El Paso Investors Club

According to recent data analyzed by the NAHB’s Eye on Housing, the number of single-family homes built-for-rent has been increasing over the last four quarters.  Using data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, they report that construction starts of single-family homes for rent totaled 42k homes, compared to 29k in the prior four quarters. In Q2 2018, there were 13k single-family built-for-rent starts.  Interestingly, this class of single-family construction excludes homes that are sold to another party for rental purposes and only includes homes built and held for rental purposes.

Click here to read the full story at the NAHB’s Eye on Housing.

According to New York Fed’s most recent Quarterly Report on Household Debt, Americans’ total household debt has risen for the past 16 quarters and the total is now $618 billion higher than the previous peak of $12.68 trillion, in Q3 of 2008.  In addition, overall household debt is now 19.2% above the post-financial-crisis low reached during Q2 of 2013. The report is based on data from the New York Fed’s Consumer Credit Panel, a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data.  The New York Fed also issued an accompanying blog post that examines the impact of the removal of third-party collection accounts from credit reports following the implementation of the National Consumer Assistance Plan.

Key takeaways:

• Mortgage balances 9the largest component of household debt) rose by $60 billion during the second quarter, to $9.00 trillion
• Balances on home equity lines of credit (HELOC) continued their downward trend, declining by $4 billion, to $432 billion
• Auto loan balances continued their six-year upward trend, increasing by $9 billion in the quarter, to $1.24 trillion
• Credit card balances rose by $14 billion, or 1.7%, after a seasonal decline in the first quarter

“Aggregate household debt grew for the 16th consecutive quarter in the second quarter of 2018,” said Wilbert van der Klaauw, senior vice president at the New York Fed, “While overall delinquency rates have remained stable at relatively low levels, transition rates into delinquency have fallen noticeably for student debt over the past year, reflecting an improved labor market and increased participation in various income-driven repayment plans.”

Click here to read the full report at the Federal Reserve Bank of New York.

The U.S. Department of Housing and Urban Development recently filed a formal complaint against Facebook for violating the Fair Housing Act by allowing landlords and home-sellers to engage in housing discrimination when utilizing their online advertising platform.  The “HUD Secretary-initiated” complaint follows an investigation into Facebook’s advertising platform that includes targeting tools enabling advertisers to filter prospective tenants or home-buyers based on protected classes.

The full release is below:

HUD FILES HOUSING DISCRIMINATION COMPLAINT AGAINST FACEBOOK
Secretary-initiated complaint alleges platform allows advertisers to discriminate

WASHINGTON – The U.S. Department of Housing and Urban Development (HUD) announced today a formal complaint against Facebook for violating the Fair Housing Act by allowing landlords and home sellers to use its advertising platform to engage in housing discrimination.

HUD claims Facebook enables advertisers to control which users receive housing-related ads based upon the recipient’s race, color, religion, sex, familial status, national origin, disability, and/or zip code. Facebook then invites advertisers to express unlawful preferences by offering discriminatory options, allowing them to effectively limit housing options for these protected classes under the guise of ‘targeted advertising.’ Read HUD’s complaint against Facebook.

“The Fair Housing Act prohibits housing discrimination including those who might limit or deny housing options with a click of a mouse,” said Anna María Farías, HUD’s Assistant Secretary for Fair Housing and Equal Opportunity. “When Facebook uses the vast amount of personal data it collects to help advertisers to discriminate, it’s the same as slamming the door in someone’s face.”

The Fair Housing Act prohibits discrimination in housing transactions including print and online advertisement on the basis of race, color, national origin, religion, sex, disability, or familial status. HUD’s Secretary-initiated complaint follows the Department’s investigation into Facebook’s advertising platform which includes targeting tools that enable advertisers to filter prospective tenants or homebuyers based on these protected classes.

For example, HUD’s complaint alleges Facebook’s platform violates the Fair Housing Act. It enables advertisers to, among other things:

• display housing ads either only to men or women;
• not show ads to Facebook users interested in an “assistance dog,” “mobility scooter,” “accessibility” or “deaf culture”;
• not show ads to users whom Facebook categorizes as interested in “child care” or “parenting,” or show ads only to users with children above a specified age;
• to display/not display ads to users whom Facebook categorizes as interested in a particular place of worship, religion or tenet, such as the “Christian Church,” “Sikhism,” “Hinduism,” or the “Bible.”
• not show ads to users whom Facebook categorizes as interested in “Latin America,” “Canada,” “Southeast Asia,” “China,” “Honduras,” or “Somalia.”
• draw a red line around zip codes and then not display ads to Facebook users who live in specific zip codes.

Additionally, Facebook promotes its advertising targeting platform for housing purposes with “success stories” for finding “the perfect homeowners,” “reaching home buyers,” “attracting renters” and “personalizing property ads.”

In addition, today the U.S. Attorney for the Southern District of New York (SDNY) filed a statement of interest, joined in by HUD, in U.S. District Court on behalf of a number of private litigants challenging Facebook’s advertising platform.

HUD Secretary-Initiated Complaints

The Secretary of HUD may file a fair housing complaint directly against those whom the Department believes may be in violation of the Fair Housing Act. Secretary-Initiated Complaints are appropriate in cases, among others, involving significant issues that are national in scope or when the Department is made aware of potential violations of the Act and broad public interest relief is warranted or where HUD does not know of a specific aggrieved person or injured party that is willing or able to come forward. A Fair Housing Act complaint, including a Secretary initiated complaint, is not a determination of liability.

A Secretary-Initiated Complaint will result in a formal fact-finding investigation. The party against whom the complaint is filed will be provided notice and an opportunity to respond. If HUD’s investigation results in a determination that reasonable cause exists that there has been a violation of the Fair Housing Act, a charge of discrimination may be filed. Throughout the process, HUD will seek conciliation and voluntary resolution. Charges may be resolved through settlement, through referral to the Department of Justice, or through an administrative determination.

This year marks the 50th anniversary of the Fair Housing Act. In commemoration, HUD, local communities, and fair housing organizations across the country have coordinated a variety of activities to enhance fair housing awareness, highlight HUD’s fair housing enforcement efforts, and end housing discrimination in the nation. For a list of activities, log onto www.hud.gov/fairhousingis50.

Persons who believe they have experienced discrimination may file a complaint by contacting HUD’s Office of Fair Housing and Equal Opportunity at (800) 669-9777 (voice) or (800) 927-9275 (TTY).

Click here to read the full release at HUD.gov.

Conventional Mortgage rates can be like a moving target (click here to see what they are today).  Failure to lock in that great rate of the moment might cost you thousands over the life of the loan.  Today’s infographic from Keeping Current Matters gives us a quick snapshot of the average interest rate and mortgage payments over the last four decades.  They also remind us that current rates are still well below the historic norm!  Happy Friday!!!

Hat Tip to Keeping Current Matters.

Local Market Monitor, a National REIA preferred vendor, recently released their National Economic Outlook for August, 2018 where they share their thoughts on developments taking place in the U.S. economy.  Interestingly, they find “the high level of consumer spending a bit disturbing” and suspect it might have been built on borrowed money & credit cards.

National Economic Outlook – August 2018

August 14, 2018
By Ingo Winzer

I normally don’t pay much attention to the Gross Domestic Product. I’m not an economist and how you can accurately estimate the output of as large and complicated an economy as the US to within a percentage point is thankfully beyond my understanding. Furthermore, the swings from one quarter to the next are sometimes so large that the number in an quarter seems meaningless. The last time GDP was over 4 percent (4.9 percent, in the third quarter of 2014), in the very next quarter it was 1.9 percent.

But the 4.1 percent GDP growth in the second quarter of this year has been trumpeted as evidence of a very strong economy, so we better have a closer look. The largest portion of the 4.1 percent was 2.7 percent due to consumer spending. Other than that, exports were up, imports held steady, and the government spent a bit more. I actually find the high level of consumer spending a bit disturbing because I strongly suspect it was built on borrowed money – credit cards.

GDP is an income statement, not a balance sheet, and if GDP looks good only because consumers keep borrowing, what’s good in the short run will have bad consequences down the road. The next GDP report comes out in late October, just in time for the elections.

Overall, jobs in July were up 1.6 percent from last year, the same level we’ve been at for months. Jobs were up 2.6 percent in manufacturing – this is a big deal if it continues. Manufacturing is now just 10 percent of the economy (measured by jobs) but if it’s doing better because US factories have become more efficient, we can expect the entire sector to keep growing for years.

Jobs were up 2.6 percent in business services, 1.8 percent in healthcare, 1.8 percent at restaurants, 1.3 percent in finance, and just 0.6 percent in retail trade. As always, government jobs were flat.

Don’t miss what else Ingo has to say about the economy this month.  Click Here to see his FREE 6 minute webinar. 

About the Author: Ingo Winzer is President of Local Market Monitor, and has analyzed real estate markets for more than 20 years. His views on real estate markets are often quoted in the national press and in 2005, he warned that many housing markets were dangerously over-priced. Previously, Ingo was a founder and Executive Vice President of First Research, an industry research company that was acquired by Dun and Bradstreet in March 2007. He is a graduate of MIT and holds an MBA in Finance from Boston University. He resides in Cambridge, Massachusetts.

Click here for more information about Local Market Monitor.

San Antonio Express-News: Security guards monitor the perimeter of a facility, which was formerly a Walmart in Brownsville, TX.

Every area has them…..empty “big box” stores.  Whether they were a Walmart or a Kroger’s there’s usually one thing for certain;  they generally sit empty for a long time and are often eyesores to the community.  A recent article in Texas’ San Antonio Express-Newsdiscusses an unlikely use for these shuttered spaces (that has also generated some controversy) as detention centers for illegals.

While this is certainly one way to repurpose a nonproducing asset, it was completely unforeseen:

“According to a special warranty deed, Walmart placed restrictions on the property forbidding the space from being used as a grocery store, supermarket, wholesale club similar to a Sam’s Club, discount store, pharmacy, adult book or adult video store, bar or nightclub, among other uses….In several tweets, Walmart has said it was “really disturbed by how our former store is being used … we had no idea it’d be used for this.”

Click here to read the full story at the San Antonio Express-News.

Source: WSJ and RealPage Inc.

We have had several posts about rent control and its harmful unintended consequences, and now this:  The Wall Street Journal (as reposted by Realtor.com) is reporting that Freddie Mac (in a new twist in controlling rent increases) is launching a new program that will offer lower-cost financing to owners who agree to cap rent increases for the life of their loans.  While similar to “rent control” it differs dramatically in that it is a voluntary arrangement between the private owner and the lender.  The program launched in early August and is available nationwide.   Eligible properties start with at least 50% of rents affordable to households earning 100% of Area Median Income or less. Borrowers then agree to limit rent growth on 80% of the units for at least the 10-year loan term.

“The initiative comes at a potentially appealing time for real-estate investors who are facing a slowing rental market. Freddie Mac will provide mezzanine debt—which is more risky but pays a higher interest rate than senior debt—at below market cost.”

Click here to read the full story on Realtor.com.

Click here to read Freddie Mac’s release about the program.

According to a recent report from the NAHB’s Eye on Housing, the median age of owner-occupied homes was 37 years, which is 6 years more than it was just a few short years ago.  The NAHB attributes this to modest gains in residential construction over the past ten years.  We see it as an opportunity to fix-n-flip, especially in this tight market with low inventory driving up prices.

“This aging housing stock signals a growing remodeling market, as old structures normally need to add new amenities, or repair/replace old components. Rising home prices also encourage home owners to spend more on home improvement…”

“

Click here to read the full report at the NAHB’s Eye on Housing.

A new report from Trulia says that, nationwide, buying a home is 26.3% cheaper than renting.  Of course this all depends on the particular area, however their study also shows that for the first time in five years renting has come out best in two West Coast metros: San Jose and San Francisco, CA.  Both of these locales have soaring home values and flattened rents.  They also point out that in a few other areas (like Honolulu and Seattle) the savings from buying a home has dissipated, leaving home buying with a slight advantage.

Click here to read the full report on Trulia.com.

According to the National Association of Realtor’s latest quarterly Metropolitan Median Area Prices and Affordability report, Single-family home prices increased in 90% of measured markets, with 161 out of 178 metropolitan statistical areas (MSAs) showing sales price gains in Q2 compared to one year ago. Twenty-four metro areas (13%) experienced double-digit increases, down from 30% in Q1, 2018.  The NAR’s report provides a breakdown of condo and co-op prices by metro market.

The five most expensive housing markets for single-families in Q2 were San Jose, California ($1,405,000); San Francisco-Oakland-Hayward, California ($1,070,000); Anaheim-Santa Ana-Irvine, California ($830,000); urban Honolulu ($795,200); and San Diego-Carlsbad ($645,000).  The five lowest-cost metro areas in Q2 were Youngstown-Warren-Boardman, Ohio ($94,400); Cumberland, Maryland ($94,900); Decatur, Illinois ($96,900); Elmira, New York ($106,300); and Erie, Pennsylvania ($121,700).  In addition, total existing-home sales, including single family & condos, decreased 1.7% to a seasonally adjusted annual rate of 5.41 million in Q2 from 5.51 million in the first quarter, and are 2.4% lower than the 5.55 million pace experienced during Q2 of 2017.

Lawrence Yun, NAR chief economist, says this year’s spring buying season did not meet expectations, despite very strong demand. “The ongoing supply crunch affecting much of the country worsened for most of the second quarter, as the growing number of interested buyers in many markets overwhelmed what was already a meager level of available listings,” he said. “With not enough homes for sale, multiple bids caused prices to rise briskly and further out of the reach of some prospective buyers.”

Click here to read the full report at the NAR.