Where o’ where will housing crash?

Posted on September 30, 2022 by grim

From Marketwatch:

Most economists see the U.S. turning into a buyer’s housing market in 2023. Here’s where you’ll see the biggest declines in value.

Frustrated by the housing market? Housing experts say they’re expecting the market to tip back into buyers’ court by 2023, according to a new report.

Mortgage rates are approaching 7%, but home prices are only slowly coming back down and inventory is still tight compared to pre-pandemic levels.

Still, the U.S. housing market will shift in favor of home buyers by the end of 2023, 44% of 107 economists and housing experts polled by real-estate company Zillow for its Home Price Expectations Survey said. 

And 12% of these experts believed that shift will happen sooner — that is, this year.

Yet roughly 45% of experts surveyed by Zillow say buyers will have to wait, and expect the market to shift in buyers’ favor in 2024, and beyond.

All survey respondents said to expect home-price deceleration in 2023.
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Most of the housing experts surveyed by Zillow noted that the markets most likely to see home prices decline over the next year include pandemic boomtowns like Boise, Austin, and Raleigh; 77% of the experts surveyed expect declines in those cities. They saw a huge jump in sales amid the earliest days of the coronavirus pandemic.

Redfin, another real-estate brokerage company, also noted that Sun Belt home buyers are cancelling their home-purchase agreements at the highest rate as compared to the rest of the nation.
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The markets least likely to see home prices decline over the next year include Midwestern cities like Columbus, Indianapolis, and Minneapolis, Zillow said. Only 36% of respondents expected home prices to decline in these areas over the next 12 months.

Posted in Housing Bubble, National Real Estate | 110 Comments

So much for the mortgage industry

Posted on September 29, 2022 by grim

From CNBC:

Mortgage refinancing drops to a 22-year low as interest rates surge even higher

Mortgage rates drove even higher last week after the Federal Reserve signaled it would continue its aggressive action to cool inflation. That, and rising uncertainty in the overall housing market, caused mortgage application volume to drop 3.7% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

After a strange rebound the week before, applications to refinance a home loan declined 11% for the week and were 84% lower than the same week one year ago. They are now at a 22-year low because there are very few borrowers who can benefit from a refinance at today’s higher rates.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 6.52% from 6.25%, with points rising to 1.15 from 0.71 (including the origination fee) for loans with a 20% down payment. That is the highest level since mid-2008.

“After a brief pause in July, mortgage rates have increased more than a percentage point over the past six weeks,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Ongoing uncertainty about the impact of the Fed’s reduction of its MBS and Treasury holdings is adding to the volatility in mortgage rates.”

Posted in Economics, Mortgages, National Real Estate | 78 Comments

Poof

Posted on September 28, 2022 by grim

From CNBC:

Home prices cooled in July at the fastest rate in the history of S&P Case-Shiller Index

U.S. home prices cooled in July at the fastest rate in the history of the S&P CoreLogic Case-Shiller Index, according to a report released Tuesday.

Home prices in July were still higher than they were a year ago, but cooled significantly from June gains. Prices nationally rose 15.8% over July 2021, well below the 18.1% increase in the previous month, according to the report.

The 10-City composite, which tracks prices in major metropolitan areas such as New York and Boston, climbed 14.9% year over year, down from 17.4% in June. The 20-City composite, which adds regions such as the Seattle metro area and greater Detroit, gained 16.1%, down from 18.7% in the previous month. July’s year-over-year gains were lower compared with June in each of the cities covered by the index.

“July’s report reflects a forceful deceleration,” wrote Craig J. Lazzara, managing director at S&P DJI in a release, noting the difference in the annual gains in June and July. The 2.3 percentage point “difference between those two monthly rates of gain is the largest deceleration in the history of the index.”

Tampa, Florida, Miami and Dallas saw the highest annual gains among the 20 cities in July, with increases of 31.8%, 31.7% and 24.7%, respectively. Washington, D.C., Minneapolis and San Francisco saw the smallest gains, but were still well above year-ago levels.

Posted in Demographics, Economics, Employment, Housing Bubble, National Real Estate | 69 Comments

“More remote work leads to higher house prices and rents”

Posted on September 27, 2022 by grim

From Bloomberg:

Remote Work Drove Over 60% of House-Price Surge, Fed Study Finds

The shift to working from home drove more than half of the increase in house and rent prices during the pandemic and will likely drive up costs and inflation going forward as the shift becomes permanent, according to research from the Federal Reserve Bank of San Francisco. 

“The transition to remote work because of the COVID-19 pandemic has been a key driver of the recent surge in housing prices,” economists Augustus Kmetz and John Mondragon, of the San Francisco Fed, and Johannes Wieland of the University of California, San Diego, wrote in a note published Monday.

House prices rose 24% in the two years ended November 2021, the authors wrote. More than 60% of that increase is attributable to the rise in work from home during the pandemic — a trend that has persisted, with 30% of work still being done from home as of last month.

“This suggests that the fundamentals of housing demand have changed, such that the persistence of remote work is likely to affect the future path of real estate prices and inflation,” the economists wrote. 

The authors, who adjusted housing data to account for the migration from expensive cities to more affordable areas that occurred during the pandemic, found that each 1 percentage point increase in remote work results in about a 0.9 percentage point increase in house prices. The impact on rent prices has been identical.

Posted in Demographics, Economics, Employment, Housing Bubble, National Real Estate | 86 Comments

The starter home may never exist again

Posted on September 26, 2022 by grim

From the NYT:

Whatever Happened to the Starter Home?

As recently as the 1990s, when Jason Nageli started off, the home-building industry was still constructing what real-estate ads would brightly call the “starter home.” In the Denver area, he sold newly built two-story houses with three bedrooms in 1,400 square feet or less.

The price: $99,000 to $125,000, or around $200,000 in today’s dollars.

That house would be in tremendous demand today. But few builders construct anything like it anymore. And you couldn’t buy those Denver area homes built 25 years ago at an entry-level price today, either. They go for half a million dollars.

The disappearance of such affordable homes is central to the American housing crisis. The nation has a deepening shortage of housing. But, more specifically, there isn’t enough of this housing: small, no-frills homes that would give a family new to the country or a young couple with student debt a foothold to build equity.

The affordable end of the market has been squeezed from every side. Land costs have risen steeply in booming parts of the country. Construction materials and government fees have become more expensive. And communities nationwide are far more prescriptive today than decades ago about what housing should look like and how big it must be. Some ban vinyl siding. Others require two-car garages. Nearly all make it difficult to build the kind of home that could sell for $200,000 today.

“It’s just become where you can’t get to that number anymore,” said Mr. Nageli, now the operations manager for the Utah builder Holmes Homes.

Nationwide, the small detached house has all but vanished from new construction. Only about 8 percent of new single-family homes today are 1,400 square feet or less. In the 1940s, according to CoreLogic, nearly 70 percent of new houses were that small.

Posted in Demographics, Economics, National Real Estate | 50 Comments

Foreclosures coming?

Posted on September 25, 2022 by grim

From Patch:

NJ Housing Market Troubles Loom As Foreclosures Surge: Reports

With inflation still high, foreclosures nearing pre-pandemic levels and a recession potentially looming, new analysis warns that New Jersey has some of the nation’s most vulnerable housing markets. Meanwhile, the Garden State has one of the highest foreclosure rates in the United States, according to new reports from ATTOM.

New Jersey had the nation’s fourth-highest rate of properties entering foreclosure filings in August — 1 out of 2,441 housing units, according to the real estate data curator. Only Illinois (1 in every 1,926), Delaware (1 of every 2,387) and South Carolina (1 in every 2,417) had higher rates.

Based on gaps in home affordability, underwater mortgages, foreclosures and unemployment, many of New Jersey’s housing markets show among the highest risks of decline in the nation, according to ATTOM.
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Many of New Jersey’s most vulnerable markets include suburbs of New York and Philadelphia. Bergen, Essex, Ocean, Passaic, Sussex, Union, Camden and Gloucester Counties are among the nation’s 50 most vulnerable housing markets based on data from the second quarter of 2022, according to ATTOM.

Out of the top 50 most vulnerable counties, three in New Jersey had among the highest rates of homes with a foreclosure action during the second quarter. Cumberland County (1 in 373 homes), Warren County (1 in 373) and Camden County (1 in 462). Only Cuyahoga County (Cleveland), Ohio, had a higher foreclosure rate (1 in 365 homes) on the list of vulnerable markets.

Posted in Economics, Foreclosures, Mortgages, New Jersey Real Estate | 18 Comments

UK brings out the big guns to fight recession

Posted on September 23, 2022 by grim

From CNBC:

UK government dishes out extensive tax cuts as country braces for recession

The measures include:

  • Cancellation of a planned rise in corporation tax to 25%, keeping it at 19%, the lowest rate in the G-20.
  • A reversal in the recent 1.25% rise in National Insurance contributions — a tax on income.
  • A reduction in the basic rate of income tax from 20 pence to 19 pence.
  • Scrapping of the 45% tax paid on incomes over £150,000 ($166,770), taking the top rate to 40%.
  • Significant cuts to stamp duty, a tax paid on home purchases.
  • A network of “investment zones” around the country where businesses will be offered tax cuts, liberalized planning rules and a reduction in regulatory obstacles.
  • A claim-back scheme for sales taxes paid by tourists.
  • Scrapping of an increase in tax rates on various alcohols.
  • Scrapping of a cap on bankers’ bonuses.
Posted in Economics, Politics | 99 Comments

Not going to get better any time soon

Posted on September 22, 2022 by grim

From CNN:

Home sales dropped 20% in August from a year ago

Home sales declined for the seventh month in a row in August as higher mortgage rates and stubbornly high prices pushed prospective buyers out of the market.

Sales of existing homes — which include single-family homes, townhomes, condominiums and co-ops — were down 19.9% from a year ago and down 0.4% from July, according to a report from the National Association of Realtors. 

Sales in August were at their weakest level since May 2020, which was an anomaly because that was in the early days of the pandemic lockdown. Setting that aside, sales last month were the weakest they have been since November 2015.

A year-over-year decline in sales was seen in all price categories, with steeper drops at the lower end, and in all regions, dropping the most in the West where affordability challenges are greatest.

Home prices continued to climb during the month, although it was the lowest year-over-year increase since June 2020. The median home price was $389,500 in August, up 7.7% from a year ago, according to the report. That’s down from the record high of $413,800 in June. The price increase marks more than a decade of year-over-year monthly gains.

“The housing sector is the most sensitive to and experiences the most immediate impacts from the Federal Reserve’s interest rate policy changes,” said Lawrence Yun, NAR’s chief economist. “The softness in home sales reflects this year’s escalating mortgage rates.”

Posted in Economics, Housing Bubble, National Real Estate | 96 Comments

Decision Day

Posted on September 21, 2022 by grim

From CNBC:

Fed expected to hike rates by three-quarters of a point again, but its forecast may matter most

It’s not what the Federal Reserve does, but what it says it could do in the future that will be most crucial when the central bank ends its two-day meeting Wednesday.

The Fed is expected to fire off another three-quarter point rate hike — its third in a row. It will also release quarterly forecasts for inflation, the economy, and the future path of interest rates Wednesday at 2 p.m. ET.

The Fed’s projections are always important, but this time they are even more so because investors have been trying to game how high it will raise interest ratesand how much officials expect their actions could affect the economy.

Fed Chair Jerome Powell speaks at 2:30 p.m. ET, and he is expected to emphasize the central bank will do what it takes to fight inflation and it is unlikely to reverse its rate hikes anytime soon.

Posted in Economics, Mortgages, National Real Estate | 122 Comments

Why sell?

Posted on September 20, 2022 by grim

From the Wall Street Journal:

In a Slowing Housing Market, Sellers Ask: Why List a Home When You Can Collect Rent?

After Mark and Melissa Reichert moved from California to Dallas, the couple put their home in the Los Angeles suburbs up for sale this summer. Yet even after they cut the asking price by $10,000, there was hardly any interest.

Instead, they decided to rent out the house. Their monthly payout now covers their ownership costs. If the housing market remains sluggish, they would likely keep the home as a rental once the current two-year lease expires, Mr. Reichert said.

“There’s just not serious buyers out there,” he said.

Home sellers across the U.S., discouraged by the slowing housing market and able to capitalize on the soaring home-rental market, are increasingly opting to hold on to their houses and lease them out instead.

Higher mortgage-interest rates have reduced home-buying demand, and homes are sitting on the market for longer. Home prices have slid from their springtime peaks in some markets, and some sellers are reluctant to lower their asking prices.

And with many prospective home buyers priced out of the market, rents for single-family homes have soared in recent years.
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The number of home listings that were delisted without going under contract rose 58% in August from a year earlier, though the overall number remains a small portion of total listings, according to brokerage HouseCanary.

Posted in Economics, National Real Estate | 112 Comments

Back to Work

Posted on September 19, 2022 by grim

From CNBC:

New York City is getting closer to the tipping point in return to office work

Jamie Dimon may have been off by a year, but New York City’s offices are finally starting to fill up.

In May 2021, the JPMorgan chief executive predicted that the percentage of workers in offices in the city would be back to normal by the following fall. “Yes, the commute, you know, yes, people don’t like commuting, but so what?” Dimon said in his not-so-empathic way at the Wall Street Journal CEO Summit.

As a Covid wave prognosticator and expert on worker psychology, the bank CEO failed. But his view of bringing workers back is getting closer to reality.

Nearly half of office workers (49%) are back in New York City on an average weekday, up from 38% in April, according to the latest data this week from the Partnership for New York City, which has been tracking office occupancy as a vital sign for New York’s economy. Fully remote office worker levels are now down to 16%, from 28% in April.

But as far as making that unwelcome commute again, only 9% of office workers are doing it full time, according to the survey.

Hybrid work is the expectation, and that is not a new finding in the organization’s research, with 77% of employers saying it will be “predominant post-pandemic policy,” due to employee feedback. But the latest data shows that the largest share of employees on a hybrid schedule are in the office three days a week — 37% three days; 12% four days; 15% two days; 11% one day.

Public transit data is showing the increase in returning workers as well. The 3.7 million subway riders daily this week was the most since March 2020, and commuter rails also hit levels in recent weeks not seen since the pandemic began.
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If the Partnership’s data proves correct, more than half of all office workers will be back either three days (42%) or four days (12%) per week by January. And the percentage of those fully remote will decline further, to 12%.

Wylde conceded it isn’t easy, and worker resistance remains. “Old habits are hard to break, and for two and a half years, people have been working at home, working remotely, and we’ve have had four false starts in getting back to the office.”

Posted in Economics, Employment, New Jersey Real Estate, NYC | 102 Comments

Good time to buy?

Posted on September 18, 2022 by grim

From Fox Business:

Redfin predicts sharpest turn in housing market since 2008 crash

If you’re looking to buy a home soon, you’re in luck. After two years of record high sales, data shows the housing market is starting to cool down, but there is a catch. 

For the first time since March 2021, the average home is selling for less than its list price, but high mortgage rates are still impacting what people can afford. 

Mortgage rates are the highest they’ve been in 14 years, reaching nearly 6%, according to the real estate company Redfin. 

“This is the sharpest turn in the housing market since the housing market crash in 2008,” said Daryl Fairweather, Redfin’s Chief Economist. 

While home prices are still higher than a year ago, with the average home now selling for just under $370,000, inflation and high interest rates are slowing down the market. 

“We haven’t seen interest rates this high since 2008, 2007, so it is a big change from the housing market we’ve all gotten used to,” Fairweather said. 

With these higher interest rates, mortgages are up about 40% from a year ago. 

“Buyers just don’t have the 40% extra money to put towards housing every month,” Fairweather said. “A lot of homebuyers had to drop out and go to the rental market instead or choose not to buy that second home or investment property.” 

Posted in Economics, Housing Bubble, Mortgages, National Real Estate | 42 Comments

Recovery

Posted on September 16, 2022 by grim

From NJ1015:

Jobs in NJ erase pandemic losses — but here’s how economy changed

Employment in New Jersey has finally fully recovered from the losses suffered during the economic shutdowns imposed in the first months of the pandemic, according to preliminary estimates released by the state Thursday.

Estimates produced by the U.S. Bureau of Labor Statistics report a record-high number of jobs in the state in August for the first time in two and a half years – 4,241,200, a gain of 15,400 from a month earlier and 12,800 above the previous high set in February 2020.

In the pandemic’s first two months, when only businesses deemed essential could open and restaurants were limited to takeout service, employment in the state plunged by 732,600, more than 17% of all the jobs in New Jersey.

New Jersey’s economy has now gained jobs in 21 consecutive months.
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The unemployment rate rose by 0.3 percentage points in August to 4%, the highest in four months.

That was mostly driven by an increase in labor force participation, which reached its highest level since June 2021, which the state labor department described as a signal that more workers are seeking jobs because of strong labor conditions. But unemployment was also at a four-month high at 188,700.

“While it is disappointing that New Jersey’s unemployment rate increased, and that our gap with the national rate ticked up, the message of the report is that job growth in the state remains strong, and it may be the case that people who had withdrawn from the labor force are coming back to look for jobs,” said former state chief economist Charles Steindel, in a report for the conservative Garden State Initiative.

Posted in Economics, Employment, New Jersey Real Estate | 124 Comments

6%

Posted on September 15, 2022 by grim

From Reuters:

U.S. mortgage interest rates top 6% for first time since 2008

The average interest rate on the most popular U.S. home loan rose above 6% for the first time since 2008 and is now more than double the level it was one year ago, Mortgage Bankers Association (MBA) data showed on Wednesday.

Rising mortgage rates are increasingly weighing on the interest-rate sensitive housing sector as the Federal Reserve pushes on with aggressively lifting borrowing costs in order to tame high inflation. The central bank has raised its benchmark overnight lending rate by 225 basis points since March.

Expectations for Fed tightening have led to a surge in Treasury yields since the start of this year. The yield on the 10-year note acts as a benchmark for mortgage rates.

The average contract rate on a 30-year fixed-rate mortgage rose by 7 basis points to 6.01% for the week ended Sept. 9, a level not seen since towards the end of the financial crisis and Great Recession.

The MBA also said its Market Composite Index, a measure of mortgage loan application volume, declined 1.2% from a week earlier and is now down 64.0% from one year ago. Its Refinance Index fell 4.2% from the prior week and was down 83.3% compared to one year ago.

Posted in Economics, Housing Bubble, Mortgages | 128 Comments

Hang on to your mortgage

Posted on September 14, 2022 by grim

From CNBC:

Inflation rose 0.1% in August even with sharp drop in gas prices

Inflation rose more than expected in August as rising shelter and food costs offset a drop in gas prices, the Bureau of Labor Statistics reported Tuesday.

The consumer price index, which tracks a broad swath of goods and services, increased 0.1% for the month and 8.3% over the past year. Excluding volatile food and energy costs, CPI rose 0.6% from July and 6.3% from the same month in 2021.

Economists had been expecting headline inflation to fall 0.1% and core to increase 0.3%, according to Dow Jones estimates. The respective year-over-year forecasts were for 8% and 6% gains.

Energy prices fell 5% for the month, led by a 10.6% slide in the gasoline index. However, those declines were offset by increases elsewhere.

The food index increased 0.8% in August and shelter costs, which make up about one-third of the weighting in the CPI, jumped 0.7% and are up 6.2% from a year ago.

Medical care services also showed a big gain, rising 0.8% on the month and up 5.6% from August 2021. New vehicle prices also climbed, increasing 0.8% though used vehicles fell 0.1%.

Posted in Economics, Mortgages, National Real Estate | 56 Comments