U.S. New-Home Sales Rise at Fastest Pace in Eight Years U.S. new-home sales posted their strongest month in more than eight years while prices jumped to a record level, suggesting healthy demand alongside limited supplies across the housing market.
Purchases of new, single-family homes jumped 16.6% from a month earlier to a seasonally adjusted annual rate of 619,000, the Commerce Department said Tuesday. That was the fastest pace since January 2008.
The median price of a new home—the point at which half of homes were sold above and half sold below—rose to $321,100 last month. That was up 9.7% from a year earlier and the highest level on record. Prices aren’t adjusted for seasonal factors. (…)
Highlighting the paucity of available units, the pace of sales on homes not yet started climbed to the highest level since May 2007. (…)
This is a bizarre jump (charts from Bloomberg and CalculatedRisk)
More Young Adults Living With Parents Than a Romantic Partner For the first time in the modern era, young adults are more likely to live with their parents than with a spouse or partner, according to a new study by Pew Research Center.
(…) The share of young adults living with their parents hit 32.1% in 2014, passing the 31.6% who lived with a spouse or partner in a separate household. The rest lived alone, with roommates or other family members, or as single parents.
In 1960, meanwhile, a peak 62% of 18-34-year-olds lived as part of a romantic couple in their own households, while only 20% lived in their parents’ home, Pew said. (…)
Pew researchers suggest several factors, including declining employment among young men in recent decades and lingering effects of the recession. But the researchers said that the chief reason is a “dramatic drop in the share of young Americans who are choosing to settle down romantically before age 35” either with a spouse or a partner.
(…) half of those 18 to 24 were sharing a roof with their parents while only 25% of those ages 25-29 were.
(…) The Gallup Daily tracking survey reveals that members of the millennials do in fact differ from other generations in some important ways — ways that millennials’ relative youth alone does not explain. (…)
Contrary to what we would expect, given normal demographic patterns of adolescents’ movement into early adulthood and family formation, the data show that significantly more millennials are currently single/never married than was true for those in older generations, and considerably more are in domestic partnerships. Specifically, more than half of all millennials (59%) have never married, and 9% are in domestic partnerships. Gallup has noted a trend toward fewer young adults being married in recent years. (…)
Millennials are clearly delaying marriage longer than any generation before them, in spite of evidence suggesting that many millennials intend to marry at some point. For example, a 2013 Gallup poll found that 86% of single/never married Americans aged 18 to 34 (roughly equivalent to the millennial generation) wanted to get married someday.
The percentage of single-adult households for millennials (18%) is no different from that of Gen Xers (16%) or baby boomers (19%), while the percentage of single-adult traditionalist households (31%) is larger for obvious mortality reasons. The percentage of current two-adult millennial households (46%) is significantly lower than that of Gen Xers (57%), baby boomers (52%) or traditionalists (55%). Significantly more millennials are currently in multi-adult households of three or more (36%) than is true for any other generation, suggesting that these reflect some form of communal living arrangement (77% of millennials in multi-adult households of three or more are single/never married, while 12% are married).
The key point, however, is this: There doesn’t appear to be any evidence that millennials — both married and single/never married — are putting off having children. Even among the small percentage (2%) of married 18-year-old millennials, less than half (44%) have no children, and the percentage decreases with age to just 17% at age 34. And while few single 18-year-old millennials have children (4%), that percentage rises to almost half by age 34. In other words, almost half of the oldest millennials who have never married nonetheless have children. In 2000, the comparable number for Gen Xers aged 30 to 34 was just 30%. (…)
In a 2013 Gallup poll, 87% of adults between 18 and 40 who did not yet have children said they wanted them someday. The current data suggest that for millennials, “having children someday” does not necessarily depend on being married.
(…) The U.S. economy has been recovering at a slow pace over the past eight years, with young adults’ spending hit hardest by this lethargic progress. Gallup’s latest report, How Millennials Want to Work and Live, reports that in 2008, Americans aged 19 to 35 were spending an average of $98 per day. Among that same age group now, average daily spending has fallen by $13. Among older Americans, spending is close to — if not on par with — 2008 levels. Perhaps because of their lower wages and higher amounts of student debt, millennials have been unable to catch up to 2008 spending levels, while older generations are less likely to have those constraints.
However, there is positive spending momentum among millennials. Across all generations, fewer than four in 10 Americans (37%) say they are spending more than they were a year ago, but a larger proportion of millennials (42%) say they are spending more. It is worth noting, though, that Americans — millennials included — are spending more on things they need than on things they want. More millennials report spending more on nondiscretionary categories such as groceries (52%), utilities (37%) and healthcare (35%), while fewer are spending more on discretionary purchases such as leisure activities (33%), travel (26%) and dining out (26%). (…)
Millennials’ increased spending on leisure activities versus a year ago and versus other generations is intriguing, as it suggests they might be starting to free up their bank accounts and spend more on nonessentials. They are the only generation to do so, and this financial freedom presents a substantial amount of opportunity for brands that can connect with them. (…)
Auto, Mortgage Delinquencies Rise in Energy Regions The New York Fed’s quarterly report on household debt and credit found rising auto and mortgage delinquencies in the U.S. counties that had the highest employment in the oil and gas industry, even as the national picture continues its gradual improvement.
Delinquencies on auto loans have spiked in the U.S. counties that had the highest employment in the oil-and-gas industry, according to the Federal Reserve Bank of New York’s quarterly report on household debt and credit. Mortgage delinquencies have also climbed, though not as dramatically. (…)
So far, the increase in delinquencies and deterioration of credit appears to be concentrated only within energy regions of the country.
“These energy counties are 1.7% of total employment, which is small in the national picture,” said Andrew Haughwout, a New York Fed economist who co-wrote the research. “But this report is evidence of real hardship in these counties.”
The national picture remains one of gradual credit improvement. Overall credit increased by $136 billion, to $12.25 trillion, in the first quarter of 2016, driven by an increase of $120 billion in mortgage debt. The amount of debt remains much lower than the peak in 2008, when the housing crisis and recession racked household balance sheets.
Delinquency rates declined nationally—the share of people more than 90 days behind on their mortgage fell to the lowest since 2007. The share of all household debt that is delinquent declined to 3.6% in the first quarter, also the lowest since 2007.
The amount of student loans rose by $29 billion, to $1.26 trillion. The delinquency rate on student loans improved slightly in the first quarter, but remains far higher than all other types of debt. About 11% of student-loan balances are delinquent, compared to 3.6% for loan balances overall and just 2.1% of mortgages. The figures do not include student loan balances that are in grace periods and forbearance, and the New York Fed says student loan delinquencies may be about twice as high for loans that are actually in repayment.
As a supplement to this quarter’s report, the New York Fed took stock of the fallout from the decline in oil prices, by comparing oil counties to the rest of the country. It defined oil counties as those in which at least 6% of employees worked in the oil and gas industry at the end of 2014—about 10% of all counties. (…)
MORE ON THE CHINA RISK
Jim Chanos interviewed by Business Insider:
“One other problem people aren’t paying enough attention to — and that is the asset-liability mismatch,” he said. “And if we learned anything … during our crisis, it was you shouldn’t finance hard-to-value long-term esoteric real-estate-related derivatives or securities with overnight money, which is what a lot of the investment banks ended up doing by ’07/’08. They couldn’t move a bunch of the gunk on their balance sheet and increasingly they were financing themselves in the repo market.”
That is now happening in China, Chanos said. Banks are financing uneconomic projects and/or losses with debt carried on the balance sheets of Chinese banks. That debt is then being financed overnight in the repo market.
All of that is swirling around in the country’s $33-trillion-and-growing banking system.
A few more points Chanos hit:
- Chinese President Xi Jinping has been a more repressive, inward-looking leader than anyone expected. He has taken “steps backward” from the reform the world expected by moving against the army, the media, and the internet (which he sees as an alternate power base) in general.
- “We’re getting in some pretty scary debt to capital numbers in China,” Chanos reminded listeners. “We’re 300% of GDP as opposed to 100% of GDP the last time they had a big problem.”
- Countries that depend on China for trade represent 40% of global gross domestic product. “So if China really does go into decline, it’s going to take a lot of countries down with it,” Chanos said.
Check out the full podcast here
Bad loans are rising sharply at the lowest tiers of China’s financial sector, with some small commercial banks reporting delinquency rates of 20 per cent or more on their loan books. (…)
China has several thousand city or rural banks. Several of those banks included in a small survey conducted by the Financial Times had rates of special mention loans between 10 to 15 per cent of total loans. (…)
For a lot more on this: Certain Uncertainties
PBoC sets renminbi fix at 5-year low Central bank declines to fight against global dollar strength
(…) “The PBoC’s FX reserves have been stable and exchange rate depreciation expectations have ebbed. But the yuan’s twin outflows of foreign investors unwinding carry trades and local firms paying FX debts have continued,” Mansoor Mohi-Uddin, senior market strategist at Royal Bank of Scotland in Singapore, wrote on Wednesday. “Both are now set to flare up again as the Fed gets ready to hike rates this summer.” (…)