Published on: Apr 22, 2016 @ 8:12 am
Black Knight – “First Look” at March 2016
The Data and Analytics division of Black Knight
Financial Services (NYSE: BKFS) reports the following
“first look” at March 2016 month-end mortgage
performance statistics derived from its loan-level
database representing the majority of the national
mortgage market.
– National delinquency rate fell 8% in March; at
4.08%, it is at its lowest point since March 2007
– At just under 2%, the rate of 30-day delinquencies
is at lowest level in over 15 years
– Spurred by declining interest rates, prepayment
speeds (historically a good indicator of refinance
activity) were up 46% from one month ago
– Foreclosure starts were down 14% from February;
still driven primarily by repeat foreclosure activity
US jobless claims fall to 4-decade low
A proxy for layoffs across the US pointed to one of the
healthiest labor markets in decades, as the number of
US workers who applied for new unemployment benefits
declined to the lowest level since the early 1970s.
Initial jobless claims fell by 6,000 to a seasonally
adjusted 247,000 in the week ended April 16, the Labor
Department said Thursday. That was the lowest level for
jobless claims since the week of Nov. 24, 1973. That
also marked the 59th straight week that initial jobless
claims remained below 300,000, the longest such streak
in more than four decades. Recent claims data are
“astonishingly low,” said Timothy Hopper, chief
economist at TIAA Global Asset Management. “The fact
that the numbers continue to ratchet down suggests that
labor demand is strong and a sign the labor market
should continue to improve.” Yet while the numbers
point to a stable labor market, they don’t foretell an
economic acceleration. In fact, last time jobless
claims were this low, an oil-shock recession had just
begun. The direction of the layoff proxy is a key
difference between the latest readings and those in
1973. Jobless claims entered 2016 near these historic
lows but have fallen slightly. In contrast, by November
1973, when the National Bureau of Economic Research
pegs the start of a recession that stretched into the
early part of 1975, jobless claims had been modestly
climbing for nine months.
Federal Reserve officials will likely consider the
relative health of the labor market at next week’s
policy meeting. But recently, central bankers have
indicated they are concerned about weakness in the
global economy and are watching inflation readings and
wage gains closely. A large majority of economists
surveyed by The Wall Street Journal expect the Fed to
hold its benchmark interest rate steady at the meeting.
A low level of layoffs typically coincides with solid
hiring. Employers added 215,000 jobs in March, a
healthy increase. The unemployment rate ticked up to
5%, but the increase in part reflected more workers
entering the labor force. Jobless claims have trended
near the four-decade low much of this spring. But that
comes with a caveat. The Easter holiday, which moves on
the calendar each year, can distort seasonal
adjustments to the data during March and April. The
four-week moving average, which smooths out volatility,
fell by 4,500 last week to 260,500. That level has
stayed fairly consistent since early March. Still,
there was one other historical point of strength in the
latest reading. A measure of the number of people on
unemployment rolls, which are reported with a one-week
lag, fell by 39,000 in the week ended April 9 to the
lowest level recorded since 2000.
NAHB – remodeling market index dips in first quarter of
2016
The National Association of Home Builders’ (NAHB)
Remodeling Market Index (RMI) posted a reading of 54 in
the first quarter of 2016, dipping four points below
the previous quarter but remaining in positive
territory above 50. An RMI above 50 indicates that
more remodelers report market activity is higher
(compared to the prior quarter) than report it is
lower. The overall RMI averages ratings of current
remodeling activity with indicators of future
remodeling activity. “Remodelers were solidly booked
for jobs in the first quarter of 2016 but calls and
appointments for work slowed down in comparison to the
end of 2015,” said 2016 NAHB Remodelers Chair Tim
Shigley, CAPS, CGP, GMB, GMR, a remodeler from Wichita,
Kan. “Volatility in the financial markets during the
first quarter may have impacted consumers’ readiness to
commit to projects.” The RMI’s current market
conditions index stands at 55, decreasing by a single
point from the previous quarter. Among its components,
major additions and alterations continued gains from
the previous quarter, rising to 55 from 54. The smaller
remodeling projects component decreased two points to
54, and the home maintenance and repair component of
the RMI decreased two points to 56. At 53, the RMI’s
future market conditions index decreased six points
from the previous quarter. Among its four components,
calls for bids decreased to 51 from 58, the amount of
work committed fell to 52 from 57 and appointments for
proposals dropped to 52 from 60. Meanwhile, the backlog
of remodeling jobs decreased only three points to 58
from the previous quarter’s reading and high-water mark
of 61.
SunEdison files for bankruptcy protection
SunEdison, once the fastest-growing US renewable energy
company, filed for Chapter 11 bankruptcy protection on
Thursday as years of debt-fueled acquisitions proved
unsustainable. In its bankruptcy filing, the company
said it had assets of $20.7 billion and liabilities of
$16.1 billion as of Sept. 30. The company said its two
publicly traded subsidiaries, TerraForm Power and
TerraForm Global, were not part of the bankruptcy. The
company said it secured up to $300 million in new
financing from its first-lien and second-lien lenders,
which is subject to court approval. The money will be
used to support SunEdison’s operations during its
bankruptcy, such as paying wages and vendors, and
proceeding with ongoing projects. “Our decision to
initiate a court-supervised restructuring was a
difficult but important step to address our immediate
liquidity issues,” said Ahmad Chatila, SunEdison chief
executive officer. He said the company planned to use
Chapter 11 to reduce debt, shed non-core operations and
take steps to get the most value out of its technology
and intellectual property.
Zillow – Q1 2016 market report: tight inventory, rapid
price growth represent real headwinds for the market’s
core
– There are 5.9% fewer homes for sale in the US than
there were a year ago.
– There are 10.4% fewer entry-level homes for sale in
the US than there were a year ago.
– Low supply is driving up home prices among
entry-level homes, which are often sought after by
first-time buyers.
Faced with rapidly appreciating home values and a
dwindling inventory of homes for sale in the critical
entry-level and mid-market home segments, first-time
and move-up home buyers – typically the housing
market’s bread-and-butter – are likely in store for a
tough spring home shopping season. Nationwide, median
home values rose 4.8% year-over-year in March and 1.1%
over the course of the first quarter, to a Zillow Home
Value Index of $186,200, according to the first quarter
Zillow Real Estate Market Report. And while overall US
home values continue to grow at a modest (though slowly
accelerating) clip, home values are rising the fastest
among entry-level and mid-market homes in a large
majority of the nation’s biggest housing markets. A
number of factors are driving this growth, and many are
positive, including strengthening household formation,
continued growth in jobs and wages, and general
confidence and optimism in the overall value of
homeownership, especially among younger generations.
But the likeliest contributor to this rapid growth in
the bottom and middle is worrisome: There is a real
lack of homes to buy in these segments.
Overall, there were 5.9% fewer homes available for sale
nationwide at the end of the first quarter than there
were a year ago. But the number of homes for sale in
the bottom and middle thirds of the US market each fell
by 10.4%, compared to a relatively scant decline of
just 1.9% in the top third of the market. This is
leading to a situation in which the majority of homes
for sale in many markets are more expensive homes not
typically sought by budget-conscious entry-level and
younger buyers. In all 35 of the nation’s largest
markets and the US as a whole, more homes are available
for sale in the top-third of the market than in either
of the other segments. In nine of those large metros,
top-tier homes make up more than half of all homes
available for sale. And strong demand for
more-affordable homes, driven in part by those healthy
fundamentals noted earlier, can’t help but push prices
up more quickly for those budget-friendly homes that
are available. Home values in the bottom tier are
growing faster than the other two tiers in 18 of the
nation’s 35 largest metro housing markets, and
middle-tier growth is outpacing bottom and top-tier
growth in another eleven. That leaves just six of the
country’s 35 largest markets in which home value growth
in the top tier is outpacing the bottom and middle.
And in some cases, the growth rates between top and
bottom tiers aren’t particularly close. In the
fast-growing Denver metro, for example, bottom-tier
home values grew at a 20.3% annual pace in March,
fastest among markets in which bottom-tier values are
growing the most, and almost double local top-tier
annual growth of “just” 10.6%. Similar trends can be
found in Phoenix, where bottom-tier home values are
growing at almost triple the annual pace of top-tier
values (11.2% at the bottom vs. 4.2% at the top) and
Riverside (10% vs. 2.7%).
This rapid home value appreciation and limited
inventory in the bottom two-thirds of the market
undoubtedly puts a majority of would-be home buyers in
a tough spot. But the flip side is that those
better-heeled buyers in search of a top-tier home are
swimming in much smoother waters. Annual home value
growth among top-tier homes in 20 of the nation’s top
35 markets is slower than the overall national pace of
4.8%. Additionally, the most expensive homes on the
market are also more likely to have a price cut. The
share of top-tier listings nationwide with a price cut
has increased 1.6 percentage points over the past year,
compared to just 0.4 percentage points in the middle
tier and 0.5 percentage points at the bottom. In other
words, buyers looking for the most expensive homes will
find somewhat softening prices, a relatively larger
selection of homes to choose from and more limited
competition this spring. At the same time, entry-level
and mid-market buyers are likely to face much stiffer
competition, rapidly rising prices and very limited
inventory. Yet another reminder that it pays to be
wealthy.
In March, the median US home value rose 0.4% from
February, according to the Zillow Home Value Index. US
home values have grown on a year-over-year basis for 45
straight months. But while home values have been
growing consistently for going on four years, lately,
the pace of growth has picked up after a yearlong
cooling-off period from spring 2014 through spring
2015. The post-bottom pace of annual home value growth
peaked at 7.9% in April 2014, then slowed in each of
the subsequent 12 months, reaching a low of 2.7% in
April 2015. Annual home value growth has since been
higher than the month before in 10 of the past 11
months, before falling somewhat in March to a 4.8%
pace, from 4.9% in February. While annual growth in
this range is largely sustainable and not much to worry
about on its own, this uptick in growth bears watching
as the spring home shopping season heats up –
especially in light of the rapid growth and limited
inventory issues noted earlier. If home values begin
growing too much, too fast, many more buyers risk
getting priced out of the market, which has a number of
trickle-down effects. One of these impacts could be
felt in the rental market, as would-be buyers are stuck
renting for longer, keeping apartments occupied that
may otherwise go to newly formed renter households and
contributing to upward pressure on rents themselves.
Another impact could be continued deterioration in home
affordability overall if growth in home values outpaces
income growth. Home values in 25 of the nation’s 35
largest metro markets grew faster year-over-year than
the nation’s 4.8% annual pace in March. Home values
grew by more than 10% per year in seven of those large
metro markets: Denver (up 15.7% year-over-year),
Portland (14.8%), Dallas (13%), San Jose (12.6%),
Seattle (11.7%), San Francisco (11.5%) and Miami
(10.5%). None of the nation’s largest metros
experienced annual home value declines in March.
The US median rent in March was $1,389 per month, up
0.5% from February and 2.6% from March 2015, according
to the Zillow Rent Index. US rents have grown
year-over-year for 43 consecutive months. March was the
fifth straight month in which median US home values
grew faster year-over-year than median rents. Similar
to home value growth, annual growth in rents in this
range is normal and nothing to worry much about.
However, between August 2015 and February, monthly
rents in each of those seven months hovered between
$1,380 and $1,382, before rising to the current $1,389
this month. This $7 per month bump isn’t huge by any
means, but does represent a bit of a departure from
recent trends, and could be an early signal that rental
growth is picking up again, potentially as a result of
tightness in the rental market caused by renters unable
to find a home to buy in their budget. This also bears
watching. Median rents in all but one of the nation’s
35 largest metro markets grew year-over-year to some
extent, with only Cleveland experiencing an annual
decline (-1.2% from March 2015). Rents grew fastest
year-over-year in the San Francisco (up 9.9% from March
2015), Portland (up 8.6%) and San Jose (up 8%) metros.
Looking ahead, Zillow expects national home values to
continue growing, rising another 2.7% through March
2017 to a Zillow Home Value Index of $191,257. US rents
are also expected to keep growing over the next year,
at a 2.7% pace through March 2017 to a Zillow Rent
Index of $1,426. Existing home sales activity in March
was fairly strong, a somewhat promising sign for the
upcoming spring season after a disappointing February.
But existing home sales have been very volatile lately,
and have failed to string together more than a couple
months in a row of increases before stumbling again. It
will take several solid months this spring to break the
two-steps-forward, one-step-back routine the market has
been stuck in for a while – and it’s hard to
meaningfully increase sales activity when the number of
homes for sale keeps dropping. Which means the market
could be setting up to be pretty tough for potential
buyers this spring, especially for first-time buyers
and those looking to move up from their first home and
into a slightly more expensive place. Competition will
be fierce, and buyers’ patience will be tested. In
order to stand out in a competitive market, buyers
should get pre-approved for a loan, find an agent who
has experience with bidding wars and be prepared to
come in at the asking price, so the seller knows
they’re serious.