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MBA – December new home purchase mortgage applications decreased 6.1%

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

Oil climbs 1 pct as OPEC output drop eases glut concerns

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

NAHB – remodelers’ confidence holds relatively steady in fourth quarter

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

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

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

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

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

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

Flooding

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

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

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

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

Flood Map

Atlantic Hurricanes

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

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

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

Natural Hazard Report Table

Wildfire

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

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

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

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

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

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

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

MBA – mortgage credit availability decreased in December

Mortgage credit availability decreased in December according to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA) that analyzes data from Ellie Mae’s AllRegs® Market Clarity® business information tool. The MCAI decreased 7.3% to 175.0 in December. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. The Conventional MCAI decreased (14.5%) and the Government MCAI increased slightly (0.1%). Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 14.9%, while the Conforming MCAI decreased by 14.0%.  “The supply of credit dropped in December to its lowest since February 2017. The decline was driven by a sharp decrease in the conventional credit space, as we saw the expiration of the Home Affordable Refinance Program (HARP),” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Credit availability in government loans was stable over the month, ticking up slightly. We also saw a decline in high balance and super conforming programs, which drove the decline in the jumbo index.” The MCAI decreased 7.3% to 175.0 in December. The Conventional MCAI decreased (14.5%) and the Government MCAI increased slightly (0.1%). Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 14.9%, while the Conforming MCAI decreased by 14.0%.

Bernie Sanders to introduce bill to raise federal minimum wage to $15

Independent Vermont Sen. Bernie Sanders said he – along with other members of Congress – plans to introduce a bill in Congress this week that would raise the federal minimum wage to $15 per hour. “The federal minimum wage of $7.25 is a starvation wage. That is why I, along with many other members of Congress, will introduce legislation this week to raise that wage to $15 an hour. If you work 40 hours a week, you should not live in poverty.” The bill is expected to come as the government shutdown enters its fourth week – eclipsing the record for the longest lapse in federal funding over the weekend – as many federal employees go unpaid. Raising the minimum wage sparks a range of opinions on Capitol Hill – from whether it should be raised at all to whose job it should be to do so. Such a bill is unlikely to make significant headway because, even though Democrats took control of the House of Representatives during the 2018 midterm elections, Republicans maintain control in the Senate.

During an interview with FOX Business in November, White House economic adviser Larry Kudlow argued against having the federal government set the national minimum wage since conditions vary meaningfully among states. “The federal government shouldn’t have jurisdiction over the states anyway in a matter like this. The conditions are different in these states, the cost of living is different, the state of business is different,” Kudlow said. Twenty states raised their minimum wages at the outset of 2019, including California, New York and Washington. The White House adviser added that he has no problem with Americans taking home larger paychecks, especially if the raise comes from companies in the private sector – like Amazon. Sanders has been a staunch advocate for raising the minimum wage to $15 per hour. He introduced bills last year aimed at corporate America – including the Stop BEZOS Act Opens a New Window.  – pressuring America’s largest corporations to lift workers’ wages. In addition to Amazon, Sanders has publicly targeted McDonalds, Walmart and American Airlines.

NAR – homeownership part of “american dream”; housing costs deterrent for non-owners

Homeowners and non-homeowners both strongly consider homeownership part of the American Dream. That is according to new consumer survey data from the National Association of Realtors®, which revealed that among those polled, approximately 75% of non-homeowners believe homeownership is part of their American Dream, while nine in 10 current homeowners said the same. NAR’s Aspiring Home Buyers Profile analyzed 2018 quarterly consumer insights from its Housing Opportunities and Market Experience (HOME) survey1 to capture the housing expectations and sentiments of non-homeowners – both renters and those living with a family member. When non-homeowners were asked for the chief reason why they currently do not own a home, most respondents said it was because they were currently unable to afford a mortgage. Over the last quarter of 2018, 43% of non-owners said they did not own a home because they were not in a position to purchase, which was down from the third quarter of 2018, when 49% of non-homeowners answered the same. Also in the 4th quarter, 33% of non-homeowners said they do not own because current life circumstances are not suitable for ownership, while 16% said they need the flexibility of renting. In addition, the survey looked at the main reason why non-homeowners would buy a home in the future. Throughout 2018, 28 to 31% of non-owners each quarter said an improvement in their financial situation would be the top reason that would encourage them to buy a home in the future. In each quarter, 26 to 30% of non-owners said a change in lifestyle – such as getting married, starting a family or retiring – would be the primary reason they would make a future home purchase.

Lawrence Yun, NAR chief economist, says unaffordable housing has caused a number of potential buyers to hold off on purchasing a new home. “The lack of affordable and moderately priced homes has forced non-homeowners to delay achieving that part of the American Dream. However, as the survey confirms, significant lifestyle changes like marriage or starting a family often spur non-owners to pursue home-ownership.” For this year’s survey, homeowners and non-owners were also asked about adult family or friends moving into their homes, the span of time this individual(s) lived within the household, and if they thought about moving to a new home because of the change. According to the survey, 11% of homeowners had an adult child move into their residence, while 5% of non-owners had an adult move into their home. Of those who had someone move into their home, 44% said that the individual intended to live with them for over one year or to stay permanently. Forty-four% of non-owners reported that the individual planned on living with them for between six months to one year. Eighty-eight% of those surveyed who had someone move into their home reported that their living situation remained acceptable and therefore did not warrant consideration of moving into a different home. Twelve% said they did consider moving or ultimately did move due to their home situation changing. “While home sales were slightly down in 2018, there is still a sizable pent-up housing demand. Economic growth, interest rates, and the supply of moderately priced-homes will dictate how well the real estate industry will do this year,” said Yun.”

More Americans fleeing high-tax states

More and more Americans are fleeing high-tax states – from California to Hawaii to New Jersey to New York – and relocating elsewhere in the hopes of holding onto some more of their hard-earned cash. Problem is that’s pushing up the cost of living in the states they’re fleeing to, according to the country’s largest real estate trade group. They’re going to nearby secondary states that used to be “affordable” – states like Washington, Nevada, Colorado and Arizona, for example, says Lawrence Yun, chief economist of the National Association of REALTORS(r). And it isn’t just the working class looking to move to lower-tax states. Taxes are often a top consideration particularly when someone is relocating for work or looking to retire says tax expert Bob Meighan, a former executive with Intuit. The biggest tax you’re going to face, after the IRS, is the one your state presents. That’s why Florida is a big draw “particularly among northeast residents currently living in high property-tax states such as New York, New Jersey (the highest in the country), and Connecticut,” says Yun. “In Florida, you get both lower taxes and a warmer climate.” Last year, these were the ten highest income tax states, according to TurboTax (*These rates do not include local taxes.):

California 13.3%

Hawaii 11%

Oregon 9.9%

Minnesota 9.85%

Iowa 8.98%

New Jersey 8.97%

Vermont 8.95%

District of Columbia 8.95%

New York 8.82%

Wisconsin 7.65%

DSNews – is the housing market overheating?

The housing market might experience a downturn, but it won’t affect homeownership as much as the last housing crisis did, according to a study titled Where are We Now with Housing: A Report, by the Florida Atlantic University College of Business. The study investigated and compared the current status of US housing at the national level with that of housing at the peak of the last cycle in July 2006. It revealed that while national housing prices were slightly overheated, residential real estate markets were experiencing minimal downward pressure on the demand for homeownership. “Understanding where housing stands today relative to the last cycle’s peak creates more informed real estate consumers and perhaps a less bumpy ride this time around as the nation enters another housing cycle peak,” said Ken Johnson, the author of the study and co-author of the Beracha, Hardin & Johnson Buy vs. Rent Index (BH&J). To compare home prices and their impact on demand, the study investigated scores of the CoreLogic Case-Shiller Home Price Index and the BH&J. It found that housing prices were at 7.3% above their long-term pricing trend compared to 31% at the peak of the last housing cycle. In terms of downward pressure on housing demand, the study found that at the end of the last cycle the BH&J Index indicated an extreme downward pressure on homeownership with a score of 1.00. Comparatively, this time around, the index reflected a score of 0.039 suggesting only minimal pressure on homeownership demand. “It looks like we’re in for more of a very high tide, as opposed to a tsunami, as residential prices peak in this latest cycle,” Johnson said. “At a minimum, we can expect flatter housing price growth. At worst, we could experience price declines slightly below the long-term pricing trend.”

Oil prices jump on US-China trade hopes, supply cuts

Oil prices rose by more than 1.5% on Monday on hopes that talks in Beijing can resolve a trade war between the United States and China, while supply cuts by major producers also supported crude. Brent crude futures were at $58.04 per barrel at 0751 GMT, up 98 cents, or 1.7%, from their last close. US West Texas Intermediate (WTI) crude oil futures were at $48.85 per barrel, up 89 cents, or 1.9%. Financial markets were riding a relief rally on Monday on expectations that face-to-face trade negotiations between delegates from Washington and Beijing, starting on Monday, would lead to an easing in tensions between the two biggest economies in the world. The United States and Beijing have been locked in an escalating trade spat since early 2018, raising import tariffs on each other’s goods. The dispute has weighed on economic growth.

Goldman Sachs said in a note on Monday that it had downgraded its average Brent crude oil forecast for 2019 to $62.50 a barrel from $70 due to “the strongest macro headwinds since 2015.” French bank Societe Generale also lowered its oil price forecasts, cutting its 2019 average price expectation for Brent by $9 to $64 a barrel and reducing its WTI forecast to $57 a barrel, also a reduction of $9. The bank said it had revised its global oil demand growth forecast to 1.27 million barrels per day (bpd), down from 1.43 million bpd previously. In the latest signs of widespread economic slowdown that could also hit fuel demand, British new car sales in 2018 fell at their fastest rate since the global financial crisis a decade ago, preliminary industry data showed on Monday. Meanwhile, German industrial orders dropped in November, official data showed on Monday, as Germany’s exporters suffer from the trade dispute between China and the United States.

Government shutdown halts reverse mortgage endorsements

With the government shutdown approaching the two-week mark, reverse mortgage endorsements have ground to a halt. The Federal Housing Administration released a notice stating it will not be making insurance endorsements for HECM loans during the shutdown. The FHA also noted that assistance will not be provided for lenders with issues regarding the Collateral Risk Assessment related to the second-appraisal protocol. If the first appraisal was submitted under the interim protocol, a second appraisal must follow the interim processes, the FHA said. If the first appraisal was submitted on or after Nov. 30, 2018, when the process was fully automated, lenders must adhere to guidelines for the automated process. And, apparently, if questions arise, lenders are out of luck. The FHA also said condominium project approvals under HUD review will be unavailable during the shutdown.

But some activities will continue as normal, albeit with “limited staff assistance available and longer wait times for assistance,” the FHA said. HECM payments will continue to be made to borrowers, as well as refunds on mortgage insurance premiums. Submissions of upfront MIP payments for new endorsements are still required, with the FHA specifically noting that lenders are required to submit monthly MIPs during the shutdown. FHA Connection will still be available and will continue to assign case numbers. The Home Equity Reverse Mortgage Information Technology system and Electronic Appraisal Delivery portal will also be available for existing lenders only. “As a result of the Federal Government shutdown due to a lapse in appropriations, until further notice the Federal Housing Administration’s Office of Single Family Housing and its mortgage insurance program will be operating with limited service,” the FHA bulletin said. “Please note that across the board, the services that remain available during the shutdown will have significant impacts to customer service and/or limited functionality.”

Nucor to build $1.35B steel plant in Midwest

US steelmaker Nucor said Monday it will spend $1.35 billion to build a steel production facility in the Midwest, creating approximately 400 full-time jobs. The plate mill is expected to begin production in 2022 and be capable of producing 1.2 million tons of plate products per year, said Nucor, which operates plants in North Carolina, Alabama and Texas. The mill will produce cut-to-length, coiled, heat-treated and discrete plates ranging from 60 to 160 inches wide, and in various gauges. “Tax reform, continued improvements to our regulatory approach and strong trade enforcement are giving businesses like ours the confidence to make long-term capital investments here in the United States,” CEO John Ferriola said in a statement. Nucor said it expects to select a site early this year. “By building this state-of-the-art plate mill in the Midwest – the largest plate-consuming area in the United States – we will enhance our ability to serve our customers in the region while also furthering our goal of meeting all the steel needs of our customers around the country,” Leon Topalian, a Nucor executive vice president, said in a statement.

DSNews – in times of emergency

The current insurance system leaves too many homeowners vulnerable when disaster strikes even with private insurance policies playing a major role. According to a recent report by the Urban Institute, the number of flood insurance policies in force through the National Flood Insurance Program decreasing over the past decade further complicated the issue. In light of these factors, the recent stance by the Federal Emergency Management Agency (FEMA) on federal policies gained importance. Congress had passed legislation that extended the National Flood Insurance Program to May 31, 2019, before the partial shutdown on the December 21. However, on December 26, in a stance that was contrary to the ones it had taken during past shutdowns, FEMA, said that insurers would not be allowed to issue and renew federal policies during the shutdown. Apart from National Association of Realtors (NAR), organizations such as the Property Casualty Insurers Association of America and the Independent Insurance Agents & Brokers of America and the Congress expressed their concerns urging the agency to reevaluate its decision. FEMA was quick to address the concerns and reverse its policy disallowing new or renewal flood insurance policies during the shutdown and announced a reversal of the unexpected ruling the agency released earlier, on December 28.

NAR estimates that the FEMA ruling disallowing insurance could have affected home sales across America, as its research revealed the possibility of up to disruptions in 40,000 closings each month that the NFIP cannot issue flood insurance policies—making flood insurance imperative especially at a time when market disruption would be extremely hard-felt. A recent report by CoreLogic revealed that serious delinquencies have recorded an upward spike in disaster-affected areas. “Lenders, for example, will need to carefully consider whether or not it even makes sense to continue offering mortgage loans in frequently-hit by natural disaster areas, and which may or may not be covered by the battered and bruised Federal Flood Insurance Program. Servicers will need to look closely at their potential losses, particularly when managing loans insured by government agencies. Property insurers will certainly adjust premiums to address increased levels of risk,” Rick Sharga, EVP of Carrington Mortgage said.

 

NAR – pending home sales see 0.7% drop in November

Pending home sales overall slipped in November, but saw minor increases in the Northeast and the West, according to the National Association of Realtors®.The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 0.7% to 101.4 in November, down from 102.1 in October. However, year-over-year contract signings dropped 7.7%, making this the eleventh straight month of annual decreases. Lawrence Yun, NAR chief economist, said the current sales numbers don’t fully take into account other data. “The latest decline in contract signings implies more short-term pullback in the housing sector and does not yet capture the impact of recent favorable conditions of mortgage rates,” he said. Yun added that while pending contracts have reached their lowest mark since 2014, there is no reason to be overly concerned, and he predicts solid growth potential for the long-term. All four major regions sustained a drop when compared to one year ago, with the West taking the brunt of the decrease. “The West crawled back lightly, but is still experiencing the biggest annual decline among the regions because of unaffordable conditions,” Yun said. Yun suggests that affordability challenges in the West are part of the blame for the drop in sales. Home prices in the West region have risen too much, too fast, according to Yun. “Land cost is expensive, and zoning regulations are too stringent. Therefore, local officials should consider ways to boost local supply; if not, they risk seeing population migrating to neighboring states and away from the West Coast.”

Yun indicated the latest government shutdown will harm the housing market. “Unlike past government shutdowns, with this present closure, flood insurance is not available. That means that roughly 40,000 homes per month may go unsold because purchasing a home requires flood insurance in those affected areas,” Yun said. “The longer the shutdown means fewer homes sold and slower economic growth.” That said, Yun cited year-over-year increases in active listings from data at realtor.com® to illustrate a potential rise in inventory. Denver-Aurora-Lakewood, Colo., Seattle-Tacoma-Bellevue, Wash., San Francisco-Oakland-Hayward, Calif., San Diego-Carlsbad, Calif., and Providence-Warwick, Rhode Island saw the largest increase in active listings in November compared to a year ago. Yun believes that there are good longer-term prospects for home sales. “Home sales in 2018 look to close out the year with 5.3 million home sales, which would be similar to that experienced in the year 2000. But given the 17 million more jobs now compared to the turn of the century, the home sales are clearly underperforming today. That also means there is steady longer-term growth potential.” The PHSI in the Northeast rose 2.7% to 95.1 in November, and is now 3.5% below a year ago. In the Midwest, the index fell 2.3% to 98.1 in November and is 7.0% lower than November 2017. Pending home sales in the South fell 2.7% to an index of 115.7 in November, which is 7.4% lower than a year ago. The index in the West increased 2.8% in November to 87.2 and fell 12.2% below a year ago.

Gold hits over 6-month high as investors flock to safety

Gold climbed to a more than six-month high on Friday, as concerns about slowing global economic growth and a partial government shutdown in the United States stoked safe-haven demand, although gains in equities capped the upside. Spot gold had risen by 0.5% to $1,281.08 per ounce as of 0713 GMT, and was set for a second straight weekly gain with no end in sight for China-US trade tensions and political uncertainty in the United States. The precious metal hit its highest level since June 19 at $1,281.39 earlier in the session. US gold futures inched up 0.2% to $1,283.2 per ounce on Friday. “People see gold as the only safe haven at this point of time,” said Brian Lan, managing director at dealer GoldSilver Central in Singapore, referring to political and economic upheavals such as the Sino-US trade spat and the partial US government shutdown. The dollar index, a gauge of its value versus six major peers, edged lower, having lost 0.5% overnight, adding to gold’s appeal by making it cheaper for holders of other currencies. Financial markets are expecting US growth to slow next year as a result of rising interest rates. A measure of US consumer confidence posted its sharpest decline in more than three years in December, emphasizing the possibility. In a blow to worsening trade tensions between the world’s two biggest economies, US President Donald Trump is considering an executive order that would bar US companies from using telecommunications equipment made by China’s Huawei and ZTE. Gold is often used by investors as a hedge against political and financial uncertainty. Meanwhile, Asian stocks inched higher after Wall Street ended volatile trade in the green in the previous session, limiting gold’s advance.

Senior execs at Vanguard Funding sent to jail for embezzling $8.9 million

The former chief operating officer and chief financial officer of a New York-based mortgage lender will spend between 18 and 24 months in prison after admitting to embezzling more than $8.9 million from warehouse lines of credit that were meant to fund mortgages. According to the US Attorney’s Office for the Eastern District of New York, Edward Sypher, Jr. and Matthew Voss, who are senior executives at Vanguard Funding, pleaded guilty earlier this year to conspiring to commit wire and bank fraud in connection with the scheme. Voss, the COO of Vanguard, and Sypher, the company’s CFO, were charged last year for their participation in the fraud. Edward Bohm, who was the president of sales, was also charged for his alleged participation in the scheme. Vanguard was a 33-branch, mortgage lending operation licensed in California, Connecticut, Florida, Georgia, Maryland, Massachusetts, North Carolina, New Jersey, New York, Pennsylvania, and Washington. Court documents stated that between August 2015 and March 2017, Voss, Sypher and Bohm engaged in a scheme to obtain warehouse lines of credit from various lenders, including Santander Bank, Bankunited, and Northpointe Bank, which were supposed to be used to fund mortgages for Vanguard’s customers. But instead of using the money for the company’s customers, Voss, Sypher and Bohm allegedly used the money to pay personal expenses and compensation, and to pay off loans they had previously obtained with fraudulent loan submissions for improper purposes.

According to the criminal complaint, which was unsealed back in August, an agent from the Federal Bureau of Investigation stated that Bohm and Sypher were both recorded discussing their roles in the scheme. In one recording, Bohm allegedly said that the trio wouldn’t face charges because their scheme’s targets were lenders. “At the end of the day, the s— we did wasn’t to the public,” Bohm allegedly said in the recording. Sypher was also recorded during a meeting in Vanguard’s offices last year, allegedly claiming that his role in the company meant that he would be not be charged if the scheme became public. “I’m a W-2 employee. I don’t pull strings in this f—— thing,” Sypher allegedly said. During that same meeting, Sypher allegedly told a co-conspirator: “You and I never had any communication on any of this s—. Ever. Ever. Okay? Outside of the normal course of business. None. So, we’re not going to f—— jail.” But, jail is exactly where Sypher and Voss are now headed after pleading guilty for their involvement in the scheme. Each faced up to 20 years, but their actual sentences are much shorter. Last week, Sypher was sentenced to 18 months in prison, followed by three years of supervised release. Sypher was also ordered to pay $22,150.45 in forfeiture. Additionally, Sypher was ordered to pay restitution, the amount of which will be determined by a judge at a later date.

“When fraudsters treat investors like their own personal ATMs, using funds invested in good faith to line their own pockets, pay for personal expenses, and repay other fraudulent loans, confidence in the integrity of our financial systems suffers,” said William Sweeney, Jr., assistant director-in-charge of the FBI’s New York field office. “Thanks to the diligent work of the FBI and our partners, Sypher will be held accountable for his crimes.” And earlier this month, Voss was sentenced to 24 months in prison, followed by three years of supervised release. Voss was also ordered to pay restitution, the amount of which will be determined by a judge at a later date. “With today’s sentence, Matthew Voss has been held accountable for using his extensive knowledge of the mortgage industry to deceive banks that trusted and relied upon him as a business partner and divert money for his personal use,” United States Attorney Richard Donoghue said. “This Office, together with our law enforcement partners, will vigorously investigate and prosecute those who commit fraud to advance their own financial interests at the expense of businesses and residents of our community.”

Sears faces critical deadline, will it survive?

Today is a big day for former retail icon Sears, which could potentially be forced to liquidate if its former CEO, Eddie Lampert, does not submit an official buyout bid by the end of the day. Lampert, who is still the company’s chairman, proposed buying the struggling retailer in full for $4.6 billion through his hedge fund ESL Investments – including 500 Sears and Kmart stores, store inventory and other assets. As part of the deal, ESL would also forgive $1.8 billion of debt that the retailer owes the hedge fund. Unless the retailer receives the bid from Lampert – or a similar one from another firm – it could be broken up by liquidators next month. Spokespersons for both Sears and ESL declined to comment. If Lampert does submit a bid – which will be made public – it would be decided by next Friday whether he is a qualified bidder. Sears filed for bankruptcy in October and has since shuttered hundreds of stores as it attempts to restructure and return to profitability. As part of its bankruptcy deal, the once iconic retail chain said it would close more than 170 of its 700 stores by the end of the year.

MBA’s Broeksmit statement about FEMA decision on NFIP

Robert D. Broeksmit, CMB, President and CEO of the Mortgage Bankers Association (MBA), issued the following statement today on the decision by the Federal Emergency Management Agency (FEMA) not to approve or renew flood insurance policies under the National Flood Insurance Program (NFIP) during the current government shutdown. “I respectfully ask officials at FEMA to reconsider their decision not to issue new NFIP policies or renew existing policies during the current shutdown.  We have heard concerns from some MBA members that the inability to secure the required flood insurance may jeopardize loan closings.  FEMA should reverse its decision. The longer this shutdown goes on, the more disruptive this decision will be.”

NAHB – builder confidence drops four points amid concerns over housing affordability

Builder confidence in the market for newly-built single-family homes fell four points to 56 in December on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) as concerns over housing affordability persist. Although this is the lowest HMI reading since May 2015, builder sentiment remains in positive territory. “We are hearing from builders that consumer demand exists, but that customers are hesitating to make a purchase because of rising home costs,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “However, recent declines in mortgage interest rates should help move the market forward in early 2019.” “The fact that builder confidence dropped significantly in areas of the country with high home prices shows how the growing housing affordability crisis is hurting the market,” said NAHB Chief Economist Robert Dietz. “This housing slowdown is an early indicator of economic softening, and it is important that builders manage supply-side costs to keep home prices competitive for buyers at different price points.” Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. All the HMI indices posted declines. The index measuring current sales conditions fell six points to 61, the component gauging expectations in the next six months dropped four points to 61, and the metric charting buyer traffic edged down two points to 43. Looking at the three-month moving averages for regional HMI scores, the Midwest dropped two points to 55; the West and South both fell three points to 68 and 65, respectively; and the Northeast registered an eight-point drop to 50.

Google to spend $1B on new campus in New York

Alphabet’s Google plans to invest more than $1 billion on a new campus in New York. That would be the second major technology company, after Amazon, to pick America’s financial capital to expand and create thousands of jobs. The 1.7 million square-foot campus will be called Google Hudson Square, according to a company blog post on Monday. Google hopes to start moving into the building by 2022. It’s the latest tech giant to announce that it would be building new campuses. Apple announced last week it would spend $1 billion to build a new campus in Austin, Texas. Last month, Amazon.com said it would open offices in New York and the Washington, D.C. area, creating more than 25,000 jobs. Mountain View, California-based Google’s move to invest in prime real estate on the Lower West Side of Manhattan also underscores the growing importance of New York as a hub for innovation and an incubator for technology companies. New York is quickly becoming a hub for technology as the city provides a better option to other places that would require more investment. The Wall Street Journal reported last month that Google was nearing a deal to buy or lease an office building in New York City that could add space for more than 12,000 new workers.

HUD Deputy Secretary Pam Patenaude resigns

This morning the Deputy Secretary of the Department of Housing and Urban Development, Pam Patenaude announced to Secretary Ben Carson her plans to step down in the New Year. “It has been my honor to serve President Trump and Secretary Carson and I am deeply grateful to both for this opportunity,” her resignation letter states. “Thank you to my HUD family and fellow “housers” for helping Americans access decent, safe and affordable housing.” Patenaude’s future is unclear. The letter simply adds she is grateful for an extensive, 35-year career in housing and that she looks forward to returning with her husband, Chuck, to their home in New Hampshire. “I will continue to promote the President’s agenda to make this nation stronger and more prosperous for every American,” the letter reads. Prior to her role at HUD, Patenaude served as the president of the J. Ronald Terwilliger Foundation for Housing America’s Families. Patenaude is also the former director of housing policy at the Bipartisan Policy Center. She was also honored with a HousingWire 2013 Women of Influence award. Patenaude served as HUD assistant secretary for Community, Planning and Development during the George W. Bush administration. She brings more than 25 years of experience in housing, community economic development, real estate, and public policy.

Oil prices pressured by oversupply, global economic concerns

Oil prices steadied on Monday after slipping by around 2% last week, but remained under pressure from oversupply and concern over the prospects for global economic growth and fuel demand. Brent crude oil was down 10 cents a barrel at $60.18 per barrel by 0945 GMT. US light crude was down 5 cents at $51.15. Both benchmarks fell more than 25% through October and November as a supply glut inflated global inventories but have stabilized over the last three weeks, trading within fairly narrow ranges as oil producers have promised to cut production. Many investors doubt planned supply cuts by the Organization of the Petroleum Exporting Countries and other producers such as Russia will be enough to rebalance markets. OPEC and its allies have agreed to reduce output by 1.2 million barrels per day (bpd) from January, in a move to be reviewed at a meeting in April. But US shale output is growing steadily, taking market share from the big Middle East oil producers in OPEC and making it harder for them to balance their budgets. “The dust has settled on the decision by OPEC/non-OPEC to slash production,” said Stephen Brennock, an analyst at London brokerage PVM Oil. “Yet the producer alliance has so far little to show for it.” “Far from breathing new life into the energy complex, oil prices are below the pre-OPEC meeting level. The truth of the matter is that fresh OPEC+ cuts will not go far enough to overturn the incumbent supply surplus,” he added.

Potential government shutdown looms over 2019 economic forecast

A recent Wall Street Journal poll revealed that most economists think the trade dispute between the US and China poses the greatest downside risk to the economic outlook in 2019, but economists at Capital Economics disagree. “We think the biggest downside risk next year is the possibility of a lengthy federal shutdown that could eventually develop into another debt ceiling crisis,” Capital Economics wrote in its weekly report issued Friday. President Donald Trump and Democrats on the Hill can’t seem to strike a deal on federal spending, which means the government may shut down as soon as Friday if lawmakers can’t come to an agreement. According to Capital Economics, a government shutdown is the darkest black cloud looming over the economic forecast in 2019. The report notes that markets are currently “fairly sanguine” about the possibility, despite President Trump’s recent remark that he would be “proud to shut down the government” if his request for $5 billion to fund a border wall is shot down. But the economists warn that a shutdown could be lengthy, weighing down the first half of the year. “Previous shutdowns have had only a modest impact,” they wrote, “but this one could go on for months, particularly if a critical Mueller report convinces the Democrats to impeach.”

ATTOM – US home flips down 12% in Q3 2018 to 3.5-year low

–  Average Home Flipping Returns Drop to 6.5-Year Low; Share of Flips Sold to FHA Buyers at a More Than 10-Year Low

–  Share of Home Flips Purchased with Financing Decreases From 10-Year High in Q2 2018

ATTOM Data Solutions, curator of the nation’s premier property database, today released its Q3 2018 US Home Flipping Report, which shows that a total of 45,901 US single family homes and condos were flipped in the third quarter of 2018, down 12% from a year ago to the lowest level since Q1 2015 — a 3.5-year low. Homes flipped in Q3 2018 represented 5.0% of all single family home and condo sales during the quarter — down from a 5.2% home flipping rate in Q2 2018 and down from a 5.1% home flipping rate in Q3 2017 to the lowest level since Q3 2016. “Home flipping acts as a canary in the coal mine for a cooling housing market because the high velocity of transactions provides home flippers with some of the best and most real-time data on how the market is trending,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “We’ve now seen three consecutive quarters with year-over-year decreases in home flips. The last time that happened was in 2014 following the mortgage rate jump in the second half of 2013, but it’s still far from the 11 consecutive quarters with year-over-year decreases in home flips extending from Q2 2006 through Q4 2008 and leading up to the last housing crash.” Homes flipped in Q3 2018 sold for an average of $63,000 more than what the home flipper purchased them for, down from an all-time high average gross flipping profit of $68,000 in the first quarter and down from an average gross flipping profit of $65,000 a year ago to the lowest level since Q2 2016.

The average gross flipping profit of $63,000 in Q3 2018 represented an average 42.6% gross flipping return on investment, down from an average 44.1% gross flipping ROI in the previous quarter and down from an average 48.1% gross flipping ROI in Q3 2017 to the lowest level since Q1 2012 — a 6.5-year low. The share of homes flipped that were sold by the home flipper between $100,000 to $200,000 made up 31.6% of all flipped sales, while those flip sales that occurred on homes sold for more than $5 million saw the highest gross flipping return on investment (ROI) of any price range.

Q3 2018

Sales Price Range   Share of Total Home Flips Gross ROI

Under $50K               6.3%                                                   20%

$50K – $100K           9.3%                                                   50%

$100K – $200K        31.6%                                                 55%

$200K – $300K        24.8%                                                 39%

$300K – $400K        12.1%                                                 31%

$400K – $500K        6.0%                                                   30%

$500K – $750K        6.2%                                                   27%

$750K – $1M             1.8%                                                   26%

$1M – $2M                1.6%                                                   28%

$2M – $5M                0.3%                                                   43%

Over $5M                   0.1%                                                   187%

States with the highest average gross flipping ROI in Q3 2018 were Pennsylvania (96.7%), Ohio (90.4%), Kentucky (84.7%), Louisiana (82.4%), and Michigan (78.6%). Among 133 metropolitan statistical areas with at least 50 flips in Q3 2018 and a population of at least 200,000, those with the highest average gross flipping ROI in Q3 2018 were Pittsburgh, Pennsylvania (136.7%); Cleveland, Ohio (120.2%); Atlantic City, New Jersey (110.3%); Scranton, Pennsylvania (109.0%); and Philadelphia, Pennsylvania (107.9%). Among 1,264 US zip codes analyzed in the report with at least 10 flips during the quarter, those with the highest average gross flipping ROI in Q3 2018 were 33993 in Cape Coral, Florida (881.0%); 41091 in Cincinnati, Ohio (631.0%); 40356 in Lexington, Kentucky (421.1%); and 21216 (410.4%) and 21218 (357.1%), both in Baltimore, Maryland. Arizona had the highest home flipping rate among all states in Q3 2018 (7.7%), followed by Tennessee (7.5%), Nevada (7.2%), Alabama (6.6%), and Maryland (6.0%). Among 133 metropolitan statistical areas with at least 50 flips in Q3 2018 and a population of at least 200,000, those with the highest home flipping rate for the quarter were Memphis, Tennessee (10.4%); Atlantic City, New Jersey (9.1%); Phoenix, Arizona (8.6%); Las Vegas, Nevada (7.8%) and Huntsville, Alabama (7.5%). Among 1,264 US zip codes analyzed in the report with at least 10 flips during the quarter, those with the highest home flipping rate were 38115 in Memphis, Tennessee (28.1%); 33142 in Miami, Florida (27.3%); 11717 in Brentwood, New York (27.1%); 75224 in Dallas, Texas (26.8%); and 11436 in the county of Queens, New York (25.6%).

Homes flipped in Q3 2018 that were originally purchased with financing by the home flipper represented 38.8% of all homes flipped during the quarter, down from 40.7% in the previous quarter and down from 39.2% a year ago. States where the% of flips that were purchased with financing in the third quarter of 2018 that were well above the national average of 38.8% included; the District of Columbia (67.2%), Colorado (55.7%), Minnesota (52.1%), New Hampshire (52.0%) and Rhode Island (49.2%). Among 133 metropolitan statistical areas with at least 50 flips in Q3 2018 and a population of at least 200,000, those with the highest% of home flip sales purchased with financing in Q3 2018 were Madison, Wisconsin (62.5%); Colorado Springs, Colorado (62.2%); Cedar Rapids, Iowa (60.4%) Manchester, New Hampshire (57.6%) and Greeley, Colorado (56.9%). Of the homes flipped in Q3 2018, 12.7% were sold to buyers using loans backed by the Federal Housing Administration (FHA) — likely first-time homebuyers — down from 16.1% in Q3 2017 to a 10-year low. Among 53 metro areas analyzed in the report with at least 1 million people, those with the smallest share of completed flips sold to FHA buyers in Q3 2018 were San Jose, California (1.5%); Raleigh, North Carolina (3.8%); Las Vegas, Nevada (5.1%); San Francisco, California (5.7%); and Memphis, Tennessee (5.8%). Among the 53 metro areas analyzed in the report with at least 1 million people, those with the highest share of completed flips sold to FHA buyers in Q3 2018 were Riverside, California (24.3%); Baltimore, Maryland (23.0%); Chicago, Illinois (21.1%); Philadelphia, Pennsylvania (20.5%); and San Antonio, Texas (20.2%).

–  The median year built of homes flipped in Q3 2018 was 1978, the third consecutive quarter for the oldest median year built as far back as data is available — Q1 2000.

–  The median square footage of homes flipped in Q3 2018 was 1,408, the smallest median square footage as far back as data is available — Q1 2000.

–  A total of 37,905 entities flipped properties in Q3 2018, a ratio of 1.21 flips per entity, the lowest ratio of flips per entity since Q4 2007 — a nearly 11-year low.

–  The average time to complete a home flip was 179 days, down from 185 days in the previous quarter, and down from 180 days in Q3 2017.

US employers added 155,000 jobs in November, missing expectations

US employers added 155,000 jobs in November, missing Wall Street’s expectations for an increase of 200,000 jobs, after an already rocky week for stocks exacerbated on Thursday by investor fears that a U.S-China trade deal could be reneged amid newly inflamed tensions. The unemployment rate remained steady at 3.7%, the lowest rate in 50 years, while the labor force participation rate also stayed the same at 62.9% during the month. Average hourly earnings meanwhile rose by 6 cents to $27.35. Over the year, average hourly earnings have increased by a total of 81 cents, or about 3.1%. Although it was a weaker-than-expected number, experts portrayed the data as another good report, particularly regarding wage growth. It’s the 98th-straight month of gains and indicates that despite a slight miss, the labor market remains robust and the economy strong. “Wage growth remains respectable with the 3.1% gain in average hourly earnings over the past year,” said Mark Hamrick, senior economic analyst for Bankrate.com “That’s not a lottery jackpot, but it also doesn’t set off inflation alarm bells for financial markets or central bankers.

CoreLogic – homeowners with negative equity declines by only 81,000 in the third quarter of 2018

–  Smallest quarter-to-quarter decline in negative equity since economic recovery began in 2010

–  Homeowners had an average annual home equity gain of $12,400 in the third quarter of 2018, the smallest annual increase in eight quarters

–  The annual equity gain in the national CoreLogic Home Price Index slowed to 5.4% in September, compared with 6.2% in June, reflecting slowing price growth

CoreLogic released the Home Equity Report for the third quarter of 2018. The report shows that US homeowners with mortgages (which account for roughly 63% of all properties) have seen their equity increase by 9.4% year over year, representing a gain of nearly $775.2 billion since the third quarter of 2017. Additionally, the average homeowner gained $12,400 in home equity between the third quarter of 2017 and the third quarter of 2018. While home equity grew in almost every state in the nation, western states experienced the most significant increases. California homeowners gained an average of approximately $36,500 in home equity, and Nevada homeowners experienced an average increase of approximately $32,600 in home equity. From the second quarter of 2018 to the third quarter of 2018, the total number of mortgaged homes in negative equity decreased 4% to 2.2 million homes or 4.1% of all mortgaged properties. Year over year, the number of mortgaged properties in negative equity fell 16% from 2.6 million homes – or 5% of all mortgaged properties – in the third quarter of 2018. “On average, homeowners saw their home equity increase again this quarter but not nearly as much as in previous quarters,” said Dr. Frank Nothaft, chief economist for CoreLogic. “During the third quarter, homeowners gained an average of $12,400 compared to the second quarter when the average home equity wealth increase was more than $16,000. This lower year-over-year gain reflects the slowing in appreciation we’ve seen in the CoreLogic Home Price Index.”

Negative equity, often referred to as being underwater or upside down, applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in a home’s value, an increase in mortgage debt or both. Negative equity peaked at 26% of mortgaged residential properties in the fourth quarter of 2009, based on the CoreLogic equity data analysis which began in the third quarter of 2009. The national aggregate value of negative equity was approximately $281.6 billion at the end of the third quarter of 2018. This is down quarter over quarter by approximately $1.1 billion, from $280.5 billion in the second quarter of 2018 and down year over year by approximately $2.7 billion, from $279 billion in the third quarter of 2017. “The number of homes in a negative equity position have remained around 2.2 million for two consecutive quarters this year,” said Frank Martell, president and CEO of CoreLogic. “Without equity, those homeowners are unable to sell their homes and are more likely to transition from delinquency to foreclosure if they face financial distress.”

Huawei CFO extradition order was an independent act by the DOJ

A top Huawei telecoms executive was arrested in Canada on Saturday at the request of the US, clouding a trade deal with China and forcing the stock market to claw back from its deep losses on Thursday. Huawei Technologies CFO Meng Wanzhou was arrested in Vancouver on Dec. 1 and faces extradition to the US White House trade adviser Peter Navarro told FOX Business the White House had no prior knowledge of the Huawei executive’s detainment, or of the Justice Department’s actions prior to President Trump’s dinner with Chinese President Xi Jinping at the G20 Summit in Argentina. “The Justice Department acts independently when it prosecutes felonies, and that’s the case that we have with this particular case,” he said during an interview on “Trish Regan Primetime” on Thursday. Wanzhou, 46, was arrested by Canadian authorities as part of an US investigation into an alleged scheme by Huawei to use a global banking institution to make illegal transactions involving Iran, Reuters reported. An overseer at HSBC Holdings flagged the suspicious transactions by the world’s largest telecom company. The arrest of the Huawei CFO fueled trade concerns with a Chinese state-run newspaper claiming its “declaration of war.” Navarro said the 90-day tariff truce between the world’s two largest economies remains strong. “Is China going to follow through on all the structural changes it needs to make in order for them to be a good member of the international trading society? It remains to be seen,” he said.

MBA – Broeksmit Statement on Kraninger confirmation

Robert D. Broeksmit, CMB, President and CEO of the Mortgage Bankers Association (MBA), released the following statement regarding the confirmation of Kathleen Kraninger to be the next head of the Bureau of Consumer Financial Protection (BCFP). “Kathy Kraninger is an intelligent, experienced administrator who has worked on a broad range of complex, high-profile issues over the course of her career. We look forward to working with her and anticipate she will continue the Bureau’s efforts to protect consumers by providing financial institutions clear and understandable regulations accompanied by appropriate compliance and implementation requirements.”

NAHB -builder confidence drops as housing affordability issues rise

Growing affordability concerns resulted in builder confidence in the market for newly-built single-family homes falling eight points to 60 in November on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Despite the sharp drop, builder sentiment still remains in positive territory. “Builders report that they continue to see signs of consumer demand for new homes but that customers are taking a pause due to concerns over rising interest rates and home prices,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “For the past several years, shortages of labor and lots along with rising regulatory costs have led to a slow recovery in single-family construction,” said NAHB Chief Economist Robert Dietz. “While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall.” With the prospect of future interest rate hikes in store, Dietz said that builders have adopted a more cautious approach to market conditions and urged policymakers to take note. “Recent policy statements on economic conditions have lacked commentary on housing, even as housing affordability has hit a 10-year low,” said Dietz. “Given that housing leads the economy, policymakers need to focus more on residential market conditions.” Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. All of the major HMI indices posted declines. The index measuring current sales conditions fell seven points to 67, the component gauging expectations in the next six months dropped 10 points to 65 and the metric charting buyer traffic registered an eight-point drop to 45. Looking at the three-month moving averages for regional HMI scores, the Northeast rose two points to 58. The Midwest edged one point lower to 57, the South declined two points to 68 and the West dropped three points to 71.

General Electric taps John Rice, 2 others to lead power unit

General Electric on Monday formally named three executives, including longtime company official John Rice, to spearhead a turnaround effort for its struggling power business. Rice, the company’s former vice chairman who retired in 2017, will return as chairman of GE Gas Power to guide the division’s overall strategy. Longtime executive Scott Strazik will serve as CEO of GE Gas Power, replacing Russell Stokes, who will take over as CEO of GE Power Portfolio – a new business that includes the company’s steam, grid solutions, nuclear and power conversion efforts. “One of my top priorities is positioning our businesses to win, starting with GE Power,” GE Chairman and CEO Lawrence Culp said in a statement. “The leaders we are announcing today are exceptionally well suited to lead our new Gas Power and Power Portfolio teams in their efforts to deliver better customer outcomes and improve their execution and cost structures. I am confident this is the right strategy and the right team to lead these businesses forward.” The three executives will report to Culp. GE shares up more than 2% in midday trading. Culp, who took over as CEO last September, restructured GE Power as part of overall cost-cutting measures. The company has struggled to adapt in recent years to systemic changes to the US economy.

Senate set to vote on Trump’s CFPB nominee

For the last year, Mick Mulvaney has run the CFPB, taking over for Richard Cordray, who left the bureau the day after Thanksgiving last year. But Mulvaney’s appointment has been on an “interim” basis, which was extended when the Trump administration officially nominated Kathleen Kraninger to lead the bureau for the next five years. Kraninger was officially nominated in June, and passed out of the Senate Banking Committee back in August, but her nomination has not come to a full vote in the Senate yet. That’s about to change. Late last week, Senate Majority Leader Mitch McConnell, R-Kentucky, moved to bring Kraninger’s nomination to the Senate floor for a full vote. According to multiple reports, the vote is likely to be scheduled for the week after Thanksgiving. And with Kraninger likely to be confirmed by a majority Republican Senate, Mulvaney’s time at the CFPB will likely soon come to a close. Kraninger has the support of the housing industry. Last week, the housing industry’s largest and most prominent trade groups joined together to call on the Senate to bring Kraninger’s nomination to a vote. “The undersigned organizations, representing the many facets of the housing and financial industries, support the nomination of Kathleen Kraninger as the Director of the Bureau of Consumer Financial Protection,” the groups said in a letter to the Senate leadership and members of the Senate Committee on Banking, Housing, and Urban Affairs. “Our organizations believe Ms. Kraninger has the ability to lead and manage a large government agency, like the Bureau, which is tasked to ensure consumers’ financial interests are protected,” the groups continue. “We believe she will also fulfill the equally important role of ensuring businesses have the necessary compliance support to further those interests.” The letter is signed by 21 of the housing industry’s top groups, including the National Association of Realtors, the Mortgage Bankers Association, the National Association of Home Builders, and the National Multifamily Housing Council. Those groups wanted a vote from the Senate, and now it looks like they’re going to get one.

Treasury yields slip amid weak housing data, global trade worries

Treasury yields fell on Monday after the release of weaker-than-forecast housing data while concerns over global trade plagued investors. The benchmark 10-year note yield slipped to 3.061% while the short-term two-year yield dipped to 2.787%. Bond yields move inversely to prices. Homebuilder sentiment dropped to its lowest level since August 2016 this month amid rising mortgage rates and unrelenting price growth. “Builder sentiment is now joining the reality that housing has been slowing all year after hanging in pretty well this year,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a note. “As the most interest rate sensitive area of the economy outside of auto’s, a moderation in housing was to be expected but what we’re seeing is just how sensitive the economy is to modest changes in interest rates that are historically low,” he said. The rise in bond prices also comes as US stocks sold off, adding to their steep losses from last week.

Black Knight to invest in Dun & Bradstreet

–  Black Knight is joining renowned investor group led by CC Capital, Cannae Holdings and Thomas H. Lee Partners, L.P.

–  Investment of up to $375 million to result in Black Knight economic ownership interest of less than 20% in re-capitalized company

–  Upon the acquisition closing, Black Knight CEO Anthony Jabbour has agreed to serve as CEO of Dun & Bradstreet, while continuing in his current role at Black Knight

Black Knight, Inc. announced that its Board of Directors has approved a $375 million investment in Dun & Bradstreet, a global leader in commercial data, analytics and insights for businesses. Black Knight will join an investment consortium led by CC Capital, Cannae Holdings and Thomas H. Lee Partners, L.P. which has announced plans to acquire Dun & Bradstreet. The Black Knight investment will represent an economic ownership interest of less than 20% in the re-capitalized Dun & Bradstreet. As previously announced, the acquisition is expected to close no later than the first quarter of 2019. Following the completion of the acquisition, Anthony Jabbour, Black Knight’s Chief Executive Officer, has agreed to serve as Chief Executive Officer of Dun & Bradstreet while continuing in his current role at Black Knight. Additionally, William P. Foley II, Executive Chairman of Black Knight, will serve as Executive Chairman of Dun & Bradstreet’s Board of Directors. “Dun & Bradstreet is a well-established market leader that will benefit greatly from this investment group’s proven track record of harnessing companies’ potential and generating long-term growth,” said Foley. “I am confident that with Anthony’s leadership, expertise and experience as well as the dedication of Dun & Bradstreet’s talented employees, the company’s best days are ahead.” “With an impressive 177-year legacy and the support of a phenomenal group of investors, Dun & Bradstreet is entering an important next chapter in its evolution as a company,” said Jabbour. “I am excited by the opportunities in leading Dun & Bradstreet and look forward to working closely with management, Bill and the rest of the consortium and continuing the Company’s long history of excellence in helping customers and partners around the world.” Chinh Chu, Senior Managing Director and Founder of CC Capital, stated, “We are pleased that Black Knight will invest alongside us in Dun & Bradstreet and that both Anthony and Bill will take on these new roles upon closing. We are confident that they are the right leaders to help unlock the significant potential within this venerable company.” “We look forward to working with Anthony and the team as we reinvigorate growth at Dun & Bradstreet and create increased value for all stakeholders,” added Thomas Hagerty, a Managing Director at Thomas H. Lee Partners, L.P. “We share in the excitement about what’s ahead for the company and believe today’s announcement is a testament to the strength of that future.” Upon the completion of the transaction, Dun & Bradstreet will become a privately held company, and shares of Dun & Bradstreet common stock will no longer trade on the New York Stock Exchange.

CoreLogic – mortgage rate forecasts call for higher rates and suggest an 11-plus% jump in buyers’ mortgage payments by next August

While the US median sale price has risen by just under 6% over the past year, the principal-and-interest mortgage payment on the median-priced home has increased nearly 15%. Moreover, while the CoreLogic Home Price Index Forecast suggests US home prices will rise 4.7% year over year in August 2019, some mortgage rate forecasts indicate the mortgage payments homebuyers will face by then will have risen by more than 11%. One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the “typical mortgage payment.” It’s a mortgage-rate-adjusted monthly payment based on each month’s US median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20% down payment. It does not include taxes or insurance. The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced US home. The US median sale price in August 2018 – $226,155 – was up 5.7 year over year, while the typical mortgage payment was up 14.5% because of a nearly 0.7-percentage-point rise in mortgage rates over that one-year period.

A consensus forecast suggests mortgage rates will rise by about 0.5 percentage points between August 2018 and August 2019. The CoreLogic HPI Forecast suggests the median sale price will rise 1.9% in real, or inflation-adjust, terms over that same period (or 4.7% in nominal terms). Based on these projections, the real typical monthly mortgage payment would rise from $922 in August 2018 to $1,000 by August 2019, an 8.4% year-over-year gain. In nominal terms the typical mortgage payment’s year-over-year gain would be 11.4%. An IHS Markit forecast calls for real disposable income to rise by around 2.5% over the next year, meaning homebuyers would see a larger chunk of their incomes devoted to mortgage payments. When adjusted for inflation the typical mortgage payment puts homebuyers’ current costs in the proper historical context. Figure 2 shows that while the inflation-adjusted typical mortgage payment has trended higher in recent years, in August 2018 it remained 28.1% below the all-time peak of $1,283 in July 2006. That’s because the average mortgage rate back in June 2006 was about 6.7%, compared with an average rate of about 4.6% in August 2018, and the inflation-adjusted US median sale price in June 2006 was $248,980 (or $199,500 in 2006 dollars), compared with an August 2018 median of $226,155.

Walmart 3Q earnings beat expectations, but revenue misses

Walmart, the world’s biggest retailer, said Thursday its third-quarter adjusted earnings per share (EPS) beat Wall Street expectations on strong online shopping, but revenue was a miss. EPS was $1.08, higher than the $1.01 that had been expected and a penny more than the year-earlier quarter. Revenue came in at $124.9 billion, less than the $125.5 billion analysts polled by Refinitiv expected, but higher than the $123.2 billion in the year-earlier quarter. Same-store sales increased 3.4% and e-commerce sales surged 32%. In the US e-commerce sales climbed 43%. The company raised its fiscal 2019 guidance for adjusted EPS to a range of $4.75 to $4.85, up from $4.65 to $4.80.

NAR – realtors see increase in commercial income and sales volume for second straight year

Commercial real estate markets are on the rise, with Realtors® specializing in commercial real estate reporting both an increase in members’ gross income and sales volume, according to the National Association of Realtors® 2018 Commercial Member Profile. Corresponding to tightened inventory conditions, sales transactions for NAR’s commercial members have slowly decreased in the last two years, down from eight in 2016 to seven in 2017. The annual study’s results represent Realtors®, members of NAR, who conduct all or part of their business in commercial sales, leasing, brokerage and development for land, office and industrial space, multifamily and retail buildings, as well as property management. “The commercial real estate industry is strong and is on pace with the growing economy. Although there is a slight decrease in transactions, commercial professionals have reported improvements in their markets and business activity for consecutive years. Realtors® reported that sales volume and costs of sales increased this year, as well as median gross annual income,” said NAR President John Smaby. The median gross annual income for commercial members hit an all-time high of $150,700 in 2017, up from $120,900 in 2016. The median sales transaction volume in 2017, among members who had a transaction, was $3,870,500, an increase from the median sales volume of $3,500,000 in 2016. The median dollar value of sales has also steadily risen since 2013 to its peak of $602,500 for all commercial members in 2017, up from $543,500 in 2016.

The median gross leasing volume was $705,500 in 2017 for members who had a transaction, an increase from $538,500 in 2016. Brokers and brokers’ associates reported the highest annual gross income of $186,900 and $139,700, respectively, while sales agents reported $104,600, an increase from $81,300. Commercial members with less than two years of experience reported a median annual income of $44,000 in 2017, up from $31,500 in 2016; and those with more than 26 years of experience reported a median annual income of $192,600 in 2017, up from $162,200 in 2016. “Commercial real estate professionals are reporting great growth in the past year, which has convinced more and more members to enter the commercial industry. Fifty-one% of NAR’s commercial members worked in sales as their primary service area, followed by 16% in leasing and 12% in investment. Twenty-nine% of NAR’s commercial members worked with commercial buildings, with 13% on multifamily structures, retail, and office space. Forty-nine% of NAR’s commercial members were brokers, 29% licensed sales agents, 17% broker associates, and five% were appraisers. The median age of commercial members remained the same as last year, 60, while the median age for NAR’s commercial members with two years of experience or less was 46. Thirty% were female, up from 27% in 2017 and 70% were male, down from 73% in 2017. Seventy-eight% of commercial members worked at least 40 hours a week.

Oracle loses $10B Pentagon contract protest as rivals fear Amazon is front-runner

The US Government Accountability Office (GAO) denied a protest by tech giant Oracle on Wednesday, which claimed the Pentagon’s $10 billion pending cloud contract violated federal procurement standards and was biased toward e-commerce giant Amazon. Oracle objected to the Pentagon’s request for a single-award contract, said its solicitation process “unduly restrict[s] competition,” and asserted there were potential conflicts of interest related to the procurement process. The GAO shot down those claims, saying the Pentagon’s decision to pursue a single-source contract to obtain the cloud services was fine since “the agency reasonably determined that a single-award approach is in the government’s best interests for various reasons, including national security concerns, as the statute allows.” It also rejected conflicts of interest claims. Oracle filed the protest in August. IBM still has a complaint on file with the GAO that has not yet been resolved. In a statement, a spokesperson for the company said “both the warfighter and the taxpayer ” would benefit from a process that is truly competitive. “We are convinced that if given the opportunity to compete, DoD would choose Oracle Cloud Infrastructure for a very substantial portion of its workloads because OCI delivers the best, most performant and most secure product available at the best price,” the company spokesperson said.

The Defense Department’s pending cloud storage contract, known as Joint Enterprise Defense Infrastructure (JEDI), could span a decade and will likely be its largest yet – valued around $10 billion. The department issued draft requests for proposals to host sensitive and classified information and is expected to announce a single winner next year. Last month, search giant Google pulled its bid for the JEDI contract, amid concerns the job does not align with the company’s artificial intelligence principles. Google has dealt with employee protests and concerns over producing technology for the US military. Amazon, Oracle, IBM and Microsoft are believed to be the top contenders – but the single-source clause sparked concerns among rivals that Amazon was likely to be the winner, due to its other standing cloud deals. Microsoft released a statement in March saying it believes the best strategy would leverage “the innovations of multiple cloud service providers.” Google also said it believed a multi-cloud approach would be in the government’s best interest, “because it allows them to choose the right cloud for the right workload.” Amazon, which already holds a $600 billion cloud contract with the CIA, has a robust cloud computing division, known as Amazon Web Services, which one analyst predicts could generate $60 billion in revenue over the next five years. Earlier this year, the Pentagon dramatically scaled back the value of a contract it signed with Amazon partner REAN, to $65 million from $950 million. The original five-year agreement — which was legally challenged by Oracle – was to help accelerate agencies’ migration to the cloud.

Airbnb takes Boston to court over city’s “draconian” short-term rental rules

The city of Boston has new rules surrounding short-term rentals that are set to go into effect on Jan. 1, 2019. The rules are designed to limit the growing number of short-term rentals in the city by restricting who can list their house or apartment on a short-term rental site. But according to the most prominent short-term rental site, Airbnb, Boston’s short-term rental rules violate the Constitution, multiple federal laws, and Massachusetts state law. Therefore, the site is asking a federal judge to invalidate the city’s rules. This week, Airbnb sued the city of Boston in federal court, claiming that the city’s short-term rental ordinance requires the site (and similar sites) to police its platform far more than it does now and share confidential user information with the city. As the Boston Globe wrote this week, the city’s rules would place serious restrictions on who can rent out a unit or house via the short-term rental site. From the Globe report: “Under the rules set to take effect in January, Airbnb investors and apartment tenants would be prohibited from renting their homes by the night, and property owners would not be allowed to list more than one unit on the website. Airbnb has about 6,300 listings in Boston. Studies suggest an outsized share of its business comes from investors and other hosts the rules are aimed at curtailing.”

Airbnb claims that the city’s rules go “much further than that,” and threaten short-term rental sites with “draconian” punishments should they violate the city’s rules. “This is a case about a city trying to conscript home-sharing platforms into enforcing regulations on the city’s behalf, in a manner that would thwart both federal and Massachusetts law. The City of Boston has enacted an Ordinance limiting short-term residential rentals by hosts. But it goes much further than that,” Airbnb claims in its lawsuit filing. “The Ordinance also enlists home-sharing platforms like Airbnb into enforcing those limits under threat of draconian penalties, including $300-per-violation-per-day fines and complete banishment from doing business in Boston,” Airbnb continues. “Airbnb believes that home-sharing may be lawfully regulated, and it has worked with dozens of cities to develop the tools they need to do so without violating federal or state law,” the filing adds. “Boston’s heavy-handed approach, however, crosses several clear legal lines and must be invalidated.” According to Airbnb, Boston’s short-term rental rules would also force the site and others like it to “actively police third-party content on their websites by penalizing the design and operation of their platforms and restricting and imposing severe financial burdens on protected commercial speech.” And the site claims that the city’s rules would require it to “to disclose to the City confidential information about its users without any legal process or precompliance review.”

Airbnb also claims that the city requires short-term rental platforms to enter into nebulous “agreements” with the city that carry heavy penalties. “The Ordinance, for example, compels Airbnb to enter into undefined so-called ‘agreements’ with the City that will require Airbnb to take down listings posted by third-parties and prevent whatever scope of listings in whatever manner Boston dictates—or else be barred from Boston altogether,” Airbnb claims. According to Airbnb, the city’s rules violate the Communications Decency Act, the Stored Communications Act, the First, Fourth, and 14th Amendments of the Constitution, and the Massachusetts Declaration of Rights. To that end, the company is asking a judge to nullify the city’s rules. The city, of course, is standing by its rules but is not commenting on the lawsuit. “We cannot comment due to pending litigation,” Boston city pokesperson Samantha Ormsby said.

MBA – comments on FHA’s annual report to Congress

Robert D. Broeksmit, CMB, President and CEO of the Mortgage Bankers Association (MBA), issued the following statement regarding the US Department of Housing and Urban Development’s (HUD) Annual Report to Congress Regarding the Financial Status of the FHA Mutual Mortgage Insurance Fund. “The continued growth of the Capital Reserve Ratio is welcome news, and indicates that FHA is effectively serving its core mission in the single-family market – providing safe and affordable credit to qualified first time and low-and moderate-income borrowers – while appropriately managing its risk and protecting taxpayers. “The increase in the MMIF capital ratio to 2.76% in fiscal year 2018 moves the program farther above the 2% statutory minimum. Importantly, the forward book of business continues to perform well, with significant improvements in key indicators such as serious delinquencies, early payment defaults, claims payments, and loss rates. “We are glad to see that FHA is closely monitoring the increasing risk in the forward portfolio, indicated by rising debt-to-income ratios, declining credit scores, and the increasing use of downpayment assistance programs. While current FHA delinquencies are quite low, it is prudent to keep an eye on these trends to ensure the program does not face undue challenges if, and when, the economy and job market cool. “The drain on the fund presented by the HECM program continues a trend that MBA has highlighted previously and remains a topic of concern. Reverse mortgages are an important financial tool that, if used properly, can allow the growing number of retirees to age in place. MBA applauds the recent steps FHA has taken to stabilize and improve the HECM program, and policymakers should continue considering ways to insulate the forward program from the volatility in the reverse program.”

NAHB – statement from NAHB Chairman Randy Noel on FHA actuarial report

Randy Noel, chairman of the National Association of Home Builders (NAHB) and a custom home builder from LaPlace, La., issued the following statement after the Federal Housing Administration (FHA) released its annual actuarial report to Congress: “Today’s FHA report is very encouraging and shows a marked upturn in the health of the FHA Mutual Mortgage Insurance Fund. The net worth of the fund increased more than $8 billion over the past year to $34.86 billion and its capital-reserve ratio jumped from an upwardly revised 2.18% to 2.76%, which is well above the congressionally mandated level of 2%. “The report clearly shows that actions instituted by HUD Secretary Ben Carson and FHA Commissioner Brian Montgomery to enhance the agency’s capital reserves are showing positive results. It’s also another indicator that FHA’s financial picture continues to brighten and should provide momentum for the agency to consider a mortgage insurance premium reduction to help first-time home buyers and young families seeking to enter the housing market.”

ATTOM – nearly 1.5 million vacant US homes in Q3 2018 represent 1.52% of all single family homes and condos

–  Foreclosures Hazard Risk Most Recent Articles Single Family Rental

–  Vacant Home Rate Down from 1.58% in Q3 2017

–  10,000 Vacant “Zombie” Foreclosures Down From More Than 44,000 in 2013

ATTOM Data Solutions, curator of the nation’s premier property database, today released its 2018 Vacant Property and Zombie Foreclosure Report, which shows that nearly 1.5 million (1,447,906) US single family homes and condos were vacant at the end of Q3 2018, representing 1.52% of all homes nationwide — down from 1.58% in 2017. The report also found that there were 10,291 vacant “zombie” foreclosures homes nationwide at the end of Q3 2018, representing 3.38% of all homes actively in the foreclosure process. The number of zombie foreclosure homes was down from 14,312 a year ago, and the zombie foreclosure rate was down from 4.18% a year ago. “The number of vacant foreclosures is now less than one-fourth of the more than 44,000 in 2013 when we first began tracking these zombie homes,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Policy solutions such as land banks designed to mitigate the ripple effects of vacant properties on neighborhoods and cities have had a substantial impact, and a booming housing market in many areas of the country is lifting all boats. There are still high concentrations of zombie homes and other vacant homes in some local markets and submarkets, but those high concentrations are becoming fewer and farther between.”

States with the highest share of vacant homes were Tennessee (2.65%), Kansas (2.50%), Oklahoma (2.49%), Mississippi (2.47%), and Indiana (2.45%). Among 153 metropolitan statistical areas analyzed in the report, those with the highest share of vacant homes were Flint, Michigan (6.99%); Youngstown, Ohio (3.80%); Beaumont-Port Arthur, Texas (3.71%); Myrtle Beach, South Carolina (3.70%); and Mobile, Alabama (3.69%). Among 405 US counties analyzed in the report, those with the highest share of vacant homes were Baltimore City, Maryland (7.83%); Genesee County (Flint), Michigan (6.99%); Saint Louis City, Missouri (5.93%); Bibb County (Macon), Georgia (5.73%); and Wayne County (Detroit), Michigan (5.60%). Among the 15,957 US zip codes analyzed in the report, 217 zip codes with a combined population of more than 2.8 million posted a vacant home rate of at least 10% at the end of Q3 2018. Zip codes with the highest vacant home rate at the end of Q3 2018 were led by 46402 in Gary, Indiana (31.41% vacant); 48505 in Flint, Michigan (31.17%); 46409 in Gary Indiana (28.92%); 46407 in Gary, Indiana (28.59%); and 29928 in Hilton Head Island, South Carolina (26.38%).

ADP job growth of 227,000 highest in eight months

Hiring remains strong across the US with private sector employment increasing by 227,000 jobs in October, according to the ADP National Employment Report®. Analysts were expecting 189,000 jobs would be added during the month. The most jobs were trade/transportation/utilities where 61,000 positions were added. Forty-thousand jobs were created in the leisure/hospitality category and 36,000 jobs were added in professional/business services. The US October payroll increase was the highest since February 2018. ADP revised the September payroll additions to 218,000 from 230,000. Despite a significant shortage in skilled talent, the labor market continues to grow,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “We saw significant gains across all industries with trade and leisure and hospitality leading the way.  We continue to see larger employers benefit in this environment as they are more apt to provide the competitive wages and strong benefits employees desire.” On Friday, the government will release its October payrolls report, which will offer an in-depth look at the labor market, including job additions, the unemployment rate, the labor participation rate and wage growth.

MBA – mortgage applications down

Mortgage applications decreased 2.5% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 26, 2018. The Market Composite Index, a measure of mortgage loan application volume, decreased 2.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 3% compared with the previous week. The Refinance Index decreased 4% from the previous week. The seasonally adjusted Purchase Index decreased 2% from one week earlier. The unadjusted Purchase Index decreased 2% compared with the previous week and was 0.4% lower than the same week one year ago. “The 30-year fixed-rate mortgage held steady over the week, but total applications decreased overall. Purchase applications inched backward from the previous week, as well as compared to one year ago – the first year-over-year decline in purchase activity since August,” said Joel Kan, AVP of economic and industry forecasts. “Purchase applications may have been adversely impacted by the recent uptick in rates and the significant stock market volatility we have seen the past couple of weeks. Additionally, the ARM share of applications increased to its highest level since 2017, but since this is a compositional measure, it was driven by a greater decrease in applications for fixed-term loans relative to the decrease in ARM applications.” The refinance share of mortgage activity decreased to 39.4% of total applications from 39.8% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.6% of total applications, the highest level since May 2017. The FHA share of total applications increased to 10.3% from 10.1% the week prior. The VA share of total applications decreased to 9.8% from 10.1% the week prior. The USDA share of total applications remained unchanged at 0.7% from the week prior.

Health care costs could plummet in Trump’s Medicare price revamp

HHS Secretary Alex Azar on the Trump administration’s plan to lower drug prices and efforts to stop the marketing and sale of e-cigarettes to teenagers.

President Trump is taking aim at “foreign free riding” by other nations and wants Americans to have the same benefits that produce lower drug prices, according to Department of Health and Human Services Secretary Alex Azar. The plan, unveiled by Trump in a speech last Thursday at the Department of Health and Human Services, calls for Medicare Opens a New Window.  to negotiate better deals with pharmaceutical companies. “Right now pharma is giving these discounts to other countries,” said HHS Secretary Alex Azar to FOX Business’ Stuart Varney on Tuesday. “And you know what we are doing? We are currently paying the list price plus a 6% markup in our program.” According to Azar, the new payment system would potentially save the American taxpayer and seniors billions in healthcare Opens a New Window.  “So we are just saying give us some of this, end this foreign freeriding off the backs of the American taxpayer and America’s seniors, and it will lead to $17 billion in savings over 5 years for the Medicare program and $3.4 billion of savings for America’s seniors,” he said. Azar said the savings will kick in by early 2020.

Rent just hit an all-time high

As it turns out, rents are still going up and just hit an all-time high, again. Earlier this week, the US Census Bureau reported that during the third quarter, the nationwide median asking rent topped $1,000 for the first time ever. According to the Census data, the median asking rent during the third quarter was $1,003, an increase of $52 over the second quarter and an increase of $91 over the same time period last year. That’s an increase of nearly 10% in just one year, which rents checked in at $912. The increase has been dramatic over the last few years. Just three years ago, the asking rent was a full $200 less per month than it is right now. As one might expect, the largest increase came in in the Northeast, where rents are among the highest in the nation. In the Northeast, the median asking rent rose from $1,134 in the second quarter to $1,210 in the third quarter. Interestingly, the third quarter total is actually less than it was during the first quarter, when the asking rent was $1,279. The largest year-to-date increase is actually in the South, where rents have climbed from $907 in the first quarter to $973 in the third quarter, an increase of $66. Rents in the West have also risen, from $1,345 in the first quarter to $1,382 in the third quarter, an increase of $37 this year. On the other hand, rents in the Midwest have fallen from $764 in the first quarter to $751 in the third quarter. So, despite falling in the Midwest and the Northeast, rents went up in the South and West, and all that added up to a $49 increase in rents this year. The rise in asking prices isn’t confined to rental units either. The median asking sales price for homes is going up as well. According to the Census data, the nationwide median asking sales price for a home rose to $206,400 during the third quarter, which marks the first time that figure has crossed $200,000. So there’s not much of a respite from the affordability issue in either renting or owning, and that’s bad news for renters, buyers, and everyone else (unless you’re a landlord or a seller, of course).

Black Knight – First Look: seasonal, calendar and hurricane-related pressures

Black Knight, Inc. reports the following “first look” at September 2018 month-end mortgage performance statistics derived from its loan-level database representing the majority of the national mortgage market.

–  Mortgage delinquencies rose more than 13% in September, the largest single-month rise since November 2008

–  16 of the last 19 Septembers have seen delinquencies increase, averaging a 5.2% rise over that time frame, the largest of any month during the calendar year

–  September 2018 also ended on a Sunday, which typically creates strong upward pressure on delinquencies

–  Hurricane Florence-related delinquencies spiked 38% month-over-month, with more than 6,000 borrowers already missing a payment as a direct result of the storm

–  Foreclosure starts posted a double-digit monthly decline, hitting a nearly 18-year low at just 40,000 for the month

–  Both the inventory of loans in active foreclosure and the foreclosure rate have now fallen below their pre-recession averages for the first time since the financial crisis

–  In the face of rising interest rates and affordability pressures, monthly prepayment activity – now primarily driven by housing turnover – fell by nearly 25% from August

Boeing shares surge after the company reports blowout results and raises 2018 forecast

–  The aerospace giant reports third-quarter adjusted earnings of $3.58 a share, topping Wall Street expectations by 11 cents.

–  Boeing raises its full year 2018 earnings forecast.

–  CEO Dennis Muilenberg notes that the company landed billions in military contracts this summer.

Shares of Dow component Boeing rose 3.8% in premarket trading Wednesday after the company reported strong third-quarter earnings on the back of a robust defense business and more efficient commercial aircraft production. The company also raised its 2018 earnings forecast, in what looks to be a record year for revenue. The aerospace giant reported adjusted earnings of $3.58 a share, topping expectations of 11 cents by analysts surveyed by Refinitiv. Third-quarter revenue came in a $25.15 billion, which was over $1 billion more than analysts forecast. Boeing raised its full year 2018 earnings forecast to a range of $14.90 to $15.10, up from its previous guidance of $14.30 to $14.50. Boeing may see its full year revenue top $100 billion for the first time, as well. Boeing landed billions in military contracts this summer which CEO Dennis Muilenberg highlighted and said was “important new defense business.” The Navy selected Boeing to develop the MQ-25 unmanned aircraft system and the Air Force awarded Boeing $9.2 billion to build the T-X trainer aircraft. Boeing also landed a $2.4 billion contract to build the MH-139 helicopter for the Air Force. Boeing is very in tune with the administration and customer base, says Jefferies analyst

“What really surprised us to the upside was aerospace margins in the 13% range and they’re raising their guidance for that,” Jefferies analyst Sheila Kahyaoglu said on CNBC’s “Squawk Box.”

For its its airplane-making business, Boeing delivered 190 commercial aircraft in the third quarter, bringing its total deliveries for the year to 568. The business had fallen short of delivery estimates in the second quarter but Boeing stuck to guidance in the latest report, saying the company would deliver at least 810 airplanes this year. Boeing continues to ramp up production, especially on its core 737 aircraft, and aims to get to a key production rate of 52 aircraft each month. “They maintained their delivery guidance, which means they could get to that 52 a month by the end of the year,” Kahyaoglu added. The trade war between President Donald Trump’s administration and China is a key theme Kahyaoglu is watching. She said China is “a big customer of Boeing,” representing about a third of the company’s orders for 737 aircraft. While it’s important for Boeing shareholders to pay attention to the company’s business in China, the analyst did not raise concern about Boeing possibly getting caught in the middle of the trade war. “I think Boeing’s very in tune with the administration but also with its customers,” Kahyaoglu said. Boeing shares slipped 2.3% over the last three months but the stock is still up 18.7% for the year as of Tuesday’s close of $350.05 a share.

Fannie Mae identifies new fake employers being used on mortgages

The number of fake employers showing up on borrowers’ mortgages is growing. Earlier this year, Fannie Mae issued a warning to lenders after identifying more than 30 companies that appeared to be fake that were showing up on borrowers’ mortgage documentation as their place of employment. The 30 companies were generally located in the Southern California and Los Angeles County areas. But the wave of fake employers spread throughout California, as Fannie Mae later called out 10 more potentially fake companies located in Northern California, including some in Silicon Valley. Now, Fannie Mae is issuing another warning, telling lenders that it has found five more potentially fake employers in the state of California. The newly identified potentially fake employers are:

–  BTR International, located on S. Olive in Los Angeles, CA

–  Building Blocks Learning Center, located on Calabasas Rd. in Calabasas, CA

–  Digicox Printing Material, located on Sherman Way in North Hollywood, CA

–  Volt Temp Distributors, located on Gladys Avenue in Los Angeles, CA

–  Western Law Group, located on W. Glenoaks Blvd. in Glendale, CA

According to Fannie Mae, there are a series of red flags that lenders should be on the lookout for on loans that could include a fake employer or other potential mortgage fraud issues, including:

–  TPO / broker loans

–  Originated 2015–2018 (present)

–  Employment (occupation) does not “sensibly” coincide with borrower’s profile (age or experience)

–  Borrower on current job for short period of time

–  Prior borrower employment shows “Student”

–  Starting salary appears high

–  Purported employer does not exist

–  Employer’s purported location cannot be ascertained

–  Paystub templates are similar for various employers across other (involved) loan files

–  Paystubs sometimes lack typical withholdings (health, medical, 401(k), etc.)

–  Gift letters are substantial and are not (or cannot be) supported through re-verification

Oil extends drop, falling toward $75, on demand worries

Published October 24, 2018MarketsReuters

Oil fell towards $75 a barrel to its lowest since late August on Wednesday, pressured by concern that demand is weakening and supply ample even as US sanctions loom on oil exporter Iran. In a sign supply is plentiful, industry group the American Petroleum Institute said on Tuesday US crude stocks had risen by 9.9 million barrels – more than forecast. The US government’s supply report is due at 1430 GMT. Brent crude, the global benchmark, was down $1.28 to $75.16 a barrel at 0855 GMT. It fell earlier to $75.11, the lowest since Aug. 24. US crude dropped 30 cents to $66.13. “Demand worries have been around for a while,” said analyst Olivier Jakob of Petromatrix, adding that as long as refining margins for gasoline and inter-month spreads for crude remained weak, “it’s going to be difficult to rebound.” Crude fell sharply in the previous session, with Brent closing down 4.3%. “This price movement comes as little surprise with attention now clearly being focused on the weakening economic situation and gloomy demand outlook,” said analysts at JBC in a report. A sell-off in equities due to concern about the economic outlook also weighed on crude on Tuesday. Forecasters such as the International Energy Agency already expect slower oil-demand growth for 2019 due to a slowing economy.

Wells Fargo commits $1.6 billion to help revitalize Washington, D.C.

Aiming to aid in the revitalization of the nation’s capital, Wells Fargo announced Tuesday that it is committing more than $1.6 billion in lending and philanthropy in Washington, D.C., over five years. The financial commitment is part of a new program being launched by the bank in coordination with the National Community Reinvestment Coalition called the “Where We Live” program. Through the program, Wells Fargo will triple its community giving and “concentrate resources on the biggest needs identified by community leaders,” including affordable housing, small businesses, and job skills. According to Wells Fargo, the effort will primarily be focused on Ward 7 and Ward 8, two of the city’s most economically challenged areas. Included among the effort is a five-year, $16 million philanthropic commitment that includes $4 million for Community Development Financial Institutions to help grow the small business community and $6 million for nonprofit housing initiatives, including down payment assistance and development of affordable rental properties. But the bulk of the financial effort will come in the form of more than $1.5 billion for loans and equity investments in mortgage lending, small business lending and community lending and investment.

Part of that push has already begun. According to the bank, one of the early Where We Live projects utilized $90 million in lending and equity investments from Wells Fargo to convert an abandoned housing complex into 220 affordable rental units. “Communities succeed when we all work together,” Wells Fargo CEO Tim Sloan said. “The Where We Live program is rooted in two things: investments that help people live, work and thrive, and a deep understanding that neighborhoods need long-term partners,” Sloan added. “It builds on Wells Fargo’s legacy of empowering residents and small businesses in our nation’s capital for the past 100 years, and our desire to create a compelling community investment model in Washington, D.C.” Wells Fargo isn’t the first bank to commit financial muscle to the D.C. area in this year alone. Back in April, JPMorgan Chase announced that it was committing $4 billion over five years for home and small business lending in the area as part of an expansion into the region. And now, it’s Wells Fargo’s turn to help D.C., especially in areas that are sorely in need of help. “This is an important step by Wells Fargo to expand its investment in the District, and to listen and work more closely with community groups,” John Taylor, president and founder of NCRC, said. “Expanding access to mortgage and small business loans is essential to closing the wealth gap,” Taylor continued. “Lenders need to listen and focus on the needs of the communities where they do business. It’s heartening to see Wells Fargo strengthen its commitment to do just that.”