ISM Manufacturing Index dips to 58.1, high concerns regarding tariffs

The July PMI® registered 58.1 percent, a decrease of 2.1 percentage points from the June reading of 60.2 percent.

Production and employment continues to expand in spite of labor and material shortages. Inputs — expressed as supplier deliveries, inventories and imports — had expansion increases, due primarily to negative supply chain issues, but at easing levels compared to the prior month. Price pressure remains strong, but the index softened for the second straight month.

Demand remains robust, but the nation’s employment resources and supply chains continue to struggle. Respondents are again overwhelmingly concerned about how tariff-related activity, including reciprocal tariffs, will continue to affect their business.

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ISM November manufacturing index dips 0.5 points to 58.2

The November PMI® registered 58.2 percent, a decrease of 0.5 percentage point from the October reading of 58.7 percent. Comments from the panel reflect expanding business conditions, with New Orders and Production leading gains, employment expanding at a slower rate, order backlogs stable and expanding, and export orders all continuing to grow in November.

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Manufacturing sector index rose 2.5 percentage points in July

The August PMI® registered 58.8 percent, an increase of 2.5 percentage points from the July reading of 56.3 percent. Comments from the panel reflect expanding business conditions, with new orders, production, employment, backlog and exports all growing in August.

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Manufacturing sector index dipped 1.5 points in July to 56.3

The July PMI® registered 56.3 percent, a decrease of 1.5 percentage points from the June reading of 57.8 percent. Comments from the panel generally reflect expanding business conditions, with new orders, production, employment, backlog and exports all growing in July compared to June.

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Manufacturing sector index mostly flat in May; pricing pressure slowing

The May PMI® registered 54.9 percent, an increase of 0.1 percentage point from the April reading of 54.8 percent. The slowing of pricing pressure, especially in basic commodities, should have a positive impact on margins and buying policies as this moderation moves up the value chain.

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Manufacturing sector index fell 0.6 percentage point in July but still indicates growth

The July PMI® registered 52.6 percent, a decrease of 0.6 percentage point from the June reading of 53.2 percent and posting growth in the manufacturing sector for the fifth consecutive month.

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BuilderBytes' MetroIntelligence Economic Update for 7/7/16

Please click here to see the edition of BuilderBytes for 7/7/16 on the Web.

In this issue of the MetroIntelligence Economic Update, we covered the following indicators:

• Construction spending unexpectedly fell 0.8 percent in May
• Manufacturing sector index registered growth in May for fourth straight month
• Service sector economy index rebounded strongly in June
• Factory orders declined one percent in May, but order backlogs grew
• Corelogic HPI shows May home prices rose 5.9 percent year-on-year and 1.3 percent from April

Want to advertise in this three-times-per-week newsletter and reach over 130,000 readers? Contact the editor at nslevin@penpubinc.com.

BuilderBytes' MetroIntelligence Economic Update for 7/1/16

Please click here to see the edition of BuilderBytes for 7/1/16 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:

• Pending home sales dipped in May year-on-year for the first time in almost two years
• Conference Board:  Consumer confidence rebounds in June after May decline
• Personal income, consumer spending and prices all rose in May while savings rate dipped slightly
• Chicago PMI rose in June to highest level since January 2016
• Mortgage applications dip 2.6 percent even as rates edge down to lowest level since May 2013
• Initial unemployment claims rise 10,000 in latest report

Want to advertise in the newsletter and reach over 130,000 readers? Contact the editor at nslevin@penpubinc.com.

Manufacturing sector index registered growth in May for fourth straight month

The June PMI registered 53.2 percent, an increase of 1.9 percentage points from the May reading of 51.3 percent. Manufacturing registered growth in June for the fourth consecutive month.

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Manufacturing economy grew again in May for third straight month

The May PMI® registered 51.3 percent, an increase of 0.5 percentage point from the April reading of 50.8 percent. and registering growth for the third consecutive month.

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Good credit may not be enough in "distressed" counties

Given the mortgage insurers' recent lending restrictions throughout California, good credit may not be enough for borrowers without a sufficient down payment or those looking to buy investment property or second homes. While that could push many buyers into the arms of the FHA, that program also has its own restrictions, and condo projects generally must be pre-approved by the agency.

First, from a story in the Daily Breeze:

Just when consumers and the U.S. economy need banks to lend more freely, the mortgage industry is making it harder to borrow - even for those with good credit.

In recent weeks, mortgage insurers, whose backing is required for borrowers who can't afford the traditional 20 percent down payment on a home, have already flagged nearly a quarter of the nation's ZIP codes where they refuse to insure some home loans.

That's more than 9,600 ZIP codes in at least 34 states where they won't insure certain types of home loans - those for investment properties or second homes, those with riskier adjustable-rate or interest-only mortgages, or for buyers making small down payments such as 3 percent.

Many mortgage insurers include the South Bay and much of California in a category known as "distressed market," where home values are expected to drop...

The reluctance to extend credit comes despite a flurry of government initiatives, including steady interest rate cuts by the Federal Reserve, intended to make it easier for would-be borrowers and those facing interest-rate resets on their mortgages.

The growing reluctance of lenders threatens to dampen sellers' already soggy prospects for the spring home-buying season - and that means more pain for the already battered housing sector and the broader economy.

The new restrictions will "severely limit the potential pool of buyers," whether the buyer plans to live in the home or rent it out, said Patrick Duffy, principal at MetroIntelligence Real Estate Advisors, a Los Angeles consulting firm.

"It could delay the rebound in the market," Duffy said. "It's going to force people to take longer to save up for the down payment."

While the South Bay will be affected by the reduced availability of mortgages, the area remains "a very popular area with a very high median income." That reality could insulate the South Bay from the worst effects of the tightening lending standards, Duffy said.

With banks and mortgage insurers pulling back, state and federal programs for first-time homebuyers and people with poor credit are attempting to fill the void.

"This is a great way to throw loans in the arms of the federal government," Duffy said. "FHA offers loans with only 3 percent down, and they just increased limits."...

Home buyers are adjusting to the new reality, Realtor Adolph James said.

"One of the things I've noticed is most of the people interested in purchasing property in the South Bay are bringing more money than they had in the past," said James, of Shorewood Realtors in Manhattan Beach.

"You're seeing fewer people coming with only 5 percent or 10 percent (as a down payment). The psyche is you can't come in with a shoestring because that's how people got in trouble."

Inland areas such as Harbor Gateway, which generally attract first-time homebuyers, are likely to feel the pain from the credit crunch more so than the beach cities, James said.

"That's where this stuff started and that's probably where it's going to end," James said. "You're going to see a few defaults in the beach areas, but nothing like what you're going to see in the entry-level areas."

Next, for an excellent overview of the pros and cons of FHA loans (as well as other timely posts), here's a summary from the SFVRealEstate blog, which is authored by Broker Associate Judy Graff and covers local and national topics for L.A.'s San Fernando Valley:

New FHA Loans: What You Need to Know

• New FHA restrictions just came out. Here’s the upside.
• The loan limits for SFR in L.A. are $729,750 (same as “jumbo conforming”).
• Loan limits for 2 units are $934,200.
• The interest rate is 6% as of this writing; however, there is mortgage insurance (see below).
• Minimum down payment is 3% (not including closing costs).
• Fixed rate and Adjustable rate programs are available.
• NO MINIMUM FICO REQUIREMENT (this is huge).
• Must be full documentation loan. No stated income loans.
• No buyer reserve requirement (this is also huge).
• No income limits.
• The seller can contribute up to 6%, including closing costs, although the seller does not have to pay the closing costs.
• There can be non-occupant co-signers on the loan.
• You do not have to be a first-time buyer.
• Gifts are permitted for the entire 3% borrower investment and don’t need to be “seasoned.”
• Gifts are also permitted for all closing costs & pre-paid items.
• Down payment assistance programs are permitted, such as city first-time buyer housing programs.

Now, here’s the downside:

• There is mortgage insurance. It equals either 0.5% point per month, or 1.5% points up front. The up-front payment is deductible from your taxes during the year that you buy.
• There are stricter appraisal requirements:
• Any operable or useful element in the subject property must have at least 2 or more years of useful life or it must be replaced.
• The appraiser must be FHA-approved.
• The appraiser can require a separate inspection upon any “visible” defect or if he/she has knowledge of any existing problem.
• The property must be structurally sound.
• It must have a useable garage.
• The property cannot have code violations.
• Each living unit much contain domestic hot water, sanitary facilities and a safe method of sewage disposal. Connection to public systems is required if available.
• Heating systems must be adequate for healthful and comfortable living conditions.
• Condo projects must be pre-approved; they can be spot-approved but this is much more difficult.
• Condo projects must have sufficient reserve funds.

Lenders restrict lending in 25% of country's zip codes

Reverting to standards last seen 20 years ago, lenders and private mortgage insurers have flagged about 25 percent of the country's zip codes as ineligible for loans on properties with less than 3% down payments as well as any investment properties, second homes or purchases made with adjustable rate loans. From an AP story via MSNBC:

Mortgage insurers, whose backing is required for borrowers who can’t afford the traditional 20 percent down payment on a home, have already flagged nearly a quarter of the nation’s ZIP codes where they refuse to insure some home loans... The entire states of California, Florida, Arizona, Michigan, Ohio and Nevada — which have seen the highest foreclosure rates and the worst price declines — are blackballed on some mortgage insurers’ lists.

Banks that have lost billions because of bad bets during the housing boom are now reverting to strict lending standards not seen in nearly 20 years, according to industry data and interviews with lenders.

For new home buyers and those seeking to refinance, it can mean higher down payments and a higher bar for credit scores, among other requirements. The toughest restrictions are in markets where home prices are falling, though regions where property values are rising are not immune...

The reluctance to extend credit comes despite a flurry of government initiatives, including steady interest rate cuts by the Federal Reserve, intended to make it easier for would-be borrowers and those facing interest-rate resets on their mortgages...

In recent weeks, mortgage insurers have flagged more than 9,600 ZIP codes in at least 34 states where they won’t insure certain types of home loans — those for investment properties or second homes, those with riskier adjustable-rate or interest-only mortgages, or for buyers making down payments of less than 3 percent.

With banks and mortgage insurers pulling back, state and federal programs for first-time buyers and people with poor credit are attempting to fill the void...

Amid the turmoil, the mortgage industry is playing hardball with borrowers.

Wells Fargo & Co. now requires a 25 percent down payment in the most distressed markets, according to a document sent to mortgage brokers last month. A company spokesman said in an e-mail message that Wells Fargo is “focused, as we’ve always been, on fair and responsible lending and sound credit risk management.”

Some borrowers who took out home-equity loans or second mortgages are being blocked from refinancing. The problem is most common among consumers using two different lenders.

Companies that made second mortgages are now denying requests — common in a refinancing transaction — to take secondary status in the event of a foreclosure. Especially in markets where prices are declining, holders of those loans want to be paid off before a loan is refinanced rather than take on the risk of default, industry experts say.

Lenders’ changes have removed 30 to 40 percent of the borrowers who could have qualified in recent years, estimated Tom LaMalfa, managing director at Wholesale Access, a Columbia, Md.-based mortgage research firm.

Lenders and mortgage insurers are also requiring proof of income and employment, something they didn’t always do during the housing boom.