Homebuying Season Continues

 The Mortgage Corner

We know the spring buying season barely got off the ground because of elevated mortgage rates. But there are enough homes for sale to continue purchases into the summer.

Analysis by Redfin, the national real estate and housing finance entity, showed active listings still high in June, but down -8.1 percent YOY from 2021 and 2022 per the Redfin graph of active listings below.

There is enough supply (2.5 months) that median housing prices fell $50,000 last year in June, from $397,000 to less than $350k in December 2022. But prices rose again this June 2023 to $382,861, so the question is what happens next?

This always depends on supply, and builders have been playing catchup, as I’ve been saying. There are now as many new homes as existing homes for sale.

So, will supply improve enough and interest rates hold steady enough to allow prices a downward trajectory for the rest of this year, as well?

Redfin.com

“There are two things that would jumpstart the housing market: A big drop in mortgage rates and/or a big surge of new listings,” said Redfin Deputy Chief Economist Taylor Marr. “Neither of those things happened this spring; instead, rates rose and new listings dropped to record lows. And with one or two more interest-rate hikes expected this year, mortgage rates are likely to remain elevated at least through the summer, continuing to limit both demand and supply.”

Supplies should increase because groundbreaking on U.S. single-family homebuilding projects surged in May by the most in more than three decades and permits for future construction also climbed, suggesting the housing market may be turning a corner after getting clobbered by Federal Reserve interest rate hikes.

“The May housing starts data and our latest builder confidence survey both point to a bottom forming for single-family residential construction earlier this year,” said NAHB Chief Economist Robert Dietz. “However, due to weakness at the start of the year, single-family housing starts are still down 24% on a year-to-date basis.”

What gives us hope the Fed will slow its rate hikes is consumer inflation continues to decline. U.S. consumer prices rose a modest 0.2% in June. The CPI rate of inflation slowed to the lowest level since 2021. The last time inflation was this low was in March 2021.

The overall Consumer Price Index inflation rate plunged from 4 to 3 percent in 12 months, its core rate without food and energy prices fell to 4.8 percent.

But even though there wasn’t much of a spring homebuying season this year, there was a spring building season,” Redfin’s Marr said. “That means there’s hope for more listings somewhat soon, with homebuilders working to fill the inventory bucket.”

NAR chief economist Lawrence Yun said in reaction to the good inflation report that falling gasoline prices and healthcare service costs were helpful. Rents are still climbing at a brisk pace, rising by 8.3 percent, but have turned the corner for sure. Rents were rising at 8.8 percent in the early part of the year, so this is the slowest gain in 7 months.

Rents comprise 40 percent of the Consumer Price Index, and with so many apartment units under construction, rents should continue to decline, thus improving the inflation rate and prospect for lower mortgage rates.

Harlan Green © 2023

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Home Construction Catching Up

 The Mortgage Corner

Calculated Risk

Calculated Risk’s Bill McBride says the most residential units are under construction since 1973, as can be seen in his Calculated Risk graph.

“Combined, there are 1.622 million units under construction. It is the most since February 1973, when a record 1.628 million units were under construction (mostly apartments in 1973 for the baby boom generation).”

And privately‐owned housing starts (new construction) in March of this year were at a seasonally adjusted annual rate of 1,793,000, which should keep builders and homebuyers satisfied for the rest of this year, at least. 

New starts are 0.3 percent above the revised February estimate of 1,788,000 and 3.9 percent above the March 2021 rate of 1,725,000.  Single‐family housing starts in March were at a rate of 1,200,000; this is 1.7 percent below the revised February figure of 1,221,000. The March rate for units in buildings with five units or more was 574,000.

Housing construction should now begin to catch up to demand. Many of the single-family and rental unit completions were held up by supply delays during the pandemic that are finally beginning to ease as the pandemic has eased.

Builder confidence is still high for newly built single-family homes, though it moved two points lower to 77 in April, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This is the fourth straight month that builder sentiment has declined, but it is still above the 60s index confidence levels that prevailed in earlier decades.

But there are still problems with rising interest rates that makes everything more expensive and knocks many first-time buyers out of the housing market with limited incomes.

“The housing market faces an inflection point as an unexpectedly quick rise in interest rates, rising home prices and escalating material costs have significantly decreased housing affordability conditions, particularly in the crucial entry-level market,” said NAHB Chief Economist Robert Dietz.

Mortgage interest rates have jumped more than 1.9 percentage points since the start of the year and currently stand at 5 percent, the highest level in more than a decade, as can be seen with the FRED graph of historical 30-yr conforming fixed rates. They were as low as 2.5 percent in the past 2 years during the pandemic.

FRED30yrfixed

This is while existing-home sales decreased 2.7 percent between February and March, dropping to a seasonally-adjusted, annual rate of 5.77 million, the National Association of Realtors said Wednesday. It was the second consecutive month in which sales fell. Compared to a year ago, sales were down 4.5 percent.

“The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power,” Lawrence Yun, chief economist for the National Association of Realtors, said in the report. “Still, homes are selling rapidly, and home price gains remain in the double-digits.”

Yun now predicts that home sales will contract by 10 percent in 2022, as surging mortgage rates curb home-buying demand and home-price growth. With slower demand, the inventory of unsold existing homes increased to 950,000 as of the end of March. That would support 2.0 months at the monthly sales pace, which is still way below the 4-6 month supply available, historically.

So, we will depend on the construction of more rental units, apartments, to satisfy the continued demand for housing in years to come, just as we did in the 1970s for the growing population of baby boomers.

Harlan Green © 2021

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Here's To a Lasting Housing Recovery!

The Mortgage Corner

Since it is the holidays, I want to propose a New Year’s toast to a lasting housing recovery.

Firstly, home builders are beginning to play catch up with the housing shortage that has plagued those wanting a place to live since the end of the Great Recession and busted housing bubble. That’s when construction ground to a halt because one million more homes were built than were needed at the time.

Does this mean the housing market could begin a decade-long recovery as has happened in the past? It’s possible. Consumers are flush with cash from the pandemic aid and the personal savings rate is still at a post-recession high (6.9 percent).

More than 1,800,000 housing units per year were constructed during the height of the housing bubble in 2006 (see below graph), which fell to just 400,000 units annually during the Great Recession in 2008 (gray bar), which is part of the reason for the current housing shortage.

The last two recoveries lasted approximately 10 years. So why not toast the possibility that this may be a housing recovery that might last, if the other roadblocks to a housing recovery, labor material shortages should ease next year?

CalculatedRisk

Construction is booming, which should begin to fill the very low inventory of homes for sale, despite the labor and material shortages.

“Single‐family housing starts in November were at a rate of 1,173,000; this is 11.3 percent above the revised October figure of 1,054,000. The November rate for units in buildings with five units or more was 491,000,” according to the Census Bureau.

Calculated Risk

Rising existing-home sales are helping to fill the housing need. Existing-home sales rose 1.9 percent to a seasonally adjusted annual rate of 6.46 million in November, the National Association of Realtors said Wednesday. That is the third straight monthly gain. And there is room to grow more sales.

More than 7 million existing homes were sold in 2005 at the height of the housing bubble, per the above existing-home sales graph but sales declined to 4 million in 2008 during the Great Recession (gray bar in graph).

Unsold inventory is at a 2.1-month supply in November, the lowest since January. That’s down from 2.3 in the same month last year, and a 4 to 6 month supply of homes for sale during more normal times.

“Supply-chain disruptions for building new homes and labor shortages have hindered bringing more inventory to the market,” said NAR chief economist Lawrence Yun. “Therefore, housing prices continue to march higher due to the near record-low supply levels.”

There’s better economic news as well that may help to cure the housing crunch. Third quarter GDP growth was revised up slightly to 2.3 percent, and Q4 growth is projected to be even higher.

Consumer confidence is also on the rise again with the holidays. The index of consumer confidence rose to 115.8 in December from a revised 111.9 in the prior month, The Conference Board said Wednesday.

Lynn Franco, Senior Director of Economic Indicators at The Conference Board said, “The Present Situation Index dipped slightly but remains very high, suggesting the economy has maintained its momentum in the final month of 2021. Expectations about short-term growth prospects improved, setting the stage for continued growth in early 2022. The proportion of consumers planning to purchase homes, automobiles, major appliances, and vacations over the next six months all increased.”

So this is the best time to raise a toast to a continued housing recovery—and a Happier New Year!

Harlan Green © 2021

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

 

Full Speed Ahead for Housing Construction, Sales?

The Mortgage Corner

Wrightson.com

The ultra-low interest rates are making a difference as homebuilder sentiment is soaring along with new building permits, which should boost new and existing-home sales as well. For instance, more new homes on the market encourage existing-home owners to move up or downsize, depending on their age and family.

Builder confidence in the market for newly-built single-family homes increased five points to 76 in December off an upwardly revised November reading, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. This is the highest reading since June of 1999.

This is making a small dent in the severe housing shortage since the Great Recession that has resulted in soaring rents and the current homelessness in communities that haven’t been building enough new housing.

“While we are seeing near-term positive market conditions with a 50-year low for the unemployment rate and increased wage growth, we are still underbuilding due to supply-side constraints like labor and land availability,” said NAHB Chief Economist Robert Dietz. “Higher development costs are hurting affordability and dampening more robust construction growth.”

All three components of that gauge -- present sales, future sales expectations and prospective buyers traffic -- improved, said Wrightson, but the biggest gain was a seven-point rise in current sales of new homes to a 21-year high of 84.  Regionally, the gains were more mixed, with the Midwest index improving sharply, the South rising marginally, and the West and Northeast declining.

Homebuilders also boosted construction on new homes in the U.S. at an annual pace of 1.37 million in November, the Commerce Department said today. This was a 3.2 percent (±10.0 percent) increase from a revised 1.32 million in October, 13.6 percent higher than a year ago.

And new building permits hit another post-recession high, up at a seasonally-adjusted rate of 1.48 million. That was 1.4 percent (±1.4 percent) above the pace of 1.46 million set in October and 11.1 percent above last year’s rate.

We know there is still a tremendous shortage of housing that came from the reluctance of builders to build for years after the Great Recession. Some of the shortage also came from Wall Street firms buying up housing abandoned from the busted housing bubble that were then turned into rentals.

A recent report by CBSN documented the carnage from the busted housing bubble and Great Recession. More than 9 million homes were foreclosed or sold at a loss after the bubble popped, leading to fears that tracts of abandoned neighborhoods would become "ghost towns."

This led government officials such as then Fed Chair Ben Bernanke to suggest foreclosed homes could be sold in bulk to private investors as rental properties. But that wasn’t enough, as there was very little government help to keep homeowners in their homes as happened during the Great Depression when the Home Owners' Loan Corporation (HOLC lent low-interest money to families in danger of losing their homes to foreclosure. By the mid-1930s, the HOLC had refinanced nearly 20 percent of urban homes in the country, allowing homeowners to stay in their homes with very lenient terms to enable them to weather the joblessness of the Great Depression.

“In the decade since the crash,” said the CBSN report, “7 million more households have become renters, while only 1 million more have become homeowners, according to Census data. And "institutional landlords," as the Wall Street investors are called, have become a major driver of the affordable housing woes many Americans are now facing—from steep rent payments all the way to eviction.”

The homeownership rate as a percentage of households that own vs. renting hasn’t recovered, dropping from its pre-recession high of 69 percent to 64.3 percent of households today. The U.S. has become a nation of renters at a time when rental rates are soaring due to the lack of new housing, resulting also in the more than one-half million homeless.

Another casualty of the Great Recession was lack of new household formation among the millennial generation children of the baby boomers who in fact outnumber their boomer parents; but alas, were without adequate available housing.

But now residential construction is beginning to meet the demand from new household formation that is back to the longer-term 1.2 million historical average, according to the U.S. Census Bureau. Millennials are paying down their college debt enough to move out of their rental or parents’ home, and forming more families.

There is more economic good news to report this week in upcoming columns. Industrial production has picked up in autos and trucks after the GM strike, according to the Federal Reserve, though not back to pre-recession levels. And job vacancies continue to soar with 1.4 million more vacancies than new job hires.

It means jobs are plentiful, so look for housing construction and home sales to keep this economic recovery afloat!

Harlan Green © 2019

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How Strong is US Housing?

Econoday.com

The NAR reported that Existing-home sales saw a minor decline in April, continuing March’s drop in sales, according to the National Association of Realtors®. Two of the four major U.S. regions saw a slight dip in sales, while the West saw growth and the Midwest essentially bore no changes last month.

Lawrence Yun, NAR’s chief economist, said he is not overly concerned about the 0.4 percent dip in sales and expects moderate growth very soon. “First, we are seeing historically low mortgage rates combined with a pent-up demand to buy, so buyers will look to take advantage of these conditions,” he said. “Also, job creation is improving, causing wage growth to align with home price growth, which helps affordability and will help spur more home sales.”

Interest rate are back to almost historic lows last seen during the Fed’s QE programs, with the 30-year conforming fixed rate down to 3.50 percent, and High-Balance fixed rate @ 3.75 percent for a 1 point origination fee.

Refinancing applications jumped 8 percent last week, and purchase applications are 7 percent over last year, according to the Mortgage Bankers Association, because of the most recent rate declines, which are largely due to economic uncertainties (with outcomes of the trade wars, in particular).

Econoday.com

And housing starts rose 5.7 percent on the month to a higher-than-expected annual rate of 1.235 million while permits gained 0.6 percent to 1.296 million, which is slightly higher than expected. But the battle is still uphill for housing as year-on-year comparisons show: at minus 2.5 percent for starts and minus 5.0 percent for permits.

Total existing-home sales, https://www.nar.realtor/existing-home-sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 0.4 percent from March to a seasonally adjusted annual rate of 5.19 million in April. Total sales are down 4.4 percent from a year ago (5.43 million in April 2018).

Existing-sales of single-family homes, the key component in this report, did fall 1.1 percent in the month to a 4.620 million rate but here too the 3-month average is positive, at 4.733 million for the best showing since August last year. Condo sales, the second and much smaller component in the report, were a big positive in April, up 5.6 percent to a 570,000 rate.

Housing data are often volatile and 3-month averages can offer a more balanced view, as we know, and on this basis April's results are still good at a 5.293 million rate for the best showing since September last year.

I see 2019 housing purchases continuing to improve, largely because there is a disconnect between a fully employed economy (at 3.4 percent unemployment rate) and record-low interest rates.  It really means too much uncertainty in the financial markets, which translates to low demand, which leads to low overall inflation (reason for all the retail discounting), and bottom-level interest rates.

Consumer sentiment is also soaring at the moment, with the U. of Michigan survey at a 15-year high.  It will continue to boost builder optimism and housing construction that is struggling to keep up with sales, as long as the optimism prevails.  Sentiment can change on a dime, however, should we have what is called a ‘black swan’ event (a term for something totally unexpected, such as another trade war, or real war).  And that seems to be how this administration likes it, unfortunately.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Homeownership Expands Again

The Mortgage Corner

Washington Post

“New data indicate that in 2016, in defiance of myriad prognostications, the decade-long decline in the homeownership rate abruptly reversed. Once-rapid growth in renter households stalled, and the long-stagnant number of owner-led households began rising,” says the Washington Post’s Andrew Van Dam.

The homeownership of American households peaked at the height of the housing bubble at 69 percent, and only now has returned to post-recession levels. This is confirmed by several other indicators, including the big jump in household formation by the millennial generation, children of the baby boomers, in particular, who are now 22 to 38 years of age. It took them this long to buy because of the Great Recession that depressed incomes and huge amount of college debt.

And builders are beginning to realize that fact, as housing starts jumped back to historical levels in January to a 1.230 million annual rate. After falling 28 percent in December, starts in the West jumped 29 percent in January, as California began to recover from the record number of wildfires. The biggest region for home builders is the South where January starts rose 14 percent to more than reverse December's nearly 8 percent decline, which were also weather-related.

Econoday.com

Another reason for the rise in homeownership has to be steadily rising rents since they hit bottom in 2008, and mortgages rates still at almost record lows. “In the middle of 2015, rents nationally rose more than 6 percent from a year earlier — easily their fastest growth since the real estate data experts at Zillow began keeping track. It is one of the few times on record that rents rose faster than home prices,” said Van Dam.

The last piece of the housing puzzle is the moderation of housing prices that no longer rise at 5 percent per year. The Case-Shiller same-home index year-on-year prices were up only 4.2 percent in the month which missed expectations by a very sharp 6 tenths. This is the lowest growth rate since November 2014 and compares with FHFA's 5.6 percent rate for December which was a 3-year low.

The surge in new households, as well as record low mortgage rates, have helped new-home sales as well. New home sales jumped 3.7 percent in December to a 621,000 annual rate that is on the high end of expectations, though December's year-on-year rate is still minus 2.4 percent.

We therefore see a steady improvement for home sales in 2019, since I predict interest rates could stay this low for the foreseeable future. Why? Economic growth is slowing, while consumer incomes are rising above inflation rate, and there is still a housing shortage.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Big Boost In Housing Construction

The Mortgage Corner

Nationwide housing starts rose 13.7 percent in October to a seasonally adjusted annual rate of 1.29 million units after a slight upward revision to the September reading, according to newly released data from the U.S. Department of Housing and Urban Development and the Commerce Department. This is the highest housing production reading since October 2016, when total starts hit a post-recession high of 1.33 million.

And today’s huge 1.2 percent rise in the Conference Board’s Index of Leading Economic Indicators for October (that predicts future growth trends) should be a sign that housing construction will continue to ramp up in 2018.  Construction needs to catch up to rising household formation as more of the millennial generation’s 18-38 year-olds—the largest generation in history—are now forming their own living arrangements.

“The growth of the LEI, coupled with widespread strengths among its components, suggests that solid growth in the US economy will continue through the holiday season and into the new year,” said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board.

Graph: Econoday

Rising housing starts are because a total of 3 Quantitative Easings by the Fed has kept interest rates at record lows since 2009; where they still are today. For instance, the 30-yr conformed fixed rate is @ 3.50 percent for one origination point, which was unheard of before the various QE bond buying programs begun under Fed Chair Ben Bernanke.

I reported last week that new-home sales shot up 19 percent in September to a consensus crushing annualized rate of 667,000. This is the largest percentage gain in 28 years, folks, which accentuates the rising demand for housing.

The Census Bureau reported ownership increased to 63.9 percent of total households in the third quarter, the highest level since 2014. It is creeping up to the 65 percent historical ownership rate, but remains below the 69 percent clocked at the peak of the housing bubble a decade ago.

“We are seeing solid, steady production growth that is consistent with NAHB’s forecast for continued strengthening of the single-family sector,” said NAHB Chief Economist Robert Dietz. “As the job market and overall economy continue to firm, we should see demand for housing increase as we head into 2018.”

Regionally in October, combined single- and multifamily housing production rose 42.2 percent in the Northeast, 18.4 percent in the Midwest and 17.2 percent in the South. Starts fell 3.7 percent in the West.

Why has it taken so long for the housing market to recover? Fewer new households are being formed that would require a home of their own. A 2016 San Francisco Fed study by economist Fred Furlong on household formation concluded:

“…ownership rates increased during the housing boom of the late 1990s and early 2000s, but fell after 2007. Ownership rates have been driven down by several factors including tougher credit requirements, rising foreclosures, and deteriorating household finances since the Great Recession.”

It is also true that many young adults chose alternative residential choices such as living with parents, other relatives, or friends. There is also a correlation between these living arrangements and both the rise in student debt and the decline in marriage rates.
So we know why the Fed has kept interest rates this low for almost seven years!

“But there are signs that a readjustment is imminent,” said Furlong. “The current population share of young adults is fairly close to the share that existed at the start of the most recent housing boom. Also, while more young people are living with their parents, they are forming their own households, albeit later in life, leading to higher headship rates over time. Mr. Furlong notes that U.S. Census Bureau projections suggest that household formations will average about 1.5 million per year through 2020, which is much better than the 900,000 annual averages of the last 5 years.”

This will continue to boost housing demand, needless to say. Overall permit issuance in October was up 5.9 percent to a seasonally adjusted annual rate of 1.297 million units. Single-family permits rose 1.9 percent to 839,000 units while multifamily permits fell 9.5 percent to 458,000.

An increased supply will also help housing prices, since buying or renting a home has become increasingly expensive for the younger generations.  Continued economic growth will also encourage more millennials—heretofore burdened with student debt and an inadequate housing supply—to strike out on their own.

Harlan Green © 2017

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Where Are the New Homes?

There just aren’t enough home being built to satisfy surging demand.  The drop in new-home sales total for July to 571,000 units is misleading; mainly because May and June totals were revised upward. That’s because the Census Bureau estimate comes from a very small survey sample with plus or minus 11 percent possible deviation, hence the sometimes large revisions. For instance, this is 9.4 percent (±12.9 percent) below the revised June rate of 630,000 and is 8.9 percent (±15.4 percent) below the July 2016 estimate of 627,000.

And the available supply of new homes for sale rose sharply, up 4,000 to 276,000 new homes on the market. Relative to sales, supply moved from 5.2 months to 5.8 months, which is nearly at the 6-month mark, widely considered to be balanced for new homes, says Econoday.
So with more new homes coming on line, sales could jump again.

Graph: Econoday

This is while existing-home sales ran at a seasonally adjusted annual rate of 5.44 million, the National Association of Realtors said today. That was down 1.3 percent from a downwardly-revised June pace but 2.1 percent higher than a year ago. That’s because there aren’t enough home for sale, folks, with available supply down to 4.2 month. It was the lowest since last August.

“Homes are selling fast,” NAR Chief Economist Lawrence Yun said. In July, that strong demand meant listings went into contract in under 30 days. It also pushed prices higher. The median sales price in July was $258,300, a 6.2 percent increase compared to a year ago.

All will depend on more homes being built, and housing starts are trending higher. Although nationwide housing starts fell 4.8 percent in July to a seasonally adjusted annual rate of 1.16 million units, according to data from the U.S. Department of Housing and Urban Development and the Commerce Department, year-to-date, single-family starts are 8.6 percent above their level over the same period last year.

Homebuilder’s optimism is also holding up. Builder confidence in the market for newly-built single-family homes rose four points in August to a level of 68 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), said the NAHB.

 “The fact that builder confidence has returned to the healthy levels we saw this spring is consistent with our forecast for a gradual strengthening in the housing market,” said NAHB Chief Economist Robert Dietz. “GDP growth improved in the second quarter, which helped sustain housing demand. However, builders continue to face supply-side challenges, such as lot and labor shortages and rising building material costs.”

Graph: Econoday

The number of housing permits for future construction is the main factor determining future new-home inventories. And housing permits have been a thorn in the economy's side all year, bouncing up occasionally but diving more times than not, reports Econoday. Permits were a negative in the week, falling to a 1.223 million annualized rate for a 4.1 percent monthly decline.

Permits are a leading indicator for construction and the results are pointing to further flattening for residential spending. Yet there are more pluses than minuses in housing, evident in the yearly rate for permits, which, is up 4.1 percent, as much as July was down.

So, the overall housing market remains strong. And guess what, interest rates plunged again, so that the 30-year conforming fixed rate is again at 3.50 percent for a 1 point origination fee. With rates this low, and the Fed now saying it may hold off on another rate hike, we could see these rates hold for the rest of this year.

Where are the new homes? Regionally, new home sales increased 6.2 percent in the Midwest. Sales fell 4.1 percent in the South, 21.3 percent in the West and 23.8 percent in the Northeast.  The number of permits issued rose 19.2 percent in the Northeast, fell 1.4 percent in the South, 7.9 percent in the West, and 17.4 percent in the Midwest.

Harlan Green © 2017

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Housing Construction Rebounds, For How Long?

The Mortgage Corner

The Conference Board’s Index of Leading Indicators (LEI) that predicts future growth says it is being boosted by a rebound in housing starts, which means more badly needed new homes being built. Its June report posted a 0.6 percent gain. Permits had been soft through most of the spring before gaining sharply in this week's housing starts report.

But there’s concern over how long this might last, though I predict full employment and the prospect of low interest rates for the rest of this year could prolong the trend.

Starts for all homes jumped 8.3 percent in June to a 1.215 million annualized rate with permits up 7.4 percent to a 1.254 million rate. As weak as the details were in the prior report, is how strong they are in the latest. Single-family permits rose a huge 4.1 percent to an 811,000 rate with multi-family permits up 13.9 percent to 443,000. Permits are strongest in the Midwest followed by the West and South.

Graph: Econoday

Actual starts for single-family homes rose 6.3 percent in June's report to 849,000 with multi-family up 13.3 percent to 366,000. The Northeast is in front followed by the Midwest. Starts in the West are up slightly and are down noticeably in the South, probably due to all the errant weather, including floods and a few tornadoes.

The LEI tracks 12 indicators of growth, including interest rates spreads and hours worked. The fact that housing permits provided the biggest boost to the LEI means that housing is probably a leading indicator of future growth as it has been in past recoveries. So why has it taken so long for housing construction and sales to catch fire? The busted housing bubble left millions of vacant homes first had to be reabsorbed into the housing market.

Then all those homeowners that lost their homes had to reestablish their credit bonafides. This is while Fannie Mae and Freddie Mac haven’t sufficiently lowered their credit and loan qualifying requirements that would add some 1 million prospective homebuyers to the list of eligibles, according to the Urban Institute.

Then there is the millennial generation saddled with all that student debt that the current administration doesn’t want to forgive or amend terms. The list goes on and on, in other words, for what needs to be done to make housing more affordable.

The NAHB, or National Association of Home Builders, also puts out a builder sentiment index that attempts to predict future activity, but which may lag housing starts data. The report cites the effects of high lumber costs on home builders in showing construction, for instance, but shows slower activity evenly divided among the 3 components in its index.

Higher future sales still lead for 73 percent of respondents with higher present sales at 70 percent of those polled. But only 48 percent report higher traffic, which is below the breakeven 50 percent for the 2nd month in a row. Regionally, the West remains the strongest for homebuilders followed by the Midwest and South and the Northeast far behind. So is optimism leading reality, if fewer buyers are lookng?

These are still terrific numbers, however, and it looks like lower interest rates are here for the rest of this year, with the conforming 30-year fixed rate holding at 3.50 percent for one origination point in California.

Why are rates still at such record lows with the Fed having already raised their overnight rate 3 times to 1.25 percent? Consumers aren’t borrowing more, which would increase loan rates.

Graph: Econoday

For instance, retail sales are still stuck below what is considered to be a robust demand for more goods and services. Annual sales are under 3 percent for the first time since August last year with the 3-month average below 4 percent. And 6 percent annual sales increases have been the norm during past recoveries.

This really means a certain middle and upper segment of income earners are doing well, but not the rest of US. The boosting of the minimum wage in the more prosperous cities and states is a start, but that is happening in only a handful of states, as I’ve said.

Much more needs to be done, in other words, to help the still record income inequality that haunts this laggard recovery from the Greatest Recession since the Great Depression.

Harlan Green © 2017

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Builder Optimism + Affordability Higher

The Mortgage Corner

Good news is that rising wages and moderating home prices offset a rise in mortgage interest rates to give housing affordability a slight boost in the first quarter of 2017, said the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) last week.

And In a further sign that the housing market continues to strengthen, builder confidence in the market for newly-built single-family homes rose two points in May to a level of 70 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the second highest HMI reading since the downturn.

NAHB.org

"The HMI confidence measure of future sales conditions reached its highest level since June 2005, a sign of growing consumer confidence in the new home market," said NAHB Chief Economist Robert Dietz. "Especially as existing home inventory remains tight, we can expect increased demand for new construction moving forward."

But housing construction is not yet catching up to demand, as I said in a recent column. The first quarter ended with a thud for housing starts which fell a very steep 6.8 percent to a 1.215 million annualized rate which is the weakest since November, said the NAHB. Posting similar declines were both single-family homes, at an 821,000 pace, and multi-family, at 394,000. Housing construction does show nearly double-digit year-on-year growth, though quarter-to-quarter movement is barely perceptible. 

It looks like employment is now ahead of housing, hence demand exceeds the supply of new housing, a good sign.

"Ongoing job growth continues to fuel demand for housing, while wage growth is helping to offset the effects of rising mortgage rates and keep home prices affordable," said NAHB Chief Economist Robert Dietz. "NAHB anticipates that housing will continue on a gradual, upward path throughout the year."

In all, 60.3 percent of new and existing homes sold between the beginning of January and end of March were affordable to families earning the U.S. median income of $68,000. This is up from the 59.9 percent of homes sold that were affordable to median-income earners in the fourth quarter.

The national median home price fell to $245,000 in the first quarter from $250,000 in the final quarter of 2016. Meanwhile, average mortgage rates rose nearly half a point from 3.84 percent in the fourth quarter to 4.33 percent in the first quarter.

But mortgage rates have fallen since then, which will increase affordability for first-time home buyers, in particular. The 30-year fixed conforming rate today is 3.625 percent with a 1 point origination fee in California, which means fixed mortgage rates have returned to rates last available in the 1950s.

So, once again, interest rates are not rising with expectations of higher inflation. Inflation is not even showing up in housing prices. So let us hope this continues, even if the Fed does raise short term rates a third time in June, as it has hinted it would do.

Harlan Green © 2017

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Record Low Interest Rates Boost Housing

The Mortgage Corner

The conforming 30-year fixed rate mortgage is now 3.50 percent and the so-called Hi-Balance conforming 30-year fixed rate is 3.75 percent for a 1 percent origination fee in California. And this is what has kept the demand for housing on a tear, in spite of tepid economic growth, with GDP growth still stuck at 2 percent per the Philly Fed Index seen below.

Why? It’s mainly because there is still very little inflation, and the bond market that determines mortgage rates likes low inflation. The low inflation rate may be because there’s still doubt on what growth-inducing legislation may ever get through a weak President and Congress stuck in ideological warfare. So we could see builders’ record profits continue for the rest of this year, and maybe more affordable housing.

Both new-home construction and builder optimism are at post-recession highs, but with normal seasonal fluctuations (such as mid-March Northeast blizzard), says the National Association of Home Builders (NAHB).

Following an elevated February reading, nationwide housing starts fell 6.8 percent in March to a seasonally adjusted annual rate of 1.22 million units, according to the U.S. HUD and the Commerce Department. Still, new housing production in the first quarter of this year is running 8.1 percent above the pace in 2016, reports the NAHB.

Graph: Econoday

This is why builder confidence in the market for newly-built single-family homes remained solid in April, falling three points to a level of 68 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) after an unusually high March reading, said the NAHB.

”The fact that current sales conditions has been over 70 for five consecutive months shows that there is continued demand for new construction,” said NAHB Chief Economist Robert Dietz. “However, builders are facing several challenges, such as hefty regulatory costs and ongoing increases in building material prices." 

The building industry is doing its share to boost growth as it continues to add jobs, with monthly employment data for February showing that home builder and remodeler employment increased by 18,900. Over the last 12 months, home builders and remodelers have added 136,000 jobs on a net basis and residential construction employment now stands at 2.707 million.

Graph: Calculated Risk

And where is US manufacturing activity these days? It’s still increasing in most states. The Philadelphia Federal Reserve has released the coincident indexes for the 50 states for February 2017. Over the past three months, the indexes increased in 47 states (green states), decreased in two, and remained stable in one (Michigan), for a three-month diffusion index of 90. In the past month, the indexes increased in 44 states, decreased in four, and remained stable in two, for a one-month diffusion index of 80.

“Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and almost all green now,” says Calculated Risk’s Bill McBride.

So, economic growth continues into the eighth year of this business cycle. And housing is usually a leading indicator of future growth, but that will depend on what looks like lower interest rates, future (lower) inflation trends, actions of the Federal Reserve, and Congress, of course.

Harlan Green © 2017

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Surging Construction Sector Aids Home Sales

The Mortgage Corner

Construction payrolls were a positive surprise of the January employment report, rising 36,000 for the best gain since March. Construction was soft through most of last year though it did pick up at year end.

And this is why Pending and New-home sales are doing so well. Overall construction spending fell 0.2 percent in December but spending on new single-family homes rose 0.5 percent in the month with multi-family spending up 2.8 percent.

Graph: Econoday

This is why sales of newly built, single-family homes rose 12.2 percent in 2016 to 563,000 units, the highest annual rate since 2007, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

Only public construction spending fell a sharp 1.7 percent in the month. Educational spending fell 2.2 percent with highways & streets down 0.6 percent. Private nonresidential categories (ie, commercial) are mixed with total spending for this component unchanged in the month.

“We are encouraged by the growth in the housing sector last year, and by the fact that builders increased inventory by 10 percent in anticipation of future business,” said Robert Dietz, chief economist of the National Association of Home Builders (NAHB). “NAHB’s forecast calls for continued upward momentum this year, with housing starts expected to rise 10 percent over the course of 2017.”

The inventory of new home sales for sale was 259,000 in December, which is a 5.8-month supply at the current sales pace, an improvement from the 5 percent range most of last year. The median sales price of new houses sold was $322,500, up from.

Graph: Trading Economics

So we know why housing starts, or construction, is so important in building up inventories depleted by the Great Recession. Starts jumped 11.3 percent from the previous month to a seasonally adjusted annualized rate of 1226 thousand in December of 2016, beating market expectations of 1200 thousand. Multi-segment starts rebounded while single-family declined for the second month. Considering full 2016, housing starts rose 4.9 percent to 1166.4 thousand.

“This report represents firm growth for housing in 2016, as single-family starts rose 9 percent and multifamily production was down slightly,” said NAHB Chief Economist Robert Dietz. “We expect that 2017 will be another year of gradual, steady improvement in the housing market. Multifamily starts have been volatile in recent months, but should level off as supply meets demand. Meanwhile, single-family production continues to gain momentum but is limited by supply-side headwinds.”

So housing construction is returning to normal times. Starts in the United States averaged 1438.64 thousand from 1959 until 2016, reaching an all-time high of 2494 Thousand in January of 1972 and a record low of 478 Thousand in April of 2009.

Harlan Green © 2017

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Housing Starts Surge With Builder Optimism

The Mortgage Corner

A mid-winter surge in multifamily production resulted in overall nationwide housing starts rising 11.3 percent to a seasonally adjusted annual rate of 1.23 million units, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This is Yuge, and will help to ease the shortage of rental units that has been driving up rental rates, squeezing low and moderate-income renters out of some housing markets.

Single-family construction dropped 4 percent to a seasonally adjusted annual rate of 795,000 units, but that was still 3.9 percent higher in a year. Multifamily production jumped 57 percent to 431,000 units in December. However, the monthly data for apartment production has exhibited strong volatility since August, sand the National Association of Home Builders. Still this may stop the average rent increase of 7 percent annually in high growth regions.

Graph: Calculated Risk

“This report represents firm growth for housing in 2016, as single-family starts rose 9 percent and multifamily production was down slightly,” said NAHB Chief Economist Robert Dietz. “We expect that 2017 will be another year of gradual, steady improvement in the housing market. Multifamily starts have been volatile in recent months, but should level off as supply meets demand. Meanwhile, single-family production continues to gain momentum but is limited by supply-side headwinds.”

Regionally in December, combined single- and multifamily housing production rose 31.2 percent in the Midwest, 23.5 percent in the West and 18.5 percent in the Northeast. The South posted a loss of 1.4 percent. That is an incredible increase in mid-winter, and reflects the rush to build before the predicted rise in interest rates this year.
The National Association of Home Builders (NAHB) also reported that though the housing market index (HMI) of builder optimism in future housing construction dropped slightly to 67 in January, down from 69 in December, any number above 50 indicates that more builders view sales conditions as good than poor. And this is easily the highest confidence rating since the end of the Great Recession.

Graph: NAHB

The slight drop in confidence may also be because of uncertainty over future building regulations, which are set state by state, rather than nationally, and interest rates, of course, which many predict will rise, as I said.

So despite the January drop, some builders say there are still reasons to be bullish. "Builders begin the year optimistic that a new Congress and administration will help create a better climate for small businesses, particularly as it relates to streamlining and reforming the regulatory process," said NAHB Chairman Granger MacDonald.

Such optimism will evaporate, however, if interest rate rise sharply. But with the conforming 30-year fixed rate falling back to 3.75 percent in California of late, that may not happen. Could it be that optimism over future growth could also mean higher inflation, which means higher interest rates, as well?

This writer is also optimistic that with Janet Yellen and her Fed Governors still cautious about forecasting higher growth and inflation—where will all those workers come from that will be needed for any new infrastructure projects when there is already a shortage of construction workers—remains to be seen.

Harlan Green © 2017

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Real Estate In 2017—Good Time To Buy?

 The Mortgage Corner

Surging mortgage rates, dwindling inventory, and soaring home prices are taking a toll on Americans’ attitudes toward ownership, according to a home purchase sentiment survey released Monday. But that may be misleading, as mortgage rates have barely budged from post-WWII lows. And the construction industry and homebuilders’ sentiments are soaring, which means many more new homes will be coming into the housing market.

December 2016 Index	Change since last month	Change since last year
Good time to buy	32	+2	-3
Good time to sell	13	0	+5
Home prices will go up	35	0	-5
Mortgage rates will go down	-55	-4	-3
Confidence about not losing job	68	+4	-4
Household income is significantly higher	10	-5	-5
Overall index	80.7	-0.5	-2.5

Graph: Marketwatch

The home purchase sentiment index compiled by mortgage finance provider Fannie Mae fell in December, its fifth straight monthly decline. Fannie’s index has six components. In December, two were lower compared to November, two were unchanged, and two increased. The increases were because respondents were more confident about not losing their jobs, and thought it a better time to buy. The biggest negative was their belief interest rates would rise this year. But it may be a small rise due to market uncertainties. Stocks are already oversold and interest rates still at historic lows, as I’ve said.

Graph: Econoday

Construction had been lagging through most of 2016 but, like the factory sector (i.e, auto sales ended 2016 at record high of 18.5 million sold vehicles), appears to have picked up steam going into year-end, says Econoday. Spending rose 0.9 percent in November and is now up 4.1 percent annually. And non-residential construction’s boost is particularly heartening with its emphasis on infrastructure projects, up 0.9 percent with most categories showing gains led by office construction and transportation construction. Public spending was also solid including a 3.1 percent monthly jump in Federal spending (which boosts public infrastructure spending).

Residential spending rose 1.0 percent in the month on top of October's 1.6 percent gain. The gain here is concentrated in single-family homes which offset a monthly dip for multi-family units which otherwise have been leading the residential sector. Home improvements added to the spending in November.

The 30-year fixed conforming mortgage rate quoted by Fannie Mae is back down to 3.75 percent for one origination point. And what with the future uncertainty of the stock market (with indexes already at historic highs), much of the excess savings will remain in bonds, the major determinate of mortgage rates.

That is, unless worldwide growth picks up. But that won’t happen if Trump carries out his promise of trade wars to promote American workers first. That promise may be difficult to carry out, however, since his Republican colleagues have historically been free-traders.

Harlan Green © 2016

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Housing Construction, Sales Strong, Interest Rates Still Ultra-Low

The Mortgage Corner

Housing starts are being hit by huge swings. November starts fell 18.7 percent in November to a much lower-than-expected 1.090 million annualized rate following an upward revised gain of 27.4 percent to 1.340 million in October, says Econoday. But that’s to be expected with winter weather already hitting the Midwest and eastern states.

This is while interest rates have barely budged since the Fed raised its short term rates 0.25 percent to s range of 0.50 to 0.75 percent. That’s why housing construction and builder sentiment remain strong. The 30-year conforming fixed rate remains below 4 percent--@3.875 percent for one origination point (i.e., one percent) in California.

And existing-home sales are at record highs for this cycle. Existing-home sales ran at a seasonally adjusted annual 5.61 million pace, the National Association of Realtors said Thursday. That was up 0.7 percent from a downwardly-revised pace of 5.57 million in October and marks the highest since February 2007.

Lawrence Yun, NAR chief economist, says it's been an outstanding three-month stretch for the housing market as 2016 nears the finish line. "The healthiest job market since the Great Recession and the anticipation of some buyers to close on a home before mortgage rates accurately rose from their historically low level have combined to drive sales higher in recent months," he said. "Furthermore, it's no coincidence that home shoppers in the Northeast — where price growth has been tame all year — had the most success last month."

November’s existing sales rate was 15.4 percent higher compared to a year ago, the first month when new regulations, known as the “Know Before You Owe”, or TRID disclosures that added extra days to disclosure times went into effect, snarling closing times.

Single-family starts fell 4.1 percent in November to a seasonally adjusted annual rate of 828,000 units while multifamily production dropped 45.1 percent to 262,000 units. However, the best news in the report is a 15.4 percent gain in housing completions to a 1.216 million rate which follows a 6.3 percent jump in the prior month. Houses authorized but not started are also up, 3.0 percent higher to 138,000. Gains here will help ease what is very tight supply for new homes.

 

The Mortgage Corner

 

 “Single-family starts declined from a robust level in October but still remain very solid,” said NAHB Chief Economist Robert Dietz. “Though rising mortgage rates could be a headwind for housing, we expect single-family production to continue on a long-run, gradual growth trend. Meanwhile, the multifamily sector, which has been volatile in recent months, is expected to level off at a solid rate as that market finds balance between supply and demand.”

 Rising household wealth is one reason housing sales have returned to 2007 levels, as household net worth rose to a new all-time high and home equity rose to just a hair below its level in 2006, before the housing bubble burst, said the Federal Reserve in its quarterly flow of funds report.

NAR Chief Economist Lawrence Yun believes housing sales could go even higher if housing starts continue to increase. The “big obstacle,” said Yun, is the ongoing “housing shortage,” which is pushing prices to record levels, as well. There were 4.0 months of supply at the current pace of sales, the 18th month in which inventory was tighter compared to its level a year ago.”

 Rising household wealth is one reason housing sales have returned to 2007 levels, as household net worth rose to a new all-time high and home equity rose to just a hair below its level in 2006, before the housing bubble burst, said the Federal Reserve in its quarterly flow of funds report.

But inflation is on the rise, which will boost housing prices further and perhaps encourage more construction, as well. The median existing-home price across the country was $234,900, up 6.8 percent compared to November 2015. This means those with little or no equity in their homes will see their financial position improve, thus adding to future economic growth.

Harlan Green © 2016

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Housing Starts, Home Sales 'Yuge'

The Mortgage Corner

Housing starts surged 25.5 percent in October to a 1.323 million annualized rate. This is the best rate of the cycle since August 2007 with the monthly percentage gain the strongest since 1982, says Econoday. It and other recent good news, such as much higher retail sales, could mean something like a 4 percent GDP growth rate in Q4 this year.

But we still have a housing shortage. The jump reflects a 10.7 percent rise to an 869,000 rate for the report's key component, single-family homes which follows an 8.4 percent surge in September. And multi-family homes snapped back from September's odd 39 percent decline, rising 69 percent in October to a 454,000 rate, which should mitigate surging rental prices.

Graph: Econoday

Actual sales of new homes have also been trending higher all year and would be higher still if not for the lack of supply. The surge in mortgage rates which jumped 18 basis points in the November 11 week to 3.95 percent (for conforming loans $417,500 or less) could begin to restrict sales, however. New home sales for October, which will not have been affected by November's jump in mortgage rates, will be one of the coming week's highlights (released Wednesday, November 23).

Graph: Econoday

This is while October existing home sales jumped 2.0 percent to an annualized rate of 5.6 million. September's sales were revised slightly higher to an annualized rate of 5.490 million from 5.470 million. On the year, sales were up 5.9 percent from the same month a year ago. October sales were the highest since February 2007, which could be due to buyers rushing in ahead of a well-publicized, possible Federal Reserve decision to raise short-term rates in December.

So how can we mitigate the shortage of available workers and land that is holding back home sales? NAR chief economist Lawrence Yun mused in a recent Forbes article how the Donald Trump Presidency might affect housing over the next 4 years..

“There could be less regulatory land-use and zoning burden for home construction, and thereby lower the cost of building,” says Dr. Yun. “In recent years, newly constructed home prices have been much higher than existing home prices. Homebuilders say that is due to all the extra cost of regulation and not necessarily from higher input cost of lumber, cement, and worker wages.”

And, mortgage standards are too strict, which is restricting first-time homebuyers, in particular that used to be 40 percent of existing-home sales. So Fannie Mae and Freddie Mac, the main guarantors for conventional mortgages, should continue to be supported in some way.

“Washington’s instinct is to eliminate Fannie and Freddie because of their past sins from past managers,” says Yun, “then mortgages will be much more expensive with 30-year fixed rate products disappearing from the market place. We should view supporting Fannie and Freddie in the same way as we view supporting FDIC deposit government guarantee at banks – to help smooth the financial market.”

“Multifamily production bounced back after an unusually weak reading last month while single-family starts exhibited unusually strong growth as well,” said NAHB Chief Economist Robert Dietz. “Though October’s single- and multifamily production rates are clearly unsustainable, we expect continued growth in the housing sector in the months ahead.”

But home supply was down 0.5 percent to 2.02 million or a 4.3 month’s supply in October. We are still not building enough homes, in other words, which is why housing prices continue to rise faster than inflation, and there are fewer affordable, entry-level homes.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Housing Sales, Prices Continue Skyward

The Mortgage Corner

The S&P Case Shiller Home Price Index continues to soar, with Seattle and Portland existing-home prices up double digits in a year, while Dallas and Denver are up some 8 percent annually.

Case-Shiller’s national index is within a hair of its 2006 peak — just 0.1 percent below. The smaller 20-City index is 7.2 percent lower. Tight inventory has constrained the housing market for years, driving prices higher. Many analysts have expected to see price gains decelerate in response, especially in overheated metros like San Francisco, but that hasn’t happened yet. San Francisco prices were flat in July but picked up again in August, and are up 6.7 percent in a year.

September existing-home sales are also soaring again, after a slight drop in August. September sales surged 3.2 percent to a 5.470 million annualized rate that exceeds Econoday's high estimate. The key single-family component leads the report, up 4.1 percent to a 4.860 million rate while condos, where choices are limited and permits for new building are on the rise, fell 3.2 percent to a 610,000 rate.

Graph: Econoday

It is possible because mortgage rates are still at record lows, with the 30-year conforming fixed rate still as low as 3.0 percent for those that want to buy down the rate and have excellent credit. Fannie and Freddie offer their best rates to those with 740 plus credit scores.

This has enabled more first-time homebuyers to own homes, with their percentage up to 34 percent of sales. Regionally, September sales were strongest in the West, up 5.0 percent for a year-on-year gain of 1.6 percent, and in the Midwest, up 3.9 percent on the month for a year-on-year plus 2.3 percent. Total year-on-year resales are up but only fractionally, at plus 0.6 percent.

But the existing-home inventory of homes for sale is still at a 4.5 month supply at the current sales rate, hardly enough to supply the rising demand from first-time homebuyers. And so new-home sales have to eventually fill the void.

New-home sales are still struggling in September, up 3.1 percent to a 593,000 annualized rate, though sharp downward revisions to both August (575,000 from 609,000) and also July (629,000 from 659,000) do lower expectations for more solid strength in the new home market. But year-on-year, sales are up 30 percent in what is a sharp contrast to the fractional 0.6 percent gain on the existing-home side.

Graph: Econoday

The potential for more inventory is mixed with new-home construction permits higher in what is a deceptively solid housing starts & permits report. Starts plunged what looks like a shocking 9.0 percent in September, to a 1.047 million annualized rate. But the drop is tied entirely to the volatile multi-family component where starts fell a massive 38 percent in the month to a 264,000 rate. The more important single-family component is up sharply in its own right, 8.1 percent higher to a 783,000 rate.

We can therefore see from the graph that starts are still on an upward trend, which is needed if we want housing prices to mitigate their sharp rises of late, and so make housing more affordable to those youngest household-forming adults.

The demand is there as evidenced by the sharp rise in new-home prices nationally, up 6.7 percent in the month to a median $313,500. And further price gains can be expected as the year-on-year gain, in contrast to the surge in sales, is only 1.9 percent, says Econoday.  While the existing-home median price is already up 15 percent this year, per the NAR’s affordability index.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen