Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on bigger issues.
The average cost for homebuilders to comply with regulations for new home construction has increased by nearly 30% over the last five years, which is bad news for an industry that so desperately needs more inventory, an article by Chris Kirkham in The Wall Street Journal said.
New research from the National Association of Home Builders cited in the article found that the rise is to due to regulatory costs such as local impact fees, storm-water discharge permits and new construction codes, which have risen at roughly the same rate as the average price for new homes, making it increasingly difficult for builders to pursue affordable single-family construction projects.
“It really makes it hard to satisfy the lower end of the market, which is a lot of first-time buyers,” said Paul Emrath, vice president for survey and housing policy research at the NAHB, who conducted the survey of about 400 builders across the country.
Market experts are widely divided on the strength of the U.S. Economy, with only a little more than a month left until the Federal Open Market Committee meets again in June.
And the FOMC's job is getting more and more difficult as the latest jobs report added another layer on the pile of reports to debate.
An article in MarketWatch by Jeffry Bartash presented both sides of the argument those who say the economy is strengthening and those who don’t.
From the article:
Add it all up and the Federal Reserve’s job probably got a little bit harder. The Fed had been planning to raise interest rates several times this year, but it’s had to back off in light of weaker U.S. and global economic conditions. The April employment report further muddies the picture.
Even economists are divided on the issue, with some saying the jobs report is a clear sign that the Fed will not raise interest rates, while others say the report holds little weight in the Fed’s decision.
A top bond manager at BlackRock said in a Reuters article by Richard Leong that he now doesn’t expect the Fed to raise interest rates more than once in 2016 given the disappointing April jobs report.
Analysts at Goldman Sachs are bearish on interest rate hikes for the short term.
From an email to clients this weekend:
"Following the period of market volatility early this year, many observers seem to have concluded that a little monetary tightening must go a long way—markets are now more sensitive to changes in Fed policy, so any increase in the funds rate will elicit a large reaction in financial conditions. As a result, the FOMC will not raise rates very fast, or very far."
As it stands, the Fed has five more meetings slated for 2016: June, July, September, November and December.
Standard & Poor's released a note this weekend to clients summarizing interest rates and the impact on housing.
- According to the Federal Housing Finance Agency the average interest rate on all mortgages fell 13bps m/m to 3.76% in March.
- The National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders Index fell 15bps w/w to 3.73%.
- The average interest rate on conventional 30-year FRM of $417 or less fell 16bps m/m to 3.95%. T
- The effective interest rate on all mortgage loans was down 15bps w/w to 3.88%, and the average loan amount increased $8.3k m/m to $325k.
However, the S&P analysts add that rising home prices cancel out any benefits of lower interest rates.
"According to Black Knight Financial Services' March Mortgage Monitor report, early 2016 interest rate declines would have saved $44/month on the purchase of a median-priced home, however, home price appreciation has pushed those savings to only $18/month. Gains in home prices in states such as Washington, Colorado, and Oregon completely canceled out interest rate savings."
In the latest update on one of the most public company squabbles, PulteGroup had a shareholder meeting last Wednesday to put an end to talks about who exactly will the led the company. Could this be the end of the family feud?
From the article in the Atlantic Journal-Constitution by Russell Grantham:
At Wednesday’s shareholder meeting, all of the directors, including Dugas, were elected with at least 83 percent of shareholder votes, the company said. The margin was 93 percent excluding Pulte’s votes, the company said.
No further answers were given though on what was going on with executive leadership at the homebuilder, despite questions.
To recap:
Bill Pulte, who founded PulteGroup in 1950, made various allegations and attacks against the company, its management and its strategy, demanding an immediate CEO change and a different direction for the company. In an effort to avoid a contested public battle that would not be in the interests of shareholders, PulteGroup CEO Richard Dugas offered to accelerate and make public the board’s succession plan and announced he will resign come May 2017.
However, despite calls on poor company decisions, the earnings show the company faired quite well in its first-quarter earnings, beating revenue and earnings per share expectations.
Pennsylvania Department of Banking and Securities closed First CornerStone Bank in King of Prussia, Pennsylvania on May 6. The Federal Deposit Insurance Corporation was named Receiver.
