In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the homeownership rate.
- The U.S. homeownership rate remained roughly stable at 65.2 percent in the 4th quarter of 2013 from 65.3 in the 3rd quarter of the same year. It was also roughly the same as the 4th quarter of 2012 when the rate was 65.4 percent. If adjusted for seasonal variation, the rate has remained stable at 65.1 percent since the second quarter of 2013.
- The Census Housing Vacancy Survey, the source of this data, shows that there are just shy of 115 million households in the U.S. and slightly fewer than 75 million of those households own the home that they live in. This also means that every one percent change in the homeownership rate at this population size results in a shift of 1.2 million households from renting to owning or vice versa.
- The Census bureau actually has several estimates of the homeownership rate which are slightly different and typically show similar trends. This particular data source has been published quarterly since 1965. As shown in the graph below, this is not the first boom and bust that we’ve seen in the homeownership rate. From the beginning of the series in 1965 through 1980 the homeownership rate was on a slow and steady rise from a low of 62.9 percent. In 1980 it peaked at 65.8 percent before falling back to 63.5 in 1985.
- From its 1985 low through 1995 the homeownership rate remained in a roughly narrow range of 63.5 to 64.5. In 1995, the homeownership rate began a steady ascent that peaked at 69.2 percent in 2004. Since that time, the rate has receded, but at slightly higher than 65 percent, it remains higher than the 1985 to 1995 norm. With a year’s worth of readings around the 65 percent mark, has homeownership reached its near-term low? Will it stabilize at 65 percent for a long time as it did in the late eighties and early nineties or will it climb again? Only time will tell.
- In favor of a stabilizing homeownership rate, homeownership rates have begun to rise in the Midwest and South—regions with homeownership rates already above the US average. By contrast, homeownership in the West continues to slump and the pattern in the Northeast varies substantially from quarter to quarter.
In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest mortgage applications data.
- Seasonally adjusted applications to purchase homes rose 1.5% in the week ending January 24th compared to the prior week. The purchase index is roughly 12% lower than the same time in 2013. Last week’s improvement comes after a 3.5% drop in the prior week. Purchase applications have been volatile after a sharp increase in the week prior to the implementation of the new qualified mortgage rule two weeks ago.
- The Qualified Mortgage rule went into effect for all applications received on or after January 10th. The “QM” rule introduced stronger underwriting, fee and pricing protections for consumers, but those protections could also raise costs or limit credit access for some consumers.
- The average rate for a 30-year fixed rate mortgage as reported by the Mortgage Bankers Association eased five basis points from the prior week to 4.52%, and has eased nearly 14 basis points in the last 2 weeks.
- In a bit of a surprise, new purchase applications for conventional mortgages eased 0.3% following a decline of 2.9% in the prior week, but applications for government financing jumped 5.8%, bettering the prior week’s decline of 5.2%. This shift could hurt the relatively nascent revival of the private mortgage insurance business if it is sustained.
- Mortgage applications have been volatile since the implementation of the new qualified mortgage rule two weeks ago. Since then mortgage rates have eased helping to buttress applications. What’s more, the MBA’s index reflects a larger mix of retail lenders than small and mid-sized independents whose influence grew in the last two years as a result of the refinance boom. The qualified mortgage rule is likely to have a stronger impact on these small to mid-sized mortgage originators as they are not exempt from the rule nor do they have the deep legal resources to move aggressively in this new regulatory environment as many of the larger retail operations would. As a result of these two factors, this week’s reading may mask to some extent shifts in the market. Still, applications reflect the same moderate downward trajectory relative to last year as foot traffic, pending home sales and existing homes sales have displayed in recent months.
Home prices are generally still rising. About 89 percent of REALTORS® who responded to NAR’s monthly survey reported constant or rising prices (87 percent in November). Healthy demand, the drop in distressed sales, and low although improving inventory levels have supported the price growth. See the December REALTORS® Confidence Index Survey report for more information.
Approximately 11 percent of reported sales were of properties that sold at a net premium to the original listing price. In mid-2013, about 20 percent of REALTORS® reported selling properties at a premium.
In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s second update discusses the Case Shiller Home Price index.
- Case Shiller data is yet another source confirming that home price increases continued in November 2013. The 10-city and 20-city indexes each rose by 13.8 and 13.7 percent, respectively, from November 2012. NAR data released last week showed a gain of 8.9 percent in the same period and showed continued gains of 9.8 percent in the year ending December 2013.
- While this increase was the 18th consecutive month of year-over-year increases in home prices reported by the 20-city index and the 9th consecutive month of double-digit year-over-year gains, the index remains about 20 percent below the peak it reached in July 2006.
- It’s also of note that NAR data for November showed a deceleration or slowing in the rate of price growth whereas Case Shiller data shows acceleration or increase in the rate of price growth. This is probably due to the lag in the Case Shiller data.
- NAR reports the median price of all homes that have sold while Case Shiller reports the results of a weighted repeat-sales index. Case Shiller uses public records data which has a reporting lag. To deal with the lag, Case Shiller data is based on a 3 month moving average, so reported November prices include information from repeat transactions closed in September, October, and November. For this reason, the changes in the NAR median price tend to lead Case Shiller.
- NAR data showed continued price growth in December but a deceleration from the double-digit pace seen in the summer and spring, so expect Case Shiller repeat prices to follow suit.
- Case Shiller reports price indexes for the 20 cities it tracks in addition to the 20-city index. By its measure of prices, Denver and Dallas are the only metro areas to have fully recovered from housing price declines to reach recent new highs, but Denver is slightly below the high it set two months ago.
- As seen in other house price measures such as NAR’s, Case Shiller showed the biggest 1-year price growth in western cities such as Las Vegas (27.3%), San Francisco (23.2%), Los Angeles (21.6%), and San Diego (18.7%). The smallest year-over-year gains were seen in the East and Midwest in cities like New York (6.0%) and Cleveland (6.0%).
- Americans are less pessimistic than before, but not yet optimistic. The latest consumer confidence index rose to 80.7 in January from 77 in December and 72 in November. However, it has yet to reach the 100 line, the point at which it is considered neutral. For comparison, the index was in the 110s during the second-term of Ronald Reagan Presidency and in the 130s during the second term of Bill Clinton’s Presidency.
- The trend, however, is a steady improvement. At the depths of the economic downturn, the index was touching a record low of 25. Further steady improvements in the job market will continue to lift confidence, which in turn can lift people to make major expenditures including home purchases.
- Changing the mood of the country can have a measurable impact on the country while costing not a dime of taxpayers’ money. But getting a speech right or projecting power is never an easy task from the country’s leadership persepctive.
- Back during the 1930s Great Depression, FDR wanted to try everything possible to lift the spirit of the folks. He even hid his physical handicap in order to show health and strength, though being in a wheelchair would be considered a less consequential matter in today’s world. Winston Churchill also had huge confidence in America at that time just as the stock market was tanking big time (1932), saying in essence that U.S. will continue to go on living with a strong resurgence even if the rest of the world sank into sea (as he watched the menacing growth of Nazism in Germany and terror in Stalin-ruled Soviet Union). Churchill put his money where his mouth was – in the U.S. stock market – and wound up making a hefty return. Confidence matters.
Confidence about current market conditions was essentially unchanged from November to December . The REALTORS® Confidence Index for single family sales registered at 59 (same as in November). The indexes for townhouses/duplexes was at 43 (42 in November) while the index for condominiums was at 37 (38 in November). An index of 50 marks “moderate” conditions. See the December REALTORS® Confidence Index Survey for more information.
Confidence about the next 6 months saw a slight improvement in December. The 6-month outlook index for single family rose to 66 (64 in November). The index for townhouses slightly rose to 48 (46 in November) while the index for condominiums registered at 44 (43 in November). REALTORS® expressed concern about a variety of factors that can impact the market such as the new regulations pertaining to the Ability to Pay Rule for Qualifying Mortgage, the reduction in FHA loan limits, uncertainty regarding flood insurance rates, and the state of the economy.
 An index of 50 delineates “moderate” conditions and indicates a balance of respondents having “weak” (index=0) and “strong” (index=100) expectations. The index is calculated as a weighted average using the share of respondents for each index as weights. The index is not adjusted for seasonality effects.
In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest in new home sales data.
- New home sales fell for the second consecutive month. Sales fell 7 percent in December following a 4 percent decline in November. Though new home sales generally reflect the degree of new home construction – that is, if more homes are built then there will be more new home sales – the latest weakness is a part of weakening demand, which has become hampered by increasingly challenging affordability conditions.
- Even with softer demand, new home prices continue to rise. In December, a typical new home sold for $270,200, up 4.6 percent from one year prior. New home prices partly reflect construction material costs, which are incorporated into the supply and demand dynamics. The gap between new and existing home prices is sizable in the current environment, suggesting existing homes could be a better buy.
- The inventory of newly built homes is essentially at a 50-year low. More new home construction is needed. Housing starts need to rise by at least 50 percent quickly to help relieve both new home inventory and existing home inventory. The speed of sale is quick. In the latest month, it took 3.2 months to sell a new home compared to over 12 months during the depths of the housing market crash.
- Details on the data are as follows. In December 414,000 new homes went under contract compared to 445,000 in November. Because the data follows the standard reporting format (seasonally adjusted and annualized), the latest two-month softness is more than the usual slowdown that occurs at the end of the year. There is no data for new home sales closings. It is only contract signings that are reported.
In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest housing price indices data, including the FHFA index.
- This week NAR released existing home sales and median home price information while the FHFA released their housing price index data. Both data series showed continued gains in home prices with some deceleration suggesting that the pace of home price increase should fall back into a more normal range in the next few months.
- Home sales edged up slightly in December finishing the month slightly below the year ago sales pace. For the year, sales were up 9.1 percent.
- In the same release, NAR showed year over year house price gains of 9.9 percent—a solidly above average increase, and only the second month in the last 13 for house price gains to register less than 10 percent. For the calendar year, the median home price rose 11.5 percent over 2012. At the same time, the FHFA reported a 7.6 percent home price rise for the year ending November 2013.
- NAR reports the median price of all homes that have sold while FHFA reports the results of a weighted repeat-sales index. Because home sales among higher priced properties have been growing more than among lower price tiers, the NAR median price has risen by more than the weighted repeat sales index—which computes price change based on repeat sales of the same property.
- FHFA sources data primarily from Fannie and Freddie mortgages, transactions using prime conventional financing, and misses out on cash transactions as well as jumbo, subprime, and government backed transactions such as those using VA or FHA financing.
- FHFA releases data at the Census division level and it confirms the trend seen in NAR measures. The most robust gains from a year ago were in the West. NAR reported price change of 15.8% in November and 16.0% in December. According to FHFA year over year prices rose 15.4 percent in the Pacific division which includes Hawaii, Alaska, Washington, Oregon, and California and 10.7 percent in the Mountain division which includes Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, and New Mexico.
- Likewise, NAR data showed the smallest price gains from a year ago in the Northeast (5.7% for the year ending in November and 3.6% for the year ending in December), and FHFA showed a similar pattern. Prices rose 4.2 percent in New England (Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut) and 3.2 percent in the Middle Atlantic states (New York, New Jersey, Pennsylvania) from one year ago.
In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest housing starts data.
- New home construction reached the 3rd highest level in the past 66 months. However, the latest annualized pace of 999,000 new units is insufficient to satisfy demand. Another 50 percent increase in housing starts is needed to help relieve the inventory shortage conditions.
- The latest figure is a decline from the prior month, which was the best in over 5 years. But activity is still higher from a year ago. Both single-family and multifamily housing starts softened in December. Perhaps the deep freeze in a good portion of the country could have impacted builders, postponing the digging of the earth. Housing permits, which are just paper approval and which should not have been impacted by the weather, also weakened a bit.
- It takes about 6 months to go from housing starts to housing completion and ready for sale for a single-family home. Big builders can do it quicker on spec homes. Owner-initiated construction takes more than twice as long to complete.
- The inventory of newly constructed homes is essentially at a 50-year low. Much more construction is needed. Publicly-listed companies like KB Homes and Toll Brothers can tap Wall Street funds to get busy. However, small local builders have historically been the principal supplier of new homes in America. These local homebuilders rely on construction loans, which are very hard to get. Many local lenders have indicated the burdensome regulation arising from Dodd-Frank financial market regulations have hindered their ability to lend. Hence, large companies are getting bigger at the expense of smaller guys getting shut out. A case of unintended consequence of a government policy?
- The insufficient new housing starts will mean a likely continuation of a housing shortage in 2014. Therefore, home prices and rents will rise in nearly all local markets in 2014.
In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the consumer price index.
- Consumer prices (CPI) increased 0.3 percent in December, marking the largest 1-month increase since June 2013. On a year-over-year basis, however, prices rose 1.5 percent, well below the Federal Reserve’s 2 percent inflation target.
- Data show that energy prices had a big impact on the headline figure for the month. Core inflation—a measure that excludes energy and food prices—was up by a much smaller 0.1 percent on the month. However, energy prices have risen less than other prices throughout the year and core inflation was 1.7 percent—slightly higher than headline inflation—for the year. While the Fed does not target this specific measure, the factors driving the Fed’s preferred measure of inflation are the same, suggesting that there is currently no major inflationary pressure pushing the Fed to tighten monetary policy. If this trend continues, expect a gradual taper followed by moderate increases in the Federal Funds interest rate.
- One of the big non-energy components of the CPI, the shelter index, rose 0.2 percent for the month and 2.5 percent for the year. This has a big effect on the overall index because shelter is a little more than 30 percent of the index.
- Rent of primary residences—actual market rents paid by individuals who do not own the home they live in (pictured below)—rose 2.9 percent for the year ending in December 2013. When rents are rising, it becomes more attractive to own a home. Because the bulk of home ownership costs for someone with a 30-year fixed rate mortgage are fixed, even if rents are initially cheaper, potential buyers can expect rent costs to catch up to ownership costs.
- A few other sub-components of the shelter index show interesting trends. Housing at School, excluding board (pictured below) shows a gradual decline, but this is just a decline in the rate of increase. In fact, for the year ending December 2013, the price of housing at school was still rising at a 3.4 percent rate—faster than that for rent of primary residences. In contrast, Other Lodging Away from Home Including Hotels/Motels (pictured below) shows rough stability—a meager 0.6 percent gain for the year ending in December 2013. While the trend for hotel/motel pricing is more variable, it has seen smaller price gains than housing at school over the last 6 years with only a few exceptions.
- Rising mortgage rates will tame the enthusiasm of some homebuyers. But the lack of choice when choosing a home will also hinder buying.
- Inventory levels are already very low. Newly constructed home inventory is essentially at a 50-year low. Existing home inventory is hovering at a 13-year low.
- Increases from housing starts will bring more inventory to the market. But the current production of little over a million is not sufficient. Another quick ramp up of around 40 to 50 percent is needed to adequately supply the market.
- Another source of potential inventory is from homes where mortgages have not been paid or the home is already in the foreclosure process though not yet cleanly released from all the paperwork. How is this so-called shadow inventory trending?
- The table below shows the shadow inventory situation for all 50 states. It shows the current as well as peak distressed conditions. The data is also overlaid with home price trends to help gauge where shadow would be most useful. Naturally, fast price appreciating markets such as California and Nevada would like to have more inventory, but the shadows in these states have been greatly depleted. California’s shadow has been slashed by 71 percent while Nevada cut its future distressed homes by 59 percent.
- At the other end, slow price appreciating states have no need for additional supply. Yet, states like New Jersey, New York, and Connecticut have barely dented their shadow and these distressed homes still loom over the market. These states have only reduced their shadow by around 10 percent from the peak condition. Take a look at your state’s condition after the jump.
In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest mortgage applications data.
- Seasonally adjusted applications to purchase homes surged 11.9% in the week ending January 10th compared to the prior week. However, this improvement reflects a technical adjustment in the prior week as well as a rush to submit applications in advance of a major regulatory change in the current week.
- The Qualified Mortgage rule went into effect for all applications received on or after January 10th. The “QM” rule introduced stronger underwriting, fee and pricing protections for consumer, but those protections could also raise costs or limit credit access for some consumers.
- The average rate for a 30-year fixed rate mortgage eased two basis points from the prior week to 4.51%.
- New purchase applications for conventional and government financing rose, by 12.6% and 9.0%, respectively.
- In a separate data report released this morning, the average FICO scores for conventional and FHA financed, purchase mortgages closed in December were 756 and 690, respectively. Though traditional, safe underwriting standards have been restored since the boom period and risky products like NINJA loans and low or no documentation loans eliminated, credit overlays remain significantly higher than the pre-boom period when average FICOs were 30 to 40 points lower for conventional and FHA mortgages. Several important reforms and regulatory changes remain that have kept conditions tight.
- Mortgage applications shot upward this week, reversing some of December’s weakness. However, this improvement is likely due to a rush to submit applications in advance of new regulations. Thus, purchase applications in subsequent weeks could suffer as a result of demand having been pulled forward. The impact of the new regulations will largely be smoothed out in time as most originators are already compliant with the new underwriting standards and understanding of limitations and legal liabilities improves with time, but the market faces adjustments in the near term.
Distressed property sales remained at 14 percent of sales reported by REALTORS® in November 2013 . This is substantially down from levels a few years ago when distressed property sales accounted for close to 30 percent of sales. This trend is in line with the broad decline in foreclosure inventory amid the recovery in home prices and government programs to assist financially strained homebuyers. Read more in the latest RCI report.
 NAR’s monthly REALTOR® Confidence Survey asks about the last sale for the month. This percent is computed by dividing the number of REALTORS® who reported that their last sale was a distressed sale by the number of REALTORS® who reported a sale for the reference month. To convert to percent, the ratio is multiplied by 100.
In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest data on retail sales.
- Retail sales squeaked out a small gain in December, rising by only 0.2 percent from the prior month. Cold weather and more precipitation this past December compared to historical norms may have contributed to the sluggish sales. From one year ago, sales were up 4 percent.
- The national retail vacancy rate will not move down if sales rise at this slow pace. Rent growth, hence, will be difficult. NAR projects a retail vacancy rate of 10.1 percent in 2014, with retail space rents rising by only 2 percent.
- Recent softness in home sales is causing sales at furniture shops to decelerate. A similar slowdown is occurring at building and garden equipment stores.
- Employment at retail stores meanwhile has been increasing quite nicely, with a net gain of 381,000 in the past 12 months. But that growth is in jeopardy if retail sales do not accelerate higher.
- Because consumer spending comprises two-third of the economy, consumer spending growth (supported by job and income growth) is needed to further propel the economy.
- Spending at jewelry stores, interestingly, is rising at a double-digit pace. The record high stock market is likely causing the high net worth households to visit Tiffany’s on 5th Avenue, which then subsequently forces other high income people to spend conspicuously in order to keep up with the Jones. Though present, the show-off consumption is not that bad in the U.S. given many years of being a high income country. Pretty much everyone has a high-definition TV and a smartphone.
- Conspicuous spending is most visible today in Moscow. The newly rich need to show they are no longer pretending to get paid (and pretending to work) as occurred in former communist times. Though subway stations in Moscow contain artistic beauty, as if visiting a museum, the newly-rich refuses to take underground transport and are adamant to show off their latest German-made car even through they endure possibly the worst traffic jams in the world. Pedestrians beware: it is common for drivers to view the wide sidewalks as another lane.
In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest data on the unemployment rate.
- The unemployment rate plunged in December to the lowest level in five years. The latest 6.7 percent jobless rate is almost back to normal. The mystery, however, is that very few jobs were created over the month.
- The all-important payroll jobs grew by only 74,000 in December. That is much less than the 200,000 or so that are needed each month to move the job market into a noticeably improved state.
- The principal reason for the deep fall in the unemployment rate is due to nearly ½ million people leaving the labor force in the past three months. When people are not looking for work, even though they are without a job, they are no longer officially classified as being unemployed. The opposite side of the coin – the employment rate, measuring what proportion of the adult population has a job – remains stuck at recession levels. Only 58.6 percent of adults have jobs compared to 63 percent prior to the Great Recession. In this sense the job market has only been treading water over the past five years with no meaningful progress.
- As to job creation over a longer period, from the low point in 2010 a total of 7.5 million net new jobs have been added to the economy. Note that 8 million jobs were lost during the Great Recession, so we have not yet fully recovered all the jobs that were shed several years ago. Moreover, every year there are fresh high-school and college graduates looking for jobs.
- Improvements in the housing sector led to about 100,000 net new jobs over the past 12 months in residential construction and for general contractors. In the more sluggish commercial real estate arena, only 20,000 jobs have been added.
- In other sectors, rental leasing jobs have increased solidly by 46,000. The low apartment vacancy rates naturally require more workers for property management. Federal government jobs have fallen by 80,000. Given that the defense spending has been taking the biggest blow over the past year, many military and defense related jobs may have been shed. Finally, Hollywood is hemorrhaging as there are 23,000 fewer jobs (a big 6 percent plunge) in the motion pictures and sound recording industries. Smiles at Oscars could be of the sad kind.
- Despite the mixed news on employment, the direction is clearly for the better. The net 2.2 million new jobs and the likely 2 million or so in the current year will provide support for home sales and increased leasing of commercial buildings.
At the national level, housing affordability is up for the month due to a break in mortgage rates and home prices gains but affordability will be down for the year. What is affordability like in your market?
- Housing affordability is up for the month of November as mortgage rates and the median price for a single family home in the US decreased slightly from October. In spite of the decrease, the median single-family home price is up 9.4 % from last year keeping prices moving at a high year-over-year pace.
- As a result of higher home prices and mortgage rates that are up 25.1%, nationally, affordability is down from 203 in November 2012 to 170.3 in November 2013.
- Home prices are expected to slow down while inventory figures improve. Income levels are up and should help consumer confidence before rates begin to rise for the coming year.
- By region, affordability is up from one month ago in all regions. The Midwest had the biggest gain in affordability at 3.4%. From one year ago, affordability is down in all regions. The West saw the biggest decline in affordability as a result of having the largest price gain at 15.9 %.
- Mortgage rates are expected to increase as the Fed reduces bond purchases and eventually begins to tighten monetary policy. For a look at how the housing market might respond to a change in rates, I recommend this Stress Test by Chief Economist Lawrence Yun.
- 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.
In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest in unemployment insurance claims data.
- The job market appears to be sustaining the gains made in 2013 as the year starts. Fewer initial claims for unemployment insurance were filed in the week ending January 4 with filings recorded at 330,000, a decrease of 15,000 claims from the previous week. The January number is also lower than the average number of claims filed in 2013. Fewer unemployment claims filed means fewer job losses.
- Another positive job indicator is the net increase of 238,000 payroll jobs in December based on information provided by ADP, a payroll processing company. This data is not considered “official.” The official tally by the Department of Labor comes out tomorrow morning. Based on ADP, around 200,000 jobs are expected to be created. The economy needs about that much to speed up the decline in the unemployment rate.
In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s second economic update discusses mortgage purchase applications.
- Applications to purchase homes slipped 0.5% from last week on a seasonally adjusted basis, according to data released this morning by the Mortgage Bankers Association. The average rate for a 30-year fixed rate mortgage climbed nearly 40 basis points, from 4.1% to 4.53%, from the beginning of November through the first week in January. The steady climb has weighed on consumer sentiment and affordability.
- In a bit of a surprise, conventional purchase mortgage applications ticked upward by 0.1% while applications for government financed loans fell 1.9%.
- Yesterday the MBA announced that its index of mortgage credit availability improved by a modest 0.6% for the month. Credit availability has had a small improvement since its low in 2012 with more lenders offering lower down payment loans to highly qualified borrows, but credit access remains well below levels seen in 2007.
- Mortgage applications fell in four of the last six weeks following the steady rise in mortgage rates. Rates are roughly at the same level as in August. Rates are likely to rise through the spring as the Federal Reserve tappers its purchases of mortgage backed securities and Treasuries. This action will press up on mortgage rates, eroding affordability in an environment of tight credit.
In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest in employment conditions.
- The national economy continues to heal and move ahead. A total of 7.5 million net new jobs have been added in the past 4 years following the disastrous 8 million net job cuts during the Great Recession. In the past 12 months, 2.3 million net new jobs have been added, representing a growth rate of 1.7 percent for the country as a whole.
- Some states and metro markets are doing much better than the national job growth rate while others are faring much worse. North Dakota continues to shine due principally to massive new oil and gas production. The southern states of Texas, Florida, and Georgia have robust job growth. Alabama and D.C. (just the city proper and not the suburbs) are stalled with net zero job creation. Alaska lost some jobs. Puerto Rico is under tremendous stress with 4.3 percent fewer jobs, portending a possible government bankruptcy like one experienced in Detroit.
- Among the metro markets, several small Florida markets are on fire (Sebastian-Vero Beach growing at +8.1%; Naples +7.9%; and Port St. Lucie +6.1%). The energy cities of Odessa and Midland are also moving fast with a 5% growth rate. Among the large cities, there are three standouts: Tampa-St. Petersburg (+3.3%), Houston (+3.1%), and Nashville (+3.1%).
- The table below shows the ranking of states and U.S. territories:
REALTORS® generally expect modest price increases in the next 12 months with demand easing and more inventory coming into the market. The median expected price increase is 3.7 percent .
Some REALTORS® saw the forecasted slowdown as a welcome brake to the rapid home price growth amid the modest growth in consumer incomes and jobs. Local conditions vary, and conditions can change as the economy changes. See the November REALTORS® Confidence Index Survey report for more information.
 The median is the middle value. A median expected price change of 4 percent means that 50 percent of respondents expect prices to increase above 4 percent while the other 50 percent expect prices to increase (or decrease) at less than 4 percent.