Data indicates easing in first-time homebuyer demand
Builders beginning to move down the pricing curve, but still above key price point
Genworth Mortgage Insurance, an operating segment of Genworth Financial, Inc. (NYSE: GNW), today released its First-Time Homebuyer Market Report for the first quarter of 2018. The report aggregates all publicly-available government data and proprietary mortgage industry data into one dataset. The below highlights are followed by analysis from Genworth’s Chief Economist, Tian Liu.
First-time homebuyers purchased 411,000 single-family homes, a decline of two percent from the first quarter of 2017.
First-time homebuyers accounted for 37 percent of single-family homes sold and 57 percent of purchase mortgages financed.
Home sales without financing (all-cash transactions) and purchase loans made by investors were up 11,000 units, or three percent from a year ago suggesting an increase in speculative demand and otherwise a more competitive environment among potential homebuyers.
For the first time since the first quarter of 2012, home sales grew faster than home purchase originations. The number of purchase loans for the purchase of owner-occupied homes were down 2 percent from a year ago, while home sales stayed flat.
In the first quarter, 81 percent of first-time homebuyers used low down payment mortgages, while only 19 percent used high down payment mortgages.
Low down payment mortgages financed 332,000 home sales to first-time homebuyers, a one percent decline from a year ago, and represented 69 percent of purchase loans originated, the highest since the first quarter of 2010.
Conventional loans with mortgage insurance financed 127,000 home sales to first-time homebuyers, an 18 percent increase from a year ago, marking the 27th consecutive quarter of growth for the mortgage insurance industry and the best first quarter since 1995.
Among new single-family homes, homebuilders reported rapid sales growth in homes priced between $250,000 and $300,000, an increase of 17 percent from the first quarter of 2017 (the median first-time homebuyer price range is $250,000 and below).
2018 Macro Outlook
Higher mortgage rates have increased the cost of financing, and may have contributed to lower home sales.
Despite the increased homebuilding activities at the “lower” end of the market, the supply response has been insufficient in easing inventory pressure.
Contrary to most forecasts, we believe that strong first-time homebuyer demand and an insufficient supply increase will keep home prices growing at their current pace.
Housing supply will continue to expand to meet the strong first-time homebuyer demand. In addition to new construction, we will also likely see the conversion of rental units back to owner-occupied properties, lower vacancy rates, and increased remodeling activities.
Comments from Tian Liu, Chief Economist, Genworth Mortgage Insurance:
“This quarter’s decline in first-time homebuyer sales reflects a slowdown in cyclical momentum as the first-time homebuyer market approached its historical norms. It also reflects a shortage of available homes priced at or below the median first-time homebuyer market price of $250,000. While for the first time since 2014 first-time homebuyer demand is slightly easing, supply pressures will continue to drive price appreciation and freeze out a large percentage of the 2.7 million first-time homebuyers who are still missing from the market.
We believe that the housing market is becoming overheated, which is supported by this quarter’s growth of all-cash transactions and purchase loans made by investors, and the corresponding decrease in first-time homebuyers. It is becoming increasingly common to see multiple offers submitted on a property, which results in purchase prices surpassing listing prices, as well as inflated home prices, making cash offers more coveted. Because first-time homebuyers prefer using debt over cash when purchasing a home, this quarter’s surge in cash purchases is a competitive disadvantage to them and helps explain their pull-back.
Despite the current headwinds, we have begun to see an acceleration of homes built at slightly lower price points, a change from the homebuilding at higher price points we have been seeing. We see this as a positive market change that will support an increase of first-time homebuyer purchases and lead to fewer buyers being priced out of the market. If this trend gains meaningful traction, new construction will play a larger role in meeting first-time homebuyer demand.
More broadly, we are not overly concerned by this quarter’s slow-down in first-time homebuyer purchase growth and remain optimistic that this demographic will continue dominating the mortgage market and growing its market share. To address the housing supply inadequacies, we call on policymakers to encourage production of new homes at lower price points by abstaining from regulations that restrict affordable housing (zoning), access to low-cost building supplies (tariffs and quotas), and labor supply (immigration).”
Exclusive: Portugal sees green hydrogen output by end-2022, $12 billion in investment lined up
By Sergio Goncalves
LISBON (Reuters) – Portugal will start producing green hydrogen by the end of 2022 and already has private investment worth around 10 billion euros ($12 billion) lined up for eight projects that are expected to move forward, Environment Minister Joao Matos Fernandes said.
He told Reuters in a telephone interview there were also several “pre-contracts for the purchase and assembly of electrolysers” to produce the zero-carbon fuel made by electrolysis out of water using renewable wind and solar energy.
Such hydrogen is more expensive to extract than the heavily polluting conventional method of using heat and chemical reactions to release hydrogen from coal or natural gas, known as brown and grey hydrogen respectively.
Hydrogen is now mostly used in the oil refining industry and to produce ammonia fertilisers, but sectors such as steelmaking, transportation and chemicals are beginning to develop large-scale hydrogen applications to gradually replace fossil fuels as countries try to reduce pollution.
The European Commission has mapped out a plan to scale up green hydrogen projects across polluting sectors to meet a net zero emissions goal by 2050 and become a leader in a market analysts expect to be worth $1.2 trillion by that date.
“By the end of 2022, there will certainly be green hydrogen production in Portugal,” Matos Fernandes said. “Green hydrogen will, over time, allow Portugal to completely change its paradigm and become an energy exporting country.”
He said seven groups had submitted applications under Europe’s IPCEI scheme for common-interest projects to make part of a planned export-oriented “hydrogen cluster” near the port of Sines, from where hydrogen could be shipped to Rotterdam. Total investment there is estimated at some 7 billion euros.
A consortium including Portugal’s main utility EDP, oil company Galp, world’s largest wind turbine maker Vestas, among others, is behind one of the projects.
In Estarreja in north Portugal, local firm Bondalti Chemicals aims to invest 2.4 billion euros in a hydrogen plant.
Altogether, these envisage an installed capacity of over 1,000 megawatts (MW).
Matos Fernandes said Portugal was also negotiating with Spain the construction of a pipeline for renewable gases, including hydrogen, from Sines to France, crossing Spain.
Spain and Portugal also want to develop an ambitious cross-border lithium project taking advantage of the geographical proximity of their lithium deposits and aiming to cover the entire value chain from mining to refining, cell and battery manufacturing to battery recycling, he said.
Portugal is already a large producer of low-grade lithium mainly for the ceramics industry, but is preparing to make higher-grade metal used in electric car batteries.
A much-awaited licensing tender for lithium-bearing areas that has been delayed by the COVID-19 pandemic should take place by the year-end, Matos Fernandes said.
He promised the tender would address environmental concerns by local communities and there would be no lithium mining “at any cost”.
The minister also said Portugal would use its six-month presidency of the Council of the European Union to finalise a landmark law that would make the bloc’s climate targets irreversible and speed up emissions cuts this decade, expecting it to be approved in the first half of 2021.
(Reporting by Sergio Goncalves; Editing by Andrei Khalip and David Evans)
Under fire in EU, AstraZeneca CEO says ‘hopefully’ will meet vaccine supply goals
BRUSSELS (Reuters) – AstraZeneca boss Pascal Soriot said on Thursday he hoped to meet the European Union’s expectations on the number of COVID-19 vaccines the company can deliver to the bloc in the second quarter, after big cuts in the first three months of the year.
The Anglo-Swedish drugmaker has been under fire in the EU for its delayed supplies of shots to the 27-nation bloc, which ordered 300 million doses by the end of June.
“We are working 24/7 to improve delivery and hopefully catch up to the expectations for Q2,” Soriot told EU lawmakers in a public hearing.
Under its contract with the EU, the company has committed to delivering 180 million doses in the second quarter.
Soriot did not mention the 180 million target, but said he was confident the company will be able to increase production in the second quarter using factories outside the EU that had no production problems, including in the United States.
He confirmed the company was trying to get 40 million doses of the COVID-19 vaccine to the EU by the end of March, which is less than half the amount it promised for the quarter in its contract.
The EU, which has fallen far behind the United States and former member Britain in vaccinating its public, has repeatedly urged the firm to deliver more.
Lower-than-expected yields – the amount of vaccine that can be produced from base ingredients – at its factories hurt output in the first three months.
Asked about supplies to Britain, which relies on the same factories used by the EU, Soriot said the former EU member with a population of around 66 million was smaller, and noted that most doses produced in the EU were used to serve the EU which has a population of about 450 million.
Executives from rival drugmakers that have developed or are testing COVID-19 vaccines, including Moderna Inc and CureVac NV were also part of the panel.
But most questions were directed at Soriot amid anger that the company has failed to deliver promised vaccine quantities to the bloc on schedule.
Moderna Chief Executive Officer Stephane Bancel said the company has experienced fluctuations as the U.S. biotech group ramps up output of its COVID-19 vaccine.
He said usually a company would stockpile product ahead of a launch, but it is shipping every dose it makes, leaving it without any spare inventory.
His comments came a day after the company increased its output target for this year and 2022 as it invests in additional manufacturing capacity.
(Reporting by Josephine Mason in London and Francesco Guarascio in Brussels; Editing by Susan Fenton, Bill Berkrot and Keith Weir)
Shift to sun, ski and suburbs gives Airbnb advantage over hotels
By Ankit Ajmera
(Reuters) – Airbnb’s quarterly results are likely to show the pandemic may have helped the home rental company lure leisure travelers away from big hotels during the global travel collapse of 2020.
Weary of being locked up in their homes for months, travelers hit the road and booked homes and cottages on Airbnb, while avoiding flights and downtown hotels, analysts said.
Airbnb accounted for 18% of the total U.S. lodging revenue in 2020, up from 11.5% in 2019, data from hotel analytics provider STR and vacation rental data company AirDNA showed.
It outperformed the hotel industry and online travel agents such as Expedia and Booking.com thanks to its greater offer of ‘sun, ski, and suburban’ rental homes, Cowen & Co analysts said.
(Graphic: Airbnb grabs bigger share of U.S. lodging market in pandemic: https://graphics.reuters.com/AIRBNB-RESULTS/yxmpjxqdopr/chart.png)
For an interactive graphic, click here: https://tmsnrt.rs/3pPbQwH
In 2019, about 90% of Airbnb’s bookings came from leisure travels compared with about 20%-30% for large hotels chains, including Marriott and Hilton, that rely on business travel to grow their profits.
“Unfortunately, the hotel operators do not have as much supply in locations where people are willing to travel,” said Jamie Lane, vice president of research at AirDNA.
Lane said with mass vaccinations later in the year, the share of alternative accommodations including Airbnb will drop before continuing to grow at 2%-3% per year once normal travel patterns return.
(Graphic: Airbnb U.S. sales against top hotels: https://graphics.reuters.com/AIRBNB-RESULTS/gjnpwzkdbvw/chart.png)
For an interactive graphic, click here: https://tmsnrt.rs/3dPKvsd
* The San Francisco-based company is expected to report gross bookings of $23.10 billion in 2020, down from about $38 billion a year earlier, according to the mean estimate of 12 analysts according to Refinitiv; gross bookings are seen rising by 50% in 2021.
* Analysts’ mean estimate for Airbnb’s full-year net loss is $3.52 billion, bigger than a loss of $674.3 million a year earlier. Full-year revenue is expected to drop 32% to $3.27 billion.
WALL STREET SENTIMENT
* Of 34 brokerages, 20 rate Airbnb’s stock “hold”, 12 “buy” or higher and two “sell” or lower
* Wall Street’s median 12-month price target for Airbnb is $156â€‹, about 22% below its last closing price of $200.20.
* The company’s stock has nearly tripled since listing in December
(Graphic: Airbnb’s stock has nearly tripled since debut: https://graphics.reuters.com/AIRBNB-RESULTS/jznpnoqrlvl/chart.png)
For an interactive graphic, click here: https://tmsnrt.rs/3dG2lOd
(Reporting by Ankit Ajmera in Bengaluru; Editing by Sweta Singh and Saumyadeb Chakrabarty)
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