v.20 n.6 – Released February 29, 2016
This Week’s Headlines:
- SoCal Home Sales and Median Prices in December
- Spending and Income Off to a Good Start
- California Home Sales and Median Prices in January
- Fed Survey Reports Household Lending Steady
- Events of Interest
- June 16-17, 2016: Select L.A. International Investment Summit
Home sales in Southern California accelerated slightly over the year in January, rising by 7.3% to 14,619 units (new and resale houses and condominiums). Sales last month were the highest for a January since 2013 but were still below the January average of 17,288 units observed since 1988. Over the month sales fell by 30.8% – somewhat higher than the average December to July decline of 27.7%. A large seasonal drop in home sales in January is normal. January and February both tend to be relatively weak months for home sales because many people prefer not to buy over the holidays or during the winter in the middle of the school year.
The median price across Southern California increased by 6.7% over the year in January to $405,000 but was down by 1.8% over the month. A dip in median price between December and January is also considered normal, typically around 2.8%. The median price has now been climbing for 46 consecutive months on a year-over-year basis and is within 14.4% of the peak price reached mid-2007. The share of homes priced above $500,000 was 39.6% in January, up from 35.6% a year ago. The number of homes sold for $500,000 or more was up by 19.6%. Meanwhile, home sales in the more affordable price ranges fell from a year earlier. Sales of homes below $300,000 were down by 9% and sales of homes priced under $200,000 dropped by 20%. First-time buyers and young families are having a tough time finding homes in the lower prices ranges and continue to struggle with higher prices, low levels of affordable new home construction and moderately tight credit conditions. (Kimberly Ritter-Martinez)
Total personal income in the U.S. increased in January by 0.5% or $79.6 billion on a nominal basis and was the highest rate of increase since June 2015. Wages and salaries, which make up a little over half of personal income, were up by 0.6% ($48.1 billion), the result of both rising employment and wage gains. The rest of the components of income, with the exception on rental income, were all lower in January compared with December.
Real disposable income (adjusted for taxes and inflation) rose by 0.4% matching the increase in December. Real personal consumption expenditures also rose by 0.4% in January. Reversing the declines posted in December, real spending on durable goods was up by 1.1% over the month, while spending on nondurable goods increased by 0.4%. Spending on services, which comprises 65% of consumer spending, was up by 0.3%.
On a year-to-year basis, incomes and spending moved higher in January:
- Real disposable income rose by 2.8%, matching the December increase.
- Real personal consumption expenditures accelerated from 2.5% in December to 2.9%.
- Growth in real spending on goods (4.0%) outpaced spending on services (2.3%) although in dollar terms, Americans spend more than two times as much on services as they do goods.
Consumer prices edged higher over the month in January (0.1%) but were up sharply over the year, rising by 1.3%. Excluding food and energy, prices advanced by 1.7%.
Personal income and consumer spending started the year on a much stronger note than the one that closed 2015. Continued employment growth and accelerating wage gains point to stronger consumer spending going forward, but expectations may be tempered by consumer confidence, which took a hit in February and could effect consumer attitudes toward spending in the near term. (Kimberly Ritter-Martinez)
Source: US Bureau of Economic Analysis
The California Association of Realtors (CAR) has released their report on California existing home sales and median prices in January. The fundamentals underlying demand for housing remain strong in California and 2016 got off to a healthy start. The statewide median price rose over the year in January by 9.2% to $468,330 but was down over the month by 4.3%. The year-to-year price gain was the largest since May 2014 and reflects the shift in sales activity toward higher-priced properties.
Sales of single-family homes increased by 8.8% over the year in January to 383,670 units sold (annualized rate, adjusted for seasonality). This was the highest sales level for a January since 2013. Year-over-year increases were recorded in all three of the state’s major regions: Southern California (6.5%), San Francisco Bay Area (6.8%), and the Central Valley (11.8%). Over the month, sales declined by 5.4%.
Mortgage interest rates edged down in January, with the 30-year, fixed-mortgage interest rate averaging 3.87%, down from 3.96% in December, but up from 3.67% in January 2015.
Below is a year-over-year summary of sales and price activity in Southern California by county. Although the statewide sales figures are seasonally adjusted, regional and county figures are not.
- Los Angeles County: unit sales rose by 5.2% over the year in January, while the median price rose by 8.9% to $480,950.
- Orange County: sales shot up by 15.2% and the median price increased by 4.5% to $704,950.
- Riverside County: sales of existing homes rose by 7.7% while the median price moved higher by 8.9% to $333,370.
- San Bernardino County: sales increased by 5.7% in January; the median price jumped by 13.5% to $234,460.
- San Diego County: unit sales inched up by 2.9% and the median price increased by 9.2% to $542,150.
- Ventura County: sales were up by 3.7% over the year while the median price rose by 9.6% to $638,590.
The Federal Reserve recently released results for the January 2016 Senior Loan Officer Survey on Bank Lending Practices. This survey addresses changes in the supply of, and demand for, bank loans to businesses and households during the past three months.
Recent data from the January survey painted a somewhat mixed picture of the nation’s lending markets. On balance, banks reported tightening standards on both commercial and industrial (C&I) loans, and commercial real estate (CRE) loans during the fourth quarter of 2015. At the same time, demand for C&I loans weakened slightly, while demand for CRE loans increased. Banks reported, on net, that they expect to tighten loan standards in 2016 for both C&I and CRE loans. Banks also expect loan performance of C&I loans and loans secured by multifamily residential properties to deteriorate over the course of this year.
Asked about loans to households, the survey found a moderate easing of standards for GSE-eligible (Fannie Mae and Freddie Mac) residential mortgage loans and auto loans. Standards for credit card loans were mostly unchanged, but the trend has been a steady easing of standards since the end of the recession. Survey respondents also indicated they expect to ease standards on some categories of residential mortgage loans over 2016 and that delinquency and charge-off rates on subprime auto loans will increase. On the demand side, a moderate fraction of banks reported weaker demand across most categories of home loans during the final three months of 2015. Overall, however, demand for credit card and auto loans was solid in 2015. Households have responded to employment growth and stronger household balance sheets with an increase in borrowing.
Changes in borrowing by businesses and consumers to finance investment and consumption are an indication of confidence levels and the relative strength of the economy. Banks in general have been easing lending standards for several years and demand has mostly trended upward since the end of the recession. Although the overall pace of improvement in the credit markets has been moderate, the trend on both the business and consumer sides remains largely positive. (Kimberly Ritter-Martinez)
Source: Federal Reserve
June 16-17, 2016: Select L.A. International Investment Summit
JW Marriott at LA Live: 900 West Olympic Blvd., Los Angeles, CA 90015
The 2016 SELECT LA Investment Summit is Southern California’s premier international trade event that brings together global investors with business and governmental leaders from Southern California to facilitate and secure foreign direct investment (FDI), and gain exclusive insights on market trends and opportunities in the Los Angeles region.
SELECT LA offers the perfect environment to create and foster new relationships with individuals who are responsible for turning a conversation into an investment opportunity. Just as important is understanding the local processes and protocol for a diverse array of industries and verticals. World Trade Center Los Angeles will facilitate the conference and present many ways to get in the mix, such as table exhibits, one-on-one interactions, seminars and panels led by local and international innovators and executives.