Collingwood News Update: How to Move #Home Sales Out of the Basement
Sales of previously owned homes fell for a second month in August as inventory of homes for sale continued to shrink.
Existing-home sales declined 0.9% to a seasonally adjusted annual rate of 5.33 million, the National Association of Realtors said. That was only 0.8% higher than a year ago, although year to date figures are 3% higher.
“We’ve had a ‘job filled non recovery’ where hiring has recovered and unemployment has dropped – yet we haven’t seen a meaningful change in GDP largely because productivity has cratered and income growth has stalled,” says The Collingwood Group Chairman Tim Rood. “A similar story has unfolded with the housing recovery. Much of the rally in home values can be attributed to and is a mirror reflection of the steep decline in value during the housing crisis. And while low interest rates and high rents have fueled a housing rebound – the housing market has not had much of an impact on GDP because of the anemic new home construction numbers. Housing appears to have plateaued. Weak fundamentals (income growth, consumer confidence, median price to income, etc) cannot be cured just by low interest rates.”
At the current pace of sales, it would take 4.6 months to exhaust all inventory, lower than the six months that’s traditionally been the marker of a balanced market. Inventory was lower compared to a year ago for the 15th straight month in August.
As inventory tightened, it pressured prices higher. The median sales price was $240,000, which is 5.1% higher than in August 2015.
First-time homebuyers comprised 31% of the market in August. First-timers represent fresh demand in the market, but they’ve struggled to gain a foothold as prices remain high, credit stays tight, and investors crowd in.
An informal Collingwood Group Study find finds three primary groups at play in the housing market each with unique problems:
- make up 1/3 of the population
- struggling under massive amount of student loan debt
- dealing with a tough labor market
- paying rents that are inflated, which makes saving for down payment nearly impossible
- tightness of mortgage credit weighing on this group that has huge debt from college
- have been financially hobbled by the tech bubble and burst followed by the housing market collapse.
- lost 45% of their networth in the hosuing crisis
- hold 40% of the $1T of student loan debt
- high credit card debt
- need move buyers to buy their house (if the had enough equity to sell
- estimated 43% of baby boomers do not have the financial resources to support themselves after retirement
- $14,500 is median retirement-account balance among these households
- had expected to have about $45,000 in annual retirement income, but have only saved enough to provide about $9,100 a year,
- 2/3 still report feeling the effects of the financial crisis
- Aging in place (not selling their homes and downsizing)
What Clinton/Trump Need to do to Fix Housing
The Collingwood Group Chairman Tim Rood with his take on what Clinton and Trump need to do to fix housing, on Fox Business Network’s Cavuto: https://www.youtube.com/watch?v=znVK4JpdhCE
#Mortgage Rates Drop
Freddie Mac reports mortgage rates ticking down slightly from last week’s post-Brexit high.
- 30-year fixed-rate mortgage (FRM) averaged 3.48 percent with an average 0.6 point for the week ending September 22, 2016, down from last week when it averaged 3.50 percent. A year ago at this time, the 30-year FRM averaged 3.86 percent.
- 15-year FRM this week averaged 2.76 percent with an average 0.5 point, down from last week when it averaged 2.77 percent. A year ago at this time, the 15-year FRM averaged 3.08 percent.
- 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.80 percent this week with an average 0.5 point, down from last week when it averaged 2.82 percent. A year ago, the 5-year ARM averaged 2.91 percent.
“The 10-year Treasury yield declined after last week’s post-Brexit high in anticipation of the Fed’s September policy meeting,” says Sean Becketti, chief economist, Freddie Mac. “The 30-year fixed-rate mortgage followed Treasury yields, falling 2 basis points and settling at 3.48 percent. Despite the decrease in rates, the Refinance Index plunged 8 percent to its lowest level since June.”
Mortgage Prepayments Skyrocket
Black Knight Financial reports Mortgage prepayment skyrocket last month fueled by post-‘Brexit’ activity, hitting their highest single-month rate in over three years.
Black Knight also reports:
- Monthly prepayment rate (historically a good indicator of refinance activity) increased by 32 percent month-over-month
- August’s prepayment rate of 1.67 percent is the highest Single Month Mortality (SMM) rate in over three years
- Delinquencies fully recovered from July’s spike, falling 6 percent (-135,000) from one month ago
- Inventory of loans in foreclosure has now declined for 19 consecutive months and in 51 of the past 52 months
Good luck finding a house in the suburbs
New York City’s housing scarcity is sprawling out into the suburbs. The number of homes for sale in the New York metropolitan area fell by 7.7 percent in the third quarter from a year ago, according to a new report by listing site Trulia.
The supply crunch hit starter homes the hardest, with the number of units on the market falling by 12.9 percent. Starter homes are defined as the bottom third of the market. Meanwhile, the premium home inventory fell by a mere 4.5 percent.
The good news for prospective buyers is that the median price of a starter home actually fell by 0.5 percent, to $209,983. The median price of tradeup homes (the middle third of the market) rose by 3.2 percent and the median price of premium homes rose by 13.1 percent.
The inventory crunch is part of a national trend, with the number of homes for sale falling for the fifth consecutive quarter. Trulia notes that this is “the longest streak of inventory decline since the housing market bottom in 2012.” Country wide, housing inventory fell by 6.7 percent while starter home inventory fell by 10.7 percent.
Jobless Claims Drop to Two-Month Low as Labor Market Firms
The number of Americans filing for unemployment benefits unexpectedly fell last week to a two-month low, pointing to labor market strength that could pave the way for the Federal Reserve to raise interest rates by December.
The upbeat initial jobless claims data came a day after the U.S. central bank left interest rates unchanged but strongly signaled it could raise borrowing costs by the end of the year, citing a recent pickup in economic growth and continued progress in the labor market.
Initial claims for state unemployment benefits declined 8,000 to a seasonally adjusted 252,000 for the week ended Sept. 17, the Labor Department said on Thursday, the lowest level since mid-July. Claims for the prior week were unrevised.
It was the 81st consecutive week that claims remained below the 300,000 threshold, which is associated with robust labor market conditions. That is the longest stretch since 1970, when the labor market was much smaller.
read more: http://www.reuters.com
SelfDriving Cars will Change Your Business
As it firms up plans to upend the auto industry, Apple Inc. is looking toward British carmaker McLaren and San Francisco-based startup Lit Motors for help.
Both would give Apple some of the know-how needed to compete head to head against or forge a meaningful partnership with automakers. Yet the two companies exist on opposite ends of the spectrum: McLaren designs million-dollar race cars that mostly run on gas for its affluent customer base, while Lit Motors is developing an electric vehicle that looks like a mashup of a Smart Car and a motorcycle.
McLaren is known for its expensive cars, design aesthetic and focus on customer service. None of those features would immediately benefit Apple’s work on a car. The Cupertino, California-based company already has hundreds of car engineers in a special projects group called Project Titan and its Jony Ive-led industrial design team has a former Lamborghini designer on staff. What McLaren would bring to a partnership is a top brand name, high-end buyers and a research-and-development strategy.
“McLaren has experience dealing with high-end customers, customers who discriminate between good and really good,” said Anil Doradla, an analyst at William Blair & Co. “In that context, I believe they will be very supportive of an Apple experience in the car.”
Apple is exploring a strategic investment in the British carmaker, people familiar with the matter said. Even so, the company denied any current discussions.
Apple also is in active talks to acquire Lit Motors, another person familiar with the matter said. Through its work on a small vehicle known as the C-1, the startup would provide the expertise to develop the components for an electric car or a platform for other automakers.
>When the Media Needs and EXPERT it Turns to Collingwood Group, Shouldn’t You<
Transition for Hillary Clinton, Donald Trump is Key
Collingwood Group Vice Chairman, Brian Montgomery, who was on the transition team of Mitt Romney and George Bush, with his take on why a well planned transition for Hillary Clinton and Donald Trump is key in appearance on the nationwide Jim Bohannon Radio show:
#Regulation Nation – How #Mortgage Servicers Can Prosper
The combination of a changing business climate, regulations and federal oversight does not mean that (mortgage) servicers can’t enhance their business portfolio, and the Servicing Lab in at the 2016 Five Star Conference and Expo provided tools to create effective servicing strategies and at the same time comply with the changing regulatory landscape.
Topics at the lab included an update on Fannie Mae Servicing from Malloy Evans, VP, Single-Family Servicing and MHA, Fannie Mae; issues in loss mitigation; a consumer credit trends market update from Joanne Gaskin, Senior Director, Scores and Analytics, FICO; compliance concerns; and a presentation on doing business in D.C. from Tim Rood, Chairman, The Collingwood Group.
…On the topic of avoiding regulatory scrutiny, Collingwood Group’s Rood said, “Story matters, and servicers have to understand their audience in Washington. Success is possible, but it takes almost a metaphysical change in their view of patience. They’ve got to work together. The industry itself needs to come together and decide on some compelling storyline that they can all agree to that has their mutual self-interests clearly identified. Get a clear, compelling story, stick with it, make some allies in the industry, and stop thinking that you are or that you can stay off the radar.”
Five Star White Paper Has State of the Market Covered
The mortgage servicing industry is worlds away from where it was six years ago at the peak of the housing crisis, and many housing metrics have returned to their pre-crisis levels of “normal” activity—which has led many to question what will become of default servicing.
The Five Star Institute discusses the current state of the mortgage servicing industry in the context of delinquencies, defaults, and the homeownership rate in a new white paper, “U.S. Residential Mortgage Default Performance Update & Market Analysis.”
Industry experts such as Moody’s Analytics Chief Economist Mark Zandi, Trulia Chief Economist Ralph McLaughlin, Urban Institute Housing Finance Policy Center Co-Director Laurie Goodman, Collingwood Group Managing Director Tom Booker, Five Star President and CEO Ed Delgado, and Ten-X Chief Marketing Officer Rick Sharga discussed where default numbers are now compared to where they were, and also where they are headed.
Will Trump’s Economic Advisers Help Housing?
“Relative to housing, I hope this impressive group of economic advisers highlight for Mr. Trump the tight credit market and its negative impact on the ability of middle class families to buy a home in particular minority homebuyers,” said The Collingwood Group Vice Chairman Brian Montgomery, former Assistant Secretary of HUD and FHA Commissioner. “I would also add to the list soaring apartment rental rates especially in urban markets making it nearly impossible for lower income families to live there, a regulatory environment that has driven the cost to originate a mortgage loan to record high levels, and finally how to begin extracting the full faith and credit of the US government from a $6 trillion housing market and bring back private capital.”
Have a prosperous day ahead, and a great weekend. Stay cool!