U.S. Existing-Home Sales Rose in March
Existing-home sales increased 1.1% in March from February to a seasonally annual rate of 5.6 million, the National Association of Realtors said Monday. Compared with a year earlier, sales declined 1.2%. (…)
The median sale price for an existing home in March was $250,400, up 5.8% from a year earlier.
Inventory is especially tight at the lower end of the market. Deals for homes priced below $250,000 declined in March on an annual basis, while transactions for homes priced above $250,000 grew robustly from the previous year. (…)
The average interest rate on a 30-year fixed-rate mortgage for the week ending April 19 was 4.47%, according to Freddie Mac, up from 3.95% at the beginning of the year.
The housing market is going nowhere but South as Haver Analytics illustrates:
And now, one must consider one’s after tax cost…
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Tax Changes Mean Mortgage-Interest Deduction Finds Fewer Takers Boost in standard deduction means fewer will claim write-off for housing borrowing
Meet the new mortgage-interest deduction. It’s smaller and much more concentrated among high-income households.
In 2018, the deduction will save taxpayers $25 billion, down from $60 billion in 2017, according to estimates released on Monday by the Joint Committee on Taxation, the official analysts of tax policy for Congress.
That’s largely because of the way last year’s tax law change altered the standard deduction. The much higher standard deduction means that far fewer taxpayers will itemize their deductions. In most cases, only taxpayers with total deductions exceeding $12,000 for individuals and $24,000 for married couples will itemize. And those deductions can now include only $10,000 in state and local taxes, which means the most likely itemizers are Americans with sizable mortgages or charitable contributions.
The result is that just 18 million households are expected to itemize deductions for 2018, down from 46.5 million in 2017, according to JCT.
The resulting home mortgage-interest deduction — once considered a tax break too sacred to touch — will be used by just 13.8 million taxpayers, down 57%. In 2017, about 12.4% of the tax break went to households with incomes exceeding $500,000, and 36.5% of the benefit went to people earning between $100,000 and $200,000.
Now, 23.9% of the shrunken mortgage-interest deduction is projected to go to households making more than $500,000 with 28.9% of the benefit going to households between $100,000 and $200,000. (…)
In early 2019, many Americans will get a surprise when filing their 2018 tax returns: their mortgage has gotten a lot more costly.
Bank of Canada sees economy improving, plays down inflation risk
Poloz, in testimony to the House of Commons’ Finance Committee, reiterated that while higher interest rates would likely be warranted over time, some policy accommodation is still required to keep inflation on track.
Pointing to the bank’s outlook for inflation of 2 per cent two years from now, Poloz said policymakers are confident they have the right modelling and framework to guide interest rate decisions.
“Given what our outlook is, we’ve got monetary conditions roughly where they should be, and in that context, the fact that inflation is rising above 2 (per cent) for now is due to temporary factors and we can see through them,” he told the committee. (…)
Poloz said policymakers are watching wages, which he said will pick up as job vacancies continue to grow, and will in turn encourage more people to enter the workforce.
“We are just now in the last six months reaching wage movements that are actually positive in real terms, above 2 per cent. And so that’s a really important bridge to cross and when we get up to the 2.5-to-3-per cent zone, then we have got more scope for getting faster reintegration of people back into the workforce,” he said.
Poloz reiterated his expectation that business investment and export growth will soon contribute more to economic growth, which has until now mostly been driven by households and government spending.
“I am hopeful that when we get past the bottlenecks that we saw during in the winter time, that we’ll get some clearing of inventory out and exports will rebound,” he said. (…)
MARGINS SQUEEZE?
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Why Working on the Railroad Comes With a $25,000 Bonus Workers are being offered bonuses of up to $25,000 to join BNSF Railway and Union Pacific as the railroads struggle to fill jobs.
(…) Freight volumes are rising on strong economic growth and industrial expansion, and a shortage of available truck capacity is pushing more shipments onto rails. (…)
Union Pacific is offering $10,000 to $20,000 “hiring incentives” to train crews in cities like Denver, Kansas City, Mo., and North Platte, Neb., where its largest rail yard is located. Those jobs average $40,000 in pay over the first year and $60,000 the next, according to job listings.
Electricians to inspect, repair and maintain locomotives are being wooed with $25,000 signing bonuses to Union Pacific locations outside Milwaukee; in Hinkle, Ore., a three-hour drive from Portland; and elsewhere. (…)
BNSF, owned by Berkshire Hathaway Inc., BRK.A -0.44% has hiring incentives starting at $15,000 for some new hires, according to a document reviewed by The Wall Street Journal.
A BNSF spokeswoman said the railroad is facing a talent shortage across its system and is extending the offer to diesel mechanics, electricians and conductor trainees. (…)
The median Union Pacific employee—a locomotive engineer—made nearly $83,000 in total compensation in 2017, according to a company securities filing. Health-care and retirement benefits, including a pension, are also fairly generous. (…)
Trucking companies experiencing strong freight demand are dangling bonuses and other incentives to recruit and retain drivers. Last year, the median salary for long-haul truckload drivers working irregular routes was about $53,000, up 15% compared with 2013, according to the American Trucking Associations, an industry group. (…)
The hiring bonuses aren’t happening on the large freight railroads east of the Mississippi River, where companies say there is slack in the railroad hiring pool. (…)
Maybe that “slack” will take the train to where the bonuses are… Nowadays, moving is winning as The Atlanta Fed shows:
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U.S. Hospital Profits Fall as Labor Costs Grow and Patient Mix Shifts Decline points to new challenges for U.S. hospitals as more patients seek medical care in nonhospital settings
The median hospital operating cash flow margin—monitored by Moody’s Investors Service as a signal of financial strength—fell to 8.1% last year from 9.5% a year earlier, in a preliminary analysis of 160 nonprofit and public hospitals and hospital systems with credit ratings from the agency, a Moody’s report said.
That is the lowest level in the past decade, Moody’s data show. The prior low point came in 2008, when the median margin reached 9.1%.
(…) a nursing shortage has compounded an uptick in hospital operating expenses, whose growth has outpaced operating revenue for the second straight year in 2017, according to Moody’s.
Hospitals in tight labor markets for nurses are offering bonuses to hire and retain nurses and relying on costly temporary nurse staffing agencies, said Lisa Goldstein, an analyst for Moody’s who also authored the preliminary analysis. (…)
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Main Street’s Gain May Be Wall Street’s Pain These days, the biggest companies have high profit margins. There’s a vital question for investors: Will those margins fall now that wage pressures are on the rise?
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Strong ad sales not enough to offset surge in costs at Alphabet
(…) Alphabet’s operating margin of 22 per cent, down from 27 per cent a year ago, missed expectations because of the growth in expenses. (…)
Interesting that one of the fastest growing company, in a virtual monopoly with FB, is experiencing margins problems. Margins also declined in 2017 but many blamed the acquisition of Nest in 2017. Q1’18 vs Q1’17 is clean according to RBC.
This also won’t help margins:
Oil Breaches $75 on Risk to Iran Deal Brent oil prices hit a more than three-year high amid concerns the U.S. could withdraw from the Iranian nuclear deal, a move that could tighten global supplies.
- Ned Davis Research @NDR_Research Energy upgraded to overweight. We believe March 15, 2018 could mark a major Energy sector relative strength low. http://www.ndr.com/p/IF18_10.PDF
INFLATION WATCH
From Markit’s U.S. Flash PMI:
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Services:
Average cost burdens continued to rise in April, with the rate of input price inflation edging up slightly since March. Average prices charged meanwhile increased at a pace broadly in line with that seen in March, albeit one that was weaker than seen for input costs.
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Manufacturing:
Price pressures within the factory sector intensified, with the rate of input cost inflation picking up to the fastest since June 2011. Cost increases were partly linked by producers to the introduction of tariffs. Moreover, greater client demand and higher raw material prices underpinned the quickest rise in average selling prices for almost seven years.
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World wine output falls to 60-year low Global wine output fell to its lowest level in 60 years in 2017 due to poor weather conditions in the European Union that slashed production in the bloc, international wine organization OIV said.