By Na Zhao, Ph.DNAHB Economics and Housing Policy GroupReport available to the public as a courtesy of HousingEconomics.com
This article announces NAHB’s “priced out estimates” for 2019, showing how higher home prices and interest rates affect housing affordability. The 2019 U.S. estimates indicate that a $1,000 increase in the median new home price would price 127,560 U.S. households out of the market. In other words, 127,560 households would qualify for the new home mortgage before the change, but not afterwards. Similarly, 25 basis points added to the current mortgage rate would price out around 1 million households. The article also includes priced out estimates for individual states and more than 300 metropolitan areas.
The Priced Out Methodology and Data
The NAHB Priced Out model uses the ability to qualify a mortgage to measure housing affordability, because most home buyers finance their new home purchase with conventional loans,  and because convenient underwriting standards for these loans exist. The standard NAHB adopts for its priced-out estimates is that the sum of the mortgage payment (including the principal amount, loan interest, property tax, homeowners’ property and private mortgage insurance premiums (PITI), is no more than 28 percent of monthly gross household income.
As a result the number of households that qualify for mortgages for a certain priced home depends on the household income distribution in an area and the mortgage interest rate at that time. The most recent detailed household income distributions for all states and metro areas are from the 2017 American Community Survey (ACS). NAHB adjusts the income distributions to reflect the income and population changes that may happen from 2017 to 2019. The income distribution is adjusted for inflation using the 2018 median family income published by the Department of Housing and Urban Development (HUD) for all states and metro areas, and then extrapolated it into 2019. The number of households in 2019 is projected by the growth rate of households from 2016 to 2017.
The assumptions of the priced out calculation include a 10% s down payment and a 30-year fixed rate mortgage, at an interest rate of 4.85%. For a loan with this down payment, private mortgage insurance is required by lenders and also included as part of PITI. The typical private mortgage insurance annual premium is 73 basis points, based on the standard assumption of national median credit score of 738 and 10% down payment and 30-year fixed mortgage rate. Effective local property tax rates are calculated using data from the 2017 American Community Survey (ACS) summary files. Homeowner’s insurance rates are constructed from the 2016 ACS Public Use Microdata Sample (PUMS). According to Brisbane property valuers, for the U.S. as a whole, the property tax is $12 per $1,000 of property value and the homeowner insurance is $4 per $1,000 property value.
Under these assumptions, 32.7 million of the 122.5 million U.S. households could afford to buy a new median priced home at $355,183 in 2019. A $1,000 home price increase thus would price 127,560 households out of the market for this home. These are the households that can qualify for a mortgage before a $1,000 increase but not afterwards, as shown in Table 1 below.
State and Local Estimates
The number of priced out households varies across both states and metropolitan areas, largely affected by the sizes of local population and the affordability of new homes. The 2019 priced-out estimates for all states and the District of Columbia are shown in Table 2 (available in the Additional Resources box), which presents the projected 2019 median new home price and the amount of income needed to qualify the mortgage, and the number of households could be priced out if price goes up by $1,000. Among all the states, Texas registered the largest number of households priced out of the market by a $1,000 increase in the median-priced home in the state (11,152), followed by California (9,897), and Ohio (7,341).
Table 3, which is available in the Additional Resources box, shows the 2019 priced-out estimates for 382 metropolitan statistical areas. The metropolitan area with the largest priced out effect, in terms of absolute numbers, is Chicago-Naperville-Elgin, IL-IN-WI, where 4,499 households are squeezed out of the market for a new median-priced home if price increases by $1,000. This is largely because Chicago is a populous metropolitan area with a large number of households; and, compared to the largest metropolitan areas on the East and West costs, the median priced home is more affordable to begin with. Around 27% of households there are capable of buying new median-priced homes. For similar reasons, Houston-The Woodlands-Sugar Land, TX metro area, where nearly 33% of households can afford median-priced new homes.to begin with, registered the second largest number of priced out households (3,546), where nearly 33% of households can afford median-priced new homes. In New York-Newark-Jersey City, NY-NJ-PA, 3,531 households are squeezed out of the housing market for a new median-priced home if price increases by $1,000. Compared to Chicago or Houston, the median-priced new home is affordable to a smaller share of the households in New York, but New York is the largest metro area by population size with over 7 million households.
The NAHB 2019 priced-out estimates also present how interest rates affect the number of households would be priced out of the new home market. If the mortgage interest rate goes up, the monthly mortgage payments will increase as well and therefore higher household income thresholds to qualify a mortgage loan. Table 4 shows the number of households priced out of the market for a new median priced home at $355,183 by each 25 basis-point increase in interest rate from 2.85% to 10.85%. When interest rates goes up from 2.85% to 3.10%, around 1.26 million households could no longer afford buying median-priced new homes. An increase from 4.85% to 5.10% could price approximately one million households out of the market. However, about 423,000 households would be squeezed out of the market if interest rate goes up to 10.85% from 10.6%. This diminishing effects happen because only a few households at the thinner end of household income distribution will be affected. On the contrary, when interest rates are relatively low, 25 basis-point increase would affect a larger number of households at the thicker part of income distribution.
FootnotesAccording to the 2017 American Housing Survey (funded by HUD and conducted by the Census Bureau), 74 percent of the home buyers who moved into their homes in 2016 or 2017 had a regular primary mortgage on the home.Private mortgage insurance premium (PMI) is obtained from the PMI Cost Calculator( https://www.hsh.com/calc-pmionly.html)Median credit score information is shown in the article “Four ways today’s high home prices affect the larger economy” October 2018 Urban Institute https://www.urban.org/urban-wire/four-ways-todays-high-home-prices-affect-larger-economyProducing metro level estimates from the ACS PUMS involves aggregating Public Use Microdata Area (PUMA) level data according to the latest definitions of metropolitan areas. Due to complexity of these procedures and since metro level insurance rates tend to remain stable over time, NAHB revises these estimates only periodically.
Pending home sales declined slightly in November on an annualized basis for the eleventh straight month. The Pending Home Sales Index decreased by 0.7% from 102.1 in October to 101.4 in November, and was 7.7% below the level one year ago. The Pending Home Sales Index (PHSI) is a forward-looking indicator based on signed contracts reported by the National Association of Realtors (NAR).
According to NAR, the decline in PHSI may not fully capture the current situation, as it did not reflect the impact of recent favorable conditions mortgage rates. But the housing market has been slowing down this year due to rising mortgage rates.
The PHSI increased 2.7% and 2.8% in the Northeast and West, but decreased 2.3% and 2.7% in the Midwest and South. Year-over-year, the PHSI declined in all regions, ranging from a decline of 3.5% in the Northeast to a decrease of 12.2% in the West. NAR stated that the annual drop in the West may be explained by the growing concerns of affordability due to rapidly increasing home prices in the region.
Existing sales slightly increased in November, but builder confidence fell in December to its lowest value since May 2015 as concerns over housing affordability persist. However, NAR anticipates a solid long-term prospect for home sales, as the current home sales level matches sales in 2000 while more jobs are created now compared to the early 2000’s.
Annual inflation rate in the United States fell to 1.9 percent in December of 2018 from 2.2 percent in November, matching market expectations. It is the lowest inflation rate since August of 2017, mainly due to a decline in gasoline cost. On a monthly basis, consumer prices edged down 0.1 percent after a flat reading in the previous month and also in line with forecasts. It is the first monthly decrease in consumer prices in nine months, due to a 7.5 percent slump in gasoline prices. Inflation Rate in the United States averaged 3.27 percent from 1914 until 2018, reaching an all time high of 23.70 percent in June of 1920 and a record low of -15.80 percent in June of 1921.
Annual inflation rate in the United States fell to 1.9 percent in December of 2018 from 2.2 percent in November, matching market expectations. It is the lowest inflation rate since August of 2017, mainly due to a decline in gasoline cost. On a monthly basis, consumer prices edged down 0.1 percent after a flat reading in the previous month and also in line with forecasts. It is the first monthly decrease in consumer prices in nine months, due to a 7.5 percent slump in gasoline prices.
Year-on-year, prices fell for gasoline (-2.1 pecent compared to +5 percent in November); new vehicles (-0.3 percent compared to +0.3 percent); medical care commodities (-0.5 percent compared to +0.6 percent); and apparel (-0.1 percent compared to -0.4 percent). Also, cost slowed for fuel oil (1.9 percent compared to 16.1 percent in November); transportation services (2.8 percent compared to 3.3 percent); and used cars and trucks (1.4 percent compared to 2.3 percent). On the other hand, inflation went up for electricity (1.1 percent compared to 0.6 percent); food (1.6 percent compared to 1.4 percent); medical care services (2.6 percent compared to 2.4 percent); and used cars and trucks (1.4 percent compared to 0.4 percent) but was steady for shelter (3.2 percent). Also, cost rebounded for utility piped gas service (2.3 percent compared to -2.1 percent). Excluding food and energy, consumer prices increased 2.2 percent over a year earlier, the same as in November and matching forecasts. On a monthly basis, the gasoline index fell 7.5 percent in December. This decline more than offset increases in several indexes including shelter, food, and other energy components. The energy index went down 3.5 percent, as the gasoline and fuel oil indexes decreased, but the indexes for natural gas and for electricity increased. The food index went up 0.4 percent in December. The index for all items less food and energy increased 0.2 percent in December, the same increase as in October and November and in line with forecasts. Along with the index for shelter, the indexes for recreation, medical care, and household furnishings and operations all increased in December, while the indexes for airline fares, used cars and trucks, and motor vehicle insurance all declined.
Americans are on the move, but where are they moving to and from?
Interactive Map: To understand inbound and outbound percentages for each state, use the legend. To view reasons for moving and demographic data, select the year and state that you would like to view using the dropdown menus. (If you are using a desktop computer, you can use your mouse to click and select a state.)
Americans are on the move, relocating to western and southern parts of the country. We love moving from Los Angeles to another city as it brings in excitement and also new adventures in life. The results of United Van Lines’ 42nd Annual National Movers Study, which tracks customers’ state-to-state migration patterns over the past year, revealed that more residents moved out of New Jersey than any other state in 2018, with 66.8 percent of New Jersey moves being outbound. The study also found that the state with the highest percentage of inbound migration was Vermont (72.6 percent), with 234 total moves. Oregon, which had 3,346 total moves, experienced the second highest percentage nationally, with 63.8 percent inbound moves.
States in the Mountain West and Pacific West regions, including Oregon, Idaho (62.4 percent), Nevada (61.8 percent), Washington (58.8 percent) and South Dakota (57 percent) continue to increase in popularity for inbound moves. In tune with this trend, Arizona (60.2 percent) joined the list of top 10 inbound states in 2018.
Several southern states also experienced high percentages of inbound migration, such as South Carolina (59.9 percent, this makes moving to Greenville very popular) and North Carolina (57 percent). United Van Lines determined the top reasons for moving south include job change (46.6 percent) and retirement (22.3 percent).
In the Northeast, however, an outbound moving trend by roping in some great movers continues. New Jersey (66.8 percent), Connecticut (62 percent) and New York (61.5 percent) were included among the top 10 outbound states for the fourth consecutive year. Midwestern states like Illinois (65.9 percent), Kansas (58.7 percent), Ohio (56.5 percent) and Iowa (55.5 percent) saw high outbound relocation as well.
“As the nation’s largest household goods mover, our study allows us to identify the most and least popular states for residential relocation throughout the country, year after year,” said Eily Cummings, director of corporate communications at United Van Lines. “These findings accurately reflect not only where Americans are moving to and from, but also the reasons why.” Consider using a professional moving company for your next move.
The National Movers Study reveals the business data of inbound and outbound moves from 2018. In addition to this study, United Van Lines also conducts a survey to find out more about the reasons behind these moves. A leading motivation behind these migration patterns across all regions is a career change, as the survey showed approximately one out of every two people who moved in the past year moved for a new job or company transfer. Other reasons for the high percentage of moves to the Mountain West in 2018 include retirement (28.1 percent), proximity to family (20.8 percent) and lifestyle change (19.4 percent). Compared to all other states, Idaho saw the largest influx of new residents desiring a lifestyle change (25.95 percent), and more people flocked to New Mexico for retirement than any other state (42.74 percent).
“The data collected by United Van Lines aligns with longer-term migration patterns to southern and western states, trends driven by factors like job growth, lower costs of living, state budgetary challenges and more temperate climates,” said Michael Stoll, economist and professor in the Department of Public Policy at the University of California, Los Angeles. “Unlike a few decades ago, retirees are leaving California, instead choosing other states in the Pacific West and Mountain West. We’re also seeing young professionals migrating to vibrant, metropolitan economies, like Washington, D.C. and Seattle.”
The top inbound states of 2018 were:
District of Columbia
New to the 2018 top inbound list are Arizona at No. 5 and District of Columbia at No. 10, with 60.2 percent and 56.7 percent inbound moves, respectively.
The top outbound states for 2018 were:
New Jersey (66.8 percent), which has ranked in the top 10 for the past 10 years, moved up one spot on the outbound list to No. 1. New additions to the 2018 top outbound list include Iowa (55.5 percent), Montana (55 percent) and Michigan (55 percent).
In several states, the number of residents moving inbound was approximately the same as the number moving outbound. Arkansas and Mississippi are among these “balanced states.”
Since 1977, United Van Lines has annually tracked migration patterns on a state-by-state basis. The 2018 study is based on household moves handled by United within the 48 contiguous states and Washington, D.C. and ranks states based off the inbound and outbound percentages of total moves in each state. United classifies states as “high inbound” if 55 percent or more of the moves are going into a state, “high outbound” if 55 percent or more moves were coming out of a state or “balanced” if the difference between inbound and outbound is negligible.
To view the entire 2018 study, an interactive map and archived press releases from United, visit the United Van Lines website.
U.S. consumers filed fewer loan applications to buy and refinance homes, while home borrowing costs were mixed with 30-year mortgage rates unchanged on the week, the Mortgage Bankers Association said on Wednesday.
The Washington-based industry group said its seasonally adjusted index on mortgage requests fell 2.5 percent to 329.5 in the week ended Oct. 26. It hit 322.1 two weeks earlier, which was the weakest reading since Dec. 26, 2014.
Interest rates on 30-year conforming mortgages, whose balances are $453,100 or less, on average were unchanged at 5.11 percent, the highest since February 2011.
Other borrowing costs that MBA tracks were both higher and lower from the previous week.
MBA’s seasonally adjusted measure on loan applications for home purchases, a proxy on future home sales, fell 1.5 percent to 224.9 last week. It was close to 224.0, which was the lowest since February 2017, set two weeks earlier.
The purchase application index was lower year-over-year, according to Joel Kan, MBA’s assistant vice president of economic and industry forecasts.
“Purchase applications may have been adversely impacted by the recent uptick in rates and the significant stock market volatility we have seen the past couple of weeks,” Kan said in a statement.
Mortgage rates jumped this month in step with U.S. bond yields US10YT=RR on worries about rising inflation and growing federal borrowing to finance a widening budget deficit.
Rising borrowing costs, disappointing company results and trade tensions between China and the United States stoked a stock market rout as the S&P 500 .SPX fell last Friday to its lowest since early May.
China, Japan factory output weakens in face of trade threat
Wall Street share prices have recovered some of last week’s losses.
The group’s seasonally adjusted gauge on refinancing applications decreased 3.8 percent to 884.2 last week, holding above 838.1 two weeks ago, which was the lowest reading since December 2000.
What happened: Sales of newly-constructed homes rose 3.5% compared to July, and edged past the MarketWatch consensus of a 625,000 pace. And the pace of sales in August was 12.7% higher than a year ago. But hefty revisions to prior months were all downward, a reminder that the housing recovery remains grudgingly slow.
The median selling price in August was $320,200, 1.9% higher than year-ago price.
Big picture: The government’s home-construction reports are based on small samples and are often revised heavily, making it hard to rely on any one month’s data. For the year to date, sales were 6.9% higher than the same period last year. That year-to-date comparison has declined steadily over the course of the year, a possible sign of flagging momentum.
Another sign may be rising inventories: at the current pace of sales, it would take 6.1 months to exhaust available supply, one of the highest ratios in recent years. In a note out after the release, Amherst Pierpont Securities Chief Economist Stephen Stanley noted that there were 318,000 homes available for sale in August, the highest number since 2011.
What they’re saying:Economists at Freddie Mac analyzed the pace of new housing construction and found that years of underbuilding has left the U.S. with a cumulative shortfall — that is, supply compared to historical averages — of 4.6 million housing units in the years since 2000. That number is especially stark considering that builders constructed a surplus of homes in the bubble years of the last decade.
Investors have turned bearish on publicly-traded builders, even as the fundamentals remain tilted in their favor. On a Tuesday call with analysts, KB Home KBH, -2.95% CEO Jeffrey Mezger addressed that issue, and reiterated the company’s commitment to lower-priced homes, where most housing-watchers think the greatest need — and the greatest opportunity — sits.
“I keep getting back to the current inventory levels which are low. While the national numbers are four months, many of the markets we’re in today at still two months, month-and-a-half, and then when you get into the price points we play at, it’s even less. So there’s not a lot of inventory out there at the affordable price band and much of the headlines, I think, are tied to higher price points that are seeing some slowdown and we’re trying to stay ahead of that,” Mezger said. “We think market conditions are very good and continue to see a great opportunity as we head into 2019.”
House prices rose in 25 out of the 39 world’s housing markets which have so far published housing statistics, using inflation-adjusted figures.
The more upbeat nominal figures, more familiar to the public, showed house price rises in 32 countries. House prices fell in only 6 countries and remained stable in 1 country.
Most of Europe continues to experience strong price rises, especially Ireland and the Netherlands. In Asia Hong Kong and Macau have risen strongly over the past year. There have also been notable turnarounds in Thailand, Egypt, and Puerto Rico. But China, Ukraine, and most of the Middle East are experiencing either house price falls – or a sharp deceleration of house price rises
The strongest housing markets in our global house price survey during the year to Q2 2018 included: Hong Kong (+13.15%), Ireland (+11.57%), Netherlands (+7.24%), Macau (+6.31%), and Mexico (+5.12%) using inflation-adjusted figures.
The biggest y-o-y house-price declines were in Qatar (-16.91%), Kiev, Ukraine (-7.81%), Dubai, UAE (-7.63%), Turkey (-4.21%), and Shanghai, China (-3.51%), again using inflation-adjusted figures.
Momentum. Only 16 of the world’s housing markets for which figures are available showed stronger upward momentum during the year to Q2 2018, while 23 housing markets showed weaker momentum, according to Global Property Guide’s research. Momentum is a measure of the “change in the change”; simply put, momentum has increased if a property market has risen faster this year than last (or fallen less).
Inflation-adjusted figures are used throughout this survey. In the case of Kiev, Ukraine, the Global Property Guide adjusts using the official U.S. inflation rate since Ukrainian secondary market dwelling sales are denominated in U.S. dollars.
The strongest performing markets:
Hong Kong is now the strongest housing market in our global survey, up from fourth place in the previous quarter. Residential property prices surged 13.15% during the year to Q2 2018, after y-o-y rises of 12.28% in Q1 2018, 12.78% in Q4 2017, 13.41% in Q3 2017 and 19.27% in Q2 2017. Quarter-on-quarter, house prices increased 5.05% in Q2 2018.
The boom continues despite stamp duties being raised for all non-first time homebuyers (November 2016) and allowable loans on residential and commercial properties being cut in May 2017. In addition, Chief Executive Carrie Lam revealed in June 2018 another series of cooling measures, including a tax against vacant flats.
Ireland‘seconomy grew by 7.8% last year. It is not surprising that the housing market is growing at breakneck speed. Residential property prices were up by 11.57% during the year to Q2 2018, after y-o-y rises of 12.4% in Q1 2018, 11.7% in Q4 2017, 11.75% in Q3 2017, and 11.8% in Q2 2017. During the latest quarter, Irish house prices increased 2.22%. Ireland’s surging house prices are being driven by strong demand and supply shortages..
The Netherlands‘ housing market continues to perform very well, mainly due to robust demand, coupled with inadequate housing supply. The average purchase price of all dwellings rose by 7.24% during the year to Q2 2018, slightly up from the previous year’s 6.39% growth. On a quarterly basis, house prices were up 0.85% during the latest quarter.
During 2017, home sales surged 13% from a year ago. However in the first seven months of 2018, home sales dropped more than 7% from a year earlier due to supply shortages.
Macau’s housing market remains strong. The average transaction price of residential units rose by 6.31% during the year to Q2 2018, following y-o-y rises of 4.22% in Q1 2018, 4.93% in Q4 2017, 9.59% in Q3 2017 and 11.79% in Q2 2017. House prices increased by 5.21% q-o-q during the latest quarter. Macau’s housing market is buoyed by massive infrastructure investments, which will transform Macau’s connections to China and Hong Kong.
Mexico‘s housing market is strengthening, amidst improving economic conditions. The nationwide house price index rising by 5.12% during the year to Q2 2018, up from a y-o-y growth of just 0.73% in Q2 2017. On a quarterly basis, house prices increased 4.89% during the latest quarter.
Most Europe remains vibrant
European house price rises continue unabated. House prices have risen over the past year in no less than 13 of the 20 European housing markets for which figures were available.
Ireland remains the best performer in Europe, buoyed by its very strong economy. Residential property prices were up by 11.57% during the year to Q2 2018, after y-o-y rises of 12.4% in Q1 2018, 11.7% in Q4 2017, 11.75% in Q3 2017, and 11.8% in Q2 2017. During the latest quarter, Irish house prices increased 2.22%. Ireland’s surging house prices are mainly driven by strong demand as well as supply shortages. The Irish economy grew by around 7.8% last year and is projected to expand by another 5.6% this year, according to the European Commission.
The Netherlands‘ housing market remains strong, mainly due to robust demand, coupled with lack of adequate housing supply in the market. The average purchase price of all dwellings rose by 7.24% during the year to Q2 2018, slightly up from the previous year’s 6.39% growth. On a quarterly basis, house prices were up 0.85% during the latest quarter. During 2017, home sales surged 13% from a year ago, fuelled by low interest rates and robust economic growth. In the first seven months of 2018, home sales dropped more than 7% from a year earlier to 124,615 units, according to Statistics Netherlands. The Dutch economy grew by 3.1% in 2017, the highest growth since 2007. GDP is expected to grow by another 3.2% this year and by 2.4% in 2019, according to the IMF.
Portugal’s housing prices continue to rise strongly, fuelled by surging demand as well as improved economic conditions. Nationwide property prices rose by 4.53% during the year to Q2 2018, from y-o-y rises of 4.7% in Q1 2018, 3.03% in Q4 2017, 4.04% in Q3 2017 and 3.47% in Q2 2017. During the latest quarter, house prices were almost stable.
After more than three years of depression, house prices in Portugal started to recover in 2014. The Portuguese economy is expected to expand by 2.4% this year, after GDP growth of 2.7% in 2017, 1.6% in 2016, 1.8% in 2015, and 0.9% in 2014.
Other strong European housing markets included Iceland, with house prices rising by 4.18% during the year to Q2 2018, Spain (4.01%), and Riga, Latvia (2.68%). All, expect Latvia, recorded positive quarterly growth during the latest quarter. In terms of momentum, only Spain had stronger performance in Q2 2018 compared to a year earlier.
Minimal annual house price rises during the year to Q2 2018 were registered in Jersey (1.93%), Germany (1.74%), Slovak Republic (1.68%), Romania (1.66%), Athens, Greece (0.66%), Lithuania (0.48%) and Finland (0.43%). Only Germany, Slovak Republic, Finland and Lithuania saw quarterly growth during the latest quarter. On the other hand, only Jersey, Greece and Finland performed better in Q2 2018 compared to the previous year.
Other strong European housing markets included Jersey, with house prices rising by 8.91% during the year to Q1 2018, Macedonia (6.1%), Riga, Latvia (5.72%), Romania (4.71%), Portugal (4.7%), Germany (4.19%), and Estonia (3.72%). All recorded positive quarterly growth during the latest quarter. In terms of momentum, only Macedonia, Latvia, Portugal and Jersey had stronger performances in Q1 2018 compared to a year earlier.
Modest to very minimal annual house price rises during the year to Q1 2018 were registered in Sweden (2.97%), Slovak Republic (2.41%), Spain (2.37%), Vienna, Austria (1.68%), Finland (0.29%), and Lithuania (0.1%). Only Slovak Republic, Spain, and Austria saw quarterly growth during the latest quarter. On the other hand, only Spain, Austria and Finland performed better in Q1 2018 compared to the previous year.
The U.K.’s house prices were unchanged during the year to Q1 2018. London was the worst-performing region, with house prices falling by 3.4% y-o-y in Q1 2018. Some high-end London districts have experienced significant price-falls.
Europe’s weakest housing markets
Ukraine‘s housing market remains depressed, despite improved economic conditions. Secondary market apartment prices in Kiev fell by 7.81% (inflation-adjusted) during the year to Q2 2018, to an average price of US$ 1,071 per square metre (sq. m.) – worse than the previous year’s 5.13% decline. House prices fell 1.94% quarter-on-quarter in Q2 2018.
House prices in Ukraine have been falling over the past five years, particularly in 2014 (with prices plunging 37.38%) because ofhryvnia devaluation due to the Russian war. Ukraine’s economy is expected to expand by 3.2% this year, after expansions of 2.5% in 2017 and 2.4% in 2016, and contractions of 9.8% in 2015, 6.6% in 2014 and 0.03% in 2013.
Turkey’s housing market continues to weaken, amidst its plummeting currency (the lira), record-high inflation, and the country’s political conflict with the US. Nationwide residential property prices fell by 4.21% during the year to Q2 2018, in contrast with a 1.62 y-o-y rise in a year earlier – the fourth consecutive quarter of y-o-y price declines. On a quarterly basis, house prices dropped 1.99% during the latest quarter.
In June 2018, inflation rose to 15.39%, the highest level since 2004. The Turkish lira plunged to record lows, having shed more than 40% of its value against the US dollar in the past year. The government recently cut its 2018 GDP growth forecast to 3% – 4% from its earlier estimate of 5%.
Switzerland’s house prices fell 3.49% y-o-y in Q2 2018, the fourth consecutive quarter of annual price declines and the biggest fall in almost two decades. During the latest quarter, prices fell by 1.28% q-o-q.
After about 15 years of uninterrupted house price rises, the Swiss government’s efforts to cool the country’s overheated property market have finally succeeded. The Swiss economy is expected to expand by 2.3% this year and by another 2% in 2019, following annual growth of 1.1% in 2017, 1.4% in 2016, 1.2% in 2015 and 2.5% in 2014, according to the IMF.
Other weak European housing markets included Sweden, with house prices falling by 1.86% during the year to Q2 2018, Russia(-0.81%), Norway (-0.73%), and the UK (-0.09%). Only Norway and the UK saw quarterly growth during the latest quarter. All, except Russia, performed better in Q2 2018 compared to the previous year.
The Asia-Pacific region remains strong, but China slowing rapidly
Two of the five strongest housing markets in our global survey are in Asia-Pacific, with house prices rising in 6 of the 9 housing markets for which figures were available during the year to Q2 2018.
Hong Kong‘s housing market continues to boom, with residential property prices surging 13.15% during the year to Q2 2018, from y-o-y rises of 12.28% in Q1 2018, 12.78% in Q4 2017, 13.41% in Q3 2017, and 19.27% in Q2 2017. Quarter-on-quarter, house prices increased 5.05% in Q2 2018.
The latest house price rises come despite the government raising stamp duties for all non-first time homebuyers starting November 2016 and cutting allowable loans on residential and commercial properties in May 2017. In June 2018, Chief Executive Carrie Lam revealed another series of cooling measures, including a tax against vacant flats. In the first half of 2018, the total number of property transactions in Hong Kong increased 5.6% from a year earlier while sales values rose by 8.4%, according to the Ratings and Valuation Department (RVD). The economy expanded by 3.8% last year, the highest growth since 2011. The IMF recently raised its 2018 growth forecast for Hong Kong to 3.6%, up from its earlier estimate of 2.6%.
Macau’s housing market remains vibrant, amidst massive infrastructure investments, which will transform Macau’s connections to China and Hong Kong. The average transaction price of residential units rose by 6.31% during the year to Q2 2018, following y-o-y rises of 4.22% in Q1 2018, 4.93% in Q4 2017, 9.59% in Q3 2017 and 11.79% in Q2 2017. House prices increased strongly by 5.21% q-o-q during the latest quarter.
Macau’s economy grew by a spectacular 9.3% in 2017, a sharp turnaround from y-o-y declines of 0.9% in 2016, 21.6% in 2015, and 1.2% in 2014. Macau’s economy is expected to grow by 7% this year and by another 6.1% in 2019, according to the IMF.
Thailand’s housing market is rising strongly again, with nationwide house prices rising by 5.01% during the year to Q2 2018, in contrast to a y-o-y decline of 3.02% in the previous year. House prices fell slightly by 0.58% q-o-q in Q2 2018. During the first five months of 2018, nationwide land and building transactions rose by 3.2% y-o-y to THB 425.74 billion (US$ 13.1 billion). The Bank of Thailand recently raised its 2018 economic growth forecast for the fifth time to 4.4% from its earlier projection of 4.1% due to rising exports and strong private consumption.
Other Asia-Pacific housing markets with modest house price rises include New Zealand, with house prices rising by 4.3% during the year to Q2 2018, Tokyo, Japan (3.89%), and Indonesia (0.01%). All, except Japan, recorded positive quarterly growth during the latest quarter. In addition, all showed stronger upward momentum in Q2 2018 as compared to the previous year.
Sharp housing slowdown China
China’s housing market is now slowing, with new regulatory and monetary policies impacting developers and speculative buyers. In Shanghai, the price index of second-hand houses fell by 3.51% during the year to Q2 2018, in sharp contrast with a y-o-y rise of 6.76 in Q2 2017. During the latest quarter, house prices in Shanghai fell by 0.81%.
Despite this, the Chinese economy grew by 6.7% y-o-y in Q2 2018, only slightly lower than the 6.8% growth recorded the previous quarter. The economy is projected to expand by 6.6% this year, after expanding 6.9% in 2017 and 6.7% in 2016. China has achieved 27 straight years of above 6% growth.
Taiwan‘s housing market is still weak. Nationwide house prices fell by 0.27% during the year to Q2 2018, compared to a decline of 0.07% y-o-y in Q2 2017. Quarter-on-quarter, house prices fell by 0.15% in during the latest quarter.
South Korea‘s housing market is also fragile, with the nationwide housing purchase price index falling by 0.08% during the year to Q2 2018, from a y-o-y decline of 0.73% a year earlier. House prices dropped 0.04% q-o-q during the latest quarter.
Middle Eastern housing markets continue to struggle, but Egypt is an exception
TheMiddle East is now in the doldrums, with two of the three weakest housing markets in our global house price survey: Qatar and UAE. This is not surprising given the region’s ailing economy due to low oil prices and the ongoing political and diplomatic crisis. The Middle East’s economy grew by just 1.1% in 2017, the lowest level in eight years.
Qatar remains the weakest housing market in our global survey, amidst a sharp economic slowdown and the adverse impact of the blockade it is suffering from other Golf countries.
Qatar’s real estate price index dropped 16.91% during the year to Q2 2018, after y-o-y declines of 9.65% in Q1 2018, 10.42% in Q4 2017, 3.47% in Q3 2017, and 4.52% in Q2 2017. Property prices fell by 6.62% q-o-q during the latest quarter. The Qatari economy is expected to grow by a modest 2.6% this year, after annual average growth of 2.1% in 2016-17, 4.2% during 2012-15, and 15.7% in 2008-11.
Other Middle Eastern housing markets are also depressed.
In Dubai, residential property prices fell 7.63% during the year to Q2 2018, worse than the prior year’s 2.51% decline, amidst weak economic growth, low investor sentiment, and an oversupply of housing. During the latest quarter, house prices in Dubai dropped 1.33% q-o-q.
Likewise, Israel‘s decade-long house price boom is now over, with government cooling measures intensifying. The nationwide average price of owner-occupied dwellings fell by 1.21% during the year to Q2 2018, in sharp contrast with the previous year’s 4.06% growth. Israeli house prices fell 1.14% q-o-q in Q2 2018.
Egypt is an exception
Egypt’s housing market has risen over the past year, with the nationwide real estate index rising by 4.51% during the year to Q2 2018, in contrast with the y-o-y decline of 5.32% during the previous year. However house prices fell 9.91% quarter-on-quarter during the latest quarter.
Rapid house price rises should be expected in Egypt due to the dramatic inflation unleashed by more-than-halving of the currency’s value in November 2016. That house prices have not risen more is surprising.
President Abdel Fattah el-Sisi recently removed the last restrictions on foreign ownership of land and property in Egypt. He also allowed the government, the biggest landowner in Egypt, to use its land for public-private partnership schemes. The economy is expected to grow strongly by 5.2% this year, the fastest pace in a decade, according to the IMF.
The Americas are mixed
The U.S. remains strong but Canada is slowing sharply.
In Latin America, Mexico is strengthening while Chile has rebounded strongly. House prices are still falling in Brazil, despite some improvement.
After five years of strong house price growth, the U.S. housing market remains surprisingly vibrant. The Federal Housing Finance Agency’s seasonally-adjusted purchase-only U.S. house price index increased 3.67% y-o-y in Q2 2018 (inflation-adjusted), after annual rises of 4.93% in Q1 2018, 4.64% in Q4 2017, 4.68% in Q3 2017 and 4.77% in Q2 2017. The FHFA index rose by 0.07% q-o-q during the latest quarter.
U.S. housing demand and construction activity are mixed. In July 2018, sales of new single-family houses rose by 12.8% y-o-y while existing home sales were down by 1.5%. Building permits authorized for new housing units rose by 4.2% in July 2018 from a year earlier. On the other hand, new housing starts fell by 1.4% y-o-y in July 2018, while completions were slightly down by 0.8%.
The world’s biggest economy grew by 4.1% y-o-y in Q2 2018, nearly double the 2.2% growth the previous quarter and the fastest pace since Q3 2014. Growth was mainly driven by consumers spending their tax cuts and exporters rushing to get their goods delivered ahead of retaliatory tariffs. Recently, the IMF raised its 2018 US growth forecast from 2.3% to 2.7% and finally to 2.9%, an acceleration from the expansions of 2.3% in 2017 and 1.5% in 2016.
In December 2017, President Donald Trump signed a landmark tax law (known as the Tax Cuts and Jobs Act or TCJA) considered to be the largest overhaul of the U.S. tax code in over 30 years.
Canada‘s housing market is slowing sharply, amidst the introduction of more market-cooling measures and rising mortgage interest rates. House prices in the country’s eleven major cities rose by a meagre 0.41% during the year to Q2 2018, a sharp deceleration from last year’s 13.02% growth. Quarter-on-quarter, house prices increased 1.68% q-o-q in Q2 2018.
The Canadian Real Estate Association (CREA) expects home sales to fall by 11% this year, mainly due to higher home prices and interest rates, supply shortages, and heightened uncertainty. Demand is weak. In July 2018, actual sales activity dropped 1.3% from a year earlier. The Canadian economy grew by a healthy 3% in 2017, the highest growth since 2011. The economy is expected to expand by 2.1% this year and by another 2% in 2019.
The Latin Americas are improving
Mexico‘s nationwide house price index rose by 5.12% during the year to Q2 2018, up from just 0.73% y-o-y house price rises in Q2 2017. House prices increased 4.89% q-o-q during the latest quarter.
Chile‘s housing market continues to grow stronger, despite the introduction of a property sales tax in 2016. The average price of new apartments in Greater Santiago rose by 3.39% during the year to Q2 2018, up from the previous year’s 2.11% y-o-y growth. House prices fell by 1.07% q-o-q in Q2 2018.
Brazil’s house prices are still falling, but the outlook is now positive, amidst increasing construction and home sales, as well as a positive economic outlook. In Sao Paulo, house prices fell by 2.38% during the year to Q2 2018, after a y-o-y decline of 2.15% a year earlier. Quarter-on-quarter, house prices in Sao Paulo fell by 1.22% in Q2 2018.
Marilyn Monroe got married in Waccabuc, Westchester.
The actress married playwright Arthur Miller in a short civil ceremony in the White Plains Courthouse in 1956.
It was her third marriage and Miller’s second. Few knew of the impending ceremony.
But their relationship had caused headlines. Miller had divorced his wife to marry Monroe, who had divorced Joe DiMaggio in 1954.
When the news got out of their impending nuptials, the couple held a press conference at Miller’s house in Connecticut on June 29. The local paper had the headline: “Local Resident Will Marry Miss Monroe of Hollywood’, adding, ‘Roxbury Only Spot in World to Greet News Calmly.”
Marilyn Monroe and Arthur Miller held a wedding reception at this Waccabuc home. Karen Croke, email@example.com
Afterwards, they slipped into Westchester and were married in a quick ceremony at the courthouse, after which, as reported the following day in The New York Times, the Millers “got into their sports car and disappeared into traffic.”
They weren’t heading far.
On July 1, the couple held a Jewish ceremony and wedding reception for 25 guests in the Westchester County home of Miller’s literary agent, Kay Brown.
From the outside, it’s not hard to imagine the party that once took place here.
The French Country-style residence built in 1948 seems untouched from those halcyon days when many stars, including Tallulah Bankhead and Benny Goodman lived nearby and fabulous parties were the norm.
The gated property is set on a quiet road with a wonderful view of the surrounding area, and is just across from the 16th hole of the Waccabuc Country Club.
There are many original details, including parquet and tile floors, French doors, leaded windows, and European-style fireplaces. One of the highlights is the living room with walls of glass and terrace exit, a private master suite, and a first-floor guest suite with its own side entrance.
There are four bedrooms and five bathrooms in the home, which is in the Katonah School district.
Outside, the just over 4 acre property is still private and serene. A crescent-shaped lawn terrace steps down to pool and pool house with summer kitchen and cabana, and all surrounded by light woodlands, specimen landscaping and gardens creating sought-after privacy.
Sadly, the Millers were married for only five years before divorcing in 1961. Monroe tragically died the following the year.
The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for May new residential housing starts. The latest reading of 1.350M was above the Investing.com forecast of 1.310M and an increase from the previous month’s revised 1.286M. March figures were also revised.
Here is the opening of this morning’s monthly report:
Privately-owned housing starts in May were at a seasonally adjusted annual rate of 1,350,000. This is 5.0 percent (±10.2 percent)* above the revised April estimate of 1,286,000 and is 20.3 percent (±14.4 percent) above the May 2017 rate of 1,122,000. Single-family housing starts in May were at a rate of 936,000; this is 3.9 percent (±10.6 percent)* above the revised April figure of 901,000. The May rate for units in buildings with five units or more was 404,000. [link to report]
Here is the historical series for total privately owned housing starts, which dates from 1959. Because of the extreme volatility of the monthly data points, a 6-month moving average has been included.
The Population-Adjusted Reality
Here is the data with a simple population adjustment. The Census Bureau’s mid-month population estimates show substantial growth in the US population since 1959. Here is a chart of housing starts as a percent of the population. We’ve added a linear regression through the monthly data to highlight the trend.