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Worst Ever US Home Affordability Is Just 0.5% Away

Worst Ever US Home Affordability Is Just 0.5% Away

A month and a half ago, when mortgage rates were exploding higher with the 30Yr fixed mortgage…

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Worst Ever US Home Affordability Is Just 0.5% Away

A month and a half ago, when mortgage rates were exploding higher with the 30Yr fixed mortgage rate averaging 4.5%, the highest since 2018 and up more than nearly 100bp from the December average of 3.26%, we said that "Housing Affordability Is About To Crash The Most On Record",  and warned that the mortgage "rates shock" meant housing affordability would be down more than 25% yoy by March - a record decline - with additional downside from higher home prices.

Once again, we were right, and as CNBC reported overnight looking at the latest spike in mortgage rates, which just hit their highest level since 2009...

... and with home prices continuing to experience double-digit gains, all of the major housing markets in the United States are less affordable than they have been historically, and "affordability is near its worst point on record."

The average rate on the 30-year fixed started this year at 3.29% and hit 5.55% on Monday, according to Mortgage News Daily. Rates will move even higher after Wednesday’s Federal Reserve meeting, when markets will get more commentary on the Fed’s drive to curb inflation.

Citing research from Black Knight, a mortgage technology and data provider, CNBC shows that 95% of the 100 biggest U.S. housing markets are less affordable than their long-term levels. That figure was at 6% at the start of the Covid pandemic. And with thirty-seven markets already less affordable than they have ever been, expect this to soon spread to all markets... before we have another huge market crash just like in 2006.

While home prices did pull back slightly in March, they were still up 19.9% year over year. Compared with February, prices rose 2.3%, the fifth time since the pandemic began when home prices rose more than 2% in a single month. Adding across, prices are up almost 6% in the first three months of the year even as consumers are grappling with rising prices across categories, from real estate to airfare to groceries, and defecating all over Biden's approval rating in the process.

According to CNBC, homebuying affordability has not been this bad since July 2006, when rates were around 6.75%. Back then, it took 34% of the median income to cover the monthly mortgage payment, including principal and interest, for a home purchased with a 20% down payment.

As of April 21, that payment-to-income ratio had reached 32.5%. Historically, a ratio above 21% has caused the housing market to cool off, with the exception of the last two years. The pandemic has created an anomaly in the housing market, because demand is so high and supply is so low. A relentless flight from liberal cities - that have been turned into bastions of crime - into the suburbs, has only helped to push home prices to the stratosphere.

If rates were to rise just 50 basis points more - which they will - or home prices were to increase just 5% more, home affordability would be the worst on record, according to Black Knight.

What would that mean in practical terms? Well, as of this moment, that monthly housing payment is at a new high, up $552 (an increase of 38%) year to date to $1,809, and up $790 (or 72%) since the onset of the pandemic. It will take just a modest increase to hit new all time highs.

According to CNBC, in reaction to weaker affordability, and in a repeat of what we saw just before the 2007 housing bubble burst, consumers are suddenly turning to adjustable-rate mortgages, which offer a lower interest rate. The ARM share of rate locks from potential homebuyers jumped from 2.5% in December to nearly 8% in March, according to Black Knight. As of last week, that share was more than 9%, according to the Mortgage Bankers Association.

At this point some may ask how how it is possible that demand has yet to fade despite these near record prices. The answer is simple: not enough supply, too much demand, and a surge in purchases ahead of even higher rates.

A Tuesday report from the National Association of Realtors found - what else - that home prices continued to surge in virtually every corner of the U.S. during the first quarter even as mortgage rates rose rapidly. Many buyers rushed to lock in purchases in the first quarter before rates climbed even higher, according to real-estate agents.

The median sales price for single-family existing homes was higher in the first quarter compared with a year ago in 181 of the 185 metro areas tracked by the NAR, the association said Tuesday. Nationwide, the median single-family existing-home sales price rose 15.7% in the first quarter from a year ago to $368,200, the NAR said.

The current housing boom has been geographically widespread, with most metro areas in the country posting robust home-price growth in the past two years. The Punta Gorda, Fla., metro area posted the strongest median-price increase in the first quarter, up 34.4% from a year earlier. Following Punta Gorda was the Ocala, Fla., metro area, up 33.8%, and Ogden, Utah, up 30.8%.

The only metro areas to post declines in the first quarter from a year earlier were Cape Girardeau, Mo., where median prices fell 2%, Topeka, Kan., down 1.9%, and Rockford, Ill., down 1%. Prices were unchanged in Bismarck, N.D.

“The housing market remains very active right now,” said Nick Bailey, chief executive of Re/Max LLC, on a Re/Max Holdings Inc. earnings call last week. “Buyers are rushing to beat anticipated mortgage rate hikes.”

Still, economists expect rising mortgage rates to lead to slower home-price growth by the end of the year. Prices can be slow to respond to changes in buyer activity because sellers often wait weeks before dropping their list prices. Some buyers are also less sensitive to rising rates, such as cash buyers or those moving from high-cost markets to more affordable ones. Homes typically go under contract a month or two before the contract closes, so the first-quarter data largely reflects purchase decisions made in late 2021 or the beginning of the first quarter.

On the other hand, the ability for many households to work remotely continues to spur home-buying demand. Millions of millennials are also aging into their prime home-buying years.

Tyler Durden Wed, 05/04/2022 - 11:45

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The next pandemic? It’s already here for Earth’s wildlife

Bird flu is decimating species already threatened by climate change and habitat loss.

I am a conservation biologist who studies emerging infectious diseases. When people ask me what I think the next pandemic will be I often say that we are in the midst of one – it’s just afflicting a great many species more than ours.

I am referring to the highly pathogenic strain of avian influenza H5N1 (HPAI H5N1), otherwise known as bird flu, which has killed millions of birds and unknown numbers of mammals, particularly during the past three years.

This is the strain that emerged in domestic geese in China in 1997 and quickly jumped to humans in south-east Asia with a mortality rate of around 40-50%. My research group encountered the virus when it killed a mammal, an endangered Owston’s palm civet, in a captive breeding programme in Cuc Phuong National Park Vietnam in 2005.

How these animals caught bird flu was never confirmed. Their diet is mainly earthworms, so they had not been infected by eating diseased poultry like many captive tigers in the region.

This discovery prompted us to collate all confirmed reports of fatal infection with bird flu to assess just how broad a threat to wildlife this virus might pose.

This is how a newly discovered virus in Chinese poultry came to threaten so much of the world’s biodiversity.

H5N1 originated on a Chinese poultry farm in 1997. ChameleonsEye/Shutterstock

The first signs

Until December 2005, most confirmed infections had been found in a few zoos and rescue centres in Thailand and Cambodia. Our analysis in 2006 showed that nearly half (48%) of all the different groups of birds (known to taxonomists as “orders”) contained a species in which a fatal infection of bird flu had been reported. These 13 orders comprised 84% of all bird species.

We reasoned 20 years ago that the strains of H5N1 circulating were probably highly pathogenic to all bird orders. We also showed that the list of confirmed infected species included those that were globally threatened and that important habitats, such as Vietnam’s Mekong delta, lay close to reported poultry outbreaks.

Mammals known to be susceptible to bird flu during the early 2000s included primates, rodents, pigs and rabbits. Large carnivores such as Bengal tigers and clouded leopards were reported to have been killed, as well as domestic cats.

Our 2006 paper showed the ease with which this virus crossed species barriers and suggested it might one day produce a pandemic-scale threat to global biodiversity.

Unfortunately, our warnings were correct.

A roving sickness

Two decades on, bird flu is killing species from the high Arctic to mainland Antarctica.

In the past couple of years, bird flu has spread rapidly across Europe and infiltrated North and South America, killing millions of poultry and a variety of bird and mammal species. A recent paper found that 26 countries have reported at least 48 mammal species that have died from the virus since 2020, when the latest increase in reported infections started.

Not even the ocean is safe. Since 2020, 13 species of aquatic mammal have succumbed, including American sea lions, porpoises and dolphins, often dying in their thousands in South America. A wide range of scavenging and predatory mammals that live on land are now also confirmed to be susceptible, including mountain lions, lynx, brown, black and polar bears.

The UK alone has lost over 75% of its great skuas and seen a 25% decline in northern gannets. Recent declines in sandwich terns (35%) and common terns (42%) were also largely driven by the virus.

Scientists haven’t managed to completely sequence the virus in all affected species. Research and continuous surveillance could tell us how adaptable it ultimately becomes, and whether it can jump to even more species. We know it can already infect humans – one or more genetic mutations may make it more infectious.

At the crossroads

Between January 1 2003 and December 21 2023, 882 cases of human infection with the H5N1 virus were reported from 23 countries, of which 461 (52%) were fatal.

Of these fatal cases, more than half were in Vietnam, China, Cambodia and Laos. Poultry-to-human infections were first recorded in Cambodia in December 2003. Intermittent cases were reported until 2014, followed by a gap until 2023, yielding 41 deaths from 64 cases. The subtype of H5N1 virus responsible has been detected in poultry in Cambodia since 2014. In the early 2000s, the H5N1 virus circulating had a high human mortality rate, so it is worrying that we are now starting to see people dying after contact with poultry again.

It’s not just H5 subtypes of bird flu that concern humans. The H10N1 virus was originally isolated from wild birds in South Korea, but has also been reported in samples from China and Mongolia.

Recent research found that these particular virus subtypes may be able to jump to humans after they were found to be pathogenic in laboratory mice and ferrets. The first person who was confirmed to be infected with H10N5 died in China on January 27 2024, but this patient was also suffering from seasonal flu (H3N2). They had been exposed to live poultry which also tested positive for H10N5.

Species already threatened with extinction are among those which have died due to bird flu in the past three years. The first deaths from the virus in mainland Antarctica have just been confirmed in skuas, highlighting a looming threat to penguin colonies whose eggs and chicks skuas prey on. Humboldt penguins have already been killed by the virus in Chile.

A colony of king penguins.
Remote penguin colonies are already threatened by climate change. AndreAnita/Shutterstock

How can we stem this tsunami of H5N1 and other avian influenzas? Completely overhaul poultry production on a global scale. Make farms self-sufficient in rearing eggs and chicks instead of exporting them internationally. The trend towards megafarms containing over a million birds must be stopped in its tracks.

To prevent the worst outcomes for this virus, we must revisit its primary source: the incubator of intensive poultry farms.

Diana Bell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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A major cruise line is testing a monthly subscription service

The Cruise Scarlet Summer Season Pass was designed with remote workers in mind.

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While going on a cruise once meant disconnecting from the world when between ports because any WiFi available aboard was glitchy and expensive, advances in technology over the last decade have enabled millions to not only stay in touch with home but even work remotely.

With such remote workers and digital nomads in mind, Virgin Voyages has designed a monthly pass that gives those who want to work from the seas a WFH setup on its Scarlet Lady ship — while the latter acronym usually means "work from home," the cruise line is advertising as "work from the helm.”

Related: Royal Caribbean shares a warning with passengers

"Inspired by Richard Branson's belief and track record that brilliant work is best paired with a hearty dose of fun, we're welcoming Sailors on board Scarlet Lady for a full month to help them achieve that perfect work-life balance," Virgin Voyages said in announcing its new promotion. "Take a vacation away from your monotonous work-from-home set up (sorry, but…not sorry) and start taking calls from your private balcony overlooking the Mediterranean sea."

A man looks through his phone while sitting in a hot tub on a cruise ship.

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This is how much it'll cost you to work from a cruise ship for a month

While the single most important feature for successful work at sea — WiFi — is already available for free on Virgin cruises, the new Scarlet Summer Season Pass includes a faster connection, a $10 daily coffee credit, access to a private rooftop, and other member-only areas as well as wash and fold laundry service that Virgin advertises as a perk that will allow one to concentrate on work

More Travel:

The pass starts at $9,990 for a two-guest cabin and is available for four monthlong cruises departing in June, July, August, and September — each departs from ports such as Barcelona, Marseille, and Palma de Mallorca and spends four weeks touring around the Mediterranean.

Longer cruises are becoming more common, here's why

The new pass is essentially a version of an upgraded cruise package with additional perks but is specifically tailored to those who plan on working from the ship as an opportunity to market to them.

"Stay connected to your work with the fastest at-sea internet in the biz when you want and log-off to let the exquisite landscape of the Mediterranean inspire you when you need," reads the promotional material for the pass.

Amid the rise of remote work post-pandemic, cruise lines have been seeing growing interest in longer journeys in which many of the passengers not just vacation in the traditional sense but work from a mobile office.

In 2023, Turkish cruise line operator Miray even started selling cabins on a three-year tour around the world but the endeavor hit the rocks after one of the engineers declared the MV Gemini ship the company planned to use for the journey "unseaworthy" and the cruise ship line dealt with a PR scandal that ultimately sank the project before it could take off.

While three years at sea would have set a record as the longest cruise journey on the market, companies such as Royal Caribbean  (RCL) (both with its namesake brand and its Celebrity Cruises line) have been offering increasingly long cruises that serve as many people’s temporary homes and cross through multiple continents.

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As the pandemic turns four, here’s what we need to do for a healthier future

On the fourth anniversary of the pandemic, a public health researcher offers four principles for a healthier future.

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John Gomez/Shutterstock

Anniversaries are usually festive occasions, marked by celebration and joy. But there’ll be no popping of corks for this one.

March 11 2024 marks four years since the World Health Organization (WHO) declared COVID-19 a pandemic.

Although no longer officially a public health emergency of international concern, the pandemic is still with us, and the virus is still causing serious harm.

Here are three priorities – three Cs – for a healthier future.

Clear guidance

Over the past four years, one of the biggest challenges people faced when trying to follow COVID rules was understanding them.

From a behavioural science perspective, one of the major themes of the last four years has been whether guidance was clear enough or whether people were receiving too many different and confusing messages – something colleagues and I called “alert fatigue”.

With colleagues, I conducted an evidence review of communication during COVID and found that the lack of clarity, as well as a lack of trust in those setting rules, were key barriers to adherence to measures like social distancing.

In future, whether it’s another COVID wave, or another virus or public health emergency, clear communication by trustworthy messengers is going to be key.

Combat complacency

As Maria van Kerkove, COVID technical lead for WHO, puts it there is no acceptable level of death from COVID. COVID complacency is setting in as we have moved out of the emergency phase of the pandemic. But is still much work to be done.

First, we still need to understand this virus better. Four years is not a long time to understand the longer-term effects of COVID. For example, evidence on how the virus affects the brain and cognitive functioning is in its infancy.

The extent, severity and possible treatment of long COVID is another priority that must not be forgotten – not least because it is still causing a lot of long-term sickness and absence.

Culture change

During the pandemic’s first few years, there was a question over how many of our new habits, from elbow bumping (remember that?) to remote working, were here to stay.

Turns out old habits die hard – and in most cases that’s not a bad thing – after all handshaking and hugging can be good for our health.

But there is some pandemic behaviour we could have kept, under certain conditions. I’m pretty sure most people don’t wear masks when they have respiratory symptoms, even though some health authorities, such as the NHS, recommend it.

Masks could still be thought of like umbrellas: we keep one handy for when we need it, for example, when visiting vulnerable people, especially during times when there’s a spike in COVID.

If masks hadn’t been so politicised as a symbol of conformity and oppression so early in the pandemic, then we might arguably have seen people in more countries adopting the behaviour in parts of east Asia, where people continue to wear masks or face coverings when they are sick to avoid spreading it to others.

Although the pandemic led to the growth of remote or hybrid working, presenteeism – going to work when sick – is still a major issue.

Encouraging parents to send children to school when they are unwell is unlikely to help public health, or attendance for that matter. For instance, although one child might recover quickly from a given virus, other children who might catch it from them might be ill for days.

Similarly, a culture of presenteeism that pressures workers to come in when ill is likely to backfire later on, helping infectious disease spread in workplaces.

At the most fundamental level, we need to do more to create a culture of equality. Some groups, especially the most economically deprived, fared much worse than others during the pandemic. Health inequalities have widened as a result. With ongoing pandemic impacts, for example, long COVID rates, also disproportionately affecting those from disadvantaged groups, health inequalities are likely to persist without significant action to address them.

Vaccine inequity is still a problem globally. At a national level, in some wealthier countries like the UK, those from more deprived backgrounds are going to be less able to afford private vaccines.

We may be out of the emergency phase of COVID, but the pandemic is not yet over. As we reflect on the past four years, working to provide clearer public health communication, avoiding COVID complacency and reducing health inequalities are all things that can help prepare for any future waves or, indeed, pandemics.

Simon Nicholas Williams has received funding from Senedd Cymru, Public Health Wales and the Wales Covid Evidence Centre for research on COVID-19, and has consulted for the World Health Organization. However, this article reflects the views of the author only, in his academic capacity at Swansea University, and no funding or organizational bodies were involved in the writing or content of this article.

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