Behind the Housing Market’s Spring Surge
The housing market is emerging from its winter doldrums: Several different measures released this morning all point to a recent pickup in the real estate market.
Sales of existing homes jumped 6.1 percent in March to a seasonally adjusted annual rate of 5.19 million — well above expectations and the best month since September 2013. “The pickup in sales is echoed in stronger mortgage applications, new home sales, and faster rising prices—all suggesting a rebound in demand as the spring selling season approaches,” UBS economists wrote Wednesday.
Related: Why the Housing Market Is About to Perk Up
The median sale price last month was $212,100, up 7.8 percent from a year earlier (compared with a 7.2 percent annual gain as of February). “It looks like the combination of limited available inventory and a decline in the share of distressed sales in the market continue to put upward pressure on prices,” J.P. Morgan economist Daniel Silver wrote.
US Existing Home Sales data by YCharts
Mortgage purchase applications, meanwhile, rose 5 percent on a seasonally adjusted basis in the week ending April 17, suggesting that the increased activity from March has also continued into April.
Related: Americans Spend More on Taxes Than on Food, Clothing and Shelter
That trend may also reflect a policy change by the Federal Housing Administration in January. “Almost immediately after the mortgage insurance premium was cut by 50 basis points, purchase applications started to climb to highs not seen since the summer of 2013,” the IHS Global Insight economists Patrick Newport and Stephanie Karol wrote Wednesday. “We expect that the rule change will support market entry among younger buyers.” First-time homebuyers played an important part in the March increase, they suggest, as they increased their purchases by 10 percent year-over-year. Investors, meanwhile, bought 9 percent fewer properties than they had in March 2014, as the charts below from UBS detail.
The housing recovery had softened in recent months, even beyond the winter’s weather-related issues, so the new data — while not yet signaling a stronger trend — is an encouraging sign for increased activity in the spring and potentially beyond. “Home sales should pick up through the rest of 2015,” Gus Faucher, senior economist at PNC Financial Services Group, wrote Wednesday. “The fundamentals for housing are solid, with average job growth (200,000+ per month), good affordability, very low mortgage rates, increasing consumer confidence, expanding access to credit, and significant pent-up demand after years of depressed sales.”
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Tweet of the Day: The Black Hole of Big Pharma
Billionaire John D. Arnold, a former energy trader and hedge fund manager turned philanthropist with a focus on health care, says Big Pharma appears to have a powerful hold on members of Congress.
Arnold pointed out that PhRMA, the main pharmaceutical industry lobbying group, had revenues of $459 million in 2018, and that total lobbying on behalf of the sector probably came to about $1 billion last year. “I guess $1 bil each year is an intractable force in our political system,” he concluded.
Warren’s Taxes Could Add Up to More Than 100%
The Wall Street Journal’s Richard Rubin says Elizabeth Warren’s proposed taxes could claim more than 100% of income for some wealthy investors. Here’s an example Rubin discussed Friday:
“Consider a billionaire with a $1,000 investment who earns a 6% return, or $60, received as a capital gain, dividend or interest. If all of Ms. Warren’s taxes are implemented, he could owe 58.2% of that, or $35 in federal tax. Plus, his entire investment would incur a 6% wealth tax, i.e., at least $60. The result: taxes as high as $95 on income of $60 for a combined tax rate of 158%.”
In Rubin’s back-of-the-envelope analysis, an investor worth $2 billion would need to achieve a return of more than 10% in order to see any net gain after taxes. Rubin notes that actual tax bills would likely vary considerably depending on things like location, rates of return, and as-yet-undefined policy details. But tax rates exceeding 100% would not be unusual, especially for billionaires.
Biden Proposes $1.3 Trillion Infrastructure Plan
Joe Biden on Thursday put out a $1.3 trillion infrastructure proposal. The 10-year “Plan to Invest in Middle Class Competitiveness” calls for investments to revitalize the nation’s roads, highways and bridges, speed the adoption of electric vehicles, launch a “second great railroad revolution” and make U.S. airports the best in the world.
“The infrastructure plan Joe Biden released Thursday morning is heavy on high-speed rail, transit, biking and other items that Barack Obama championed during his presidency — along with a complete lack of specifics on how he plans to pay for it all,” Politico’s Tanya Snyder wrote. Biden’s campaign site says that every cent of the $1.3 trillion would be paid for by reversing the 2017 corporate tax cuts, closing tax loopholes, cracking down on tax evasion and ending fossil-fuel subsidies.
Read more about Biden’s plan at Politico.
Number of the Day: 18 Million
There were 18 million military veterans in the United States in 2018, according to the Census Bureau. That figure includes 485,000 World War II vets, 1.3 million who served in the Korean War, 6.4 million from the Vietnam War era, 3.8 million from the first Gulf War and another 3.8 million since 9/11. We join with the rest of the country today in thanking them for their service.
Chart of the Day: Dem Candidates Face Their Own Tax Plans
Democratic presidential candidates are proposing a variety of new taxes to pay for their preferred social programs. Bloomberg’s Laura Davison and Misyrlena Egkolfopoulou took a look at how the top four candidates would fare under their own tax proposals.
