Monday Morning Cup of Coffee takes a look at news coming across the HousingWire weekend desk, with more coverage to come on bigger issues.
It may be a bit early to tell for sure yet, but the sky is probably, definitely falling in an economic sense and we should probably all start panicking.
At least that’s my takeaway from this great economic wrap of last week’s events from Mark Pender, senior editor at Econoday.com. And, in reality, things aren’t that bad if one looks closely at the data provided.
This is from the note, titled “Turn for the worse:”
The week saw an unrelenting rush of bad economic news, starting with continued weakness in inflation and including trouble for consumer spending, consumer confidence, housing, manufacturing and inventories. The week also saw the Federal Reserve carefully follow their script, removing stimulus as planned on the assumption that inflation and the economy will improve. But are the Fed’s views based more on optimism or realism?
Pender is basically telling us to buckle up for a difficult second-quarter results period, especially in regard to the now struggling housing sector:
An emerging disappointment is housing, which broke out early in the year but has since lost pace. Housing starts fell 5.5 in May to a far lower-than-expected annualized rate of 1.092 million with permits likewise weak, down 4.9% to a 1.168 million rate. Starts have averaged 1.124 million so far this quarter, down 9.2% from the first quarter’s 1.238 million average. Don’t look for residential investment to bail out second-quarter GDP.
And here’s his overall prediction for this week’s economic news, which, as you guessed it, isn’t that pretty:
Steep declines in housing starts and permits were among the prior week’s biggest disappointments and point to moderation for this week’s heavy run of housing statistics. Existing home sales are not expected to improve in Wednesday’s report for May with new home sales on Friday expected to show only a moderate bounce back from severe contraction in April. Growth in the FHFA house price index is expected to slow though still remain healthy. The current account deficit will be Tuesday’s focus with jobless claims Thursday’s focus.
The research team at Standard Poor’s also put out a research note Sunday. While the report examines some other measures, the results are also decidedly toned with darkened notes, much as Pender’s work is portrayed.
All this would be more easily digestible if the SP team didn’t mention other issues with the economy in addition to Pender’s thoughts. SP instead points to lack of housing availability that is leading this nation into a renter’s nightmare.
From the report (emailed, so sorry no link to share):
The NAR released a study that investigates the current historically low U.S. homeownership rate, which persists despite a steadily improving job market and historically low mortgage rates. Mortgage availability was cited as a main barrier, as credit standards have not normalized in the wake of the recession. According to a separate study, the share of income needed to afford the mortgage payment on a typical U.S. home continued to rise in Q1 2017, driven in part by home value appreciation that is outpacing growth in income.
Even though there is a decline in home affordability, rent isn’t getting any cheaper, either. It’s a one-two punch, and it will keep hitting, harder and harder for the next decade at least.
“In yet a another study, the National Multifamily Housing Council and the National Apartment Association found that some 4.6mn new apartments will be needed by 2030, as a result of growing demand fueled by an aging population, immigration, and declining home sales,” the SP email states.
Luckily there are some initiatives to try to solve some of these problems. Looking across the nation, there are pockets of hope, here and there.
According to this report in Business Insider, in Detroit, an entire neighborhood of tiny houses is under construction, with one primary goal: giving homeless and low-income people the opportunity to own a house.
Dana Varinsky and Leanna Garfield write that a local nonprofit organization called Cass Community Social Services is spearheading the project, which will build 25 single-family homes ranging from 250 to 400 square feet.
However, the progress is slow going as only the first six homes were completed in late 2016.
But, it’s a start!
Speaking of starts, things aren’t going the best for Airbnb after news of short-term rental restrictions are slowing down its rental business in key American cities. What’s more, the company is struggling to control problematic listings, such as this one in Santa Monica.
According to this article in Bloomberg, Airbnb is buying a startup called Trooly that will help limit these bad actors.
The two companies have a history:
Los Altos, California-based Trooly has been helping Airbnb authenticate user identities since 2015. By analyzing data from public records, social media and other sources, Trooly’s technology could help Airbnb track various customer violations, such as side deals between guests and hosts.
“We look forward to welcoming the Trooly team to Airbnb in the coming weeks,” said Airbnb spokesman Tim Rathschmidt. He declined to provide a purchase price or specifics of the arrangement.
That’s it for now, have a great week, everyone!