Approximately 16 percent of REALTOR® respondents reported that their last sale was for investment purposes (same as in May), according to the June 2014 REALTORS® Confidence Index. Since January of this year, the share of sales for investment purposes appears to be on the decline from the historical average of about 20 percent in recent years. For investors intending to rent out the property, rising home prices are cutting into profits even if rents continue to rise.
Median price growth improved in 122 of 173 markets in the 2nd quarter of 2014. Salem, Oregon surged 24.9% on a year-over-year basis followed by Eugene. With the exception of Lansing and Charlotte, markets in the California, Nevada, and Florida rounded out the top 10 (left, below).
While the number of markets that experienced year-over-year growth eased from 126 in the 1st quarter to 119 in the 2nd, 23 markets shifted from negative year-over-year growth in the 1st quarter to positive growth in the 2nd. Smaller markets in the Midwest and South dominated this list, sustaining an expansion of growth or stabilization in the 2nd quarter as the large, coastal markets eased.
Curious how your market has done? NAR Research recently released Local Market Reports for the 2nd quarter of 2014. These reports cover market fundamentals of supply and demand for more than 172 metro areas.
Home prices are still broadly rising. Approximately 68 percent percent of REALTOR® respondents reported that the price of their “average home transaction” is higher today compared to a year ago (same as in May), according to data from the June 2014 REALTORS® Confidence Index. About 21 percent reported constant prices, and 11 percent reported lower prices. Tight inventory has sustained prices and has encouraged more home selling, but it has also made homes less affordable in an economy where incomes and jobs are expanding modestly.
- Personal income in the U.S. continues to increase, which assures consumer spending will contribute to economic growth in the upcoming months. Income from wages is rising steadily. Rent income is shooting high. Farmer income is falling in line with lower crop prices.
- The total personal income from all sources rose by 3.9 percent in June from a year ago. Income from wage and salaries gained 5 percent and profits earned by entrepreneurs also rose by 5 percent. But interest income hardly changed with historical low interest rates. Meanwhile, farmers’ income fell by nearly 20 percent (though from very high levels). Politicians still need to be mindful of farmers’ moods in Iowa.
- Rental income continues to rise at a good pace with a 7 percent gain. The rent income is accruing a large number of investors who bought homes in the past few years. Apartment rent increases of around 3 to 4 percent are also contributing to the overall rent income growth.
- Income from unemployment checks is falling rapidly. Though there were few loud complaints about the unemployed households unable to feed the family when the eligibility extensions were ended, the rapid decline in unemployment payments combined with a general increase in private sector income are very positive indicators about the direction of the economy. Tough love may have induced people to find work faster.
- As should be obvious, income helps but is not the sole factor for human happiness. Research shows that having good reliable friends to talk with is one of the best indicators to general happiness. For those financially fortunate, giving money to charities also raises happiness.
- For those with absolutely no human feelings other than getting a strong itch in the palm when money is talked about, there tends to be only a short-term ephemeral happiness. Benedict Arnold after receiving a huge 20,000 pound payment for betraying America lived out his final years in poverty and in disgrace in London.
At the national level, housing affordability is down for the month of June due to higher prices and qualifying income levels despite the lowest mortgage rates of the year.
- Housing affordability is down for the month of June as the median price for a single family home in the US rose again. The median single-family home price is $224,300 up 4.5 % from June 2013 as year over year price gains are continuing to slow down.
- Mortgage rates are up 56 basis points (one percentage point equals 100 basis points) from last year, nationally, affordability is down from 168.5 in June 2013 to 153.4 in June 2014.
- Changes in the credit approval process may increase the number of potential home buyers improving their chances at finding a loan. New homes will help inventory which in turn will tame price growth, making it a good time to enter the market for those considering purchasing a home.
- Affordability is down slightly from one month ago in all regions. The Midwest had the biggest drop in affordability. From one year ago, affordability is down in all regions. The West saw the biggest decline in affordability at 10.5 %.
- Homeowners are still able to take advantage of programs that allow them to refinance and lock in a low mortgage rate with price growth providing equity. Locking in a lower rate now will save money paid in interest for the long term.
- What does housing affordability look like in your market? View the full data release here.
- The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principle and interest payment to income). See further details on the methodology and assumptions behind the calculation here.
- Initial claims for unemployment insurance filed under the regular state programs during the week ended August 9 rose to 311,000, an increase of 21,000 from the previous week’s level. The trend has generally been downward so the spike may just be due to data volatility. The 4-week moving average in which volatility has been smoothed out is at 295,750 claims which is still below the benchmark of 300,000 that most analysts consider as an indicator of normal economic activity.
- Initial claims data by state lag a week compared to the national level data. For the week ended August 2 during which unemployment insurance claims fell to 290,000, the states that reported large decreases were California (-9,244), Tennessee (-1090), and New York (-1063). NY reported a decline in claims from the food service, educational service, and transportation/warehousing sectors.
- Commercial REALTORS® should expect a boost in demand for warehouse spaces.
- Consumer spending at retail shops is growing less robustly now than before. Retail sales in July were up 3.7 percent from one year ago, and marked a deceleration from the 5-to-7 percent growth experienced in recent past years during economic recovery periods. The retail vacancy rates will therefore barely move down from the current high level.
- Regarding home-related spending, people are spending more for outdoors items rather than for indoors. Sales of building materials-and-garden equipment rose by 5.1 percent while sales at furniture-and-home furnishing shops grew by only 2.5 percent. Only a robust home sales recovery can kick up sales in these stores.
- Spending at restaurants is gaining speed, up 6.2 percent from a year ago. It could be related to huge stock market gains over the past few years that may be helping the wealthier people to enjoy good food and fine wine. More restaurants could be opening.
- Not at a restaurant, but spending at liquor stores also increased with surprising strength at 8 percent. Let’s hope recent gains are related to people celebrating events and not for drowning their sorrows.
- The decelerating retail sale growth is not good news for commercial REALTORS® needing to find tenants for empty retail spaces, though working with Pharmaceutical companies looks to have a better pay-off. Another trend worth noting is the rise in sales via the internet, which means there will be increasing demand for warehouse spaces though not for retail spaces. As a testament of that trend, job growth in warehousing is about twice as fast as in retail trade.
- NAR expects the retail vacancy rate to hover at 10 percent and retail rents to rise at 2 percent this year and next.
- Two other retail sectors of note are the fast sales growth (8 percent) occurring at pharmacy and drug stores and falling sales (minus 2 percent) at sporting shops. Is America becoming less healthy or is this trend related to America getting old?
- In that vein, ancient classical Greeks loved competition. There were frequent officially sponsored contests. The Olympics was one. But there were other competitions that drew huge crowds as well such as who could write the best tragic plays. The country lived by the simple motto of “a healthy mind in a healthy body”. Remember that when you’re tempted to just sit and watch TV. Get moving and think creative thoughts – about business or other matters. Raise a glass to celebrate. But don’t allow, as F. Scott Fitzgerald would lament, the drink to take you.
Approximately 28 percent of REALTOR® respondents reported that their last transaction in June was by a first time home buyer (27 percent in May) , according to the June 2014 REALTORS® Confidence Index.
Tight underwriting standards are especially challenging for first-time buyers, who generally need mortgage financing with low down payment terms, may be paying off student debt, and may have credit scores that are not top-notch. REALTORS® have also reported that the increase in FHA mortgage insurance costs is discouraging buyers or making loans unaffordable. Inability to pay for closing costs was also reported to be adversely affecting sales.
 First time buyers account for about 40 percent of all homebuyers based on data from NAR’s Profile of Home Buyers and Sellers. NAR’s survey of buyers and sellers in general does not capture investor purchases but does cover both existing and new home sales. In contrast, NAR’s Realtor Confidence Index Survey, which surveys REALTORS®, captures purchases for investment purposes.
- Fed survey shows growing prime lending, but weak elsewhere
- Lenders cautious after implementation of new rules; more caution in jumbo and non-traditional space
- Consumer costs in general have risen due to compliance costs
- Lending would be tighter without temporary exemptions for GSE production
- CFPB should consider a permanent GSE exemption and compensating factors
The Federal Reserve released its Senior Loan Officer Opinion Survey (SLOOS) for the 2nd quarter of 2014 on Monday. The report covers lending patterns for prime, subprime, and non-traditional (jumbo) loans. This quarter’s reports shows some positive movements in prime lending, but ominous signs about the new regulatory environment.
Respondents indicated a strong net improvement in willingness to lend to prime candidates. As depicted below by the blue line below, when asked whether they were tightening or loosening standards, on net the field indicated 20% more were loosening than tightening, the first significant improvement since the housing decline in 2009. Lending to non-traditional mortgages showed modest improvement, but subprime lending remained unchanged from its tight stance. The improvement in lending for prime loans was led by large banks and likely reflects actions by lenders such as Wells Fargo to expand lending to lower FICO borrowers with the use of compensating factors.
Demand for loans showed a similar pattern with prime borrowers increasing, non-traditional interest modestly higher, while demand from subprime borrowers was neutral. A survey by the New York Federal reserve from earlier this summer suggested that borrowers with lower credit scores expect to apply less often for mortgages over the remainder of 2014 and they expect to be rejected for those applications at a higher rate than borrowers with better credit scores. The implication is that the sluggish response from non-prime borrowers could reflect the weak borrower expectations.
Also of interest in this quarter’s SLOOS is a set of questions related to the new rules that went into effect on January 10th of this year and which govern all mortgage lending practices. The new rules require lenders to verify a borrower’s ability to repay the mortgage (ATR) or face legal action. A lender can earn a presumption of compliance with the ATR by fulfilling certain obligations that define the loans as a qualified mortgage. There are two levels of QM loans, the safe harbor which grants more legal safety and a rebuttable presumption.
When asked to identify the extent to which the new ATR/QM rules impacted their likelihood of approving an application for a prime borrower with a FICO greater than or equal to 680, 32.9% of lenders indicated that their approval rate was “somewhat” lower than it would otherwise be and 2.9% indicated that it was “much” lower, while 1.4% indicated that it was “somewhat” higher. The caution though was disproportionately more evident among small and mid-sized lenders, 47.1% of whom indicated a “somewhat” lower willingness to approve loans as depicted below. This pattern was also true when lenders were asked about prime borrowers with credit scores below 680.
A separate survey released this week by Bankrate.com showed an 8.5% increase in lender origination fees from 2013 to 2014. Respondents indicated the higher fees were a result of increases in staffing and compliance costs that resulted from the new rules.
Finally, the Fed survey asked lenders who indicated that their lending was “the same” under the new rules whether elimination of the GSE’s exemption to the 43% back-end DTI requirement would have impacted their outlook. Of these respondents, 36% indicated that their policies would be “somewhat” tighter without the exemption while 18% indicated it would be “substantially” tighter.
With the new ATR/QM roughly six months behind us, it appears that lenders remain cautious about the new rules and are passing on compliance costs to the consumer. However, the rules have helped to reduce some risks with lenders hesitant to make loans with risky product features and verifying a borrower’s ability to repay. Still, it appears that there are some areas, including the 43% DTI, where the CFPB could improve liquidity by making this rule permanent for the GSEs and exploring the use of compensating factors for non-GSE loans with DTIs greater than 43%.
• There is an all-time high in commercial property prices, according to Green Street Advisors. The price index in July was unchanged from the record-high set in June. It is up 6.0 percent from one year ago and up a whopping 76 percent from the cyclical low five years ago.
• For those who took the plunge to buy during the scary times in 2009, the returns on their investments have been quite spectacular. Warren Buffet’s adage – “buy when others are fearful and sell when others are greedy” – appears right-on regarding recent cycle of commercial real estate. But given the likely rising interest rate environment, the opportunities for further price gains could be limited. That is, there will be less chasing of yields and chasing after commercial real estate if alternative investments like the U.S. Treasury offer higher interest rates.
• This Green Street Advisors index is should be taken with a grain of salt. First, it captures the information of contracts and appraisal data, and not the final transacted prices. Second, it only tracks properties that are very expensive in cities like New York and San Francisco. It misses out on commercial property prices of local bakeries in Indianapolis or warehouse building across the railroad tracks in Chattanooga, for example.
• Another index from the Federal Reserve shows recovering prices but not at record highs.
• Commercial REALTOR® members are active in all markets and have indicated that commercial property prices have only turned positive in the past year. The prices are nowhere near record highs. This also means there could be a reallocation of investment money away from Green Street-type properties to smaller-sized commercial buildings in mid-sized cities.
Many people choose to change location when they retire. Below is a story based on the migration flows for retirees (65 years +) in the 100 largest metropolitan areas. Specifically, the story compares the percentage of people (any age) moving from different state to these cities and the percentage of retirees moving and living in these cities.
- Florida has experienced the highest inflow of retirees. The area between Sarasota and Cape Coral – Fort Myers are the most favorable cities among retirees on the move. Miami has also large number of retirees moving (12.6%) and living (24.5%) there.
- McAllen, Texas has a large number of retirees moving to the city. Almost one out of five people moving to the city is a retiree. The benefits of lower medical cost across the border may be the reason.
- Phoenix and Tucson have many retirees moving and living in the city.
- One out of 10 people moving to Las Vegas is 65 years and older.
- Youngstown (16.1% of the population), Scranton (18.1%) and Buffalo (16.1%) have a sizable retiree population. But the reasons are due to younger people going elsewhere.
Click on the tabs to follow the story. Hover over the map for a snapshot of each metro area’s share and see how the map changes moving along the story. Data collected from 2010 through 2012 as part of the American Community Survey (ACS). Metro areas are colored with dark green indicating the highest percentage and, respectively with red indicating the lowest percentage. “Movers” are identified as people moving from different state to the city and “Retirees” as people 65 years and older.
- American workers became more productive in the second quarter after dozing off in the first quarter. Productivity – measured as total output for a given hour of work – rose 2.5 percent in the second quarter after having fallen 4.5 percent in the first quarter. Aside from quarter-to-quarter choppiness, productivity has been growing at less than one percent for the past 4 years.
- By comparison, during the economic glory days of the 1950s and 1960s in the United States, when standards of living rapidly rose and the U.S. became an economic superpower, productivity grew by nearly 3 percent annually.
- REALTOR® productivity has been rising recently. Thanks to a housing recovery from 3 years ago, average transactions per REALTOR® have risen from 10 transactions a year in 2011 to 12 transactions a year in 2012 and 2013. Those who are new to the industry are far less productive, with an average of only 3 transactions a year, while those who have been practicing for over 15 years have on average 15 transactions per year.
- Real estate brokerages are also getting more productive in terms of utilizing smaller square footage of office space per agent. There used to be about one back-office staff person for about 15 to 20 agents. Now the figure is said to be one back-office staff person for 25 to 35 agents.
- Consistent productivity growth will solve many economic problems. GDP will expand faster. The budget deficit will fall more rapidly. Entitlement spending can be better absorbed. And most important, standard of living will rise with more leisure hours. Let’s hope U.S. productivity can kick into higher gear soon and on a consistent basis.
- Some industries by nature cannot increase productivity. Classical music concerts always require a certain number of musicians playing the violin and cello. That is, one cannot reduce the number of musicians and get the full effect. A Broadway show is similar – there needs to be a certain number of performers to make it work. In these industries, ticket prices become ever more expensive over time since productivity cannot rise.
- ESPN analysis shows that many multimillionaire sports players are said to go bankrupt within 5 years of retirement. This is likely related to having a large entourage. Any unproductive person tagging along with a star and getting paid will drain away dollars quite quickly.
Presentation by Dr. Anthony Downs, Senior Fellow Brookings Institution
Summary by Jed Smith, Managing Director, Quantitative Research
The REALTOR® University Brown Bag monthly lecture series features presentations by well-known economists, analysts, and social scientists on evolving national and regional issues of interest to REALTORS®. Lectures are available on www. realtor.org. The presentation by Dr. Anthony Downs focused on a housing issue of interest to everyone—traffic congestion: Watch the highlights video.
Most Americans agree that traffic congestion is a major problem in their communities, and congestion seems to be getting worse. Dr. Anthony Downs discusses the problems of traffic congestion—based on his book Still Stuck in Traffic. He focused on three major issues:
- Why congestion occurs: Efficiencies of scale from the interaction of people increase as the number of people present increases. Bigger areas and gatherings of people produce even more efficiency than is the case for smaller gatherings. Economic efficiency, growth, and congestion seem to vary together.
- Where future population growth is likely to develop: Dr. Downs noted that urban planners advocate high density, high rise population concentrations. However, analyses of urban areas with population growth in recent years have shown that the majority of population growth has occurred in the suburbs. High density population concentrations have not proven to be popular, although urban planners view such concentrations as desirable—their story and they are sticking to it! Planners project an additional 129 million additional people living in central cities over 2010-2050. There just isn’t enough space in the central cities to accommodate this number of people. Again—more commuting and congestion due to people commuting.
- Will walkable communities will dominate future housing choices? Dr. Downs noted that urban planners focus on walkable communities as an ideal for the future development of cities, alleging that the Millennial generation prefers to walk, bike, or use public transportation. As he indicated, the Millenials have not yet reached two important stages in life: marriage and children. Small children need open space, monitored gathering places, playgrounds, and specialized facilities and services—not walkable open air bars and great shopping experiences.
What Does this Mean to REALTORS®? It’s easy to note that a house is in the midst of congestion. In some cases, that may be good for the prospective buyer—congestion goes with the desirable features. In addition, finding a home near good shopping and restaurants sounds great, but the buyer may want to think ahead a few years as to how the home will fit with long term needs.
- The most boring economic statistical trend is U.S. population. It grows by one percent each year, a gain of about 2 to 3 million. The trend arises from about 4 million live births and about 2 million deaths in the U.S. each year. Legal immigration makes up the remainder.
- More people should mean more housing demand. But that is not always the case. What really matters is household formation. One household can be one person living in a city apartment. One household can also mean a family of six living in a suburban home. Population growth therefore can be accompanied at times by no growth in households if a young adult moves-in with a parent(s). Currently, there are a record number of such cases. Such crowded living arrangements do not create housing demand.
- Bad news: Historically, there had been about 1.2 to 1.4 million net new household formations each year in the U.S. The figure is typically low during an economic downturn and then bounces higher as better times return. What is most perplexing today is that the household formation has been running at half the normal rate for not one or two years but for seven straight years.
- Good news: It seems near impossible for household formation to remain crunched as it has been in the upcoming years. Household formations are therefore bound to pop-out. That in turn will create demand for both rental and ownership housing. Home sales and housing starts will therefore mostly rise in the upcoming years.
- Conversely, as common sense would have it, countries or regions experiencing population declines will have less need for new home construction and should expect far fewer home sales. Germany, Italy, Japan, and Russia are current examples. People in these countries are choosing to have fewer babies and hence the housing industry should not expect rolling times.
- Not from choice, but terrible events can lead to major depopulation. Europe, on August 4th, took pause to remember the horrific war that occurred 100 years ago. At the start, soldiers mobilized across Europe with an enthusiastic spirit as if going to a football match. Then the reality of dirty trench warfare took hold. 16 million died during the war. After the war ended, another tragedy struck. The Spanish Flu spanned the globe and took even more lives: 20 to 40 million. Though inconsequential to the above matter, records show virtually no new houses being built for about twenty years in France.
With home inventories limited relative to demand, properties were reported as selling faster for the sixth straight month, typically at 44 days (47 days in May) , according to the June 2014 REALTORS® Confidence Index. Short sales were on the market for the longest, at 120 days (125 days in May), and foreclosed properties were on market at 54 days (57 days in May). Non-distressed properties were on the market at 42 days (44 days in May). Conditions varied across areas.
Approximately 42 percent of respondents reported that properties were on the market for less than a month when sold, and about 5 percent were on the market for more than six months.
 This is the median days on the market. A median of say 30 days means that half of the properties were on the market for less than 30 days and another half of properties were on the market for more than 30 days.
- Shadow inventory – defined as the number of properties in the foreclosure process or in serious delinquency status – fell modestly in June from the prior month and is well below the level of one year ago. The overall trend is far fewer scary properties in the pipeline. That automatically means fewer distressed property sales in the future and should also mean a better appraisal process.
- Here are the fresh numbers according to Black Knight Financial Service:
- Seriously delinquent or in foreclosure was 4.17% in June, up from 4.22% in May, but down from 5.6% one year ago.
- The number of foreclosure starts did increase to 88,314 from 86,258 over the month. But this is not a trend but the timing of when states are initiating the foreclosure process, particularly in judicial states.
- NAR’s data from the REALTORS® Confidence Index shows a marked decline in distressed property sales. The number of foreclosure sales made up only 8 percent of all sales while short sales comprised only 4 percent. REALTORS® who specialized in this market segment should be aware of declining business opportunities in the months ahead. The comparable figures this time next year will be about half of today’s distressed figures.
- Some states have made a spectacular progress. Shadows in Arizona and California have been all but burned off.
- Some states still have looming shadow inventory and hence will be lagging behind in home price recovery. New Jersey and New York are prime examples of where the court system has been very slow to move turn the property into an REO. Anecdotal stories abound of “distressed homeowners” still in a home even after not paying mortgages for more than 2 years. Some are said to game the system, such as leaving the residence and finding a renter: paying no mortgage and collecting rental income. Do not be surprised therefore if current mortgage borrowers in NJ and NY are paying higher mortgage rates to compensate for this type of lender risk.
Presentation by Brooking Institution’s Jennifer Bradley
Summary by Jed Smith, Managing Director, Quantitative Research
The REALTOR® University Brown Bag monthly lecture series features presentations by leading economists, analysts, and social scientists on evolving national and regional issues of interest to REALTORS®. Jennifer Bradley focused on a new approach to revitalizing urban areas and creating more jobs though the integration of technology and community networking:
Ms. Bradley noted that the top 100 U.S. urban areas account for approximately 75 percent of U.S. GDP, 1/8 of land, and 2/3 of the people. She views urban areas as the place where innovation and resources can create jobs. Bradley noted that until recently, the approach to job growth has focused on government spending to prime economic activity. Based on her work with the Brookings Metropolitan Project she has propounded a new job creating paradigm based on innovation and networking.
Bradley notes that metropolitan areas are ideally suited for the promotion of innovation. Urban areas typically have a wide variety of assets—research centers, educational centers, diverse populations, creative individuals, and transportation and other resources. In the examples which she cites she focuses on a key approach for success in job creation: activating networks across organizations to provide a basis for experimentation, innovation, and interpersonal contact, resulting in the full utilization of an areas assets. In short, cities can create value by creating opportunities for networking and experimentation. She indicates that the development of a vibrant networked culture will drive the types of growth discussed in the Metropolitan Revolution.
What Does this Mean to REALTORS®? As leaders in the community with numerous contacts REALTORS® may have an opportunity to help with job growth, community revitalization, and the growth of business—which is good for everybody’s business.
In addition to the talk, the videos referenced in Ms. Bradley’s talk can be found on-line:
- Solid job gains of 209,000 in July, bringing the 12-month tally to 2.6 million. Job gains will be critical for home sales and commercial leasing activity in what will inevitably be a rising interest rate environment ahead.
- Construction related jobs rose by 22,000 over the month and by 211,000 in the past year. Though positive, the construction jobs are not rising as fast as housing starts, which imply there is a labor shortage in this sector. Homebuilders and general contractors will need to pay higher wages to entice people to work in homebuilding.
- A typical worker’s wage rose by 2.0 percent over the past 12-months. Since consumer price inflation is running roughly the same (2.1 percent in July), there is no net gain in purchasing power for consumers. Consumer’s housing costs are rising faster: national rents at 3-to-4 percent and national home prices at 4-to-9 percent depending upon data source. Local market data has larger variations.
- The unemployment rate rose a notch to 6.2 percent. The increase is due to more people re-entering the labor force. The trend of more people searching for work is a good development even if they cannot find a job right away. A healthy person should not be sitting on a couch at home all day.
- The employment rate – how many of the adult population have jobs – stood at 59 percent. Before the financial market crisis in 2008, the employment rate had been 62 to 64 percent. So there is still a plenty of room for improvement in America’s employment situation.
- The latest data is good all-around and we hope the trend continues. But one sad commentary is worth noting. Aside from construction, there is an acute labor shortage in trucking driving. A college degree is not required and annual pay can be $80,000 to $100,000 after putting-in overtime hours. Yet, the trucking industry is having difficult time finding drivers. The reason: drugs. Irrespective of how one feels about drug usage, from the libertarian view of free choice as long as it harms no one to some claims of health benefits, the trucking industry is focused on only one thing: safety! And many applicants, unfortunately, cannot pass the drug test.
REALTORS® generally expect home prices to increase in all states and the District of Columbia over the next 12 months, according to the June 2014 REALTORS® Confidence Index. The median expected price increase is 3.6 percent .
Expected price movements depend on local conditions relating to housing demand and supply, demographics, and job growth. Difficulties in accessing mortgage financing, and modest expectations about overall economic and job prospects are factors underpinning the modest price expectation. The expected price growth was highest in FL, TX, CA, and OR, where inventory remains tight, and where there are strong growth sectors (e.g., technology, oil) and cash sales (FL).
 The median expected price change is the value such that 50 percent of respondents expect prices to change above this value and 50 percent of respondents expect prices to change below this value. A median expected price change is computed for each state based on the respondents for that state. The graph shows the range of these state median expected price changes. To increase sample size, the data is averaged from the last three survey months.
- There was a sharp bounce back in GDP in the second quarter, with a 4 percent growth rate. This assures that a recession is not in the cards and that job gains will continue.
- Gross Domestic Product, or GDP, tries to measure the monetary value of all things produced in the U.S. It also indirectly measures everyone’s income all combined. The fact that it grew solidly on the heels of a measurable decline in the first quarter is reassuring that people’s income and job gains will continue. That in turn will help build an additional pool of home buyers and increase leasing activity in commercial real estate.
- The latest growth was led by solid gains in residential construction (7.5 percent gain) and a respectable growth in business spending (5.5 percent gain). Consumer spending growth was humming along at 2.5 percent. The government spending contribution was modest. The net export situation deteriorated a bit as Americans bought too many foreign-made things.
- Caution Ahead: there was a sizable growth in business inventory. This trend counts as current production but also means there is less need to rapidly expand in the months ahead. GDP growth for the remainder of the year is likely to be 2 to 3 percent. For the year as a whole, accounting for the disappointing first quarter, GDP will likely expand by only 1.7 percent in 2014.
- U.S. GDP growth of 1.7 percent looks puny when compared to the second biggest economy in the world. China is projected to grow by 7 to 8 percent. The gap between the two largest economies will therefore narrow.
- The very fast growth in China is creating many growing pains. Pollution conditions are absolutely awful – just as was the case in the British Industrial Revolution in the past century. Some processed food was found to contain anti-freeze and some pork meat was colored to look like beef. Confucianism is being set aside in favor of materialism. Many women from watching a popular dating show are said to prefer “crying in the backseat of a BMW over laughing on the back of a bicycle.” Not too different from the U.S. reality shows of a similar genre.