Home-Price Growth Hit Record in July The Case-Shiller index rose 19.7% in the year that ended in July, as buyers continued to compete amid a shortage of homes for sale. But there are signs the market could be starting to cool.
(…) “The last several months have been extraordinary not only in the level of price gains but in the consistency of gains across the country,” said Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices.
July marked the fourth consecutive month of record price appreciation, he said.
But the data suggest the market could be starting to cool. Price growth slowed slightly in three of the 20 cities tracked by the index: Detroit, Cleveland and Washington, D.C. (…)
Home-price increases are outweighing the advantage of low mortgage rates. Households that bought homes in May are spending almost 21% of their income on monthly mortgage payments, above the average rate for the past decade, according to Realtor.com. (…)
That was for July. Here’s Redfin’s Housing Market Update covering the four-week period ending September 19. Starting to cool?
Early homebuyer demand reached the highest point in at least three years during the week ending September 19, according to Redfin’s Homebuyer Demand Index, which measures requests for home tours and other home-buying services from Redfin agents, adjusted for seasonality. Mortgage purchase applications also increased 2%, on top of an 8% increase the prior week.
During the four-week period ending September 19, most other housing market measures showed a typical late-summer seasonal decline with pending sales down 12% from their 2021 peak, the share of homes sold above list price falling below 50%, and time on market inching up to 20 days. Asking prices, which often increase in September, were up 2.4% from the four-week period ending September 5.
“The fact that homebuyer demand is setting new records as summer draws to a close leads me to believe that home prices have room to grow,” said Redfin Chief Economist Daryl Fairweather. “This fall will be a litmus test for how hot the 2022 housing market will get. And it looks like we are heading into another unseasonably hot fall as ultra-low mortgage rates and employers’ remote-work policies mean Americans are still on the move.”
Data based on homes listed and/or sold during the period:
- The median home-sale price increased 13% year over year to $356,663. This was essentially flat from the four-week period ending September 12.
- Asking prices of newly listed homes were up 11% from the same time a year ago to a median of $359,724, an all-time high.
- Pending home sales were up 6% year over year.
- New listings of homes for sale were down 6% from a year earlier. New listings have been below 2020 levels since the four-week period ending August 22.
- Active listings (the number of homes listed for sale at any point during the period) fell 21% from 2020.
- 46% of homes that went under contract had an accepted offer within the first two weeks on the market, above the 43% rate of a year earlier.
- 33% of homes that went under contract had an accepted offer within one week of hitting the market, up from 31% during the same period a year earlier.
- Homes that sold were on the market for a median of 20 days, up from the all-time low of 15 days seen in late June and July, and down from 32 days a year earlier.
- 49% of homes sold above list price, up from 34% a year earlier.
- On average, 4.9% of homes for sale each week had a price drop, up 0.8 percentage points from the same time in 2020, and the highest level since the four-week period ending October 13, 2019.
- The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, decreased to 101.2%. In other words, the average home sold for 1.2% above its asking price.
Other leading indicators of homebuying activity:
- Mortgage purchase applications increased 2% week over week (seasonally adjusted) during the week ending September 17. For the week ending September 16, 30-year mortgage rates were down slightly at 2.86%.
- From January 1 to September 19, home tours were up 11%, compared to a 33% increase over the same period last year, according to home tour technology company ShowingTime.
- The Redfin Homebuyer Demand Index hit a 3-year high during the week ending September 19, up 23% from a year earlier. The seasonally adjusted Redfin Homebuyer Demand Index is a measure of requests for home tours and other home-buying services from Redfin agents.
- Housing components account for 31% of the weight of the basket of goods and services that make up headline CPI and 40% of the core (ex food and energy). The primary rents and owners’ equivalent rents components that form housing within CPI lag behind actual house price changes by anywhere between 12 and 18 months – 14 months is currently the best fit: (ING)
House prices to boost inflation
(Macrobond, ING)
(…) The current real estate boom has spread into smaller cities and suburbs, with buyers taking advantage of low mortgage rates to purchase bigger properties. Home prices in some parts of Ontario are 35 per cent to 55 per cent higher than before the COVID-19 pandemic, according to Canadian Real Estate Association data.
“We are now detecting price acceleration for Canada as a whole,” CMHC chief economist Bob Dugan said on a conference call Tuesday.
Now, six of the 14 census metropolitan areas (CMAs) assessed by the agency are in its high-risk category. That is up from five in the agency’s previous report issued in March. (…)
U.S. Consumer Confidence Deteriorates Further in September
The Conference Board Consumer Confidence Index declined 5.1% (+7.9% y/y) this month to 109.3 from 115.2 in August, revised from 113.8. Confidence index has fallen 15.2% during the last three months. The confidence index remained at the lowest level since February. A September reading of 115.0 had been expected in the Action Economics Forecast Survey.
The Present Situation index declined 3.7% this month (+45.0% y/y) to 143.4 following a 5.3% August decline to 148.9, revised from 147.3. The Consumer Expectations reading weakened 6.7% (-15.8% y/y) in September to 86.6 after a 10.6% decline in August to 92.8, revised from 91.4.
The jobs gap, representing the difference between respondents indicating that jobs are plentiful and those saying jobs are hard to get, fell to 42.5% this month from 44.4% in August, revised from 42.8%. This series has a 73% correlation with the unemployment rate over the last ten years. The jobs plentiful measure edged up to a record high of 55.9% this month. The jobs hard-to-get measure rose for the third straight month to 13.4%, the highest level since April.
Current business conditions were perceived as good by a greatly lessened 19.3% of respondents in August, down from a high of 25.2% in June. Expectations that business conditions would improve in six months weakened to 21.5% from 39.1% six months ago. More jobs were expected in six months by a 21.5% of respondents, down from 35.4% in March. The percentage expecting income to increase backpedaled to 17.3%, the least in four months.
The expected inflation rate in twelve months eased to 6.5% from 6.7% in August, but remained up from a 4.4% low in January of last year. The share of respondents planning to buy a new home within six months held at 0.5% and remained down from 2.0% in June 2020. Those planning to buy a major appliance fell to 47.0%, down from 53.9% two months ago.
Confidence of individuals under 35 years fell sharply to the lowest level since April. Confidence amongst those between 35 and 54 also fell sharply to the lowest level since January. Confidence amongst individuals 55 and over was fairly steady at the lowest level in six months.
Confident or not, Americans keep spending judging from the latest Chase Consumer Spending Tracker (through September 20):
Control sales hanging in at a high level:
- Eurozone consumer activity returns to pre-pandemic levels Data show rising confidence but high energy prices and supply-chain disruptions pose threat
- Global food inflation may be sparked by ruined harvests in Brazil. The country faces the most extreme drought in at least a century, leaving orange and sugar cane fields parched. The frost plaguing crops is the worst in two decades, killing coffee plants that would have supplied the world for years to come. The disruptions may cause logistical bottlenecks. Read more in our Big Take.
Evergrande to Raise $1.5 Billion by Selling Bank Stake to State-Owned Firm China Evergrande plans to raise about $1.5 billion by selling most of its minority stake in a Chinese bank to a state-owned enterprise, an indication that authorities are moving to contain the fallout from its financial difficulties.
(…) Shengjing Bank has also demanded that Evergrande use net proceeds from the stake sale to repay what the developer owes it, according to a regulatory filing. (…) Evergrande said in a regulatory filing Wednesday that “its liquidity issue has adversely affected Shengjing Bank in a material way” and that the purchase of most of its stake by a state-owned enterprise would help stabilize the lender’s operations.
The local government had little choice but to help Evergrande resolve its liabilities with the bank, said Li Gen, chief executive of Beijing BG Capital Management Ltd., a credit-focused asset manager. If the state-owned enterprise hadn’t stepped in to buy some of Evergrande’s stake, Shengjing Bank would likely have to book significant loan losses, which could affect its lending to other businesses. (…)
Shengjing Bank’s chairman, Qiu Huofa, previously worked as an executive vice president at Evergrande, as did the bank’s chief approval officer. Its board also has other Evergrande representatives who were appointed after the developer became its controlling shareholder. (…)
Seems like the objective was really to save the bank, not Evergrande…
Some holders of a bond issued by a company called Jumbo Fortune Enterprises are forming a committee to press their claims in the event of a default because they maintain China Evergrande Group is a guarantor of the debt, according to people familiar with the plans.
The $260 million note from Jumbo Fortune Enterprises matures Oct. 3, according to data compiled by Bloomberg. The dollar note is guaranteed by China Evergrande Group and its unit Tianji Holding Ltd., people familiar with the matter said, asking not to be identified because the details are private. (…)
It’s already fallen behind on payments to banks, suppliers and holders of onshore investment products. The builder faces a $45 million coupon on Sept. 29 for a dollar bond that matures 2024, after giving no sign last week of having met a separate $83.5 million coupon payment on other securities. (…)
Five business days would be allowed if any failure to pay were due to administrative or technical error, though beyond that there would be no grace period, the people said. (…)
Evergrande’s next major public note to mature will be in March, part of $7.4 billion of securities due in 2022.
The total debt of local government financing vehicles rose to about 53 trillion yuan ($8.2 trillion) at the end of last year from 16 trillion yuan in 2013, the economists wrote in a report. That’s equal to about 52% of gross domestic product and is larger than amount of official outstanding government debt. (…)
Land sales are a major source of revenue for local governments and sales have slowed down as the crisis at property developer China Evergrande Group worsens. To make up the funding gap left by shrinking land sales revenue, Goldman recommended the government increase the bond quota for 2022 by more than 500 billion yuan from this year’s level of 3.65 trillion yuan. (…)
- ‘Hidden debt’ on China’s Belt and Road tops $385bn, says new study More than 40 countries have debt exposure to Beijing greater than 10% of their GDP
COVID-19
(NBF)