House Prices

House Prices

Can China's economy reverse a sluggish 2023 in the last quarter?

Post By: September 29, 2023 0 Comment(s)
  • The months ahead are set to bring more clarity on China’s economic outlook and any government support — especially for real estate.
  • “Probably in half a year, we are going to see the housing market stabilize,” Yao Yang, dean of the National School of Development at Peking University in Beijing, told reporters in a briefing Wednesday.
  • In coming weeks, China’s ruling Communist Party is also due to hold its Third Plenum, a meeting held once every five years which typically focuses on longer-term aspects of the economy.

This photo taken on September 24, 2023, shows residential buildings in Chongqing, in southwest China.

Stringer | Afp | Getty Images

BEIJING — The last three months of the year are set to bring more clarity on China’s economic outlook and any government support — especially for the critical real estate sector.

China’s rebound this year from Covid-19 has slowed since April. Then over the summer, the property slump accelerated, despite many large cities easing restrictions for buying apartments.

“Gradually, the central government is going to loosen up on the supply side, too,” Yao Yang, dean of the National School of Development at Peking University, told reporters in a briefing Wednesday.

“Probably in half a year, we are going to see the housing market stabilize,” he said, noting regulators were previously “overshooting” in their real estate crackdown.

At its peak, China’s property sector accounted for about a quarter of the economy, which means the industry’s struggles have weighed on everything from consumption to local government finances.

Yao also expects the central government to allow local governments to borrow more money to pay back their long-term debt — which he said can help the economy recover fully by the middle of next year.

In 2020, Beijing tried to rein in real estate developers’ high reliance on debt with new restrictions on financing. Covid restrictions dampened homebuyer appetite, drying up an important source of cash for developers since apartments are typically sold ahead of completion in China.

Developers delayed construction on projects, further worrying homebuyers. By late 2022, several real estate giants had defaulted on their debt. This summer, top leadership started to signal a new tone.

“The decline in the real estate sector was the result of the government’s intentional measures to correct the bubbles in the market,” Yao said. He noted that floor space sold this year will likely be more than 500 million square meters less than what it was before the crackdown — and 200 million square meters less than what’s considered acceptable for the industry.

But he and other economists mostly don’t expect real estate to return to significant growth in the future.

Dan Wang, Shanghai-based chief economist at Hang Seng China, said she expects housing market weakness will persist and prices to fall in the coming years, but not abruptly.

Her analysis found an unofficial minimum price for sales of newly built homes across China. “Some developers would say they sort of know the baseline, they cannot give a discount of 15%,” she said.

“For [the] Chinese government, they would like to see more of a controlled decline rather than a sudden adjustment,” she said, noting significant social consequences if house prices plunge, since much of household wealth is stored in housing.

The combination of these measures could allow the economy to rebound modestly from 4Q23 onward.

Morgan Stanley

This week, worries about China’s real estate sector persisted with highly indebted Evergrande running into more liquidity problems — along with reports Wednesday its chairman has been put under surveillance.

“A breakthrough on Evergrande’s restructuring, yeah it’s going to make a difference,” Clifford Lau, portfolio manager at William Blair, said in a phone interview Monday.

“But is it going to re-price the entire bond sector to high single-digit[s], to 20 cents to a dollar? I think that is a very long journey.”

Such headlines have weighed on sentiment, both domestically and among international investors. Some longtime China watchers, especially outside the country, have said they are confused about Beijing’s economic policies. Foreign businesses have grown pessimistic.

“When we talk about confidence, most of businesses live in today. They want to get by today. No one cares about 10 years after,” said Yao, who is also director of the China Center for Economic Research.

“So the lack of confidence is the same thing as slowing down of the Chinese economy. If the economy is slowing down, no one is going to have an optimistic view about the economy [any]where,” he said.

Yao has been a long and early proponent of handing out cash to some people in China to boost consumption. While some cities have done so, central government authorities have been hesitant, preferring to cut taxes, especially for businesses.

Lack of formal communication is not helping sentiment.

China’s tightly controlled system means that policy changes can typically only occur after major meetings of top leadership known as the Politburo. Those generally occur in late April and late July, and another meeting in December to discuss the year ahead.

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In the coming weeks, China’s ruling Communist Party is due to hold its Third Plenum, a meeting held once every five years which typically focuses on longer term aspects of the economy.

“A central-government-led, comprehensive plan to resolve local debt risk may be unveiled before/at the Third Plenum this fall. The combination of these measures could allow the economy to rebound modestly from 4Q23 onward,” Robin Xing, chief China economist at Morgan Stanley, and a team said in a note.

Also widely anticipated is the National Financial Work Conference, a meeting to discuss financial development and risks. It has been delayed since it was originally expected to be held last year.

The meetings are part of a structure China has had for years. What’s different is that more recently, policymakers have become less likely to make major announcements before high-level directives are clear.

The Communist Party of China is also gaining increased oversight of finance and tech with the establishment of new commissions — a reorganization process announced in March and expected to take effect by the end of the year.

It’s not clear how much more policymakers need to do for the economy, especially since there’s still modest growth.

In the long term, Yao expects China’s GDP has the potential to grow by 5.5% a year, supported by a high savings rate and the country’s leadership in new energy vehicles, renewables and advanced technology.

This month, weekly data from Nomura indicate the real estate sales slump has moderated. Retail sales also grew better-than-expected in August and industrial profits for the month surged by 17.2% from a year ago.

Bruce Pang, chief economist and head of research for Greater China at JLL, pointed out that industrial profits rose regardless of company type.

What’s needed is “policy stability, not policy overshoot,” he said in Mandarin, according to a CNBC translation.

Pang doesn’t expect major policy changes at meetings later this year, but anticipates the central bank will continue to lower interest rates and growth to pick up naturally.

Even with a number of lowered China growth forecasts this year, economists’ expectations are close to, or slightly lower than, the official target of around 5%. Nomura on Wednesday increased its full-year GDP forecast to 4.8% from 4.6%.

“I guess every couple of years, you hear these stories about something. Trust companies, shadow banking was supposed to take the country down back in 2013. Didn’t happen,” said Peter Alexander, founder of Shanghai-based consulting firm Z-Ben. He said he arrived in China in 1996, at around the Asian financial crisis.

“Somehow, someway,” he said, “policy has entered to be able to provide some form of corrective action that has stabilized, or at a minimum, postponed the supposed inevitable.”

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In Brief: House Prices; Banks; Wealth Platforms

Post By: September 29, 2023 0 Comment(s)

Weekly Reports | 10:00 AM

Jarden wrong on house prices; pressure to bear on bank NIMs; disruptors winning in wealth management; RBNZ clamps down on general insurers; emerging market growth weakens.

-Getting a house price forecast very wrong
-Margin pressures on banks
-The rise of disruptor wealth platforms
-General insurers face tougher NZ regulations
-Slow China impacting on EM growth

Jarden’s Mea Culpa on House Prices

Back in February, when the RBA returned from the summer break with a newfound hawkish determination, extending a hiking cycle which was thought to be near its end, Jarden downgraded its forecasts for house prices to a -20-25% fall.

The key driver of this was an assumed -30% fall in borrowing capacity which was expected to flow through to house prices. Since then, house prices have increased 5%, recovering half of a record -10% peak-to-trough decline.

While borrowing capacity collapsed, as expected, house prices have shown unexpected resilience. Jarden poses the rhetorical question: How did we get it so wrong?

Jarden expected the 20-plus year relationship between borrowing power and prices, which implies the average household can buy the average home, to hold. Instead, tight supply and improving sentiment have driven a solid recovery and we seem to be entering an environment in which only high-income households (or those with significant family assistance) can buy – in other words, the end of the “great Australian dream”.

Jarden notes at the end of 2022, the RBA had begun to sound more dovish, hence the surprise when it flipped to hawkish again in early 2023. Late 2022 was when interest rate and house price expectations troughed. This shift in sentiment, combined with record low listings, saw prices turn quickly.

Importantly, a key difference between the most recent downturn and the 2018-19 correction is supply. While months of supply peaked at eight in 2019, in 2022 it peaked at just four.

Jarden highlights it’s only higher income earners, and the those with access to the Bank of Mum & Dad, driving the recovery. The average borrower’s income has increased at more than 2x the pace of the average household, up 30% since 2019.

Outright foreign buying has not been a key driver of the housing market, but Jarden does suggest the surge in migration and ensuing rental/housing crisis is driving some domestic buyers to bring forward purchases and increasing demand in a supply-constrained market.

Jarden continues to see downside risk to house prices given the gap between prices and borrowing capacity, along with the worst affordability on record, but “reluctantly” upgrades forecasts, now expecting house prices to rise 5-7% in 2023 and 5% in 2024 to make a new record high by mid-2024.

NIM Pressure for Banks

Goldman Sachs has undertaken a full reassessment of bank earnings forecasts.

The broker now forecasts system housing credit growth to trough at around 4% (previously 1%), outperforming system business credit growth over the course of FY24-25. While there has been some relief in mortgage competition, Goldman does not expect this to be sustained over the remainder of 2023 and into 2024, and with ongoing deposit pressures, now forecasts FY24 net interest margins (NIM) down -8 basis points and FY25 down -6.

The broker increases FY24 expense assumptions, largely driven by elevated non-staff inflation, which contributes to an FY24-25 fall in profit growth (pre-provision operating profit) of -6% and -1% year on year. Goldman expects bad & doubtful debts to be more benign than previously, which adds 3% to FY24 earnings per share.

Separately, Goldman Sachs has downgraded Bank of Queensland ((BOQ)) to Sell with a $5.60 target price.

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Here's where Long Island home prices rose and fell the most in the first half of 2023

Post By: September 28, 2023 0 Comment(s)

A handful of Long Island communities saw median home prices rise by 10% or more in the first half of 2023, while  several others saw prices drop by that big a margin, according to community-level data shared with Newsday by appraisal firm Miller Samuel. 

But most areas saw prices change relatively little after the pandemic sent home values soaring. Those towns maintained high home prices even as mortgage rates have risen to their highest levels in 20 years, making housing less affordable. 

In the first half of 2023, the median home price increased or stayed flat in about half of 188 Long Island communities and declined in the other half, according to Newsday’s analysis. 

Overall, the median price of a home on Long Island was $589,000 in the first half, down 0.2% from last year, while the number of sales that closed fell 28.3% compared with the January-to-June period in 2022. Miller Samuel excludes the Hamptons and North Fork in its calculations for the rest of Long Island.

Most of the movements within towns were small. In nearly three-quarters of communities that had at least 50 sales, the median price among deals that closed from January to June increased or decreased by no more than 5% compared to the first half of 2022. 

But some of those places experienced more significant changes. Rockville Centre, Lake Grove and Manorville each saw the median home price increase by at least 10% year over year, while Great Neck, West Islip and Dix Hills saw median prices fall by 10% or more. Newsday spoke with a dozen real estate agents in those areas to examine factors that might have affected price changes. 

For Jonathan Miller, CEO of Miller Samuel, the measure that explains the overall housing market best is the number of homes for sale. There are about 5,000 houses on the market across Long Island. For years, 15,000 to 20,000 homes was typical. The peak during the housing crisis in 2008 was about 32,000, according to data from OneKey MLS.

“Listing inventory is the metric of this current housing market,” Miller said. “It’s the one to focus on because it’s driving everything else. It’s keeping prices elevated and it’s restraining sales.”

Prices began to heat up again this summer. In August, the median price hit a record $730,000 in Nassau County and an all-time high $590,000 in Suffolk County, according to OneKey MLS. Meanwhile, the number of sales recorded in August was 19% lower than it had been during that month in 2022.

“Long Island is not an outlier,” Miller said. “It’s essentially performing in the way that most suburban markets are performing in the U.S., which is higher prices generally and a severe decline in sales activity.”

Here’s a look at what happened in six Long Island communities where home prices climbed or fell at least 10%:

Douglas Elliman real estate agent Felix Gutierrez puts up an open house sign at a Rockville Centre home Sept. 16. Credit: Debbie Egan-Chin

Rockville Centre

Up 18.5%

Median price first half of 2023: $785,000

Median price first half of 2022: $663,500

Rockville Centre recorded the largest increase in median price in the first half among all Long Island communities that recorded at least 50 sales between January and June.

Real estate agents in the area said the village’s mix of a strong school district, a roughly 40-minute train ride into Manhattan and a downtown area lined with bars and restaurants attract homebuyers to the area.

“What makes a house in Rockville Centre attractive to buy at a higher price point — and easier to sell at a higher price point — a good part of it is the school district,” said Stephanie Feiner, an agent at Keller Williams Points North, who recently worked with a buyer who bought a $1.2 million home in the village. “It’s someplace where you can still work in the city but not feel like you have to leave two hours ahead of time to do it.”

Part of the reason Rockville Centre ascended to the top of the list has to do with the way the data is reported to include sales of single-family homes, condos and co-ops. Houses command higher prices in the village, and this year single-family home sales represented a larger percentage of all sales, at 70%. The shift in the mix of sales contributed to a higher median price.

Like much of Long Island, homes that hit the market tend to sell quickly, agents said. There were 43 listings on a recent Friday, including three condos, 17 co-op apartments and 23 houses. Prices ranged from $179,000 for a studio in a co-op building to $1.8 million for a four-bedroom, nearly 4,500-square-foot house.

“It’s been very tight. As soon as homes are coming on, they’re going.” said Elizabeth Byrne, a broker at Harms Real Estate and a 23-year resident of the village. “We’re a town of old homes. The majority of the homes were built between the 1920s and early 1950s. Regardless of their condition, they’re selling at higher price levels because of the lack of inventory.”

Charles Maione, an associate broker at Douglas Elliman Real Estate, said he’s started to notice a change now that mortgage rates have risen above 7% again. The added expense of interest “makes homes more expensive and carves buyers out” who can no longer afford to buy, he said.

Amber and Nick DiNozzi’s home in Lake Grove recently went into contract for more than $25,000 over the asking price.  Credit: Mandalay Luxury Real Estate Photography

Lake Grove

Up 15.5%

Median price first half of 2023: $607,500

Median price first half of 2022: $526,000

When Amber and Nick DiNozzi put their three-bedroom house on the market in August for $469,999, they expected to have no problem finding a buyer, but they were still overwhelmed by the response.

“The sheer amount of people who wanted to see the home … I was like, ‘Wow,’” Amber DiNozzi said. “I remember as a kid going to houses with my parents at one point, and I don’t think it was ever like this.”

The couple, both 36, listed the house on a Monday and estimated about 80 people came through over the course of a week. By Saturday of that week, they had accepted an offer, which was more than $25,000 above the asking price.

The DiNozzis are looking to move to a larger home with their two children. The family had outgrown the house, which is about 880 square feet plus a basement. The couple bought it in 2016 for $305,000. They plan to rent a house that better meets their needs, including more space for their children and a potentially shorter commute to Manhattan for Nick, before looking to buy again in Suffolk County.

“That’s where we’re stepping out in faith,” Nick DiNozzi said. “It’s definitely not ideal. Do we want to just settle and stay in a house that’s not working for us and meeting our needs just because we’re afraid or nervous that house prices or mortgage rates are going to go up too high? … I think we both have the peace knowing this is what’s going to be the best for us. If anything, it’s going to be an adventure.”

Bryan Karp, an associate broker at Coldwell Banker American Homes who listed the DiNozzis’ house, said he can remember when just a few years ago, there were 80 houses on the market in Lake Grove. In one recent search, there were just 22.

“In Lake Grove there is rarely ever new construction,” Karp said. “When there’s the opportunity of an all-fixed-up house or a house that’s been renovated, people jump toward it.”

The village benefits from its proximity to one of the Island’s largest employers in Stony Brook University and its hospital as well as highways and the Ronkonkoma station of the Long Island Rail Road. A new Wegmans supermarket is expected to open next year at the corner of Middle Country Road and Moriches Road. 

This four-bedroom home on a cul-de-sac in Manorville sold for $720,000 in May.  Credit: Scape Imagery/Tyus Gholson

Manorville

Up 14.3%

Median price first half of 2023: $560,000

Median price first half of 2022: $490,000

When people choose Manorville, they’re typically looking for serenity and larger properties that sell for a fraction of what they would command either farther west in Nassau County or in the Hamptons, said Dawn Jordan, a real estate agent at First Hampton International Realty in Westhampton Beach.

Jordan said she sees home prices rising, particularly among lower-to-median priced homes “because the buyer pool is so large.”

The rise of remote work has helped boost the market in Manorville, which sits to the west of the Long Island Central Pine Barrens and is home to Waterdrinker Family Farm & Garden. 

The area was able to provide more of what buyers were looking for during the pandemic. “They wanted bigger homes, they wanted property, they wanted a pool [and] an office,” said Jordan, who has lived in Manorville for 24 years.

Buyers still have little leverage to ask sellers to make minor repairs because homeowners often have multiple offers to choose from.

“It’s tough on buyers,” Jordan said. “They need to understand when they go in you can’t be asking for little things to be done. You just have to move forward and take on the responsibility yourself to fix minor things.” 

Demand remains high for homes in Great Neck, broker Edna Mashaal said. “Every time a house comes on the market there are multiple offers on it.” 

undefined Credit: Danielle Silverman

Great Neck

Down 16.5%

Median price first half of 2023: $685,000

Median price first half of 2022: $820,000

Great Neck saw the steepest decline in median price among Long Island communities with at least 50 sales, but the factors leading to that decline are tied, in part, to the way data is collected.

First, home sales data for Great Neck, as provided by Miller Samuel, includes all the villages in the broader Great Neck area. That combines sales of luxury homes in Kings Point village and Great Neck village with co-op apartments sold in Great Neck Plaza near the Long Island Rail Road station.

In addition, sales of less expensive co-ops and condos made up the majority of transactions in the Great Neck area during the first half of the year, pushing the median price lower.  

When isolating only the 73 single-family home sales, the median price rose by 1% to about $1.4 million. The median price among 83 co-op sales rose 7.8% to $365,000. The area’s price decline was tied to the shift in the mix of properties sold.

Edna Mashaal, a real estate broker and owner of Edna Mashaal Realty in Great Neck, said competition in the market hasn’t let up. Even after mortgage rates rose, houses priced around $1 million often find a buyer within a week.

“Every time a house comes on the market there are multiple offers on it,” she said. “ … There’s so many buyers for every house. It’s a seller’s market.”

This three-bedroom waterfront home with pool in West Islip sold for $881,250 in February. It was originally listed for $939,000. Credit: Jump Visual/Andrea Onglengco

West Islip

Down 10.9%

Median price first half of 2023: $578,200

Median price first half of 2022: $649,000

West Islip appears to be one place where climbing mortgage rates had a greater effect on home prices.

The South Shore community, where all but one of the properties sold in the first half of the year were single-family homes, saw the median price fall even as agents report a serious scarcity of homes on the market.

The average rate for a 30-year fixed mortgage was 6.44% during the first six months of 2023. During that period a year ago, the average was 4.5%. It was 7.19% for the week ending Sept. 21.  

At one point in the past week there were only 26 houses for sale in West Islip, when before the pandemic, associate broker Irene Siconolfi, of Douglas Elliman, remembers there being about five times as many.

Asked about the drop in price, Siconolfi said buyers were more hesitant earlier this year as they adjusted to higher mortgage rates. She suspects the median price could rise in the latter part of the year.

“I feel like in the beginning of the year we were slow because people were just trying to digest it,” said Siconolfi, a West Islip resident. “Then they realized this is not going to get better, it’s going to get worse, so I’m just going to pull the trigger.”

But she hasn’t noticed much of a change in the market and buyers are still doing whatever they can to land a deal, including looking at adjustable-rate mortgages to lower their monthly payments or borrowing money from family to bring more cash to deals.

“I’ve been advising people, if the listing goes up on Monday and you think you’re going to an open house on a Saturday, good luck because it’s not going to last that long,” she said. 

A wide disparity in home prices within the town could have contributed to the change in median price from last year. At the end of September, listings ranged from $419,500 for a three-bedroom, lender-owned property to $5.95 million for an 8,000-square-foot house on the Great South Bay with a private beach.

This four-bedroom ranch on 1.46 acres in Dix Hills is listed for $919,000. Credit: Christo Galluzzo

Dix Hills

Down 10.3%

Median price first half of 2023: $872,500

Median price first half of 2022: $973,000

In Dix Hills, one of the highest-priced areas of western Suffolk County, both home prices and the number of transactions were lower in the first half of 2023 than during that six-month stretch a year earlier.

Nearly all sales in Dix Hills are of single-family homes, but it’s possible a shift in types of houses that were sold in the first half contributed to a lower median price.

Deepa Sachdev, a Dix Hills resident and associate broker at Exit Realty Achieve in Smithtown, said the inventory situation there is similar to the rest of Long Island. There were about half as many houses for sale this summer as there were in the past couple of years, she said.

There are “people wanting to sell, but then where do they go given they’re currently sitting on a mortgage with a very low and desirable interest rate,” she said. “They don’t feel like selling and then going somewhere where they will pay a lot more for a mortgage.”

Homeowners should be careful to seek prices that are reasonable based on other recent comparable sales, because buyers are savvy and have access to more data than ever on local home values, she said.

“You are starting to see some prices drop,” Sachdev said. “Some houses sit on the market for a lot longer than usual, but if a house is priced well and marketed well, there are a lot of buyers trying to buy it.” 

Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain’s New York Business.

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Housing Market Is Least Affordable This Century

Post By: September 28, 2023 0 Comment(s)

Pending home sales plummeted in August, according to the National Association of Realtors (NAR), another indication that the housing market continued to suffer under the weight of high borrowing costs as mortgage lending rates hit the highest levels since the beginning of the century.

The data from NAR which gives insights into would-be home sales based on contract signings showed that it fell 7.1 percent last month and nearly 19 percent from a year ago. The data comes as the 30-year fixed-rate mortgage, the most popular house loan, hit above 7.3 percent, a two-decade high.

The elevated rates are crowding out potential home buyers as they are scared away by the potentially expensive monthly payments they will have to make due to the exorbitant rates.

“Mortgage rates have been rising above 7% since August, which has diminished the pool of home buyers,” Lawrence Yun, NAR’s chief economist, said in a statement Thursday. “Some would-be home buyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets.”

The current housing market is different from what it was at the start of the century, according to mortgage lender Freddie Mac, as it is accompanied by rising house prices.

“These headwinds are causing both buyers and sellers to hold out for better circumstances,” the lender said.

Part of the reason prices have jumped is due to the low availability of homes for sale. Construction of new homes has declined while sellers of previously owned homes are holding back as they are reluctant to do away with properties that they may have acquired during an environment of low rates.

“It’s clear that increased housing inventory and better interest rates are essential to revive the housing market,” Yun said.

Mortgage rates have soared as the Federal Reserve hiked rates to a two-decade high of the current level of 5.25 to 5.5 percent to battle inflation. Policymakers from the central bank have also indicated that they may raise rates at least one more time this year and keep them elevated for a while.

NAR suggested that the Fed may need to take a pause in its rate moves, especially as the policy environment may hit the rental market too.

“The Federal Reserve must consider the sharply decelerating rent growth in its consideration of future monetary policy. There is no need to raise interest rates,” Yun said.

The souring interest in home buying was felt across the country, the NAR said. Sales in pending homes fell in all four U.S. regions in August from last month and also compared to one year ago.

Another dynamic that may affect home sales is the impending shutdown of the government that may come as the Republican-led House of Representatives has struggled to move forward with spending bills that will keep federal agencies open beyond the September 30 deadline.

“Moreover, the government shutdown will disrupt some home sales in the short run due to the lack of flood insurance or delays in government-backed mortgage issuance,” NAR’s Yun said.

A tract of new tightly packed homes are viewed along the Boulder City Parkway on January 11, 2022, in Henderson, Nevada. Low inventory and high mortgage rates have made buying a house expensive for buyers. GEORGE ROSE/GETTY IMAGES

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Atlanta housing market makes up 53% of statewide value, data shows – WSB-TV Channel 2

Post By: September 28, 2023 0 Comment(s)

ATLANTA — The Atlanta real estate market surged in value alongside the national market trend, according to new data from real estate company Zillow.

The latest report on housing market trends released by the company said the U.S. housing market rebounded in 2023, increasing its overall value by $2.6 trillion in the past year.

Atlanta’s housing market jumped $41 billion, according to Zillow’s data, continuing an upward trend that returned after a slight dip near the end of 2022.

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Nationally, the overall housing market value increased 49% since before the COVID-19 pandemic. Atlanta’s housing market value increased by 50.9% since the pandemic. Georgia’s statewide housing market value rose 61% since before the pandemic, dating back to levels in the beginning of March 2020.

June 2022 was the previously reported peak for home prices in the U.S. until this past summer.

Zillow’s market data shows Atlanta’s housing stock was worth $721.7 billion as of June 2023, compared to the previous year’s peak of $692 billion. The increased growth has reportedly been due to a combination of higher mortgage rates and a subsequent decline in residential investment, according to Zillow.

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From Zillow’s data, price proportions show the Atlanta metro makes up more than half of Georgia’s overall market value.

The state’s most recently reported market value was from June 2023, where Georgia homes were collectively worth about $1.36 trillion, while Atlanta’s market value was $721.7 billion.

Effectively, that means Atlanta homes together are worth 53% of the state’s entire market value. Changes in the market for buying and selling homes means prices for renters are also changing.

Per reports from the Bureau of Labor Statistics, the prices are only going up when it comes to housing and Atlanta is no exception.

Discussing rising mortgage rates, and their impacts on the market, an economist working for federally-backed mortgage company Freddie Mac said the rates are affecting buyer and seller mentalities.

“The 30-year fixed-rate mortgage has hit the highest level since the year 2000,” Sam Khater, Freddie Mac’s Chief Economist, said. “However, unlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory. These headwinds are causing both buyers and sellers to hold out for better circumstances.”

In early June 2022, the mortgage rate was a reported 5.09% for a 30-year fixed rate mortgage, according to Freddie Mac.

The same time period in June 2023 had a mortgage rate of 6.79%. The latest reported rate from Freddie Mac is 7.31%, which the company said was a 23-year high.

Khater’s sentiment was echoed by Zillow’s own report on the housing market. They said the higher rates are influencing who is choosing to buy new homes and even changing the way home builders are approaching addressing new builds.

“With many homeowners opting to stay put and hold onto their low mortgage rate, new home sales should make up a bigger piece of the home sales pie moving forward,” Zillow said in their report. “That’s especially true with builders adapting to the needs of today’s home buyers who are navigating higher mortgage rates — namely with smaller, more affordable homes and by offering incentives like interest rate buydowns to tempt buyers off of the fence.”

Affordability remains a concern, even based on older data. A new set of home affordability numbers for the Atlanta metro were released by the Federal Reserve on Sept. 20. According to their ranking, published in the Home Ownership Affordability Monitor, only one county in the Atlanta area was affordable as of July, the most recent data available.

With the exception of Paulding County, the core and outlying counties that make up the Atlanta metro area were all unaffordable, though not always as significantly out of reach for buyers.

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London house prices fall sharply

Post By: September 28, 2023 0 Comment(s) , , ,

London and southeast England are seeing the biggest home discounts in Britain as buyers across the country secure the largest price cuts nationwide in almost five years.

The average discount to the asking price for a newly agreed home sale was nearly 5% in London and southeast England this month, according to a report from property portal Zoopla. 

That compared with a 2.8% discount for properties elsewhere in Britain and a national average of 4.2%, the biggest reduction since March 2019.

“House prices are falling the most in London and the south east as higher mortgage rates have the greatest impact on buying power and prices,” said Richard Donnell, executive director at Zoopla. 

“It’s in these areas where buyers are driving the greatest discounts to asking price to achieve a sale as they have stronger negotiating power.” 

British households are facing a barrage of cost pressures triggered by pricey borrowing and inflation that is only slowly dropping back from generational highs. 

That has led to a slump in first-time buyer sales, as wannabe homeowners remain stuck in ever-pricier rental contracts while mortgages become more expensive.

A separate report showed almost a quarter of British mortgage holders are considering selling up and moving to a cheaper property after borrowing costs surged. 

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German inflation falls to 4.5%; UK home sellers increase discounts; mortgage rates ease – as it happened | Business

Post By: September 28, 2023 0 Comment(s)

German inflation falls to lowest since February 2022

Just in: Inflation in Germany has fallen to its lowest level since Russia’s full-scale invasion of Ukraine last year.

The inflation rate in Germany is expected to be 4.5% in September, statistics body Destatis has reported, down from 6.1% in August.

The last time Germany’s inflation rate was lower than this was in February 2022 – the month the war began – when it stood at 4.3%.

Food prices were 7.5% higher than a year ago, but energy prices were only 1% higher.

Core inflation (which strips out food and energy) is expected to have fallen to +4.6%, from 5.5% in August.

Key events

Afternoon summary

Time for a quick recap::

UK house sellers are cutting asking prices to persuade buyers to reach a deal, a report from Zoopla shows.

Mortgage holders are making big changes to their finances to cope with dramatically higher monthly payments, such as cutting pension contributions and downsizing to a smaller property.

But there is some relief, with the average five-year fixed mortgage rate falling below 6% today for the first time since early July.

Inflation in Germany has eased to its lowest since the Ukraine war began, with consumer prices up 4.5% in the last year.

Spanish inflation has risen, though, lifted by higher energy costs.

In the markets, the European Stoxx 600 has hit its lowest level in six months today, while bond prices have also weakened.

Here’s the rest of today’s stories:

Italian government bond prices are also weakening, pushing the gap between Italy and Germany’s bond yields wider:

#Italy #spread klakson: we’re back at 200bps on the 10yr.
Progressive withdrawal of ECB support and worse than expected deficit dynamics start to have an effect on cost of debt.
Move not quick and “brutal” enough to imagine the use of ECB’s TPI anytime soon. pic.twitter.com/ip5SAVpXwi

— Gustavo Baratta (@gusbaratta) September 28, 2023

The FT attributes the move to the Italian government raising its fiscal deficit targets and cutting its growth forecast for this year and next, meaning higher budget deficits than expected.

Government bond prices have been sliding today, in a selloff that has gripped the European and US markets.

The drop in prices has pushed up the yield, or interest rates, on these bonds, as investors anticipate that interest rates will stay high for longer than hoped.

UK 30-year bond yields, for example, have risen by 16 basis points to 4.948%, up from 4.779% last night, to the highest level since the market panic after Liz Truss’s mini-budget a year ago.

It’s party conference season in the UK, when the main political parties gather with their supporters for a few days of debate and discussion with their grassroots faithful.

And new data commissioned by Bibby Financial Services shows that small businesses have litttle confidence in UK political parties. Nearly one in four (22%) SMEs are unable to identify the political party that best serves their needs.

The survey also shows “a clear shift to the left” with 33% of SMEs saying that the Labour Party best serves their needs, compared to just 26% choosing the Conservative Party.

They add:

● Ahead of next year’s general election, economic growth and job creation (71%) are the most critical issue for small businesses, followed by tax policies and incentives (68%) and access to affordable financing and loans (46%).

● In terms of specific measures or reforms that the next government could make in 2024, tax incentives is the most popular policy SMEs would like to see (65%), followed by access to low interest loans or grants for business expansion and job creation (57%). Post Brexit, SMEs would also like to see streamlined and simplified regulatory processes put in place, to help navigate compliance requirements (29%).

The John Lewis Partnership is considering raising as much as £150m by selling and leasing back a dozen of its Waitrose supermarkets, Bloomberg is reporting.

The move comes as the strugging retailer seeks more capital, after it warned this month it will take two years longer to achieve its turnaround goals.

Bloomberg says:

The marketing of the stores will begin next week and mostly includes supermarkets in the south of England with 20-year inflation-linked leases, said the people, asking not to be identified as the information isn’t yet public.

CBRE is acting as agent for the partnership, which owns the upmarket grocer and the John Lewis department store chain, they said, adding that there’s no certainty a deal will take place.

The number of Americans filing new claims for unemployment support remains low by historic standards, despite a small last week.

New data from the US Labor Department shows there were 204,000 new initial claims filed last week, an increase of 2,000 from the previous week.

That’s lower than expected, though, as the US jobs market appears to remain robust despite higher interest rates.

New data has confirmed that the US economy expanded at an annual rate of 2.1% in the second quarter of 2023.

Economists had expected a small rise, to 2.2%. However, upward revisions to nonresidential fixed investment, exports, and inventory investment were wiped out by a downward revision to consumer spending.

John Leiper, chief investment oficer at Titan Asset Management, says interest rate increases have hit consumer spending:

No major changes to the headline GDP number, in line with last quarter and slightly below expectations. The key data reading for me is Q2 personal consumption which came in noticeably below expectations and the prior reading. It also marks the lowest rate of increase since Q2 2020.

This data follows the weaker than expected consumer confidence report on Tuesday and contributes to a growing sense that the consumer, responsible for much of the US economy’s recent resilience, is starting to buckle under the weight of prior monetary tightening.

This fall in German inflation may hearten the European Central Bank that its monetary tightening programme is working.

Earlier this month the ECB lifted eurozone interest rates to record highs, pushing up its deposit rate for the 10th consecutive time, to 4%.

German inflation out. Quite a big drop in core & service infl. Looks OK. But then again… Germany is the growth lagard nowadays.
Nonetheless we believe the ECB has no ned to do more. Perhaps it already did too much. #dkøko #dkfinans #ECB pic.twitter.com/Ir6msTeI7I

— Frederik Engholm (@FrederikEngholm) September 28, 2023

Germany’s #inflation softened more than estimated: Sep CPI slowed to 4.5% from 6.1% in Aug, slowest since Feb 2022 versus a 4.6% estimate. Core inflation, which excludes volatile food and energy prices, sank to 4.6% in Sep, from 5.5% in Aug, so core > headline inflation. pic.twitter.com/hCln6ZkZJn

— Holger Zschaepitz (@Schuldensuehner) September 28, 2023

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Texas economic activity strengthens despite slowing job growth, greater price resistance

Post By: September 28, 2023 0 Comment(s) , , , , ,

Diego Morales-Burnett, Pia Orrenius and Ana Pranger




Texas employment growth slowed even as overall activity strengthened in August and September. Resistance to price increases rose.

Employment expanded 1.1 percent in August, down sharply from 3.8 percent in the first half of 2023. Meanwhile, respondents to the Texas Business Outlook Surveys (TBOS) reported faster service sector growth along with rebounding manufacturing production. They also noted, however, that price pressures were stable in recent months.

TBOS respondents in August lowered their selling price and wage growth expectations for the year relative to what year-end expectations were in May. There was no downward revision of input cost growth, however, likely reflecting higher energy prices. The price of benchmark West Texas Intermediate crude oil has risen more than 20 percent to near $90 per barrel in the past year.

Employment growth slows in August

Texas job growth slowed in August, expanding only 1.1 percent at an annualized rate, equivalent to adding 12,401 jobs (Chart 1). By comparison, the nation’s employment grew 1.4 percent, outpacing Texas for the first time since November 2022.

Chart 1

Downloadable chart | Chart data

Texas job growth had remained robust over the past year amid higher interest rates, falling manufacturing production and fears of recession. It is unclear whether the recent result indicates actual slowing or is a statistical anomaly.

Given strong job growth earlier this year, the Dallas Fed’s Texas Employment Forecast is now 2.9 percent for 2023 (December over December), implying growth of 2.1 percent, annualized, through the end of the year. Though lower than previous forecasts, this would still be stronger growth than Texas’ long-term, 2 percent trend annual employment growth rate.

Declining job openings and rapid labor force expansion have helped rebalance the state labor market since late 2021. The share of firms hiring has fallen from near 70 percent at its peak to nearly 50 percent in July. About half of those firms looking for workers reported that a lack of applicants is impeding their ability to hire, compared with three-quarters saying they were similarly constrained in July 2021.

Despite less-tight labor markets, some TBOS firms continue to report trouble finding qualified workers in particular areas. One administrative services contact said, “Skilled labor is still hard to find for our business. We have increased our hiring pay by 22 percent and cannot find qualified candidates.”

Manufacturing rebounds as service sector stays strong

There were positive output signs, especially in the goods sector, in the September TBOS. Manufacturing production expanded after contracting for four months (Chart 2). However, services revenue growth declined following a surge in August.

Chart 2

Downloadable chart | Chart data

Overall, company outlooks remained pessimistic, which may mean a short-lived upturn. Comments were overwhelmingly negative, citing downside risks including the United Auto Workers national strike, the possibility of a federal government shutdown, weak demand in China, falling housing activity, troubled commercial real estate markets and difficulty passing on higher costs to customers.

Price pressures stable despite sharply higher input costs

Selling prices in September increased at about the same pace as in August in both the service and manufacturing sectors (Chart 3). Manufacturing input price pressures surged, however, possibly the result of higher energy prices.

Chart 3

Downloadable chart | Chart data

Despite heightened cost pressures, Texas firms lowered their expectations for price and wage inflation, according to TBOS special questions in August (Chart 4). Selling prices were expected to rise 3.3 percent between December 2022 and December 2023, down from a 3.8 percent expectation in May.

Chart 4

Downloadable chart | Chart data

Cost growth expectations did not change over the summer, as firms still anticipate 4.7 percent growth, while wage growth expectations fell only slightly (from 5.3 to 5.0 percent). Thus, the decrease in selling prices does not appear to be a product of cheaper inputs, but likely of limited ability to pass costs on to customers.

In their comments, TBOS respondents confirmed this situation. “[The] cost of goods sold continues to increase beyond [firms’] ability to raise prices,” one TBOS respondent said. Another noted a change in consumer attitudes, saying, “Customers were willing to accept practically any price increase over the last couple of years, [but] we are starting to see resistance to continued price increases.” That firm also reported it “expect[ed] more resistance going forward,” potentially making it even more difficult to pass through costs.



About the authors

Diego Morales-Burnett

Diego Morales-Burnett is a research analyst in the Research Department at the Federal Reserve Bank of Dallas.

Pia Orrenius

Pia Orrenius is a senior economist at the Federal Reserve Bank of Dallas.

Ana Pranger

Ana Pranger is a research analyst in the Research Department at the Federal Reserve Bank of Dallas.

The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.

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First-Time Homebuyers Face Another Obstacle: Student Loan Repayments

Post By: September 28, 2023 0 Comment(s)

How Student Loan Repayments Could Impact First-Time Homebuyers

On Oct. 1, millions of Americans will face the harsh reality of having to resume student loan payments after a three-year respite instituted during the COVID-19 pandemic.

Of the roughly 43 million adult Americans with a federal student loan, the debt burden falls excessively on young adults, according to the New America think tank. Specifically, one-third of those who carry student loan debt are 25 to 34 years old, although Americans of all ages grapple with the debt.

The resumption of monthly debt repayments looming on the horizon for these younger adults coincides with that point in their lives when they’re most likely to be shopping for homes. However, paying off that debt plus mortgage rates stuck above 7% and home prices that continue to rise are likely to result in delays for many hoping to achieve the American dream of homeownership.

And it’s not just about owning a home.

“The age of first-time homeownership really does matter for long-term wealth building,” says Jung Hyun Choi, a senior research associate with the Housing Finance Policy Center at the Urban Institute. “We do find evidence that those who purchase homes younger in life have significantly greater housing wealth.”

Where do student loan repayments stand?

Millions of former students and graduates are expected to have had to rearrange their budgets to resume payments averaging $337 a month, according to The Motley Fool. Interest on the loans resumed on Sept. 1.

Those monthly payments are on top of pricier rents, inflation, the huge increase in mortgage rates over the past year, and higher home prices. That’s left many potential buyers facing the prospect of even higher monthly mortgage payments they can’t afford after some student loan relief efforts they were hoping for were stalled.

The U.S. Supreme Court blocked the one-time student loan forgiveness program from President Joe Biden‘s administration, which would have provided up to $20,000 in relief to millions of student loan borrowers. Before that decision, the administration had approved more than $116.6 billion in student loan forgiveness for more than 3.4 million borrowers.

In response to the Supreme Court’s ruling, the Biden administration launched the Saving on a Valuable Education (SAVE) Plan, which is an income-driven repayment plan that calculates student loan repayments based on a borrower’s income and family size—not their loan balance—and forgives the remaining balance after a certain number of years.

According to the administration, the SAVE plan “will cut many borrowers’ monthly payments to zero, will save other borrowers around $1,000 per year, will prevent balances from growing because of unpaid interest, and will get more borrowers closer to forgiveness faster.”

Some borrowers might still be eligible for student loan forgiveness via an existing student loan forgiveness program, including the Public Service Loan Forgiveness program.

However, these programs won’t apply to every borrower and many will have to begin making student loan payments this fall.

Student loan repayments and first-time homebuyers

For millions of Americans, student loans serve as a barrier to achieving financial goals, including the ability to save up for a down payment and closing costs to purchase a home.

A recent survey by the National Association of Realtors® found that nearly one-quarter of all home buyers and 37% of first-time homebuyers had student debt, with an average amount of around $30,000. A little over a quarter of student-loan debt holders, 29%, said their debt has affected their decision or their ability to purchase a home.

The typical mortgage payment is about 90% more than it was just two years earlier, according to an analysis looking at the Realtor.com® median home list prices and Freddie Mac’s average weekly mortgage rates. (This doesn’t include property taxes or home insurance costs.)

Unfortunately, higher interest rates are also affecting borrower’s debt-to-income ratio. The more debt someone has, the harder it is to qualify for a larger loan.

“The debt-to-income has become the dominant reason behind mortgage denials,” says Choi.

Of course, for some first-time homebuyers, the resumption of student loans might make little difference in an already pricey housing market.

“The resumption of student loan payments is certainly not a plus for potential first-time homebuyers, but I don’t think it will make a significant difference since they’re already locked out of the housing market by the high mortgage rates and high house prices,” says Mark Zandi, chief economist at Moody’s Analytics. “Purchasing a home for most potential first-timers is not affordable—with or without the resumption of student loan payments.”

What options do borrowers have in this market?

All might not be lost for those who are facing student loan debt repayment and don’t want to defer their dream of homeownership, says Ralph DiBugnara, mortgage banker, real estate investor, and president of Home Qualified in New York City.

Buyers might be eligible to receive assistance on down payment and closing costs or find mortgages that require no down payments, such as Veterans Affairs loans, U.S. Department of Agriculture loans, or government-backed, low down payment loans such as Federal Housing Administration loans where buyers often need just 3.5% down.

“What’s come out of the market being less affordable is there are a lot of state, local, and government programs that are allowing down payment assistance … especially if you are in any average or lower-than-average income bracket,” he says.

In addition to down payment assistance, first-time homebuyers should take a hard look at their real budget, especially with student loan repayments coming back, and perhaps even consider house hacking, says DiBugnara. This can mean buying a home with family or friends or purchasing one with a room, additional unit, parking spot, or even a pool that could be rented out for extra money.

“Find a home or any kind of property where you can generate income on it while you’re living there,” DiBugnara says.

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Opinion: Why is housing unaffordable in L.A.? Here's the sorry history

Post By: September 28, 2023 0 Comment(s)

The high cost of housing is driving Southern California’s biggest challenges. Income is not keeping pace with housing costs. It hasn’t for at least two generations, and the problem of unaffordable shelter shows few signs of letting up.

There’s a metric called “housing burden” that lays the situation bare. Over the last 50 years, it tracks the growing, gaping mismatch between income and shelter costs in Los Angeles County.

In 1979, UCLA land experts Leo Grebler and Frank Mittelbach wrote: “As a general, time-honored rule of thumb” house prices in a community “should not exceed 2 to 2½ times the annual income” of its residents.

Within a decade, home prices began to drastically violate this rule. If it were applied today, it would mean a four-person household with the median Los Angeles County income of $98,200 could afford to buy a house that cost $245,500. However, the median home price in the county last month, according to Redfin, was $980,000.

How did things get so unbalanced?

In the 1950s and 1960s, buying a single-family home in Los Angeles was an attainable prospect. The GI Bill and the Federal Housing Authority helped with loans and mortgage dollars (albeit primarily for white families). And home building was on a tear, thanks to the region’s pro-development political climate.

By the 1970s, however, a cascade of factors — local to global — changed the equation.

Housing prices first shot ahead of income in the mid-1970s. Analysts attributed the spike to the first cohort of baby boomers reaching home-buying age, which expanded the pool of buyers and created a seller’s market. The 1973 oil crisis and ensuing inflation pushed buyers to pay up for fear prices would rise even higher. Unrelenting demand thus not only kept pace with prices, it increased them.

Social-demographic factors also factored in. Per capita income doubled from 1966 to 1977, due in part to more women in the workplace. When federal policies struck down gender discrimination in loan and credit decisions, two-income families could qualify for larger mortgage loans, elevating the demand for higher-priced homes.

Then land and building costs climbed, pushing prices even higher. And in 1978, Proposition 13 became law.

The ballot measure slashed property taxes and with them, funding for municipal services. Cities and towns scrambled to recoup the lost revenue. New real estate developments were “money-losers,” as urban planner and former Ventura Mayor William Fulton observed, because property taxes fell so low. Instead, municipalities turned to retail development to generate lucrative sales tax revenue. Prop. 13 thus became a powerful disincentive to build housing.

The rising slow-growth movement put another damper on housing supply. It was pushed by homeowners who resisted adding multifamily housing in single-family neighborhoods or new development in nearby open space.

One study by the California Legislative Analyst’s Office found that by the early 2000s, more than two-thirds of cities and counties in coastal California metro areas had slow-growth policies in place, and that when a community added such a policy, it resulted in a 3% to 5% increase in home prices. Moreover, the historical momentum of R-1 (single family) zoning stymied the construction of multifamily units.

The upshot of all these pressures? From 1980 to 2010 in Los Angeles, the population grew by 31.3% while housing units grew by only 20.6%.

L.A.’s spiraling housing costs paralleled trends in large, global metro regions by the turn of the 21st century, suggesting that forces beyond L.A. were also at work. In the 1990s and early 2000s, the housing bubble was driven by finance structures linked to global markets, inflows of global capital and unregulated banking practices that set off unrestrained and predatory lending and buying frenzies. Even after the 2007-09 banking crisis and Great Recession, home prices in L.A. soon regained traction.

Taking a longer view, economist Robert Shiller traced rising housing costs in the late 1980s and early 2000s across metro areas globally, including L.A. He pinned a good deal of the blame on “irrational exuberance” that motivated uncontrolled buying. The psychological draw of metro areas such as Paris, London, Sydney and L.A. reinforced the belief that land prices would continue to go up and up. Media fed these perceptions. And housing bubbles blew up.

Looking at the housing burden graph, the price surge since 2020 is truly eye-popping. Urban analyst Richard Florida attributes it to pandemic-driven demands for more housing space especially among millennials, a massive shortage of housing overall and, perhaps most disturbingly, the growing competition from large institutional investors who’ve been snapping up homes and apartments in recent years. In 2021, they bought 29% of all single-family homes in California and, with their ability to outbid other buyers, they drive up prices.

Over the last 50 years, L.A.’s housing burden has evolved from challenging to simply unsustainable. The consequences are all around us, in skyrocketing rents, a ubiquitous homelessness crisis, housing overcrowding, rising commuting times to drive-till-you-qualify exurbs, population flows out of California and intensified wealth inequality.

Solutions must come from both the housing and the income side.

Increasing the housing supply is crucial. It must be accompanied by policies that protect individual buyers from corporate competitors, ensure the ongoing production of affordable housing, and guard against gentrification.

Even more importantly, wages and salaries must climb considerably to make housing affordable again. The major employers in our region — from the movie studios to hotels to hospitals and logistics firms — must take a long, hard look at the housing burden graph and see in it their own role in widening the gap. The Writers Guild and actors’ strikes, the Unite Here Local 11 hospitality industry strike and the strike vote last week by Kaiser Permanente healthcare workers speak directly to L.A.’s housing burden.

The struggle to match income to cost of shelter is an inescapable fact of L.A. life that demands swift, conscientious redress.

Becky Nicolaides is a research affiliate at the Huntington-USC Institute on California and the West, and author of “The New Suburbia: How Diversity Remade Suburban Life in Los Angeles After 1945,” forthcoming from Oxford University Press. The data set collected for the book, a granular look at demographics from 1950 to 2010, will be published online by the USC libraries next year.

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