How The Trump Presidency Has Affected Housing (What we know so far)

Investor confidence soared after the 2016 election of Donald J. Trump, sending the U.S. stock market on a tear that would last a full year. It also made housing more expensive. That is because when the stock market rallies, the bond market usually sells off, and bond yields rise. Mortgage rates loosely follow the yield on the 10-year Treasury.

 

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The average rate on the popular 30-year fixed mortgage hovered around 3.5 percent in the fall of 2016 and then shot up to as high as 4.3 percent immediately after the election, according to Freddie Mac. It stayed above 4 percent for the first half of the year and is currently just below that now.

The jump in mortgage rates, however, didn’t immediately dampen consumer or builder confidence, which are both key to the housing market.

Builders were euphoric after the election, anticipating big deregulation in their sector. That has yet to happen, and now builders are fighting the Trump administration over its proposed tax plan, which cuts popular deductions for homeownership.

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Housing starts and building permits are currently higher than they were a year ago, but the gains have been slower than expected. Builders complain of high costs for land, labor and materials. The Trump administration’s anti-immigration stance has only hurt the construction labor shortage, which is largely fueled by Mexican workers.

“We need a national immigration reform bill. We have people that are afraid of being deported so they’ve gone underground. It’s just made housing expensive,” said Patrick Hamill, CEO of Denver-based Oakwood homes.

Home prices continue to climb due to the lack of supply, and that has sidelined both first-time and move-up buyers. Affordability continues to weaken, and if interest rates rise further, it will only get worse. Existing home sales have been falling since the summer, the inventory of homes for sale continues to shrink and single-family home construction still lags demand by a lot.

“The important question here is whether the optimism we saw after last year’s election has manifested itself into the housing market this year. We aren’t seeing signs that’s the case,” said Ralph McLaughlin, chief economist at Trulia, a real estate listing site.

“This softening of many of these indicators isn’t necessarily the result of anything the Trump administration has or hasn’t done, but, rather, we were expecting a possible bump in housing and we haven’t seen that yet, unlike the labor market and unlike the stock market,” he added.

Despite soaring home prices in certain hot urban markets, Trulia shows price gains softening around the country. This comes after robust gains during the Obama administration. The first-time homebuyer tax credit, launched in 2008 and expired in 2010, was a bailout after the housing crash and boosted home sales and prices, especially at the lower end of the market.

Under Trump, housing market conditions have worsened in more counties than they’ve improved.

Originally published HERE.

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Blackstone Profit Tops Projections (Real Estate Fuels Increase)

Real estate continues to fuel gains for Blackstone Group LP, which reported a jump in third-quarter profit that exceeded all analysts’ estimates. The shares rose.

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Economic net income, a measure of earnings that reflects both realized and unrealized investment gains, was $834.3 million, or 69 cents a share, compared with $687 million a year earlier, New York-based Blackstone said in a statement Thursday. Analysts were expecting 54 cents a share on average and 61 cents at most, according to 13 estimates compiled by Bloomberg.

Gains were widespread. Blackstone’s opportunistic real estate portfolio appreciated 5.5 percent during the three months ended Sept. 30, exceeding the 4 percent rise in the S&P 500 index of large U.S. companies. Drivers included the firm’s investments in Invitation Homes Inc. and Hilton Worldwide Holdings Inc. Blackstone’s credit funds also posted gains across performing and distressed debt strategies, as did the firm’s hedge funds.

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Shares of Blackstone, led by Chief Executive Officer Steve Schwarzman, rose 1.2 percent to $33.89 as of 10:24 a.m. in New York as wider markets declined. The stock has gained 33 percent, including reinvested dividends, this year.

Blackstone’s private equity portfolio gained by 3.3 percent. Analysts, who rely on moves in public holdings to help predict firm profits, have little clarity on changes in value of private assets that haven’t been sold or taken public.

 

Gathering Assets

Real estate led the charge for Blackstone’s asset sales in the quarter. The unit, its biggest at $111 billion, sold $3.1 billion in holdings, including a U.K. office property and a portfolio of French hotels. The firm also continued trimming its stake in Hilton, selling shares it held in both its real estate and private equity funds.

Asset sales helped fuel $625.6 million of distributable earnings, which reflect profits on those disposals and fund management fees, compared with $593.5 million a year earlier.

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Despite the disposals, Blackstone’s assets rose at the fastest pace in more than two years. Clients poured into various strategies including tactical opportunities, Asian real estate, hedge funds and distressed credit.

“Fundraising appears to be accelerating into year-end behind solid year-to-date performance,” Jefferies Group LLC analysts led by Dan Fannon said in a note to clients Thursday.

Schwarzman, 70, said in the statement that he expects Blackstone’s assets to continue rising in the fourth quarter. The firm is raising money for its new infrastructure fund, and it’s making a foray into early-stage growth investing,

Overseeing $387.4 billion across private equity, real estate, credit and hedge funds as of Sept. 30, Blackstone is considered a bellwether for the alternative-asset industry. The firm added an additional $10 billion this week with the acquisition of energy investor Harvest Fund Advisors.

Originally published here.

 

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4 Major Cities That Are In Trouble (Housing Market Mini-Bubble)

Home price gains are accelerating again, and in some cities those values are overheating. Four of the nation’s largest cities are now considered overvalued, according to CoreLogic. Home prices in Denver, Houston, Miami and the Washington, D.C., metropolitan area now exceed sustainable levels.

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To determine if a market is overvalued, CoreLogic compares current prices to their long-run, sustainable levels, which are supported by local economic fundamentals like disposable income. An overvalued market is one in which home prices are at least 10 percent higher than that level. The rest of the top 10 markets are considered “at value,” but none are undervalued, as prices are higher in all of them compared with a year ago.

“With no end to the escalation in sight, affordability is rapidly deteriorating nationally,” said Frank Martell, president and CEO of CoreLogic. “While low mortgage rates are keeping the market affordable from a monthly payment perspective, affordability will likely become a much bigger challenge in the years ahead until the industry resolves the housing supply challenge.”

Home prices rose 6.7 percent nationally in June compared with June 2016. That is a slightly higher annual gain than May. Prices are now up nearly 50 percent from the trough of the housing crash in March 2011.

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The soaring gains now are due to a historically short supply of affordable homes for sale. The number of homes for sale in June was 11 percent lower than a year ago, according to Realtor.com.

“As of Q2 2017, the unsold inventory as a share of all households is 1.9 percent, which is the lowest Q2 reading in over 30 years,” said Frank Nothaft, chief economist at CoreLogic.

While the price gains are widespread, all real estate is still local, and some previously hot markets are actually cooling off. San Francisco is considered at value, with prices up just 5.3 percent, compared with an 8.7 percent annual gain in Denver. The New York City metropolitan area is seeing values up just over 3 percent annually and is considered at a sustainable level, but Houston, while seeing the same price gain is overvalued based on its economy.

Home prices in Denver, Houston, Miami and the Washington, D.C., metropolitan area now exceed sustainable levels.

Originally published here.

 

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