US Household Wealth, Property Values: 4Q and Full-Year 2018

US Household Wealth, Property Values: 4Q and Full-Year 2018

Of particular interest to building materials suppliers, especially those dealing in wood products, is the latest data on the strength of the US real estate market for full-year 2018. Home buying-and-selling activity, with details like inventory and prices, are good indicators of looming construction projects. Canadian and US softwood lumber manufacturers, the sawmills, as well as wholesalers and secondary suppliers, carefully watch this data to gain an understanding of the demand that will be coming from their customers, the construction industry and home builders.
An excellent bellwether to future US housing activity, is the latest Home Equity Report from CoreLogic. This shows that US homeowners with mortgages (roughly 63% of all properties) have seen their equity increase by +8.1% year-over-year, representing a gain of nearly US$678.4 billion since 4Q 2017. (background here: https://madisonsreport.com/2019/03/06/us-new-home-sales-house-price-december-and-full-year-2018/). As well, the market value of owner-occupied real estate in the USA increased to US$25.6 trillion totally in 3Q 2018, US$298 billion more than 2Q 2018 and US$1,526 billion more than 3Q 2017, said the Governors of the US Federal Reserve System Wednesday. Be ahead of these data releases! Don’t delay, this week’s softwood lumber market comment was published to the website Monday morning.

Madison’s Lumber Prices, delivered every Friday morning, are a good forecast indicator of US home builder’s current lumber buying activity ——> DETAILS

US Construction Materials Prices: January 2019

Construction materials prices in the US rose +3.3% from January 2018 to January 2019, according to the producer price index for inputs for multifamily residential construction, tracked by the federal Bureau of Labor Statistics . That’s more than twice the increase for the consumer price index, at +1.6%, over the same period.
However, price hikes for construction materials have slowed overall since the summer of 2018. The PPI had increased +8% over the 12 months that ended in June 2018.
(lumber price graph

SOURCE: Madison’s Lumber Reporter www.madisonsreport.com

US Home Equity: 4Q 2018

CoreLogic Thursday released the Home Equity Report for 4Q 2018, which shows that US homeowner property equity increased by +8.1% since 4Q 2017, representing a gain of nearly US$678.4 billion.
The US economy, meanwhile, grew by +3% in 2018 from a year earlier, up from an expansion of +2.2% in 2017 and actually the fastest pace since 2005.
Another report entirely, assessing the same asset class, finds that the value of owners’ equity in real estate rose by US$1.3 trillion over the past four quarters, and reached US$15.4 trillion in 3Q 2018, according to the Governors of the US Federal Reserve System. The net worth of households and nonprofits, meanwhile, fell to US$104.3 trillion during 4Q 2018, said the same report.

About 30.3% of owner occupied households had no mortgage debt as of April 2010. So the approximately 50+ million households with mortgages have far less than 60% equity – and about 2.2 million homeowners still have negative equity. — Calculated Risk

The market value of owner-occupied real estate in the USA increased to US$25.6 trillion totally in 3Q 2018, US$298 billion more than 2Q 2018 and US$1,526 billion more than 3Q 2017. — Financial Accounts of the United States, published by the Board of Governors of the Federal Reserve System via NAHB Eye on Housing

Key Insights to US Homeowner Equity: Calculated Risk

  • Investment in single family structures was US$278 billion, or about 1.3% of GDP, and was down in 4Q compared to 3Q.
  • Investment in multi-family structures increased in 4Q.
  • Investment in home improvement was at a US$270 billion in 4Q.
  • Home improvement spending was solid over 2017.

Mortgages with Negative Equity: January 20

From 3Q 2018 to 4Q 2018, the total number of mortgaged homes in negative equity increased +1.6% to 2.2 million homes, or 4.2% of all mortgaged properties. This was the first quarterly increase since 4Q 2015.
Despite that quarter-over-quarter increase, on a year-over-year basis, the number of mortgaged properties in negative equity fell -14%, or by 351,000, from 2.6 million homes – or 4.9% of all mortgaged properties – in 4Q 2018.
On a year-over-year basis, the number of homeowners with negative equity has declined by 351,000 (from 2.6 million to 2.2 million).

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