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Economics

CoreLogic: homebuyer demographics are shifting, investors are jumping ship

CoreLogic’s new report indicates that “Generation Renter” and retiring Baby Boomers will strongly impact the next two decades of homeownership, and notes who will have to step up as the investor “Gold Rush” ends.

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According to CoreLogic’s June MarketPulse report, home prices continue to increase, reaching double digits at 10.5 percent in April 2014 compared to April 2013. Further, the property information, analytics and data-enabled services provider reports that REO inventory is on the rise, reaching 430,000 properties in March of 2014 (the most recent month of reporting).

The company states that overall institutional investor share is falling in many markets, but prices, demand and supply remain attractive in Atlanta, Charlotte, Miami and Phoenix.

“Generation Renter” is on the rise

In the report, CoreLogic Deputy Chief Economist Sam Khater cites the Millennial generation as being slower to marry, and as taking more time to further their education than previous generations, both of which play a tremendous role in household formation (aka buying a house). Further, as the generation struggles to find employment after college, many are living with parents or renting for longer periods of time than past generations.

Khater said, “While Millennials were severely impacted by the Great Recession, they were on a fundamentally different trajectory than their predecessors even before the recession, particularly as it pertains to education, debt and income. The cascading effect of Millennials’ changing economic impact is hampering their ability to achieve homeownership, which puts an increased emphasis on entry-level affordable homeownership, such as condominiums.”

He concludes, “Unlike their predecessors, only a minority of Millennials are homeowners, so perhaps a more apt nickname for this cohort is Generation Renter, or Generation R.”

The overall health of the market today

CoreLogic President and CEO Anand Nallathambi reiterates that we are in the middle of a historic reset in the mortgage market driven by weak economic growth, as well as a number of other factors.

Nallathambi cites four factors that he says will likely change the face of the mortgage market for years to come. In summary:

  1. Shifting Demographics – as previously mentioned, “Generation Renter” is bucking the trend of young first-time buyers entering the market at this stage of an economic recovery, and as investors leave the market, Baby Boomers are retiring in record numbers (thus their mortgages are being paid off, or they’re cashing out to pay for a smaller space in full). These two generations are driving the shift in the market.
  2. Underlying Health of the U.S. Homebuyer – Nallathambi states, “”Until we see a sustained pathway to job creation and income growth [not generated by “unprecedented fiscal and monetary stimulus”], we will continue to see potential homebuyers hesitate to take on mortgages and purchase homes.”
  3. The Unintended Consequences of Low Interest Rates – Homeowners benefited from low interest rates by refinancing, boosting consumer spending power, but only in the near-to-medium term, which could have the opposite effect on home buying. These homeowners may stay out of the housing market longer than they otherwise would have, prolonging the inventory shortage and reducing the pool of possible buyers. Lastly, he cites new government policy that loosens up tight lending, but “likely only modestly.”
  4. The End of the Investors’ “Gold Rush” – “There are still pockets of investors around the country, but the properties desireable to investors are dwindling,” Nallathambi observes. “Our research shows that investors are leaving the market and first-time and trade-up buyers will need to step in to fill the void.”

Read the full CoreLogic MarketPulse report for in-depth commentary from company leadership.

Economics

Why it’s about to get more expensive to get a mortgage

(FINANCE) Borrowing money is getting more expensive, especially for those looking to get a mortgage. But why?

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Although there have been some blips, bonds have grown substantially in value since the 1980s. They’ve performed extremely well for a number of reasons, not least of which is the big slowdown in inflation over that time period.

The result, for investors, has been that anything “bond-lik,e” i.e. capable of paying a regular income – like a high-dividend stock or even a property like your home – has shot up in value. A reversal of bond prices would mean less support for such investments.

That’s what the economy is currently experiencing. According to Financial Times, American worker wage growth is hastening the sell-off of bonds by the US government, which is decreasing the overall price of bonds. As bond prices go down, the interest rates that they offer new investors go up. That rate jumped to 2.85 percent last Friday, the highest level since 2014.

Since the rates at which banks lend their money are largely based on the interest rates offered by bonds, regular folks looking to take out a mortgage or a loan are facing higher costs.

How does this work?

If we’re talkin’ bond prices, we’re talkin’ yield. When the price of a bond goes up, the yield of that bond goes down! Let’s say you’re getting paid $5 each year. If you pay $50 for that right, then you’re making a 10% “yield” (5/50 = 10%). But if you pay $100 for that right, then you’re making a 5% “yield” (5/100 = 5%).

It’s the same thing with the price of a bond because the amount a bond investor gets paid (usually) is fixed. And so, when the bond goes up in value, the “yield” goes down – and vice versa.

For realtors, its important to help clients shop for the best rates to improve their confidence in this market. Leveraging the right online and local financing resources can help potential buyers get the best deal. Explaining broader market context is also critical. Historically, a three percent interest rate is still very low.

According to Investopedia, mortgage rates averaged 7.81% in 1996 and 10.19% in 1986. Instilling confidence with information will put buyers and sellers in the right place to make moves.

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Economics

How does this soft jobs report impact the housing market?

(REAL ESTATE NEWS) When we see a soft jobs report, does that hurt or help the housing market? We talk to two economists about it.

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In a year of political uncertainty, the release of any jobs report is polarizing. Political figures and armchair policy wonks will read into the data as they wish, but not housing economists.

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That’s who we look to in these times, because we all know that jobs is the cure-all for a recovering economy, but payroll growth slumped in September as the U.S. Labor Department reports that employers added only 156,000 jobs.

This fell short of the 172,000 originally projected by economists surveyed by Bloomberg.

Hidden positives in the report

Dr. Ralph McLaughlin, Chief Economist at Trulia said, “While the September jobs report came in below expectations, the continued addition of jobs to the US economy will help buoy demand for homes, both on the for-sale and rental side of the market.”

He observed another positive hidden in the Labor Department result. “In addition, wage growth kicked up again, which will help bolster the savings of first-time homebuyers trying to scrape together a downpayment.”

Real estate remains unchanged

“Given no major surprise in the data, the national outlook for real estate market remains essentially unchanged, with home sales expected to squeak out slight gains in 2016 and 2017 while commercial building vacancy rates should continue to fall,” said NAR Chief Economist, Dr. Lawrence Yun.

Yun adds that “we should note that men have been underperforming as 68.4% of adults have jobs, down from historic norm of around 75%. Meanwhile, 55.8% of women have jobs, roughly matching the historic norms.”

Pointing out that the data is being “digested” through the perspective of the upcoming election, Dr. Yun notes that, “among men, those with a college degree 72% of adults are working while only 54% of those with only a high school degree are working.”

Dr. Yun observes, “There will surely be a big divergent voting patterns among men versus women and among those with college education and those without in November.”

#jobsVhousing

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Economics

Mortgage companies hiring time travelers to uncover missing documents?

(MORTGAGE NEWS) – Mortgage companies are hiring for an interesting new position that may speak to their role in the economic crash of 2008.

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During the Great Recession of 2008, it’s been estimated that around seven million Americans lost their home. Many of the homes that went into foreclosure did so because people lost their jobs, and just gave up on their home. In some, people got kicked out based on false documentation, faulty paperwork or just downright illegal mortgage servicing. Numerous lawsuits have been filed and won by homeowners who were wrongfully evicted.

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In California, in Yvanova v. New Century Mortgage Corporation, the California Supreme Court ruled that plaintiffs held the right to contest foreclosures when documentation (in this case, a mortgage transfer that was allegedly void) was not handled correctly. The Court didn’t determine validity of the document in Yvanova’s case, just that she had the right to contest the foreclosure.

New jobs in mortgage documentation

According to David Dayen, who wrote Chain of Title, this phenomenon has brought new jobs to the market. Career Builder lists a job for a “Default Breach Specialist” posted by a recruiting firm in Jacksonville, Florida. The primary characteristics for this position:

“The Default Breach Specialist responsibilities include ensuring all breach letters are issued as required by investors, insurers and/or State Law.  Responsible for ordering title, reviewing title and all security documents to identify missing assignments needed to complete the chain of title prior to foreclosure referral.”

Seeking time travelers

According to Dayen, all the assignments of mortgage should have been prepared and recorded at the time of the sale or transfer. He questions why any mortgage company would need to order these documents.

In Yvanova’s case, it’s alleged that the mortgage was not converted into the trust in a legal fashion. In many of the cases involving foreclosure, third parties were hired to produce the paperwork that conveyed a mortgage into the trust. Dayen alleges that many of these companies “mocked up” documentation.

Although it is possible that the mortgage company is simply looking for someone to make sure everything is in the case file, it’s also possible (some would say highly likely) that some documents may never be found because they don’t exist.

The failure to follow the law as it pertains to property records is so bad that companies are now hiring chain of title specialists to manage the problem. This does not put the real estate industry in the best light.

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