Foreclosures coming?

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.

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 | 14 Comments

UK brings out the big guns to fight recession

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

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

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?

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.

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

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.

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?

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

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.

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%

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

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

Upgrade your house … on Joe

From CBS News:

Biden’s inflation law offers up to $14,000 for home upgrades. Here’s how to qualify.

President Biden’s Inflation Reduction Act takes on climate change by helping Americansreduce their carbon footprint. A key element in that push is offering up to $14,000 in rebates and tax credits for people to make their homes more energy-efficient.

Those benefits can be used to lower the cost of home upgrades, ranging from installing heat pumps to buying new electric appliances like stoves and dryers. About 40% of carbon emissions stems from buildings, so such incentives could help the U.S. achieve its goal of lowering fossil-fuel emissions, said Lauren Urbanek, senior energy policy advocate at the nonprofit Natural Resources Defense League. 

“This gives people some very concrete and generous incentives to do that, both in the form of tax credits and direct cash rebates,” Urbanek told CBS MoneyWatch. “This is the biggest federal investment in buildings ever, at least one that is specified for climate change.”

There are two separate rebate programs, according to the NRDC. 

  • The HOMES Rebate Program: This provides more than $4 billion to states to help residents make their entire home more energy-efficient. The program provides rebates based on the energy savings their upgraded home will achieve. For instance, homeowners that make changes that cut their energy usage by at least 35% can get up to $4,000 in rebates. That amount is doubled for low- and middle-income households, who can get up to $8,000 in rebates. 
  • High-Efficiency Electric Home Rebate Act (HEEHRA): This provides rebates for low- and middle-income families to electrify their homes, such as by installing heat pumps or electric clothes dryers. The per household rebate is capped at $14,000, and households can’t receive two rebates for the same upgrade. For instance, if they claim a HOMES Rebate program for a heat pump, they can’t also get a rebate through the HEEHRA. 

Posted in Economics, National Real Estate, Where's the Beef? | 206 Comments

The power of positive thinking

From Bloomberg:

US Consumers See Home Prices Falling for First Time Since 2020

For the first time in two years, US consumers expect home prices to fall over the next 12 months.

An August survey by Fannie Mae found that respondents see a 0.4% decline in housing prices compared with the prior month’s expectations for a 1.9% increase. 

Consumers also anticipate that rental price growth will slow, with year-ahead expectations dropping nearly two percentage points, the steepest slide in data back to 2010, according to the survey released Wednesday.

The Fannie Mae report found that the share of respondents who say home prices will go up in the next 12 months decreased to 33% from 39%, while the percentage who expect them to fall increased 3 percentage points to 33%. 

“The share of consumers expecting home prices to go down over the next year increased substantially in August,” said Doug Duncan, chief economist at Fannie Mae. “We also observed a large decline in consumers reporting high home prices as the primary reason for it being a good time to sell a home, suggesting that expectations of slowing or declining home prices have begun to negatively affect selling sentiment.”

The Fannie Mae survey found that half of consumers think it would be difficult for them to get a home mortgage today — the largest share since October 2014.

Posted in Economics, Housing Bubble, National Real Estate | 107 Comments

Ain’t gunna happen?

From the Washington Post:

It’s a Housing Slump, Not a Crisis

I’m in the process of building a house, so I recently met with the head of a real estate brokerage to discuss selling my current home in about a year. Knowing that I worked in finance, he asked me my views on the housing market because he said he was seeing lot of doom and gloom on the internet.

First, all real estate is local. The housing market where I live in coastal South Carolina is still strong. Although transactions are down from a year ago, that’s because there are very few houses on the market. A lot of people – many of them cash flush and not impacted by rising interest rates — are moving here from other parts of the country, and I wouldn’t have any trouble selling my house today if I wanted. He agreed.

He also agreed when I told him that you can’t randomly scroll on Twitter these days without running into predictions of an impending housing collapse. Jeff Weniger, the head of equities at WisdomTree investments, recently posted a thread on Twitter labeled “Housing is in trouble” that went a bit viral. The thread was well-researched with charts and data to back up each of his points, such as how the supply of new homes has skyrocketed, as have monthly principal and interest payments on mortgages. Correspondingly, the National Association of Home Builders’ Housing Market Index has tanked. New and existing home sales have dropped precipitously, and affordability has tumbled to 2005 levels.

Some people take these facts and extrapolate them into a thesis, which is that a housing crisis is coming that will be equal to or greater than the one that we experienced in 2008. In fact, judging from what I read online, this seems to be the prevailing view. I suppose some of this is understandable. The Federal Reserve is raising interest rates like never before, and I suppose that in some nightmare scenario higher borrowing costs will choke off demand for credit. But I doubt it will get that far, given how important the housing market is to the economy, accounting for anywhere between 15% and 20% of gross domestic product.

There are two main reasons why we are not going to experience another crisis in residential real estate. The first is that housing is financed much differently than in the years leading up to the subprime mortgage collapse and resultant financial crisis. You had no money down mortgages, “liar” loans, NINJA loans, interest only mortgages, negative amortization mortgages and numerous financial innovations on top of those – all of which were facilitated by poor underwriting standards. Then, those mortgages were packaged together into bonds given top AAA credit ratings. Those bonds were then packaged into high-risk securities called collateralized debt obligations that were also assigned the highest credit ratings. Finally, Wall Street created many hundreds and hundreds of billions of dollars of risky credit-default swap contracts tied to all those bonds and CDOs. It was a virtual daisy chain of leverage, and when people stopped paying for mortgages they shouldn’t have been given the first place, there was a domino-like effect that led to a bailout of some of the country’s biggest financial institutions. 

Today, there is no market for subprime mortgages or related bonds, CDOs and credit-default swaps to speak of. What is out there is negligible and certainly not a threat to the financial system. I am not much of a fan of regulation, but it’s clear that things like the Volcker Rule, the Dodd-Frank Act and Basel III have made the financial system safer by curbing excessive risk-taking. In fact, it may be nearly impossible to have a housing-related crisis ever again. I recently obtained a construction loan for my new home, and I can assure you that the underwriting standards were the opposite of lax. At the very end of the process, my lender required a 30% down payment instead of 20% out of an abundance of caution. 

The second reason is that consumers have massively deleveraged themselves. Almost half of mortgaged properties were considered equity-rich in the second quarter, meaning owners had at least 50% in home equity, according to real estate data provider Attom. Bloomberg News reported that it was the ninth straight quarterly increase, helped in part by an increase in down payments by recent buyers. Nationwide, the portion of mortgaged homes that were equity-rich reached a record 48.1% in last quarter, up from 34.4% a year earlier. Meanwhile, the share of homes that were considered seriously underwater — where the mortgage is 25% greater that the property’s estimated market value — dropped to a low of 2.9%.

Posted in Demographics, Economics, Employment, Housing Bubble | 61 Comments

Will services save us from recession?

From Quartz:

The service economy is keeping the US from slipping into a recession

As US manufacturing activity slows down, spending on services is keeping the American economy afloat, recent data suggests. 

Growth in the services sector accelerated in August for the second month in a row, according to the Institute for Supply Management index released Tuesday. The indicator, which is based on a survey of purchasing and supply executives, came in at 56.9% in August, reaching its highest point in four months. (A reading above 50% denotes expansion.)

Survey responses show a booming services sector as companies benefit from a slowdown in inflation and more reliable supply chains. Executives in a variety of areas, from mining to real estate, reported business is growing. Agriculture, forestry, fishing and hunting, and arts, entertainment and recreation were the only two sectors to contract.

“Starting to see some cost pressures relief,” said one survey participant in the food services industry. “The overall supply environment is healthy.”

Other data underscore the trend. The personal consumption expenditure report, released by the Bureau of Economic Analysis a couple of weeks ago, showed that, adjusted for inflation, spending on services increased by 0.2% in July compared to June.

Posted in Economics, Employment, Housing Bubble, National Real Estate | 68 Comments

Who pops first?

From MarketWatch:

‘An increasing squeeze on list prices.’ 3 top economists and real estate pros on the housing markets where home prices will drop the most this year

Buyers in some markets are already getting — or may soon get — some relief in the form of lower home prices, pros say. Already, in the last 4 – 8 weeks, experts have noticed downward price pressure in higher priced markets that were previously robust. (See the lowest mortgage rates you may get now here.) “These were markets where the median sale-to-list price ratio was running well in excess of 5% above list price, and examples include San Francisco, San Jose, Austin, Denver and Seattle,” says Chris Stroud, co-founder and chief of research at HouseCanary, a technology-powered national brokerage that provides residential real estate analytics.

ll of the cities listed above experienced a pretty quick decline in their respective median closing prices during July and August as buyers no longer had to get into bidding wars or make offers above asking to be competitive. “Median closing prices have largely stabilized in these markets for the most part over the last few weeks now that excesses have been worked out of the system,” says Stroud. 

The markets with the highest share of price cuts in Realtor.com’s July data are mostly clustered in the Sun Belt and include Las Vegas, Phoenix, Austin, Sacramento, Denver, Portland, Dallas-Fort Worth, Nashville, Tampa and San Diego.

Those same markets may see more declines, says Realtor.com’s senior economist George Ratiu. “As we look toward the next few months of rebalancing, we can expect these markets to feel an increasing squeeze on list prices, as seasonal trends take deeper root and buyer traffic waves from summer’s peak.”

For their part, a team of Goldman Sachs strategists said that metro areas in the west are more likely to see a price correction, and that’s “especially true for markets with low levels of housing affordability, such as Seattle, San Diego and Los Angeles.”

Markets that saw an especially large influx of out-of-staters — places like Boise, Denver and Salt Lake City — may be more vulnerable to price drops as the shift to remote work is largely complete, says Kate Wood, home expert at NerdWallet. “It’s a double whammy for home sellers as the influx of deep-pocketed out-of-staters dries up and many local residents are now priced out. With home prices remaining high, these markets are still far from buyer-friendly, but sellers probably shouldn’t expect the bidding wars and zero-contingency offers that proliferated over the last two years,” says Wood. 

Posted in Demographics, Economics, Employment, National Real Estate | 128 Comments