Monday, May 21, 2018

In March, 'release of deeds of trust' down 23 percent

A release of a deed of trust is an event that occurs when a deed of trust (often referred to as  a mortgage) is paid off, either through refinance, sale, or when all payments have been completed on a home loan. It is a "positive" economic indicator in sense that areas with improving economies tend to generally also report increases in releases of deeds of trust.

Other factors can be important as well. In cases where there is a housing shortage, but other economic indicators are robust, we might also see declining release activity. It's not always easy to know which factors are the key factors in whether or not releases are going up or down. 

Since early 2017, the general trend in release activity has been downward. In March 2018, releases totaled 21,304. That's up 11 percent from February 2018, when releases totaled 19,095. Overall, however, monthly data shows that monthly release totals have fallen repeatedly since December 2016's peak of 33,943:



Looking at annual totals, we find that 2017's total was down from 302,249, dropping to 297,151. That's still above 2015's total, however, and well above 2014's totals. 



The trend in year-over-year changes has also shown a decline. Over the past nine months, releases have been down every month, when compared to the same month a year earlier. In March 2018, releases were down 23 percent, compared to March of 2017 — when releases totaled 27,798. 



Another factor at work may be rising interest rates. Since re-finance activity is a factor in releases, and since re-fi's often slow as rates increase, we may be seeing slowing release activity as a result of significant increases in  mortgage rates over the past year. Mortgage rates are now the highest they've been since 2013:





For more on historical release activity in Colorado, see here. 


Saturday, May 19, 2018

Foreclosures in Colorado's Metro Counties Remain Near Multi-Year Lows


Foreclosure activity in Colorado metropolitan counties continues to be near multi-year lows. Over the past two years, foreclosure rates have been exceptionally low compared to the previous decade. 



March 2018 foreclosure filings were down 20 percent from March 2017, dropping from 540 to 432, year over year.

March 2018 foreclosure sales (completed foreclosures) were down compared to March 2017 with a decrease of 33.9 percent, dropping from 177 to 117, year over year.  

Filings rose 6.1 percent from February 2018 to March 2018, and auction sales were up 19.4 percent over the same period.

For the first three months of 2018 as a whole, foreclosure filings were down 11.8 percent, compared to the same period of last year. Filings fell from 1,429 for the first three months of 2017 to 1,260 during the same period of 2018. Foreclosure sales were also down during the same period: sales fell 24.9 percent from 450 to 338.

Pueblo County reported the highest foreclosure rate during March, while Boulder County reported the lowest rate. 

Comparing the first three months of this year to the first three months of last year, both filings and sales were down: 

Filings for Jan-Mar:

Sales for Jan-Mar: 

There's not a whole lot to say here except that foreclosure rates are low, and currently show no signs of heading back upward. So long as home prices continue to climb quickly upward, even those homeowners who have troubles with income can always just sell their homes in order to avoid foreclosure. 


Monday, May 14, 2018

Housing: High Prices, Few New Units

During the housing bubble that ended in 2007-8, the amount of new housing construction was remarkable. Enormous subdivisions were being constructed in metro areas across the land. Buildings of condominiums sprang up in city centers, and the ready availability of credit meant many were buying more than one house as "investments" or summer homes. New housing, it seemed, was everywhere. 
At the same time, home prices were increasing, driven up in part by fact that everyone was convinced that housing prices always go up, and real estate — any real estate — was a rock solid investment. 
When the bubble popped, there was suddenly a housing glut. From Las Vegas to Florida, we heard about buildings of condos that were more than half empty, and about suburban housing developments that became ghost towns. 
On the most superficial level, the current boom might remind some of the pre-2008 bubble. Housing prices are climbing fast, and in many areas, there are bidding wars for houses that are quite ordinary. 
This time, though, things are different. This time, there isn't nearly as much housing being built was during the last bubble. There may be a bubble in prices this time, but there does not appear to be a bubble in construction. 
A look at housing starts in recent years shows that in raw numbers, starts are still not even close to getting back to where they were during the last boom: 

Now, some might think "it's good we not going back to bubble levels." True enough. But when we take into account growth in new households, we see that current construction trends are even weaker than the graph above suggests, and are below even more commonly-seen non-bubble levels of construction. 
As both the Wall Street Journal and USA Today noticed last month, the amount of new housing construction taking place right now, as a proportion of existing households, is at historic lows. USA Today reports:
Since the real estate market crash took the wind out of the construction boom of the 2000s, fewer homes are being built per U.S. household than at nearly any time in history.
And the Wall Street Journal concludes:
Home construction per household a decade after the bust remains near the lowest level in 60 years of record-keeping...What makes the slump puzzling is that by most other measures, the American economy is booming. Jobs are plentiful, wages are on the rise and the stock market is near record highs. Millennials, the largest generation since the baby boomers, are aging into home ownership.
When we look at new housing construction compared to total households going back to 1959, we find that 2009 and 2010 were years with the smallest amount of new construction in decadesUnknown Object:

Only the early 90s are comparable to what happened in the wake of the 2008 financial crisis. 
Moreover, since 2010, new construction has rebounded remarkably little. 
Last year, the Kansas City Fed produced a similar analysis, and the results were pretty much the same: new housing construction, taking household growth into account, now remains near a multi-decade low. 
But why has this happened? The Fed Report considers a number of options, including:
One reason is that builders in many metropolitan areas are facing a shortage of qualified construction workers. In addition, smaller builders, which account for the majority of single-family development in some mid-sized metropolitan areas, are having trouble financing land purchases and construction....A third explanation is the limited availability of undeveloped land in desired locations. 
Some of these factors were due to accidents of history. Many of the Mexican immigrants who worked in construction in the US in the decade following the 1994 Mexican financial crisis now are less interested in working in the US thanks to improvements in the Mexican economy. Since 2009, net migration from Mexico has fallen below zero. Some of those leaving took their homebuilding skills with them. 
Meanwhile, finding inexpensive financing for land acquisition and construction has been difficult as money has been siphoned off to other forms of bubble investment as central-bank produced asset inflation continues. 
While real estate is certainly affected by expansive monetary policy, bubbles inflate in unpredictable ways. During the last bubble, investors grew enamored with housing, and money flowed accordingly. But nowadays, as Brendan Brown has often noted, other investment "narratives" have directed many investors' attention elsewhere. It's no longer assumed that housing prices will always go up. Meanwhile, lumber costs, labor costs, and regulatory costs at the local level continue to push up production costs. Since the advent of Dodd-Frank, small banks have been more often squeezed out by a handful of huge banks. As small banks disappear, so does access to financing for many smaller builders in smaller markets. 
Taking all of these things together, the supply of housing is not recovering to more historically normal levels. 
This doesn't mean demand for housing has gone away, of course. Population growth has not contracted like housing construction has. Vacancy rates are down and housing prices in both rental housing and in single-family housing continues to head upward.
And this lackluster production is all happening during a period of expansion. Presumably, it should be easy to find financing to build housing right now, and to find buyers who can pay a price that will cover expenses for homebuilders. That doesn't seem to be happening. 

Thursday, May 10, 2018

Unemployment Rates in Colorado Near What They Were During the Late-90s Boom

According to the  most recent monthly data from the Bureau of Labor Statistics, the unemployment rate in Colorado in March 2018 fell to 2.9 percent, down from 3.3 percent in February. March's rate was up slightly from March 2017's rate of 2.8 percent.

This continues a nine-year trend, beginning in 2010, in which unemployment rates in general have been falling in Colorado, and in its metro areas.

It also continues a trend in which Colorado's unemployment rate has been lower than the national rate.  Since May of 2013, Colorado has had a lower unemployment rate than the US overall in every month. In March 2018, the nationwide unemployment rate was 4.1 percent.



Through Colorado Metro areas, similar trends of declining unemployment have existed in recent years. Although rates have inched up slightly since mid-2017, unemployment rates nevertheless remain quite low.

In March, Colorado's metro areas had the following unemployment rates:

US 4.1
Colorado 2.9
Ft Collins 2.5
Denver-Aur 2.8
Greeley 2.7
GJ 4.0
Colo Spr 3.4
Pueblo 4.4
Boulder 2.5

Graphed monthly, the metros compare like this:



To add a bit more clarity, though, I've graphed the rates at 3-year intervals for each  metro area, for March of each year: 



We find that Boulder tends to consistently have the lowest unemployment rate in the state. Grand Junction and Pueblo, on the other hand, tend to have the highest rates. Overall, though, rates statewide are near where they were in 2000 before the dot-com bust, and during the very large economic expansion of the late 1990s and early 2000s in Colorado. 

There are signs that the economy in Colorado is cooling down, but at this time, there are not signs of large changes in current employment trends.