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CoreLogic – rising single-family rent prices among southern US metros

–  US single-family rent prices increased 3% year over year in July 2018—

–  Orlando had the highest year-over-year rent price increase at 6.4% in July 2018

–  Low-end rental prices were up 3.9% compared to high-end price gains of 2.7% in July 2018

CoreLogic released its latest Single-Family Rent Index (SFRI), which analyzes single-family rent price changes nationally and among 20 metropolitan areas. Data collected for July 2018 shows a national rent increase of 3%,* compared to 2.7% in July 2017. Low rental home inventory, relative to demand, fuels the growth of single-family rent prices. The SFRI shows that single-family rent prices have climbed between 2010 and 2018. However, year-over-year rent price increases have slowed since February 2016, when they peaked at 4.1%, and have stabilized over the last year with a monthly average of 2.7%.  High-end rentals continued to dampen national rent growth in July 2018, despite accelerating rates of increase among this tier. High-end rentals, defined as properties with rent prices greater than 125% of a region’s median rent, saw rent increases of 2.7% year over year in July 2018, up from a gain of 1.9% in July 2017. Rent prices among low-end rentals, properties with rent prices less than 75% of the regional median, increased 3.9% in July 2018, down from a gain of 4.3% in July 2017.

Of the 20 metros analyzed, Orlando had the highest year-over-year increase in single-family rents in July 2018 at 6.4% (compared with July 2017), officially outpacing Las Vegas where rent prices led the nation throughout the first half of 2018. Las Vegas experienced the second highest rent prices in July 2018 at 5.7%, followed by Tucson at 4.2%. Seattle experienced the lowest rent price increase in July 2018 at 1.1%. This is the first time since the start of the year that Honolulu did not see the lowest rent price increase among the 20 analyzed metros. Rent prices in Honolulu stopped decreasing in May 2018 after seven months of decline. Metro areas with limited new construction, low rental vacancies and strong local economies that attract new employees tend to have stronger rent growth. Both Orlando and Las Vegas experienced high year-over-year rent growth, driven by employment growth of 4.3% and 3.9% year over year respectively. This is compared with the national employment growth average of 1.6%, according to data from the United States Bureau of Labor Statistics. St. Louis experienced the lowest employment growth, which could be a factor in its low rent growth of 1.8%. Rent prices continue to increase in areas affected by last year’s hurricanes like the Houston metro area, which experienced growth of 3.8% year over year in July 2018. This is down from the metro’s 2018 peak of 4.4% in May 2018. However, it is up from a 1.2% increase in October 2017, which was the first rent increase for Houston since April 2016. “Single-family rents were quick to respond to the late-summer hurricanes in 2017 with increased rental demand showing up in higher rents in just one-two months after the disasters,” said Molly Boesel, CoreLogic principal economist. “Similar movements in rents could be seen in metro areas affected by Hurricane Florence in the following months.”

Trade talks with Canada to resume

Canada’s foreign minister will be back in Washington on Wednesday to resume talks aimed at reaching an agreement on a new trade deal with the US to replace NAFTA. Chrystia Freeland will meet with US Trade Representative Robert Lighthizer as a US-imposed deadline of Oct. 1 looms. It will be the first meeting between the two officials in eight days. Lower-level officials have reportedly been negotiating in recent days. American business and political leaders are increasing the pressure on Canadian Prime Minister Justin Trudeau to agree on a deal to renew NAFTA (North American Free Trade Agreement) and drop his insistence that no deal is better than a bad deal, according to Reuters. The two sides are said to be far apart in some areas and Trudeau says his Liberal government will walk away, if necessary. US negotiators are pressing for more access to Canada’s protected dairy market. US House Majority Whip Steve Scalise, R-La., issued a statement Tuesday citing “a growing frustration with many in Congress” over Canadian negotiating tactics and suggested Canada could be left out of NAFTA. Last month, President Trump announced a side deal with Mexico and made clear he was prepared to exclude Canada, if necessary. The United States takes 75% of Canada’s goods exports and Trump is threatening to impose tariffs on autos.

NAR – Realtors view technology as increasingly valuable for business, competition

As technology continues to transform and modernize the real estate industry, Realtors®, members of the National Association of Realtors®, are focused on adapting to and remaining at the forefront of this change. Last month, NAR kicked-off the inaugural Innovation, Opportunity & Investment Summit in San Francisco, where Realtors® joined real estate technology companies and the investment community to discuss evolutions in real estate technology and strategies for Realtors® to keep up with these trends. “During the iOi Summit, Realtors® collaborated with leading technology firms to identify Realtor®-friendly technology tools and resources. The summit is a part of an ongoing process of creating a dynamic, competitive real estate market that will help NAR advance our members-first mission for years to come,” said NAR CEO Bob Goldberg. Following the iOi Summit, NAR developed a survey focused on Realtors® day-to-day use of technology and analyzed ways technology continues to change how Realtors® and real estate businesses operate. According to the 2018 REALTOR® Technology Survey, Realtors® have spent countless hours and millions of dollars advancing real estate technologies and keeping up with the latest trends in order to further their business. “The iOi Summit and the Realtor® Technology Survey are both initiatives that help us better understand Realtors® use of technology, embrace change and identify the business technology tools of the future. Both are part of my vision as CEO, advocating for technologies that are Realtor®-centric and ensure a competitive market for consumers throughout the real estate transaction,” said Goldberg.

According to the survey, Realtors® continue to find the most value in current technology tools that increase efficiency and enhance remote work capabilities. The three most valuable technology tools Realtors® used in their businesses, excluding email and cell phones, were local MLS websites/apps (64%), lockbox/smart key devices (39%), and social media platforms (28%). As the real estate market becomes more dynamic and competitive with advances like smart technology, Realtors® are becoming more familiar with smart home and Internet connected devices. Realtors® always stay in touch with the latest trends buyers want in their homes. The survey found that Realtors® are most familiar with security devices (19%), home-connected wearable devices (12%), and home comfort devices (12%). While the majority of agents are satisfied with the technology tools provided by their broker, they do want some additional tools. When asked what additional technology tools Realtors® would like to see their broker provide in the future, respondents most wanted to see predictive analytics (36%), CRM tools (35%), and transaction management software (25%). According to the survey, 41% of Realtors® were somewhat satisfied with MLS-provided technology and nearly 29% were extremely satisfied with their MLS’s technology offerings. Only two% of respondents do not use any of the technology tools or services that their MLS offers. The tech tools that have given respondents or their agents the highest number of quality business leads in the last year were social media (47%), their MLS site (32%), their brokerage’s website (29%), and listing aggregator sites (29%).

Tesla chief Elon Musk’s comments spur criminal investigation

Electric automaker Tesla is under criminal investigation by the Department of Justice over comments made by CEO Elon Musk, Bloomberg reported Tuesday, citing two people familiar with the matter. The news sent shares of Tesla lower during Tuesday’s trading session. The company is reportedly being investigated for fraud after Musk rattled investors last month when he announced on Twitter that he was considering taking the company private, a process for which he claimed funding had already been “secured.” He offered no concrete details on a proposed strategy, but specified a buyout price of $420 per share. That sent shares soaring and raised concerns Musk made the announcement to give Tesla’s stock price a boost. But he later revealed that there was no concrete funding deal in place, and eventually announced he had decided it would be better for Tesla to remain a public company. The Justice Department declined to comment. A Tesla spokesperson said the company received a voluntary request for documents from the DOJ following Musk’s announcement about taking the company private, and Tesla has been “cooperative.” “We respect the DOJ’s desire to get information about this and believe that the matter should be quickly resolved as they review the information they have received,” the spokesperson said, adding that Tesla has not received a subpoena, request for testimony or any other formal process. Sources told Bloomberg the criminal investigation is still in its early stages. Last month, Musk said during an interview with The New York Times that  he wrote the tweet in his car on the way to the airport and no one reviewed it. The billionaire businessman said at the time he did not regret sending the post, having previously offered the rationale via blog post that he wanted all of his shareholders to be made aware of the situation simultaneously.

Housing market warms to buyers

For housing, it has been a seller’s market for many months but now, with low supplies and rising prices, this trend could be reversing. An analysis of the housing market by First American Chief Economist Mark Fleming and Senior Economist Odeta Kushi noted that housing inventories have increased modestly since December 2017, which marked a 25-year-low point. In December 2017, only 166 homes out of 10,000 were for sale. In July 2018, this number increased to 174 per 10,000. According to Fleming, “While this is still very low, it’s the first time we’ve reached this level since July 2017 and a slight improvement from December’s 25-year-low point.” The supply shortage is easing only in higher-end homes nationally. In July, the inventory of homes worth less than $200,000 was down 15.6% nationally versus a year ago, while the supply of homes that cost more than $350,000 increased 5.7% – with the economists citing realtor.com data. According to Fleming and Kushi, potential homeowners should still “take heart” from the recent inventory increase and the slowdown in price appreciation, which are potential signals of good news for those interested in buying a home. “These factors indicate that the seller’s market may be coming to an end. It’s been six years since the end of the last one, but the rare buyer’s market may be the housing market’s future,” according to Fleming.

NAHB – builder confidence remains firm in September

Builder confidence in the market for newly-built single-family homes remained unchanged at a solid 67 reading in September on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). “Despite rising affordability concerns, builders continue to report firm demand for housing, especially as millennials and other newcomers enter the market,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “The recent decline in lumber prices from record-high levels earlier this summer is also welcome relief, although builders still need to manage construction costs to keep homes competitively priced.” “A growing economy and rising incomes combined with increasing household formations should boost demand for new single-family homes moving forward,” said NAHB Chief Economist Robert Dietz. “However, housing affordability is becoming a challenge, as builders face overly burdensome regulations and rising material costs exacerbated by an escalating trade skirmish. Interest rates are also forecasted to keep rising.” Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. The HMI index measuring current sales conditions rose one point to 74 and the component gauging expectations in the next six months increased two points to 74. Meanwhile, the metric charting buyer traffic held steady at 49. Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 54 and the South remained unchanged at 70. The West edged down a single point to 73 and the Midwest fell three points to 59.

CoreLogic – US homebuyers’ “typical mortgage payment” up 15% year over year – more than double the median sale price’s gain

While the US median sale price has risen by just over 6% over the past year the principal-and-interest mortgage payment on that median-priced home has increased more than 15%. Moreover, the CoreLogic Home Price Index Forecast suggests US home prices will be up 4.7% year-over-year in June 2019, while some mortgage rate forecasts suggest the mortgage payments homebuyers will face at that point will have risen almost twice as much. 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 June 2018 – $233,732 – was up 6.3 year over year, while the typical mortgage payment rose 15.1% because of a .67-percentage-point rise in mortgage rates over that one-year period. A consensus forecast suggests mortgage rates will rise by about 0.36 percentage points between June 2018 and June 2019. The CoreLogic HPI Forecast suggests the median sale price will rise 2.2% in real terms over that same period (or 4.7% in nominal terms). Based on these projections, the inflation-adjusted typical monthly mortgage payment would rise from $955 in June 2018 to $1,018 by June 2019, a 6.5% year-over-year gain (Figure 1). In nominal terms the typical mortgage payment’s year-over-year gain would be 9.2%. An IHS Markit forecast calls for real disposable income to rise by less than 3% 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 June 2018 it remained 25.3% below the all-time peak of $1,279 in June 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 June 2018, and the inflation-adjusted US median sale price in June 2006 was $248,312 (or $199,750 in 2006 dollars), compared with a June 2018 median of $233,732.

 

CoreLogic – Kilauea’s lava lessons

The Hawaiian Islands are a lush tropical paradise with palm trees, beaches, and breathtaking active volcanoes. Their very makeup intrigues many, but it is also the source of potential catastrophe. The Island of Hawai’i, commonly referred to as the Big Island, is home to five volcanoes, including Mt. Kilauea. Kilauea is one of the world’s most active volcanoes which has been erupting on and off over the last several thousands of years. Kilauea’s current eruption has made headlines over the past few months, but this eruption is actually part of the ongoing eruption which began in 1983. When many people think of volcanoes they think of steep, explosive stratovolcanoes like Mt. St. Helens in Oregon or Mt. Pinatubo in the Philippines—both of which have had some of the most destructive eruptions in recent history. In contrast, the Hawaiian volcanoes are a different variety known as shield volcanoes which are characterized by their gentle sloping sides and broad domes. The eruptions are also very different in the Hawaiian shield volcanoes, where the lava is very fluid and basaltic as opposed to pyroclastic. On May 17, 2018, Kilauea experienced an explosive eruption. This type of eruption, while not entirely unexpected, is uncommon with these types of volcanoes. The flowing lava came in contact with the water table, which in turn generated the explosive eruption, sending ash plumes into the air and impacting air quality. Even though catastrophic eruptions are not common with Mt. Kilauea, the nature of the flowy basaltic lava does pose a great risk to homes and businesses in its path. CoreLogic® analyzed the area impacted to understand the potential damage.

The area impacted by the lava flow is a small, remote part of the Big Island of Hawaii, far from the popular cities of Kona and Hilo. The US Geological Survey (USGS) monitors the volcanoes and has identified a “thermal zone” which has potential for risk.  Within the entire thermal zone, there are 5,902 homes at potential risk. Of these, 1,029 homes are in the high-risk area. The area impacted is called the Leilani Estates. The average home value in this region is $230 thousand which puts the total value of residential properties at high risk around $239 million. It is important to note that a high-risk property does not guarantee that it will burn, but knowing the weight of the risk is essential for insurance companies and homeowners. According to the most recent report by Hawaii County Civil Defense on June 23, 2018, lava is covering an area of 6,144 acres. A total of 637 homes in this area have been destroyed, which is a total value of approximately $146.5 million lost. The area within the thermal zone has been evacuated, but beyond life safety, a big concern is insurance for the lost homes. Many have questioned the insurance coverage for homes lost to lava flow in Hawaii. The insurance commissioner of Hawaii Gordon Ito had commented on May 9 that most homes are covered by standard homeowner policies as the structure was lost to fire—but this is not always the case as some policies have exclusions for lava. Lava has yet to stop flowing in Hawaii, and if the past 35 years have been telling, it is unlikely to suddenly cease. While much of the lava is running off into the ocean, growing the island bit by bit, the risk remains for those homes and homeowners yet unaffected. Having a strong grasp on that risk is paramount to make smart decisions when it comes to selecting a policy which protects and restores homes.

Musk says Tesla moves from production problems to delivery problems

Tesla Chief executive Elon Musk has had what seemed like endless problems over the past couple months. He now says that the company is facing bigger logistical problem concerning delivery than overall production delays. Musk admitted problems in Twitter response to a customer complaint on a delivery delay. Tesla has been working to iron out production bumps after failing to meet production targets for its Model 3 sedans. Musk said last week, the company would eliminate some color options for its electric cars to streamline production. In the past month, Musk has been the target of much criticism and unwanted publicity following a podcast appearance in which he smoked a tobacco product that reportedly contained marijuana. Tesla has also seen the departure of a number of executives since 2016. In September alone, the automaker saw its vice-president of worldwide finance and operations, chief people officer and chief accounting officer all leave. He also was threatened with a lawsuit surrounding alleged comments against one of the cave divers that helped save the members of the youth soccer team that was trapped in a flooded mine. Back on August 7, Musk tweeted that he was considering taking the company private at $420 per share in a transaction valuing it at $72 billion, and that funding was “secured.” On the evening of August 24,  Musk, by then facing US Securities and Exchange Commission scrutiny into the factual accuracy of his financing tweet, blogged that Tesla would remain public, citing investor resistance.

Manafort to forfeit $21.7 million in real estate holdings

According to a report from NBC News, Paul Manafort will forfeit an estimated $21.7 million in New York real estate assets as part of his recent plea deal, which includes his apartment in Trump Tower worth an estimated $3 million. Manafort pleaded guilty to two counts ­– federal conspiracy and conspiracy to obstruct justice – and agreed to cooperate with Special Counsel Robert Mueller in his investigation of President Trump’s alleged involvement with Russia. Manafort also admitted guilt to 10 outstanding counts from his earlier trial in Virginia, which prosecutors could use against him should he renege on his promise to cooperate with Mueller. Manafort’s plea deal mandates the forfeiture of his Hamptons home ($7.3 million), three apartments in Manhattan, a Brooklyn townhouse, three bank accounts and a life insurance policy. Despite these forfeitures, Manafort won’t be destitute when he makes it out of the pen. He negotiated to hang on to one of his bank accounts and according to NBC News, he still has at least three properties left in his name worth an estimated $6 million.

GM recalls 1.2M pickups, SUVs for power steering problem

General Motors is recalling 1.2 million big pickup trucks and SUVs mainly in North America because of power-assisted steering problems that have been cited in a number of accidents. GM says the power steering can fail momentarily during a voltage drop and suddenly return, mainly during low-speed turns. Such a failure increases the risk of a crash. The company says it has 30 reports of crashes with two injuries, but no deaths. The recall covers certain 2015 Chevrolet Silverado and GMC Sierra 1500 pickups as well as Chevy Tahoe and Suburban SUVs. Also affected are 2015 Cadillac Escalade and GMC Yukon SUVs. Dealers will update the power steering software at no cost to owners. No date has been set to notify customers, but GM says the software is available now, so owners can contact dealers to schedule repairs. More than 1 million of the trucks are in the US, and most of the rest are in Canada and Mexico. There’s a small number in other countries. GM recalled 2014 model year trucks last year for the same problem.

DSNews – the week ahead: the pulse of the housing market

On Tuesday, the latest installment of the NAHB Wells Fargo Housing Market Index (HMI) will drop, providing insights into “the pulse of the single-family housing market.” The Index is based on a survey that asks home builders “to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes.” The previous release of the HMI found the Index dropping one point to “a solid 67” in mid-August. “The good news is that builders continue to report strong demand for new housing, fueled by steady job and income growth along with rising household formations,” said NAHB Chairman Randy Noel at the time. “However, they are increasingly focused on growing affordability concerns, stemming from rising construction costs, shortages of skilled labor and a dearth of buildable lots.” Here’s what else is happening in The Week Ahead.

–  Housing Starts Survey, Wednesday, 8:30 a.m. ET

–  MBA Mortgage Apps 7:30 a.m. ET

–  NAR Existing Home Sales 10 a.m. ET

–  Fed Balance Sheet, 4:30 p.m. ET

Micahel Arroyo pleads guilty to loan scheme

Fortune reported that a New York real estate broker pleaded guilty to a loan scheme that defrauded banks of $3.5 million, a crime for which he will spend 21 months in prison. Micahel Arroyo was sentenced to 21 months in prison and five years of supervised release for conspiracy to commit bank fraud by “shotgunning” loans, a practice where the fraudster submits several loan applications to different banks at the same time in order to underhandedly acquire multiple home equity lines of credit. Arroyo and his partner in crime Rafael Popoteur obtained loans of more than $500,000 on residential properties in New York and New Jersey from multiple banks between 2012 and 2014, according to Department of Justice officials. Popoteur also pleaded guilty to conspiracy to commit bank fraud and was sentenced to thee years of supervised release, including one year of house arrest.

ATTOM – Top Real Estate Disrupters: Purplebricks Disrupting the Realtor Role

Real estate tech company Purplebricks, which allows homeowners to list their homes for a flat fee rather than using the traditional commission-based fee structure, secured a $177 million investment in Q1 2018, the second largest in the real estate tech space during the quarter, according to RE:Tech. “We’re giving consumers a viable alternative versus the traditional real estate model,” said U.S. CEO Eric Eckardt, noting that the company appeals to investors because it is cashflow positive on an adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) basis, “which is almost unheard of for a tech company.” Purplebricks was founded in 2014 in the U.K. and has expanded to six states since its U.S. launch in September 2017: California, New York, Connecticut, New Jersey, Arizona and Nevada. “We’re moving quickly,” said Eckardt, noting the first quarter infusion of capital helped to fuel this rapid expansion. “I think that’s a really validation of great value, great service.” Purplebricks charges home sellers a flat fee of $3,600 to list and market their home for sale. On a property that sells for $500,000 that amounts to a savings of $8,900 overpaying the typical seller-side commission of 2.5 percent. Included in the fee is a local real estate agent to help with the process along with professional photography, a 3D virtual tour of the home, yard signage, and the property is listed for sale on the local Multiple Listing Service (MLS) along with popular listing portals such as Zillow, Trulia and Realtor.com — everything one would expect paying a real estate agent the full commission, according to Eckardt. “If you compare it to a quote-on-quote traditional real estate firm they are getting the same service,” he said, adding that every home seller gets the same level of service, whether the home is selling for $250,000 or $1 million. “Everything we do is built around the consumer.”

Prospective homebuyers using Purplebricks get a $1,000 rebate out of the buy-side commission to use toward closing costs, and Eckardt noted that buyers using Purplebricks also get access to additional online offering and negotiation tools that are not available through a traditional real estate agent. “(Buyers) can transact online 24/7,” he said, adding that the online platform enables peer-to-peer transactions. “If you see a home that you like, you can make an offer directly through the platform. … “When you want to schedule a showing, it goes directly to the home sellers.” At its heart, the Purplebricks model disrupts the traditional role of real estate agents. “The market has spoken. The shift has taken place,” Eckardt said. “There is pressure on commissions. Ten years ago the gatekeeper was the agent, but now consumers have access to that information so now the role of the agent is more of the trusted.” Along with a plethora of other online listing platforms now available, Purplebricks utilizes technology along with property and neighborhood data on its website to provide consumers with self-service access to the information and services that previously would have been provided by agents. “Data and technology is helping buyers and sellers make more informed decisions,” Eckardt said, noting that Purplebricks users can “not just look at price and features of the property, but also look at the community to help them make a more informed buying decision.” The Purplebricks’ model also releases agents from time spent prospecting for new clients given that each agent has an exclusive territory, assigned to all buyers and sellers in those territories, according to Eckardt. “We estimate that a traditional agent spends 70 percent of their time finding new business,” he said, noting that the average Purplebricks agents has seven years of experience — an indication that even veteran agents are interested in hanging up their prospecting hat. “(Our agents are) professional, full-time, ethical, just want to work with customers, not deal with online lead gen or CRM. There is a home at Purplebricks for them. “We still believe the agent is the center of the transaction,” he added. “Their role is more as a trusted advisor rather than gathering information.”

Oil climbs as US drilling stalls, Iranian sanctions bite

Oil prices rose on Monday as U.S. drilling stalled and investors anticipated lower supply once new U.S. sanctions against Iran’s crude exports kick in from November. Benchmark Brent crude oil rose $1.09 a barrel, or 1.4 percent, to a high of $77.92 and was trading at $77.50 by 1130 GMT. U.S. light crude was 50 cents higher at $68.25. “A higher oil price scenario is built on lower exports from Iran due to U.S. sanctions, capped U.S. shale output growth, instability in production in countries like Libya and Venezuela and no material negative impact from a U.S./China trade war on oil demand in the next 6-9 months,” said Harry Tchilinguirian, oil strategist at French bank BNP Paribas. “We see Brent trading above $80 under (that) scenario,” he told Reuters Global Oil Forum. U.S. drillers cut two oil rigs last week, bringing the total count to 860, Baker Hughes said on Friday. The number of rigs drilling for oil in the United States has stalled since May, reflecting increases in well productivity but also bottlenecks and infrastructure constraints. Outside the United States, Iranian crude oil exports are declining ahead of a November deadline for the implementation of new U.S. sanctions. Although many importers of Iranian oil have said they oppose sanctions, few seem prepared to defy Washington. “Governments can talk tough,” said Energy consultancy FGE. “They can say they are going to stand up to Trump and/or push for waivers. But generally the companies we speak to … say they won’t risk it,” FGE said. “U.S. financial penalties and the loss of shipping insurance scare everyone.” While Washington exerts pressure on countries to cut imports from Iran, it is also urging other producers to raise output in order to hold down prices. U.S. Energy Secretary Rick Perry will meet counterparts from Saudi Arabia and Russia on Monday and Thursday respectively as the Trump administration encourages the world’s biggest exporter and producer to keep output up. Investors are concerned about the impact on oil demand of the trade dispute between the United States and other large economies, as well as the weakness of emerging markets. “Trade wars, and especially rising interest rates, can spell trouble for the emerging markets that drive (oil) demand growth,” FGE said. Despite this, the consultancy said the likelihood of much weaker oil prices was fairly low as the Organization of the Petroleum Exporting Countries would probably adjust output to stabilize prices.

DSNews – Minority Neighborhoods Gain Equity

Minority neighborhoods saw some of the largest gains in home equity, coming from the lowest levels of home equity but seeing the most substantial gains from 2012 to 2018, according to a report from Redfin. Meanwhile, white neighborhoods, despite having the lowest levels of equity gain by percentage, still had the largest gains in absolute dollars. Additionally the home equity gap between white and minority communities expanded to $94,000 in 2018. “Home prices over the last six years rose most steeply in minority communities, and unlike in past booms when Americans just borrowed more and more money, these price gains led to real increases in wealth for homeowners of color,” said Redfin CEO Glenn Kelman. “But even though homeowners in mostly minority communities had the largest percentage gains in home equity, it was the folks living in mostly white neighborhoods who had the largest dollar gains, just because they had so much more home equity at the beginning of the recovery. This just goes to show that, even as a strong market broadly benefits homeowners, it’s still very hard for people starting with less money ever to catch up. On an absolute-dollar basis, homeowners in minority communities became wealthier, but still fell further behind.” White communities’ average home equity in 2018 was $348,000, compared to $127,000, representing a $221,000 gain. Minority communities’ average home equity in 2018 was $254,000, compared to $69,000 in 2012, a 265 percent gain, nominally a $185,000 gain. Redfin also covered mixed race communities, which saw a 199 percent gain in home equity, from $104,000 in 2012 to $311,000 in 2018. Overall, people of all races saw a 199 percent gain in equity in that time frame, from $99,000 to $293,000. According to Redfin, Riverside, CA is the only place where minority communities posted the largest equity gains in absolute dollars, followed by mixed-race and then white neighborhoods.

RMBS Performance Stays Strong

mortgagesPrime and nonprime residential mortgage based securities (RMBS) transactions performance have been improving according to the latest RMBS trends study from Fitch Ratings. Prime performance was strong in the first half of 2018, reflecting the high quality collateral attributes strong macroeconomic conditions and continued home price growth, with 60+ delinquencies averaging only 11 basis points for Fitch-rated prime transactions. According to Fitch, the expected pool losses on outstanding prime seasoned pools appears to have declined significantly in recent years, compared to the past low delinquency and significant home price appreciation in recent years. Additionally, Fitch notes that nonprime pools have benefited from strong borrower performance and lower than expected delinquencies to date. The study also found that CPRs have caused senior classes to de-lever and pool factors to decline faster than previously expected. Out of roughly 46,000 loans, only 298 loans are delinquent, and only 60 have incurred a loss. Ratings have seen positive improvements, with RMBS classes initially rated below ‘AAAsf’ since 2010, the prime sector has seen 51 percent upgraded while 16 percent of nonprime were upgraded. This includes 72 classes in Fitch’s biannual review completed in August. Additionally, combined 2018 issuance activity in the prime and nonprime RMBS sectors is on pace to more than double the previous highest annual total since the financial crisis. Volume in both sectors has already exceeded any full year since the financial crisis, with roughly $13 billion in prime and $5 billion in in non-prime RMBS issued through the first half. According to Fitch ratings in an earlier Q1 report, non-bank RMBS servicers are shifting their focus from delinquent borrowers and are concentrating their efforts on Fannie Mae, Freddie Mac, and Ginnie Mae loans. “Mortgage servicers are benefiting from a positive credit environment with clean-paying loans becoming the norm and seriously delinquent loans fading from view,” said Roelof Slump, Managing Director, Fitch. More than 90 percent of the company’s rated servicers managed to curtail delinquencies in the first quarter compared with the Q4 2017, it notes.

More companies dropping college degree requirement for new hires

More and more companies are scrapping college degree requirements for jobs in favor of candidates with experience in non-traditional education. No diploma? No problem. More and more companies are scrapping college degree requirements for jobs. They’re not saying you shouldn’t seek higher education, but not having a degree won’t be a barrier for you to work in certain jobs at their companies. Some of the 15 big companies saying “no bachelor’s degree is fine” include Google, Nordstrom, Bank of America, Ernst & Young, IBM and Apple. The changes are coming as job seekers, as well as high school graduates, consider whether college is worth the skyrocketing cost.

MBA – mortgage delinquencies down in 2nd Quarter of 2018

The delinquency rate for mortgage loans on one-to-four-unit residential properties fell to a seasonally adjusted rate of 4.36% of all loans outstanding at the end of the second quarter of 2018.  The delinquency rate was down 27 basis points from the previous quarter, but was up 12 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The percentage of loans on which foreclosure actions were started dropped four basis points from the last quarter to 0.24%, its lowest level since the second quarter of 1987.  “We continue to see improvement in the overall mortgage delinquency rate as the impact of the hurricanes from one year ago lessens, particularly for conventional loans,” according to Marina Walsh, Vice President of Industry Analysis at MBA. “Among the various loan types, the delinquency rate for conventional loans was two basis points lower than one year ago, prior to the hurricanes.  While delinquencies for both FHA and VA loans were up from one year ago, they were improved over the previous quarter.” “The economic outlook continues to support good loan performance.  Gross domestic product grew at a 4.1% rate, the unemployment rate was at an 18-year low, and job growth is averaging over 210,000 jobs per month, so far this year.   This means the economy is close to full employment.”  “But even with positive economic news, we continue to monitor factors that may contribute to a rise in delinquencies in future quarters.  Like past natural disasters, the wildfires in California may have a negative impact. Other factors include the aging of servicing portfolios as mortgage refinances slow, and the changing credit quality among certain loan types.”

Key findings of MBA’s Quarterly National Delinquency Survey include:

–  Mortgage delinquencies dropped across all stages of delinquency in the second quarter of 2018 compared to the first quarter of 2018.  The 30-day delinquency rate dropped two basis points from the previous quarter, while the 60-day and 90-day delinquency buckets dropped by eight and 18 basis points respectively.

–  The delinquency rate for conventional loans decreased 33 basis points over the previous quarter to 3.45%.  The FHA delinquency rate fell by 32 basis points to 8.70% and VA delinquency rate fell by 35 basis points to 3.97% over the previous quarter.

–  On a year-over-year basis, the delinquency rate for conventional loans dropped by two basis points, while the FHA delinquency rate increased by 76 basis points and the VA delinquency rate increased by 25 basis points.

–  The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.  The percentage of loans in the foreclosure process at the end of the second quarter was 1.05%, down 11 basis points from the first quarter of 2018 and 24 basis points lower than one year ago. This was the lowest foreclosure inventory rate since the third quarter of 2006.

–  The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 2.30% in the second quarter of 2018, a decrease of 31 basis points from last quarter, and a decrease of 19 basis points from last year.

–  Both Texas and Florida continue to recover from the September 2017 hurricanes.  The non-seasonally-adjusted overall mortgage delinquency rate in Texas dropped by 26 basis points to 5.36% in the second quarter. Prior to the hurricane one year ago, the overall delinquency rate for Texas was 5.05%. In Florida, the non-seasonally-adjusted overall mortgage delinquency rate on all loans dropped 139 basis points to 5.20% in the second quarter.  Prior to the hurricane one year ago, the overall delinquency rate for Florida was 4.07%.

–  The recovery process for FHA borrowers in Texas and Florida is improving at a slower pace. The FHA non-seasonally-adjusted mortgage delinquency rate in Texas was 10.53% in the second quarter, compared to 9.56% one year ago. In Florida, the non-seasonally-adjusted FHA mortgage delinquency rate was 9.01%, compared to 6.16% one year ago.

JPMorgan slashes Tesla stock price target, shares fall

JPMorgan analysts have slashed their stock price target on Tesla to $195 from $308, back where it was before chief executive Elon Musk’s going-private tweet. On Aug. 7, Musk tweeted that he is considering talking Tesla private for $420 – “funding secured.” In communicating the downgrade, JPMorgan’s analysts wrote, “Our interpretation of subsequent events leads us to believe that funding was not secured for a going private transaction, nor was there any formal proposal.” “Tesla does appear to be exploring a going private transaction, but we now believe that such a process appears much less developed than we had earlier presumed, suggesting formal incorporation into our valuation analysis seems premature at this time,” analyst Ryan Brinkman wrote in a client note. JPMorgan analysts upped their forecast on Tesla from $198 to $308 when Tesla’s stock surged following Musk’s tweets. They have an underweight rating on the stock. The media price target of analysts covering Tesla is $336, according to Reuters.

NAHB – housing starts hold their ground in July

Total housing starts inched up 0.9% in July to a seasonally adjusted annual rate of 1.17 million units, according to newly released data from the US Department of Housing and Urban Development and the Commerce Department. The July reading of 1.17 million is the number of housing units builders would begin if they kept this pace for the next 12 months. Within this overall number, single-family starts held firm, up 0.9% to 862,000 units. Meanwhile, the multifamily sector—which includes apartment buildings and condos—rose 3% to 306,000. “Builder confidence remains solid, although it has fallen back somewhat in recent months due to rising construction costs in 2018, including lumber,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “As builders grapple with higher costs, one positive development is that lumber prices have shown signs of easing the past two months off their record high levels posted in June.” Some projects are experiencing construction start delays due to cost concerns, with the number of single-family units authorized but not started up 25% since July 2017. “Supply-side challenges including increases in material prices and chronic labor shortages are affecting affordability in many markets,” said NAHB Chief Economist Robert Dietz. “However, consumer demand remains strong due to a growing economy and job market and favorable demographics. Moreover, on a year-to-date basis, single-family construction has shown steady progress, up 7.2%, while 5+ multifamily production is up 3.4% as well.”

Regionally, combined single- and multifamily housing starts in July rose 11.6% in the Midwest and 10.4% in the South. Starts fell 4% in the Northeast and posted a 19.6% decline in the West due to affordability constraints in the coastal markets. Overall permits, which are often a harbinger of future housing production, rose 1.5% to 1.31 million units in July. Single-family permits posted a modest gain of 1.9% to 869,000. Multifamily permits were relatively unchanged, up 1.7% to 410,000. Looking at regional permit data, permits rose 5.9% in the Northeast, 5.8% in the Midwest and 1.2% in the West. Permits edged 0.3% lower in the South.

Small business optimism at 35-year high

Small business owners’ optimism touched a 35-year high in July, with businesses setting records in terms of job creation and hiring, while they cited the availability of qualified workers as their biggest challenge. In another signal of just how good this economy is, the small business owners also noted that they were able to increase prices. In July 2018, the NFIB’s Small Business Optimism Index marked its second highest level in the survey’s 45-year history, at 107.9 – just shy of the July 1983 record-high of 108. Records were set for job creation plans. A seasonally-adjusted net 23% of businesses are planning to create new jobs, while 37% of business owners said they had job openings that they could not fill in July. “Small business owners are leading this economy and expressing optimism rivaling the highest levels in history,” said NFIB President and CEO Juanita Duggan. “Expansion continues to be a priority for small businesses who show no signs of slowing as they anticipate more sales and better business conditions.” A net 35% of owners expect better business conditions, while they said the availability of qualified workers was their No. 1 problem. Owners also reported that they were increasing the compensation they offered workers. Fifty-nine% of firms were hiring or trying to hire, while 52% (88% of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill. Twenty-three% of owners said their biggest business problem was finding qualified workers. “Despite challenges in finding qualified workers to fill a record number of job openings, they’re taking advantage of this economy and pursuing growth,” said NFIB chief economist Bill Dunkelberg. Profits continued to perform, and more firms raised prices in July, a positive signal of demand.

HUD Secretary Carson accuses Facebook of enabling housing discrimination

Housing Secretary Ben Carson accused Facebook on Friday of enabling illegal housing discrimination by giving landlords and developers advertising tools that made it easy to exclude people based on race, gender, Zip code or religion — or whether a potential renter has young children at home or a personal disability. The action, which comes after nearly two years of preliminary investigation, amounts to a formal legal complaint against the company and starts a process that could culminate in a federal lawsuit against Facebook. It stands accused of creating advertising targeting tools — which classified people according to interests such as “English as Second Language” or “Disabled Parking Permit” — that resulted in violations of the Fair Housing Act. The move by the Department of Housing and Urban Development came on the same day the Justice Department targeted Facebook on similar issues. In that action, the government took the side of several fair-housing groups in opposing Facebook’s efforts to have a discrimination lawsuit dismissed, arguing that Facebook can be held liable when its ad-targeting tools allow advertisers to unfairly deprive some categories of people of housing offers. Taken together, the moves mark an escalation of federal scrutiny of how Facebook’s tools may create illegal forms of discrimination, allegations that also are central to separate lawsuits regarding the access to credit and employment opportunities, which, like housing, are subject to federal legal protection. The federal actions also suggests limits on the reach of a key federal law, the Communications Decency Act, that long has been interpreted as offering technology companies broad immunity against many legal claims related to online content. “The Fair Housing Act prohibits housing discrimination, including those who might limit or deny housing options with a click of a mouse,” said Anna María Farías, HUD’s assistant secretary for fair housing and equal opportunity. “When Facebook uses the vast amount of personal data it collects to help advertisers to discriminate, it’s the same as slamming the door in someone’s face.”

Facebook said in a statement Friday afternoon, “There is no place for discrimination on Facebook; it’s strictly prohibited in our policies. Over the past year we’ve strengthened our systems to further protect against misuse. We’re aware of the statement of interest filed and will respond in court; we’ll continue working directly with HUD to address their concerns.” In March, several housing groups, led by the National Fair Housing Alliance, sued Facebook in federal district court in New York for engaging in illegal housing discrimination through its advertising tools. The company asked the court last month to dismiss the case, citing immunity because it was an “interactive computer service” protected by the Communications Decency Act. But Geoffrey S. Berman, the US attorney for the Southern District of New York, sided with the plaintiffs, arguing that Facebook was instead an “Internet content provider” under federal law because it collects and analyzes data and offers user categories that advertisers can choose, “based on demographics, interests, behaviors and other criteria.” That means that Facebook, at least in providing online tools to advertisers, falls beyond the reach of the Communication Decency Act’s immunity provisions, which are cherished by Silicon Valley and frequently portrayed as key to the ability of the technology industry to innovate freely. Berman wrote, “The Complaint sufficiently alleges that, for purposes of housing advertisements, the categorizing of Facebook users based on protected characteristics, and the mechanism that Facebook offers advertisers to target those segments of the potential audience, violated the FHA.” The Justice Department did not take a position on the merits of the legal claim overall, only about the applicability of the Communications Decency Act.

Lisa Rice, president of National Fair Housing Alliance, called the government’s action “a strong statement in support of our claims,” adding, “Facebook is one of the largest adverting companies in the world, and instead of using its vast resources to create more open markets, our claims assert that data is being harnessed in a way that perpetuates systemic bias in housing markets.” After a ProPublica investigation two years ago, Facebook said it would no longer allow advertisers to target ads for housing, credit offers and employment by “ethnic affinities,” a category the social network had created to enable businesses to reach minority groups. But the housing groups have argued that Facebook has not gone far enough. The government statement on Friday quoted this complaint in saying that the platform’s advertising tools still give landlords, developers and others the ability to target some potential renters while excluding others. An HUD news release Friday said that Facebook’s tools, while not explicitly mentioning race, disabilities or family size, allow all of that and more for advertisers interested in targeting certain groups while excluding others from housing offers. Such groups included people interested in “assistance dog,” “mobility scooter” or “deaf culture.” The advertising tools also allowed offers to exclude people interested in “child care” or “parenting,” or to target people based on their stated interest in Christianity, Hinduism or the Bible. Ads could also be tailored based on user Zip codes, the HUD release said. The formal complaint was filed four months after Carson testified on the Hill that he would be reopening HUD’s investigation into Facebook. The initial investigation had begun during the Obama administration following the ProPublica story revealing that Facebook allowed advertisers to target housing and other ads based on race.

But Carson dropped the investigation last fall. After a public outcry, he told senators in April that he had done so because of time pressures and had always intended to revisit the case. “Some of the suits that were being pursued — we didn’t really have time to study them,” Carson said in April. “We wanted to pull them back and have the chance to really study them.” A HUD official said Friday that Carson’s team began taking more time to understand the merits of the Facebook case. “They did not like the perception that they were scaling back on civil rights,” said the official, who is not authorized to speak on the record. “It doesn’t take a genius for anyone looking at Facebook to figure out that’s a problem that denies people housing. It’s hard for Facebook to justify.” The filing of the formal complaint signifies that HUD has found enough during its initial investigation to say the department believes Facebook may have violated federal housing laws. It begins an official process that allows the company to resolve the complaint by working with HUD before the department decides to either file a lawsuit or dismiss the case.

Black Knight – June 2018 Mortgage Monitor

–  Home Price Growth Slows Across Much of US; Cooling Prices, Slight Interest Rate Reductions Help Affordability Hold Steady

–  Home price appreciation slowed each month from March through May, the first three-month slide in nearly four years

–  Though every state saw prices increase in May – typically one of the strongest months for home price appreciation – the average home gained just 0.93% in value, the lowest growth rate for any May in the last four years

–  Two-thirds of both states and large metropolitan areas have seen slowdowns in rates of home price appreciation

–  32 states have seen price gains slow, while 18 have picked up speed, with California seeing three times the national average deceleration

–  Cooling home prices, combined with a slight reprieve in interest rates, have been enough to hold affordability steady

–  The cost to purchase the average-priced home has increased by only $4 per month over the past two months as compared to a $138 per month increase through the first five months of 2018

The Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based on data as of the end of June 2018. This month, Black Knight examined the slowdown in the rate of home price appreciation seen from March through May 2018, while also gauging the impact this slowdown and slightly lower interest rates have had on home affordability. As Ben Graboske, executive vice president of Black Knight’s Data & Analytics division explained, what is being seen is not a matter of home prices falling, but rather a slowing in their continuing increase. “In May – typically one of the strongest months of the year for home price growth – every state in the nation saw home prices increase,” said Graboske. “However, the average monthly gain in value of less than one% was the lowest for any May in the last four years. In addition, the annual rate of appreciation declined each month from March through May, the first three-month slowdown in almost four years. Thirty-two states, as well as 33 of the 50 largest metropolitan areas, have experienced slowdowns in appreciation over the same period.

All that said, the annual rate of home price growth is still historically high at 6.3%, some 2.5 percentage points above long-term norms. For more than six years, we’ve been riding a wave of home price appreciation above the 25-year average. The question now is whether tightening affordability will end that streak and if more deceleration is on the horizon. “On that front, the recent cooling of home price gains and slight reprieve in rising interest rates have combined to stabilize affordability in recent months. As rates have ticked down from 4.66% in late May to 4.52% in mid-July, the monthly principal and interest payment to purchase the average home has only increased by $4 per month – significantly less compared to the $138 per month increase we saw over the first five months of 2018. Still, the $1,213 in principal and interest per month needed to buy the average home remains near a post-recession high. While that represents a nearly $500 per month increase from the bottom of the market in 2012, it’s important to keep in mind that it’s still roughly 13% less than was required back in 2006.”

This report also looked at how rising short-term interest rates have impacted holders of outstanding adjustable-rate mortgages (ARMs), finding that 1.7 million such borrowers have seen their monthly mortgage payments increase by an average of $70 over the past 12 months. This subset of borrowers had been the beneficiary of downward reductions in their rates and payments following the financial crisis, but that’s no longer the case. Increases to both the LIBOR and constant maturity Treasury rates have resulted in the average rate on a post-reset ARM rising by more than .5% over the past 12 months and nearly .75% over the past two years, pushing the average post-reset ARM interest rate to more than 4.5%. While this has not led to any measurable increase in post-reset ARM delinquencies, ARM loans are now prepaying at a 70% higher rate than their fixed-rate counterparts over the past 12 months. This is a trend that may continue as an estimated 1 million borrowers would face an additional payment increase upon their next reset if index values were to hold steady at today’s rates.

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

–  Total US loan delinquency rate: 3.74%

–  Month-over-month change in delinquency rate: 2.71%

–  Total US foreclosure pre-sale inventory rate: 0.56%

–  Month-over-month change in foreclosure pre-sale inventory rate: -4.51%

–  States with highest percentage of non-current* loans: MS, LA, AL, WV, ME

–  States with lowest percentage of non-current loans: ND, ID, WA, OR, CO

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

Oil prices climb following unexpected production dip

Former Shell Oil President John Hofmeister on the outlook for oil prices.

Oil prices climbed Monday amid reports that Saudi Arabia’s crude production fell unexpectedly in July, while the reimposition of sanctions on Iran sparked concerns of a tighter oil market supply/demand balance in the future. Last Friday, two OPEC sources said that Saudi Arabia produced about 10.3 million barrels per day of crude oil in July, down about 200,000 barrels per day from June, according to Reuters. OPEC and Russia agreed in June to start increasing crude oil production after prices rallied to a 3 1/2 year high on a tighter market fundamentals which followed more than a year of output curbs. The US will reimpose the first set of sanctions on Iran on Monday as part of its decision to pull out of the Iran nuclear deal. The remainder of the sanctions, including oil, will take effect in November, a White House official told FOX Business’ Edward Lawrence. The sanctions on oil could ultimately block more than 1 million barrels a day of Iran’s approximate 2.5 million barrels a day of crude oil exports.

Also, the latest drilling update indicated that production in the US decreased in the prior week. Baker Hughes on Friday reported that the number of active oil rigs decreased by 2 versus the prior week.

Wells Fargo: Error contributed to hundreds of foreclosures

Wells Fargo says a company miscalculation could be the reason for hundreds of foreclosures, the bank revealed in a regulatory filing Friday. The report, filed to the Securities and Exchange Commission, said 625 customers were “incorrectly” denied a loan modification or were not offered a modification, all of which should have qualified. Out of those cases, 400 homes were foreclosed, something Wells Fargo defends might have happened anyway. To make up for the mistake, Wells Fargo has accrued $8 million to remedy affected customers, the report said. That amount averages $12,800 per borrower but the company did not say how much each individual would get or how the compensation would be distributed. Wells Fargo spokesman Tom Goyda told the Los Angeles Times all are receiving what the company deems is appropriate given the circumstances. “We’re very sorry that this error occurred,” Goyda said, adding there is not a 100% “clear cause and effect relationship between the modification denial and the ultimate foreclosure.” Goyda said he could not say what prompted the review of the loan modifications.

The latest finding adds to the bank’s growing list of problems, including a scandal in 2016 after regulators found the bank had opened millions of accounts without customers’ permission to meet quotas and generate sales bonuses. On Wednesday, the bank agreed to pay a $2.09 billion penalty for issuing mortgage loans it was aware contained incorrect income information. The bank agreed to pay the civil penalty under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 for the actions, which the government said contributed to last decade’s financial crisis. In June, Wells Fargo agreed to pay $5.1 million to settle charges of financial misconduct, after the SEC learned the bank generated large fees by improperly encouraging retail customers to actively trade market-linked investments, which were intended to be held to maturity. In addition, the SEC found that Wells Fargo did not properly investigate employees who were engaged in the practice and supervisors systematically approved the transactions, despite internal policies prohibiting similar practices. In February, the Federal Reserve capped Wells Fargo assets until the bank reforms itself to the regulator’s satisfaction.

Millions drop off food stamps

The number of people collecting foods stamps has dropped tremendously since President Trump took office, according to the latest numbers from the US Department of Agriculture (USDA). More than 2.8 million have stopped participating in the Supplemental Nutritional Assistance Program (SNAP) – commonly known as food stamps – since Trump’s first full month in office, the data showed. Food stamp enrollment in May 2018 was 39,329,356 versus 42,134,301 in February 2017. SNAP, which provides resources for individuals and families in need of food assistance, numbers are consistent with the downward trend seen over the past few years. It also comes as the Trump administration attempts to reform the program on state and federal levels of government. Since Trump took office, the administration has zeroed in on promoting pro-growth policies. The economy is growing at a rate above predictions and job growth has been strong across the board, according to the White House.

DSNews – Goldman Sachs Moves Forward on Consumer Relief Obligation

Goldman Sachs has reached 62% of its $1.8-billion consumer relief obligation, which was enacted under its two April 11, 2016, mortgage-related settlement agreements with the US Department of Justice and three states. Eric D. Green, the independent Monitor of the consumer-relief portions of the agreements, has announced that the forgiveness of balances due on 1,127 mortgages has moved the bank $127.1 million closer to its agreement sum. Professor Green is a professional mediator and retired Boston University law professor, who was named by the settling parties as independent Monitor with responsibility for determining the fulfillment of Goldman Sachs’ consumer-relief obligations. Green has assembled a team of finance, accounting, and legal professionals to assist in the task. Since the last report, produced on May 15 of this year, Professor Green reports that “Goldman Sachs forgave the balances due on 1,024 first-lien mortgages, for a total principal forgiveness of $113,504,343, an average of $110,844 per borrower.” The bank also forgave amounts due and previously deferred on 103 first-lien mortgages, for total forgiveness of $5,139,100, an average of $49,894 per borrower.

These two reports resulted in the total reportable consumer-relief credit of $127,109,482 after the application of crediting calculations and multipliers specified in the settlement agreements. “Approximately 28 months after the settlement agreements were signed, the total amount of credit claimed and conditionally validated in my reports under both settlement agreements comes to $1,120,530,304, or 62% of the $1.8 billion target,” Professor Green said. The two agreements settled “potential and filed legal claims” regarding the marketing, structuring, arrangement, underwriting, issuance, and sale of mortgage-based securities. Goldman Sachs reached settlements with the Department of Justice, California, Illinois and New York, as well as the National Credit Union Administration Board and the Federal Home Loan Banks of Chicago and Des Moines. The bank agreed to provide a total of $5.06 billion under the settlements, including consumer relief valued at $1.8 billion to be distributed by the end of January 2021. According to the statement, the modified mortgages were spread across 45 states and the District of Columbia, “with 36% of the credit located in the settling states of New York, Illinois, and California, and 46% of the credit located in Hardest Hit Areas, or census tracts identified by the US Department of Housing and Urban Development as containing large concentrations of distressed properties and foreclosure activities.”

Realtor.com – America’s most profitable housing markets

Owning a home has long been considered the fastest and most predictable way to build wealth in the United States. And while home sale prices are at an all-time record (at a median of $262,000 as of June) not everyone is walking away with double-digit annual returns. Picking a place where home prices will continue to surge in the long term is one part science, one part dogged research, and one part blind, dumb luck. Nothing is guaranteed. But if past is prologue, we’re here to help increase your odds of picking a winner: The realtor.com® data team found the markets where home sellers are walking away with the biggest returns. Our analysis finds that the median annual return for home sales was 8% nationally over the last 12 months. Not too shabby, homeowners! But digging into the numbers reveals a disparity. Of the 100 largest metros, the annual return was high as 14%—and as low as 2%. That’s the difference between living retirement on the beach and not retiring at all. “Owning can be a great way to build up overall net worth,” says Danielle Hale, chief economist for realtor.com. “If you’re looking to transition in a local market [to a bigger home], you have the home equity. If you’re looking to retire and move somewhere else, you have the money to do that.” Many of the places with the highest returns are the nation’s fastest-growing cities, where highly paid techies are spurring bidding wars. But that isn’t always the case. A few of the places where home sellers walked away with the fattest profits are those that hit rock-bottom in the Great Recession. Savvy buyers who got in on the ground floor have seen their home appreciation soar. “They walked into the room when everyone was running out,” Jonathan Miller, a national real estate appraiser at Miller Samuel in New York, says of these buyers. “They are now being compensated for their risk.” To find the country’s most profitable housing markets, we looked at homes that sold over the past 12 months in the 100 largest metropolitan areas. (Metros include the main city and the suburbs surrounding it.)  Then we compared the most recent sale prices to their previous ones, going back as far as 2008. The profit was defined as the difference between the two sales. Finally, we used those figures to create an average annualized return for each market, and limited our ranking to one metro per state.

  1. Bridgeport, CT (Fairfield County, CT)

Average annualized return: 14%

Median home list price: $789,100

Bridgeport, CT

Fairfield County has spent decades esconced as the crown jewel of New York City’s suburbs, a hot spot for wealthy home buyers looking to snag a mansion in luxe, high-status communities like Greenwich, CT, where median home prices are $1.9 million. But this county is more than just leafy, picture-perfect commuter towns; it also stretches into the perennially downtrodden city of Bridgeport. And ever since the financial recovery, properties at both ends of the economic spectrum have been doing very well. First, the high end: Unlike in nearby Westchester County, NY, home buyers in Fairfield County don’t have to pay a mansion tax. And ever since last year’s tax law changes, which made deductions less generous, the county has been attracting even more interest among big-ticket purchasers. That increased demand has more and more homeowners cashing in, to get their hands on those profits. It’s common for sellers here to use that windfall to upgrade to an even nicer home, says Leslie McElwreath, a real estate agent at Sotheby’s International Realty’s office in Greenwich. But it isn’t just mansions driving the price increases. Even higher price appreciation can be found in way less affluent Bridgeport proper, says Miller, the real estate appraiser. The median price there is just $199,000. That’s lured in buyers, and that is now driving prices up. “If you look at the high end of the county, housing prices haven’t risen as much since the financial crisis,” Miller says. “But areas hit hard by foreclosures in the region are now seeing large gains in property values.”

  1. Detroit, MI

Average annualized return: 12%

Median home list price: $260,000

The Great Recession dealt Detroit a near-knockout punch. The Motor City had struggled for decades with the loss of blue-collar, manufacturing jobs. Then the auto industry went into a tailspin, leading to widespread unemployment and a rash of foreclosures. Locally based General Motors and Ford received a federal bailout to stay afloat. But in 2013, the city still filed for Chapter 9 bankruptcy. With so many folks looking to leave, the median home values in Detroit fell from $137,200 in March 2008 to $108,800 by March 2012, leaving many owners underwater on their mortgages. But in recent years, the city has been on the upswing, as more folks move into its revitalized downtown. Younger buyers are finally flocking into the area to purchase condos in converted industrial buildings, like this one-bedroom condo/loft for $299,900. Homeowners who rode out the bad times are starting to see the rewards. That’s especially true for those who bought at the bottom of the market. “Detroit fell harder than most markets,” real estate appraiser Miller says. “[But its] rebound has been encouraging.”

  1. Seattle, WA

Average annualized return: 12%

Median home list price: $582,400

Why did so many cities go nuts submitting bids for Amazon’s second global headquarters? Maybe it has something to do with the remarkable transformation the company has wrought in its home city of Seattle. All those lucrative tech jobs have attracted home buyers of means, who’ve sent real estate prices soaring. It’s turning average Joe and Jane homeowners into millionaires. Competition is fierce. In the last year alone, nearly two-thirds of homes sold in Seattle have received multiple offers, according to a realtor.com analysis. That’s the highest incidence of bidding wars outside California. Buyers are snapping up condos in downtown Seattle with good views of the skyline or Elliott Bay. But demand is equally as strong for family-friendly, single-family homes in suburbs like Bellevue, WA. “More than 75% of my buyers are from Microsoft or Amazon,” says Jim Price, an adviser at Engel & Völkers in Seattle. “Lots of millennials here are making six figures and are ready to be first-time home buyers.”

  1. San Jose, CA

Average annualized return: 12%

Median home list price: $1,240,300

The number of deep-pocketed techies and venture capitalists in the heart of Silicon Valley seems to be limitless. Combine that with the meager supply of available homes, and even wee vacant lots can go for over $1 million. Silicon Valley home buyers from companies like Apple, which is likely to become the world’s first company worth more than $1 trillion, are turning former middle-class neighborhoods into mansion-lined boulevards. Buyers are consistently tearing down the more reasonably sized homes on their lots to put up larger ones. This happened in Los Altos, CA, where the median home price is now above $6 million.The most expensive home for sale in Los Altos is a 21,000-square-foot mansion priced at $55 million. Those who don’t have quite so much spare cash can consider this two-bedroom 1,500 square-foot condo, currently the cheapest abode on the market, at $1.6 million. And home sellers looking to unload their property in a hurry don’t have to worry. Not only do 80% of home sales in San Jose result in a bidding war, many of these buyers are willing to pay in all cash.

  1. Palm Bay, FL

Average annualized return: 12%

Median home list price: $270,000

In the 2015 film “The Big Short,” two characters flew to Florida before the housing bubble burst to figure out why so many homeowners weren’t making their mortgage payments. They discovered that folks were purchasing properties they couldn’t afford. True enough, when the housing market collapsed, the state was among the hardest hit. “Florida was just devastated by the foreclosure crisis, and had to reinvent itself,” real estate appraiser Miller says. “It has been a long recovery period, but people that went against the grain [buying at the market’s bottom] in recent years have done well.” Like much of coastal Florida, Palm Bay has a big demand from baby boomer retirees who are looking to buy homes in the area. Around a 45-minute drive to Orlando, where the median-priced home is $318,500, Palm Bay attracts home buyers looking for a lower price tag. Even a beachfront condo can be found at around $300,000.

  1. Denver, CO

Average annualized return: 11%

Median home list price: $467,600

Colorado has been on a steady growth track for years, helped along by its snazzy craft beer scene and unbeatable scenery. When the state legalized marijuana in 2012, it was just the pungent icing on the cake. “After that, there’s been just a huge influx of people and money into Denver,” says Ryan Penn, an associate broker at 360dwellings Real Estate in the city. Many of his clients come from the more expensive coastal cities. “I’m representing a couple of buyers who are relocating from Los Angeles, and they’re in contract to sign for a $1.3 million home. In California, they would pay three times more for something the same size.” Young professionals are enticed by the condos and single-family homes priced between $300,000 to $500,000. But they should expect to write 20 to 25 offers before they win a bidding war, Penn says. Bad news for them—and great news for sellers. “Even if you bought a home two years ago, you can be sitting on $100,000 of equity,” Penn says. “The biggest demand in homes is for those priced around $500,000.”

  1. Providence, RI

Average annualized return: 11%

Median home list price: $350,000

The biggest selling point for the capital of Rhode Island is its reasonably priced homes and its proximity to Boston. The bigger city is just an hour away, but its median home price is 51% higher, at $529,100. “We have a lot of buyers from Boston and elsewhere looking for more affordable housing,” says Robert Rutley, a local real estate agent at Taylor & Associates. “A lot of them are transplants moving in from around the country for the universities.” Providence is home to Brown University, Johnson & Wales University, and the Rhode Island School of Design, among others. Just this month, Rutley sold a three-family home in Providence that closed with 17 offers and sold for $30,000 more than the asking price. The hot market is spurred by a growing downtown, which has new hotels and apartment complexes going up. This is great news for home sellers, many of whom found themselves underwater on their mortgages after the housing crash. During the first quarter of 2018, 6.8% of homes in Rhode Island were under water, compared to more than 10% just two years earlier, according to CoreLogic, a real estate data firm. Over the last year alone, the average Rhode Island homeowner added $18,600 in home equity.

  1. Boston, MA

Average annualized return: 10%

Median home list price: $529,100

Boston has several historic districts where the stately brownstones are star attractions. But because the city limits construction there and doesn’t allow high-rises to go up in many parts of town, there is a limited supply of homes for sale. And that’s pushing home prices up, up, and away. “The people buying [in these areas] want the historic Boston experience,” says Collin Bray, a real estate agent at Century 21 Cityside in Boston. “They pay big money for high ceilings and deep fireplaces.” A rebounding financial sector, which employs many residents, has pushed wages higher. But money isn’t always enough to snag the most desirable homes for sale in this skintight market. “I’ve heard of buyers showing up at sellers’ doorsteps, ringing the doorbell, and introducing themselves, so hopefully the seller will remember them,” Bray says.

  1. Nashville, TN

Average annualized return: 10%

Median home list price: $368,000

Folks are used to paying sky-high home prices in places like New York and San Francisco. But it’s new territory for for native Nashvillians, where prices have steadily been climbing for the last few years. A surplus of good jobs has brought home buyers here. And the coolness factor of living in Music City has made it catnip for younger buyers. Older homeowners who purchased their homes for around $30,000 decades ago are now selling their abodes for a mint and then moving into multifamily homes with their children or into retirement communities, says local real estate agent Brian Copeland of Doorbell Real Estate. “They can’t pass up on how much profit they’d make if they sold,” Copeland says.

  1. Portland, OR

Average annualized return: 10%

Median home list price: $477,500

Portland has been sizzling for some time now—and it’s more than just the parody-worthy hipster scene that’s responsible. As it turns out, the housing market here is uniquely well situated; many new residents are refugees fleeing expensive West Coast markets like Seattle and San Francisco. “It’s really the last affordable major city on the West Coast,” says local real estate broker Darcie Alexander of PDX Green Team. “We have the great coffee, a variety of restaurants, and tons of art and music, but at a fraction of the price.” Between 2010 to 2017, the population of the metro area grew 11%, to about 647,805 in the city. That increase, and the climb out of the recession, have led to a jump of 56% in home prices during the same time period. That’s been a boon for sellers, who haven’t had a hard time unloading their homes. (Single-family houses like this three-bedroom, two-bath ranch priced at $334,900 are particularly popular.) So what are sellers doing with those big profits? “[They’re] wanting to buy something bigger in a higher price range, but they’re staying in Portland,” Alexander says. “Most people are either reinvesting it into the real estate market or they’re paying off debt.”

Halliburton revenue beats on higher North America rig count

Oilfield services provider Halliburton Co’s quarterly revenue rose 24% to beat analysts’ estimates on Monday as higher oil prices encouraged US oil and gas producers to put more rigs to work. US rig count, an early indicator of future output, stood at 858 in the week to July 20, according to a Baker Hughes report, up from 764 a year earlier, as energy companies ramp up production in anticipation of higher prices in 2018. Margins in US onshore operations are closing in on what the company achieved during the previous peak in 2014, Halliburton Chief Executive Jeff Miller said in a statement. Halliburton’s North America revenue rose 38.4% to $3.83 billion, while revenue from its international business increased 6% to $2.31 billion. The company’s total revenue rose to $6.15 billion from $4.96 billion. Net profit attributable to Halliburton rose to $511 million, or 58 cents per share, in the second quarter ended June 30, from $28 million, or 3 cents per share, a year earlier. The company took a charge of $262 million in the year-ago quarter. Excluding one-time items, the company earned 58 cents per share, in line with Wall Street estimate, according to Thomson Reuters.

Are cities finally fed up with Airbnb wiping out local housing?

Are cities finally fed up with Airbnb’s decimation of local housing? It’s starting to appear that way, as two major cities have voted to limit or restrict short-term rentals, becoming the latest metros to do so. Last Wednesday, the New York City Council voted unanimously to significantly restrict Airbnb and other online home rental services. The council passed a bill that seeks to prevent landlords and tenants from illegally renting out apartments for a few days at a time to tourists, a trend that the city says has aggravated the housing crisis by making short-term rentals more profitable than long-term leases. According to a New York Times article, Airbnb and other home rental services, like HomeAway, would be required to provide the addresses and names of hosts to the city’s Office of Special Enforcement each month, and to specify whether rentals are for a whole apartment or just a room. From the article:  “New York City is Airbnb’s largest domestic market, but under state law, it is illegal in most buildings for an apartment to be rented out for less than 30 days unless the permanent tenant is residing in the apartment at the same time. The new disclosure requirements would make it much easier for the city to enforce the state law and could lead to many of the 50,000 units rented through Airbnb in the city coming off the market. After similar rules went into effect in San Francisco, listings fell by half.” “The vacancy rate in New York City is very low,” the Council speaker, Corey Johnson, said before the vote. “We’re in an affordable housing crisis. We’re in a homelessness crisis. And Airbnb will not give us this data.”

According to the NYT’s reporting, home rental companies will face fines of up to $1,500 for each listing they fail to disclose, down from the $25,000 originally proposed. A New York City Hall spokeswoman told the paper that the new restrictions have the support of Mayor Bill de Blasio, who has prioritized affordable housing in the city, and he is expected to sign the bill into law. On the other side of the country, in San Diego, the city council recently voted to outlaw vacation rentals in secondary homes, restricting Airbnb and other short-term rentals to primary residences only. An article from the San Diego Union-Tribune explains that the action will curtail investor activity in the short-term rental market while also barring residents and out-of-towners from hosting short-term stays in multiple properties other than their residences. From the article: “One exception was made for San Diegans who have additional units on the same property as their residence, as in a duplex. In those instances only, a resident would be able to get a license for a second vacation rental. While not part of Monday’s action, council members said they would like to revisit the issue of granny flats, which under current rules, could not be used for vacation rentals.” The crackdown on Airbnb-style rentals has the potential to affect as many as 80% of the city’s more than 11,000 vacation rentals, estimated Elyse Lowe, the mayor’s director of land use and economic development policy. Airbnb responded to the vote, releasing a statement to the paper: “Today’s vote by the San Diego City Council is an affront to thousands of responsible, hard-working San Diegans and will result in millions of dollars in lost tax revenue for the City. San Diego has been a vacation rental destination for nearly 100 years and today’s vote all but ensures activity will be forced underground and guests will choose alternative destinations.”

Bitcoin rallies 5% to $7,700, building steam after a tough few months for cryptocurrency

–   Bitcoin is nearing $8,000 and building on last week’s 20% rally.

–  The digital currency rose 5% to around $7,700 Monday after breaking above the $7,000 level for the first time in a month last Tuesday.

–  Bitcoin pundits say news that BlackRock will look into cryptocurrencies and blockchain has helped prices, and investors are awaiting approval of a bitcoin ETF which could come as soon as August.

Bitcoin continued its rally Monday, shrugging off regulatory and security worries that have dragged down cryptocurrency prices this year. The world’s largest and most popular digital currency rose 5% to a high of $7,770.58, according to data from CoinDesk, and is up roughly 20% in the past week. It broke above the $7,000 level for the first time in a month last Tuesday following news that asset-management giant BlackRock will set up a working group to explore cryptocurrencies and blockchain technology. Grayscale, which manages $2 billion in assets, said in a report last week that it’s seeing more institutions interested in cryptocurrency products, which eToro’s Matthew Newton said adds to the long-term upside for bitcoin. He also pointed to anticipation surrounding approval of a bitcoin ETF, which the Securities and Exchange Comission is reportedly due to decide in August. “In the long-run all of these points are very bullish,” said Newton, an analyst at eToro. “Technically, on the charts, what happened last week was very positive, but getting through these levels will be critical in the short term action.” From a technical perspective, Newton Advisor founder and analyst Mark Newton is also watching the “formidable area of resistance” near $8,000. Until that level is broken, he said it’s tough to “make too much of this as being a move that would start to lead us meaningfully higher.” “This will truly be the ‘line in the sand’ so to speak as to whether BTC can begin a larger rally, or whether this will still take some time,” Newton said. Bitcoin is still down more than 60% from its all-time high near $20,000 in December. It and other cryptocurrencies have come under global scrutiny this year amid thefts, frauds around initial coin offerings, market manipulation and its potential for money laundering. The entire market capitalization for cryptocurrencies has dropped by more than 50% this year, according to CoinMarketCap.com.

NAR – realtors survey shows rising membership, younger agents joining industry

The income and sales volume of National Association of Realtors® members dropped slightly over the last year, but membership increased as younger members continue to enter the industry, according to the 2018 National Association of Realtors® Member Profile. This past year, there was a rise in new members from 1.22 million in March 2017 to 1.30 million in April 2018. The profile found that 29% of members have less than two years of experience, an increase from 28%. “While inventory shortages continue and home prices remain high, NAR has seen a whopping 6% increase in membership over the last year. Younger Americans are seeking business opportunities that working in real estate provides, but the overall trend is a slightly older age profile,” Lawrence Yun, NAR chief economist stated. The survey’s results are representative of the nation’s 1.3 million Realtors®; members of NAR account for about half of all active real estate licensees in the US Realtors® go beyond state licensing requirements by subscribing to NAR’s Code of Ethics and standards of practice and committing to continuing education. Realtors®’ median age was 54 this year, slightly up from the last two years, at 53. Sixty-three% of Realtors® are female, and the typical Realtor® is a 54-year-old white female who attended college and is a homeowner. The most common first careers reported are in management, business or finance, or in sales and retail, both at 16%. Only five% of Realtors® reported real estate was their first career; 72% said that real estate was their only occupation, and that number jumps to 82% among members with 16 or more years of experience. Sixty-five% of Realtors® are licensed sales agents (same as last year), 21% hold broker licenses (down from 22%), and 15% hold broker associate licenses (same as last year). New members tended to be more diverse than more experienced members; 25% of members with two years of experience or less were minorities, up from 22% last year.

According to the survey, the main factors that limit potential clients in completing transactions are difficulty finding the right property (35%), housing affordability (17%), and difficulty in obtaining mortgage financing (12%). Impacted by low inventory, the typical number of transactions decreased slightly from 12 transactions in 2016 to 11 transactions in 2017. Despite rising home prices again in 2017, the median brokerage sales volume decreased to $1.8 million in 2017 from $1.9 million in 2016. “A familiar story lingers from last year, as limited inventory continues to plague many housing markets across the country. For the fifth year in a row, the difficulty finding the right property has surpassed the difficulty in obtaining a mortgage as the most cited reason limiting potential homebuyers,” said Yun. The typical Realtor® earned 12% of their business from repeat clients and customers (compared to 13% in 2017) and 17% through referral from past clients and customers (compared to 18% in 2017). Realtors®’ web presence and use of social media has increased in recent years as a valuable marketing tool to reach clients and build online communities. Sixty-eight% of members reported having their own website, the same number as last year. Members continue to be more comfortable with using the latest technology on a daily basis as 71% of members were on Facebook for professional use and 59% were on LinkedIn (same as last year). Finally, 80% reported that they are certain they would remain in the real estate business, while those who were newest to the profession were least certain they would remain; 5% of all members were uncertain whether they would remain in the business.

Trump workforce re-training order could create 500K new job opportunities

President Trump signed an executive order at the White House on Thursday aimed at increasing training opportunities for American workers to help close the so-called skills gap. “We’re asking businesses and organizations across the country to sign our new pledge to America’s workers,” Trump said. “Today, 23 companies and associations are pledging to expand apprenticeships … for on-the-job training and vocational education.” The president added that the opportunities will be for Americans of all ages, from college students looking to land their first job to older workers looking to learn skills for a new career. More than 15 companies signed on to the effort, including IBM, Home Depot, Lockheed Martin, FedEx Corp, General Motors and Walmart. FedEx CEO Fred Smith said his company would re-train 500,000 workers, while IBM’s Jen Crozier committed to creating 100,000 new opportunities. As part of the order, top administration officials will form a National Council for the American Worker, which will focus on industries considered to have high potential for workers. Executives and experts from the private sector, educational institutions, and other outside organizations will also be enlisted to form a separate advisory board. Trump said the members of that board will be announced in the coming weeks. The White House said the initiative could lead to 500,000 new job opportunities in the US labor force. Trump said on Thursday that the US economy has created 3.7 million jobs since the election. The skills gap has been a prevalent problem for companies, which have a number of job openings. Lockheed Martin CEO Marilyn Hewson said in an article on Fox News Thursday that a lack of qualified workers in her industry has “a clear, real-world impact.” Hewson pledged to create at least 8,000 new opportunities for workers over the next five years.

NAHB – remodeling confidence increases despite rising costs

The National Association of Home Builders’ (NAHB) Remodeling Market Index (RMI) posted a reading of 58 in the second quarter of 2018, up one point from 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 ratings of current remodeling activity with indicators of future remodeling activity. “Remodelers across the country continue to see demand,” said NAHB Remodelers Chair Joanne Theunissen, CGP, CGR, a remodeler from Mt. Pleasant, Mich. “However, the rising cost of materials is impeding the market’s ability to be even stronger.” Current market conditions decreased one point from the first quarter of 2018 to 57. Among its three major components, major additions and alterations waned one point to 55, minor additions and alterations decreased two points to 58, and the home maintenance and repair component rose two points to 59. The future market indicators gained four points from the previous quarter to 59. Calls for bids fell two points to 55, amount of work committed for the next three months increased two points to 56, the backlog of remodeling jobs jumped nine points to 66 and appointments for proposals rose seven points to 61. “Improving economic growth is supporting demand for home remodeling,” said NAHB Chief Economist Robert Dietz. “However, remodelers have to deal with rising material prices, especially lumber, and the continued shortage of labor to keep prices competitive. The labor shortage is also a factor contributing to the increasing backlog of remodeling jobs.”

Lockheed Martin CEO pledges over $100M in workforce training

Lockheed Martin CEO Marillyn Hewson joined President Trump’s pledge to American workers by investing hundreds of millions of dollars in training students and workers to prepare them for the jobs of the future. “We are very excited about the opportunity to participate in this initiative. We think it is the right strategy,” Hewson said during an interview on FOX Business’ “After the Bell” on Thursday. Lockheed Martin is investing $100 million in employee training and educational opportunities over the next five years. In addition, the company has rolled out $50 million to support the STEM Scholarship Fund and $5 million toward apprenticeship and vocational opportunities. “We want to make sure that we’ve got the workers for today as well as for the future,” Hewson said.

ATTOM – Housing Precogs: Predictions Beyond Hunches

Peter G. Miller July 19th, 2018

The following is an excerpt from a white paper published by ATTOM Data Solutions. Real estate used to be a game of hunches. People bought and sold property because they had a sense of pricing, timing, and marketplace trends. Mortgages were made in large measure on the basis of past performance. Today hunches are out, big data is in, and the artificial intelligence revolution is taking the real estate world by storm as the use of predictive analytics comes with the promise of better leads and early access to future inventory — translating into lower costs, less risk and bigger profits for the industry. The drive away from housing market hunches to sophisticated predictive analytics based on big data principles is led by a growing group of housing precogs that are relative newcomers to the industry with strong ties to Silicon Valley and funded largely by venture capital. “We use predictive analytics and machine learning to analyze how likely a homeowner is to sell in the near future,” said Avi Gupta, President and CEO at SmartZip Analytics. “These techniques look at historical data — who has sold in the past — to identify, from several thousand data attributes, which ones may have been a factor in triggering those sales. And then, they look for owners that exhibit similar triggers to predict who is more likely to sell in the future.” Gupta added that “real estate is truly hyper-local, in that, the triggers that matter in a given neighborhood block can be different from the one next door, or even across the street. And these triggers can change from time to time even for the same neighborhood block. Hence, we have had to build hundreds of predictive models that look for various combinations of triggers to find the one that is the most accurate for each neighborhood across the country.”

Back in 1971 — when many MLS brokers carried printed 3×5 cards to show inventory — the playwright Arthur Miller wrote that “too many information handlers seem to measure a man by the number of bits of storage capacity his dossier will occupy.” Now such dossiers are far larger, vast electronic collections which detail our preferences in excruciating detail. Not just a tidbit here and there, but encyclopedic volumes of data ceaselessly gathered with clicks, links, cookies, tracking pixels, surveys, cell phone locators, loyalty programs, credit card purchases, and other collection techniques. Companies, governments, and data brokers are accumulating unheard of volumes of data. Forget about gigabytes, petabytes, and exabytes. We’ve hit zettabytes — a measure equal to one trillion gigabytes. “By 2025 the global datasphere will grow to 163 zettabytes,” says IDC. “That’s ten times the 16.1ZB of data generated in 2016. All this data will unlock unique user experiences and a new world of business opportunities.” While data by itself has some innate value, it becomes exponentially more valuable for predictive analytics when sorted and analyzed with artificial intelligence. “Generally speaking,” explains Alex Villacorta, EVP and chief economist at HouseCanary. “the growth of data across every part of the economy and our personal lives has provided us predictive modelers the ability to better understand how various pieces of a person’s life affect their decision-making. Everything is now on the table, from our social activity to current headline news to the types of products we buy online.” “For a growing number of industries,” says McKinsey & Company, “AI is tilting the playing field – you’ll need to understand how before your competitors do.”

Data is just part of the equation — and a relatively small part at that — when it comes to applying AI principles to predicting future real estate transactions, according to Brad McDaniel Co-Founder and CEO of Likely.AI, Brad McDaniel, Co-Founder and CEO of Likely.AI, a real estate predictive analytics firma company that provides AI-driven leads to the real estate and mortgage industries. “With the most advanced version of AI, called deep learning, which is what we use, only 10% of the final prediction decision is determined by the data itself,” he said. “That is because 90% of the predictive power comes from the extremely complicated interactions between the layers of neurons within the deep neural networks that we have created. We now live in a time where data availability is everywhere, but what you do with it is where the magic happens.”

NAHB supports trump’s workforce development plan; pledges to train 50,000 new workers

Randy Noel, chairman of the National Association of Home Builders (NAHB) and a custom home builder from LaPlace, La., today issued the following statement in support of the White House executive order on workforce development: “NAHB applauds President Trump’s leadership for signing an executive order that will develop a national strategy to expand job-training and apprenticeship opportunities for students and workers and give them the proper tools to succeed in the American workforce. “Given the chronic labor shortages in the home building industry, I am especially pleased to attend this important White House event. NAHB will help do it part to invest in the future workforce by pledging to train 50,000 new workers over the next five years for a career in the construction trades. The Home Builders Institute, our workforce development arm, is a national leader for career training in the home building industry. To honor the administration’s important commitment to America’s workers, we will expand our training, certification and job placement programs for underserved and at-risk youth, transitioning military, veterans, ex-offenders and displaced workers.”

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

–  While low-end rents are still increasing faster than high-end rents, high-end segment rent growth accelerated and low-end segment decelerated in April 2018 compared with April 2017.

–  Metros in the southwest region showed the highest rent increases over the past year.

Single-family rents climbed steadily between 2010 and 2018, as measured by the CoreLogic Single-Family Rental Index (SFRI). However, year-over-year rent price increases have slowed since February 2016, when they peaked at 4.2%, and have stabilized over the last year with a monthly average of 2.7%.  In April 2018, single-family rents increased 2.9% year over year, a 1.3-percentage-point decline in the growth rate since it hit a high of 4.2% in February 2016. The SFRI index measures rent changes among single-family rental homes, including condominiums, using a repeat-rent analysis to measure the same rental properties over time. Using the index to analyze specific price tiers reveals important differences. The index’s overall growth in April 2018 was propped up by the low-end rentals, defined as properties with rents 75% or less of a region’s median rent.

Rents on lower-priced rental homes increased 4.2% year over year and rents in the higher-priced homes, defined as properties with rents more than 125% of the regional median rent, increased 2.7% year over year. However, rent growth is accelerating for the high end and decelerating for the low end. High-end rent growth was 1.1 percentage points higher than in April 2017, and low-end rent growth was 0.2 percentage points lower than April 2017. Rent growth varies significantly across metro areas. The year-over-year change in the rental index for 20 large metro areas in April 2018. Las Vegas had the highest year-over-year rent growth in April with an increase of 5.9%, followed by Phoenix (+5.5%) and Orlando (+5.3%). Both Phoenix and Orlando had strong year-over-year job growth in April, with job gains of 2.8% and 3.2% respectively. This is compared with national employment growth of 1.6%. Honolulu was the only metro among the 20 analyzed to show a decrease in the rent index, declining 0.3% year over year in April. Rents continue to increase in metro areas such as Houston and Miami that were hit by hurricanes last year and left with tighter rental supplies. Houston rents rose 4.1% year over year in April 2018 and Miami rents increased 2.1%. Prior to the 2017 late-summer hurricanes, rents had been decreasing in those two metro areas.

MBA – mortgage applications decrease

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 July 13, 2018. Last week’s results included an adjustment for the Fourth of July holiday. 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 increased 22% compared with the previous week. The Refinance Index increased 2% from the previous week. The seasonally adjusted Purchase Index decreased 5% from one week earlier. The unadjusted Purchase Index increased 19% compared with the previous week and was 1% higher than the same week one year ago. The refinance share of mortgage activity increased to 36.5% of total applications from 34.8% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.1% of total applications. The FHA share of total applications increased to 10.6% from 10.0% the week prior. The VA share of total applications decreased to 10.2% from 11.3% the week prior. The USDA share of total applications decreased to 0.7% from 0.8% the week prior.

NAHB – builder confidence stays at healthy level in July

Builder confidence in the market for newly-built single-family homes remained unchanged at a solid 68 reading in July on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). “Consumer demand for single-family homes is holding strong this summer, buoyed by steady job growth, income gains and low unemployment in many parts of the country,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “Builders are encouraged by growing housing demand, but they continue to be burdened by rising construction material costs,” said NAHB Chief Economist Robert Dietz. “Builders need to manage these cost increases as they strive to provide competitively priced homes, especially as more first-time home buyers enter the housing market.” Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor. The HMI index measuring current sales conditions remained unchanged at 74. Meanwhile, the component gauging expectations in the next six months dropped two points to 73 and the metric charting buyer traffic rose two points to 52. Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 57 while the Midwest remained unchanged at 65. The West and South each fell one point to 75 and 70, respectively.

Oil prices fall on rise in US stocks, demand worries

Oil prices fell on Wednesday after news of a rise in US crude inventories last week, defying analysts’ expectations for a big fall, while concerns about weak demand also resurfaced. Brent crude oil was down 60 cents at $71.56 a barrel by 0750 GMT. The benchmark hit a three-month low on Tuesday. US light crude was down 50 cents at $67.58, not far off Tuesday’s one-month low of $67.03 per barrel. Oil markets have fallen over the last week as Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries and Russia have increased production and as some supply disruptions have eased. Investors have also begun to worry about the impact on global economic growth and energy demand of the escalating trade dispute between the United States and its trading partners, including China. The US oil market has been tight in recent months but data on Tuesday from the American Petroleum Institute (API) showed an unexpected a rise of more than 600,000 barrels in national crude inventories. Analysts had forecast a decline of 3.6 million barrels in US crude stocks for the week through July 13. Official numbers from the US Department of Energy’s Energy Information Administration are due at 10:30 a.m. EDT (1430 GMT) on Wednesday.

CoreLogic – For homebuyers in most of 10 largest US metro areas, the “typical mortgage payment” remains below pre-crisis peak

Of the nation’s 10 largest metro areas all but two have posted median home sale prices this year that are within about 10% of an all-time high – a sign of waning affordability. But in most of those markets the inflation-adjusted, principal-and-interest mortgage payments that homebuyers have committed to this year remain much lower than their pre-crisis peaks. 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 median home sale price (see recent blog on the US typical mtg payment). 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 in order to get a mortgage to buy the median-priced home. Adjusting the historical typical mortgage payments for inflation – meaning they are in 2018 dollars – shows that while the payments have trended higher in all of the top 10 metros in recent years they remained below peak levels this March in all but the Denver and San Francisco areas.

The main reason the typical mortgage payment remains well below record levels in most of the country is that the average mortgage rate back in June 2006, when the US typical mortgage payment peaked, was about 6.7%, compared with an average mortgage rate of about 4.4% in March 2018. Also, the inflation-adjusted US median sale price in June 2006 was $247,110 (or $199,899 in 2006 dollars), compared with $213,400 in March 2018. The March 2018 typical mortgage payments in the Denver and San Francisco regions have risen to record levels because those regions’ prices hit new highs this spring, reflecting strong technology sector job growth that has helped fuel robust housing demand at a time supply has not kept pace. The US typical mortgage payment’s high point in 2006 reflects an abundance of subprime and other risky home financing products back then – products no longer widely available – that allowed homebuyers to stretch to their financial max, creating what some people consider an artificial price peak. An alternative reference point for comparing today’s typical mortgage payments is 2002, before the worst of the risky loans inflated an historic home price bubble. Half of the top 10 metro areas had inflation-adjusted typical mortgage payments in March 2018 that were higher than in March 2002, meaning affordability is worse now.

Google fined record $5B by EU over illegal app practices

The European Commission fined Google $5 billion (4.34 billion euros) for its “illegal practices” of pushing its Android apps on smartphone customers, the governing body said Wednesday. The fine will exceed last year’s then-record 2.4 billion euro penalty following an investigation into Google’s shopping-search service. Despite the eye-popping dollar amount, the fine is less than 1% of the company’s market capitalization which is about $830 billion. Shares rose on Thursday, a sign investors are not concerned at this point. For the year, the stock has gained 15% exceeding the 5% gain of the S&P 500. The commission said the tech giant must end its current conduct within the next 90 days or it will face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, the parent company of Google. It added that market dominance is not illegal under EU antitrust rules, but dominant companies have a “special responsibility” to not abuse their powerful position in the marketplace by restricting competition in markets “where they are dominant or in separate markets.” “Google has used Android as a vehicle to cement the dominance of its search engine,” Commissioner Margrethe Vestager, said in a statement. “These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules.”

Banking analyst predicts next bubble about to burst

The commercial real estate market may be booming, but trouble could be on the horizon for the biggest lenders in the market, according to banking analyst Dick Bove. “Commercial real estate is in a bubble,” Bove said on FOX Business Opens a New Window. ’ “Mornings with Maria Opens a New Window. ” on Tuesday. “I think that you are going to see loan losses coming up in that sector.” The commercial real estate market celebrated its strongest year on record in 2017, according to the Mortgage Bankers Association Opens a New Window. . Mortgage bankers closed a record-high $530 billion in commercial and multifamily property loans. And while 2018 carries much of the momentum forward, economic headwinds could derail loan growth for banks in that market, Bove said. “The fact is that the biggest lenders of the commercial real estate market tend to be the mid-cap banks,” Bove said. “So the net effect is if they are doing extraordinarily well because that sector is doing well, but if that sector pops they are going to get hurt.”

ATTOM – how California housing stacks up split into three states

–  Proposed Northern California State Would Take Highest Share of Property Tax Revenue;

–  Proposed California State Would Absorb Lowest Share of Flood and Wildfire Risk

ATTOM Data Solutions, curator of the nation’s premier property database, today released an analysis showing what the three California housing markets would look like if the state is split into three new states per a proposal that has qualified for the state’s November ballot. For this analysis, ATTOM looked at home values, price appreciation, sales volume and property taxes along with flood risk and wildfire risk for nearly 7.5 million single family homes statewide, broken down by county into the three new proposed states — Northern California (40 counties); Southern California (12 counties); and California (6 counties). Counties comprising the proposed Northern California state took in 41% of the current California’s property tax revenue on single family homes in 2017 while accounting for 38% of homes. Counties comprising the proposed California state took in 27% of the current California’s property tax revenue on single family homes in 2017 while accounting for 25% of the homes. Conversely, counties comprising the proposed Southern California state account for 37% of the current California’s single family homes but took in 32% of the total property tax revenue on those homes in 2017.

Median home prices in the proposed Northern California state are up 120% since the bottom of the market in Q1 2009, while median home prices in the new Southern California are up 106% and median home prices in the new California are up 98% over the same period. The proposed Northern California state is also outperforming when it comes to home price appreciation over the past year — up 9% compared to 8% in the proposed California and 7% in the proposed Southern California — and the last five years — up 64% compared to 59% in the proposed California and 57% in the proposed Southern California. First quarter 2018 home sales in the proposed Southern California state are up 59% compared to 10 years ago, in Q1 2008. That compares to a 52% increase in the proposed California state and a 35% increase in the proposed Northern California over the same period. Single family home sales in the proposed Southern California state also accounted for a disproportionately high share of home sales in Q1 2018 (42%) relative to its share of single family home inventory (37%).

Less than 1% (0.94%) of all single family homes in the proposed California state are in high-risk flood zones compared to 2.26% in the new Southern California and 3.72% in the new Northern California. Additionally, just over 2% (2.02%) of all single family homes in the proposed California state are in high-risk wildfire zones compared to 7.26% in the new Northern California and 9.38% in the new Southern California. “The proposed state of Northern California definitely bears a disproportionate share of real estate related flood risk, which makes sense given the terrain and the waterways present there,” said Clifford A. Lipscomb, vice chairman and co-managing director at Greenfield Advisors, a real estate research firm. “In contrast, the data show that the proposed state of Southern California bears the bulk of the risk when it comes to wildfires. The data suggest that Southern California has almost $30 billion more real estate exposure to wildfire risk than the proposed Northern California. California is in a distant third place for both types of risk in terms of real estate.”

CoreLogic – loan performance insights finds declining mortgage delinquency rates for April as states impacted by 2017 hurricanes continue to recover

–  Early-Stage Delinquencies Drop 0.4 percentage Points Year Over Year in April

–  The Share of Home Loans Transitioning from Current to 30 Days Past Due is the Lowest for the Month of April Since 2000

–  Only Hurricane-Impacted States Are Experiencing Significant Serious Delinquency Rate Increases

CoreLogic released its monthly Loan Performance Insights Report. The report shows that, nationally, 4.2% of mortgages were in some stage of delinquency (30 days or more past due, including those in foreclosure) in April 2018, representing a 0.6 percentage point decline in the overall delinquency rate compared with April 2017, when it was 4.8%. As of April 2018, the foreclosure inventory rate – which measures the share of mortgages in some stage of the foreclosure process – was 0.6%, down 0.1 percentage points from 0.7% in April 2017. Since August 2017, the foreclosure inventory rate has been steady at 0.6%, the lowest level since June 2007, when it was also 0.6%. The April 2018 foreclosure inventory rate was the lowest for that month in 11 years; it was also 0.6% in April 2007. Measuring early-stage delinquency rates is important for analyzing the health of the mortgage market. To monitor mortgage performance comprehensively, CoreLogic examines all stages of delinquency, as well as transition rates, which indicate the percentage of mortgages moving from one stage of delinquency to the next.

The rate for early-stage delinquencies – defined as 30 to 59 days past due – was 1.8% in April 2018, down from 2.2 in April 2017. The share of mortgages that were 60 to 89 days past due in April 2018 was 0.6%, unchanged from April 2017. The serious delinquency rate – defined as 90 days or more past due, including loans in foreclosure – was 1.9% in April 2018, down from 2.0% in April 2017. The April 2018 serious delinquency rate was the lowest for that month since 2007 when it was 1.6%. “Job growth, home-price appreciation, and full-doc underwriting have pushed delinquency and foreclosure rates to the lowest point in more than a decade,” said Dr. Frank Nothaft, chief economist for CoreLogic. “The latest CoreLogic Home Price Index report revealed the annual national home price growth was 7.1% in May, the fastest annual growth in four years. US employers have also continued to employ more individuals, as employment rose by 2.4 million throughout the last 12 months with 213,000 jobs added last month alone. Together, this heightened financial stability is pushing delinquency and foreclosure rates to record lows.” Since early-stage delinquencies can be volatile, CoreLogic also analyzes transition rates. The share of mortgages that transitioned from current to 30 days past due was 0.8% in April 2018, down from 1.2% in April 2017. By comparison, in January 2007, just before the start of the financial crisis, the current- to 30-day transition rate was 1.2%, while it peaked in November 2008 at 2%.

As a result of the 2017 hurricane season, Florida and Texas are the only states showing significant gains in 90-day delinquency rates. According to the CoreLogic Storm Surge Report, Florida has the most densely populated and longest coastal area and thus the most exposure to storm surge flooding (compared to the 19 states analyzed in the report) with more than 2.7 million at-risk homes across five risk categories (Category 1 – Category 5 storms). Louisiana ranks second with more than 817,000 at-risk homes, while Texas ranks third with more than 543,000 at-risk homes. A major storm did not strike Louisiana in 2017, but Florida and Texas are still recovering from Hurricanes Irma and Harvey, respectively. “Delinquency rates are nearing historic lows, except in areas impacted by extreme weather over the past 18 months, reflecting a long period of strict underwriting practices and improved economic conditions,” said Frank Martell, president and CEO of CoreLogic. “Last year’s hurricanes and wildfires continue to affect today’s default rates. The% of loans 90 days or more delinquent or in foreclosure are more than double what they were before last autumn’s hurricanes in Houston, Texas and Naples, Florida. The 90-day-plus delinquent or in-foreclosure rate has also quadrupled in Puerto Rico.”

Stocks slide as US prepares $200B in tariffs on Chinese goods

US stocks fell Wednesday in reaction to the news that the country is pursuing a new set of tariffs that would hit $200 billion in Chinese goods. The Dow Jones Industrial Average fell 219.21 points, or 0.88%, to 24,700.45. The S&P 500 lost 19.82 points, dropping to 2,774.02. The Nasdaq Composite was down 42.59 points at 7,716.61. In a list published late Tuesday, after the markets had closed for the day, the US trade representative said the 10% tariffs would target a variety of products imported from China, including clothing, baseball gloves, bicycles, refrigerators and seafood. “New tariffs have been coming for a while, having been initially hinted at after China first announced retaliatory measures itself,” said Craig Erlam, senior market analyst at Oanda. “The recent announcement was confirmation of this and is a reminder that Trump is not bluffing and a trade war is a very real possibility, which naturally isn’t good for markets.” The additional US tariffs, which will go through a two-month approval process including a public hearing, come after China retaliated in a tit-for-tat trade skirmish last week. Asian markets responded by falling, with China’s Shanghai Composite Index dropping by 1.8%, Hong Kong’s Hang Seng finished the session down 1.3% and Japan’s Nikkei ended the day down 1.2%, snapping a three-day winning streak.

MBA – mortgage applications up

Mortgage applications increased 2.5% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 6, 2018. This week’s results included an adjustment for the Fourth of July holiday. The Market Composite Index, a measure of mortgage loan application volume, increased 2.5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 18% compared with the previous week. The Refinance Index decreased 4% from the previous week to its lowest level since December 2000. The seasonally adjusted Purchase Index increased 7% from one week earlier. The unadjusted Purchase Index decreased 15% compared with the previous week and was 8% higher than the same week one year ago. The refinance share of mortgage activity decreased to its lowest level since August 2008, 34.8% of total applications, from 37.2% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.3% of total applications. The FHA share of total applications decreased to 10.0% from 10.2% the week prior. The VA share of total applications increased to 11.3% from 10.7% the week prior. The USDA share of total applications remained unchanged at 0.8% from the week prior.

Consumer inflation getting hotter but not too hot yet

Consumer price inflation data could temporarily take market focus away from trade worries, particularly if it surprises to the upside like Wednesday’s producer prices. Economists expect Thursday’s CPI data to reveal a 0.2% increase in both headline CPI and core CPI, excluding energy and food, according to Thomson Reuters. “I wouldn’t expect a big reaction to a surprise on the downside,” said Ed Keon, chief investment strategist at QMA. “There’s still enough information showing that inflationary pressures are rising. It’s much more likely to have a negative reaction if there’s an upward surprise. … If it came out up 0.4%, given everything else that’s going on, I think you’d see a negative reaction.” Traders have been watching inflation data closely for any signs of a pickup, especially since wages are not showing much sign of improvement. A much higher pace of inflation could speed up Fed rate hikes. So far, inflation has edged above the Fed’s 2% target but not gone much further. CPI core is expected to show an annual pace of 2.3% in June. Stephen Stanley, chief economist at Amherst Pierpont points out that the Fed’s preferred inflation metric, the core PCE deflator, finally reached the Fed’s 2% target in May, for the first time in six years. He added that the Fed is no longer worried about inflation being too low, just whether it can sustain current levels. “With growth well above trend and the unemployment rate well beyond estimates of full employment, we should not be surprised that there are increasing reports of price pressures including in the trucking industry, where freight costs are said to be exploding. I have long anticipated that inflation would likely continue to accelerate after finally reaching 2%, a scenario that neither the FOMC nor the bond markets seem prepared for,” he wrote. “A 0.2% monthly gain for the CPI in June would likely push the year-over-year advance up to 2.9% for the first time in over six years, and I would not rule out a move to 3.0%,” Stanley wrote in a note. But he adds that he would expect the pace to peak in June or July for 2018. He said June food prices likely increased but gasoline prices were probably steady. Producer price inflation rose 3.4% in June, year over year, its biggest increase in 6½ years.

California ordered to restore $331 million to fund for homeowners

A state appeals court has ordered California Gov. Jerry Brown to restore money to a fund meant to help homeowners who suffered foreclosures. When California received $410 million in 2012 as part of a nationwide settlement with major banks accused of abusive foreclosures, Gov. Jerry Brown used $331 million to pay state agencies in housing and other programs to cover their deficits. Now a state appeals court has ordered the money be used for its original intent: to help homeowners who suffered foreclosures. The money was “unlawfully diverted” from a settlement fund that was designated for programs directly assisting homeowners, the Third District Court of Appeal in Sacramento said Tuesday. A Sacramento County judge had reached the same conclusion but found he lacked authority to order the state to redirect the money, a finding the appeals court rejected. Neil Barofsky, a lawyer for the National Asian American Coalition and other groups that filed the suit, said the court had properly ordered the state to “immediately put the money back into a fund where it can be used to help struggling homeowners,” particularly in poor and minority communities.

H.D. Palmer, spokesman for Brown’s Finance Department, said state officials had not decided whether to ask the California Supreme Court to review the case. He said the debt payments, most of them for housing bonds, had been approved by state lawmakers, and the case raised questions about whether “the Legislature’s appropriations power can be overridden with a court judgment.” The nation’s five largest mortgage servicers — Bank of America, Wells Fargo, Citigroup, JPMorgan Chase and GMAC — reached the settlement in 2012 in a suit by the federal government and every state except Oklahoma. It included more than $20 billion in direct aid to foreclosed homeowners and $2.5 billion to the states, including $410 million to California. Of the $410 million, at least $331 million was designated by then-state Attorney General Kamala Harris for a fund devoted to programs assisting homeowners who were harmed by the wave of foreclosures. The programs included housing counselors, foreclosure assistance hotlines, legal aid, consumer education and efforts to investigate and combat financial fraud. After the fund was established, however, the state’s Finance Department appropriated the money, with legislative approval, to pay off deficits to the state agencies in charge of state housing bonds and other consumer-related measures. State lawyers argued that the payments were consistent with the mortgage settlement and were not subject to judicial review, but the court disagreed. The money “was unlawfully diverted from a special fund in contravention of the purposes for which that special fund was established,” Justice Andrea Hoch said in the 3-0 ruling.

MBA – mortgage credit availability increased in June

Mortgage credit availability increased in June according to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA) which analyzes data from Ellie Mae’s AllRegs® Market Clarity® business information tool. The MCAI increased 0.2% to 181.0 in June. 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 increased (up 5.5%) and the Government MCAI decreased (down 3.9%). Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 9.3% while the Conforming MCAI increased by 1.0%. “Mortgage credit loosened slightly, led mainly by an increase in the jumbo MCAI which represented fierce competition among lenders for prime jumbo borrowers. However, this loosening was almost completely offset by a decline in credit for government loan programs. The Government MCAI has tightened in recent months, driven largely by policy actions to reduce churning in the Veterans Administration’s Interest Rate Reduction Refinance Loan program,” said Mike Fratantoni, MBA’s Chief Economist and Senior Vice President of Research and Industry Technology.

The MCAI increased 0.2% to 181.0 in June. The Conventional MCAI increased (up 5.5%) and the Government MCAI decreased (down 3.9%). Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 9.3% while the Conforming MCAI increased by 1.0%The Conventional, Government, Conforming, and Jumbo MCAIs are constructed using the same methodology as the Total MCAI and are designed to show relative credit risk/availability for their respective index. The primary difference between the total MCAI and the Component Indices are the population of loan programs which they examine. The Government MCAI examines FHA/VA/USDA loan programs, while the Conventional MCAI examines non-government loan programs. The Jumbo and Conforming MCAIs are a subset of the conventional MCAI and do not include FHA, VA, or USDA loan offerings. The Jumbo MCAI examines conventional programs outside conforming loan limits while the Conforming MCAI examines conventional loan programs that fall under conforming loan limits. The Conforming and Jumbo indices have the same “base levels” as the Total MCAI (March 2012=100), while the Conventional and Government indices have adjusted “base levels” in March 2012. MBA calibrated the Conventional and Government indices to better represent where each index might fall in March 2012 (the “base period”) relative to the Total=100 benchmark.

BLACK Knight – May 2018 Mortgage Monitor

–  Despite record-setting tappable equity growth, share of total equity withdrawn hits four-year low In Q1 2018

July 9, 2018 Data & Analytics

–  Tappable equity grew by more than $380 billion in Q1 2018, the largest single-quarter growth since Black Knight began tracking the metric in 2005

–  The $5.8 trillion in total tappable equity held by US homeowners with mortgages is the most ever recorded, and 16% above the mid-2006 peak

–  The average mortgage holder gained $14,700 in tappable equity over the past year and has $113,900 in total

–  Despite the increase in available equity, the amount withdrawn in Q1 2018 fell nearly 7.0% from Q4 2017

–  Just 1.17% of available equity was tapped in Q1 2018, the lowest share since Q1 2014, and the second lowest quarterly share since the beginning of the housing recovery

–  $35 billion withdrawn via home equity lines of credit (HELOCs) in Q1 2018 marked a two-year low, likely driven by the increasing interest rate spread between first-lien mortgages and HELOCs

The Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based on data as of the end of May 2018. This month, the company looks again at tappable equity, or the share of equity available for homeowners with mortgages to borrow against before reaching a maximum total combined loan-to-value (LTV) ratio of 80%. Despite the record-setting growth in such equity seen in the first quarter of 2018, homeowners are withdrawing equity at a lower rate than in the past. As Ben Graboske, executive vice president of Black Knight’s Data & Analytics division explained, although total equity withdrawn by dollar amount has increased slightly since the same time last year, the rate of growth pales in comparison to that of tappable equity. “In Q1 2018, homeowners with mortgages withdrew $63 billion in equity via cash-out refinances or HELOCs,” said Graboske. “That represents a slight one% increase from the same time last year, despite the fact that the amount of equity available for homeowners to borrow against increased by 16% over the same time period. Collectively, American homeowners now have $5.8 trillion in tappable equity available, yet only 1.17% of that total was withdrawn in the first quarter of the year. That’s the lowest quarterly share in four years, and the second lowest since the housing recovery began six years ago. Somewhat surprisingly, even though rising first-lien interest rates normally produce an increase in HELOC lending, the volume of equity withdrawn via lines of credit dropped to a two-year low as well.

“One driving factor in the decline of HELOC equity utilization is likely the increasing spread between first-lien mortgage interest rates – which are tied most closely to 10-year Treasury yields – and those of HELOCs – which are more closely tied to the federal funds rate. As of late last year, the difference between a HELOC rate and a first-lien rate had widened to 1.5%, the widest spread we’ve seen since we began comparing the two rates 10 years ago. The distance between the two has closed somewhat in Q2 as 30-year mortgage rates have been on the rise, which does suggest the market remains ripe for relatively low-risk HELOC lending expansion. Still, increasing costs in the form of higher interest rates do appear to have impacted homeowners’ borrowing decisions in Q1 2018. We should also remember that the Federal Reserve raised its target interest rate again at its June meeting, which will likely further increase the standard interest rate on HELOCs in Q3 2018. Black Knight will continue to monitor the situation moving forward.” The data also showed that tappable equity increased by more than $380 billion in Q1 2018, the largest single-quarter growth since Black Knight began tracking the metric in 2005. On an annual basis, total tappable equity increased $820 billion, a 16.5% increase over the prior 12 months. The $5.8 trillion in total available tappable equity is 16% higher than the peak seen during the pre-recession peak in 2006. Nearly 80% of the nation’s tappable equity is held by homeowners with first-lien interest rates at or below 4.5%, with 60% of the total being held by those with current rates below 4.0%. The average mortgage holder gained $14,700 in tappable equity over the past year and has $113,900 in total available equity to borrow against.

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

–  Total US loan delinquency rate: 3.64%

–  Month-over-month change in delinquency rate: -0.84%

–  Total US foreclosure pre-sale inventory rate: 0.59%

–  Month-over-month change in foreclosure pre-sale inventory rate: -3.30%

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

–  States with lowest percentage of non-current loans: MN, WA, ND, OR, CO

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

Oil prices climb on global demand

Oil prices rose on Monday as increased global demand and US efforts to shut out Iranian output using sanctions outweighed drilling data suggesting US shale production would climb. Benchmark Brent was up 70 cents at $77.81 a barrel by 1150 GMT. US crude was unchanged at $73.80. “Oil prices are starting the week on the front foot in anticipation of reduced supplies from Iran after US sanctions,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates. The United States says it wants to reduce oil exports from Iran, the world’s fifth biggest oil producer, to zero by November, in a move that will oblige other big producers such as Saudi Arabia to pump more. But Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries have little spare capacity and oil demand has risen faster than supply over the last year.

Chicago Targets ‘Zombie Housing’ for Renewal, Block by Block

In 2011, Chicago officials created the Micro Market Recovery Program (MMRP) to jump start individual blocks that had a high rate of vacant buildings due to foreclosures. MMRP sought to transform those abandoned, dilapidated buildings into affordable homes for renters or first-time homebuyers. It would help to re-settle diverse communities and attract businesses. Chicago had already spent about $169.2 million from the Housing and Urban Development’s Neighborhood Stabilization Program (NSP) for areas hit hardest by foreclosures. MMRP would take the next step and include several community groups, such as Local Initiatives Support Corporation Chicago – known as LISC Chicago – to attract investors and families, according to the Chicago Department of Planning and Development. MMRP has reoccupied nearly 1,000 buildings, including about 2,900 units, in Englewood, Auburn Gresham, West Pullman, Woodlawn and other neighborhoods. Also, more than 400 families received help with loans or obtained financial assistance to keep their existing homes. “As long as the demand and the need are there, we will continue,” says David Reifman, commissioner of the Chicago Department of Planning and Development. “Right now, our recovery is steady but not complete.”

From 2011 through December 2018, about $12.8 million will be invested in MMRP, mostly from the city’s budget and grants from various nonprofits. The amount also includes about $3 million from the Illinois attorney general’s office settlement with major banks accused of questionable lending practices related to the foreclosure crisis. “We wanted to focus our limited resources on key areas to bring back whole blocks at a time,” Reifman says. Since then, foreclosure filings decreased by double digits in the MMRP zones from 2011 through 2016. The targeted areas in the north region had a 67.6% reduction. The middle region had a 66.1% decrease, while the south region had a 25.8% decrease. In comparison, foreclosure filings citywide decreased by 69.4% during the same period. Housing prices also increased in the MMRP communities, some as much as 33.1%, according to the Institute for Housing Studies at DePaul University. The improvements are due to MMRP, community involvement, families returning to the area and an improving economy, says Geoff Smith, the institute’s executive director. “Overall, (the city’s) strategy is one that’s important,” Smith says. “It targets small areas and helps the neighborhoods recover. When there are limited resources, you need to concentrate it and then target the areas to have some level of success.” Also, providing an affordable mortgage, financial assistance, grants, and some forgivable loans are part of the equation, community experts say. MMRP aims to transform tough, poor neighborhoods, such as Englewood, where high-end grocer Whole Foods opened about two years ago. And more commercial development is planned, says Jack Swenson, program officer for LISC Chicago, which partners with the city on housing and other projects. LISC Chicago develops a relationship with residents on a targeted block, finds out their needs and concerns, and works on filling vacant lots and acquiring vacant buildings. It’s a process that ultimately leads to a stronger foundation, Swenson says. “Crime is a reality in every neighborhood and we think we sometimes forget how important a community is,” Swenson says. “In many neighborhoods across the city, it’s the people’s commitment to their community that outweigh the obstacles and they still choose to reinvest.” Besides Chicago, NSP has distributed roughly $6.8 billion nationwide over the last 10 years to cities hit hardest by foreclosures, says Brian Sullivan, HUD spokesman in Washington, D.C. “It’s hard to say if the foreclosure crisis is over,” Sullivan says. “They say all housing is local and the foreclosure crisis ended sooner in some areas rather than others. But who says it’s really over?”

Dallas received about $8 million in NSP funds to help the southern area most affected during the foreclosure crisis. Then Dallas officials in 2015 created the Neighborhood Plus Plan, a citywide revitalization program to help troubled neighborhoods. Dallas also has invested about $75.3 million in housing projects since 2009, says Dallas spokesman Corbin Rubinson. The nation’s capital received about $17.4 million in NSP funds for its struggling neighborhoods. Then in December 2017, Washington’s Property Acquisition and Disposition Division created the Vacant to Vibrant DC program to quickly dispose of or sell vacant properties. Washington budgeted about $3 million this year for both programs, says Polly Donaldson, director of the city’s Department of Housing and Community Development. Los Angeles received about $143 million in NSP funds to rebuild neighborhoods. In 2010, the city also adopted a Foreclosure Registry ordinance to further protect neighborhoods from inadequately maintained and abandoned foreclosed properties or face penalties, says Douglas Swoger, director of the asset management division of the Los Angeles Housing + Community Investment Department. What cities spend on such programs also is difficult to compare, because of the wide range of services, the geography involved, the number of vacancies and other factors, says Alan Mallach, senior fellow and researcher for the Center for Community Progress in Washington, D.C. Thousands of cities have neighborhood revitalization programs, which may range from a modest effort to give elderly homeowners grants to fix their homes to a multifaceted strategy. Some notable programs are in Minneapolis and Baltimore, Mallach says. Some neighborhood revitalization work also is done by nonprofit organizations and not by city governments. Some include Youngstown Neighborhood Development Corporation and Cleveland Neighborhood Progress in Ohio, Mallach says. Chicago’s MMRP has made tremendous progress and offers a cross-sector effort between the city, nonprofit community groups, financial institutions and others, says Maurice Jones, president and CEO of LISC, based in New York with 32 offices nationwide. LISC is a MMRP partner with Chicago. “It’s a recipe that produces results and is sustainable,” Jones says.

US Treasury yields edge higher as trade drama lingers

US government debt prices fell into the red at the start of the trading week. The yield on the benchmark 10-year Treasury note was higher at around 2.850% at 5:40 a.m. ET, while the yield on the 30-year Treasury bond was in the black at 2.953%. Bond yields move inversely to prices. Markets have been given a boost following the publication Friday of the latest jobs report, which revealed that the US economy added 213,000 jobs in June, beating expectations. This positive sentiment seen across markets is in spite of concerns surrounding trade and Brexit. The US placed $34 billion of tariffs on Chinese goods on Friday, a move that triggered China to hit back with its own set of duties. And the U.K.’s Brexit Secretary David Davis announced late Sunday that he was resigning from his post, as he wasn’t prepared to be “a reluctant conscript” to Prime Minister Theresa May’s plans to leave the European Union (EU). On Friday, May had reached a Brexit compromise with her cabinet, persuading ministers to back her intention to press for “a free trade area for goods” with the EU. On Monday, Dominic Raab was appointed as the new Brexit Secretary. On Monday, consumer credit data is due out at 3 p.m. ET, while the Treasury will auction $48 billion in 13-week bills and $42 billion in 26-week bills. The size of a four-week bill, set to be auctioned Tuesday, will also be announced.

Has the housing market in Detroit finally recovered?

At this point, most observers are aware of the plight of Detroit in the wake of the crisis. The city’s economy and housing market both went in the tank as the crisis wore on. Eventually, the city itself declared bankruptcy, marking the largest municipal bankruptcy in the history of the country. In the years since the crisis, the city has been on the rebound, with government funds and private capital helping to lead the way. And now, it appears that the city’s housing market is on the precipice of a full recovery. Last week, Amherst Capital released its latest market commentary, the Amherst Home Price Index, which showed that Detroit is now within mere decimal points of a total comeback. “Based on the Amherst Home Price index, we find that Detroit is finally within 1% of its pre-crisis peak,” Amherst noted in its report. “This was on the back of a strong 7.2% year-over-year growth in April 2018 and we fully expect it to reach new record in the next couple of months. When that happens, 13 of the top 20 big cities will have surpassed their pre-crisis peaks.” That’s right. Not only is Detroit right on the doorstep of a full recovery, Motown could soon surpass its pre-crisis peak in the next few months. Detroit’s recovery tracks with what’s going on nationwide, with home prices continuing to rise across the board, although that increase has tracked below other asset classes. From Amherst’s report: “US housing market grew at a solid 5.3% Y-o-Y in April 2018 according to Amherst Home Price Index. Overall, US single-family price growth has significantly lagged the post-crisis recoveries witnessed in equities and commercial real estate. The pace of new single-family housing construction remains anemic by historical norms even as we expect greater demand from more millennials entering family formation ages in the coming years. Amherst remains optimistic on the US home price growth for the foreseeable future. We expect National home prices to continue their solid growth, with an HPA forecast of 4.3% next year.”