November 2015 Newsletter
This year’s annual conference in Charleston, South Carolina was fantastic! The topic was, “A Year of Change, Renewal and Re-Imagination”. Charleston was dealt a seemingly insurmountable economic blow when the Naval Shipyard’s impending closure was announced in 1993. The Shipyard employed 8,000 at its peak. Mayor Joe Riley used this ‘date with the hangman’ to successfully focus on the city’s uniqueness and authenticity. In the process he became revered for his service and unwavering commitment by the U.S. Conference of Mayors.
Home Prices Accelerate in September, Says S&P/Case-Shiller
Home prices gained steam across the country in September, according to data released Tuesday by S&P/Case-Shiller, fueling concerns about affordability for buyers.
On a national basis, single-family home prices rose 4.9%, according to the S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions. This compares to a 4.6% increase in August.
An index measuring 20 cities shows that home prices rose an annual 5.5% in September, compared to 5.1% the month before. A separate index measuring 10 major cities shows that home prices gained 5%, up from 4.7% the month before.
The cities with the highest year-over-year gains were San Francisco (11.2%), Denver (10.9%) and Portland (10.1%).
Home prices have continued to rise at more than double the rate of inflation, causing some concern about whether it’s getting increasingly difficult for those looking to buy a home. Rising rents and soft wage growth add to the challenge, starting with saving for a down payment.
“Sellers may be singing the praises of the season, but buyers could be left grumbling ‘Bah Humbug’ because the market is acting more Grinch-like for renters and others looking to buy a home right now,” said Zillow chief economist Svenja Gudell.
Eyes are also on the Fed, which could raise interest rates at its December policy meeting and impact the cost of taking out a mortgage. A first rate hike isn’t likely to push the 30-year mortgage rate above 4%, though, says David Blitzer, chairman of the index committee at S&P Dow Jones Indices.
Seasonally adjusted, the national index rose 0.8% in September from the month before, while the 20-city index and 10-city index both rose 0.6% month-over-month.
Why the Housing Rebound Hasn’t Lifted the U.S. Economy Much
Joe White, The Wall Street Journal – November 24, 2015
American homeowners are finally digging out of the hole created by the housing crisis. But their housing wealth is playing a much smaller role in the overall economy than it did before the downturn.
Home equity has roughly doubled to $12.1 trillion since house prices hit bottom in 2011, according to the Federal Reserve. As a result, a key gauge of housing wealth—homeowners’ equity as a share of real-estate values—is nearing the point seen a decade ago, before the downturn.
Such a level once would have offered a double-barreled boost to the economy by providing owners with more money to tap and making them feel more flush and likely to spend. But today, that newfound wealth has had little effect on behavior. While the traditional ways Americans tap their home equity—home-equity loans, lines of credit and cash-out refinances—are higher than last year, they are still depressed.
In the first half of the year, owners borrowed $43.5 billion against their homes with home-equity loans and lines of credit, according to trade publication Inside Mortgage Finance. That was 45% higher than in the first half of 2014, but scarcely a quarter of the amount seen when equity was last as high in 2007.
Meanwhile, cash-out refinances, which let homeowners take out a new mortgage and tap some of the home’s value at the same time, were up 48% in the three months ended in August from the year-earlier period, according to Black Knight Financial Services. But they remain below the level seen in the summer of 2013. The average cash-out refinance in the three months ended in August left the borrower with mortgage debt of about 68% of the home’s value—not a risky level by any stretch.
Home equity’s effect on consumer spending is at its lowest ebb since the early 1990s, according to Moody’s Analytics. The research firm estimates that every $1 rise in home equity in the fourth quarter of 2014 would translate to about two cents of extra consumer spending over the next 1 to 1½ years. That was a third of the impact home equity had before the bust, Moody’s said.