp of approval, and with all three agencies signing off, the appraisal rule change will soon go into effect. “The appraisal threshold was last changed in 1994,” the federal agencies said in a joint statement. “Given price appreciation in residential real estate transactions since that time, the change will provide burden relief without posing a threat to the safety and soundness of financial institutions.” According to the final rule, which can be read here, the change will go into effect as soon as the final rule is recorded and published in the Federal Register.

A spokesperson for the FDIC said that the rule has been submitted to the Federal Register, adding that the publication of the rule should take place within a matter of days. Consequently, it’s likely just a few days (if not less) until certain home sales of $400,000 and below no longer require an appraisal. Now, it’s important to note that the new rules do not apply to loans wholly or partially insured or guaranteed by, or eligible for sale to, a government agency or government-sponsored agency. That means that loans sold to or guaranteed by the Federal Housing Administration, Department of Housing and Urban Development, Department of Veterans Affairs, Fannie Mae, or Freddie Mac would still require an appraisal, per each agency’s rules. It’s also important to note that the rule does not entirely exempt the relevant home sales from any type of appraisal-type action. According to the agencies, the final rule “requires institutions to obtain an evaluation to provide an estimate of the market value of real estate collateral.” The agencies state that the evaluation must be “consistent with safe and sound banking practices.” To that point, the rule establishes that an evaluation “should contain sufficient information and analysis to support the regulated institution’s decision to engage in the transaction.” According to the agencies, many of the comments they received suggested that evaluations are “appropriate substitutes for appraisals and institutions as having appropriate risk management controls in place to manage the proposed threshold change responsibly.” Beyond that, the final rule lays out a series of stipulations for the replacement of an appraisal with an evaluation.

From the rule:

“As is the case currently for transactions under the threshold exemptions, evaluations will be required for transactions exempted by the new threshold that do not receive appraisals. Although the agencies recognize, as many commenters noted, that evaluations are not subject to the same uniform standards as appraisals in terms of structure and content or the preparer’s training and credentialing requirements, evaluations must be consistent with safe and sound banking practices. The agencies have provided the Evaluation Guidance to assist institutions in complying with this requirement. The Evaluation Guidance provides information to help ensure that evaluations provide a credible estimate of the market value of the property pledged as collateral for the loan.” For instance, the Evaluation Guidance states that, generally, evaluations should be performed by persons who are competent, independent of the transaction, and have the relevant experience and knowledge of the market, location, and type of real property being valued. On evaluations, the agencies state: “Evaluations are generally less burdensome than appraisals and have been required since the 1990s.” Without a doubt, the change will have a sizable impact on the real estate market, as according to the OCC, the new rules apply to approximately 40% of home sales. According to data provided by the FDIC, the agencies estimate that increasing the appraisal threshold from $250,000 to $400,000 would have exempted an additional 214,000 residential mortgages from the agencies’ appraisal requirement in 2017, representing 3% of total HMDA originations. On a percentage basis, under the current rules, in 2017, there were 750,000 transactions that were exempted from the appraisal requirement (56%). By increasing the threshold to $400,000, there would have been an additional 214,000 sales exempted from the appraisal requirement (an additional 16%). Therefore, under the proposed rules, 72% of the eligible transactions would be exempted from the appraisal requirement, while 28% would require an appraisal.

According to the agency, the rule responds, in part, to comments that the previous exemption level for residential transactions had not kept pace with price appreciation in the residential real estate market. As one might expect, financial institutions, financial institution trade associations, and state banking regulators “generally supported” the proposal. Meanwhile, appraisers, appraiser trade organizations, individuals, and consumer advocate groups “generally opposed” the proposal. According to the FDIC, those commenting in support of the rule stated that an increase would be appropriate given the increases in real estate values since the current threshold was established in 1994. Other commenters stated that the increase would provide “burden relief for financial institutions without sacrificing safe and sound banking practices.” On the other hand, commenters opposed to the rule change stated that the proposal would “elevate risks to borrowers, financial institutions, the financial system, and taxpayers.” According to the final rule, many commenters opposed to an increase in the threshold argued on behalf of appraisers, stating that appraisers are “the only objective and unbiased party in a transaction and bring checks, balances, and oversight to the mortgage lending process.” Other commenters noted that the rule could have an outsized impact on certain consumer groups, such as low-income individuals, members of certain minority groups, or first-time homebuyers, because those borrowers are more likely buy homes in the lower price range, and would, therefore, be more likely to buy a home without an appraisal. Despite those comments, the agencies all approved the rule, which also received support from the Consumer Financial Protection Bureau.

Auto industry workers lose $266M in pay as GM strike drags on

Striking General Motors employees and the iconic automaker itself are losing hundreds of millions of dollars as a walkoff over pay and health benefits enters its third week. With no clear end in sight, the prolonged negotiations to reach a new labor agreement with 50,000 members of the United Auto Workers have paralyzed production at about 30 manufacturing sites in nine states. As of Sept. 26, GM lost profits of $113 million as plants shuttered or ran on a thin workforce, according to a report from the Anderson Economic Group. UAW workers, auto parts suppliers and small businesses that provide products and services to GM have relinquished $266 million in direct earnings, according to the report. That translates to nearly $70 million in lost federal income and payroll taxes. The fallout is likely to grow as the strike’s effects ripple through the American auto-manufacturing supply chain. “We estimate that GM is now facing $25 million per day in lost profit,” Anderson Economic Group CEO Patrick Anderson said in a statement, “and we expect that daily loss figure will continue growing as long as the strike continues.”  “The cost of a strike, to both workers and the company, grows steadily in the first week, and then pyramids out into the surrounding economy,” said Brian Peterson, Anderson’s director of public policy and economic analysis. “As we move closer to two full weeks of a strike,” he continued, “the effect on the economies of Michigan, Indiana, Ohio, and Ontario has become acute, with both union and non-union workers suffering significant income losses. Even if the strike ends today, those losses will still be felt.”

The union wants a bigger share of GM’s more than $30 billion in profits during the past five years. But the company sees a global auto sales decline looming and wants to bring its labor costs in line with the lower expenses of U.S. plants owned by foreign automakers. The top production worker wage is about $30 per hour, and GM’s total labor costs including benefits are about $63 per hour compared with an average of $50 at factories run by foreign-based automakers at plants located mostly in the South. Issues that are snagging the talks include the formula for profit-sharing, which the union wants to improve. Currently, workers get $1,000 for every $1 billion the company makes before taxes in North America. This year, workers received checks for $10,750 each, less than last year’s $11,500. Wages are also an issue, with the company seeking to shift compensation toward lump sums that depend on earnings while workers want hourly increases that will be there even if the economy goes south. They’re also bargaining over the use of temporary employees and a path to make them full-time, as well as a faster track for getting newly hired workers to the top UAW wage.

CoreLogic – housing market cooldown ends 15th month slide

According to the latest S&P CoreLogic Case-Shiller National Home Price Index, home prices in the United States grew by 3.2% in July. This ends a 15-month streak of decreasing year-over-year gains in the index that began in early 2018. However, home prices in the West continue their cooldown, with prices in Seattle falling for the third month in a row and home price growth in San Francisco falling very close to zero. Average home price growth in the top 10 metropolitan areas increased by 1.6%, down from the previous month’s 1.9% increase. In addition, the top 20 metropolitan areas entered its 16th straight month of slowing price growth, posting a gain of 2% year over year, down from 2.2% in June. Eleven of the top 20 metropolitan areas reported lower price increases compared to the previous month, which is unchanged from June. Phoenix sits at the top of the pack for the second straight month, and is followed by Las Vegas as the fastest-growing housing market in the 20-city index, with home price growth of 5.8% and 4.7%, respectively. Metros with the slowest price growth are made up predominantly by markets in the West, with Seattle, San Francisco and Los Angeles making up three of the bottom five, with home price growth of -0.6%, 0.2% and 1.1%, respectively. This month’s report brought us the first sign of housing market stabilization in over 18 months. What’s more, the geographic inversion in-home price growth has strengthened its grip, with Pacific markets making up half of the 10 markets with the slowest home price growth, while Southern and Midwestern markets make up half of the 10 markets with the quickest home price growth. This is a welcome sign to homeowners in these second-tier markets, where home prices have struggled in the recent past to rise above inflation for any extended period. Homebuyers in the most expensive but now slowest-growing markets in the Pacific are likely feeling flashes of relief, as a combination of low mortgage rates and moderate home price growth is easing what has been years of painfully low home affordability.

Trump’s Ukraine call transcript released as Wall Street brushes off impeachment inquiry

The Trump administration released the transcript of President Trump’s phone call with Ukrainian President Volodymyr Zelenskiy on Wednesday, a day after House Speaker Nancy Pelosi launched a formal impeachment against the U.S. leader. Wall Street shrugged off the release of the document and the impeachment inquiry. The Dow Jones Industrial Average was slightly higher, while the Nasdaq and S&P 500 were both slightly lower after the release. In the call, Trump raised unsubstantiated allegations that the former vice president sought to interfere with a Ukrainian prosecutor’s investigation of his son Hunter. “There’s a lot of talk about Biden’s son, that Biden stopped the prosecution and a lot of people want to find out about that,” Trump said to Zelenskiy. Trump came under fire after a whistleblower complaint alleged he pressured Zelenskiy to investigate former Vice President Joe Biden and his son Hunter. In the days before the call, Trump ordered advisers to freeze $400 million in military aid for Ukraine — prompting speculation that he was holding out the money as leverage for information on the Bidens. Trump has denied that charge, but acknowledged he blocked the funds, later released. Biden is currently one of the frontrunners among Democratic candidates looking to challenge Trump for the White House in 2020. At the exact time of the Ukraine call transcript release, Trump tweeted a video of Pelosi speaking on the House floor during the impeachment proceedings of former President Bill Clinton.

Hillary Clinton, the former Secretary of State and former first lady, tweeted shortly after the release, saying she supports impeachment. “The president of the United States has betrayed our country,” Clinton said in a tweet on Wednesday. “That’s not a political statement—it’s a harsh reality, and we must act. He is a clear and present danger to the things that keep us strong and free. I support impeachment.” The impeachment inquiry into Trump, announced Tuesday by Pelosi, focuses partly on whether Trump abused his presidential powers and sought help from a foreign government to undermine Biden and help his own reelection effort. Pelosi said Tuesday such actions would mark a “betrayal of his oath of office” and declared, “No one is above the law.” Major stock indexes slid Tuesday after Pelosi announced the impeachment inquiry, prompting speculation that political turmoil would undermine business-friendly initiatives from the White House.

NAHB – gains in home sales new post solid August

Sales of newly built, single-family homes increased 7.1 percent to a seasonally adjusted annual rate of 713,000 units in August off a revised upward reading in July, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. On a year-to-date basis, new home sales for 2019 are 6.4 percent higher than the same period in 2018. “With job growth continuing and lower interest rates in place, builders report rising confidence levels, and this is reflected in today’s solid sales report,” said Greg Ugalde, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Torrington, Conn. “We have seen a general rebound in the housing market since spring, as sales, starts and permits have all registered gains,” said Danushka Nanayakkara-Skillington, NAHB’s AVP for Forecasting and Analysis. “However, affordability remains a factor because buyers can’t benefit from lower interest rates if they don’t have the money for a downpayment.” A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the August reading of 713,000 units is the number of homes that would sell if this pace continued for the next 12 months.  The inventory of new homes for sale was 326,000 in August, representing a 5.5 months’ supply. The median sales price was $328,400. The median price of a new home sale a year earlier was $321,400. Regionally, and on a year to date basis, new home sales are 11.7 percent higher in the South and 7.8 percent higher in the West. Sales are down 16.5 percent in the Northeast and 10.5 percent in the Midwest.

US-Japan trade deal on track

With President Trump and Japanese PM Abe set to meet at the U.N. Wednesday, a trade deal between the two nations is falling into place. “The negotiating process has been completed and the results will be submitted to the two leaders,” said Masato Otaka, Press Secretary, Foreign Ministry of Japan. “Everything is on track. The important thing is to focus on the entry into force.” Japan’s Foreign Minister Toshimitsu Motegi and US Trade Representative Robert Lighthizer met on the sidelines of the 74th UN General Assembly on Monday and, according to Japanese media, “fully agreed on all trade talks”. Motegi told reporters the deal “will be satisfactory to Japan” and the text would be released Wednesday. The two sides agreed US tariffs on Japanese automobiles would be rolled back sometime in the future with no further specification on exact timing. In exchange for the removal of taxes on Japanese automobiles, Japan would in turn decrease tariffs against beef imported from the US from 38.5 percent to 9 percent. The WTO Most Favored Nation (MFN) treatment is still a mainstay of the multilateral trading system and requires WTO members to provide favorable trade terms and remove tariff barriers as part of any bilateral trade agreement with another member. The removal of auto tariffs on Japanese imports would bring the US into compliance with this WTO regulation.

MBA – mortgage applications down

Mortgage applications decreased 10.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 20, 2019. The Market Composite Index, a measure of mortgage loan application volume, decreased 10.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 11 percent compared with the previous week. The Refinance Index decreased 15 percent from the previous week and was 104 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 9 percent higher than the same week one year ago. “U.S. Treasury yields trended downward over the course of last week, as the Federal Reserve meeting highlighted the elevated uncertainty in the economic outlook. However, despite falling yields, mortgage rates ticked up again and have risen 20 basis points over the past two weeks,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The increase in rates led to fewer refinances, and activity has now dropped 17 percent over the last two weeks.” Added Kan, “Purchase applications also decreased, likely related to the two-week jump in rates, but still remained 9 percent higher than last year. The recent data on increased existing-home sales and new residential construction points to the underlying strength in the purchase market this fall.” The refinance share of mortgage activity decreased to 54.9 percent of total applications from 57.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.1 percent of total applications.

The FHA share of total applications increased to 11.4 percent from 10.9 percent the week prior. The VA share of total applications increased to 13.1 percent from 12.7 percent the week prior. The USDA share of total applications remained unchanged from 0.6 percent the week prior. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 4.02 percent from 4.01 percent, with points increasing to 0.38 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) decreased to 4.00 percent from 4.01 percent, with points decreasing to 0.26 from 0.29 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.90 percent from 3.89 percent, with points decreasing to 0.23 from 0.30 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.46 percent from 3.42 percent, with points remaining unchanged at 0.36 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week. The average contract interest rate for 5/1 ARMs decreased to 3.39 percent from 3.54 percent, with points remaining unchanged at 0.29 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

Black Knight – foreclosure starts hit 18-year low in august; mortgage prepayments continue to rise in lower interest rate environment

Black Knight, reports the following “first look” at August 2019 month-end mortgage performance statistics derived from its loan-level database representing the majority of the national mortgage market.

–  August’s 36,200 foreclosure starts made for the lowest single-month total since December 2000

–  The number of loans in active foreclosure inventory also fell; at 253,000, it’s the fewest since 2005

–  Prepayment activity – typically a good indicator of refinance activity – continues to press upward, increasing 5% from July to reach a three-year high

–  August’s prepayment rate was up 62% from the same time last year and 2.5 times the 18-year low hit in January

–  Given a 30-45 day closing window, the month’s prepayment activity reflects June/July interest rates; as rates fell further in August and September, the peak in refinance-driven prepayments is likely still to come

US stocks lower

U.S. stocks opened slightly lower on Monday after manufacturing reports in Europe indicated growth was grinding to a halt. Concerns about those reports from Germany and France are again raising concerns about a slowing global economy. All three of the major averages were trading lower. Optimism increased over the weekend as the U.S. and China referred to last week’s trade talks as “productive” and “constructive.” A higher-level round of talks is still scheduled to go ahead in October. Wall Street ended last week with losses, snapping a 3-week winning streak for the S&P 500 after reports emerged that Chinese officials canceled a planned trip to farms in Montana and Nebraska. The S&P 500 fell 0.5 percent, the Dow Jones Industrial Average dropped 0.6 percent and the Nasdaq lost 0.8 percent. In Asian trading on Monday, the Shanghai Composite index closed down 1.1 percent while Hong Kong’s Hang Seng ended the day down 0.8 percent after yet another weekend of violent protests. Tokyo’s markets were closed for holiday. Fosun Tourism Group, the biggest shareholder in Thomas Cook, fell 3.8 percent in Hong Kong after the 178-year-old British tour company collapsed. Bookings for more than 600,000 global vacationers were canceled Monday as a result. Shanghai-based Fosun International dropped 1 percent. Britain’s Civil Aviation Authority said Thomas Cook’s four airlines would be grounded and its 21,000 employees in 16 countries, including 9,000 in the UK, will lose their jobs. In Europe, London’s FTSE was off 0.2 percent, Germany’s DAX was down 1 percent and France’s CAC lost 0.7 percent.

MBA – commercial and multifamily mortgage delinquencies remain low in the second quarter of 2019

Commercial and multifamily mortgage delinquencies remained low in the second quarter of 2019, according to the Mortgage Bankers Association’s (MBA) latest Commercial/Multifamily Delinquency Report. “The strong economy, low interest rates, and liquid finance markets are all contributing to delinquency rates that are at or near record lows for commercial and multifamily mortgage loans,” said Jamie Woodwell, MBA’s Vice President of Commercial Research & Economics. “Despite uncertainty on many economic fronts, it is hard to identify factors that would dramatically change the delinquency rate picture in the near term.” MBA’s quarterly analysis looks at commercial/multifamily delinquency rates for five of the largest investor-groups: commercial banks and thrifts, commercial mortgage-backed securities (CMBS), life insurance companies, Fannie Mae and Freddie Mac. Together, these groups hold more than 80 percent of commercial/multifamily mortgage debt outstanding. Based on the unpaid principal balance (UPB) of loans, delinquency rates for each group at the end of the second quarter were as follows:

–  Banks and thrifts (90 or more days delinquent or in non-accrual): 0.46 percent, a decrease of 0.02 percentage points from the first quarter;

–  Life company portfolios (60 or more days delinquent): 0.04 percent, unchanged from the first quarter;

–  Fannie Mae (60 or more days delinquent): 0.05 percent, a decrease of 0.02 percentage points from the first quarter;

–  Freddie Mac (60 or more days delinquent): 0.03 percent, unchanged from the first quarter; and

–  CMBS (30 or more days delinquent or in REO): 2.46 percent, a decrease of 0.15 percentage points from the first quarter.

Latest Mac Pro to be made in Texas after securing tariff exemptions

Apple is boosting its commitment to the American workforce, part of a push to invest hundreds of billions into the U.S. economy. In a major announcement on Monday, Apple said it will build its redesigned Mac Pro in Austin, Texas. The move comes three days after U.S. trade officials approved exemptions that allow Apple to import key Mac Pro parts from China without them being subject to tariffs. “The Mac Pro is Apple’s most powerful computer ever and we’re proud to be building it in Austin,” Apple CEO Tim Cook said in a statement. “We thank the administration for their support enabling this opportunity.” The Wall Street Journal reported in June that Apple was moving Mac Pro production to China, but the tech giant said Monday that the high-powered computer would continue to be made in the Austin facility that has produced Mac Pros since 2013. One month after the Journal report, President Trump tweeted that the U.S. would not grant Apple tariff exemptions, saying, “Make [Mac Pros] in the USA, no Tariffs!” The Office of the U.S. Trade Representative said Friday it would grant tariff exemptions for partially assembled main circuit boards and graphics cards, which contain expensive chips from Intel, Nvidia and Advanced Micro Devices. Apple is using Intel’s Xeon processor in the new computer.

Apple rolled out the redesigned Mac Pro at its Worldwide Developers Conference in June, and it is expected to go on sale this fall. Production in Austin will begin soon, the company said. “We believe deeply in the power of American innovation,” Cook continued. “That’s why every Apple product is designed and engineered in the US, and made up of parts from 36 states, supporting 450,000 jobs with US suppliers, and we’re going to continue growing here.” Prices for the new Mac Pro start at $5,999. The computers tend to be used for music and video production. The announcement is more good news for Austin, which has the most Apple employees of any U.S. location outside its headquarters in Cupertino, California – 6,200 as of December 2018. The company said in December it is spending $1 billion on a new North Austin campus for 5,000 more employees, with the capacity to expand to 15,000 workers. “More than a dozen” U.S. companies in eight states — Arizona, Maine, New Mexico, New York, Oregon, Pennsylvania, Texas and Vermont — will supply Mac Pro components, according to Apple, and the value of U.S.-made parts is jumping 2.5 times compared to previous models.

At a dinner in August, Cook made a “very compelling argument” that U.S. tariffs on Chinese imports are hurting American companies like Apple, but not its South Korean competitor Samsung, Trump said at the time. A new round of tariffs will go into effect Oct. 15, and more tariffs will hit Dec. 15. Austin Mayor Steve Adler told FOX Business’ Stuart Varney that the city offered Apple no tax incentives. Texas Gov. Greg Abbott called the announcement “a testament to Texas’ unrivaled workforce and premier business climate.” “Apple’s latest investment is a testament to Texas’ unrivaled workforce and premier business climate.” “Our state’s economy is thriving as the tech and manufacturing sectors continue to expand,” Abbott said. “I am grateful for Apple’s commitment to creating jobs in Texas, and will continue to promote fiscal and regulatory policies that encourage investment in our state and benefit future generations of Texans.”

NAR – more than half say ‘now is a good time to buy,’ according to realtor® survey

New consumer findings from a National Association of Realtors® survey show that more than half of polled Americans believe that now is a good time to buy a home. Optimism fared well in the third quarter of 2019 as 63% of people said they believe that now is a good time for a home purchase, with 34% of those respondents saying they believe that strongly. NAR’s chief economist Lawrence Yun said the favorable outlook also contains a degree of caution. “Mortgage rates are at historically low levels, so I see no sign of the optimism about home buying fading,” he said. “However, the fact that slightly fewer are expressing strong intensity compared to recent prior quarters is implying some would-be buyers have concerns about the direction of the economy.” Among those that stated that now is a good time to purchase a home, the silent generation (those born between 1925 and 1945) were most likely to express that belief. Seventy-five percent from that demographic said that now is a good time to buy. They were closely followed by older boomers (those born between 1946 and 1954), as 72% from that age group agreed that now is a good time to purchase a home.

When NAR’s third quarter Housing Opportunities and Market Experience (HOME) survey1 asked whether now is a good time to purchase a home, of those who have an income under $50,000, 54% answered “yes.” Answers in the affirmative increased as household incomes increased. In the $50,000 to $100,000 bracket, 64% said now is a good time to buy a home, and among those polled who have an income of $100,000, 72% said that it is currently a good time to buy. “Not surprisingly, as incomes increase, the process of buying a home is less of a strain,” said Yun. “This has always been the case, but in this third quarter survey, we see it to an even greater extent – high earners are more open to buying a home.” The NAR survey also asked respondents about their thoughts on selling a home in the current market. Seventy-four percent of those polled said that now is a good time to sell a home – a modest increase over 73% last quarter. Of those respondents, 45% said they “strongly” believe now is a good time for selling a home, while the remaining 29% said they hold that belief “moderately.” Those in the West region were most likely to hold this sentiment, as 81% of the region’s respondents said “now is a good time to sell.” In comparison, in the Northeast, 67% said now is a good time to sell a home.

In regard to household income and thoughts on selling a home, the poll found that those in the higher wage brackets were more likely to state a belief in favor of now being a good time to sell a home. Among the surveyed who answered that now is a good time to sell, 82% of them earn more than $100,000. However, of those who earn less than $50,000, only 64% said now is a good time to sell. Respondents were also questioned about their outlook toward the U.S. economy. Fifty-two percent of those surveyed said they believe the U.S. economy is improving. This is a decrease from the second quarter of 2019, when 55% said they believed the economy is improving. Millennials (those born between 1980 and 1998) were the most pessimistic, only 49% said the economy is improving and 51% said it is not improving. Fifty-four percent of the silent generation – in this case, the most optimistic group – said the economy is improving. Forty percent of those in urban areas also believe the economy is improving, compared to 62% in rural areas.

CoreLogic – continued growth of low-end rental market driven by demand of younger millennials

–  U.S. single-family rent prices increased 2.9% year over year in July 2019

–  Phoenix had the highest year-over-year rent price increase at 7.2%

Low-end rent prices were up 3.5%, compared to high-end price gains of 2.7%

CoreLogic released its latest Single-Family Rent Index (SFRI), which analyzes single-family rent price changes nationally and among 20 metropolitan areas. Data collected for July 2019 shows a national rent increase of 2.9%, compared to 3.1% in July 2018. Low rental home inventory, relative to demand, fuels the growth of single-family rent prices. The SFRI shows single-family rent prices have climbed between 2010 and 2019. However, overall year-over-year rent price increases have slowed since February 2016, when they peaked at 4%, and have stabilized over the last year with a monthly average of 3.1%. National rent growth continued to be propped up by low-end rentals in July. Rent prices among this tier, defined as properties with rent prices less than 75% of the regional median, increased 3.5% year over year in July 2019, down from a gain of 4.1% in July 2018. Meanwhile, high-end rentals, defined as properties with rent prices greater than 125% of a region’s median rent, increased 2.7% in July 2019, up from a gain of 2.6% in July 2018. Annual growth of the low-end rental market has consistently outpaced that of the high-end since May 2014.  According to data collected from the CoreLogic Consumer Housing Sentiment Study (conducted in partnership with RTi Research), continued growth on the low-end could be due to 63% of younger millennials – ages 21-29 – opting to rent over purchasing a home.

For the eighth consecutive month, Phoenix had the highest year-over-year increase in single-family rents in July 2019 at 7.2% (compared to July 2018). Tucson, Arizona and Las Vegas experienced the second and third highest rent gains in July at 5.7% each, while Miami saw the lowest rent increases of all analyzed metros at 1.2%. Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth. Phoenix experienced high year-over-year rent growth in July, driven by the annual employment growth of 2.9%. This is compared with the national employment growth average of 1.5%, according to data from the United States Bureau of Labor Statistics. Orlando, Florida also experienced an elevated annual employment growth of 3.8%, which played a role in its above-average year-over-year rent increase of 3.5% in July. “Rent increases on entry-level properties continued to outpace the rest of the rental market,” said Molly Boesel, principal economist at CoreLogic. “This trend should continue in the near term with strong demand from younger millennials who indicate they prefer to rent rather than own a home.”

MBA – mortgage applications flat

Mortgage applications decreased 0.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 13, 2019. Last week’s results included an adjustment for the Labor Day holiday. The Market Composite Index, a measure of mortgage loan application volume, decreased 0.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 10 percent compared with the previous week. The Refinance Index decreased 4 percent from the previous week and was 148 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 6 percent from one week earlier. The unadjusted Purchase Index increased 16 percent compared with the previous week and was 15 percent higher than the same week one year ago. “The jump in U.S. Treasury rates at the end of last week caused mortgage rates to increase across the board, with the 30-year fixed-rate mortgage climbing to 4.01 percent – the highest in seven weeks,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Refinancing activity dropped as a result, driven solely by conventional refinances.” Added Kan, “The purchase index increased for the third straight week to its highest reading since July. Additionally, the average loan amount on purchase applications increased to its highest level since June. This is a likely a sign that the underlying demand for buying a home remains strong, despite some of the recent volatility we have seen.”

The refinance share of mortgage activity decreased to 57.9 percent of total applications from 60.0 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.0 percent of total applications. The FHA share of total applications increased to 10.9 percent from 9.3 percent the week prior. The VA share of total applications increased to 12.7 percent from 11.9 percent the week prior. The USDA share of total applications increased to 0.6 percent from 0.5 percent the week prior. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 4.01 percent from 3.82 percent, with points decreasing to 0.37 from 0.44 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) increased to 4.01 percent from 3.84 percent, with points decreasing to 0.29 from 0.34 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.89 percent from 3.76 percent, with points decreasing to 0.30 from 0.31 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week. The average contract interest rate for 15-year fixed-rate mortgages increased to 3.42 percent from 3.28 percent, with points decreasing to 0.36 from 0.47 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week. The average contract interest rate for 5/1 ARMs increased to 3.54 percent from 3.42 percent, with points decreasing to 0.29 from 0.48 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

NAHB – builder confidence hits yearly high in September

Builder confidence in the market for newly-built single-family homes rose one point to 68 in September from an upwardly revised August reading of 67, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. Sentiment levels have held in the mid- to upper 60s since May and September’s reading matches the highest level since last October. “Low interest rates and solid demand continue to fuel builders’ sentiments even as they continue to grapple with ongoing supply-side challenges that hinder housing affordability, including a shortage of lots and labor,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn. “Solid household formations and attractive mortgage rates are contributing to a positive builder outlook,” said NAHB Chief Economist Robert Dietz. “However, builders are expressing growing concerns regarding uncertainty stemming from the trade dispute with China. NAHB’s Home Building Geography Index indicates that the slowdown in the manufacturing sector is holding back home construction in some parts of the nation, although there is growth in rural and exurban areas.” 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. The HMI index gauging current sales conditions increased two points to 75 and the component measuring traffic of prospective buyers held steady at 50. The measure charting sales expectations in the next six months fell one point to 70. Looking at the three-month moving averages for regional HMI scores, the Northeast posted a two-point gain to 59, the West was also up two points to 75 and the South moved one point higher to 70. The Midwest was unchanged at 57.

MBA – August new home purchase mortgage applications increased 33 percent

The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for August 2019 shows mortgage applications for new home purchases increased 33 percent compared to a year ago. Compared to July 2019, applications decreased by 0.2 percent. This change does not include any adjustment for typical seasonal patterns. MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 785,000 units in August 2019, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors. “New home purchase activity was robust in August, as both mortgage applications and estimated home sales increased from a year ago,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Recent increases in new residential housing permits and housing starts, lower mortgage rates, and a still-strong job market all bode well for the new home sales outlook.” The seasonally adjusted estimate for August is an increase of 4.1 percent from the July pace of 754,000 units. On an unadjusted basis, MBA estimates that there were 61,000 new home sales in August 2019, a decrease of 3.2 percent from 63,000 new home sales in July. By product type, conventional loans composed 69.3 percent of loan applications, FHA loans composed 18.1 percent, RHS/USDA loans composed 0.8 percent and VA loans composed 11.8 percent. The average loan size of new homes increased from $325,457 in July to $332,497 in August.

NAR responds to CFPB’s rulemaking notice on the Qualified Mortgage Patch issue

The National Association of Realtors® is calling on the Consumer Financial Protection Bureau to improve the Qualified Mortgage definition and patch while supporting an extension before a long-term solution is secured. The current patch expires on January 10, 2021. “Realtors® believe that homeownership is an integral part of the American Dream. We also believe that the Qualified Mortgage rule should be flexible enough to adopt to changing life patterns in order to ensure homeownership remains within reach for Americans who lack traditional income documentation,” said NAR President John Smaby, a second generation Realtor® from Edina, Minnesota, in the letter(link is external). “Underwriting is the foundation upon which America’s housing finance system is built. The CFPB’s rules process should not be rushed as the re-evaluation of the patch and a market-wide QM require a thorough vetting of alternatives and their impact on both competition and consumer access.” The QM patch was intended as a temporary measure to prevent turmoil in the mortgage and real estate market after the CFPB implemented the Ability to Repay rule. The rule requires lenders to prove that a borrower has the ability to pay back their mortgage at the time of consummation. The ambiguity of the mandate led lenders to request protections, which were delivered in the form of the QM patch. Analysts estimate that more than 3.3 million home purchases financed since 2014 fall into this market segment, and its disruption could raise costs and reduce access to mortgages for hundreds of thousands of otherwise creditworthy homebuyers each year. “The National Association of Realtors® has worked alongside the CFPB to find the most palatable, pragmatic approach to improving the QM definition and patch,” Smaby continued. “While we collaborate with the CFPB to develop a permanent solution that will ensure stability in the housing market, we will continue to contend that any replacement rule must be holistic, look at the complete borrower and must build on the liquidity the QM patch provides in the market.”

CoreLogic – golden state logs first annual home sales gain in a year

California home sales in July rose above a year earlier for the first time since last summer as lower mortgage rates helped spur demand. Statewide and in Southern California the median price paid for a home hovered less than 2 percent above where it was a year earlier, but the San Francisco Bay Area’s median fell year over year for the third consecutive month. An estimated 42,432 new and existing houses and condos sold statewide in July 2019, up 5.1% from June 2019 and up 1.8% from July 2018, CoreLogic public records data show. Activity normally edges lower between June and July, and since 2000 the average change in sales between those two months is a decline of 5.3%. The year-over-year sales increase this July marked the first annual gain since July last year, and the number of homes sold this July was the highest for that month since 46,757 homes sold in July 2015. The modest strengthening of home sales this July reflects multiple factors, including lower mortgage rates, job and income growth and more inventory. While California’s median sale price was up 1.4% year over year this July, the state’s “typical mortgage payment” – the monthly principal and interest payment on the median priced home – fell 7.1 percent because of a roughly 0.7 percent decline in mortgage rates over that 12-month period.

Many of the buyers whose deals were recorded this July would have signed sales contracts in June or May. The downward movement of mortgage rates into late summer could lead to a continued strengthening in sales, especially if inventory continues to rise. One caveat to this July’s annual sales increase is there was one more business day for recording deals compared with July last year. If it weren’t for this, sales likely would have fallen 2% to 3%. However, that would still be an improvement compared with the average year-over-year change in home sales – a decline of about 9% – each month this year between January and June. Compared with a year earlier, July 2019 sales declined below $500,000 and above $1 million but increased about 7 percent between $500,000 and $1 million. Deals below $300,000 fell 7.3% year over year, while sales under $500,000 fell 0.8% and sales of $500,000 or more rose 4.4%. Sales of $1 million-plus fell 2% year over year and $2 million-plus deals fell 2.8%. Through the first seven months of this year sales of $1 million or more have fallen 8.7 percent compared with the same period last year, while $2 million-plus sales fell 8.8 percent. Stock market volatility has likely played a role in this year’s decline in high-end sales.

The median price paid for all new and existing houses and condos sold statewide in July 2019 was $502,000, down 1.2% from an all-time high of $508,000 in June 2019 and up 1.4 percent from $495,000 in July 2018. A dip in the median sale price between June and July is normal for the season and on average since 2000 the median has declined 0.4 percent between those two months. This July’s 1.4% year-over-year gain was down from an annual increase of 6.5% in July last year and an 8.1% gain in July 2017.

Other July 2019 highlights:

–  Adjusted for inflation, California’s July 2019 median sale price remained 14.2% below its March 2007 peak.

–  In the six-county Southern California region, 22,071 new and existing houses and condos sold in July 2019, up 3.7% year over year. July’s median sale price was $540,000, up 1.9% year over year. Three of the counties posted annual gains in their medians of between 2.9% and 5.0%, while Orange County logged an annual decline of 0.8% and San Diego and  Ventura counties showed no change in their medians compared with a year earlier.

–  Counties in the relatively affordable Central Valley and Inland Empire (Riverside-San Bernardino counties) recorded some of the state’s largest annual increases in home sales this July, including the following: Butte (+26%); Madera (+14.2%); Yolo (13.2%); Riverside (8.6%); Kern (+7.8%) and Sacramento (+5.7%).

UAW workers walk out on GM

By Ken Martin, Evie FordhamPublished September 16, 2019AutoFOXBusiness

 

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Auto workers walk out on GM over contract dispute

United Auto Workers members went on a nationwide strike against General Motors on Sunday night after contract talks broke off Sunday. It is the first strike against GM in 12 years. More than 49,000 UAW members walked off General Motors factory floors or set up picket lines early Monday. Talks will resume Monday morning as UAW continues to demand a bigger share in the company’s profits, including through annual pay raises. Union officials say both sides are far apart in the talks, while GM says it has made significant offers. UAW represents workers at 33 manufacturing sites and 22 parts warehouses across the country. On Sunday, President Trump tweeted for the two sides to make a deal. Trump is not the only politician who has weighed in on the topic. Democratic presidential candidates including Massachusetts Sen. Elizabeth Warren, former Vice President Joe Biden, South Bend, Ind., Mayor Pete Buttigieg, Vermont Sen. Bernie Sanders and former Housing and Urban Development Secretary Julian Castro expressed support for the workers. “The CEO of GM made nearly $22 million dollars last year—281 times the median GM worker. I stand with the 46,000 UAW members who have moved to strike, fighting for affordable health care and fair wages. GM can afford to do right by the,” Castro wrote on Twitter on Sunday.

A person briefed on the bargaining told the Associated Press that GM has offered the UAW new products for two assembly plants that it had planned to close. GM says it presented what it believes was a “strong offer” including improved wages and benefits and investments in eight facilities in four states. The strike will affect GM plants in Michigan, Ohio, Tennessee, Kentucky, New York, Texas and elsewhere in the U.S. Cox Automotive calculated on Wednesday that GM has about a 77-day supply of cars, trucks and SUVs. “If a strike occurs, GM has enough inventory on the ground so as not to hinder sales in the short run. Strong sales in August helped trim overall industry inventories to the lowest level in three years, according to Cox Automotive data, but GM’s inventories remain healthy and even above industry average,” according to commentary from Cox. International Brotherhood of Teamsters General President Jim Hoffa said on Sunday that its members won’t be transporting GM vehicles during the UAW strike. The strike comes days after UAW official Vance Pearson was charged Thursday with corruption in an alleged scheme to embezzle union money and spend cash on premium booze, golf clubs, cigars and swanky stays in California. Trump and GM chief executive Mary Barra met at the White House on Sept. 5 to talk about issues including the union contract dissussions. Barra described the meeting as “productive and valuable.”

Trump’s housing-finance plan aims to curb GSE lending in areas with rent control

When Treasury released its housing finance reform plan a week ago, there was one proposal buried in the middle that didn’t get much attention: curbing Fannie Mae and Freddie Mac multifamily lending in areas that adopt rent control. It was marked “administrative,” meaning Treasury believes it can be done without input from Congress. When the plan was released, New York had recently expanded its rent control law and Oregon had adopted statewide rent control. This week, lawmakers in California, the most populous U.S. state, joined Oregon in passing a statewide bill to control rents, and Gov. Gavin Newsom has already said he’s going to sign it. “This is the Trump administration against the blue states,” Ed Mills, a public policy analyst with Raymond James in Washington, said in an interview with HousingWire. “This matches their philosophy, but it has the added benefit of Trump, using administrative actions, being able to influence policies in states run with Democratic majorities.” But, perhaps that one suggestion, buried in the middle of a 53-page report, will never see the light of day? “This is absolutely going to happen,” Mills said. “It’s just a matter of the scale and timing. The lesson I’ve had through observing the Trump administration is: They tell you in advance what they are going to do and they more often than not follow through.” The plan cites rent control as interfering “with the functioning of local housing markets, tending to decrease the supply and quality of the available housing.”

According to the housing finance plan that Treasury Secretary Steven Mnuchin said had been approved by President Donald Trump, the Federal Housing Finance Agency, the independent regulator of Fannie Mae and Freddie Mac, should make multifamily lending tougher to secure in rent-controlled areas. “Treasury recommends: FHFA should revisit the GSEs’ underwriting criteria for acquisitions of multifamily loans secured by properties in jurisdictions that adopt rent-control laws or other undue impediments to housing development,” the plan stated. On Friday, FHFA Director Mark Calabria issued changes in multifamily lending that raised the volume caps for the government-sponsored enterprises, or GSEs, as Fannie Mae and Freddie Mac are known. It also ended a carve-out for so-called “green” loans, referring to financing for changes to make buildings more energy-efficient. It didn’t mention rent control. “Look at the action the FHFA took today, regarding some of the green-housing initiatives,” Mills said on Friday. “That’s a Democratic priority that got a lot of support, that this administration walked back.” Mills couldn’t predict when FHFA might act. FHFA and Treasury officials did not return emails seeking comment. “It’s going to be state-by-state and it’s going to be a showdown between state government and federal government,” Mills said. “For a lot of high-costs areas, the only supports that exist, the only Fannie/Freddie benefit they get, is through the multifamily space.”

Oil prices surge as attack on Saudi facility disrupts output

An attack on Saudi Arabia’s largest oil processing plant pushed crude prices sharply higher Monday. Traders are focusing on the longer-term impact as it depends on how long production is disrupted and the attack’s future implications. U.S. crude oil was at $59.80, up $4.95, or 9 percent per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, was at $66.31, up $6.09, or 10.1 percent, from its previous close. The attack on the Saudi Aramco facility halted production of 5.7 million barrels of crude a day, more than half of Saudi Arabia’s global daily exports. It is also more than 5 percent of the world’s daily crude oil production. Most output goes to Asia. Yemen’s Iran-backed Houthi rebels claimed responsibility for the attack. Officials said they would use other facilities and existing stocks to supplant the plant’s production. President Trump tweeted that the U.S. is ready to respond to a shortage.  The Wall Street Journal reported Sunday that Saudi officials said a third of crude output will be restored Monday, but bringing the entire plant back online may take weeks.

CoreLogic – a snapshot of market size and gross investment return of 2- to 4-unit single-family rentals

Of the nation’s rental housing stock, nearly 1-in-5 (18%) is comprised of homes in two- to four-unit properties. These small apartment houses come in many forms and shapes – duplexes, triplexes, fourplexes, townhouses, rowhouses, or garden apartments – and can be found in urban areas and city blocks, as well as traditional and suburban neighborhoods across the country. Primarily purchased for investment purpose – although owners frequently occupy one unit as their primary residence – these small multi-unit houses make up one-third (34%) of the single-family rental (SFR) market.  There are significant geographic variations in their market size, however. Consider the 10 major metros that make up the CoreLogic Case-Shiller Composite-10 Home Price Index, for example. When sized by the entire rental housing stock (i.e., single-family and multi-family combined), 2- to 4-unit rental homes range from 36.1% in the greater Boston metropolitan area to a mere 6.7% in Washington DC metro. But within the SFR housing market, 2- to 4-unit rentals commonly make up a significant portion, particularly in many urban areas in the Northeast and Midwest.  In Boston and New York, for example, over 70% of the SFR stock consists of 2- to 4-unit dwellings.  On the opposite end is the Denver and Washington DC metropolitan areas where 2- to 4-unit rentals represent only about one-fifth of the city’s SFR (21.2% and 19.1%, respectively). However, whether they dominate the landscape of the SFR market or not, 2- to 4-unit properties provide important affordable housing to low- to moderate-income households, particularly in high-cost markets. For owner-occupants and investors, 2- to 4-unit properties offer a number of advantages as income and investment property. When used as a principal residence, purchasing or refinancing is eligible for FHA financing and often for more favorable mortgage rates and possibly greater leverage from lenders offering conventional loans. Second, the monthly rental income provides short-term cash flow that can be used to pay some of the property expenses. And in the long term, the investment offers potential capital appreciation from rising property value.

The total gross return for the same 10 cities discussed above has two components – short-term return from rental income and long-term return from property appreciation.  Gross rental yield is annual rental income (current monthly rent multiplied by 12) divided by the property’s market value. The rate of property appreciation is measured as one-year change in the property value, proxied by the 12-month year-over-year change in single-family attached home price index. In the chart, property appreciation is stacked atop gross rental yield, labelled with the total gross return. Both the yield and property appreciation are five-month averages of January to May 2019. Despite based on a very small sample, it is nevertheless quite noticeable that high-cost cities such as San Francisco, San Diego, Los Angeles, and New York tend to have lower gross rental yield – largely depressed by high property value amid moderate rent growth.  Less-expensive cities such as Miami, Chicago, and Las Vegas generally show above-average gross rental yield (9.3%, 9.2%, and 9.0% respectively). The national average of annual gross rental yield was 8.4% during the first five months of 2019. During the same period, annual long-term return from capital appreciation averaged 2.7% across the country. In Las Vegas, average capital appreciation for single-family attached reached double-digits: 11.7%. Denver and Washington DC metros also had above-average long-term return from capital appreciation. San Francisco, on the other hand, showed a small negative return in capital appreciation which contributed negatively to the total gross return.  With the exceptions of Denver and Las Vegas, eight of the 10 metros recorded a small to moderate total gross return underperformance relative to the national average (11.1%). In Las Vegas, average yearly total gross return topped an impressive 20% in the first five months of 2019.

Trump: Love me or hate me, you’ve got to vote for me

President Donald Trump hit the campaign trail in New Hampshire Thursday night, explaining his policies and influence on the markets won’t compare to his Democratic rivals. “The bottom line is – you have no choice but to vote for me.” Using a story to reflect this point, the president noted a successful businessman he never liked was visiting the White House Opens a New Window. , and to his surprise, was there to help his re-election campaign. Trump said the businessman, who he did not name, felt he had no choice but to help keep the president in office due to the impact Trump and his administration has had on the economy. “Whether you love me or hate me, you’ve got to vote for me.” The president admitted the volatility of the markets have led to “a couple of bad days,” over China tariffs, but that good days were on the horizon. By the afternoon, stocks rallied to finish positive for the day — after Wednesday’s dramatic 800 point drop in the Dow and the worst day for the stock market in 2019. Still, the market is up more than nine percent for the year-to-date. The market swings of late have been attributed by most market watchers as concerns over trade with China and the U.S. imposed tariffs. “I never said China Opens a New Window.  was gonna be easy,” Trump explained noting that China’s devaluation of its currency Opens a New Window.  will lead to the U.S. “taking in” money. “Ultimately their devaluations are going to hurt them badly.” “If for some reason I wouldn’t have won the election, these markets would have crashed.” “The U.S. right now has the hottest economy anywhere in the world.” He blamed “decades of calamitous trade policies” for shattering American prestige and leading to the end of nearly a quarter of manufacturing jobs in the state of New Hampshire. The crowd helped POTUS make a decision on which of his campaign phrases they liked best: Make America Great Again, or Keep America Great! Trump requested audience approval for each phrase – generating more applause for the second, with people chanting “USA!” New Hampshire was lost by the president’s 2016 campaign by a mere 2,700 votes. June figures released show the state had the fourth-lowest unemployment rate in the country, which Trump noted could break records when the next jobs Opens a New Window.  report is released.

MBA – July new home purchase mortgage applications increased 31.2 percent

The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for July 2019 shows mortgage applications for new home purchases increased 31.2 percent compared from a year ago. Compared to June 2019, applications increased by 11 percent. This change does not include any adjustment for typical seasonal patterns. “July’s strong new home sales increase on a monthly and annual basis was driven by the ongoing decline in mortgage rates, combined with steady housing demand and a still-healthy job market,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The average loan size decreased last month, likely influenced by the increase in the first-time homebuyer share, as these buyers are likely to choose lower-priced, entry-level homes.” Added Kan, “MBA estimates that the pace of new home sales in July increased over 16 percent.” MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 754,000 units in July 2019, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors. The seasonally adjusted estimate for July is an increase of 16.7 percent from the June pace of 646,000 units. On an unadjusted basis, MBA estimates that there were 63,000 new home sales in July 2019, an increase of 8.6 percent from 58,000 new home sales in June. By product type, conventional loans composed 69.1 percent of loan applications, FHA loans composed 18.1 percent, RHS/USDA loans composed 1.0 percent and VA loans composed 11.7 percent. The average loan size of new homes decreased from $329,593 in June to $325,457 in July.

Apple touts US job growth despite China trade tensions

As concerns continue about the direction of the U.S economy, Apple touted its contributions to the U.S. economy in updated employment statistics on Thursday, noting that it now employs or contributes to the employment of 2.4 million people across the country. The iPhone maker said the 2.4 million total includes 90,000 direct Apple employees, as well as roughly 450,000 jobs for its U.S.-based parts suppliers and 1.9 million workers active to some degree in its “App Store.” The company’s total employment imprint is four times larger than it was four years ago. Apple affirmed that it is on track to create another 20,000 jobs in the U.S. by the year 2023 – a pledge the company initially made in late 2018. In New York, the California-based is looking around Manhattan for between 200,000 and 500,000 square feet of space for a new office according to The Real Deal,  Sources told the Ne York real estate publications that the search for new office space is to accommodate new hires the company plans to make

Apple shares are up more than 25 percent this year as growth in the company’s services business has offset sagging iPhone sales and the impact of an ongoing U.S.-China trade dispute. The company asked the Trump administration in June to exempt its products from further tariffs, warning that the duties would limit its contributions to the U.S. economy and provide a boost to its international rivals. The company said it spent a combined $60 billion with 9,000 U.S.-based suppliers in 2018. North Carolina, Florida and Pennsylvania saw significant increases in Apple-supported jobs. Apple is set to add a combined 3,200 employees in expansions in San Diego and Seattle.

CoreLogic – home-price growth faster for low-priced homes

Our CoreLogic Home Price Index has reported a strong rebound in prices from the trough in March 2011.  The national index has increased by more than 60% from its nadir with lower-priced homes experiencing much faster appreciation:  Comparing homes priced 25% below the median price in their locale with homes priced 25% above the median, the less expensive homes have had price growth that has been nearly twice as rapid through June 2019. Two causes of the imbalance in price growth across value tiers are a reduced supply of and increased demand for the lowest-priced homes.  The net result of these forces is a low months’ supply for sale for the less expensive homes, the homes that entry-level buyers and investors are generally looking to buy. In part, these trends reflect existing homeowners staying in their homes longer, thereby reducing the flow of homes listed for sale, and increasing numbers of millennials beginning to purchase their first home, accelerating demand for starter homes. Two factors have added to the demand and supply imbalance for lower-priced homes.  One is that investors are a much larger share of buyers than had been the case. During 1999 to 2003, investors were 10.7% of the buyers of entry-level homes, but this had risen to 19.2% in 2015 to 2019.  A second reason is the dearth of new construction of lower-priced homes.  In 1999 to 2003, 3.8% of entry-level sales were new construction, but by 2015 to 2019 this had fallen to only 1.8%. The lack of new-building supply for lower-priced homes has occurred throughout the U.S.  In four metros that had some of the largest number of new home sales during the last year, new construction generally added about 20% or more to the supply of higher-priced homes, but added only about 3% to the supply of lower-priced homes.  Limited supply and rising demand for lower-priced homes, relative to premium-priced homes, explains much of the difference in price growth.

NAHB – builder confidence trending higher as interest rates move lower

Builder confidence in the market for newly-built single-family homes rose one point to 66 in August, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. Sentiment levels have held at a solid 64-to-66 level for the past four months. “Even as builders report a firm demand for single-family homes, they continue to struggle with rising construction costs stemming from excessive regulations, a chronic shortage of workers and a lack of buildable lots,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn. “While 30-year mortgage rates have dropped from 4.1 percent down to 3.6 percent during the past four months, we have not seen an equivalent higher pace of building activity because the rate declines occurred due to economic uncertainty stemming largely from growing trade concerns,” said NAHB Chief Economist Robert Dietz. “Although affordability headwinds remain a challenge, demand is good and growing at lower price points and for smaller homes.” 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.

The HMI index gauging current sales conditions increased two points to 73 and the component measuring traffic of prospective buyers rose two points to 50. The measure charting sales expectations in the next six months fell one point to 70. Looking at the three-month moving averages for regional HMI scores, the South moved one point higher to 69, the West was also up one point to 73 and the Midwest inched up a single point to 57. The Northeast fell three points to 57.

CoreLogic – post-recession housing market at the state and metro level

affordability concerns, unemployment rates and the rise of millennial homebuyers

Home price growth began falling just before the start of the Great Recession and continued declining rapidly throughout 2008 and 2009. Over the past decades, state and metro housing markets have experienced numerous highs and lows in terms of home price and overvalued markets. The latest CoreLogic special report looks back at some of the areas hardest hit by the housing burst and how they’ve fared throughout the current economic expansion. In 2009, home prices dropped by 11.2% nationally, with North and South Dakota being the only states to see any annual growth that year. Meanwhile, Nevada experienced the largest decline at 25.5% – followed by Arizona (-21.3%), Florida (-19.7%) and California (-14.5%). While California’s home prices grew considerably from 2013 to 2018, affordability issues in the state have since hampered growth with the state’s average annual home price dropping from 7.4% in 2018 to 4.9% in 2019. However, other western states are seeing the opposite. Between July 2017 and July 2018, Idaho and Nevada not only became the fastest-growing states, but they also led the country in annual home price growth. During this same time, New York, Connecticut and Alaska were three of only nine states experiencing population decreases. Connecticut has been one of the slowest-appreciating states for the past five years with home price growth varying from 2.4% in 2014 to 0.9% in 2019. New York and Alaska have also experienced similar modest growth over the past few years. In May 2019, when the U.S. unemployment was at 3.6%, both New York and Nevada’s unemployment were above the national average at 4%. Idaho had the fifth-lowest unemployment (2.8%), while Connecticut’s was just slightly higher than the national average (3.8%) and Alaska’s took the spot for the highest unemployment rate in the nation at 6.4%.

The CoreLogic Market Condition Indicators (MCI) categorizes home prices in individual markets as undervalued, at value or overvalued, by comparing home prices to their long-run, sustainable levels, which are supported by local market fundamentals (such as disposable income). According to CoreLogic MCI, 32.4% of the 392 metro areas analyzed were overvalued in May 2019. This number more than doubled in September 2006, during the last expansion, to 70.2%. The largest increase in the share of overvalued metros occurred between 2012 and 2013 when the average annual share jumped from 9.9% to 15.8%. Millennial homebuyers are moving away from overvalued markets and toward more affordable areas. Of the top 10 metros for millennial buyers in May 2019, four were undervalued (Pittsburgh; Rochester, New York; Wichita, Kansas and Grand Rapids, Michigan), five were at value (Buffalo, New York; Milwaukee; Albany, New York; Provo, Utah and Des Moines, Iowa) and only one was overvalued (Salt Lake City). With current economic expansion being the longest in U.S. history, and with local housing markets stabilized from the aftershocks of the Great Recession, it’s only natural to wonder about what comes next. While some experts remain split on if there is another recession in the near future, most signs are positive. “We expect the housing market to enter a normalcy phase over the next 24 months,” said Ralph McLaughlin, deputy chief economist for CoreLogic. “With prices neither rising too fast nor too slow, and with a growing stream of young households looking to buy homes over the next two decades, the long-term view looks healthy.”