Here’s what mortgage rates will do next year, from the people who usually get it wrong
Looking back at the events that have derailed mortgage rates’ return to ‘normalcy’ over the last few years is unsettling
Rates for home loans have spent the past decade or so doing anything but what’s expected of them. Every year, it seems, the general consensus is that in the coming months, financial conditions will finally get back to “normal,” taking mortgage rates with them. And every year something has brought that “normalization” to a screeching halt.
And for 2019? Given all the variables in both financial markets and housing, forecasting mortgage rates is for the “intrepid,” in the words of Mark Zandi, chief economist for Moody’s Analytics, and a long-time housing watcher. And those are just the known unknowns. Who can guess the curveballs lying in wait in financial markets, earnings, economic data, housing markets, and beyond?
With that in mind, here are some thoughts from a few of those “intrepid” souls.
When floodwaters from now-Tropical Storm Florence finally subside and residents are allowed to return to their communities in North and South Carolina, the shift to recovery mode may seem overwhelming.
But what you do in the days after a devastating storm can mean the difference between a relatively fast cleanup and an expensive months-long demolition nightmare.
Experts advise these steps to help protect your safety and your wallet.
Taking care of your health
“The first thing you need to do is take care of yourself. Make sure you’re emotionally OK,” said Elaina Sutley, assistant professor of structural engineering at The University of Kansas. “Only then should you start assessing any structural damage.”
What materials do I need? You should make sure you have knee-high rubber boots, long-sleeve clothing, a respirator, a flashlight, a camera and liquid bleach.
Where do I start? Start by turning off any gas or power to prevent explosions or electrocution. Then begin drying out your home and addressing the structural damage such as a wall collapse or sinking ceilings. And remember: There may still be water left either in the basement or seeping from soaked furniture.
“You need to open up windows and doors. Let things dry out,” Sutley said. Fans and humidifiers can help speed up the drying process.
While everything dries, which can take a few days, homeowners are encouraged to toss any food left in the home along with any absorbent material that has come in contact with water.
“If there was salt-water flooding, there might be corrosion so get an electrician to look at that,” said Jeffrey Schlegelmilch of the National Center for Disaster Preparedness. “Even if it’s not salt water, things could still be dangerous. Fact-check with a professional before plugging anything in.”
What do I do with damaged items? Coastal areas that have experienced floods in the past will likely have protocols for picking up and handling debris such as drywall and large furniture.
What can I keep? Family heirlooms, jewelry, photographs and other valuables can be air-dried and saved. Clean and disinfect them if they came in contact with floodwater.
What should I avoid? Other than contaminated water flow, there could also be animals trapped in your home brought in by the floodwaters.
“Areas like North Carolina have a lot of poisonous snakes. Floodwaters can bring these into your home. Look out for any critters that could be lurking in hidden areas,” Schlegelmilch said.
What happens if I wait? “If your home is just left to sit, it will continue to deteriorate, and it becomes even more of a health threat,” Schlegelmilch said.
Summer’s heat and humidity make for prime conditions for mold, so act fast, Sutley said.
Taking care of your wallet
The sooner homeowners file claims with an insurance agency or the Federal Emergency Management Agency (FEMA), the faster a resolution can be reached. However, traditional homeowner policies don’t cover flooding. Only flood insurance policies reimburse families for water damage caused by flooding.
“After Hurricane Matthew hit the southeastern United States, I worked on a project where we spoke to households and businesses about receiving assistance from their insurance or FEMA,” Sutley said. “Most people who had insurance and filed a claim received help within 30 days. Most people who applied for FEMA had received it within a month.”
What do I need? Insurance documents, home deeds and your Social Security card can get you started on making an insurance claim.
Photos and videos of the property both before and after the flood are also essential since recovery agencies will likely request proof of the damage.
Where do I start? It’s important to contact your insurance agency before you remove anything from your home. “Insurance companies sometimes want to send someone down to investigate before anything is taken out,” Schlegelmilch said.
After contacting your insurance company, work can began. Homeowners are encouraged to remove any carpet or drywall that has come in contact with water before mold starts to form.
“I would look to CDC guidance for which bleach to use. You don’t want just to get surfaces to look clean, you want to make sure that there aren’t any living mold spores,” Schlegelmilch said.
What if I don’t have insurance? It’s pretty common for people not to have flood insurance, no matter their income level. In coastal regions, it may be mandatory. But for those who live further inland, there are often local aid options.
“Find out what types of public assistance is available in your area,” Schlegelmilch said. “There are a lot of charities that pop up to help people get back in their homes. Some move people to the top of the list who are low income or have disabilities.”
An artist’s illustration of Project Milestone, an initiative in the Netherlands that will build five 3D-printed concrete homes in five years. Houben + Van Mierlo Architects / Image: Project Milestone
In the Dutch city of Eindhoven, engineers, contractors and architects have joined forces to create one of the world’s first 3D-printed commercial housing projects.
Dubbed Project Milestone, the initiative will use a huge 3D printer to fabricate five concrete houses in a wooded area near the city’s airport. Plans call for the first home, a three-bedroom dwelling of just over 1,000 square feet, to be completed in mid-2019 — though the entire initiative will take five years because the technology is still being refined.
“I feel excited,” van Gurp told NBC News MACH in an email. “We are reinventing some details in the real estate industry, and it feels to be at a start of a tech revolution in this industry.”
The robotic printer used to create the homes will follow architectural plans to put down layers of a special concrete mix. The first house’s roof and walls will be fabricated off-site and then brought to the building site for assembly. Once the technology is honed, it should be possible to print an entire home on site.
Renderings of the planned homes show futuristic-looking structures with curvilinear shapes and rectangular windows and doors. The designs are intended to show off the printer’s versatility, including the ability to create unusual shapes that are hard to make with conventional construction methods, van Gurp said.
But will 3D printing really revolutionize the construction industry?
Carlo Ratti, an architect and professor of urban technologies and planning at the Massachusetts Institute of Technology, told MACH in an email that while he believes digital fabrication will revolutionize construction, 3D printing in concrete is unlikely to be the key. “Still, it is positive that we are seeing a myriad [of] experiments in concrete printing — Project Milestone is one of them — that will be useful to perfect the technique,” he said.
The project certainly seems to have captured the attention of people looking for a place to live. Within a week of the renderings’ release, van Gurp told The Guardian, 20 families had applied to rent the first home.
London house prices are falling at their fastest pace since the financial crisis, confirming the British capital as the worst-performing part of a slowing market.
Early data point to home values in London declining 2.7 percent in the year through September, the most since 2009, according to Acadata and LSL property Services. A 0.7 percent fall in August marked the first negative reading since 2011 as sellers in some of the city’s most expensive boroughs, including Westminster, Wandsworth and Hammersmith, were forced to cut prices.
Outside of London and southeast England, the market appeared more buoyant, with prices on average rising in September by more than 3 percent on the year, though the pace of growth has been slowing for months.
In London, values fell for a sixth consecutive month. If the provisional estimates are confirmed, the average price of a home in the capital was less than 582,000 ($773,000), the lowest since the end of 2015.
The downbeat picture was confirmed in a separate report from Rightmove Plc, which said asking prices in London fell an annual 2.5 percent in October. While they rose 3.1 percent on the month, driven by owners of more expensive properties, achieving these prices is far from assured as buyers now have more choice, according to Rightmove director Miles Shipside.
Values at the top end of the market have come under the most pressure, with prices falling in almost half of London’s 33 boroughs in the year through August, according to Acadata. It illustrates the toll being taken by Brexit uncertainty, higher property taxes for landlords and the prospect of the Bank of England raising interest rates for the first time in a decade.
The fall will be welcome news to people struggling to get onto the housing ladder after years of rocketing prices. Affordability is a hot political topic in the U.K. and Prime Minister Theresa May’s government announced an extension of its “Help to Buy” mortgage-assistance program earlier this month, though economists questioned its effectiveness in London where house prices are still double the national average and 10 times the earnings of a first-time buyer.
“It’s stimulative on the margin in London but not enough to make much difference there,” said Philip Rush, an economist at Heteronomics. “It’s more supportive elsewhere in the country where prices are lower, but also growing better anyway.”
LONDON — The doorbell woke Yassin Adam just before 1 a.m. A neighbor was frantically alerting others on the fourth floor of Grenfell Tower about a fire in his apartment. “My fridge blew up,” the man shouted.
Residents of Grenfell Tower had complained for years that the 24-story public housing block invited catastrophe. It lacked fire alarms, sprinklers and a fire escape. It had only a single staircase. And there were concerns about a new aluminum facade that was supposed to improve the building — but was now whisking the flames skyward.
The facade, Mr. Adam said, “burned like a fire that you pour petrol on.”
The incineration of Grenfell Tower on June 14, the deadliest fire in Britain in more than a century, is now a national tragedy. The London police on Friday blamed flammable materials used in the facade for the spread of the blaze and said the investigation could bring charges of manslaughter. Hundreds of families were evacuated from five high-rises that posed similar risks.
Flames consumed the tower so quickly that arriving firefighters wondered if they could even get inside. People trapped on the higher floors screamed for their lives through broken windows. At least 79 people died, a toll that is expected to rise as more bodies are recovered. Survivors have charged that the facade was installed to beautify their housing project for the benefit of wealthy neighbors.
A formal government inquiry into the fire has just begun. But interviews with tenants, industry executives and fire safety engineers point to a gross failure of government oversight, a refusal to heed warnings from inside Britain and around the world and a drive by successive governments from both major political parties to free businesses from the burden of safety regulations.
Promising to cut “red tape,” business-friendly politicians evidently judged that cost concerns outweighed the risks of allowing flammable materials to be used in facades. Builders in Britain were allowed to wrap residential apartment towers — perhaps several hundred of them — from top to bottom in highly flammable materials, a practice forbidden in the United States and many European countries. And companies did not hesitate to supply the British market.
The facade, installed last year at Grenfell Tower, in panels known as cladding and sold as Reynobond PE, consisted of two sheets of aluminum that sandwich a combustible core of polyethylene. It was produced by the American manufacturing giant Alcoa, which was renamed Arconic after a reorganization last year.
Arconic has marketed the flammable facades in Britain for years, even as it has adjusted its pitch elsewhere. In other European countries, Arconic’s sales materials explicitly instructed that “as soon as the building is higher than the firefighters’ ladders, it has to be conceived with an incombustible material.” An Arconic website for British customers said only that such use “depends on local building codes.”
For years, members of Parliament had written letters requesting new restrictions on cladding, especially as the same flammable facades were blamed for fires in Britain, France, the United Arab Emirates, Australia and elsewhere. Yet British authorities resisted new rules. A top building regulator explained to a coroner in 2013 that requiring only noncombustible exteriors in residential towers “limits your choice of materials quite significantly.”
Fire safety experts said the blaze at Grenfell Tower was a catastrophe that could have been avoided, if warnings had been heeded.
“How could that happen in our country at this time?” asked Dennis Davis, a former firefighter who is vice chairman of the nonprofit Fire Sector Federation.
Mr. Adam, 44, had seen posters hung by the management company telling tenants to shut their doors and stay inside in the event of a fire. But Mr. Adam, his wife, his daughter and his pregnant sister ignored the instructions and ran.
“Anyone who listened to the fire brigade and stayed where they are,” Mr. Adam said in an interview the next day, “they lost their lives.”
‘How Is That Possible?’
The first call to the London Fire Brigade came at 12:45 a.m., according to an official statement. Six minutes later, as the first firefighters reached the scene, brigade veterans struggled to fathom the speed of the blaze.
“That is not a real block with people in it!” one firefighter exclaimed, his astonishment captured in a video that later was shown on the BBC and Sky News and was shot inside his vehicle as it sped toward the building.
Other firefighters in the vehicle were heard gasping in horror.
“There are kids in there,” one said.
“How is that possible?”
“It has jumped all the way along the flats — look!”
How “are we going to get into that?” another asked, using an expletive.
Flames in an ordinary fire burst out of windows, moving from the inside out. Grenfell Tower burned in reverse, moving inward from the building’s exterior. The flames quickly tore upward in streaks through the facade, filling apartments with toxic black smoke. Torrents of orange and red branched out of the first streaks and shot upward. The flames encased the building in a cylinder of fire.
“I have never seen such a phenomenal fire, a building engulfed top to bottom in flames,” Dany Cotton, the London fire commissioner, said later that day. More than 200 firefighters battled the blaze. They brought 40 fire engines and other vehicles.
“Committing hundreds of my firefighters into a building that at points looked like it couldn’t possibly stand up due to the level of fire — I actually felt physically sick with anxiety about what was happening,” Ms. Cotton added. But the firefighters went in.
The building they entered was built in 1974 in an architectural style known as Brutalism, and the original concrete structure, built without cladding, would have contained the fire in one apartment long enough for firefighters to prevent it from spreading very far. But the building’s floor plan gives a picture of what happened. Refrigerators in most apartments appear to have been positioned against an exterior wall, next to a window and just a few inches from the cladding installed in the renovation.
When the refrigerator on the fourth floor burst into flames, the fire ignited the flammable cladding and shot up the side of the building. The London police confirmed that on Friday and identified the refrigerator brand as Hotpoint. But experts who saw footage of the blaze had known the culprit at once. “You can tell immediately it’s the cladding,” said Glenn Corbett, an associate professor of fire science at John Jay College of Criminal Justice in New York.
The first well-known use of aluminum cladding on a high-rise was on the Alcoa Building, in Pittsburgh, erected as the manufacturer’s headquarters. Makers of cladding promoted it as both aesthetically striking and energy-efficient, because the aluminum surface reflects back heat and light. Demand for cladding surged with rising fuel costs and concerns about global warming, and over time, producers began selling it in a thin “sandwich” design: Two sheets of aluminum around a core made of flammable plastics like polyethylene.
The cladding is typically paired with a much thicker layer of foam insulation against the building’s exterior wall, as was the case at Grenfell Tower. Then the cladding may be affixed to the wall with metal studs, leaving a narrow gap between the cladding and the insulation.
But by 1998, regulators in the United States — where deaths from fires are historically more common than in Britain or Western Europe — began requiring real-world simulations to test any materials to be used in buildings taller than a firefighter’s two-story ladder. “The U.S. codes say you have to test your assembly exactly the way you install it in a building,” said Robert Solomon, an engineer at the National Fire Protection Association, which is funded in part by insurance companies and drafts model codes followed in the United States and around the world.
No aluminum cladding made with pure polyethylene — the type used at Grenfell Tower — has ever passed the test, experts in the United States say. The aluminum sandwiching always failed in the heat of a fire, exposing the flammable filling. And the air gap between the cladding and the insulation could act as a chimney, intensifying the fire and sucking flames up the side of a building. Attempts to install inflammable barriers at vertical and horizontal intervals were ineffective in practice.
As a result, American building codes have effectively banned flammable cladding in high-rises for nearly two decades. The codes also require many additional safeguards, especially in new buildings or major renovations: automatic sprinkler systems, fire alarms, loudspeakers to provide emergency instructions, pressurized stairways designed to keep smoke out and multiple stairways or fire escapes.
And partly because of the influence of American architects, many territories around the world follow the American example. But not Britain.
Safety vs. Cost
British schoolchildren study the Great Fire of London, in 1666, the way American pupils might learn about the Boston Tea Party or the first Thanksgiving. But the legacy of the fire is also still felt in Britain’s building codes, experts say. London’s original great fire leapt across wooden buildings. And since then, British building codes have focused primarily on the principle of stopping the spread of flames between buildings or, within larger structures, between units.
With fire prevention in Britain, “you put all your eggs in one basket,” said Edwin Galea, director of the Fire Safety Engineering Group at the University of Greenwich. And for decades, this was fairly effective. Britain has long reported far fewer deaths from fires relative to population than the United States, and typically, fewer than 350 residents die each year in fires (compared with more than 3,000 in the United States).
But as early as 1999, after a fire in Irvine, Scotland, British fire safety engineers warned Parliament that the advent of flammable cladding had opened a dangerous loophole in the regulations. The Irvine fire saw flames leap up panels at Garnock Court, a 14-story public housing block. One resident died, four others were injured and a parliamentary committee investigated the causes.
“To a certain extent, we are hoisted by the petard of what happened here in 1666, the Great Fire of London, and we look at fire as a horizontal problem, with a fire in one building affecting the exterior of another building,” Glynton Evans, a fire safety adviser to the firefighters’ union, said to Parliament. “The problem with cladding is that it will, if it is able, spread fire, and it will spread it vertically.”
The firefighters and engineers warned Parliament that British codes required only that the aluminum used in cladding resist ignition, even though the heat of a fire would breach the surface and expose the flammable material inside. Nor did the British rules require a test to evaluate risks in real-world conditions.
“If the cladding cannot resist the spread of flame across the surface, then it will vertically envelop the building,” Mr. Evans warned, in testimony that now seems prophetic. “In other words, the fire will spread to the outside of the building, and it will go vertically.” Many other fire safety experts would repeat those concerns in the following years.
But manufacturers argued against new tests or rules. Using fire-resistant materials was more expensive, a cost that industry advocates opposed.
“Any changes to the facade to satisfy a single requirement such as fire performance will impinge on all other aspects of the wall’s performance as well as its cost,” Stephen Ledbetter, the director of the Center for Window and Cladding Technology, an industry group, wrote in testimony to Parliament
“Fire resistant walls,” he added, “are not economically viable for the prevention of fire spread from floor to floor of a building,” and “we run the risk of using a test method because it exists, not because it delivers real benefits to building owners or users.” (In an interview last week, Mr. Ledbetter said his group had updated its position earlier this year to warn against the type of cladding used at Grenfell Tower.)
Business-friendly governments in Britain — first under Labor and then under the Conservatives — campaigned to pare back regulations. A 2005 law known as the Regulatory Reform (Fire Safety) Order ended a requirement for government inspectors to certify that buildings had met fire codes, and shifted instead to a system of self-policing. Governments adopted slogans calling for the elimination of at least one regulation for each new one that was imposed, and the authorities in charge of fire safety took this to heart.
“If you think more fire protection would be good for U.K. business, then you should be making the case to the business community, not the government,” Brian Martin, the top civil servant in charge of drafting building-safety guidelines, told an industry conference in 2011, quoting the fire minister then, Bob Neill. (“Should we be looking to regulate further? ‘No’ would be my answer,’” Mr. Neill added.)
Mr. Martin, a former surveyor for large-scale commercial projects like the Canary Wharf, told his audience to expect few new regulations because the prime minister at the time, David Cameron, wanted to greatly reduce the burden on industry, according to a report by the conference organizers.
Two years later, in 2013, a coroner questioned Mr. Martin about the application of building regulations in the case of another London fire, which killed six people and injured 15 others at a public housing complex called Lakanal House. Mr. Martin defended the existing regulations, including the lack of a requirement for meaningful fire resistance in the paneling on the outside of an apartment tower.
A questioner told him that the public might be “horrified” to learn that the rules permitted the use of paneling that could spread flames up the side of a building in as little as four-and-a-half minutes. “I can’t predict what the public would think,” Mr. Martin replied, “but that is the situation.”
Moving to a requirement that the exterior of a building be “noncombustible,” Mr. Martin said, “limits your choice of materials quite significantly.”
After the coroner’s report, a cross-party coalition of members of Parliament petitioned government ministers to reform the regulations, including adding automatic sprinklers and revisiting the standards for cladding. “Today’s buildings have a much higher content of readily available combustible material,” the group wrote in a letter sent in December 2015 that specifically cited the risk of chemicals in “cladding.”
“This fire hazard results in many fires because adequate recommendations to developers simply do not exist. There is little or no requirement to mitigate external fire spread,” added the letter, which was first reported last week by the BBC.
In 2014, the Fire Protection Research Foundation, an organization in the United States, counted 20 major high-rise fires involving cladding. In at least a half-dozen — in France, Dubai, South Korea, the United States and elsewhere — the same type of panels installed at Grenfell Tower caught fire. A 2014 fire in Melbourne, Australia, resulted in multiple investigations into the dangers of combustible cladding. Another fire broke out in Dubai, around a 60-story skyscraper, on New Year’s Eve of 2015, and yet another, around a 70-story skyscraper there, this April.
But in Britain, still no changes were made. “The construction industry appears to be stronger and more powerful than the safety lobby,” said Ronnie King, a former fire chief who advises the parliamentary fire safety group. “Their voice is louder.”
‘Pray for Us’
As recently as March, a tenant blogger, writing on behalf of what he called the Grenfell Action Group, predicted a “serious and catastrophic incident,” adding, “The phrase ‘an accident waiting to happen’ springs readily to mind.”
For many tenants, an object of scorn was Grenfell Tower’s quasi-governmental owner, the Kensington and Chelsea Tenant Management Organization. It was created under legislation seeking to give public housing residents more say in running their buildings, and its board is made up of a mix of tenants, representatives of local government and independent directors. But Kensington and Chelsea is the largest tenant management organization in England, a sprawling anomaly supervising roughly 10,000 properties, more than 30 times the average for such entities. Tenants came to see it as just another landlord.
The organization had promised residents of Grenfell Tower that the renovation last year would improve both insulation and fire safety. Board minutes indicate that it worked closely with the London Fire Brigade throughout the process, and local firefighters attended a briefing afterward “where the contractor demonstrated the fire safety features.” During a board meeting last year, the organization even said it would “extend fire safety approach adopted at Grenfell Tower to all major works projects.”
But the principal contractor, the Rydon Group, based in East Sussex, England, assigned the facade work to a specialist firm that was struggling financially during the project. The firm, Harley Curtain Wall, went out of business in 2015 and transferred its assets to a successor, Harley Facades.
Another subcontractor, Omnis Exteriors, said on Friday that it had not been told that the flammable Reynobond cladding was going to be combined with flammable interior insulation. That was a problem, the firm said in a statement, adding that the cladding “should only be used in conjunction with a noncombustible material.”
The cladding itself was produced by Arconic, an industry titan whose chief executive recently stepped down after an unusual public battle with an activist shareholder. Arconic sells a flammable polyethylene version of its Reynobond cladding and a more expensive, fire-resistant version.
In a brochure aimed at customers in other European countries, the company cautions that the polyethylene Reynobond should not be used in buildings taller than 10 meters, or about 33 feet, consistent with regulations in the United States and elsewhere. “Fire is a key issue when it comes to buildings,” the brochure explains. “Especially when it comes to facades and roofs, the fire can spread extremely rapidly.”
A diagram shows flames leaping up the side of a building. “As soon as the building is higher than the firefighters’ ladders, it has to be conceived with an incombustible material,” a caption says.
But the marketing materials on Arconic’s British website are opaque on the issue.
“Q: When do I need Fire Retardant (FR) versus Polyethylene (PR) Reynobond? The answer to this, in part, depends on local building codes. Please contact your Area Sales Manager for more information,” reads a question-and-answer section.
For more than a week after the fire, Arconic declined repeated requests for comment. Then, on Thursday, the company confirmed that its flammable polyethylene panels had been used on the building. “The loss of lives, injuries and destruction following the Grenfell Tower fire are devastating, and we would like to express our deepest sympathies,” the company said. Asked about its varying product guidelines, the company added, “While we publish general usage guidelines, regulations and codes vary by country and need to be determined by the local building code experts.”
Hassan Ibrahim, who lived in an apartment on the 23rd floor of Grenfell Tower, was traveling outside England the day of the fire. His wife, Rania, and their two small children were not so lucky. As the smoke and flames drifted upward, Ms. Ibrahim debated with a neighbor whether to risk opening her door.
“Don’t open the front door,” her neighbor told her. “You are not going to be able to breathe — you are just going to bring the smoke in. You have your children. Standing near the door with all the smoke is not going to help you.”
It sounds like an offer too good to refuse – Italy is to give away, for free, more than 100 historic monasteries, castles, stone towers, inns and railway stations.
Many of the properties are situated along historic pilgrimage routes which the government wants to promote, just as Spain attracts hundreds of thousands of tourists along the famous Way of St James, which leads to the shrine of Santiago de Compostela.
The initiative, announced by the State Property Agency, is an attempt to pump new life into struggling rural areas. There is, however, a catch.
Many of the 103 properties are crumbling, having been abandoned for decades, and their new owners will be expected to restore them out of their own pocket.
Prospective owners will have to show detailed plans of how they will renovate them and turn them into businesses to boost tourism – such as hotels, restaurants, bed and breakfasts and craft workshops.
In a country where youth unemployment is close to 40 per cent, special consideration will be given to people under the age of 40. They will be initially offered a nine-year lease, with the option of extending it for another nine years.
The buildings on offer include farmhouses, monasteries and castles, such as the 13th-century Castello di Montefiore in the Marche region, Castello di Blera in Lazio and a former school in Puglia.
More than 40 of the properties are on historic walking routes or pilgrimage trails, including the Appian Way, the ancient Roman road that once led from Rome to the Adriatic coast, the Via Francigena, which led from Paris to Rome, and the Way of St Benedict, a pilgrimage route which leads through the mountains of Umbria.
Others are located along established cycling routes. If the scheme is a success, another 100 properties will be given away free next year and a further 100 in 2019.
“Slow tourism, including walking trails and cycle paths, is very much in vogue and we can combine it with properties of various kinds, from castles to old railway stations,” said Roberto Reggi, the director of the State Property Agency.
“We are hoping that the transformation and regeneration of these properties will involve young people, providing benefits that will have an impact on rural areas and on tourism.”
With popular locations such as Rome, Venice, Florence and the Cinque Terre coastline of Liguria in danger of being swamped by increasing numbers of tourists, Italy is keen to try to disperse visitors to lesser-known parts of the country. The initiative is part of a Strategic Tourism Plan being pursued by the government.
According to Federal Housing Finance Agency data on our glorious Housing Bubble 2, house prices are doing what they’ve been doing for years: they’re surging. In the first quarter, they rose 6.0% year-over-year.
“The steep, multi-year rise in U.S. home prices continued in the first quarter,” explained FHFA Deputy Chief Economist Andrew Leventis on Wednesday. So house price are going up everywhere. Well, not everywhere.
In the once hottest metropolitan statistical area where house prices have surged in the double digits for years – San Francisco, Redwood City, and the city of South San Francisco which make up the tip of the Peninsula – was the sole exception: there, house prices fell 2.5% in Q1 year-over-year.
It was the first decline since Q2 2011, when the last housing bust ended. This chart shows the year-over-year percentage change per quarter of the FHFA’s House Price Index (HPI). Note how many times prices increased between 10% and 20%-plus:Wolf Street
The HPI is based on data from mortgages that lenders have sold to Fannie Mae and Freddie Mac or that were guaranteed by them. These mortgages are capped – for the San Francisco area, at $636,150. In San Francisco itself, the median house price is about $1.35 million and the median condo price about $1.1 million, according to Paragon Real Estate in San Francisco. With a 20% down-payment, the home could be priced at $800,000 to qualify. I know buyers who made a much bigger down payment – given how little their money earns at the bank – to get a conforming mortgage because they wanted to benefit from the lower rates.
This is what the index looks like, including the ominous kink at the top, the first such sharp kink since the end of Housing Bubble 1:
In terms of price movements, how close is the HPI to the median price?
During Housing Bubble 1, the HPI double-peaked in Q3 2006 and Q2 2007. By comparison, the median price in San Francisco (as opposed to the larger area the HPI covers) peaked in November 2007.
The HPI plunged 23% and bottomed out in Q2 2011. The median price in San Francisco plunged 27% and bottomed out in Q1 2012.
The HPI then soared 83% to peak in Q4 2016. The median price in San Francisco soared over 100% – and stalled in early 2016…
“Stalled” may be too optimistic a term. Paragon Real Estate notes that the three-month moving average of the February-April median price of condos was about flat year-over-year with 2016 and 2015; so two years of essentially no movement. And house prices fell from the same period in 2016.
So the turning points of the HPI were leading indicators of turning points in the median price in San Francisco, though the HPI’s movements were less steep, plunging a little less during the bust, and soaring a little less during the boom. Now San Francisco’s housing market is into the next phase.
CoreLogic’s data corroborates the lumpy nature of the San Francisco housing market; the median price in April for all types of homes dropped 4% year-over-year to $1.3 million, with sales volume dropping 12%.
And here may be part of the reason for the lumpiness in the housing market: The construction boom has been throwing thousands of new housing units – all condos and apartments – on the market every year in recent years, and will continue to do so, just as employment growth, according to California’s Employment Development Department, has slowed down sharply:
Note that the “labor force” is based on the number of residents in San Francisco; “employment” is based on the number of jobs in San Francisco, including those jobs filled by people who commute into the city.
The labor force in San Francisco fell to 559,100 in April, the lowest since June 2016 and up only 4,500 year-over-year. This is the crucial indicator for housing demand. Employment fell to 543,900 – essentially flat in 2017 and up 7000 year-over-year. So far in 2017, year-over-year employment increases ranged from 5,000 to 8,700 jobs per month. This might sound like a lot, but…
The year-over-year increases in January-April 2016 ranged from 12,900 to 17,000 a month.
The year-over-year increases in January-April 2015 ranged from 21,100 to 22,800 a month.
This chart shows the monthly employment gains and losses on a year-over-year basis going back to 2009. Note the sharp decline in gains that started in early 2015:
Even as employment gains are tapering off, thousands of condos and apartments have come on the market and continue to come on the market every year as a result of a historic construction boom, with new towers sprouting like mushrooms in certain parts of the City. Almost all of them are high-end. So in addition to the market facing a dose of supply-and-demand reality, it also faces a problem of affordability, with not enough people making enough money even in the tech sector to buy or rent at those dizzying levels.
A Yorkville duplex that slipped onto the market earlier this week comes with a unique backstory: It was the onetime home of great American songwriter Irving Berlin. The “God Bless America” and “There’s No Business Like Show Business” songster moved into the duplex at 130 East End Avenue in 1931 at the age of 43 along with his family. At the time, Berlin already had hits like “Puttin’ on the Ritz” and “Blue Skies” under his belt, but would go on to write “I’ve Got My Love to Keep Me Warm” and “Say It Isn’t So” during the time he lived in the apartment.
Reflecting Ellin’s taste rather than [Irving’s], it was a formal, stately dwelling with impressive views of the East River. There was nothing showbizzy about the place; the antiques and floor-to-ceiling bookshelves quietly suggested the home of a wealthy, cultivated businessman possessed of exacting, if severe taste.
The Berlins lived in the apartment for the next 13 years, long enough for the space to be photographed by prolific American architectural photographer Samuel Gottscho. The photographs, on file with the Museum of the City of New York, show an apartment that today largely remains unchanged barring cosmetic upgrades like paint.
Today, the apartment shows just as stately with its sweeping entry staircase, black and white marble foyer floor, and 28-foot living room with a wood-burning fireplace and views onto the East River.
The two-bedroom, four-bathroom penthouse is on the market for $7.9 million, with monthly maintenance charges of $7,585. (Surely more pricey than in Berlin’s day.) The listing is held by Jane R. Andrews at Warburg.
S&P Dow Jones Indices released the Home Price Index for January 2017 today. The Case-Shiller U.S. National Home Price Index rose at a seasonally adjusted annual growth rate of 7.9%, slower than the 9.2% increase in December. House prices dropped to the lowest level in the first month of 2012. Five years later, house prices surpassed the pre-recession peak of 2006 and hit the highest level historically.
Along with the increases in national home prices, local home prices also increased in varying degrees in January. Figure 2 shows the annual growth rate of home prices for 20 major U.S. metropolitan areas.
Most of the 20 metro areas had positive home price appreciation, except Cleveland. Cleveland was the only one that had negative home price appreciation (-0.8%). The positive home price appreciation ranged from 5.2% to 22.6%. Seattle had the highest home price appreciation at 22.6%, followed by Chicago (16.5%) and Denver (14%). Miami had the lowest positive growth at 5.2%. Fifteen out of the 20 metro areas had the same or higher home price appreciation than the national level of 7.9%.
Ongoing home price appreciation offset a small decline in mortgage interest rates to move housing affordability slightly lower in the third quarter of 2016, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI).
In all, 61.4 percent of new and existing homes sold between the beginning of July and end of September were affordable to families earning the U.S. median income of $65,700. This is down from the 62.0 percent of homes sold that were affordable to median-income earners in the first quarter.
The national median home price increased from $240,000 in the second quarter to $247,000 in the third quarter. Meanwhile, average mortgage rates edged lower from 3.88 percent to 3.76 percent in the same period.
Elgin, Ill., was rated the nation’s most affordable major housing market, where 94.3 percent of all new and existing homes sold in this year’s third quarter were affordable to families earning the area’s median income of $82,500. Meanwhile, Fairbanks, Alaska, was rated the nation’s most affordable smaller market, with 97.7 percent of homes sold in the third quarter being affordable to families earning the median income of $93,800.
For the 16th consecutive quarter, San Francisco-Redwood City-South San Francisco, Calif., was the nation’s least affordable major housing market. There, just 9.7 percent of homes sold in the third quarter were affordable to families earning the area’s median income of $104,700.