Peak House Prices May Change

First American Data & Analytics, a leading national provider of property-centric information, risk management and valuation solutions and a division of First American Financial Corporation (NYSE: FAF), released its January 2024 Home Price Index (HPI) report. The report tracks home price changes less than four weeks behind real time at the national, state and metropolitan (Core-Based Statistical Area) levels and includes metropolitan price tiers that segment sale transactions into starter, mid and luxury tiers. The full report can be found here.

JANUARY HOUSE PRICE INDEX HIGHLIGHTS

The First American Data & Analytics’ non-seasonally adjusted (NSA) HPI showed that nationally in January[1] 2024:

• Between December 2023 and January 2024 house prices increased 0.3 percent.

• House prices increased 7.2 percent between January 2023 and January 2024.

• House prices reached a new peak for the tenth month in a row in January 2024.

• Annual house price growth peaked in December 2023 at 7.7 percent.

“The pace of annualized home price appreciation peaked in December, as buyers rushed to take advantage of falling mortgage rates. In January, the preliminary estimate of annualized appreciation cooled modestly by half a percent and is likely to slow down further in the coming months,” said Mark Fleming, chief economist at First American. “Despite concern that house prices could decline significantly at the beginning of 2023, rate-locked potential home sellers kept supply tight, maintaining pressure on prices. Optimism that mortgage rates will fall in 2024 may incent more homeowners to sell, boosting supply and, in turn, improving affordability for buyers. While more supply and improved affordability should cool post-pandemic hot house price appreciation, 2024 may still be the year that house price appreciation doesn’t get too cold, but closer to just right.”

The pace of annualized home price appreciation peaked in December, as buyers rushed to take advantage of falling mortgage rates. In January, the preliminary estimate of annualized appreciation cooled modestly by half a percent and is likely to slow down further in the coming months.” – Mark Fleming, Chief Economist, First American.

JANUARY 2024
HOUSE PRICE STAT HIGHLIGHTS

• The five most populous states experienced the following year-over-year growth in the HPI: Pennsylvania (+8.4 percent), Florida (+6.1 percent), Texas (+5.3 percent), California (+4.4 percent), and New York (+4.4 percent).

• There were no states with a year-over-year decrease in the HPI.

JANUARY 2024 HOUSE PRICE
LOCAL MARKET HIGHLIGHTS

• Among the 30 Core-Based Statistical Areas (CBSAs) tracked by First American Data & Analytics, the five markets with the greatest year-over-year increase in the HPI are: Nassau County, N.Y. (+10.7 percent), Anaheim, Calif. (+10.2 percent), Warren, Mich. (+9.6 percent), Miami (+9.4 percent), and Pittsburgh (+8.8 percent).

• Among the 30 Core-Based Statistical Areas (CBSAs) tracked by First American Data & Analytics, there were no markets with a year-over-year decrease in the HPI.

If you want something done right…

EPAB President’s Message

Jaime Gonzalez, President
El Paso Association of Builders

We have all heard the old adage: “If you want something done right, do it yourself!”.

I did a little digging on this; the general consensus is that the original quote comes from Napoleon Bonaparte. If we look into what Napoleon accomplished, I think the meaning of the phrase has been somewhat misinterpreted.

I think it could be “If you want something done right, find the right team to do it!” In the same way that Napoleon could have never accomplished what he did by himself, there is no way that any of us can do everything we need to do by ourselves.

Every organization, department, group, company, etc. needs to have a leader. Someone has to be responsible and accountable for the performance of the team. However, the main responsibility of that leader is not to do everything themselves, it is to gather and lead the right team that will help them accomplish the goal.

In my life and career, I have learned that even though sometimes it feels like we are on opposing teams, we really can’t accomplish the goal without each other. Who is more important? The sales team, or the construction team? The Superintendent or the Subcontractor? The buyer or the seller? Mom or Dad? Defense or offense?

At the end of the day, the team is working together towards the same goal. We may have different roles and different tools, but the team is what gets the job done.

Here is where the phrase gets tricky. Our success or failure, and that of our team, depends on each one of us, on our individual hard work and effort. Each one of us is the leader in charge of our own personal team. However, finding the right team is what will allow us to get something done right.

So yes, Napoleon was right, you do have to do it yourself. But that doesn’t mean
you have to do it alone.

Executive Message

It’s about the economy after all

By Ray Adauto
Executive Vice President, EPAB

According to a recent survey of credit card holders and prospective card holders, consumer trends have shifted in what someone is looking for in rewards associated with the cards. It wasn’t too long ago that perks were significantly different, when just the mere obsession of a card was a status symbol. A line of credit, which is what a credit card is, used to be most common at local grocers or hardware shops. I remember when mom would send one of us to get milk, butter, or other groceries and Mr. Silva would just put it on a tab, a simple I. O. U. that would get paid when dad got paid. The Mr. Silvas of the world knew who could be trusted to pay the credit he’d issue, and from whom he would have trouble collecting. In the 1950’s there was no VISA or Mastercard, it was Diners Club and local eateries that would have membership cards that turned into credit cards. At that time, the “perk” was the card and the status of having g one.

Well things have changed as banks and credit unions began offering specific membership perks if you held one of their cards. Nowadays according to the recent study done by Kantar, adults opening new credit cards need to have incentives, the biggest in the last year “cash back,” followed by points, and discounts or rewards. I was surprised to find out that airline miles, club access and early boarding perks were near the bottom of reasons to pick a card. Dead last was exclusive cardholder events, I’m guessing things like early booking of concerts or special seating to games just don’t matter.

This speaks to our current economy and the pitfalls of inflation and higher interest rates. Cash continues to be king, while trading cash for discounts, rewards of points is a lot like cash. The fact that the Biden administration is floating the idea of killing perks of all kinds on credit cards hasn’t stopped the cards from offering perks. It would seem to be political suicide to go down that path but like other things the government is trying to dictate. Welcome to our world.

Annual home price growth remains accelerated

Home prices declined minimally between December and January, which some see as a sign that some cooling is on the horizon. But they still increased dramatically compared to one year ago.

Both the S&P CoreLogic Case- Shiller National Home Price Index, as well as data from the Federal Housing Finance Agency found prices declined 0.1% on a month-to-month basis.

This is the first monthly decrease in the FHFA index since August 2022, but year-over-year price growth remained near the historical average, said Anju Vajja, deputy director of the Division of Research and Statistics, in a press release.

Compared with January 2023, the FHFA index was 6.3%, with all regions of the country reporting price gains, ranging from 3.8% in the West South Central states, to 8.7% in the East North Central. Other regions reporting large price gains were the Middle Atlantic at 8.6%; New England, up 8.4%; and West North Central, 7.1%.

West North Central was the only region with a big month-to-month increase, at 1.5%. The largest decrease was in the South Atlantic region, down 0.6%.

Meanwhile, the S&P Case-Shiller data showed prices nationwide increasing 6% year-over-year in January, up from a 5.6% gain in December.

On a month-to-month basis, this index has declined for three consecutive periods.

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ECONOMIC OUTLOOK

Elliot Eisenberg
Economic & Policy Blog

Elliot Eisenberg, Ph.D. is an internationally acclaimed economist and public speaker specializing in making economics fun, relevant and educational.

Weakening Wages
In 1/23, when the labor market was sizzling, Y-o-Y wage growth for those employed during the previous year peaked at 6.4%. Among those who changed jobs it was 7.7%, and among those who didn’t change jobs it was 5.7%. By 1/24 overall Y-o-Y wage growth weakened to 5.5%, for switchers it was down a stunning 1.6 percentage points to 6.1%, but for stayers it fell one-third as much to 5.1%.

Wordle Words
The Friday File: For the year ending 11/30/23, the most popular Wordle opening word was ADIEU, at slightly over 8% of all opening guesses. STARE is the next most popular at about 4.75%, followed by SLATE at 4.5%. AUDIO is next, followed closely by the word RAISE at almost 4% and 3.5% respectively. ARISE and CRANE are the 6th and 7th most popular opening gambits with both at almost 2%.

Misguided Markets
Financial markets are worthless in predicting future events. To wit, in mid-January Wall Street was predicting that the Fed would cut the Fed funds rate by a total of 170bps in 2024, almost seven quarter-point cuts, even though the Fed was suggesting three. By 2/1/24, markets were predicting five quarter-point cuts, by early February four cuts, and now 3.5 cuts. This dramatic reversal shows how markets generally overreact.

Budget Blowout
Through the first four months of FY24 (October-January), the budget deficit reached $532 billion, up 16% or $73 billion compared to a deficit of $459 billion during the same period in FY2023. While seemingly expansionary, the increase was more than 100% driven by a rise in interest payments of 37% or $100 billion, to $357 billion. Despite the rise in the deficit, the budget is so far mildly contractionary.

Borrowing Bonanza
In 23Q4, consumer debt rose $212 billion. Mortgage balances increased $112 billion, HELOCs rose $11 billion, credit card balances added $50 billion, auto loans were up $12 billion, and other balances such as retail cards and consumer loans increased $25 billion. In 23Q4, consumer spending was up $208 billion, meaning that over 100% of the rise in consumer spending was debt-financed, not a sign of healthy households.

Super Success
Since the start of CY2019, the KC Chiefs have played 20 games when the moon is a waxing crescent, a growing toenail sliver. And of those 20 games they have won 19. By contrast the 49ers are 15-15 in the last 30 waxing crescent games they have played. Lunar analysis says the Chiefs will win. The economist in me is overwhelmed at the correlation. As for causality…

MARKET DATA

New Home Sales Hold Steady in February

A small rise in mortgage rates in February led to a flat reading for new home sales.

Sales of newly built, single-family homes in February edged 0.3% lower to a 662,000 seasonally adjusted annual rate, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in February is up 5.9% from a year earlier.

“While new home sales remained flat in February, our latest home builder surveys show increased levels of confidence driven by the ongoing lean levels of existing home inventory,” said Carl Harris, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Wichita, Kan. “As interest rates subside over the course of 2024, additional home buyers will be priced into the market and new construction will be needed to meet this demand.”

“A slight uptick in mortgage rates held back the pace of new home sales in February,” said NAHB Chief Economist Robert Dietz. “Our latest builder surveys show that roughly one-quarter of builders reported cutting home prices in March. The price cuts, in combination with building slightly smaller homes, can be seen in today’s data that show a 7.6% year-over-year decline for median new home prices.”

Mortgage rates averaged 6.78% in February compared to 6.64% in January, according to Freddie Mac.
A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the February reading of 662,000 units is the number of homes that would sell if this pace continued for the next 12 months.

New single-family home inventory in February remained elevated at a level of 463,000, up 1.3% from January. This represents an 8.4 months’ supply at the current building pace. A measure near a 6 months’ supply is considered balanced. However, with only a 2.9 months’ supply of existing homes for sale, new home inventory can remain above this balanced measure.

The median new home sale price in February was $400,500, edging down 3.5% from January, and down 7.6% compared to a year ago.

Regionally, on a year-to-date basis, new home sales are up 47.0% in the Northeast, 29.7% in the Midwest and 41.0% in the West. New home sales are down 13.4% in the South.

WEBINAR

Federal Energy Efficiency Incentives for Builders

NAHB is hosting a special free webinar series this April to connect home building professionals to federal incentives for energy efficient home construction and improvements made available through the Inflation Reduction Act (IRA). Three separate sessions will respectively focus on incentives for single-family new homes, multifamily new construction and remodelers.

Join staffers from the EPA ENERGY STAR program and the DOE Zero Energy Ready Homes program for a detailed overview of the program requirements and tools available to help your projects achieve eligibility for these incentives.

Single-Family New Homes Programs: Federal Incentives
ENERGY STAR | DOE Zero Energy Ready Homes
Tuesday, April 16 at 1 p.m. ET
This webinar will introduce you to the single-family new homes versions of both EPA’s ENERGY STAR and DOE’s Zero Energy Ready Homes programs — explaining which home types are eligible to participate, providing an overview of the key elements of the requirements, defining the fundamental components of the tax credit, and discussing how builders can get started.

Multifamily New Construction Programs: Federal Incentives
ENERGY STAR | DOE Zero Energy Ready Homes
Wednesday, April 17 at 1 p.m. ET
This webinar will introduce you to the multifamily new construction versions of both EPA’s ENERGY STAR and DOE’s Zero Energy Ready Homes programs — explaining which home types are eligible to participate, providing an overview of the key elements of the requirements, defining the fundamental components of the tax credit, and discussing how builders can get started.

Energy Efficiency for Remodelers: Federal Incentives
ENERGY STAR Home Savings Tool & Home Upgrade
Thursday, April 18 at 1 p.m. ET
The ENERGY STAR Program has developed two new offerings that can help home owners and contractors identify how they can best leverage significant increased federal incentives in the IRA: ENERGY STAR Home Upgrade: A set of six generally applicable electric efficiency improvements that are designed to work together to deliver significant savings — including a certified heat pump, heat pump water heater, smart thermostat, and windows, plus a well-insulated and sealed attic and electric-ready wiring/panel improvements.
ENERGY STAR Home Savings Tool: A zip-code based web resource that helps consumers identify the incentives that are available to them for efficient products including utility rebates, federal tax credits, and state rebates.

Multifamily New Construction Programs: Federal Incentives
ENERGY STAR | DOE Zero Energy Ready Homes
Wednesday, April 17 at 1 p.m. ET
This webinar will introduce you to the multifamily new construction versions of both EPA’s ENERGY STAR and DOE’s Zero Energy Ready Homes programs — explaining which home types are eligible to participate, providing an overview of the key elements of the requirements, defining the fundamental components of the tax credit, and discussing how builders can get started.

Multifamily New Construction Programs: Federal Incentives
ENERGY STAR | DOE Zero Energy Ready Homes
Wednesday, April 17 at 1 p.m. ET
This webinar will introduce you to the multifamily new construction versions of both EPA’s ENERGY STAR and DOE’s Zero Energy Ready Homes programs — explaining which home types are eligible to participate, providing an overview of the key elements of the requirements, defining the fundamental components of the tax credit, and discussing how builders can get started.