#Home Prices Through the Roof Posting Biggest Gain in 14 Months

Posted on in Economy, FHA, Government, GSE, Housing, Industry, Mortgages, TV Appearances
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December 16, 2016
TGIF, and to our readers in the Northeast and Midwest bundle up…it’s cold out there.  >By the way there are only 8 days until Christmas!

#Home Prices Through the Roof Posting Biggest Gain in 14 Months

Home prices rose 7.7 percent in November, the largest year-over-year increase in 14 months, according to Redfin.  Meantime, Home sales rebounded after a tepid October, growing 20.1 percent, the biggest annual gain since July 2015.

The Collingwood Group Chairman Tim Rood says, “Home price appreciation continues to benefit from historically low inventory of new and existing homes. However, the median sales price for a new home is still over $300,000 which goes to show you that we still have a problem meeting demand for entry-level homes.”

 “Last year we saw a temporary slump in November sales as new mortgage industry regulations went into effect and delayed some closings,” said Redfin chief economist Nela Richardson. “Now, those regulatory hurdles have largely been resolved but the market is by no means back to normal.  The Federal Reserve’s decision to raise rates is unlikely to significantly dampen homebuyer enthusiasm as we enter 2017. We’re still expecting another year of rising prices and modestly growing home sales.”

Collingwood’s Rood adds, “Relatively strong income growth is offsetting the rise in interest rates to a large extent, keeping housing affordability near all time highs despite continued home price appreciation.”

Redfin says the number of homes for sale continued a 14-month trend of declines, down 9.7 percent from last November. This was the biggest drop in inventory since July 2014. As inventory dwindled, the overall pace of the market increased. The typical home sold in 50 days – six days faster than a year ago – making last month the fastest November housing market on record since Redfin began tracking this data in 2009. A quarter of homes went under contract within two weeks, and one-fifth of homes sold for more than their asking price last month.

Seattle, WA was the fastest market, with the typical home under contract in 15 days, down from 18 days a year earlier. Oakland, CA and Denver, CO were the next fastest markets, each with 19 median days on market. Boston, MA and Portland, OR rounded out the top five fastest markets, with the typical homes selling there in 20 and 23 days respectively.

HomeBuilders’ Confidence Surges to 11 Year High

Confidence among homebuilders surged in December to an 11-year high on prospects the election of Donald Trump will translate into a smaller regulatory burden on the industry, according to data Thursday from the National Association of Home Builders/Wells Fargo.

The post-election bounce in sentiment among builders is consistent with other data showing American industries are optimistic Trump will make it easier for companies to do business. While homebuilders in all four U.S. regions were more upbeat, the backdrop for the industry includes rising mortgage rates and shortages of available lots and skilled workers.

“Though this significant increase in builder confidence could be considered an outlier, the fact remains that the economic fundamentals continue to look good for housing,” NAHB Chief Economist Robert Dietz said in a statement. “The rise in the HMI is consistent with recent gains for the stock market and consumer confidence. At the same time, builders remain sensitive to rising mortgage rates and continue to deal with shortages of lots and labor.”

Mortgage Rates Higher, Even Before the Fed

Freddie Mac reports mortgage rates moving higher for the seventh consecutive week, even before the Fed’s rate hike.

  • 30-year fixed-rate mortgage (FRM) averaged 4.16 percent with an average 0.5 point for the week ending December 15, 2016, up from last week when it averaged 4.13 percent. A year ago at this time, the 30-year FRM averaged 3.97 percent.
  • 15-year FRM this week averaged 3.37 percent with an average 0.5 point, up from last week when it averaged 3.36 percent. A year ago at this time, the 15-year FRM averaged 3.22 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.19 percent this week with an average 0.4 point, up from last week when it averaged 3.17 percent. A year ago, the 5-year ARM averaged 3.03 percent.

“As was almost-universally expected, the FOMC closed the year with its one-and-only rate hike of 2016,” says Sean Becketti, chief economist, Freddie Mac. “The consensus of the committee points to more rate hikes in 2017. However, the experience of this year combined with the policy uncertainty that accompanies a new Administration suggests a wait-and-see outlook.”

Housing Squeeze Tightening on First-Time Buyers

It’s becoming harder to get started on the American Dream of homeownership.

Some eight years after its worst collapse since the Great Depression, the housing market has recovered in much of the country, with prices approaching peak levels set a decade ago.

But the supply of affordable houses available for first-time buyers remains tight, leaving many on the sidelines.

That shortage is worsening, according to real estate site Trulia.

Researchers there say the number of affordable homes on the market for the average first-time homebuyers this year took its biggest year-over-year drop in three years, falling 12.1 percent. The good news for younger home shoppers is that wages have begun rising after a long, flat spell following the Great Recession.

Though incomes are up, home prices have been rising even faster in many cities. That’s pricing out more households looking to get started as homeowners.

To afford the median-priced starter home, first-time buyers, on average, now have to pay some 39 percent of their monthly income — up 2 percent in three years. But mortgage lenders have held the line on strict credit and income standards when they approve a mortgage. As a result, there’s a squeeze on the supply of starter homes.

Households moving up to a larger home have it a lot easier, Trulia found. A buyer of a so-called “trade-up” home needs just 25.5 percent of their monthly income. Buyers at the upper end need just 14 percent of monthly income to afford a premium home, according to Trulia’s data.

read more: http://www.cnbc.com/2016/12/14/how-a-housing-squeeze-is-tightening-on-first-time-buyers.html

Higher Rents Push Up Inflation

Consumer prices moderated in November, but the underlying trend continued to point to firming inflation pressures amid rising rents, which could support more interest rate increases from the Federal Reserve next year.

The Labor Department said its Consumer Price Index rose 0.2 percent last month as gasoline price increases slowed and food costs remained soft. The CPI advanced 0.4 percent in October.

In the 12 months through November, the CPI increased 1.7 percent, the biggest year-on-year gain since October 2014. The CPI rose 1.6 percent in the year to October.

Economists polled by Reuters had forecast the CPI rising 0.2 percent last month and climbing to 1.7 percent from a year ago.

The so-called core CPI, which strips out food and energy costs, rose 0.2 percent last month after edging up 0.1 percent in October. Rents accounted for most of the increase in the core CPI last month. Despite the increase, the year-on-year increase in the core CPI was unchanged at 2.1 percent.

The Trump Transition

Inside Word From @realDonaldTrump Economic Team Meeting

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Collingwood Group Chairman Tim Rood met in New York with President Trump and his economic team including Treausry Secretary-designate Steven Mnuchin and Chief of Staff Reince Preibus.  Rood came away from the meeting impressed that the team wants to cut through red-tape and regulation to help fix housing and mortgage industry problems.  There was also talk of the future for Fannie Mae and Freddie Mac, public housing and more.

Many important business leaders were also in attendance  including that “My Pillow” guy.

 >CLICK HERE:   Collingwood’s Rood explained this and more in an appearance on CNBC Power Lunch 

It’s Time for an Office of National Housing Policy

by Collingwood Vice Chairman Brian Montgomery, former FHA Commissioner 

B.Montgomery_-_Head_Shot.jpgOn Jan. 20, 2017, four military aides will accompany the sitting president and vice president (and their successors) on a one-way motorcade to the U.S. Capitol. After the Oath of Office has been administered, a seamless handover of military power will occur, and the combined military command will report to President Donald Trump. Americans can be comforted by the near-perfect transfer of the commander-in-chief role from the outgoing, to the incoming president.

To the detriment of the nation’s homebuyers, no such unified and detailed plan involving our nation’s housing finance system currently exists. The Executive Office of the President should create a new office, aptly named the Office of National Housing Policy, to be tasked with developing a unified and collaborative approach to our nation’s housing policy, including homeownership and subsidized rental housing.

The prevailing view within the mortgage industry is there is little collaboration within the federal government in relation to housing policy and rules promulgation.

Despite the government controlling 90% of the residential mortgage market (and almost the entire subsidized rental market), the next president will inherit a tangled web of agencies that provide market liquidity, offer mortgage insurance and ensure regulatory oversight.

Roles and responsibilities of the current, disparate housing-related agencies are distinct and exist in silo-based structures. No unified command in our housing sector exists; to the contrary, one portion of the government heaps new rules onto the lending community, while others wait in the wings ready to pounce and prove their enforcement prowess.

To address competitive overlap amongst government entities this country could use a Housing Policy Czar — a person (and office) charged with developing, disseminating and enforcing a coordinated, collaborative housing policy and finance strategy that considers the capabilities and strengths of each independent agency.

The creation of policy experts known as “czars” with a singular focus began as far back as the Woodrow Wilson administration, but was greatly expanded during World War II under President Franklin D. Roosevelt (and subsequent presidents).

The ever-expanding regulatory burden has resulted in notable market contraction — with fewer small, community-based banks and fewer borrowers served — a predictable outcome. The government’s fragmented approach to regulatory reform and consumer protection in the aftermath of the housing crisis has today resulted in homebuyers with higher credit scores, who have higher income and are disproportionately white.

Rather than a well-synchronized plan for active warfare, the mortgage market battle plan offers a variety of competing, overlapping entities. Perhaps developing a well-coordinated “plan of attack” could start with the obvious intersection between the Federal Housing Administration and the government-sponsored enterprises.

At some level, the GSEs and FHA compete for the same customers with the ultimate risk either borne through Ginnie Mae, Fannie Mae or Freddie Mac, and at some level the private mortgage insurers. Yet, alignment of the capital standards, which would appropriately establish more appropriate pricing levels for the distinct entities to best serve their target consumer markets, doesn’t occur.

Of primary concern is to determine the future role of the GSEs since conservatorship is not a permanent state. Of equal importance would be a review of the impact of regulatory compliance on mortgage lenders which has pushed the cost of originating a mortgage loan in 2015 to $7,046 (up from $4,500 in 2008).

Of equal concern is the use of the False Claim Act by the Justice Department to punish FHA lenders for what were often administrative errors. The overreach of the FCA by the Department of Justice has driven FHA’s top producing lenders such as JPMorgan Chase, Bank of America and Citi Mortgage largely out of the nation’s flagship home buying program.

A prudent reassessment of Dodd-Frank, the future of the GSEs, fair housing, increasing homeownership rates and addressing rental housing demand all warrant a comprehensive strategy and definitive performance metrics. An independent ombudsman-type approach to housing policy, specifically denationalizing housing finance and promoting risk-sharing with the private sector, is needed and long overdue.

The objective of this approach would be to monitor systemic risk, reduce uncertainty, end competitive overlap and eliminate the duplication of efforts among agencies. The existing disjointed structure is antiquated and has not worked well.

Carson Conundrum

Reaction flooding in to President Elect Donald Trump’s choice, tapping Ben Carson as his nominee for Housing Secretary.

Collingwood Group Chairman Tim Rood on Fox Business’s Cavuto said, “Dr Carson is an intelligent, impassioned, and empathetic individual.”

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As for his lack of experience in the housing arena that may be a positive, Collingwood’s Rood says, “Sometimes the very best policy makers are those who listen; and sometimes, good leaders who are not steeped in the subject matter are better listeners than those who believe they have all the answers.”

>Click Here for Collingwood Chairman Tim Rood’s full interview on FBN’s Cavuto

B.Montgomery_-_Head_Shot.jpgCollingwood Group Deputy Chairman Brian Montgomery tells Westwood One’s First Light radio show, “There is little doubt President-elect Trump greatly admires and respects Dr. Ben Carson and felt strongly about him joining his Cabinet.

Having spent almost eight years in the Executive Office of the President, I speak from experience in saying a Cabinet Secretary who has the ear of the President is a positive for that agency and individual.  In this instance, I think Dr. Carson will be able to “elevate” the issue of Housing within the Trump Administration.  The fact Dr. Carson is a household name I believe will provide him a larger platform to articulate his vision for how best to help tackle any number of issues within the housing arena: shortage of affordable rental housing, the impact of new regulations which have constricted the mortgage market, and the growing senior population and how best to address their housing need.,”

sharga tv.jpg“Dr. Carson’s nomination is an indication of the tremendous respect that President-Elect Trump has developed for his former rival,” says Ten-X EVP Rick Sharga.Sharga adds “Dr. Carson has spoken out in the past about the need to revitalize many of the country’s urban areas, so it wouldn’t be a surprise if he focuses on doing that, and trying to find solutions to the growing problem of affordable housing. Since Dr. Carson has also discussed the unintended consequences of over-reaching government regulations, it’s possible we may also see some streamlining, or regulatory relief as well.”

By the way, Fannies’ stock price ended the day down 5 percent, Freddie’s is down 6 percent, and both were going even lower in after-hours trading

-“The Trump Effect” on Housing, The Collingwood Group Chairman Tim Rood on Fox Business’s Cavuto: https://www.youtube.com/watchtim chicago.jpg?v=TqPcoYyJuo

-Rood on the National Business Report  >CLICK HERE TO WATCH: https://youtu.be/nxQu7fxkyOg-Collingwood Group’ Chairm

-Collingwood’s Rood on Business First AM >CLICK HERE TO WATCH: https://youtu.be/6OKQyEQ-bpo

-Rood with the trifecta, a third television interview from the Chicago Board of Trade >CLICK HERE: https://www.youtube.com/watch?v=vU0MXC8vRRo

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Have a productive day, and a grerat weekend!


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