#Housing Outlook Brightens for this Year Despite Higher #Mortgages

Posted on in Economy, FHA, Government, GSE, Housing, Industry, Mortgages, TV Appearances
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THE COLLINGWOOD GROUP NEWS BRIEFING

Everything YOU need to know to stay ahead of your competitors
Janualy 3, 2017
Happy New (Work) Year

Welcome back to the office, happy New (Work) Year from The Collingwood Group.  Here are some of the stories you may have missed, and a look at what’s ahead on this day that Congress gets back to work, with just about two weeks to go before Donald Trump takes over at the White House:

#Housing Outlook Brightens this Year Despite Higher Rates

The housing market is expected to pick up moderately this year on steady job and income growth and an easing supply crunch, but rising mortgage rates are likely to temper the gains, economists say.

The “X” factor is President-elect Donald Trump. Some of his proposed policies could juice home sales and starts more than anticipated while others may constrain the market.

“We think 2017 is going to be another solid year” for housing, says Ralph McLaughlin, chief economist of real estate research firm Trulia. “But homebuyers will continue to face headwinds.”

Existing home sales are projected to increase 2% to a post-recession high of about 5.5 million in 2017, says Lawrence Yun, chief economist of the National Association of Realtors. But that’s less than this year’s 3.3% gain and below the 5.75 million considered normal in light of population growth.

Among the chief stumbling blocks is the rise in mortgage rates. Since late October, the average 30-year rate has climbed from 3.47% to 4.32%, boosting the monthly payment on a $200,000 mortgage by $97. Yun estimates the rate will increase to about 4.6% by the end of 2017, adding an another $34 to that monthly mortgage check.

Rates are rising in anticipation of higher inflation under Trump’s fiscal stimulus plan and faster interest rate hikes by the Federal Reserve.

McLaughlin notes that with rents soaring in recent years, owning a home is still a far better deal than renting in most of the country. But as mortgage rates edge higher, Yun says some low- and moderate-income buyers will no longer qualify for a loan.

“People at the margins (will be) priced out,” he says. He estimates the increase in rates over the next year will mean 400,000 fewer home sales than if borrowing costs were flat.

Kendall Walker, a real estate agent at Redfin in Northern Virginia, says she hasn’t yet seen customers ditch their house hunts because of higher rates. But she adds, “We’ve had some buyers come down in price” to offset the bigger mortgage burden, reducing the size of their dream homes by as much as 30%.

Fortunately, Yun says, steady job and pay gains will result in an overall pickup in home sales in 2017. Many economists expect current average annual earnings growth of 2.5% to approach 3% by the end of next year as the low, 4.6% unemployment rate forces employers to bid up for workers.

Employers added solid 178,000 jobs in Nov.

Another positive development is the prospect of somewhat more ample supplies. There was a four-month inventory of homes nationally in November, according to the Realtors group, well below a healthy six-month stockpile. That has crimped sales and pushed up prices, which have risen 5% to 6% the past couple of years.

One reason for the meager inventory: the housing crash left many homeowners owing more on their mortgages than their homes were worth. Some have hesitated to unload their units until they realize bigger equity gains, McLaughlin says. Also, many investors snapped up cheap homes during the crisis and rented them out, leaving fewer on the market.

But as a result of rising prices, the share of homeowners who are “seriously underwater” fell to 10.8% in the third quarter from 29% in 2012, according to ATTOM Data Solutions and RealtyTrac. Higher home values also have prodded more investors to sell their units, a trend McLaughlin expects to continue.

read more: http://www.usatoday.com/story/money/2017/01/01/housing-outlook-brightens-despite-higher-rates/95953932/

Red/Blue State Divide Stretches from Politics to Housing

Home prices are on the rise in big cities but in the rest of the country, where Donald Trump scored big, those prices are flat. Collingwood Chairman, Tim Rood dissected the reasons on Fox Business Network.

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https://www.youtube.com/watch?v=zHjDMOpUUMA&feature=youtu.be&utm_campaign=Weekly+Washington+Updates&utm_source=hs_email&utm_medium=email&utm_content=39910526&_hsenc=p2ANqtz–jHlDGH11WlrRDjuxbIEX0BFccjKoniOwVsWcfxw9bx0iT1mtMi-3YOsMWRmaPrNT4fKt5i388R_OmnTf8n3gFg5xvSkvM0P0MnvNfGEJCifsG-TI&_hsmi=39935976

Rent’s Too Damn High, But….

Landlords of upscale properties across the U.S. are bracing for rough conditions in 2017 that will likely force them to slash rents and offer deep concessions as a glut of supply brings a seven-year luxury-apartment boom to an end.

The turnaround follows a more-than-26% jump in U.S. apartment rents since early 2010, far outstripping inflation and income growth. But in 2016, rents rose a modest 3.8%, a significant drop from the recent high of 5.6% year-to-year growth in the third quarter of 2015, according to a report to be released Tuesday by MPF Research, a division of RealPage Inc. that tracks the U.S. apartment market.

Developers in New York are already offering up to three months of free rent on some projects. In Los Angeles, some landlords are offering six months of free parking, and some in Houston are waiving security deposits. Meanwhile, MPF Vice President Jay Parsons said he expects little or no rent growth in urban rental markets this year.

“This will be a very challenged leasing environment almost everywhere,” Mr. Parsons said.

The slowdown, he said, is being driven not by a pullback in demand but rather a flood of new apartments. Demand for urban properties jumped after the housing bust as young, high-earning professionals eschewed homeownership and flocked to big cities. Developers responded by focusing most of their efforts on high-end properties.

Now, though, the number of upscale apartments coming onto the market appear to be outpacing the number of renters able to move into them: More than 50,000 new units were rented by tenants in the fourth quarter in the U.S., six times the number in the year-earlier period. But that demand was overwhelmed by the 88,000 new units that were completed in the quarter, the most since the mid-1980s, according to MPF.

That gap looks set to widen in 2017. More than 378,000 new apartments are expected to be completed across the country this year, almost 35% more than the 20-year average, according to real estate tracker Axiometrics Inc.

http://www.wsj.com/articles/luxury-apartment-boom-looks-set-to-fizzle-in-2017-1483358401

The Middle Class Can’t Afford to Live in Cities Anymore

In the center of Boston rises the small neighborhood of Fort Hill, on top of which sits Highland Park, designed in the 1800s by Frederick Olmsted.1 Patriots stored gunpowder here during the Revolutionary War, and a tower fit for Repunzel commemorates their efforts. The abolitionist writer William Lloyd Garrison fought against slavery from a house on this hill. And now the battle for urban housing affordability rages on these streets. It’s a microcosm of the battle playing out on a neighborhood level in every growing city in America: a battle between those who want to keep property values high, and those who want the chance to live in the cities that have the best economic prospects.

If cities want to retain a middle class, experts say, they will have to make it happen on their own.

The casualties in this war are mostly the middle class. In 2016, rents continued their years-long rise, incomes stratified further, and the average price to buy a home in major US cities rose. The strain pushed the middle class out of cities like Boston, San Francisco, Los Angeles, New York, Austin—the so-called “hot cities.” Some families move to the suburbs. Others flee for less expensive cities. But across the US, the trend holds: cities are increasingly home to high-rollers who can pay the high rents or down payments and lower income people who qualify for subsidized housing.

Macroeconomists say this a good problem to have. These cities are growing. People want to live in them. Stagnating economies in the Rust Belt might envy this kind of trouble. From the perspective of the overall wealth of cities, the middle class being pushed out doesn’t matter. But it matters on the human level, the neighborhood level. In Fort Hill, it means that a teacher at the local elementary school cannot afford to live in the neighborhood where she works. The effects on inequality, mobility, and the demographic composition of cities are very real, their causes multifold, and the solutions difficult.

The savings that used to be associated with the middle class has dried up in the past few years, as interest rates stayed low and wage growth stagnated. Not only does this make it harder for people to stay in the middle class, but it makes coming up with high sums to rent or buy city apartments impossible.

read more: https://www.wired.com/2016/12/year-housing-middle-class-cant-afford-live-cities-anymore/

House Flipping Makes a Comeback as Home Prices Rise

House flipping, a potent symbol of the real-estate market’s excess in the run-up to the financial crisis, is once again becoming hot, fueled by a combination of skyrocketing home prices, venture-backed startups and Wall Street cash.

After nearly being felled by real-estate forays almost a decade ago, a number of banks are now arranging financing vehicles for house flippers, who aim to make a profit by buying and selling homes in a matter of months. The sector is small—participants say roughly several hundred million dollars in financing deals have been made in recent months—but is expected to keep growing.

In recent months, big banks, including Wells Fargo & Co., Goldman Sachs Group Inc. and J.P. Morgan Chase & Co. have started extending credit lines to companies that specialize in lending to home flippers. Earlier this month, J.P. Morgan agreed to lend an estimated $60 million to 5 Arch Funding, an Irvine, Calif., company that offers financing to flippers, according to people familiar with the deal.

“The floodgates have opened,” says Eduardo Axtle, a 35-year-old former telecom entrepreneur in Oakland, Calif., who has taken out about 50 home loans over the past five years. These days, he is bombarded by unsolicited emails from brokers offering him access to financing.

The number of investors who flipped a house in the first nine months of 2016 reached the highest level since 2007. About a third of the deals in the third quarter were financed with debt, a percentage not seen in eight years.

Trying to win business, big banks in the past few weeks have flown executives to Southern California—where much of the house-flipping activity is occurring—to organize funding deals, say people familiar with the meetings.

Investors are making an average profit of about $61,000 on each flip, up from about $19,000 at the bottom of the market in 2009, according to housing-research firm ATTOM Data Solutions, which is the parent company of real-estate website RealtyTrac. The calculation measures the difference between the housing value when an investor purchases the home and when it is sold.

The market for house-flipping loans in the U.S. is expected to reach about $48 billion in total sales volume this year, the highest since 2006, according to ATTOM.

read more: http://www.wsj.com/articles/as-home-prices-rise-flippers-make-a-comeback-1482921000

People are Lining Up to Live in Old Shipping Containers

For an architect, innovative designs usually take years, rather than months, to materialize. But when Travis Price was approached by a panicked DC landlord needing a quick way to replace his dilapidated house in time for Catholic University students to move in that fall, he had just the solution.  Bisnow: Jon Banister Price, pictured above with senior architect Kelly Davies Grace, decided to try building with something unconventional: old sea shipping containers.  In less than six months, Price had finished designing, permitting and building the three-story, 24-bed apartment building made from 18 shipping containers in time for students to rent it in September. Price was amazed how quickly the project sailed through the permitting process, which typically would have put him past his deadline before construction could even begin. “We convinced the city, and it was not a hard sell,” Price said. “They loved it, and every jurisdiction we’ve gone to and shown what it means, they’ve said, ‘how many, how fast?'” When it came time to rent to students, it turned out the design was more than just convenient, it was also popular.  “The line was a mile long,” Price said. “They want to be in the cool, hip new thing.”  As one of the concept’s pioneers, Price is often contacted by developers interested in building with shipping containers. He has conducted feasibility studies for roughly 70 other potential projects, about 30 of which he says appear to be moving forward.

read more: https://www.bisnow.com/national/news/construction-development/shipping-container-condo-travis-price-69136?be=lgiserman%40collingwoodllc.com&utm_source=Newsletter&utm_medium=email&utm_campaign=wed-28-dec-2016-000000-0600_national-re?utm_source=CopyShare&utm_medium=Browser

Week Ahead:

Today

Construction Spending 10:00 AM ET

Tomorrow

ADP Employment Report 8:15 AM ET

Gallup US Consumer Spending t2:00 PM ET

FED Minutes 2:00 PM ET

Thursday

Challenger Job-Cut Report 7:30 AM ET

Jobless Claims 8:30 AM ET

Friday

The Big Kahuna: Jobs Report for December and all of 2016 8:30 AM ET

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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Lou Giserman

Senior Media Consultant

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