All posts in "Real Estate"

Housing Starts increased to 1.215 Million Annual Rate in June

Housing Starts increased to 1.215 Million Annual Rate in June

by Bill McBride on 7/19/2017 08:39:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,215,000. This is 8.3 percent above the revised May estimate of 1,122,000 and is 2.1 percent above the June 2016 rate of 1,190,000. Single-family housing starts in June were at a rate of 849,000; this is 6.3 percent above the revised May figure of 799,000. The June rate for units in buildings with five units or more was 359,000.

Building Permits:
Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,254,000. This is 7.4 percent above the revised May rate of 1,168,000 and is 5.1 percent above the June 2016 rate of 1,193,000. Single-family authorizations in June were at a rate of 811,000; this is 4.1 percent above the revised May figure of 779,000. Authorizations of units in buildings with five units or more were at a rate of 409,000 in June.
emphasis added

Total Housing Starts and Single Family Housing StartsClick on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) increased in June compared to May.  Multi-family starts are down 13% year-over-year.

Multi-family is volatile month-to-month, but has been mostly moving sideways over the last couple of years.

Single-family starts (blue) increased in May, and are up 10.3% year-over-year.

Total Housing Starts and Single Family Housing Starts
The second graph shows total and single unit starts since 1968.

The second graph shows the huge collapse following the housing bubble, and then – after moving sideways for a couple of years – housing is now recovering (but still historically low),

Total housing starts in June were above expectations, and starts for May were revised up.    This was a solid report.  I’ll have more later …

Published at Wed, 19 Jul 2017 12:39:00 +0000

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MBA: Mortgage Applications Increase in Latest Weekly Survey

MBA: Mortgage Applications Increase in Latest Weekly Survey

by Bill McBride on 7/19/2017 07:00:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 6.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 14, 2017. Last week’s results included an adjustment for the Fourth of July holiday.

… The Refinance Index increased 13 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 27 percent compared with the previous week and was 7 percent higher than the same week one year ago. …

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.22 percent, with points decreasing to 0.31 from 0.40 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Mortgage Refinance IndexClick on graph for larger image.

The first graph shows the refinance index since 1990.

Refinance activity will not pick up significantly unless mortgage rates fall well below 4%.

Mortgage Purchase Index
The second graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 7% year-over-year.

Published at Wed, 19 Jul 2017 11:00:00 +0000

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Fannie Mae: Mortgage Serious Delinquency rate declined in May, Lowest since December 2007

 

Fannie Mae: Mortgage Serious Delinquency rate declined in May, Lowest since December 2007

by Bill McBride on 6/29/2017 04:17:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate declined to 1.04% in May, from 1.07% in April. The serious delinquency rate is down from 1.38% in May 2016.

This is the lowest serious delinquency rate since December 2007.

These are mortgage loans that are “three monthly payments or more past due or in foreclosure”.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although the rate is declining, the “normal” serious delinquency rate is under 1%.

The Fannie Mae serious delinquency rate has fallen 0.34 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will below 1% this Summer.

Note: Freddie Mac reported earlier.

Published at Thu, 29 Jun 2017 20:17:00 +0000

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MBA: Mortgage Applications Increase in Latest Weekly Survey

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MBA: Mortgage Applications Increase in Latest Weekly Survey

by Bill McBride on 6/07/2017 07:00:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 7.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 2, 2017. This week’s results included an adjustment for the Memorial Day holiday.

… The Refinance Index increased 3 percent from the previous week. The seasonally adjusted Purchase Index increased 10 percent from one week earlier to its highest level since May 2010. The unadjusted Purchase Index decreased 14 percent compared with the previous week and was 6 percent higher than the same week one year ago. …

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.17 percent, with points decreasing to 0.32 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Mortgage Refinance IndexClick on graph for larger image.

The first graph shows the refinance index since 1990.

Refinance activity will not increase significantly unless rates fall sharply.

Mortgage Purchase Index
The second graph shows the MBA mortgage purchase index.

Even with the increase in mortgage rates late last year, purchase activity is still up 6% year-over-year.

Published at Wed, 07 Jun 2017 11:00:00 +0000

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MBA: Mortgage Applications Decrease in Latest Weekly Survey

MBA: Mortgage Applications Decrease in Latest Weekly Survey

by Bill McBride on 5/31/2017 07:00:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 3.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 26, 2017.

… The Refinance Index decreased 6 percent from the previous week. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 7 percent higher than the same week one year ago. …

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.17 percent, with points decreasing to 0.32 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Mortgage Refinance IndexClick on graph for larger image.

The first graph shows the refinance index since 1990.

Refinance activity will not increase significantly unless rates fall sharply.

Mortgage Purchase Index
The second graph shows the MBA mortgage purchase index.

Even with the increase in mortgage rates late last year, purchase activity is still up 7% year-over-year.

Published at Wed, 31 May 2017 11:00:00 +0000

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Case-Shiller: National House Price Index increased 5.8% year-over-year in March

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Case-Shiller: National House Price Index increased 5.8% year-over-year in March

by Bill McBride on 5/30/2017 09:12:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for March (“March” is a 3 month average of January, February and March prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Seattle, Portland, Dallas and Denver Lead Gains in S&P Corelogic Case-Shiller Home Price Indices

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.8% annual gain in March, up from 5.7% last month and setting a 33-month high. The 10-City Composite and the 20-City Composite indices came in at 5.2% and 5.9% annual increases, respectively, unchanged from last month.

Seattle, Portland, and Dallas reported the highest year-over-year gains among the 20 cities. In March, Seattle led the way with a 12.3% year-over-year price increase, followed by Portland with 9.2%, and Dallas with an 8.6% increase. Ten cities reported higher price increases in the year ending March 2017 than in the year ending February 2017.

Before seasonal adjustment, the National Index posted a month-over-month gain of 0.8% in March. The 10-City Composite posted a 0.9% increase and the 20-City Composite reported a 1.0% increase. After seasonal adjustment, the National Index recorded a 0.3% month-over-month increase. Both the 10-City Composite and the 20-City Composite indices posted a 0.9% month-over-month increase after seasonal adjustment. Eighteen of the 20 cities reported increases in March before seasonal adjustment; after seasonal adjustment, 17 cities saw prices rise.
emphasis added

Case-Shiller House Prices IndicesClick on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 6.4% from the peak, and up 0.8% in March (SA).

The Composite 20 index is off 3.9% from the peak, and up 0.9% (SA) in March.

The National index is 2.4% above the bubble peak (SA), and up 0.3% (SA) in March.  The National index is up 38.4% from the post-bubble low set in December 2011 (SA).

Case-Shiller House Prices Indices The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 5.2% compared to March 2016.  The Composite 20 SA is up 5.9% year-over-year.

The National index SA is up 5.8% year-over-year.

Note: According to the data, prices increased in 18 of 20 cities month-over-month seasonally adjusted.

I’ll have more later.

(Why?)
Published at Tue, 30 May 2017 13:12:00 +0000

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Freddie Mac: Mortgage Serious Delinquency rate unchanged in April

{pixabay|100|campaign}Freddie Mac: Mortgage Serious Delinquency rate unchanged in April

by Bill McBride on 5/26/2017 02:44:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in April was at 0.92%, unchanged from 0.92% in March.  Freddie’s rate is down from 1.15% in April 2016.

Freddie’s serious delinquency rate peaked in February 2010 at 4.20%.

This matches last month as the lowest serious delinquency rate since May 2008.

These are mortgage loans that are “three monthly payments or more past due or in foreclosure”. 

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although the rate is still declining, the rate of decline has slowed.

Maybe the rate will decline another 0.2 to 0.4 percentage points or so to a cycle bottom, but this is pretty close to normal.

Note: Fannie Mae will report for April soon.

(Why?)

Published at Fri, 26 May 2017 18:44:00 +0000

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AIA: Architecture Billings Index increased in March

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AIA: Architecture Billings Index increased in March

by Bill McBride on 4/19/2017 09:55:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Architecture Billings Index continues to strengthen

The first quarter of the year ended on a positive note for the Architecture Billings Index (ABI).  As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the March ABI score was 54.3, up from a score of 50.7 in the previous month. This score reflects a sizable increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.8, down from a reading of 61.5 the previous month, while the new design contracts index dipped from 54.7 to 52.3.

“The first quarter started out on uneasy footing, but fortunately ended on an upswing  entering the traditionally busy spring season,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD.  “All sectors showed growth except for the commercial/industrial market, which, for the first time in over a year displayed a decrease in design services.”

• Regional averages: Midwest (54.6), South (52.6), Northeast (52.4), West (50.2)

• Sector index breakdown: multi-family residential (54.6), mixed practice (53.7), institutional (52.9), commercial / industrial (49.8)
emphasis added

AIA Architecture Billing IndexClick on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 54.3 in January, up from 50.7 in February. Anything above 50 indicates expansion in demand for architects’ services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an “approximate nine to twelve month lag time between architecture billings and construction spending” on non-residential construction.  This index was positive in 9 of the last 12 months, suggesting a further increase in CRE investment in 2017 and early 2018.

Published at Wed, 19 Apr 2017 13:55:00 +0000

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“Mortgage Rates Hit New 2017 Lows”

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“Mortgage Rates Hit New 2017 Lows”

by Bill McBride on 4/11/2017 10:19:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Hit New 2017 Lows

Mortgage rates moved lower today–significantly in some cases–with the average lender making it back to 2017’s lows for the first time since January.  Rates came close to 2017’s lows in late February and again last week before officially crossing the line today.

Lenders are now fairly evenly split between 4.0% and 4.125% in terms of the most prevalent conventional 30yr fixed quote on top tier scenarios.  A few of the most aggressive lenders are now quoting rates in the high 3’s (emphasis on “few”), and there are still more than a few lenders up at 4.25%.
emphasis added

Here is a table from Mortgage News Daily:

Published at Wed, 12 Apr 2017 02:19:00 +0000

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Fannie Mae: Mortgage Serious Delinquency rate declined in February, Lowest since March 2008

 

Fannie Mae: Mortgage Serious Delinquency rate declined in February, Lowest since March 2008

by Bill McBride on 3/31/2017 02:02:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate declined to 1.19% in February, from 1.20% in January. The serious delinquency rate is down from 1.52% in February 2016.

This is the lowest serious delinquency rate since March 2008.

These are mortgage loans that are “three monthly payments or more past due or in foreclosure”.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although the rate is declining, the “normal” serious delinquency rate is under 1%.

The Fannie Mae serious delinquency rate has fallen 0.33 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until later this year.

Note: Freddie Mac reported earlier.

Published at Fri, 31 Mar 2017 18:02:00 +0000

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Fannie, Freddie may write down $21 billion due to U.S. tax cut: BMO

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Fannie, Freddie may write down $21 billion due to U.S. tax cut: BMO

U.S. mortgage finance giants Fannie Mae (FNMA.PK) and Freddie Mac (FMCC.PK) may write down $21 billion of tax-related assets if there is a deep cut in the federal corporate tax rate as promised by President Donald Trump, according to an analyst at BMO Capital Markets on Friday.

These assets, known as deferred tax assets, are items such as tax credits that may be used to reduce a company’s taxes.

If the rate cut is lowered to 20 percent from 35 percent, the value of Fannie and Freddie’s deferred tax assets is worth less and it would be recognized against their capital.

The two agencies, which guarantee home loans and mortgage-backed securities, are holding little capital since they are not allowed to retain their earnings after they have been under conservatorship or government guardianship due to heavy losses from the housing market collapse more than eight years ago.

Fannie drew $116.1 billion and Freddie $71.3 billion from the U.S. Treasury Department to cover those losses. They have remitted all their profits, which are more than their draw, to the Treasury under the conservatorship arrangement.

In absence of much capital cushion, the government-sponsored enterprises (GSEs) would need borrow nearly a total of $17 billion from Treasury, BMO’s head of fixed-income strategy, Margaret Kerins, wrote in a research note.

Such a move, however, would not hurt the value of their bonds or disrupt mortgage market, she said.

“However, the potential for renewed draws is likely to be politically unpopular and may spark preemptive Treasury action

and Congress to prioritize GSE reform in addition to headline risk,” Kerins wrote.

(Reporting by Richard Leong; Editing by Jonathan Oatis and Marguerita Choy
Published at Fri, 31 Mar 2017 19:44:34 +0000

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Freddie Mac: Mortgage Serious Delinquency rate declines in February, Lowest since June 2008

 

Freddie Mac: Mortgage Serious Delinquency rate declines in February, Lowest since June 2008

by Bill McBride on 3/27/2017 12:42:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in February was at 0.98%, down from 0.99% in January.  Freddie’s rate is down from 1.26% in February 2016.

Freddie’s serious delinquency rate peaked in February 2010 at 4.20%.

This is the lowest serious delinquency rate since June 2008.

These are mortgage loans that are “three monthly payments or more past due or in foreclosure”.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although the rate is still declining, the rate of decline has slowed.

Maybe the rate will decline another 0.25 percentage points or so to a cycle bottom, but this is pretty close to normal.

Note: Fannie Mae will report soon.

Published at Mon, 27 Mar 2017 16:42:00 +0000

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Fannie Mae: Mortgage Serious Delinquency rate unchanged in January

 

Fannie Mae: Mortgage Serious Delinquency rate unchanged in January

by Bill McBride on 3/02/2017 06:31:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate was unchanged at 1.20% in January, from 1.20% in December. The serious delinquency rate is down from 1.55% in January 2016.

This ties last month as the lowest serious delinquency rate since March 2008.

These are mortgage loans that are “three monthly payments or more past due or in foreclosure”.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

Although the rate is declining, the “normal” serious delinquency rate is under 1%.

The Fannie Mae serious delinquency rate has fallen 0.35 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until later this year.

Note: Freddie Mac reported earlier.

Published at Thu, 02 Mar 2017 23:31:00 +0000

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What are the Differences Among a Real Estate Agent, a Broker and a Realtor?

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A:

Many people unfamiliar with the real estate industry use the terms real estate agent, broker and realtor interchangeably. There are differences between the three titles. However, the most important being the services each real estate professional offers to those in need of real estate services.

A real estate agent is a real estate professional who has taken and passed all required real estate classes and passed the real estate licensing exam in the state in which he or she intends to work. It is the most encompassing of the titles since it is the starting point for most real estate professionals. Agents are also referred to as real estate associates.

A realtor is a real estate agent who is a member of the National Association of Realtors. To become a member, a real estate agent has to agree to abide by the association’s standards and uphold the code of ethics.

A real estate broker has continued his or her education past the real estate agent level and passed the real estate broker license. Real estate brokers can work as independent real estate agents or have other agents working for them.

The biggest distinction between the three is that a broker can work on his or her own, while an agent or associate has to work under a licensed broker. A hybrid position, referred to as a real estate associate broker, is an agent who is working toward achieving a broker’s license. Associate brokers have to work under a licensed broker but many share in the brokerage profits above and beyond the typical agent commission.

Published at Sat, 11 Feb 2017 15:30:00 +0000

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Lawler on Household Projections

Lawler on Household Projections

by Bill McBride on 2/08/2017 10:51:00 AM

From housing economist Tom Lawler: Household Projections: New Population Estimates + New Administration = Time for an Update
When the Census Bureau released its estimates for the U.S. population in December, most press coverage focused on which states saw the fastest population growth last year. What many missed, however, was that the Census Bureau significantly reduced its population estimates for each of the past several years, with the major reason for the downward revisions stemming from reduced estimates of net international migration. The latter reductions were the result up an updated methodology used to estimate foreign-born emigration, as discussed in the following excerpt from the 2016 vintage “release notes.”

“The Vintage 2016 net international migration estimates reflect the following changes to the methodology since the release of the Vintage 2015 estimates:

“We updated the foreign-born emigration subcomponent in two ways: 1) we modified the emigrant group definitions used to calculate estimates of foreign-born emigration; 2) we applied averaged rates from multiple 5-year ACS files for non-recent arrivals (Mexican born who arrived more than 10 years ago, Asian born who arrived more than five years ago, and Non-Mexican born who arrived more than 10 years ago). These changes resolve negative rates produced by the previous residual method, which had resulted in zero emigration for certain emigrant groups. Consequently, foreign-born emigration will be higher and net international migration will be lower than the previous vintage.”

Here are some summary statistics on “Vintage 2016” population estimates (resident population” compared to “Vintage 2015” population estimates. I’m including Census projections for 2016 that had been based on Vintage 2015 estimates (used for CPS-based data for 2016) as well as a December 1, 2016 estimate based on Vintage 2016.

U.S. Resident Population, Vintage 2015 vs. Vintage 2016
Vintage 2015 Vintage 2016 Change
7/1/2010 309,346,863 309,348,193 1,330
7/1/2011 311,718,857 311,663,358 -55,499
7/1/2012 314,102,623 313,998,379 -104,244
7/1/2013 316,427,395 316,204,908 -222,487
7/1/2014 318,907,401 318,563,456 -343,945
7/1/2015 321,418,820 320,896,618 -522,202
7/1/2016 323,889,854 323,127,513 -762,341
12/1/2016 325,032,763 324,142,480 -890,283


The next table shows Census estimates of Net International Migration from the “Vintage 2015” population estimates compared to the most recent (“Vintage 2016”) estimates.

Net International Migration, July 1 – July 1, Vintage 2015 vs. Vintage 2016
Vintage 2015 Vintage 2016 Change
2011 910,951 854,172 -56,779
2012 948,321 899,576 -48,745
2013 992,215 873,972 -118,243
2014 1,133,261 977,801 -155,460
2015 1,150,528 1,036,826 -113,702
2016* 1,160,000 999,163 -160,837
*Estimate for Vintage 2015 projections


These downward population revisions were reflected in last Friday’s employment report, which showed the impact of updated population estimates on the 16+ year civilian non-institutional population assumptions used to produce employment and labor force estimates based on the “household” (CPS) survey.

16+ Civilian Non-Institutional Population, Household Employment Report, December 2016 (000’s)
Vintage 2015 Vintage 2016 Change
Total 254,742 253,911 -831
White 198,845 198,376 -469
Black 32,105 32,029 -76
Asian 15,433 15,175 -258
Other 8,359 8,331 -28
Hispanic or Latino Ethnicity* 41,190 40,838 -352
*Persons whose ethnicity is described as Hispanic or Latino may be of any race


While Census has not yet updated its estimates of age distribution of the population, data released as part of last Friday’s report allow one to estimate downward revisions in the 16+ civilian non-institutional population by age.

16+ Civilian Non-Institutional Population by Age Group Derived from* Household Employment Report, December 2016 (000’s)
Age Group Vintage 2015 Vintage 2017 Change
16-24 38,348 38,265 -83
25-34 43,839 43,692 -147
35-44 39,919 39,763 -156
45-54 42,212 42,103 -109
55-64 41,587 41,468 -119
65-74 28,913 28,794 -119
75+ 19,924 19,826 -98
Total 254,742 253,911 -831
*LEHC estimates


These new population estimates will, of course, be used by Census to produce household estimates based on the 2017 CPS/ASEC. However, Census typically does not revise previous-year estimates to reflect revisions in population estimates. As such, the change in the CPS/ASEC household estimate for March 2017 compared to the March 2017 estimate will probably be about 450,000 or so lower than it would have been without the recent methodological change used to estimate net international migration

These latest population revisions, including updated projections from Census for 2017, suggest that household projections based on the latest long-term population projections made by Census in December 2014 are woefully out of date. Here is a table comparing the population projections in that report for 2014, 2015, 2016, and 2017 compared to the most recent population estimates and projections (the latter of which only extend to 2017).

2015 Population Projections vs. Latest Estimates/Projections, U.S. Resident Population (000’s)
Projection from
December 2014
Latest Estimates/
Projections
Change
7/1/2014 318,748 318,563 -185
7/1/2015 321,369 320,877 -492
7/1/2016 323,996 323,128 -868
7/1/2017 326,626 325,534 -1,092


As the table shows, the most recent projection of the US resident population for 2017 is almost 1.1 million lower than the projection from late 2014.
Census Population ChangeGiven (1) the improved methodology to estimate net international migration, and (2) the Trump administration’s potential policies on immigration, it seems extremely likely that an updated long-term population projection would produce hugely different population projections for years subsequent to 2017 than those shown in the “latest” Census projections from late 2014. E.g., here is a table showing the components of change from Census’ long-term population projections from late 2014.

While updated estimates suggest that net international migration averaged about 900,000 over the past 5 years, the late 2014 projections assumed an average of about 1.256 million from 2015 to 2020. Even without the “Trump win” that number would currently be considered way to high, and today such a projection seems, in the words of demographer Dr. Vizzini, “inconceivable.”

For folks wondering why I am comparing recent estimates to a Census projection from December 2014, the reason is that the December 2014 projection is that latest the Census has released, and those projections have been used by quite a few analysts/institutions/organizations/etc. to produce and publish long-term projections of the number of US households. Indeed, in an unluckily-timed report released just eight days before the Census released it “Vintage 2016” population numbers, the Joint Center for Housing Studies published new household projections based on Census population projections from December 2014! (There are other serious problems with the JCHS report, but I won’t dwell on those).

So … If one both incorporated the latest Census population projections (including its new methodology for measuring net international migration), AND used updated assumptions on births, deaths, and net international migration for the next several years, what would an updated population projection look like? E.g., how should one translate what Trump and Trump officials (as well as Congressional officials) have said about immigration into a projection of net international migration? Frankly, I don’t know.

But let’s just make an “educated guess” that net international migration would be at a level lower than it recently has been, and let’s arbitrarily pick an average of 750,000. Combed with reasonable projections for birth and dealt rates, that would produce a population projection of something like that shown in the table below. (I am not adjusting Census’ latest projection for 2017).

US Resident Population Estimates and Projections (000’s)
December 2014
Projection
“More Trumpian” Difference
7/1/2015 321,369 320,877 -492
7/1/2016 323,996 323,128 -868
7/1/2017 326,626 325,534 -1,092
7/1/2018 329,256 327,647 -1,609
7/1/2019 331,884 329,751 -2,133
7/1/2020 334,503 331,840 -2,663


If such a lower net international migration number were to occur, then a “more reasonable” projection of the US resident population in 2020 would be a whopping 2.663 million below the projection in Census’ December 2014 population forecast used by quite a few analysts to project US household growth. The vast bulk of this reduction would be (1) in the adult population, and (2) in the foreign-born population. I have not yet attempted to see how such a different population projection would translate into a household projection, but some might call it “YUGE” enough to warrant throwing out household projections based on the “latest official” Census population projections, and instead focus on an updated forecast based on more reasonable population projections.

Read more at http://www.calculatedriskblog.com/2017/02/lawler-on-household-projections.html#1qVovtQYfPhB6MSc.99
Published at Wed, 08 Feb 2017 15:51:00 +0000

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40-Year Mortgages: Do They Exist?

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40-Year Mortgages: Do They Exist?

By Jim Probasco | February 3, 2017 — 11:36 AM EST

Is there such a thing as a 40-year mortgage? Most people think of a home mortgage as a loan for 30 years or less. However, longer mortgages, although less common, do happen. In fact, mortgages lasting 40, 50 and even 60 years have been around for a number of years. If you are thinking about a mortgage with an extended amortization or payback period, you should consider both the pros and cons of such an arrangement.

Pros of a 40-Year Mortgage

There are a number of reasons why a 40-year mortgage might make sense.

  • Lower Payment A 40-year mortgage will give you 10 more years to pay off your loan, resulting in a lower payment. From a cash-flow perspective, this could be helpful.
  • Bail-Out Option – Many people move long before they have paid off their 30-year loan. If you expect to sell your home in less than 40 years, the lower payment may outweigh the disadvantage of paying interest over a longer period.
  • Qualifying for a Larger Mortgage – If high interest rates keep you from qualifying for a loan on the house you want, a longer mortgage may lower the payment and put you in the house of your dreams.
  • Tax Advantage – High earners may see a 40-year mortgage as a way to write off more interest over a longer time period. If mortgage interest remains tax deductible, this could prove to be a real advantage for some people.
  • Fixed Rate – For those who plan to stay put for a number of years, a fixed interest rate over decades may be a real hedge against interest fluctuation.
  • Flexibility You’ll have a lower payment when household income is low, but as your income rises you can switch to biweekly payments, an extra payment a year or even a total refinance for a shorter term of 30, 20 or even 15 years.

Cons

There are, of course, arguments against paying for borrowed money over an extended period.

  • Higher Interest Rate – Many people don’t realize it, but a 40-year mortgage for the same amount will likely carry a slightly higher (typically 0.25%) interest rate than one for 30 years. Over time, higher interest expenses add up. This is not always true, so research rates extra carefully.
  • Paying Out More in Interest If you live in the house until the end of your mortgage, you will have paid out 10 years more in interest. That also adds up.
  • Slow Equity Buildup – When you pay off a loan over 40 years versus 30, the balance owed goes down more slowly. This means that when you do sell, you will realize less home equity.
  • Danger of Overextending Using a 40-year loan to buy a more expensive house could mean you’re buying more home than you can afford to keep up. This could be a real problem in the event of a loss of income or major emergency.
  • Lack of Availability Just because you want a 40-year mortgage doesn’t mean one will be available. Not all lenders offer them, so it’s best to check well in advance before making an offer on a house that depends on a lengthy loan.
  • Infinite Payments If you take out a 40-year mortgage and stay in the house, there’s a good chance you’ll be making house payments for the rest of your life. It will be similar to renting but with a tax deduction, albeit one that fades over time.

Alternatives

Instead of a 40-year mortgage, ask about an interest-only loan. Depending on your long-term goals and credit score, an interest-only loan might be a better deal. (For more, see How Interest-Only Mortgages Work.) Remember, though, that after the interest-only period you will start paying back both interest and principal and your monthly payments will jump considerably. Of course, if you’re planning to resell the house quite soon and housing values hold up, this could work well for you.

You can also consider making a larger down payment and financing for a shorter term, or you could look for a less expensive house. If a 40-year loan you are contemplating stretches your budget too much, it is financially wiser to cut back at the beginning. (For more, see Top 6 Mortgage Mistakes.)

The Bottom Line

Whether a 40-year mortgage makes sense for you depends on a variety of factors, not just how much you will pay out over the life of the loan. It’s important to consider all factors, including your best estimate of how long you plan to stay in the house, before deciding to seek an extended mortgage. The negatives were strong enough to include them in Investopedia’s 5 Risky Mortgage Types to Avoid.

But if you do go ahead anyway, don’t assume the interest rate on a 40-year loan will be higher. While that is typical, local competition and your credit worthiness can make a difference. Finally, before signing on the dotted line, be sure to consider the above alternatives to make sure one of them isn’t a better fit for your situation.
Published at Fri, 03 Feb 2017 16:36:00 +0000

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Improve Your Chances of Being Approved for a Mortgage

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Improve Your Chances of Being Approved for a Mortgage

By Lisa Goetz | Updated January 31, 2017 — 7:06 AM EST

There are few things more disappointing than finding a dream home, then applying for a mortgage and being turned down. Prospective homebuyers, especially those who have had their mortgage applications rejected in the past, and those with little to no credit, can benefit from thinking like lenders and putting their financial profiles under the microscope. These tips can improve your chances of getting a mortgage approved.

Know What Your Credit Report Says

Some mortgage applicants first learn their credit scores and the contents of their credit reports when they sit down with a loan officer to apply for a mortgage for the first time. Finding out about low credit scores and numerous negative entries on credit reports, such as late and missed payments and judgments, in front of a prospective lender, can be embarrassing and puts loan applicants on the fast track to rejection. At the first thought of buying a home, consumers should order copies of their credit reports from the three credit bureaus — Equifax, TransUnion and Experian 3 — and make a note of their credit scores. Lenders typically require credit scores higher than 680 for conventional mortgage approval — between 620 and 640 to approve government-insured mortgages such as FHA, VA and USDA loans — so people with credit scores lower than this range should contact the credit bureaus to correct errors and then make sure to pay their bills on time.

Pay Down Debt

Lenders want mortgage applicants to dedicate no more than between 36 and 43% of their gross monthly income to paying debts — such as car payments, installment loans and credit card bills; the lower percentage applies to conventional mortgages, and the higher percentage applies to government-insured mortgages. Individuals thinking about buying homes should first pay down as much debt as possible so that their total debt falls within these guidelines. Consumers don’t need to pay off their debts entirely — in fact, having some debt and paying it regularly shows financial responsibility — but consumers should aim to have as little debt as possible.

Have the Down Payment in Hand

The days of zero-down mortgages are over. Prospective homebuyers should have their down payments in their bank accounts well before they sit down with lenders to be taken seriously. Down payments for most home loan types can come from personal savings; many loan types also allow borrowers to use cash gifts for down payments, including FHA, VA, USDA and conventional loans, as long as the gifts are from approved sources per the loan type’s guidelines. Borrowers should, therefore, confirm their gift sources well in advance of applying for mortgages. Homebuyers planning to use funds from their retirement accounts, such as a 401(k), Roth IRA or traditional IRA, should confirm the procedure for borrowing money from the accounts, as well as the amount available to use for a housing purchase.

Stay Employed Throughout the Loan Process

A loan applicant’s job and the salary earned play a critical role in being approved for a mortgage. Even if applicants don’t like their job, he should keep it until the loan is approved. This is because the lender checks and rechecks the information loan applicants provide, and if an applicant is employed at the time of initial loan application and unemployed — or employed in a job paying less than the previous job — upon revaluation of the loan application, the lender won’t approve the mortgage.

Know How Much Home You Can Afford

The brand-new five-bedroom, three-bathroom house in the priciest subdivision in town might be the ideal home for many, but lenders only approve home loans for applicants can afford them. Before home shopping, prospective buyers should sit down with their loan officer of choice and get preapproved. Preapproval doesn’t guarantee final loan approval, but it gives homebuyers a price range in which to shop. Knowing this number makes for a less frustrating experience for homebuyers and the real estate agents helping them find homes. Most real estate agents won’t work with homebuyers unless they have been preapproved for a mortgage.
Published at Tue, 31 Jan 2017 12:06:00 +0000

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5 Ways an Open House Can Actually Hurt Your Home Sale

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5 Ways an Open House Can Actually Hurt Your Home Sale

By Donna Fuscaldo | Updated January 29, 2017 — 1:32 PM EST

Anyone selling their home has been trained to believe an open house is a good way to find a buyer. If you open your home to the public all weekend you’re sure to draw some foot traffic that could translate into a sale. But that may no longer be the case. Lots of times an open house can do more harm than good. According to the National Association of Realtors, only 9% of buyers found the home they purchased at an open house in 2014. That’s a 16% decline from 2004. The number of buyers that include open houses in their search stood at 44% in 2014, down 51% from 2004. (For related reading, see: Selling Your House? Avoid These Mistakes.)

The Internet Kills the Open House

Thanks to the Internet, the days of driving around from one open house to the next are over. Buyers do most of their research online, narrowing down their options before they even contact a real estate agent. There are a ton of websites and mobile apps that give buyers a plethora of homes to search through. They can even be alerted when new homes go on the market, or if a house they are eyeing has a change in price or goes into contract. Many of today’s buyers end up hiring a broker, getting access to the home on their schedule rather than during an open house. As a result, open houses have become a less powerful selling tool. (For more, see: Top 8 House-Hunting Mistakes.)

It Costs You Extra Money

Time is money and the longer it takes to sell your home the more costs you will incur, including the cost to host open houses. There’s candles, cakes and drinks for starters. Those little things may not seem like a lot but it can quickly add up. The air conditioning or heat may have to be on longer which means a higher utility bill. Let’s also not forget the time and cost of keeping your house in show-ready condition. Not to mention getting the kids and the pets out of the house and the stress related to the entire affair. The amount of time and money it costs to prepare for and host an open house has to be weighed against the expected outcome. If it’s only a handful of buyers that will be coming through your house, it may not be the wisest choice. (For more, see also: Take the Pain Out of Selling Your House—Online.)

Real Estate Agents Benefit More

Open houses are supposed to draw buyers but often all they do is bring your real estate agent new clients. That’s because unrepresented buyers often go to open houses, which means potential new business for your agent. And even if they don’t like your home, they may like the other homes your agent is talking about during your open house. That creates an awkward and questionable situation which may sour your relationship with a broker. (For more, see: How to Find the Best Real Estate Agent.)

Curious Neighbors May Be Your Only Visitors

Let’s face it, opening your home to strangers over the weekend can be a big hassle, even if you have been advised that it would be in your best interest. You grudgingly agree to the open house, rework your entire weekend or weekends only to find it’s only curious neighbors checking out your home. Lots of people who aren’t in the market go to open houses out of curiosity or to get ideas for their homes. And while it may be a fun way to pass the time, for you it’s a big waste of time. It’s also important to remember that serious buyers don’t have to wait for an open house as they can contact your agent directly to get a showing.

Theft Risk

One of the risks of an open house is that your belongings may get stolen. It may not happen all the time, but even one incident is enough to spook sellers and rightfully so. Since anyone can go to an open house, it’s not impossible for thieves to attend one in hopes of stealing cash, jewelry, electronics or prescription drugs. They can also use it as a way to scope out the residence for a future break in. While there isn’t any hard data on the number of thefts that occur during open houses, some police departments around the country have issued warnings to homeowners and real estate agents about the risk of being robbed.

The Bottom Line

Rewind a couple of decades and open houses were one of the few ways buyers could see homes for sale. But the Internet changed all of that, making it easy for buyers to search and view homes online. As a result, the open house isn’t such a winning proposition anymore. Not only does it take time and some money, but it also means you are opening up your home to strangers which carry certain aforementioned risks. Add data that doesn’t bode well for the effectiveness of open houses to the mix and sellers may be better off focusing their efforts somewhere other than an open house.
Published at Sun, 29 Jan 2017 18:32:00 +0000

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Fed to stop mortgage reinvestments in 2018: Morgan Stanley

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Speculation about the timing and framework on the U.S. central bank’s plan to pare its holdings of MBS and U.S. Treasury securities was rekindled after the Fed’s policy meeting on Dec. 13-14 at which they raised interest rates by a quarter point.

In the statement issued after that meeting, the Federal Open Market Committee, the Fed’s policy-setting group, said it will continue to reinvest principal payments from its MBS and Treasuries “until normalization of the level of the federal funds rate is well under way.”

Morgan Stanley analysts arrived at their call on the timing of the Fed ending its MBS reinvestments based on the Fed’s projected 3 percent longer-run equilibrium interest rate, together with their own forecast of two rate hikes in 2017 and three in 2018.

“Applying this informal guidance to our expectation for the rates path leads us to believe the Fed will halt its reinvestments of MBS in April 2018,” they said.

 

The Fed has maintained the size of its bond holdings at the current level through principal reinvestments since 2014 after its third round of large-scale bond purchases or quantitative easing ended.

“We believe the FOMC will halt its reinvestments of MBS in April 2018, preceded by a ramp-up in messaging and announcement in the March 2018 FOMC statement,” Morgan Stanley analysts wrote in a research note on Friday.

 

The Fed’s Treasuries and MBS holdings are about $2.46 trillion and $1.76 trillion, respectively. The Fed’s balance sheet size is equivalent to about 22 percent of gross domestic product, according to the analysts.

“Ending Treasury reinvestments is not necessary for a gradual normalization of the balance sheet; the economy should grow into the Fed’s Treasury portfolio within about a decade,” said Morgan Stanley economists and strategists.

 

While the Fed holds more Treasuries than MBS, the analysts said halting reinvestment of MBS is easier operationally though it may result in modestly higher mortgage rates for consumers.

It is also harder for the Fed to control the outcome if it stops reinvestments in Treasuries “namely that the impact on financial conditions and the economy would be out of the Fed’s hands,” they said.

 

(Reporting by Richard Leong; Editing by Chizu Nomiyama)
Published at Fri, 27 Jan 2017 19:34:16 +0000

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How Seasons Impact Real Estate Investments

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How Seasons Impact Real Estate Investments

By Ryan Boykin | January 7, 2017 — 6:00 AM EST

Cooling weather can mean a cooling real estate market, depending on where you live. Whether you are purchasing or selling a property, the supply and demand of housing matters. One of the factors impacting housing supply and demand is the seasonality of your market. While you might not think the seasons of the year have an influence on the price you are paying or asking for your home, it makes a big difference – in some cases, as much as 10%. How’s that for a seasonal discount?

Know Your Real Estate Market

The seasonality of a market varies from location to location. Each market has its own nuance. For example, cities like Phoenix experience a snowbird effect, wherein winter months are popular due to an influx of people coming from different regions, like the Northeast, who are relocating or buying a second home. Alternatively, in cities like Denver, the cold weather climate plays a part in the seasonality of the market by slowing down the typically brisk pace of home sales. (For more, see: When is the Best Time to Sell a House?)

It’s important to be able to identify the factors that influence your region so you can understand the impact of seasonality trends on the housing market.

Key Factors in Seasonal Real Estate

While the weather is something that will differ in each market, there are some nationwide considerations that contribute to seasonal trends in real estate. The holiday season and school year both hugely influence the supply and demand of any given market.

Buyers and sellers with children typically do not want to uproot their family in the middle of the school year and will wait until its conclusion so they have more free time for moving and the chance for a fresh start once the next school year begins. In fact, studies have shown the busiest moving times of the year occur during the summer, with June being one of the busiest months and July 31 the single busiest day, meaning people are likely shopping the housing market at the end of the school year and as the summer draws to a close.

Additionally, you will likely find fewer people moving during the holidays, which essentially eliminates the period between November and January. During this time of year people do not want to add the logistics of moving to an already hectic holiday season filled with family obligations, end-of-year deadlines, unpredictable weather conditions and more. (For related reading, see: Strategies To Buy The Perfect Vacation Home.)

How Seasonality Works for Home Buyers

Due to the fluctuations in supply and demand, it’s during this identified “seasonal pattern” that you’ll find you don’t have as much competition from the average homebuyer. With summer being the busiest moving time of year, people buy more aggressively than in the winter, limiting the number of available houses and raising market prices. In the winter, though, since nobody wants to deal with the inconvenience of moving during this time, these low-demand periods are perfect for those who are looking for a good deal. Because sellers aren’t necessarily getting a lot of interest or offers from others, they’re more willing to negotiate and you’re able to obtain a substantial discount on pricing. (For related reading, see: 5 Mistakes Real Estate Investors Should Avoid.)

Approaching Seasonality As a Home Seller

If you’re a seller, it usually means you’re a buyer. For a lot of people, this means you do not have the luxury of selling when everyone else is buying and buying when everyone is selling, because you need a home to live in during that gap. Additionally, as a seller, you want to be able to sell in a peak market when everyone’s getting eyes on your property and demand and pricing is high. However, if you don’t immediately need the proceeds from selling your home to go into the purchase of your next, then buying in the winter, setting up a short-term living arrangement – whether that be leasing, temporarily moving in with others or something else – and then selling in the spring, is a great way to maximize the trade between what you’re selling and what you’re buying.

Make the Most of Your Seasonality

For homebuyers, one of the best ways to determine how the seasons impact your specific market is to talk to your broker or agent. They should be able to provide you with the market metrics for your area, allowing you to monitor the patterns and fluctuations of average sales price for each month in the city where you are considering buying your new home. By comparing different months and years, you’ll be able to identify where there are significant peaks and lows and determine when there are substantial discounts on housing prices in your market.

Once you’ve defined the seasonality of your market, don’t let the “inconvenience mentality” keep you sitting on the sidelines. By not buying when everyone else is buying, you can find the house of your dreams and save money. Not only will you face less competition for the homes you are interested in, but sellers will be more motivated and any offer you submit on a home will stand a better chance simply because there are fewer buyers, meaning it’s unlikely you’ll have to deal with the aspects of multiple offers or going above asking price.

As with your groceries or clothes, when you’re able to get a discount it doesn’t make sense to skip the discount and pay full price. With real estate seasonality, it’s the same. You can save anywhere between 5%-10%, or tens of thousands of dollars, and have a better equity position in your home. Seasonality is simple supply and demand – don’t try and buy when everyone else is. (For more, see: 6 Mistakes to Avoid When Buying a Home.)
Published at Sat, 07 Jan 2017 11:00:00 +0000

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