June 13, 2017 –
We have previously brought up the listing shortages which seems to be constraining the real estate market while price growth continues. This shortage of listings presents a major opportunity for builders. Of course, builders are facing several shortages as well and these are constraining their ability to keep up with demand, especially within the first-time buyer market. These shortages include a lack of skilled labor and a lack of buildable lots in many areas. Thus, there are several shortages which are constraining the growth of the real estate market.
Could these shortages be related to the labor situation? We had another jobs report recently which showed a similar pattern. The number of jobs added was disappointing again. Yet, the unemployment rate moved to lows not seen since 2001. Could it be that we are running into a labor shortage? With the overall labor participation rate low, we expected that people would be coming back into the labor force as jobs were created, but perhaps their skills do not match the types of jobs that are open. Similarly, there are plenty of buildable lots in America, but not near many cities which are growing.
If the Federal Reserve Board meets this week feeling that we are facing a labor shortage and that wages are about to rise, they are likely to raise rates. If they feel that we just need to create more jobs, then they may not raise rates. While this one question may be an over-simplification of the situation and will not be the only one they face, it will be interesting to hear their statement after the meeting.
The Markets. Rates continue to drift lower, setting another 2017 low this past week. For the week ending June 8, Freddie Mac announced that 30-year fixed rates fell to 3.89% from 3.94% the week before. The average for 15-year loans moved down to 3.16%, and the average for five-year adjustables remained at 3.11%. A year ago, 30-year fixed rates averaged 3.60%. Attributed to Sean Becketti, chief economist, Freddie Mac — “The 10-year Treasury yield fell 3 basis points this week. The rate on 30-year fixed loans moved in tandem with Treasury yields, falling 5 basis points to 3.89 percent. Mixed economic data and increasing uncertainty are continuing to push rates to the lowest levels in nearly seven months.” Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
June 9, 2017
|Daily Value||Monthly Value|
|6-month Treasury Security||1.11%||1.04%|
|1-year Treasury Security||1.19%||1.12%|
|3-year Treasury Security||1.47%||1.48%|
|5-year Treasury Security||1.75%||1.84%|
|10-year Treasury Security||2.19%||2.30%|
|12-month LIBOR||1.724% (May)|
|12-month MTA||0.776% (May)|
|11th District Cost of Funds||0.645% (Apr)|
|Prime Rate||4.00% (Apr)|
If you’ve heard that some people might get a boost to their FICO credit scores — without having to do anything — you’re right. According to a new study of 30 million credit files by score developer FICO, many Americans will experience bumps in the coming months, mainly modest increases of less than 20 points. But hundreds of thousands of the increases will be super-sized — in the range of 40 to 60 points and higher. That’s because, as part of an agreement with state attorneys general, in early July the three national credit bureaus will stop collecting public information on virtually all civil judgments and roughly half of all tax liens. Equifax, Experian and TransUnion have determined that the accuracy of the public records in these areas does not meet their standards. That means the wrong people too often got tagged with issues that affected their ability to get the terms they deserved. But unanswered questions remain: How many credit files contain civil judgment or tax liens, erroneous or otherwise? After all, though many consumers’ credit files include bad information, other consumers face legitimate judgments and liens. So, some applicants’ credit scores may be artificially inflated. Examining giant samples of credit files supplied by the credit bureaus, FICO estimated that between 12 million and 14 million Americans have judgments or tax liens listed that could be affected by the changes. When these items are purged, their FICO scores tend to jump. Most of the affected consumers’ files had score increases between 1 and 19 points — not a big deal. But between 1 million and 2 million consumers appear to be in line for score boosts of 20 points to 39 points. At least 300,000 people could see increases of 60 points or higher, simply because negative information will be expunged from their files. Source: Ken Harney, The Nation’s Housing
After the recession, renters—particularly millennials—were flocking to urban areas, and as such, urban apartment construction surged to record-high levels. But now, a new study shows that’s changing. Renters are now targeting the suburbs in greater numbers. From 2011 to 2015, suburban areas outpaced urban areas in renter household gains in 19 of the 20 largest U.S. metros. Rent Café researchers speculate that cheaper rents may be one major factor driving new renters to the suburbs. In an analysis of a database of the 20 largest U.S. metros, Rent Café found that, on average, renters can save about a month’s worth of rent in one year by opting to rent in the suburbs over an urban area. Source: Rent Café Blog
Twenty-six percent of millennial college students say they plan to move back home as soon as they earn their degree in order to pay off some of their student loans, according to TD Ameritrade’s Young Money Survey of about 2,000 young adults. Thirty-two percent of millennials between the ages of 20 and 26 say they owe between $10,000 and $50,000 in student loans. The average student loan balance was $10,205. That is prompting more graduates to move back home with their parents to curb costs. Nearly half of the post-college millennials surveyed say they had “moved back to my parents’ home after college.” About one-fourth of those who are still in college say they expect to move back with their parents following graduation. “Today’s college grads are clearly under financial strain due to escalating tuition and stagnant wages,” says JJ Kinahan, chief strategist at TD Ameritrade. “Moving back in with mom and dad is a short-term sacrifice that could pay off in the long run. But that’s only if the ‘boomerang’ young adults are saving and wisely investing the thousands of dollars they would’ve spent on rent and other living expenses, and paying down their student debt.” Survey respondents ages 20 to 26 say they think it would be “embarrassing” to still be living with their parents by age 28. However, nearly 30 percent of respondents say they wouldn’t start to feel embarrassed until they were between the ages of 30 and 34. Eleven percent say they would not feel embarrassed about living with their parents beyond the age of 35. Source: USA Today