Mar. 4: Oakland – the next hot market? Good states for innovation

Rob Chrisman

Rob Chrisman began his career in mortgage banking – primarily capital markets – 31 years ago in 1985 with First California Mortgage, assisting in Secondary Marketing until 1988, when he joined Tuttle & Co., a leading mortgage pipeline risk management firm. He was an account manager and partner at Tuttle & Co. until 1996, when he moved to Scotland with his family for 9 months. See more

Check out this seriously cool map:

 

If you are interested in the concentration of the U.S. economy, you should check out the animated graphic, courtesy of Max Galka located on Metrocosm blog. This cartogram shows how every county in the U.S. morphs when it is sized proportionally to its share of the country’s total gross domestic product.

 

NAR is predicting existing home sales of 5.38 million in 2016, with average home price appreciation of 4% to 5%. It looks like the Northeast is finally starting to pick up a bit, with contracts up 11% in January.

 

TransUnion’s 4th quarter report:

 

According to the TransUnion Q4 2015 Industry Insights Report, as more consumers, and more nonprime consumers, are receiving auto loan and credit card access, delinquency levels for these credit products have only risen slightly and remain at relatively low levels.  Both mortgages and personal loans experienced yearly drops in their delinquency levels, with mortgages dropping nearly 30% in the last year. This report states the mortgage delinquency rate declined from 3.29% in Q4 2014 to 2.37% in Q4 2015. While delinquencies dropped, mortgage debt per borrower increased from $187,139 in Q4 2014 to $189,707 in Q4 2015. The rapid decline in delinquency but increase in debt is a positive sign for the residential mortgage market, per TransUnion. TransUnion data show that at the conclusion of 2015 there were 1.26 million more subprime borrowers with credit card accounts showing a balance, and 1.21 million additional subprime consumers with auto loan accounts, compared to the end of 2014. The share of subprime accounts compared to other risk tiers also rose slightly in the last year. TransUnion’s report includes auto loan, credit card as well as mortgage loan statistics.  If you are interested in viewing its Q4 Insights Report, click here.

 

What states ranked at the top of the innovation charts?

 

The Consumer Technology Association (CTA) has released their 2016 Innovation Scorecard, an annual index that grades every state and the District of Columbia based off their adoption of policies that drive economic growth, employment, and innovation. As can be seen by home values (and tight inventory) in tech hubs like Seattle and Silicon Valley, innovation is a huge driver of job growth and consequently, the demand for new housing. States like Washington D.C., Virginia, Massachusetts, Maryland, Minnesota, Colorado, New Hampshire, and Utah received highest marks for tech jobs per capita, and could be home to rising markets that will demand greater housing inventory in years to come. The full 2016 report including state-by-state ranking and profile is available for download.

 

Oakland is where it’s at, or soon will be.

 

Only a handful of new housing projects have started construction in Oakland over the course of the past three years. The city hasn’t seen a high-rise constructed for eight years but Lennar Multifamily Communities, a division of Lennar Corp., is changing that according to an article on Bizjournals. Lennar received approvals last month to build a 254-unit tower on a parking lot, at a whopping 380 feet and 33 stories. Lennar is also pursuing another project nearby, for a total pipeline of nearly 500 units. All of the residential units will be market-rate. It will also include 5,000 square feet of retail space and 232 parking spaces. The Oakland investments are part of a larger development pipeline in the East Bay for Lennar. In Berkeley, Lennar’s 155-unit project at 2600 Shattuck Ave. is under construction, with the first units opening this summer. Lennar is also working with SRM Ernst and Thompson Dorfman on around 500 units at the former Sherwin-Williams paint factory in Emeryville which is currently going through its environmental review.

 

Consumer Confidence:

 

In February, more consumers held off plans to buy a home, as confidence in the U.S. economy plunged to a seven-month low, according to a consumer confidence survey released by the Conference Board. A share of 5.3% of consumers had plans to buy a home (including both new and existing) in the following six months, compared to 7.4% in January, and 5.6% from a year earlier. The decline can be attributed to the shaky economy and plunging oil prices that put a question mark over the future financial market. People are more inclined to buy existing homes when the economy seems less positive. About 2.5% of consumers say they hope to buy an existing home in the future, while only 1.1% hope to purchase a new home. About 1.7% of customers are uncertain about purchasing a new or existing home. Across the board, all three figures decreased month-over-month. The Consumer Confidence Index dropped to a score of 92.2, the lowest point in seven months since August 2015, from a revised reading of 97.8 in January. It is also much lower than the reading of 98.8 a year earlier.

 

People are still optimistic about the housing sector going forward. Toll Brothers mentioned that a dearth of skilled labor is an issue. Interestingly, average selling prices on signed contracts are falling for them in some areas of the country (the Mid-Atlantic and the South) and are flat in the West. Their urban luxury apartment sector was where all the ASP growth was. Perhaps the builders have pushed price hikes about as far as they can and now buyers are beginning to balk.

 

Speaking of home supply, McMansion builder Toll Brothers reported earnings this morning. Revenues were driven again by an 11.7% increase in average selling prices and not by unit growth. Gross margins fell, which speaks to increasing costs. So far this February, deposits and contracts are flat with last year. The decline in stocks probably has a lot to do with it as the luxury buyer is going to be more sensitive to asset prices than the first time homebuyer.

 

It is interesting to see this dynamic with the builders – a reluctance to build more units despite higher prices. Interestingly, CalAtlantic (the new name for Standard Pacific and Ryland after their merger) is bringing back the buydown loan.

 

 

Real estate agent compensation…prevent steering…equal pay for equal work…are there equivalents in nature? You bet there are – worth two minutes (and you’ll need sound).

 

 

Rob

 

(Copyright 2016 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman. To subscribe please visit www.knowledgeforrealestateagents.com.)