THE WRIGHT REPORT Update of U.S. Residential Real Estate Trends: Including economic data, current sales, new construction, interest rates, new construction, and foreclosures. January to June, 2017 www.thewrightinsight.net Page 1 (916) 726-8308
TABLE OF CONTENTS TABLE OF CONTENTS... 2 EXECUTIVE SUMMARY:... 3 HOUSING MARKET INDICATORS:... 4 NATIONAL MARKET TRENDS:... 8 New Home Sales:... 9 Distressed Sales:... 11 Interest Rates:... 12 Macro Economic Trends:... 13 U.S. REGIONAL CITY PRICE GRAPHS:... 15 RESOURCES:... 21 www.thewrightinsight.net Page 2 (916) 726-8308
EXECUTIVE SUMMARY: The residential housing market in the U.S. continued strong in the first half of 2017. The number of sales remains high, 4.48 Million estimated for the year, and 2.39 already sold through June 2017. Median sold price of homes increased 7% to $265,500 in June 2017 from June 2016. The average sold price increased 4.7% to $305,000 in June 2017. Interest rates remains low, 3.9% in June. They are so low it is reasonable to believe they will increase in coming years. The U.S. economy showed growth of 3.0% in GDP in the 2 nd quarter. Unemployment remains very low, 4.4% in June, and the Labor Force Participation Rate seems to have leveled off between 62% and 63% (62.8% in June). Job growth, 222,000 new jobs in June, is about the same as in the first half of 2016 with new construction is still suffering from a lack of skilled workers. New SFR home sales hit 330,000 in the first ½ of 2017, and projected sales for the year were 610,000 in June. This still lags behind historical annual new home sales of over 1 Million units sold. Overall the numbers look strong, and it appears the market could continue for a few more years this way. Coming transitions, however, could come from any direction. If the economy slows, the stock market has a large correction, an international crisis disrupts the U.S. economy, or another black swan event occurs then there will be change in the national real estate market. What we know is that the stock market will eventually have a correction, there will be another recession, and international activities will affect our economy, and all of these will have some affect on the residential housing markets, and the directions it turns will be interesting to see. So enjoy the market! www.thewrightinsight.net Page 3 (916) 726-8308
HOUSING MARKET INDICATORS: Summary: Of the hundreds of economic indicators we have chosen 5 that have a stronger effect on housing markets. GDP (Gross Domestic Product), Jobs, and Unemployment reflect the employment situation which directly affects buyer s ability to purchase a home. Housing Inventory is the amount of product available supply and Interest Rates affect the cost of holding a property monthly. How will each of these indicators DRAG or DRIVE the market in 2017? Housing Market Indicators (June 2017) # DRAG Market DRIVE Market GDP (Q2-2017) 3.0% X Jobs Report (June 2017) 222K X Interest Rates 3.9% X Unemployment 4.4% X Housing Inventory 1.55M X GDP: In 2017 2 nd quarter GDP is 3.0%, down from 1.2% in Q1-17. The historical average from 1930 to 2016 is 3.3% growth annually. GDP generally expressed how well the economy is doing, and when it is not doing well then it reflects in jobs, income and ultimately buyer s willingness to purchase Real Property. www.thewrightinsight.net Page 4 (916) 726-8308
Jobs Report: Nonfarm employment remains reasonably strong with an increase of 179,000 jobs on average for the first two quarters of 2017. This is down just slightly from the 180k monthly average for Jan.-Jun. 2016. The increase in jobs in June 2017 was 222,000. https://www.bls.gov/ces/highlights062017.pdf Interest Rate: Interest rates are still close to historic lows, and they declined from 4.2% in December 16 to 3.9% in June 17. They have been 4.08% on average from January to June 2017 and 8.2 on average since 1972. So rates are at less than one half of what they have been historically. Rates affect the amount of monthly payment a homeowner will pay for when purchasing a home, and higher rates increase the monthly payment and decrease the number of people who can afford to purchase. www.thewrightinsight.net Page 5 (916) 726-8308
Unemployment: Unemployment was 4.4% in June 2017, down from 4.7% in (December) and 4.9% in June 2016. www.thewrightinsight.net Page 6 (916) 726-8308
Housing Inventory: The number of single family homes (not including condos) for sale in June 2017 is 1,552,795 units. That is an 11.4% decline from June 2016 s inventory (1,752,648). That is lower than the average since June 2013 (to June 2017) of 1,787,610 units for sale. www.thewrightinsight.net Page 7 (916) 726-8308
NATIONAL MARKET TRENDS: National Housing Market: The U.S. median sold price in June 2017 was $265,500; up 7.1% from $247,700 in June 2016. It is 15% higher than the last cycle high which reached $230,900 in July 2006, and 71% higher than the low point in January 2012 of $154,600. The average sold price for single family homes in June 2017 was $305,000, an increase of 4.7% from June 2016 ($291,300). It is 9.7% lower than the previous cycle high of $277,900 in June of 2007. In the first half of 2017 the number of single family homes sold (condos excluded) was 2,387,000, and the number estimated to sell for the year is 4,480,000. That is lower than the 4,838,000 homes sold during 2016. U.S. inventory in June 2017 was 1.55 Million units. That is down 11.4% from June 2016. The average e number of units in the national inventory since June 2013 (to June 2017) of 1,787,610 units for sale. The number of months of inventory in June is 4.2 months. The National Home Ownership Rate in Q2-2017 rose to 63.7% from Q1-2017 (63.6%), up slightly from Q2-16 at 62.9%. Another concern is the lack of affordability that is created with the increase in prices. The only reason homes are not less affordable is the interest rates are still close to historical lows. https://www.attomdata.com/news/home-prices-and-sales/q2-2017-home-affordability-index/ www.thewrightinsight.net Page 8 (916) 726-8308
New Home Sales: Sales of New Construction SFR in the first half of 2017 reached 330,000 units, 58,000 in June. It is estimated that 610,000 new homes will sell in 2017. The average number of months from permits to start of construction for SFR in the U.S. in 2016 was 9 months. From start it took an average of 6.6 months to completion. Finding skilled labor continues to be a major problem for most builders, and the problem does not appear to be resolving itself quickly. In fact, the number of new jobs in construction was relatively low through the first half of 2017. https://www.bls.gov/ces/highlights062017.pdf www.thewrightinsight.net Page 9 (916) 726-8308
It is interesting that construction jobs are still down for the first half of 2017 given the demand from builders. http://eyeonhousing.org/2017/08/share-of-builders-reporting-labor-shortages-rises-again/ In June 2017 there was 5.2 months of standing inventory with 58,000 homes selling and 272,000 available for sale. Median sold price in June was $311,600. The average sold price was $370,000. New home construction has historically provided more than 1 Million new homes to the market annually. www.thewrightinsight.net Page 10 (916) 726-8308
Distressed Sales: The number of distressedd properties going through the process of foreclosure declined 20% from last year to 428,400 in the middle of 2017. Eight states and Washington D.C. posted gains in foreclosure activity, including New Jersey, Louisiana & Mississippi. Banks closed on a total of 169,124 foreclosures in the first six months of 2017. Of those that sold at the court house steps 38% were to 3 rd party buyers, so they were not bought by the bank. That is up from 26% in the first half of 2016. https://www.attomdata.com/news/heat-maps/midyear-2017-u-s-foreclosure-market-report/ www.thewrightinsight.net Page 11 (916) 726-8308
The number of days to complete a foreclosure on average has increased over last year reaching 883 days on average for the 2 nd quarter of 2017. The states with the longest foreclosure time, all over 1,000 days) are New Jersey, Indiana, New York, Florida and Illinois. Attom Data Solutions report on the national foreclosure trends can be found here - https://www.attomdata.com/news/heat-maps/midyear-2017-u-sforeclosure-market-report/. Interest Rates: In June 2017 rates were 3.9%. They have been 4.08% on average from January to June 2017. This is higher than the average for 2016 of 3.64%, but lower than the 8.2 average since 1972. The average interest rate for October 2016 was 3.77%, and it rose more than half a point to 4.2% in December after the November elections presumably due to uncertainty created by the election. With rates beginning to increase, home buyers are still making purchases, and moving forward with purchases. www.thewrightinsight.net Page 12 (916) 726-8308
Macro Economic Trends: Current unemployment in June 2017 is 4.4%, down from 4.9% in June 2016. That is well below the Natural Rate of Unemployment which has until recently been calculated at 5.5%. The Natural Rate of Unemployment is the rate that an economy will generally maintain in good markets when all the functions of the economy are working well. The last time that the unemployment rate was 5.5% was in May of 2015. It will be interesting to see if this rate will change in the future as the methods of measuring unemployment shift, and as employment trends shift through the recent economic cycles. While unemployment is low the labor force participation rate (the % of the population actually working) is 62.8%, up slightly from June 2016 at 62.7%. LABOR FORCE PARTICIPATION RATE: https://data.bls.gov/pdq/surveyoutputservlet Job growth nationally is almost the same as in the first 6 months of 2016, which is a decline from the growth of 2014 and 2015. Average monthly growth so far in 2017 is 179,000 new jobs. www.thewrightinsight.net Page 13 (916) 726-8308
The number of jobs available increased in June to 6.2 Million: the highest in several years. https://www.bls.gov/opub/ted/2017/job-openings-rose-to-6-point-2-million-in-june-2017.htm Currently the stock market is at all time highs and bonds are very low, and it is unsure how any adjustment in the stock markets will affect real estate, and interest rate increases will affect the bond market, but they will both influence the supply and demand for residential real estate in a positive or negative way. Some major distractions in the summer of 2017 are the unstable situation with North Korea, major storm disasters in Texas & hurricanes Harvey and Irma in Florida. And continuing international situations still have yet to be resolved out, including BREXIT and the E.U., economic difficulties in Mainland China s economy, Russian and Middle East positioning and posturing to name a few. How these will affect the U.S. and more specifically U.S. residential real estate sales and trends remains to be seen. www.thewrightinsight.net Page 14 (916) 726-8308
U.S. REGIONAL CITY PRICE GRAPHS: West Coast: www.thewrightinsight.net Page 15 (916) 726-8308
Central States: www.thewrightinsight.net Page 16 (916) 726-8308
www.thewrightinsight.net Page 17 (916) 726-8308
Southern States: www.thewrightinsight.net Page 18 (916) 726-8308
East Coast: www.thewrightinsight.net Page 19 (916) 726-8308
www.thewrightinsight.net Page 20 (916) 726-8308
RESOURCES: ABREVIATIONS CAR = California Association of Realtors HAFA = Home Affordable Foreclosure Alternative HAMP = Home Affordable Mortgage Program MLS = Multiple Listing Service NAR = National Association of Realtors NOD = Notice of Default NOT = Notice of Trustee Sale REO = Real Estate Owned by a bank, or foreclosure SAR = Sacramento Association of Realtors TRID = TILA / RESPA Integrated Disclosure WRE = Wright Real Estate ADDITIONAL RESOURCES Bureau of Labor Statistics Bureau of Economic Analysis National Association of Realtors (NAR) United States Census Bureau https://www.bls.gov/data/ http://www.bea.gov www.realtor.org www.factfinder.census.gov www.thewrightinsight.net Page 21 (916) 726-8308
Serving the Sacramento Area since 2000. For FREE Information and Consulting Services contact us: Office: 916.726.8308 WrightRealEstate@gmail.com TheWrightInsight.net www.thewrightinsight.net Page 22 (916) 726-8308