Copyright©2017 Phil Crawford. All Rights Reserved.
This analysis is to provide general macro-economic data and information for intended users and clients of appraisal reports. The appraiser may incorporate this information in the appraisal process and add it to the scope of work of the appraisal assignment to help the reader (of the appraisal report) better understand economic conditions at the time of the appraisal and the stated effective date of the assignment.
Economic numbers for September were mixed due to hurricanes Harvey and Irma that affected both the Texas and Florida markets. The National Association of Realtors expects that these storms will drop existing home sales below the pace they set in 2016, however, more definitive information and data with be forthcoming at the end of October. The NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, retreated 2.6 percent to 106.3 in August from 109.1 in July. The index is considered to be at its lowest reading since January 2016, and has fallen on an annual basis in four of the past five months. The low supply levels of inventory throughout the summer months created a “lopsided” effect throughout most markets and drained a significant portion of the housing market’s momentum for 2017. Lawrence Yun, NAR chief economist, said recently, “August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes. Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search.” Mr. Yun believes that the housing market has essentially stalled which prompted the National Association of Realtors to downgrade its forecast of home sales for the remainder of the year.
This would bring pending home sales lower than levels experienced in 2016. Housing affordability has been a major concern with the NAR throughout much of the year; however, personal income met expectations and rose .02 percent in August.
It is also important to note that the Federal Reserve has indicated that they would begin the “unwinding” process of their past quantitative easing programs and the opinion of many economists are mixed on the results of this policy.
The 10-year U.S Treasury yield fell to 2.05 percent in September (9/7/2017) – its lowest level since November of 2016; however the yield aggressively climbed throughout the month to finish at 2.33 percent (9/29/2017). Mortgage interest rates remained overall stable with the move; however, there is some concern within the bond market that rates are “unsustainably low” and could begin a momentum shift to higher levels. The 10-year Treasury yield has a direct impact on mortgage interest rates and could affect housing affordably for many buyers throughout the county. This would also have an impact on home prices and values.
Consumer confidence hit a seven-month high in August of this year but declined more than expected in September to 95.1 according to The University of Michigan. Even though the confidence numbers were down for the month, Richard Curtain, Chief Economist for the Surveys of Consumers, stated “The resilience of consumers has again been demonstrated as concerns about the impact of the hurricanes on the national economy have quickly faded…. This was indicated through a “willingness to spend and incur debt.”
The Conference Board had some additional information concerning consumer confidence. Their study focused on consumers that are planning to buy a new home within the next six months. In September, there were 1.0% of the respondents planning to buy a new home within six months, compared with 1.2% in August. The underlying trend in this analysis has been moving upward since 2012. Consumer confidence plays a major role within the national real estate market and contributes to overall supply and demand activity.
***This appraisal report details the subject’s specific marketing area and shows current supply levels and offers a specific absorption rate analysis which will be contained in the 1004MC report. If there is a lack of specific data, from the subject neighborhood, then the appraiser will utilize data from a greater marketing area to define specific market trends. This information contained within the 1004MC will be client specific and will be impacted by the type of loan, scope of work and assignment (FHA, VA, Conventional, Etc.)
The following information is from the 2nd Quarter 2017.
The United States Census Bureau reported the following information for the third quarter:
Homeownership Rate 63.7%
Homeowner Vacancy Rate 1.5%
Rental Vacancy Rate 7.3%
***The appraiser will take into consideration rental vacancy rates (for a specific marketing area) if the income approach, within the appraisal report, is considered applicable and is developed per the scope of work of the assignment. Vacancy rates have a direct impact on GRMs as well as the development of capitalization rates. Effective gross income and net operating income of real property are also impacted by vacancy rates and are considered in risk assessment analysis by income producing property investors.
National Unemployment Numbers
The following unemployment data is from the Bureau of Labor Statistics/ (www.bls.gov). The current national unemployment rate is 4.4%.
Labor Force Statistics from the Current Population Survey
Age: 16 years and over
Years: 2014 to 2017
2014 6.6 6.7 6.7 6.2 6.2 6.1 6.2 6.2 6.0 5.7 5.8 5.6
2015 5.7 5.5 5.5 5.4 5.5 5.3 5.3 5.1 5.1 5.0 5.0 5.0
2016 4.9 4.9 5.0 5.0 4.7 4.9 4.9 4.9 5.0 4.9 4.6 4.7
2017 4.8 4.7 4.5 4.4 4.3 4.4 4.3 4.4
Gross Domestic Product: First Quarter 2017 (Third Estimate)
Per the Bureau of Economic Analysis, U.S. Department of Commerce
“Real gross domestic product (GDP) increased at an annual rate of 3.1 percent in the second quarter of 2017, according to the final reading released by the Bureau of Economic Analysis.
The Crawford Report Copyright ©2017 Phil Crawford. All Rights Reserved.
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