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The Economy Thread


Brandon

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I don't know what to call this, but was thinking of putting something together here that may be beneficial for people and if there is interest can continue maybe weekly or so. If this is a bad idea or not well received I'd rather not waste my time and not bump a thread no one cares about, please add your input or not and this will die off.

As most here know, I am a mortgage/real estate expert for over 21 years. That allows me to compile helpful consumer data for people looking to make all sorts of financial decisions whether mortgage/real estate related or not. I noticed over the years and experience, I have gone from just giving people rate/payment numbers to actual long term planning or economic thoughts to help them plan.......I 100% am not a financial wizard, financial planner, and 100% always recommend speaking to an astute professional such as a financial advisor, CPA, lawyer, or specific financial field of their necessity. A lot of my info comes from services or tools I pay for or have access to and I can share some of them here in kind of a weekly easy to read or interesting number newsletter.

So, if you guys want I can share some simple to digest economical numbers affecting our everyday lives from housing, to inflation, to financial trends, and ultimately what our economical climate and outlook. It could be helpful to some here or even spark conversation on various sectors. Again, please send input whether here or DM me to gather whether this is worthwhile. With that said, let's dive in!

 

The overall market and how it pertains to housing and mainly mortgages. This will be extremely confusing to most, but I can explain it and what it means to us everyday folk.

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Some interesting overall trends and data:

 
  • Food prices are up 2.9% on the back of an 8.5% rise in meat prices. 
 
  • Lumber prices are coming back down to earth – up 4% year over year, but down 19% in the last month.

 

Mortgage and real estate trends, if you are looking to buy or sell, and how to overall economy can impact your decision:

 1. Mortgage Industry Employment : The mortgage industry shows no sign of slowing down its hiring pace. Since 2010, total head count has sustained its trend upward.

2. Home Sales: Slowing home sales suggest some push back from buyers as home prices have continued to rise.

3. Existing Condo Sales Dip A Bit: Condo sales have fared well during the pandemic. Even the recent dip to 12% of total existing home sales bodes well for the trend toward condos when we zoom out and look at the larger trend.

4. Refinance Applications: When we read rates are near all-time lows, we should believe it. The relationship between the red and blue lines below tell the tale. *This comes with a graph that would just take up space.

5. Mortgage Credit Availability: The mortgage credit box remains well below pre-pandemic levels as agencies and lenders appear to take a wait-and-see approach.

 

Here are some housing numbers from "pros" and their insight on the housing market and it's current state:

 

  1. July Rental Data: Buying a Starter Home is More Affordable than Renting in Nearly Half of the Largest Markets 

The never-ending “buy vs. rent” debate is as hot as ever these days. Realtor.com makes the case that “renting” continues its squeeze in nearly half of the largest U.S. markets.

 

  • Buying a starter home was more affordable than renting in 24 of the 50 largest metro areas. 
 
  • In the 50 largest metros, the median rent was $1,607, up 9.8% year-over-year. 
 
  • Rents for all unit sizes are at series highs.
    • Studio: $1,315, up 5.6% ($70) year-over-year
    • 1-bed: $1,495, up 9.5% ($130)  
    • 2-bed: $1,802, up 10.9% ($177)
 
  • In these markets, the monthly cost to buy was 15.5% ($216) lower than renting, on average.

 

 

  1. Condo Prices Rise At Least 20 Percent In Majority Of Oceanfront Counties Around U.S. 

Condos near oceanfronts cost more. No surprise there. But a 20% increase changes the landscape. 50% of those oceanfront countries surpass the typical $305,000 condo price nationwide, while 50% fell below. 

There condos are located matter. Especially in the Southern U.S.

 

  • The Southern region of the U.S. had 69,616, or 67%, of the 104,359 condo sales in the 86 counties with sufficient data to analyze during the second quarter of 2021.
     
  • Median condo prices increased by at least 20% from the second quarter of 2020 to the second quarter of 2021 in 47 of the 86 oceanfront counties with sufficient data to analyze, or 55 percent. 
  1. Building Materials Prices: Large Increases Year-To-Date 

 

Limited existing housing inventory and the corresponding price increases are caused by several factors, including the cost of building new homes. The price of new housing materials has risen significantly, YTD.

 

  • The prices of goods used as inputs to residential construction, including and excluding energy, have risen 19.0% and 12.0%, respectively, year-to-date (YTD).
 
  • The price of steel mill products increased 81.3% YTD following a 2020 increase of 11.1%.
 
  • Copper pipe and tubing witnessed an increase of just under 35% YTD.

 

 

And there you go with keeping it simple and not getting too into the data. But the person looking to buy/sell a home, where some of the inflation numbers come from on things like gas, groceries, etc. and what it means to our personal finances, and maybe a little insight into those looking into financial planning based off what our economy and markets are doing.

Since this is my first (and maybe only one) and I'm not a tech wizard, the formatting may be off and I can work on that if this continues.

Cheers.

 

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If this moves forward I'll add additional economic data. I usually get reports and updates based on the market, as well as when the Fed meets and what their meeting agenda includes....unemployment numbers, housing movement, private sector economical overview, Fed data and overview that affects our markets, etc.

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17 hours ago, AngelsLakersFan said:

How often do you see the relationship between rent / buy flip? Seems pretty strong in favor of buy right now despite the high prices.

Good question, but one I don't see that often because I don't do too many purchases...maybe a few a year. I do a lot of refinances for people where it's their first time from their original purchase. I usually get the same story of how they bought the house and it was affordable in whatever state, county, city they are in.

Definitely interesting based on area. For instance, I am doing a ton of Idaho homes right now and it's crazy there as all the Californians are invading the state and the home values have skyrocketed. But it's also like that in all the other states I do loans in, as well. People just coming in with cash and paying more than asking.

I've crunched some numbers and it's definitely more advantageous to buy when you consider the new mortgage payment in correlation to rents in any given area.

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On 9/12/2021 at 10:12 PM, AngelsLakersFan said:

How often do you see the relationship between rent / buy flip? Seems pretty strong in favor of buy right now despite the high prices.

My son' friend bought a condo in Fullerton 4 years ago. Had a job offer in Washington he couldn't refuse and bought a home there. He was renting the condo out to pay the mortgage but it has inflated so much in value he is selling it, dropping that money into an investment for two years then flipping that into paying off his current mortgage. Whether that is the best plan is still to be seen but making over $250k profit on a four year condo purchase seems like a lottery winning. 

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Little update before the Fed meets this week.

Market Moving Releases 

 

There are two good examples of that this week in the economic data. 

  1. Inflation 
  2. Consumption 

Inflation 

Since the Fed (and other central banks around the globe) opened up the stimulus floodgates last year, inflation has been a hot topic. 

As retail and Wall Street investors alike look into their crystal balls, many have pointed to price increases in lumber, cars, housing, etc., as a sign that we’ll start to see inflation run too hot and see something similar to the 1970s. 

The Fed speakers kept telling the crystal ball readers that inflation would be “transitory” – seen in the short run — as supply chains restarted post-lockdown. 

This week’s Consumer Price Index showed inflation losing steam – even as YouTubers and TikTokers continue to point at Michael Burry’s (from The Big Short) inflation bets. 

Consumption 

Even with higher prices, direct fiscal stimulus checks fading and more Delta variant concerns, Thursday’s Retail Sales Report surprised to the upside – showing a surge in online sales perhaps tied to the back-to-school season.  

Everyone wants to look their best after missing out on last year’s back-to-school wardrobes. Many adults are feeling nostalgic as they head back to the office for the first time in a while.  

BONUS 

The mortgage market got some surprising news this week too! 

In January, FHFA put stricter rules around the amount of investment property and second home volume that could be delivered to Fannie and Freddie. 

With the change in administrations and a change of the guard at FHFA, a swift announcement was made this week suspending the last-minute policy changes from the previous administration.  

That means that investment property pricing just got 25 bps better as liquidity has opened up. 

This regulatory news is pretty dense, so be a hero to your clients and share the great news! 

 

  1. Home Flipping Increases While Profit Margins Continue To Drop Across U.S. In Second Quarter Of 2021 

    House flipping is when someone buys a property and holds onto it for a short time and then sells it (the flip part) in the hope of making a profit. Instead of buying a home to live in, you’re buying a home as a real estate investment.  
     
    79,733 single-family homes and condominiums in the United States were flipped in the second quarter. Those transactions represented 4.9% of all home sales in the second quarter of 2021, or one in 20 transactions – the first increase in more than a year. 
     
    The second quarter home flipping rate was up from 3.5%, or one in every 29 home sales in the nation, during the first quarter of 2021. But it was still down from 6.8%, or one in 15 sales, in the second quarter of last year and remained below levels seen throughout most of the past decade. 

  1. Home Price Appreciation And Average Loan Sizes 

         Home price appreciation continued to accelerate in the second quarter of 2021, driven by robust housing demand, which continues to outpace the supply of homes for       sale. Some prospective home buyers have taken out larger loans, while others, such as first‐time home buyers or those looking for less expensive homes, have been priced out of the market.   

 

  • The FHFA’s second quarter 2021 house price index data, the most recent report available, showed that home prices in June rose 18.8% compared to June 2020, while for the second quarter, the annual growth rate was 17.4%. Both measures set new records for annual price growth. 

  • MBA’s Weekly Applications Survey data showed that the average loan size for home purchase applications overall (both existing and new home purchases) was $401,000 in July 2021, up 10% from $363,000 in July 2020. 

  • For purchase applications on new homes based on data from the Builder Applications Survey, the average loan size was $402,000 in July, a 16% annual increase. The share of applications with a loan size greater than $300,000 went from 56% in July 2020 to 72% in July 2021.   

  1. Fannie Mae Introduces New Underwriting Innovation To Help More Renters Become Homeowners 

         Starting September 18, Fannie Mae will allow lenders (with the borrower’s permission) to use bank account data to identify 12 months of consistent rent payments. This is intended to aid applicants who have insufficient credit scores or credit history, which is a particularly significant obstacle for low-income households to overcome.  

Although the percentage of renter-occupied housing units dipped in Q2 2020 during the buying frenzy, the percentage/number has rebounded and accounts for more than 30% of total housing units.  

 

    4. FinFluencers For Fun 

    Bloomberg ran an article about social media influencers earning more than bankers. A rare few are raking in over $500,000 per year for TikTok videos promoting financial literacy and, in turn, being paid by companies to promote their services.   

Mass Mutual is being fined $4 million for not overseeing the social media activity of Keith Gill of GameStop fame. But Bloomberg says 25-year-old Austin Hankwitz helped Betterment surge in new account sign-ups and others like Mrs. Dow Jones find a way to connect that corporate marketing cannot. Here’s a look: 

 

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