Tag Archives: Mt Kisco Homes

European real estate bubble a ‘real possibility’ | Mt Kisco Real Estate

The euro area is at risk of a new real estate bubble as a result of expansionary monetary policy from the European Central Bank (ECB), Commerzbankanalysts have warned.

The ECB council meets on Thursday June 6, and is likely to decide on the details of the third edition of its targeted longer-term refinancing operations (TLTRO-III) program, a series of Eurosystem operations that provide financing to credit institutions for periods of up to four years.

TLTROs offer long-term funding at attractive conditions to banks in order to encourage them to lend capital to the real economy.

The central bank has faced calls from some corners of the market for fresh stimulative measures to aid the anemic European economy, and the third round of TLTROs represent a continuation of its expansionary monetary course.

“With a view to low core inflation, some policies are often passed off as a free lunch,” a note from Commerzbank senior economists Dr Ralph Solveen and Dr Jorg Kramer said in a note Friday.

“Yet the ECB’s expansionary monetary policy has a cost and it comes in the form of higher house prices, which already appear expensive in some countries, and the threat of a property price bubble is a real possibility.”Rising house prices

Commerzbank highlighted that house prices have been rising rapidly in the majority of eurozone economies, including the large economies of Germany, Belgium and France. With an increase of around 4.5% in the course of 2018, Germany was slightly above average in terms of rising house prices, while Slovenia and Latvia saw double-digit rises. Portugal, the Netherlands and Luxembourg all rose at almost 10% rates.

Yet Commerzbank analysts anticipate that ECB interest rates will remain in negative territory for the foreseeable future, further heightening the threat of a real estate bubble.

“The relation between house prices and rents, a frequently used measure for the valuation of real estate, has risen by more than 10% since early 2015. This is less than 5% below its level at the beginning of 2008, when the housing market in some euro area countries had formed considerable bubbles,” the note stated.

Commerzbank expects that if the ECB maintains its monetary policy stance until the end of 2020, average house prices will exceed pre-crisis levels.Falling debt and no building boom

Solveen and Kramer pointed out that the strength of impact of a bursting price bubble on the real economy depends, in part, on the extent to which rising house prices are accompanied by rising debt and a construction boom.

The euro zone as a whole is not yet in this position, the analysts suggested, with private household debt relative to GDP falling steadily across most of Europe’s Economic and Monetary Union (EMU), although Belgium and France were noted as exceptions.

There is also no question of a construction boom, the economists highlighted, and the share of residential construction investment in eurozone GDP is now significantly lower than at the beginning of 2008.

“The situation is somewhat different in Germany, where the rise in prices in recent years has been accompanied by a sharp rise in construction investment and bottlenecks are increasingly occurring in the construction sector,” the Commerzbank note stated.

“However, the share of residential construction investment in GDP is still lower than at the beginning of the monetary union, and there was certainly no construction boom in Germany at that time.”

read more…

https://www.cnbc.com/2019/05/31/european-real-estate-bubble-a-real-possibility-commerzbank-says.html

How tariffs increase building costs | Mt Kisco Real Estate

In July 2018, the United States Trade Representative (USTR) announced its intention to levy tariffs on a series of imports from China. USTR rolled out proposed tariffs in three waves, with the third list (List 3) covering approximately $200 billion worth of Chinese imports. The List 3 goods comprises 5745 items, approximately 450 of which are commonly used in the residential construction industry.

The NAHB economics department examined the imports identified on List 3 and published a special study that estimated the economic effects that the proposed 10-percent tariff would have on the residential construction industry. The value of the 450 building materials included on List 3 is roughly $10 billion. A 10-percent tariff on these goods, therefore, represented a $1 billion tax increase on the housing industry.

One of the questions going into the fourth quarter of 2018 was to what extent the tariffs—even the announcement of intent to levy tariffs in the future—would affect the amount of imports of building materials and construction supplies. As the recently released January 2019 trade data show, the effects of both tariffs levied, as well as announcement of future tariffs, have been substantial.

To analyze these effects, the average monthly change in import value of the 450 items between 2011 and 2017 was compared to monthly changes from January 2018 through January 2019. The “floating” nature of major Chinese holidays affecting capital flows necessitated comparison to the historical average in order to smooth out holiday induced seasonal effects that may occur in different months in different years.

As illustrated in the figure below, the largest disparities between trade flows in 2018 and the 2011-2017 period occurred in April and December 2018.

Although the 2018 study on building materials imports focused on List 3, some goods used in residential construction were affected by the section 232 tariffs (i.e. tariffs levied based on national security concerns) imposed on certain steel and aluminum imports (25 percent and 10 percent, respectively). These tariffs went into effect in March 2018 and clearly had an effect on April 2018 imports from China.

When the USTR announced tariffs to be levied on List 3 beginning September 24th, 2018, the office also announced that the tariff rate would be time sensitive. Although the tariff would initially be set at 10 percent, that rate had a planned increase to 25 percent on January 1st, 2019 in the event that China and the United States could not resolve their differences by the end of the year.

Expectations of a substantial tariff rate increasingly took hold as it was reported that the two countries were not making meaningful progress in negotiations. The data indicate that these expectations brought the timing of imports forward (to December) in order to avoid the increase.

On December 17th, 2018, however, President Trump announced that the rate hike would be delayed to March. Consequently, the data show that imports of building materials declined more than 20 percent in January 2019—in stark contrast to the historical 15-percent increase seen in January.

The President delayed the tariff rate increase indefinitely on February 24, 2019, citing “substantial progress” in trade talks between American and Chinese officials. NAHB will continue to monitor import data releases to examine the possible effects of that announcement.

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How Tariffs and Tariff Announcements are Affecting Building Materials Imports from China

Cuomo’s to blame for Westchester’s gas crisis | Mt Kisco Real Estate

Cuomo’s to blame for Westchester’s gas crisis

State officials held hearings last week into Con Ed’s ban on new natural-gas customers in much of Westchester, but it’s the state itself that blocked new gas pipelines. What’d anyone expect?

Now, it turns out, the county’s nightmare may begin sooner than thought: When Assemblywoman Amy Paulin, who represents southern Westchester, asked Con Ed if it could delay the ban (set for March 15), the utility was frank: Supply and demand determine whether there’s enough gas, it said. So shortages could occur even beforethen.

Paulin isn’t the only one worried: “A March 15 deadline is just far too soon,” warned County Executive George Latimer. And the ban could choke an economic comeback in Westchester. “A moratorium of no new hookups would create a very chilling effect” on the “revival” in New Rochelle, Yonkers and White Plains.

Yet Con Ed has been warning for a long time now. In 2017, it tried to get the Public Service Commission to let it offer incentives to pipeline developers, who feared being denied permits — but was turned down.

The PSC denies that Con Ed came to it with any “pipeline solution,” Paulin said, but public documents show that’s not so.

Let’s face it: Even if the state forced Con Ed to sign up new customers, the utility still couldn’t deliver gas it doesn’t have.

Yet this disaster is entirely self-inflicted. To suck up to climate-change radicals, who hope to do away with all fossil-fuel-based energy, Gov. Cuomo has been slow to OK new pipelines. In response, pipeline companies have lost interest in New York.

Absent new gas supplies, businesses and residents will shun the county. No one will freeze, but Westchester faces new economic drag.

And New York City’s not far behind.

One hope: a court ruling last month that states can’t use their water-quality certification process to delay federal licensing of hydropower plants. “The scope of the ruling enhances the odds” that the Constitution pipeline will be built, notes Rob Rains of Washington Analysis. Constitution’s sponsors want the court to rule against New York efforts to block the pipeline.

Alas, anti-pipeline foes are gaining steam in New York. Last year, city Comptroller Scott Stringer bucked labor unions to denounce the plan for the Northeast Supply Enhancement pipeline, a source of natural gas that’s vital to the city’s growth. At least seven public-advocate wannabes have now joined him.

Maybe they want to send city folks fleeing, much as a dead economy has Upstaters doing. Then again, if everyone leaves, there’ll be no need for natural gas . . 

read more…

Cuomo’s to blame for Westchester’s gas crisis

Pending home sales drop for 12th straight month | Mt Kisco Real Estate

Pending home sales declined as a whole in December, but for the second straight month the Western region experienced a slight increase, according to the National Association of Realtors®.

The Pending Home Sales Index,* www.nar.realtor/pending-home-sales, a forward-looking indicator based on contract signings, decreased 2.2 percent to 99.0 in December, down from 101.2 in November. Additionally, year-over-year contract signings fell 9.8 percent, making this the twelfth straight month of annual decreases.

Lawrence Yun, NAR chief economist, cited several reasons for the decline in pending sales. “The stock market correction hurt consumer confidence, record high home prices cut into affordability and mortgage rates were higher in October and November for consumers signing contracts in December,” he said.

See and share this infographic.

All four major regions experienced a decline compared to one year ago, with the South sustaining the largest decrease.

Yun says so far, the partial government shutdown has not caused any obvious damage to home sales. “Seventy-five percent of Realtors® reported that they haven’t yet felt the impact of the government closure. However, if another government shutdown takes place, it will lead to fewer homes sold,” he said.

According to Yun, as the government reopens, more mortgage options will come available for consumers. “Some home transactions were delayed, but we now expect those sales to go forward,” he said.

Still, there is growth in certain pockets. Yun cited year-over-year increases in active listings from data at realtor.com® to illustrate a potential rise in inventory. Denver-Aurora-Lakewood, Colo., Seattle-Tacoma-Bellevue, Wash., San Francisco-Oakland-Hayward, Calif., San Diego-Carlsbad, Calif., and Portland-Vancouver-Hillsboro, Ore.-Wash. saw the largest increase in active listings in December compared to a year ago.

Yun says despite the low home sales in December, he is confident that the housing market will see improvement in 2019. “The longer-term growth potential is high. The Federal Reserve announced a change in its stance on monetary policy. Rather than four rate hikes, there will likely be only one increase or even no increase at all. This has already spurred a noticeable fall in the 30-year, fixed-rate for mortgages. As a result, the forecast for home transactions has greatly improved, “Yun said.

December Pending Home Sales Regional Breakdown

The PHSI in the Northeast rose 2.0 percent to 93.2 in December, and is now 2.5 percent below a year ago. In the Midwest, the index fell 0.6 percent to 97.5 in December, 7.2 percent lower than December 2017.

Pending home sales in the South fell 5 percent to an index of 109.7 in December, which is 13.5 percent lower than a year ago. The index in the West increased 1.7 percent in December to 88.4 and fell 10.8 percent below a year ago.

The National Association of Realtors® is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
 

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

read more…

https://www.nar.realtor/newsroom/pending-home-sales-dip-22-percent-in-december

Pending sales fall for 11th straight month | Mt. Kisco Real Estate

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.

read more…

http://eyeonhousing.org/2019/01/pending-home-sales-fall-in-november/

New home sales decline | Mt Kisco Real Estate

Contracts for new single-family home sales declined in September, as eroding affordability conditions reduced sales volume. New single-family home sales declined to a significantly lower 553,000 seasonally adjusted annual rate, a 5.5% drop from a downwardly revised 585,000 annual rate recorded in August. The sales data are produced by HUD and the Census Bureau.

The weak September estimate was the lowest annual rate since December 2016. It marks a notable retreat from the recent, modest growth trend that had been in place due to solid economic conditions and unmet demographic demand but constrained by rising construction costs due to labor access issues, building material pricing and rising regulatory costs. The drop in monthly sales volume also pushed the months’ supply number to an elevated 7.1, the highest since the summer of 2011.

Despite the softer summer and early fall numbers, total sales for the first nine months of 2019 (485,000) are 3.5% higher than the comparable total for 2017 (469,000). Nonetheless, mirroring declining sales volume for the resale market, higher interest rates, storm disruption effects, and spring and summer hikes in lumber prices have taken a toll on the nation’s building markets, even as macroeconomic conditions remain positive.

Inventory increased in September to 327,000 single-family homes for sale. September saw a notable uptick in homes not-started construction but otherwise listed for sale, rising from 57,000 in August to 64,000 in September (compared to 47,000 in September of 2017). Additionally, sales of homes not started construction were lower on a year-over-year basis (168,000 annual rate in September compared to 185,000 in September of 2017), suggesting the current soft patch is demand-side focused rather than supply-side constrained.

Median new home sales pricing has decreased over the last year as the mix of supply has adjusted. Median new home price was $320,000 in September, compared to $331,500 a year ago. Managing rising construction costs in the months ahead will be a key challenge for housing affordability as input costs increase, although recent declines in lumber prices should help.

For the first nine months of 2018 (and relative to the first nine months of 2017), new home sales were up 9.7% in the Midwest, 4.4% in the South, 3.9% in the West, and down 16.5% in the Northeast, due to tax reform-related effects and affordability concerns.

read more…

http://eyeonhousing.org/2018/10/sales-stall-in-september

New homes sales down 13% year over year | Mt Kisco Real Estate

Sales of new single-family houses in the United States dropped 5.5 percent from the previous month to a seasonally adjusted annual rate of 553 thousand in September of 2018, following a downwardly revised 3.0 percent decline in August. August. It is the lowest rate since December 2016, worse than market expectations of 625 thousand. Sales in the Northeast went down to its lowest level since April 2015. Also, sales decreased in the West and in the South. New Home Sales in the United States averaged 650.36 Thousand from 1963 until 2018, reaching an all time high of 1389 Thousand in July of 2005 and a record low of 270 Thousand in February of 2011.

United States New Home Sales

US New Home Sales Lowest Since 2016

Sales of new single-family houses in the United States dropped 5.5 percent from the previous month to a seasonally adjusted annual rate of 553 thousand in September of 2018, following a downwardly revised 3.0 percent decline in August. It is the lowest rate since December 2016, worse than market expectations of 625 thousand. Sales in the Northeast went down to its lowest level since April 2015. Also, sales decreased in the West and in the South.

Sales declined in the Northeast (-40.6 percent to 19 thousand), its lowest level since April 2015; the West (-12 percent to 139 thousand) and in the South (-1.5 percent to 318 thousand). On the other hand, sales rose 6.9 percent to 77 in the Midwest.
The median sales price of new houses sold was USD 320,000 below USD 331,500 in the same month of the previous year. The average sales price fell to USD 377,200 in September from USD 379,300 a year ago.

The stock of new houses for sale went up 2.8 percent to 327 thousand. This represents a supply of 7.1 months at the current sales rate, up from 6.5 months in August.


Year-on-year, new home sales decreased 13.2 percent.

read more…

https://tradingeconomics.com/united-states/new-home-sales

Mortgage rates above 5% | Mt Kisco Real Estate

While investors are no doubt wringing their hands over what’s going on in the stock market this week, here’s another thing to fret over: rising mortgage rates.

“What many in 2016 thought would never happen again is now reality,” writes Wolf Richter of the Wolf Street blog. “A line in the sand has been breached.”

He explained that the average interest rate for 30-year fixed mortgages with conforming loan balances ($453,100 or less) and a 20% down-payment just passed 5% — the highest since 2010, according to the Mortgage Bankers Association.See Also

This, however, is not quite the “pain threshold” for the housing market, Richter wrote. No, that number is 6%, but that rate is moving ever closer.

“This is still historically low. It would take rates back to December 2008, when the Fed was kicking off its first round of QE to repress long-term rates and inflate asset prices,” he said. “Beyond that are the now unimaginably high rates of 7% and 8%.” Here’s a chart for some perspective:

Mortgage rates loosely follow the path of the 10-year U.S. Treasury noteTMUBMUSD10Y, -0.86%  . The spread between the average 30-year fixed mortgage rate and the 10-year comes in around 1.5 to 2.0 percentage points over time. The yield on the benchmark government bond has soared this month to roughly seven-year highs amid worries that increasing inflation will erode the value of fixed-income assets.

“The 10-year yield has moved in two surges so far in this rate-hike cycle, each of them over 1 percentage point, with some back-tracking in between,” Richter wrote. “It appears to have launched ‘Surge 3.’ If it plays out, this surge would push the 10-year beyond 4%. And this would bring the 30-year fixed rate into the neighborhood of 6%.”

“This new mortgage rate environment is meeting home prices across the U.S. that have surged over the past years,” Richter wrote. “Affordability issues, already tough to deal with at 4% and 4.5% and even tougher to deal with at 5%, are going to be much tougher at 6%.”

Consequently, and unsurprisingly, he said the red-hot housing markets, like Seattle, San Francisco and Denver, are most at risk.

“These price increases came on top of the crazy peaks of Housing Bubble 1,” Richter wrote. “So a 6% average 30-year fixed rate in these inflated markets will likely change the equation a lot more than in some of the less inflated markets.”

read more…

www.marketwatch.com/story/the-pain-threshold-approaches-for-the-housing-market-analyst-warns

Housing starts analysis | Mt Kisco Real Estate

Comments on August Housing Starts

 

Earlier: Housing Starts Increased to 1.282 Million Annual Rate in August

Housing starts in August were above expectations,  and starts for June and July were revised up.  Most of the increase, and upward revisions, were due to the multi-family starts that are volatile month-to-month.

The housing starts report released this morning showed starts were up 9.2% in August compared to July (and August starts were revised up), and starts were up 9.4% year-over-year compared to August 2017.

Multi-family starts were down 38% year-over-year, and single family starts were down slightly year-over-year.

This first graph shows the month to month comparison for total starts between 2017 (blue) and 2018 (red).

image: https://1.bp.blogspot.com/-QB_1ld2C2zg/W6JFJO03NdI/AAAAAAAAwCw/oMfZl_MNKV4JQQ89VJQniVoY4Ye5wNn3wCLcBGAs/s320/Starts20172018Aug.PNG

Starts Housing 2017 and 2018Click on graph for larger image.

Starts were up 9.4% in August compared to August 2017.

Through eight months, starts are up 6.9% year-to-date compared to the same period in 2017.   That is a decent increase.

Note that 2017 finished strong, so the year-over-year comparisons will be more difficult in Q4.

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

image: https://4.bp.blogspot.com/-0xhVPfh9cYs/W6JIb4I3CSI/AAAAAAAAwC8/BEcLqA1gitQDc3A9Al4_nRmL5aFh0fUiwCLcBGAs/s320/MultiAug2018.PNG

Multifamily Starts and completionsThe blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily for several years following the great recession – but turned down, and has moved sideways recently.  Completions (red line) had lagged behind – however completions and starts are at about the same level now (more deliveries).

It is likely that both starts and completions, on rolling 12 months basis, will now move mostly sideways.

As I’ve been noting for a few years, the significant growth in multi-family starts is behind us – multi-family starts peaked in June 2015 (at 510 thousand SAAR).

image: https://4.bp.blogspot.com/-2POZ_G_0KLM/W6JIeSHjiXI/AAAAAAAAwDA/WqiMP6SJVeMzG5uNm7yh_15gaMoqvNRDACLcBGAs/s320/SingleAug2018.PNG

Single family Starts and completionsThe second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion – so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Note the relatively low level of single family starts and completions.  The “wide bottom” was what I was forecasting following the recession, and now I expect a couple more years, or more, of increasing single family starts and completions.

Note: Two months ago, in response to numerous articles discussing the “slowing housing market” and some suggesting “housing has peaked”, I wrote: Has Housing Market Activity Peaked? and Has the Housing Market Peaked? (Part 2). My view – that there will be further growth in housing starts – remains the same.

Read more at https://www.calculatedriskblog.com/#o2tyGm3q82iFADMX.99

China’s biggest risk may be its property market | Mt Kisco Real Estate

China’s hot real estate market remains a challenge for authorities trying to maintain stable economic growth in the face of trade tensions with the U.S.

In fact, property is the country’s biggest risk in the next 12 months, much greater than the trade war, according to Larry Hu, head of greater China economics at Macquarie. He said he is especially watching whether the real estate market in lower-tier, or smaller, cities will see a downturn in prices or housing starts after recent sharp increases.

Real estate investment accounts for about two-thirds of Chinese household assets, according to wealth manager Noah Holdings. The property market also plays a significant role in local government revenues, bank loans and corporate investment. As a result, a sharp slowdown in the real estate market’s growth and drop in prices would have a negative affect on overall economic growth.

So far, the market has been hot: The average selling price for newly built non-governmental housing in 60 tier-three and tier-four cities tracked by Tospur Real Estate Consulting rose 28.1 percent from January 2016 to May 2018. That’s according to a report last week co-authored by Sheng Songcheng, a counselor to the People’s Bank of China and an adjunct professor at the China Europe International Business School, an educational joint-venture co-founded by the Chinese government and the European Union.

Domestic property prices overall have also been rising for more than three years, the longest streak since 2008, the report said, citing National Bureau of Statistics data.

Property sales

Source: Wind, Macquarie Macro Strategy, August 2018

Last week, Nanjing, a tier-two city, announced a ban on corporate purchases of residential properties, following similar moves to limit speculation by Shanghai and some other cities.

“You do not want to give Jeff Bezos a seven-year head start.”
Hear what else Buffett has to say

That’s a good move for controlling risk, according to Joe Zhou, real estate and investment management firm JLL’s regional director for China capital markets. He said the government is not likely to loosen its policy soon and that prices could decline on average.

However, it’s unclear whether a downturn in China’s property market would necessarily impact overall growth on the same scale. The public still expects property prices to increase because the government has constantly switched between tightening and easing policies, often to prevent a drop in growth, CEIBS’ Sheng said in the report.

Analysts also generally predict authorities will counter tightening measures with stimulus in other parts of the economy such as infrastructure. In the meantime, China’s export-reliant economy also faces pressure from U.S. tariffs and rising trade tensions.

 

read more…

 

https://www.cnbc.com/2018/08/21/china-economy-biggest-risk-may-be-property-market-not-trade-war.html