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Moody’s: Canadian lumber tariff may take up to 6 months to impact U.S. homebuilders

It may take homebuilders up to six months to feel the financial impact of the Trump administration’s recently announced tariff on Canadian softwood lumber imported into the U.S.

Canadian lumber producers, however, don’t share the same timeline and will feel an impact immediately, but since many U.S. homebuilders lock in lumber prices months in advance, they will only have to reckon with higher prices when these forward contracts expire, according to a report from Moody’s Investors Service.

The new anti-subsidy tariffs, averaging 20%, on Canadian softwood lumber imports were announced to address a long-standing issue between the U.S. and Canada on lumber.

“The U.S. lumber industry alleges Canadian wood is heavily subsidized and that imports are harming American mills and workers. Canadians argue the U.S. depends on its lumber for home construction and won’t be able to meet demand without its neighbor to the north. It’s a rift that goes back decades,” Jen Skerritt explained in an informative Q&A on the issue.

The issue reached a boiling point when the quotas and taxes on Canadian lumber exported into the U.S. expired in last 2015.

Since the beginning of the year, the Moody’s report explained that people have been anticipating some sort of action by the Trump administration. But as a side effect of this, the report stated that western Canadian softwood lumber prices (the type of lumber frequently used in home building) have already risen 29% since the start of the year.

Now more than a quarter into 2017, homebuilders have already felt, or will soon feel, the impact of higher softwood lumber prices, and the additional cost impact of a 20% tariff may range from negligible (in accordance with the old Wall Street adage of ‘buy on the rumor; sell on the news’) to as high as 20%, Moody’s stated.

Also, the report noted that larger homebuilders, such as Toll Brothers and The New Home Company, are like more likely to be adversely affected than other homebuilders since they need more lumber.  

Moody’s did the math on the potential financial impact this tariff will have on homebuilders, as seen in the chart below.

Click to enlarge

lumber chart

(Source: Moody’s Investors Service)

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CoreLogic: Distressed sales drop to lowest level in nearly 10 years

Cash sales held steady in January, but distressed sales dropped year-over-year, according to a new report from CoreLogic.

Cash sales accounted for 36.5% of total home sales in January, unchanged from the previous year. During the housing crisis, cash sales peaked at 46.6% of total home sales, however, historical norms rest at about 25%.

Real estate owned sales held the largest share of cash sales in January at 61.2%, followed by resales at 36.5% and newly constructed homes at 17.7%.

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Jan 2017

(Source: CoreLogic)

REOs make up 5.9% of distressed sales, while short sales make up 1.1%.

The distressed sales share fell to 7% in January, down 4.6 percentage points from January 2016. This marks the lowest distressed sales share for any month since September 2007.

The pre-crisis share of distressed sales hovered near 2%, which could be reached by early 2018 at the current rate of decrease.

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Jan 2017

(Source: CoreLogic)

Connecticut held the largest share of distressed sales in January at 17.3%, followed by Maryland at 16.3%, Michigan at 15.1%, New Jersey at 15.1% and Illinois at 12.8%.

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Jan 2017

(Source: CoreLogic)

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CoreLogic: Distressed sales drop to lowest level in nearly 10 years

Cash sales held steady in January, but distressed sales dropped year-over-year, according to a new report from CoreLogic.

Cash sales accounted for 36.5% of total home sales in January, unchanged from the previous year. During the housing crisis, cash sales peaked at 46.6% of total home sales, however, historical norms rest at about 25%.

Real estate owned sales held the largest share of cash sales in January at 61.2%, followed by resales at 36.5% and newly constructed homes at 17.7%.

Click to Enlarge

Jan 2017

(Source: CoreLogic)

REOs make up 5.9% of distressed sales, while short sales make up 1.1%.

The distressed sales share fell to 7% in January, down 4.6 percentage points from January 2016. This marks the lowest distressed sales share for any month since September 2007.

The pre-crisis share of distressed sales hovered near 2%, which could be reached by early 2018 at the current rate of decrease.

Click to Enlarge

Jan 2017

(Source: CoreLogic)

Connecticut held the largest share of distressed sales in January at 17.3%, followed by Maryland at 16.3%, Michigan at 15.1%, New Jersey at 15.1% and Illinois at 12.8%.

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Jan 2017

(Source: CoreLogic)

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First quarter homeownership rate underwhelms

The homeownership rate continues to hover near all-time lows, showing little signs of improvement from last quarter or even last year.

The homeownership rate for the first quarter of 2017 barely moved, inching up to 63.6%, up slightly from 63.5% last quarter and down from 63.7% last year, according to the first quarter report from the U.S. Census Bureau.

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Q1 2017

(Source: U.S. Census Bureau)

The homeownership rate dropped to its lowest rate since 1965 in the second quarter last year when it hit 62.9%.

National vacancy rates also remained steady at 7% in the first quarter for rental vacancies, unchanged from the fourth quarter and up slightly from 6.9% last year. The homeowner vacancy rate remained unchanged from last year at 1.7%. This was down slightly from 1.8% in the fourth quarter.

The Midwest holds the highest homeownership rate at 67.6%, followed by the South at 65.4%, the Northeast at 60.6% and the West at 59%.

Unsurprisingly, homeownership rates were highest for those ages 65 and older at 78.6%, and lowest for those 35 and younger and 34.3%, the report showed.

“Today’s homeownership report is fairly underwhelming, with most key indicators largely remaining flat or changing only modestly,” Zillow Chief Economist Svenja Gudell said.

“But there are a few bright spots under the hood,” Gudell said. “Hispanic and black homeownership rates both rose, even as they still remain far below white and Asian rates.”

By race, White households held the highest homeownership rate at 71.8%, followed by Asian, Native Hawaiian and Pacific Islander at 56.8%. Hispanic households came in at 46.6%.

The only race to see a significant change from last quarter’s numbers were Black households, which held the lowest rate at 42.7%, up slightly from the fourth quarter’s 41.7%.

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PRMI expands Florida footprint with new branch opening

Primary Residential Mortgage Inc. expanded its footprint in Florida with its newest branch opening in the Miami area at 12039 Southwest 132nd Court.

The new branch will fall under the direction of Branch Manager Cary Roque-Valdovinos. Overall, the new mortgage insurance team holds a combined 35 years of experience in the mortgage industry and focusing on residential home loans.

“Our team is ready and focused to assist community members with their dreams of homeownership,” Sales Manager Albert Muina said.

Roque-Valdovinos brings 31 years of industry experience to PRMI, including a role as senior mortgage loan officer for Regions Bank. She will now be responsible for the overall management of the new branch, recruitment and assisting individuals with their home loan needs.

Here is a picture of the new team:

RPMI

From left to right: Robert Vazquez, Melba Teran- Salazar, Roy Aguila, Andrea Salazar, Sue Sprague, Marilyn Suarez, and Albert Muina. Sitting: Cary Roque-Valdovinos

“There are so many loan programs out there to support home buyers and most people have no idea they exist, especially when it comes too little to no down payment options,” Sales Manager Roy Aguila said. “I want to give people in our community the tools and resources they need to help them with making one of the biggest financial decisions in their lifetime.”

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Mortgage experts agree: There is no housing bubble

A steady flow of executive orders and presidential memoranda from President Donald Trump dominates media headlines. Trump even signed an executive order on Wednesday asking for the review of designations under the Antiquities Act.

But with or without Trump, the housing market must go on.

So as the world, once again, tuned in to Trump’s tax reform plans on Wednesday, HousingWire took a break and focused on what we know best: housing. And WITHOUT discussing potential political ramifications on the industry.  We listened to reader feedback and decided to host a webinar free of politics. Enjoy the break.

Darius Bozorgi, Veros CEO, Mike Fratantoni, Mortgage Bankers Association chief economist, and Douglas Duncan, Fannie Mae chief economist, joined HousingWire on a webinar on Wednesday to discuss what’s next for the housing market and mortgage nation.

After all, housing inventory, home prices and mortgage interest rates are flooding HousingWire headlines, just as executive orders, tax reform and health care are flooding the national headlines.

To kick things off, here is a forecast chart from Veros on the future of home prices, along with the strongest and weakest markets.

Click to enlarge

chart

(Source: Veros)

Let’s start of with a question that keeps cropping up: Is America in a housing bubble?

Nay, said Bozorgi, and the others. “There is no housing bubble. There has been what we feel is a steady growth.”

Bozorgi explained that he is not seeing anything remotely close to what the industry saw post 2007 and 2008.

So America isn’t in a bubble but is it in a recession?

Duncan said they do expect in a few years to see recession-like conditions. However, he added that housing would perform relatively better in a recession.

Fratantoni added to Duncan’s point and stated, “we are already at recession levels in homebuilding.”

But as far as home prices, Fratantoni said that national home prices growing at triple the rate of the recession isn’t sustainable.

“I wouldn’t be shocked if we hit a flat period with minimal growth before we start growing again,” Fratantoni said on the future home prices.

Jacob Gaffney, HousingWire Editor-in-Chief, concluded the webinar, asking the panelists, “What is the biggest threat to the economy?”

Duncan said that there could be a recession if for some reason there was a sudden problem in the global mobility of oil.

Fratantoni noted that the Federal Reserve waiting too long to raise rates could also be a problem.

Bozorgi, although, doesn’t foresee a major shock to the housing market, reiterating Gaffney’s point that housing market progress really will be slow and steady.

These points are only a small portion of what the webinar covered. Need to know more? Check out the full webinar for free

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FHFA: Home prices jump 6.4% annually in February

Home prices increased in February both month-over-month and annually, according to the Federal Housing Finance Agency’s seasonally adjusted monthly House Price Index.

Home prices rise 0.8% in February, the index shows, and the previous halt in January’s home price growth was revised upward to a 0.2% increase. Home prices increased 6.4% annually.

But FHFA isn’t the only index showing an increase in home prices in February. Tuesday, the Case-Shiller indices reported home prices increase to an all-time high for the fourth consecutive month.

And Black Knight’s report Monday also showed home prices hit a new high in February.

This chart shows that since around 2012, home prices have steadily grown each year.

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FHFA

(Source: FHFA)

The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. Because of this, the selection excludes high-end homes bought with jumbo loans or cash sales.

Across the nine census divisions, seasonally adjusted monthly price changes in February ranged from a decrease of 0.1% in the South Atlantic division to an increase of 1.8% in the East South Central division. Annually, all changes were positive, ranging from an increase of 4.6% in the Middle Atlantic division to 9.5% in the Mountain division.

Here is a list of which states are in each of those divisions:

South Atlantic: Delaware, Maryland, District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida

East South Central: Kentucky, Tennessee, Mississippi, Alabama

Middle Atlantic: New York, New Jersey, Pennsylvania

Mountain: Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, New Mexico

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Case-Shiller: Home prices hit fourth consecutive all-time high

Home prices continued to expand in February, hitting their fourth consecutive all-time high, according to the S&P Dow Jones Indices.

The S&P CoreLogic Case-Shiller Indices, a national measure of U.S. home prices, increased both month-over-month and year-over-year in February. The National Home Price NSA Index, which covers all nine U.S. census divisions, increased by 5.8% in February, up from last month’s 5.6% increase.

Similarly, the 10-City Composite increased 5.2% annually, up from 5% in January, and the 20-City Composite increased 5.9% from last year, up from 5.7% last month.

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case-shiller

(Source: S&P CoreLogic Case-Shiller Indices)

“Housing and home prices continue to advance,” said David Blitzer, S&P Dow Jones Indices managing director and chairman of the Index Committee. “The S&P Corelogic Case-Shiller National Home Price Index and the two composite indices accelerated since the national index set a new high four months ago.”

Within the top 20 cities, Seattle, Portland and Dallas took the lead with annual home price increases of 12.2%, 9.7% and 8.8% respectively. Dallas was the only new city in the top three, and replaced Denver in the third spot.

“Other housing indicators are also advancing, but not accelerating the way prices are,” Blitzer said. “As per National Association of Realtors sales of existing homes were up 5.6% in the year ended in March.”

“There are still relatively few existing homes listed for sale and the small 3.8-month supply is supporting the recent price increases,” he said. “Housing affordability has declined since 2012 as the pressure of higher prices has been a larger factor than stable to lower mortgage rates.”

In addition to the annual increases, home prices also increased month over month. Before seasonal adjustment, the National Index increased 0.2% in February. The 10-City Composite increased 0.3% and the 20-City Composite increased 0.4%.

However, after seasonal adjustment, the National index reported a 0.4% monthly increase. The 10-City Composite increased 0.6% and the 20-City Composite increased 0.7%.

“Housing’s strength and home building are important contributors to the economic recovery,” Blitzer said. “Housing starts bottomed in March 2009 and, with a few bumps, have advanced over the last eight years. New home construction is now close to a normal pace of about 1.2 million units annually, of which around 800,000 are single family homes.”

“Most housing rebounds following a recession only last for a year or so,” he said. “The notable exception was the boom that set the stage for the bubble. Housing starts bottomed in 1991, drove through the 2000-2001 recession, and peaked in 2005 after a 14-year run.”

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[Charts] Black Knight: Home prices hit new peak in February

Home prices hit a new peak in February, according to Black Knight Financial Services’ Home Price Index.

Home prices increased 0.8% from January to $268,000 in February, up from $266,000 in January. This is an increase of 5.7% from last year’s $254,000 and a new peak in home prices.

This chart from Black Knight shows home price movement since 2005. While prices dipped in the recession years, they have shown steady growth since 2012.

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BKFS

(Source: Black Knight)

In some of the largest states and metros, the home price increase was even more pronounced in February, the index shows. While some states, such as Texas and New York, hit an all new peak, others, such as California and Florida, are still lagging, despite increasing home prices.

These infographics show the difference between Texas and California. While both states saw home prices increase 1.1%, prices in California are still 6.2% behind the May 2006 peak.

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BKFS

(Source: Black Knight)

Similarly, these two charts show the differences between Florida and New York. While Florida saw an increase of 0.7% in February, home prices are still a full 20% below their April 2006 peak. Contrarily, home prices in New York increased slightly more at 1.2%, however they already hit a new high.

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BKFS

(Source: Black Knight)

One metro, Tuscaloosa, Alabama, saw a full 4.7% monthly drop in home prices, however decreases in other metros were much less significant.

Here are Black Knight’s top and bottom ten metros for home price increases in February:

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BKFS

(Source: Black Knight)

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Home construction slows moving into spring home-buying season

Despite the increase in need at the start of the spring home-buying season, housing starts fell in March, according to a joint report released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

Privately owned housing starts decreased in March to a seasonally adjusted rate of 1.22 million. This is a decrease of 6.8% from February’s 1.3 million, but is still 9.2% above last year’s 1.11 million.

Of these, single-family starts rose to a rate of 821,000, a decrease of 6.2% from February’s 875,000.

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housing starts

(Source: U.S. Census Bureau, HUD)

However, while housing starts may be down, privately-owned housing units authorized by building permits increased in March to a seasonally-adjusted rate of 1.26 million. This is 3.6% above February’s revised rate of 1.22 million and 17% above last year’s 1.08 million.

But single-family authorizations in March decreased 1.1% to an annual rate of 823,000, down from February’s 832,000. This isn’t good news for real estate’s inventory-starved market that is about to enter one of the strongest spring home-buying seasons in recent memory.

Privately-owned housing completions increased to a seasonally-adjusted annual rate of 1.21 million, up 3.2% from February’s 1.17 million and up 13.4% from last year’s rate of 1.06 million. Single-family housing completions also fared well, increasing 7.9% from February’s 759,000 to March’s rate of 819,000.