Americans might be spending more than they can afford –Rebranded

Here’s a potential trouble spot for the U.S. economy: Americans might be spending beyond their means, dipping into savings to pay for their latest purchases.

Newly revised government figures show Americans continue to boost spending about 2.5% a year even though growth in after-tax income has slowed to around 1%. Figures are adjusted for inflation.

Gregory Daco, chief U.S. economist at Oxford Economics, said it appears Americans have been able to keep on spending by reducing their savings.

During most of the recovery, the U.S. savings rate ranged from 4% to 6%. Yet the U.S. savings rate began to slide at the start of 2016, and it fell to a nearly 10-year low of 3.2% earlier this year.

In June, the savings rate equaled 3.8%.

The low savings rate and big gap in income and spending come as quite a surprise. Before the government revisions, income growth was supposedly growing at a 2% to 2.5% annual pace. And the savings rate was listed above 5%. Everything seemed all right.

The recent changes in the government’s calculations, however, simply households aren’t doing nearly as well as previously believed.

Are Americans relying more on credit cards, home-equity loans or stock sales? It doesn’t appear so.

Consumers have recently cut back on credit, Daco noted — notably for auto loans. Home prices have only risen gradually, he pointed out, and the booming stock market tends to benefit wealthier Americans who don’t spend most of their equity gains.

Unless incomes increase faster, Americans probably can’t sustain their current rate of spending. If so, the economy could slow again in the near future.

“Savings dips tend not to be sustainable,” Daco wrote in a new report.

Courtesy of Market Watch and credited to Jeffry Bartash.

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Foreign buyers flood US real estate, but buy cheaper homes- Rebranded

The appetite for U.S. real estate continues to flourish, but international buyers are shifting their sights from luxury to less-pricey properties. This may be due to overall higher home prices, along with a stronger U.S. dollar, which both cost foreign buyers more at the negotiating table. There are also fewer nonresident foreigners investing in the market.

“Weaker economic growth throughout the world, devalued foreign currencies and financial market turbulence combined to present significant challenges for foreign buyers over the past year,” said Lawrence Yun, chief economist of the National Association of Realtors (NAR). “While these obstacles led to a cool down in sales from non-resident foreign buyers, the purchases by recent immigrant foreigners rose, resulting in the overall sales dollar volume still being the second highest since 2009.”

Foreign buyers purchased $102.6 billion of residential property in the U.S. between April 2015 and March 2016, according to NAR’s annual report on international activity in U.S. real estate. That is a 1.3 percent decline in dollar volume from the previous survey. The number of properties purchased, however, rose 2.8 percent to 214,885. The value of homes bought by foreigners was typically higher than the median price of all U.S. homes.

“The slight drop in dollar volume can probably be accounted for based on the types of properties purchased, and the locations of many of those properties. We’ve seen at least some evidence that foreign buyers — both investors and people just looking for a home — have begun looking beyond expensive markets like San Francisco, New York City and Washington D.C., and buying properties in smaller, less-expensive cities in the Southeast and Midwest,” said Rick Sharga, executive vice president at Ten-X (formerly Auction.com), an online real estate marketplace .

Another major shift was in the makeup of international buyers. Chinese purchasers continued to outpace all others, with their dollar volume exceeding the total of the next four ranked countries combined. Their dollar volume of sales, at $27.3 billion, was a slight decrease from last year’s survey but was still three times as much as Canadian buyers, who were ranked second. Chinese buyers also bought the most expensive homes at a median price of $542,084.

“Although China’s currency modestly weakened versus the U.S. dollar in the past year, it’s much stronger than it was five to 10 years ago, thereby making U.S. properties still appear reasonably affordable over a longer time span,” wrote Yun in the report.

Given today’s volatility in global financial markets, real estate is one of the safest investments available. U.S. real estate, in particular, it’s relatively inexpensive compared to properties in Asia.

“The explosive growth of the Chinese economy created a very large number of very wealthy people. As that country’s economy has slowed down, those individuals are looking for better investment alternatives, and many have concluded that U.S. real estate is a smart bet,” added Sharga.

London had been a favorite of foreign investors, but the impact of the Brexit vote is already hitting the housing market there. Buyers from the United Kingdom were the fourth-largest consumer of U.S. real estate in the data that was gathered before the Brexit vote.

“Sales activity from U.K. buyers could very well subside over the next year depending on how severe the economic fallout is from Britain’s decision to leave the European Union,” added Yun. “However, with economic instability and political turmoil outside of the U.S. likely to persist, the worldview of American real estate as a safe investment should keep demand firm even as pressures from a stronger dollar continue to weigh down on affordability.”

As for U.S. destinations, five states accounted for half of foreign buyer purchases: Florida, (22 percent), California (15 percent), Texas (10 percent), Arizona and New York (each at 4 percent). Latin Americans, Europeans and Canadians, who historically favor warmer climates, were most prevalent in Florida and Arizona. Asian buyers flocked to California and New York. Texas was more a mix of buyers from Latin American, the Caribbean, and Asia. Texas may be more of an investment play, as demand for single-family rentals there remains strong.

Sales to nonresident foreign buyers fell to the lowest dollar volume since 2013. Shares to foreign residents increased. The shares had been evenly split, but higher home prices and the depreciating value of foreign currencies likely played into that dynamic.

“Led by Venezuela (45 percent) and Brazil (24 percent), at least eight countries, including China and Canada, saw double-digit percent increases in the median sales price of a U.S. existing home when measured in their country’s currency,” added Yun.

Courtesy of CNBC and Credited to Diana Olick.

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Boston’s rising home prices, declining inventory constraining growing businesses-Rebranded

There is a trend among employers in the U.S. that is also occurring in and around downtown Boston. Companies are relocating, consolidating or expanding their headquarters in the vibrant, urban core. One of the reasons is the pursuit of younger, educated talent who are typically concentrated in cities. For Metro Boston, this employer trend includes companies such as General Electric, Partners Health Care, New Balance, Reebok and a regional office of Global Atlantic.

The challenge is accelerating Boston home prices and lack of inventory for sale. That means the demographic that these companies may be seeking — millennials — are being priced out of the Metro Boston real estate market. Furthermore, there is an extreme lack of inventory which is driving down sales and accelerating prices throughout the metro area, suburbs and even the entire Commonwealth of Massachusetts.

Millennials (ages 18-33) comprise the largest group of home buyers nationally, according to a “Home Buyer and Seller Generational Trends” report published last year by the National Association of Realtors. The study also found that despite many millennials preferring to live in an urban setting, the need for additional space and affordable housing has led them to purchase homes in the suburbs. The report concluded that last year only 15% of millennial buyers bought in an urban area, which was down from 21% three years ago.

Massachusetts saw a dip in home sales and increase in prices year over year. The Massachusetts Association of Realtors reported last month that despite the drop, median home prices for both single-family homes and condominiums hit all-time highs. The inventory also reached the lowest level for the season since MAR began recording the data in 2004.

For Greater Boston, the Greater Boston Association of Realtors found that year-over-year sales, days-on-market, and inventory are also down. As a result, prices are at an all-time record. Sales of single-family homes declined 2.2% while the median price increased 13.1% to $600,000. Inventory declined 29.6% while days-on-market declined 23.9%. Similarly, sales of condominiums are down 4.3% while the median selling price is up 8.9% to $525,381. Condominium inventory declined 17.5% and days-on-market is down 24.3% for the same time period.

Boston (cities and towns approximately within 15 miles of downtown Boston) is experiencing the same trends as the region and state according to GBAR. The median selling price of single-family homes is up 7.9% and condominiums increased 8.1% year-over-year. Inventory for single-family homes is down 29.4% and down 12% for condominiums. Sales for single-family homes saw an uptick of 1.5%, whereas condominium sales are down 4.6% year-over-year.

The current president of MAR stated “It’s not often that you see sales go down and prices hitting all-time highs. However, with the number of homes for sale so low, and demand so high, this is what we get. While we’ll be okay in the short-term if we don’t find a way to produce more housing our economy will feel the impact.”

The trend of employers gravitating closer to Boston and the lack of affordability and availability of desired housing may require more employees to commute. For Greater Boston, as in many large cities, this can present a challenge. The possible solutions for this would be to consider close-in towns that may have homes on the comparatively lower end of the price spectrum and to be close to a commuter rail line. Examples of this include town such as Dedham, Norwood, Natick, Medford, and Beverly. There are also new developments by the train that may include condominiums in the future — Boston Landing in Allston/Brighton and University Station in Westwood.

Courtesy of Market Watch and credited to Norman Holbrook.

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Investor Demand for Senior Housing Continues to Grow in U.S – Rebranded

According to CBRE’s latest U.S. Seniors Housing & Care Investor Survey, investor appetite for seniors housing & care real estate continues to grow, with the majority of investors who specialize in the sector planning to increase the size of their portfolios in 2017.

The 2017 survey reveals the intentions of the most influential seniors housing investors, developers, lenders and brokers throughout the U.S. Despite investors’ expectations for rising interest rates, nearly 60% of respondents expect to increase the size of their portfolios in 2017 compared with 47% a year ago.

Compared with prior survey results, the change in expectations for capitalization rates was negligible, indicating the possibility for more pricing stability. The number of investors anticipating a rise in cap rates increased to 44% from 33% a year ago, with only 4% expecting to see a decrease. More than half (52%) of investors expect capitalization rates to remain stable over the next year.

A noticeable shift was apparent in the compression of investment Class C assets that CBRE attributes to increased interest from investors for value-add opportunities in a yield-constrained market. The largest increase was reported for investment Class A nursing care at +24 bps from a year ago, which is likely attributable to the uncertainty regarding health care legislation or investors’ concern over the surging pricing for nursing care properties in recent years.

Independent living eclipsed assisted living as the biggest opportunity for investment, increasing to 40% of respondents from 31% a year ago. Similarly, age-restricted properties also gained interest as participants begin to direct their attention towards the more lifestyle focused spectrum of seniors housing. Memory care properties continued to lose ground, with investors now seeing the last opportunity for this property type, likely due to the overbuilding of this segment in recent years.

Increased construction activity remained the top concern for investors (38%) that would negatively impact the seniors housing and care market over the next 12 months, followed by rising interest rates (22%) and property-level operation (21%). Rising interest rates showed the biggest increase from 11% a year ago.

“Investor interest in the seniors housing sector is clearly rising. Favorable investment yields, the need-driven component of demand and the aging population storyline will continue to drive investment into the sector in 2017 and entrench its attractiveness to investors. We expect valuations to remain stable in this year with a strong long-term outlook. The industry’s fundamentals suggest the necessity for more capacity over the long-term, with short-term oversupply in select markets becoming more likely as a result of the recent record-setting construction levels,” said Jeanette Rice, head of multifamily research, Americas, CBRE.

“As the sector goes through a period of “institutionalization”, the corresponding operational results will continue to evolve with greater efficiencies and innovative design trends, which will be welcomed by investors and developers in the face of increasing supply. The seniors housing investment market is expected to move into a more rational transaction period as capitalization rates slowly increase. A shift in investors’ focus from development and acquisitions to the portfolio and operating platform optimization is also likely. Sound property level operations, capital inflows from foreign investors, and moderated development trends will be critical to maintaining short-term valuations,” said Zach Bowyer, managing director, Valuation & Advisory Services, CBRE.

Courtesy of WORLD PROPERTY JOURNAL and credited to Michael.

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Real Estate Recap on July 2017 -Rebranded

Day-by-day market activity:

Friday, July 7
U.S. Bureau of Labor Statistics Employment Situation Summary

  • Total nonfarm payroll employment increased by 222,000 in June, and the unemployment rate was little changed at 4.4 percent, the U.S. Bureau of Labor Statistics reported today.
  • Employment increased in health care, social assistance, financial activities, and mining.
  • In June, the unemployment rate, at 4.4 percent, and the number of unemployed persons, at 7 million, were little changed. Since January, the unemployment rate and the number of unemployed are down by 0.4 percentage point and 658,000, respectively.
  • The number of long-term unemployed (those jobless for 27 weeks or more) was unchanged at 1.7 million in June and accounted for 24.3 percent of the unemployed. Over the year, the number of long-term unemployed was down by 322,000.
  • In June, 1.6 million persons were marginally attached to the labor force, down by 197,000 from a year earlier.
  • Employment in professional and business services continued to trend up in June (+35,000) and has grown by 624,000 over the last 12 months.

Thursday, July 6

Mortgage Applications Increase in Latest MBA Weekly Survey

  • Mortgage applications increased 1.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 30, 2017.
  • The refinance share of mortgage activity decreased to 44.9 percent of total applications from 45.6 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.2 percent of total applications.
  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) increased to its highest level since May 2017, 4.20 percent, from 4.13 percent, with points decreasing to 0.31 from 0.32 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) increased to its highest level since May 2017, 4.10 percent, from 4.09 percent, with points increasing to 0.23 from 0.20 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
  • The average contract interest rate for 15-year fixed-rate mortgages increased to its highest level since May 2017, 3.43 percent, from 3.39 percent, with points decreasing to 0.32 from 0.33 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
  • The average contract interest rate for 5/1 ARMs increased to its highest level since March 2017, 3.37 percent, from 3.31 percent, with points decreasing to 0.22 from 0.25 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.
  • The 30-year fixed mortgage rate on Zillow Mortgages is currently 3.83 percent, up 16 basis points from this time last week. The 30-year fixed mortgage rate rose throughout the week, reaching 3.87 percent on Tuesday before falling to the current rate on Wednesday.
  • The rate for a 15-year fixed home loan is currently 3.07 percent, while the rate for a 5-1 adjustable-rate mortgage (ARM) is 3.09 percent.

“Mortgage rates moved decisively higher last week, reaching their highest levels in two months, on speculation that the European Central Bank is looking to end its bond-buying program which has helped hold down long-term interest rates around the world,” said Erin Lantz, vice president of mortgages at Zillow. “Despite a holiday-shortened week, important economic news later in the week – notably today’s publication of the minutes of the Federal Reserve’s June meeting and Friday’s monthly jobs report – could move rates.”

Wednesday, July 5

  • Home prices nationwide, including distressed sales, increased year-over-year by 6.6 percent in May 2017 compared with May 2016 and increased month-over-month by 1.2 percent in May 2017 compared with April 2017.
  • The CoreLogic HPI Forecast indicates that home prices will increase by 5.3 percent on a year-over-year basis from May 2017 to May 2018, and on month-over-month basis home prices are expected to increase by 0.9 percent from May 2017 to June 2017.
  • Overall single-family rent inflation was 3.1 percent on a year-over-year basis in May 2017 compared with May 2016.
  • Nationally, the year over year home price changed by 6.6 percent. Most states experienced increases, except Alaska, West Virginia and Wyoming. The states with the highest increases were Utah (10.4 percent) and Washington (12.6 percent), both experiencing double-digit increases.

“For current homeowners, the strong run-up in prices has boosted home equity and, in some cases, spending,” said Frank Nothaft, chief economist at Core Logic. “For renters and potential first-time homebuyers, it is not such a pretty picture. With price appreciation and rental inflation outstripping income growth, affordability is destined to become a bigger issue in most markets.

Courtesy of Inman and Credited to the writing staff.

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