A recent Harvard report revealed that the most stressful situations for Americans today involve health crises and the financial spiral it often causes. The study also indicates that of people that consider themselves highly stressed, finances is one of the top reasons.
With an economy slowly coming back from the brink of doom, many Americans continue to struggle. But when a health or work catastrophe takes place, how do homeowners cut back on their housing expenses? Trulia asked roughly 2,000 people that very question and came up with some interesting answers.
Pull out the moving boxes, it’s time to pack
When facing financial hardship, nearly two in five people say they would downsize to a smaller home to cut housing expenses. As the most common answer for how to slash the housing budget, twice as many people chose this option over the second most popular answer, which is renting out part of their home to a roommate.
Trulia reports that people would rather change where they live than whom they live with.
But not all demographics said they’d downsize, as middle-aged adults (aged 35 to 54) ranked as the least likely group to move to a less expensive area or a smaller home. Trulia cites jobs and kids that typically tie this group to a specific home or neighborhood as opposed to child-less young homeowners or retired empty nesters.
Whipping out the rent
One in ten people living in expensive neighborhoods said they would rent out part of their home to visitors or vacationers – think Airbnb. This number was more than twice the level of people living in less expensive neighborhoods, which we suspect is due to space restrictions. No one wants a stranger on their couch, but maybe in the empty garage apartment it would be tolerable.
Trulia reports that renters are more likely than owners to downsize, rent to a roommate, move to a cheaper neighborhood or city, or hell, even live out of their car. The company notes, “The only action that owners would more likely than renters to take is to stop paying the rent or mortgage.”
This makes sense, because it is much easier for renters to be nomadic as they don’t have to sell a home which could restrict their movement as they await a closing, and it also makes sense that owners are more likely to delay payments – it’s easier to get kicked out of a rental for non-payment than it is a mortgage in most situations, as the stakes are lower.
Trulia’s statement on homeownership
What caught our attention about this report is Trulia Chief Economist, Dr. Jed Kolko’s statement about homeownership. “Homeownership may have many advantages, but renting might make it easier to cut housing costs if it suddenly becomes necessary. That’s an important way that renting can set you free.”
Interesting contrast with the National Association of Realtors’ long campaign “Home Ownership Matters,” no?
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?
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.
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.
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.
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.”
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.
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.
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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