Blue and Red States are Divided on More Than Just Politics, September 28th, 2016

American Money BH

DS News recently sat down with Jeremy Sicklick, CEO and Co-Founder of HouseCanary, to discuss HouseCanary’s info-graphic which depicts the comparison of red states versus blue states in housing market indicators such as home values and the average income spent on housing as well as how this divide with grow looking into the future. HouseCanary notes in this research that since the last election in 2012, the U.S. housing market value has grown by $6 trillion, for a total value of $27 trillion.

Sicklick drives HouseCanary’s vision, strategy and growth to identify interesting and unique ways for leading corporations, investors and individual homeowners to use data to maximize their value in real estate. Sicklick was previously a Partner & Managing Director at The Boston Consulting Group where he helped leading real estate investors deploy billions in capital. Sicklick received his MBA from The Wharton School, and his BS in Accounting from the University of Southern California with highest honors.


With home values nearly double in blue states than in red states, what is causing such a heavy split?

What you’ll find is a lot of the blue states are really on the coast. On those coasts there are some very large cities (on the west coast Seattle, San Francisco, Los Angeles, Portland). All of these cities, for example, are bordered by water and mountains. What you have is the combination of high, great jobs and limited supply. You can only build so much. There’s not that much land to build out anymore. The combination, along the west coast and then on the eastern seaboard and even Florida, job centers with limited land. That’s what drives land values up and home prices up significantly.


What are the factors driving those in blue states to spend more of their income on housing compared to those in red states?

What we find is while the incomes are higher in some of these major power center cities, the cost of either home ownership or rent is also significantly higher. I was just comparing the average rents for a single family residence down the street from us here in San Francisco and it’s over $6,000, while looking at a really nice area in and around the Dallas area, the suburb of Plano, is $1,800 for an average single family home. That highlights the difference that we’re seeing.


What impact might these comparisons have on which candidate voters in these states support?

I think there’s something very broad and interesting that’s happening. We don’t know exactly how this is going to affect the presidential election. With this research, all we were really trying to do was say “there’s this massive divide that’s happening, why is that.” When we looked at it we asked, “Why look at this through the lens of real estate?” Our view was real estate is a majority of Americans’ net worth.

What we were really curious about was whether we could view some of this divide that we’re seeing between red states and blue states through the lens of real estate and the wealth creation that people had. I think it probably answers some of what we’re seeing with the increasing difference in class and wealth but TBD on how that actually impacts the presidential election.

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Consumer Confidence Hits Highest Level Since Recession

Americans expect job conditions to improve


Consumer confidence hit its highest level in nine years, right about when the last recession began, according to the Consumer Confidence Survey conducted by The Conference Board by Nielsen, a provider of information and analytics around what consumers buy and watch.

Consumer confidence increased in September to 104.1, up from 101.8 in August. The Present Situation Index increased from 125.3 to 128.5 and the Expectations Index both increased from 86.1 to 87.8.

In 1985, the index was set to 100, representing the index’s benchmark. This value is adjusted monthly based on results of a household survey of consumers’ opinions on current conditions and future economic expectations. Opinions on current conditions make up 40% of the index, while expectations of future conditions make up 60%.

“Consumer confidence increased in September for a second consecutive month and is now at its highest level since the recession,” said Lynn Franco, The Conference Board director of economic indicators. “Consumers’ assessment of present-day conditions improved, primarily the result of a more positive view of the labor market.”

“Looking ahead, consumers are more upbeat about the short-term employment outlook, but somewhat neutral about business conditions and income prospects,” Franco said. “Overall, consumers continue to rate current conditions favorably and foresee moderate economic expansion in the months ahead.”

Consumers assessment of current conditions improved in September. Those that said business conditions are good, however, decreased from 30.3% to 27.4%, but those saying conditions are bad also declined from 18.2% to 16.2%.

Those who said jobs are plentiful increased from 26.8% to 27.9% and those who said jobs are hard to get decreased from 22.8% to 21.6%.

Americans were also more confident about the short-term outlook in September. While those who expected business conditions to improve over the next six months decreased from 17.6% to 16.5%, but those expecting conditions to get worse also declined from 11.4% to 10.2%.

More consumers expect the labor market to improve in the next six months. Those who said jobs will increase went up from 14.4% to 15.1% in September. In addition, those who expect there to be fewer jobs declined from 17.5% to 17%. Those who expect their incomes may have decreased from 18.5% to 17.1%, but they are not expecting a demotion either. Those who expect a decline in pay decreased from 11% to 10.3%.

“The rise in the present situation index appears to reflect an improvement in labor market conditions,” Capital Economics Chief Economist Paul Ashworth said. “The net proportion of respondents saying that jobs were plentiful rather than hard to get improved to a nine-year high.”

“But that doesn’t necessarily mean that faster wage growth is coming soon,” Ashworth said. “Overall, a lot better than expected, but confidence hasn’t been a great guide to actual consumer spending in recent years.”

However, household income posted its first significant increase in eight years, new data from the U.S. Census Bureau showed.

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US Housing Market Moving Further into “Buy Territory”

KCM Crew, September 27th, 2016

US Housing Market Moving Further into 'Buy Territory'| Keeping Current MattersAccording to the latest Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index, the U.S. housing market has continued to move deeper into buy territory, supporting the belief that housing markets across the country remain a sound investment. The BH&J Index is a quarterly report that attempts to answer the question:

In today’s housing market, is it better to rent or buy a home?

The index examines the entire US housing market and then isolates 23 major cities for comparison. The researchers “measure the relationship between purchasing property and building wealth through a buildup in equity versus renting a comparable property and investing in a portfolio of stocks and bonds.” Ken Johnson, Ph.D., Real Estate Economist & Professor at Florida Atlantic University, and one of the index’s authors explains that:

“Housing prices, in general, continue to slow and when considered in light of the recent trends in the Buy vs. Rent Index signal that ownership remains an excellent investment for the majority of Americans.”

While 15 of the 23 metropolitan markets examined moved further into buy territory since last quarter, Dallas, Denver, and Houston are three of the major cities that are currently deep into rent territory. In these three markets, it is estimated that renting will top homeownership 7 out of 10 times. Eli Beracha, Ph.D., Assistant Professor in the T&S Hollo School of Real Estate at FIU,believes that, in these three markets, the strong odds in favor of renting to create more wealth should begin to have an impact on the demand for home ownership and from that, impact property prices in these areas.” Simply put, home prices in these areas will begin to return to more normal levels once residents realize that renting may be a better choice, therefore bringing home affordability back as well.

Bottom Line

The majority of the country is strongly in buy territory. Buying a home makes sense socially and financially. Rents are predicted to increase substantially in the next year. Protect yourself from rising rents by locking in your housing cost with a mortgage payment now. To Find Out More About the Study: The BH&J Index and other FAU real estate activities are sponsored by Investments Limited of Boca Raton. The BH&J Index is published quarterly and is available online at

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To Raise, or not to Raise Interest Rates, That is the Question

Plus the implications for housing

September 20, 2016, Ted Jones,.

This wordplay on the famous line from Shakespeare’s Hamlet is appropriate as the Federal Reserve contemplates whether or not it will resume raising the Federal Funds Rate Target.

The Fed Funds Rate is the rate that depository institutions (banks and credit unions) loan reserve balances to each other. Although it’s a very short-term interest rate, typically overnight, it has implications for many different sectors, including housing.

Ultimately, changes in the rate will percolate up to impact even the 30-year Treasury bond and 30-year residential mortgage rates.

Just as appraisers use comparable sales and historical figures to determine current values, looking at the Fed’s previous actions show what the outcomes of a rate increase could have on the housing market.   The previous four rate-rise cycles are shown in the following table. Over these four cycles, the Fed Funds Rate increased from 25 to 425 basis points, with a 231.25 basis point average.

Click to enlarge

ted jones

(Source: Federal Reserve Bank of New York)

So what will the impact be on the typical homebuyer?  If you take a look at Freddie Mac’s average 30-year residential rates, and compare that to historical federal interest rates, the average 30-year residential mortgage rate has been 290 basis points greater than the Effective Federal Funds Rate.

Knowing that, we can then use the current median existing-home price of $244,100, according to the National Association of Realtors, and the average 30-year fixed residential loan rate of 3.50%, according to Freddie Mac, to establish a good sense of how a Fed interest rate hike might impact mortgages.

Armed with this knowledge, here are three separate scenarios, corresponding to a 20% down loan, accounting for an increase in the Fed Funds Rate in the next 18 to 24 months:

Scenario 1 – Fed Funds Rate increase is 231.25 basis points

Scenario 2 – Fed Funds Rate increase is the average of scenarios 1 and 3

Scenario 3 – Fed Funds Rate increase is one-half the average of the past four rate increase cycles

Click to enlarge

ted jones

Under these assumptions, the typical homebuyer will face an increased monthly payment ranging from $130 to $270.

Will such an increase hinder housing sales? Not likely, especially if median household income continues to rise and job growth remains steady or expands. Jobs are everything to an economy and ultimately housing markets.

Are these rate increase scenarios likely to occur? If history repeats itself, then yes. However, others disagree with rates rising to these levels.

The last table shows the latest annual average 30-year residential rate forecasts from Fannie Mae, Freddie Mac and the Mortgage Bankers Association.

Each of the three organizations reduced interest rate forecasts following the BREXIT vote in the short and long term.

The drop in interest rate expectations following the BREXIT vote resulted in an average forecast increase in refinance lending volume across these three of $173 billion for 2016 (up 25 percent versus pre-BREXIT) and up $129 billion in 2017 (a 33 percent gain).

Click to enlarge

ted jones

My expectation is for rising rates, though that has been muted temporarily by BREXIT.  Homeowners that can benefit from refinancing today should act quickly.  Prospective homebuyers should so likewise to participate in what are near record-low interest rates.

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Candidate Remain Silent on Housing Policy, September 27th, 2016

Microphone One BH

Not unlike the primary debates for the 2016 presidential nominations, Monday night’s first presidential debate between Republican presidential nominee, Donald Trump, and Democratic presidential nominee, Hillary Clinton, covered topics hotly debated this election season, but left out any discussion on housing policy and legislation.

Despite their lack of discussion on the housing market during the primary debates and now the first presidential debate, both candidates have expressed their stances during the race. Trump spoke at the National Association of Home Builders’ 2016 Midyear Board of Directors Meeting in Miami, Florida and stated he believed overregulation was the source of many issues in the housing industry including the job growth.

“The U.S. economy today is 25 percent smaller than it would have been without the surge of regulations since 1980,” said Trump. “So many businesses knocked down. We will issue an executive order to impose a temporary regulation moratorium on new agency regulations.”

Furthermore, he has states that he plans to discontinue funding of at least some government housing programs and work to ease the current regulatory framework if elected. He has specifically alluded to the possibility of eliminating The U.S. Department of Housing and Urban Development.

Clinton on the other hand as shared via her website that she plans to “reduce barriers to lending in underserved communities,” and “support housing counseling programs.” She has also noted that if elected she will “provide the resources necessary to overcome blight, giving communities a chance to rebuild and renew with new businesses, new homeowners, and new hope.”

“For Hillary Clinton, growing middle class jobs and middle income security is the single lens in which she will judge economic policy,” said Gene Sperling, a top economic advisor to Clinton, in an address to the National Association of Home Builders (NAHB) Board of Directors at their Midyear Meeting in Miami. “What better helps the middle class than housing? Housing creates jobs in the United States. There is probably no other sector that creates jobs throughout income levels – from construction jobs to professional and servicing jobs.”

Though Trump and Clinton remained silent on their housing policy stances, the two candidates did discuss heavily their plans for taxation as well as gun control and racial division in the nation.

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Design Debate: Is It OK to Hang the TV Over the Fireplace?

Design Debate: Is It OK to Hang the TV Over the Fireplace? via @Houzz#TV/Fireplace

http://www.houzz.acom, September 27th, 2016

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4 Reasons to Buy this Fall

KCM Crew, September 26th, 2016

4 Reasons to Buy This Fall | Keeping Current MattersIt’s that time of year; the seasons are changing and with them come thoughts of the upcoming holidays, family get-togethers, and planning for a new year. Those who are on the fence about whether or not now is the right time to buy don’t have to look much further to find four great reasons to consider buying a home now, instead of waiting.

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.4% over the next year. The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects home values to appreciate by more than 3.5% a year for the next 5 years. The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Remain at Historic Lows

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have remained at or below 3.5% for 13 consecutive weeks. The Mortgage Bankers Association, Freddie Mac & the National Association of Realtors are in unison, projecting that rates will increase by this time next year. Any increase in rates will impact YOUR monthly mortgage payment. A year from now, the percentage of your income that you spend on housing will increase substantially if you choose to wait.

3. Either Way You Are Paying a Mortgage

Everyone should realize that, unless you are living with your parents rent-free, you are paying a mortgage – either your mortgage or your landlord’s. As a paper from the Joint Center for Housing Studies at Harvard University explains: “Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does–as Americans intuit–end up making more financial sense than renting.”

4. It’s Time to Move on with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But what if they weren’t? Would you wait? Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe now is the time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

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