November Investor Intel
The chief economist of the National Association of Realtors called the third quarter of 2015 the best quarter for housing in a decade, the head of the New York Fed called the housing economy “solid,” and some pretty credible research shows we’re not actually in a housing bubble. Handwringing—there always needs to be something!—has now moved to lack of inventory, which bodes well for vacancy rates.
For a while now, the housing market has been picking up the slack of the U.S. economy, but October’s numbers show that it was a pretty good month across multiple sectors.
After a lackluster August and September, stocks have largely rebounded and October’s jobs report was the year’s best. October payrolls rose by the most in 10 months and the jobless rate fell to a seven-year low, while hourly earnings rose from a year ago by the most since 2009. Inflation is edging closer to the Fed’s benchmark 2 percent, driven by the rising costs of rent and medical care.
Meanwhile, consumer confidence has steadied after declining for the previous three weeks as Americans’ views toward spending improved by the most in five months, according to the Bloomberg Consumer Comfort Index. Also, the University of Michigan’s preliminary consumer sentiment index for November climbed more than forecast. However, consumer discretionary spending is showing signs of lethargy.
Home prices nationwide, including distressed sales, increased by 6.4 percent in September 2015 compared with a year ago, according to CoreLogic’s latest home price index. This is up 0.6 percent compared to August 2015. CoreLogic also found distressed sales share at its lowest since September 2007. Distressed sales are expected to decline until reaching a “normal” 2 percent mark in mid-2018.
Interestingly, October foreclosure starts posted a 12 percent monthly jump—the highest increase in more than four years, according to the latest RealtyTrac Foreclosure Market Report. Why the increase? For starters, it’s a seasonal trend; the holidays are coming and year’s end is approaching. But could it be a deeper economic indicator? We’ll see, but keep in mind foreclosure starts in October were still down 14 percent from a year ago.
Something else we’re watching: First-time buyers made up 32 percent of all home buyers, down from 33 percent last year, and the lowest since 1987, according to NAR’s 2015 Profile of Home Buyers and Sellers. The report is more validation that millennials seem to be putting off home buying in favor of renting.
Finally, if the Fed raises rates in December, and there’s a 70 percent chance they will, you can expect the increase to be nominal and gradual—likely not material enough to put people off taking out a mortgage. But in a few years when it starts adding up, we could see more people choosing to rent than make those higher monthly payments, giving the single-family rental investor the opportunity to expand their portfolios.
The information on this page is provided for informational purposes only and does not constitute investment, real estate, or legal advice. This information should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. No representations or warranties whatsoever, express or implied, are given as to the accuracy or applicability of the information contained herein. The information may be modified or rendered incorrect by changes in the marketplace or developments in the law, or for any other reason, and may not be applicable to any individual reader’s facts and circumstances.