Weekly Mortgage and Real Estate Report – Week of September 17, 2018

ECONOMIC COMMENTARY
 Fed Meeting Looms 

Taking into account recent statements by the members of the Federal Reserve Board and recent economic reports, as we mentioned previously, the markets are counting upon a rate increase next week when the Fed meets. The acceleration of wage growth has the markets particularly worried and right now many analysts are expecting another increase in December. All told, that would make four hikes this year, with the pace of increases accelerating.

The Fed raised rates one time in 2015 and 2016 and three times in 2017. While two more hikes this year are not guaranteed, by next week we will likely have met last year’s pace of increases. When will the Fed stop raising rates? Mostly likely this will not happen until the pace of economic growth slows down or at least levels off. More growth increases the risk of inflation and this is exactly what the Fed is trying to prevent.

Will the increase slow the economy down? While this has not happened as of yet, there are some signs that a slower pace of growth could be on the horizon. Certainly, the real estate market has slowed down in the face of higher rates and higher home prices. But another factor within this sector is the shortage of inventory. One could surmise that more homes for sale would speed the pace of real estate sales. Thus, we can’t yet call the real estate market a precursor to a slower economy –but if sales continue to stagnate and inventory rises significantly, that could be a turning point.

REAL ESTATE NEWS
 Millennials could stand to make some improvements to their credit files. Only 39 percent of millennials without a home loan have a prime or better score, and the majority are facing higher delinquency rates on personal loans, shows a newly released study from Experian, an information services company. Eighty-six percent of millennials recently surveyed say they believe that buying a house is a good financial investment, according to the National Association of REALTORS®’ data. However, Experian’s research shows that only 15 percent are owners today. Further, 61 percent of millennials may need to improve their personal loan and bank card usage habits in order to obtain lower rates for when they are ready to purchase a home. “This data presents good news for younger, thin file millennials interested in buying a home,” says Michele Raneri, vice president of analytics and business development at Experian. “We’re seeing that small changes in financial behaviors such as building a history of on-time payments and improved credit practices can help lenders shift from viewing millennials as high-risk to low-risk relatively quickly. Knowing where you stand from a credit perspective is critical to improving your financial well-being.” Experian evaluated personal loan trends, credit scores, bank card behaviors, and mortgage trends of about 60 million millennial consumers. “Often, young people start their credit journey with a couple of mistakes first, but in the end, these mistakes create opportunities to learn how to use and build credit responsibly,” says Rod Griffin, director of consumer education and awareness at Experian. Millennial home buyers are, on average, 31 years old with an income of $64,000, Experian’s data shows. Source: ExperianDifferences in household composition and financing options incentivize homebuying demand for veteran and active military, according to the 2018 Veterans & Active Military Home Buyers Profile, which evaluated the differences of recent active-service and veteran home buyers and sellers to those who have never served. The results revealed quite a few contrasts between active-service military buyers and buyers who have never served. At a median age of 34 years old, the typical active-service buyer was a lot younger than non-military buyers (42 years old) and was more likely to be married and have multiple children living in their household. Active-service members typically bought a larger home that cost more than those purchased by both non-military buyers and veterans. Despite lower median incomes ($84,000), more stable job security and no down-payment financing options give aspiring military homeowners an advantage over their civilian peers. Fifty-six percent of active duty and 41 percent of veterans put no money down when buying a home, compared to 7 percent of non-military. As for household composition, 77 percent of active duty and 78 percent of veterans are married, compared to 63 percent of non-military. Source: National Association of Realtors®

The median age of owner-occupied homes in the U.S. is 37, indicating that more properties may become pricier to maintain as they grow older and vulnerable to disrepair, according to the 2016 American Community Survey. But builders view the aging housing stock as an opportunity. Rising home prices may prompt more households to spend more on home improvement, the National Association of Home Builders notes on its Eye on Housing blog. Further, “this indicates a strong rising demand for new construction over the long run, as current owner-occupied housing stock is older,” the NAHB writes. More than half of the owner-occupied homes were built prior to 1980, and 38 percent before 1970. Sixteen percent of the housing stock was built between 2000 and 2009. The 3 million units that came to the market between 2010 and 2016, however, added only 4 percent to the owner-occupied housing stock. A decline in new construction has prompted the share of homes that are six or fewer years old to fall greatly since 2006, according to the NAHB. Meanwhile, the number of homes that are 46 years old or older has jumped from 31 percent in 2006 to 38 percent in 2016. Source: National Association of Homebuilders

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Weekly Mortgage and Real Estate Report – Week of September 10th, 2018

ECONOMIC COMMENTARY
     The Jobs Machine Rolls 

Leading up to the jobs report released last week, all indications were that the good times would continue. We had an upward revision in the measure of economic growth for last quarter, consumers continue to spend, and confidence is soaring. Therefore, the markets were predicting another strong employment report, especially considering that last month’s numbers were a bit lighter than expected. Of course, each release is subject to revisions which is what makes the reports harder to interpret from month-to-month.

The number of jobs added was reported at 201,000 for August. This was higher than expected. The previous months were revised downward by 50,000. The headline number was the unemployment rate, which came in at 3.9%. This number carries more importance when looking at the labor participation rate, which measures how many people are coming back to the workforce. The rate came in at 62.7%, which was down from last month because of more individuals re-entering the work force.

The Fed will be meeting at the end of the month, and certainly these numbers will be considered when they decide whether to raise short-term interest rates. Right now, the markets are banking on another 1/4% increase, especially considering the statements recently made by the members of the Fed, including Chairman Powell. Even more important than the gain in jobs, the acceleration in wage growth reported for last month certainly supports this prediction.

 

REAL ESTATE NEWS
An overhaul in how several major credit reporting agencies factor in negative credit information is prompting millions of consumers’ credit scores to rise. Collection events were struck from 8 million consumers’ credit reports in the 12 months ending in June. The New York Federal Reserve reported that consumers who had at least one collections account removed from their credit reports are seeing an 11-point increase to their scores. Critics have long claimed such dings to scores are prone to errors or that they’ve unfairly kept many out of the borrowing market. Equifax, Experian PLC, and TransUnion have all agreed to revamp reports, which stems from a 2015 settlement with state attorneys general on the matter. In the settlement, the firms agreed to remove some non-loan related items that were sent to collection firms, such as gym memberships, library fines, and traffic tickets. They also agreed to strike medical-debt collections that have been paid by a patient’s insurance company. The majority of consumers who benefited from the recent changes are those who had scores below 660 before the collection events were removed, according to the New York Fed. Source: The Wall Street Journal — Want to see if your score has changed? Contact us and we will help you find out and help interpret your score “picture.” Zillow is aiming to take more ground in the rental market. Recently, the online real estate giant rolled out new online tools that allow renters to apply for multiple rentals with one application that includes a background check and eviction history through Checkr and credit reports through Experian. The new functions also allow renters to pay rent through Zillow. Yes, you heard that right. Pay rent directly through Zillow, which will then pass the funds directly along to the property manager or owner. “Renters tell us they want the entire rental process to happen online, from search to application to payment,” Zillow President Jeremy Wacksman said in a statement. “However, most landlords don’t have the resources to offer these services. We’re excited to provide the technology to help renters and landlords have a better experience.” According to Zillow, there are 35 million renters who visit Zillow’s rental sites and mobile apps each month, each of whom–if they’re not just window shopping–typically need to file about three applications with an average cost of $40 each. According to the company, these new products are part of the company’s effort to build an end-to-end solution that allows renters to complete the entire transaction using Zillow. The company said that once its rollout is complete, renters will be able to search for properties, schedule tours, apply, sign a lease and pay rent all from within Zillow itself. Source: HousingWire

Similar to the concept of rent control, Freddie Mac announced a new program to incentivize rental property owners to ease their continuous rent hikes. The housing agency is offering discounted financing to owners who agree to cap rent increases for the life of their loans. Owners who take part in the program must limit rent increases on 80 percent of their units. “Maybe there’s a way we can help change incentives,” says David Brickman, an executive vice president at Freddie Mac. “We can provide an economic basis for private, profit-oriented developers to pursue a strategy where they didn’t raise rents by quite as much.” Owners also must agree to make at least 50 percent of their units affordable to those earning the local median income or less. The program, now available across the country, is voluntary. Freddie Mac officials say they will check rents on an annual basis to make sure participating property owners are complying with the program’s rules. Those who are in violation will be assessed a penalty fee until they return rents to a level that Freddie deems compliant. The announcement comes on the heels of a recent report by RentCafé, which showed that average apartment rents reached an all-time high in July. The national average rent climbed to a record high of $1,409 in July, up 2.8 percent year over year, the rental listing service noted. Source: The New York Times

Weekly Mortgage and Real Estate Report – Week of September 3, 2018

ECONOMIC COMMENTARY
The Focus on Labor Day

 

The first Monday of every September is Labor Day. With the picnics, parades and back-to-school sales, we sometimes forget that the purpose of the holiday is to recognize the importance of the American worker. Labor Day became a national holiday at the turn of the 20th century. It was a time when American workers endured miserable conditions, from child labor to unsafe working conditions.

It was under these conditions that our workers built this country into what it is today. And even though the conditions of workplaces are nowhere near what they were one hundred years ago, the issues we face today significantly affects our workers’ livelihoods. Thus, when we talk about interest rates, trade wars, economic growth, the minimum wage and more — it is the lives of American workers that hang in the balance.

While we say goodbye to the “unofficial” summer, we must never forget to honor our workers. They are truly the backbone of America. At the end of this week, we will be looking at the employment numbers for August. These numbers represent more than statistics, they represent jobs. And each job is filled by an American worker, many of whom still fight for benefits and better working conditions. We hope everyone had a great Labor Day and are ready for school and cooler weather.

WEEKLY INTEREST RATE OVERVIEW

The Markets. Rates were essentially flat in the past week. For the week ending August 30, Freddie Mac announced that 30-year fixed rates increased one tick to 4.52% from 4.51% the week before. The average for 15-year loans fell slightly to 3.97% and the average for five-year adjustables decreased to 3.85%. A year ago, 30-year fixed rates averaged 3.82%. Attributed to Sam Khater, Chief Economist, Freddie Mac –“While sales and price growth have softened these last few months, this leveling of rates may be helping more buyers reach the market. Heading into the fall, the recent slowdown in price appreciation in several markets is good news for the many prospective buyers who were priced out earlier this year. However, despite the economy in the second quarter expanding at its fastest rate in nearly four years, Freddie Mac is still expecting only a slight increase (0.2 percent) in total home sales in 2018 (6.14 million) compared to last year (6.12 million). Given the strength of the economy, it is possible for home sales to pick up even more before year’s end. The key factor will be if affordably-priced inventory increases enough to continue this recent trend of cooling price appreciation.” Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
August 31, 2018

Daily Value Monthly Value
August 30 July
6-month Treasury Security  2.28%  2.17%
1-year Treasury Security  2.47%  2.39%
3-year Treasury Security  2.72%  2.70%
5-year Treasury Security  2.75%  2.78%
10-year Treasury Security  2.86%  2.89%
12-month LIBOR  2.827% (July)
12-month MTA  1.844% (July)
11th District Cost of Funds  0.934% (June)
Prime Rate  5.00% (July)
REAL ESTATE NEWS
 FICO has created a new prescriptive “Score Planner” tool that the company says will allow you to improve your credit score within a set time period by following a customized, detailed set of steps. Although it’s only in the pilot stage with one of the three national credit bureaus, Experian, FICO officials indicated that in the months ahead it should become widely available through participating banks, residential finance companies, brokers and others. Tom Quinn, FICO’s vice president of scores, said in an interview that it may be offered “for a fee or free of charge,” depending on the source. How does it work? For this column, FICO prepared an example based on a hypothetical consumer’s credit report. The borrower currently has a sub-par 623 score but needs a 675 or higher for a home loan at an affordable interest rate. As with all the Score Planner’s scenarios, the home buyer sets a deadline — anywhere from a few months to as long as a year — to achieve a desired score. Doing so before you apply for a home loan not only will improve your chances for approval, it should also save you thousands of dollars. Source: Ken Harney, The Nation’s HousingThe growing US economy is making homebuyers feel more confident in splashing the big bucks for a home. The luxury segment of the housing market – the top 5% of all residential sales – has gained by double-digit percentages in 19 major markets and sales at $1 million or more are up 13% year-over-year. Realtor.com’s 2018 Luxury Home Index is an analysis of the luxury sector across 91 counties and reveals that days on market was down 11 days in July to 108 compared to a year earlier. The speed of sales was higher in two thirds of the luxury markets analyzed and was the fastest for July in the 6 years that the index has been tracking that metric. In 49 of the 91 markets analyzed, the luxury tier currently has an entry point of at least $1 million and the number of sales at or above the $1 million mark in the 91 markets is up 12% compared to last year. “The strong economy is bolstering demand for luxury homes,” said Danielle Hale, chief economist for realtor.com. “They are selling fast and demand for these homes has pushed the entry level price point to more than $1 million in half of the markets studied. Although there are some pockets of weaker performance, we’ve seen double-digit price growth in 19 markets for the first time in four years.” Source: NAR

Average rents for US multifamily apartments gained 2.8% in July to an all-time high of $1,409. The survey of 127 markets also shows that average rents grew 3% year-to-date in July, evidence that there is still growth opportunity despite affordability and supply issues. With some investors concerned that the current cycle may be ending, the gain reflects favorable economic conditions according to a new report from real estate software firm Yardi. “One could say the market is experiencing typical summer growth, a good sign considering the length of the cycle, which has some worried that the party might be nearing its end,” the report says. “Economic conditions remain favorable for the multifamily industry, especially in secondary markets that are leading the nation in employment growth.” Occupancy rates increased in the first half of 2018 to 95.2% from 95.0% at the end of 2017. Even those metros among the top 30 which saw the largest increase in supply, with rent growth decelerating as the occupancy rate fell; have seen some positive signs this year. Yardi says that the occupancy rates are healthy even as more supply is added due to the strong demand from growth of rental-age households, supported by economic fundamentals. Source: MPA

Weekly Mortgage and Real Estate Report -Week of August 27, 2018

ECONOMIC COMMENTARY
Trading PlacesBorrowing from the name of a classic movie title, it seems like the focus upon trade keeps moving around the world. From Canada to Europe to China to Turkey. Thus far, we have not seen any negative effect upon economic growth. Tomorrow we will see the first revision of the measure of economic growth for the second quarter, but with the preliminary number at more than a 4.0% rate of growth, few are expecting a surprise on the downside.

On the other hand, the markets seem to be reacting to the long-term possibilities of trade wars. More specifically, when tensions flare up, stocks lose their momentum. On the bright side, interest rates tend to ease down a bit when the markets are worried about these issues. Thus far, when these trade concerns subside or there is news of possible agreements, stocks have been regaining lost ground very quickly.

Where is this leading us? From at least one vantage point, a slight slowing of the economy would not be such a bad thing if it also slows down the pace of rate increases. Economic growth is a positive phenomenon as it creates jobs and wealth, but if the economy heats up too quickly, higher rates could slow the economy more significantly. So, for right now, the markets getting a bit uptight about trade struggles might be just what the doctor ordered — as long as they don’t get out of hand.

WEEKLY INTEREST RATE OVERVIEW

The Markets. Rates inched down again this past week to their lowest level since mid-April. For the week ending August 23, Freddie Mac announced that 30-year fixed rates decreased to 4.51% from 4.53% the week before. The average for 15-year loans fell to 3.98% and the average for five-year adjustables decreased to 3.82%. A year ago, 30-year fixed rates averaged 3.86%. Attributed to Sam Khater, Chief Economist, Freddie Mac –“Backed by very strong consumer spending, the economy is red-hot this month, which is in turn rippling through the financial markets and driving equities higher. Unfortunately, the same cannot be said about the housing market, where it appears sales activity crested in late 2017. Existing-home sales have now stepped back annually for the fifth straight month, and purchase applications for home loans this week were barely above year ago levels. It is clear affordability constraints have cooled the housing market, especially in expensive coastal markets. Many metro areas desperately need more new and existing affordable inventory to break out of this slump.”  Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.
Current Indices For Adjustable Rate Mortgages
August 24, 2018

Daily Value Monthly Value
August 23 July
6-month Treasury Security  2.23%  2.17%
1-year Treasury Security  2.43%  2.39%
3-year Treasury Security  2.66%  2.70%
5-year Treasury Security  2.72%  2.78%
10-year Treasury Security  2.82%  2.89%
12-month LIBOR  2.827% (July)
12-month MTA  1.844% (July)
11th District Cost of Funds  0.934% (June)
Prime Rate  5.00% (July)
REAL ESTATE NEWS
 Millennials, millennials, millennials. It’s all we’ve heard about in the real estate market for the last several years, with a sprinkle of Baby Boomers thrown in. But here’s who we should be talking about: Women. Older women, to be exact. New data from the U.S. Census that was analyzed by economist Ralph McLaughlin “suggests single woman over 55 are the fastest-growing demographic of home buyers,” said Builder Magazine. That doesn’t mean they comprise the predominant buyer group; that goes to married couples, at 65 percent. But the numbers are interesting, nonetheless, especially when you consider that home purchases by single women last year measured 18 percent compared to only seven percent by their single male counterparts. The new U.S. Census Current Population Survey, which covered 60,000 households, showed that “the share of home purchases by single women in 2017 – including never-married individuals, widows and divorcées — hit 22.8 percent, the highest on record,” said the Washington Post. Perhaps most surprising is who comprises the largest percentage of single female buyers according to the National Association of Realtors (NAR) Generational Trends Report: 72 and older. So, what’s behind the trend? A number of things-

  • They’re downsizing. Women live longer than men, statistically, so many of these home purchases could be driven by the death of a spouse and/or the desire to trade a pricey and/or too large place for something better suited for one person. The study did not take into account how many of these buyers were already homeowners with a residence to sell.
  • Investment potential. “Primarily, older women are choosing to invest in real estate,” said CNBC.
  • Longer life spans mean more confidence in longevity. A couple of generations back, it would have been unheard of for a single woman to buy a home by herself, let alone at the age of 72. The dream of so many of our grandparents was to pay off their home and be free and clear. Entering into a 15- or 30-year home loan at an age when many are already retired is no longer a deterrent for these trailblazing women.
  • They want stability. “They want to have control over their monthly expenses,” said CNBC — “They’re going to be where their children or friends are. They’re not whimsical at that age.”
  • Rents are pricey...and still rising in many areas. The data shows that 23 percent “of single women cited rising rents as a ‘trigger’ motivation behind a home purchase,” said the Washington Post.

Weekly Mortgage and Real Estate Report – Week of August 13, 2018

ECONOMIC COMMENTARY
    What Could Stop The Machine 

The economy is humming and there is a certain optimism from analysts that the economy will continue to grow from here. Even the Federal Reserve Board in their brief recent statement used the word “strong” to characterize the economy. Though it seems to be “all systems go,” the question for this week is what could stop or slow down the present rate of growth.

For one thing, higher interest rates are the result of a stronger economy and they are designed to make sure that the economy does not run out of control. We could refer to this as an automatic braking system which would only be engaged in an emergency. Certainly, we have had higher rates this year. The strong job market could also keep a lid on economic growth if we actually run out of skilled workers to fill positions. We are seeing this somewhat in the real estate sector as there are not enough skilled workers to build homes.

Speaking of real estate, the shortage of inventory, the resulting higher prices and also higher rates seem to be slowing things down. Real estate and construction in general account for a big chunk of economic growth and any long-term slowdown could definitely affect the economy in general. Another wild card when it comes to economic growth, is the threat of a trade war. Making imports more expensive may help some industries, but hurt others and likewise for exports. We could add more variables such as the uncertain long-term effects of the tax plan, but we think you can see the picture. There are plenty of factors the economy must overcome to continue its present level of growth. We are not saying that this growth won’t continue, but it also makes sense to understand that growth is never a given, nor is any other future prediction.

REAL ESTATE NEWS
 The First American Homeownership Progress Index (HPRI) measures how a variety of lifestyle, societal, and economic factors influence homeownership rates over time at national, state and market levels. Nationally, potential homeownership demand represented by the HPRI increased 1.1 percent in 2017 compared with 2016, based on changes in the underlying lifestyle, societal and economic data. Factors that increased potential homeownership demand included income growth (+0.30 percent) and rising educational attainment (+0.13 percent), which reflects the influence of millennial behavior on homeownership. The declining unemployment rate also contributed to the rise in homeownership demand (+0.70 percent). Potential homeownership demand increased from 2016 to 2017 in 46 of the 50 metropolitan areas tracked by First American, as demographic and economic trends in these cities raised the likelihood of homeownership. “Millennials’ lifestyle and economic decisions are some of the main reasons we currently have a lower homeownership rate than expected, based on our HPRI,” said Mark Fleming, chief economist at First American. “Yet, it is reasonable to expect homeownership rates to grow as millennials continue to make important decisions, including attaining an education and, later in life, getting married and buying a home.” Source: First AmericanA new home will often come with a warranty from the builder, but that doesn’t mean the builder is on the hook for anything that breaks. Warranties differ from builder to builder, but they typically cover only specific features such as: concrete foundations and floors, carpeting, roofing, siding, garage doors, plumbing and electrical. Builder warranties usually last anywhere from six months to two years. Some last up to 10 years to cover “major structural defects.” However, many builder warranties do not cover: household appliances, shrinkage or expansion of the house, insect damage, or dampness or condensation caused by inadequate ventilation. “A builder warranty can give a false sense of security to home buyers, so you need to be careful,” says Robert Pellegrini Jr., president of PK Boston, a real estate law firm in Massachusetts. Pellegrini recommends that a real estate attorney look over the sale contract. “It’s a significant negotiation,” he says. Pellegrini says it’s important for new-home buyers to know the length of the warranty and what’s included and to learn how to notify the builder if something goes wrong during the warranty period. He says the biggest issue with warranty coverage is the cause of the problems the homeowner wants the builder to cover — “Was the damage due to neglect during building or to misuse by the homeowner?” Source: Realtor.com®

Apparently, the magic number for first-time home buyers is 28. That’s the average age that most Americans think a person should be when they buy their own home, according to a new Bankrate.com report conducted last month among a sample of 1,001 respondents. This may be a bit optimistic in practice, at least for buyers in today’s market. The National Association of Realtors®’ 2017 Profile of Home Buyers and Sellers found the median age of first-time buyers was 32 years old for the second year in a row. The Bankrate study did find some differences in opinion between genders and regions of the country. While a quarter of men think people should strive to buy their first home by age 25, just 12 percent of women say the same. Those who live in the Northeast appeared to have lower expectations for buying a first home than other survey participants. Nearly one in five living in this region responded that the right age to buy a home for the first time is 35 or older, twice as many as any other region. Source: Bankrate.com

Weekly Mortgage and Real Estate Report – Week of August 6, 2018

ECONOMIC COMMENTARY
   The Data Flows 

We started the flow of really important data on Friday, July 27. Though the numbers were preliminary, the first snapshot of economic growth for the second quarter was quite impressive. It more than made up for a weaker first quarter and you can be sure that the Federal Reserve Board’s Open Market Committee was taking note of these numbers when they met last week — especially the jump in prices reported during the quarter.

Regardless of the report, market analysts gave less than a five percent chance of a rate hike at the meeting and they were absolutely correct in that regard. However, the strong quarterly data increased the probability of a hike at their September meeting. There will be one more jobs report released and an adjustment in the quarterly growth data before they meet again in September. Right now, the markets see all systems go for a hike in September, unless there is a surprise or two in the interim.

The Fed did not have the opportunity to view the July jobs data before they met last week, but the numbers released certainly will not change their view of a growing economy. The headline numbers showed an increase of 157,000, jobs, less than expected — but the previous two months were revised upward. The unemployment rate of 3.9% was down from 4.0%. The increase in labor costs came in at 2.7%, close to the rate of inflation. Apparently, wages are not growing because workers are returning to the work force and worker shortages are only occurring within pockets of the economy.

REAL ESTATE NEWS
 Numbering just over 75 million, today’s 21- to 37-year-olds—millennials—are the largest generation in US history. They are more tech savvy, more racially and ethnically diverse, and more educated, and they marry and have children later in life than previous generations. And though most millennials have now entered peak household formation and homebuying years, they are becoming homeowners later and at lower rates. Our new, extensive Millennial Homeownership report finds that the homeownership rate of millennials between the ages of 25 and 34 was 37 percent in 2015, approximately 8 percentage points lower than the homeownership rate of Gen Xers and baby boomers at the same age. If the homeownership rate for millennials had stayed the same as previous generations, there would be about 3.4 million more homeowners today. Our report looks at demographics, lifestyle choices, and external barriers to homeownership to determine which factors have the greatest influence on millennials’ homebuying decisions. We quantify, for the first time, the influence of millennials’ lower marriage rates, greater racial diversity, increased education debt, and attitudes toward homeownership. Our findings show that delayed marriage had the most significant impact on millennial homeownership. In addition, increased racial diversity and higher debt levels played a significant role. Despite the lag, attitudes toward homeownership haven’t changed much and are expected to continue to strengthen as millennials age. Source: The Urban InstituteOwning a home makes almost half of Americans feel wealthy in their day-to-day lives, according to the Modern Wealth Index released by Charles Schwab. When Schwab asked a thousand Americans about their personal definitions of wealth in their lives, nearly half at 49% said they believe saving and investing is the way to achieve wealth over time. However, other things, including homeownership, make them feel wealthy in their day-to-day lives. The survey revealed that 49% of Americans feel wealthy when they own a home. However, homeownership was not at the top when Americans defined wealth. Sixty-two percent of the respondents defined wealth as spending time with family, while 55% said wealth means having time to themselves. Owning a home came in third. Americans also said they felt wealth in their daily lives when they eat out or have meals delivered (41%) and when they have subscription services like movie/TV and music streaming (33%). The company also asked the respondents to focus just on numbers. Respondents said they believe it takes $1.4 million to be considered financially comfortable, while it takes $2.4 million to be considered truly “wealthy.” Source: Mortgage Professional America

The most competitive, tightest housing market in decades may finally be loosening its grip, and that could put pressure on overheated home prices. The supply of homes for sale in the second quarter of 2018, the all-important spring market, rose at three times the rate of the same period in 2017, according to Trulia, a real estate listing and research company. The inventory jump was the largest quarterly improvement in three years and could be signaling a slight thaw in today’s housing market. But it is just a start. “This seasonal inventory jump wasn’t enough to offset the historical year-over-year downward trend that has continued over 14 consecutive quarters,” according to Alexandra Lee, a housing data analyst for Trulia’s economics research team. The supply of homes for sale is still down 5.3 percent compared with a year ago. Still, all real estate is local, and some markets are seeing greater relief. Thirty of the nation’s 100 largest cities now have more supply than a year ago. Source: CNBC

Weekly Mortgage and Real Estate Report – Week of July 23, 2018

ECONOMIC COMMENTARY
      The Housing Shortfall 

We are now more than half-way through the year and the biggest problem within the real estate sector continues to haunt the markets. The shortage of inventory is not only a drag for the real estate markets, but the economy as a whole. For decades, owning a home has been associated with the American dream. This is one of the few times in our history that we do not have enough homes for those who are ready to purchase.

The reasons for this shortfall are many. The financial crisis caused home building to fall significantly for years and we are still not building enough units. The Chief Economist of the National Association of Homebuilders recently estimated that builders would have to build 1.2 million units per year just to keep up with population growth and replacing aging housing stocks. At the current pace of below 950,000 units, there is a shortage of 250,000 units per year. That does not figure in the ground lost when even less units were being built in the earlier stages of the recovery.

The good news is that each year, builders are building more homes — despite obstacles such as labor shortages and higher lumber prices. But the shortages will not be made up all at once. Also contributing to the shortage is the fact that the baby boomers are holding on to their homes longer, as they delay retirement and/or downsizing. These homes will become available — again, not all at once. The housing shortage will eventually go away, but for now we will have slower growth in the real estate markets and thus a drag upon the overall economy.

REAL ESTATE NEWS
      If buying a home is anywhere in your sights, you’ll probably want to act fast. According to a new forecast, average payments will jump nearly 10 percent by early next year. It seems on-the-fence homebuyers need to pull the trigger. According to new data from CoreLogic, the typical payment on a home loan will likely jump 9.7 percent by March 2019, thanks to rising rates, inflation and higher home prices. All in all, the typical payment will come out to around $942 – a steep jump from the average $859 seen in March this year. “The U.S. median sale price has risen by just under 7 percent over the past year and the principal-and-interest payment on that median-priced home has increased nearly 10 percent,” according to CoreLogic’s Andrew Lepage. “Moreover, the CoreLogic Home Price Index Forecast suggests U.S. home prices will be up 5.8 percent year-over-year in March 2019 and some interest rate forecasts suggest the payments homebuyers face will rise as well.” Fortunately, for buyers who want to act before the impending rise, it seems homebuilders may be able to help. According to the recent data from the U.S. Census Bureau and the Department of Housing and Urban Development, housing starts were up more than 20 percent over May 2017’s numbers. Source: The Mortgage ReportsFifty-five percent of homeowners who have a child under the age of 18 say their kids’ opinions factored into their homebuying decision, according to a Harris Poll survey of more than 2,000 U.S. adults. What’s more, 74 percent of millennial parents—those up to age 36—indicate they took their kids’ opinions under consideration when buying a home. Renters pay even more attention to their children: 83 percent say their kids’ opinions mattered in their housing decisions. Though the trend is strong, real estate professionals and psychologists are torn on how much kids should be involved in real estate matters. Moving is a big decision, and involving the children more in the process may help them feel a greater sense of control and ownership, clinical psychologist Ryan Hooper told the Chicago Tribune. On the other hand, children could feel rejected if their parents are unable to fulfill their requests, Hooper says. Adam Lietman Bailey, a New York real estate attorney and author of the children’s book Home, says young children can be part of the homebuying decision without actually making the choice. He encourages parents to make their kids feel included by asking questions regarding what they like about the backyard or where their toys would go in the house. Still, “most parents already know [their kids’] desires and needs,” and “moving decisions are likely at a level above the child’s thinking capacity when choosing a home,” Bailey says. Source: The Chicago Tribune

The U.S. apartment market suffered its worst spring since 2010, near the depths of the housing crisis, as a flood of new supply and weakening demand resulted in rising vacancy rates and little or no rent increases in many major cities. Rents rose 2.3% in the second quarter compared with a year earlier, the weakest annual increase since the third quarter of 2010, according to data from RealPage Inc. While average rents continued to grow, individual landlords cut rents in some markets. In addition, landlords are offering tenants incentives. Landlords have enjoyed a record 32 straight quarters of annual rent growth on average, as the U.S. economy strengthened, and millennials delayed homeownership. But the reports of slowing, which began in a few markets in late 2016, have intensified to the point that the balance is shifting towards renters and away from landlords. Greg Willett, chief economist at RealPage, predicted average rents nationwide could flatten if current trends continue. “It’s kind of telling as we look at some of these individual markets that are losing momentum,” Mr. Willett said. The cause of the slowdown is primarily new supply. Developers responded to escalating rents by building the most new apartments in 30 years, sending a flood of new high-end units to downtown areas across the country. Developers are expected to add 300,000 new units over the next year across the U.S., Mr. Willett said. Source: The Wall Street Journal