Housing’s Impact on Economic Growth

Posted July 19, 2019 by The FHA Condos Approval Company, Inc.
Categories: FHA Condominium Approval

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A new report from CoreLogic examines how housing has played a part in what is now the longest economic expansion on record. According to a CoreLogic special report, titled “The Role of Housing in the Longest Economic Expansion,” in July 2019,  the United States’ economic expansion reached 121 months. The economy has continued to grow since the recession ended in 2009, and with housing comprising approximately 15% of GDP since 2010, the real estate market is an important indicator of economic health.

“During the last nine years, the expansion has created more than 20 million jobs, raised family incomes and rebuilt consumer confidence,” said CoreLogic Chief Economist Frank Nothaft. “The longest stretch of mortgage rates below 5% in more than 60 years has supplemented these factors. These economic forces have driven a recovery in home sales, construction, prices and home equity wealth.”

In Q1 2019, the total percent of homes underwater went from 25.9% in the first quarter of 2010 to 4.1% in the first quarter of 2019. Meanwhile, home equity reached $15.8 trillion up from $6.1 trillion in 2019. Additionally, CoreLogic notes that home flipping has increased significantly since the recession, reaching its highest point 11.4% in 2018.

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Reforming Fannie and Freddie

Posted July 19, 2019 by The FHA Condos Approval Company, Inc.
Categories: FHA Condominium Approval

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The Trump administration’s plan for Fannie Mae and Freddie Mac may not be published until September. Reuters reports that the U.S. Treasury is dealing with several other issues, putting the plan for the GSEs on hold for now.

According to Federal Housing Finance Administration (FHFA) Director Mark Calabria, he hopes Fannie and Freddie will have exited, or will be ready to exit, conservatorship before his term ends in 2024. Calabria told Reuters that he is not operating toward a hard deadline.

“That’s my time horizon,” he said. “I’m under no expectation to try to get all this done. … So if in four years, nine months they’re not out of conservatorship, I’m not pushing them out.”

Calabria stated that Treasury Secretary Steven Mnuchin is currently “juggling a number of balls,” while Craig Phillips, Mnuchin’s adviser who had been closely involved in the reform plan, also left in June.

Additionally, Calabria stated that the Treasury will back some form of government guarantee for Fannie and Freddie in the report, and notes that the government does not have forever to overhaul them and needs to progress while the housing market remains stable.

“The market looks pretty strong now, so that to me is the time when we want to make real repairs,” he said.

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Homeownership Rates Missing the Mark

Posted July 18, 2019 by The FHA Condos Approval Company, Inc.
Categories: FHA Condominium Approval

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Potential homeownership demand in 2018 increased by just 0.66% when compared to 2017, but the homeownership rate underperformed potential demand by 8.7%, according to the First American Homeownership Progress Index (HPRI). 

“The homeownership rate is influenced by shifts in underlying demographic and economic factors, as well as housing market conditions. Close examination of these underlying forces can provide a more in-depth look into the changes in the homeownership rate over time,” said First American Chief Economist Mark Fleming.

The HPRI reported declines in unemployment rates, income growth, rising education attainment, and a higher share of married households all aided growth in potential homeownership.

Factors that contributed to the decline of homeownership demand, though, included the number of children per household, and an increase in the 30-year fixed rate mortgages.

“Historically, potential homeownership demand as measured by the HPRI has mostly outpaced the actual homeownership rate, meaning the actual homeownership rate should have been higher based on the lifestyle, societal and economic trends influencing the demand for homeownership,” said Fleming. “This was largely due to demographic trends as baby boomers settled down to form households of their own.”

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Investors Setting Their Sights on Starter Homes

Posted July 18, 2019 by The FHA Condos Approval Company, Inc.
Categories: FHA Condominium Approval

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According to CoreLogic Deputy Chief Economist Ralph McLaughlin, investor homebuying in 2018 was the highest on record. Investors purchased around 11% of available homes that year, and in this Video Spotlight, McLaughlin discusses why investors are focusing their efforts on the starter home market, and what impact this may have on potential homebuyers.

According to CoreLogic data, “mom-and-pop” investors grew from 48% of all investor-purchased homes in 2013 to over 60% in 2018, and these small-volume investors seem to be focusing primarily on starter homes. Investors purchased starter homes at 2-3 times the rates of middle upper-tier homes.

“Why are investors buying homes at high rates in some markets and lower rates in others?” McLaughlin asks. “Simply put, investors are attracted to markets where rents are relatively high compared to purchase prices. This called a cap rate, and it is highly correlated with the share of investor activity across the largest 100 markets.”

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What is Causing the Decline in Single-Family Authorizations?

Posted July 17, 2019 by The FHA Condos Approval Company, Inc.
Categories: FHA Condominium Approval

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BuildFax’s latest Housing Health Report revealed year-over-year declines in single-family housing authorizations, as they have fallen 2.75% since 2018.

Also seeing declines are existing housing maintenance volume (0.75%) and existing remodel volume (0.33%).

The report uses U.S. property condition and history data to deliver economic trends, includes information on the states that had the largest year-over-year increase in average maintenance costs.

“So far, 2019 has revealed a dichotomy in the housing market—new and existing construction activity is declining steadily, while the spend on these projects is increasing consistently,” said BuildFax CEO Holly Tachovsky. “Spending is rising, in part, due to increased tariffs on construction materials, tightening labor and construction markets and an uptick in natural disaster activity. Colorado, Florida and Washington have seen the greatest increases in maintenance spend year over year, which may indicate a relationship between elevated construction costs and national affordability challenges. We expect that construction spending on the existing housing stock will eventually start declining as demand slows. As we move further into 2019, we will be monitoring whether these indicators begin to move in parallel to evaluate if such a shift in the housing market is realized.”

The report states that while maintenance volumes declined 0.75%, spending rose 6.68%, and remodel spending grew 2.47% despite a decline in the volume of remodels.

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Housing in the Slowing Economy

Posted July 17, 2019 by The FHA Condos Approval Company, Inc.
Categories: FHA Condominium Approval

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Despite expectations that the Federal Reserve will significantly ease monetary policy through the end of the year, the Fannie Mae Economic and Strategic Research (ESR) Group expects 2019 and 2020 real GDP growth to slow to 2.1% and 1.6%, respectively. This prediction has been driven by an inverted yield curve, weak business investment, waning consumer and business sentiment, and ongoing trade and global growth concerns. The ESR Group also predicted that the Fed will cut interest rates by 25 basis points in July, followed by another 25 basis points in December.

“As the current U.S. expansion celebrates its tenth anniversary, it does so under an economic backdrop of growing domestic and global uncertainty – and slowing growth,” said Fannie Mae SVP and Chief Economist Doug Duncan. “The heightened uncertainty, stemming in part from the seemingly intractable trade dispute between the U.S. and China, appears to have reduced business’ investment incentive, which is now poised to be a material drag on growth over the forecast period. With consumer spending the principal remaining GDP growth driver, in addition to the recent re-inversion of the yield curve suggesting that market participants expect economic activity to slow further, we believe that the Fed will take a more accommodative posture beginning with a rate cut at the July meeting of the FOMC.”

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Hispanic Influence on the Housing Market

Posted July 16, 2019 by The FHA Condos Approval Company, Inc.
Categories: FHA Condominium Approval

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Hispanics are one of the fastest growing group of homeowners in the U.S., the Wall Street Journal reports. WSJ states that Hispanics are experiencing the largest homeownership gains of any ethnic group in the U.S., bouncing back from a 50-year low in 2015. Data from the U.S. Census Bureau indicates that HIspanic homeownership has increased by 3.3 percentage points since 2015, compared to the overall U.S. homeownership rate increase of 1.3 percentage points since the homeownership rate bottomed out in 2016.

The National Association of Hispanic Real Estate Professionals (NAHREP) states that Hispanics accounted for the majority of new U.S. homeowner gains over the past decade, making up nearly 63% of total gains.

“The housing market would look very different today if it weren’t for a tidal wave of Latino home buyers,” Gary Acosta, NAHREP’s co-founder and Chief Executive told WSJ.

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