Millennials; How Every Lender is Being Helped by Rent and Household Formation Trends
Tomorrow's commentary has some notes about W.J. Bradley and also a stinging rebuttal to Richard Cordray's continued reliance on enforcement actions, but yesterday the commentary mentioned some perks for new buyers offered by a builder. From Coester VMS Chris Nielsen writes, "How about this perk for new condos in Washington DC: growing closets for marijuana?!"
The real estate industry continues to wait for Millennials to marry, "bear fruit," and look for a place in the 'burbs. All in due time - no use rushing things. By the way, "Millennial" is anyone between 20 and 35 in 2016. How is their pay stacking up? The Census Bureau finds Americans less than 35 years old represents the biggest age demographic in the workforce, but more than 60% of millennials employed full-time earn less than the median income level of $46,480.
A recent MBA's "Chart of the Week" noted the changes in population age between 25 and 44 year olds and single family starts. As many of the Baby Boomers matured, a robust housing demand encompassed this generation, as the average new home quality in the US increased in the late 1980s. The housing market built 1.1 million new homes per year for thirty years from 1970 to 1999. Since the last recession, single family starts have remained at historic lows. Yet just like the Baby Boomers drove the market in the past, Millennials will be the next generation driving new housing demand.
Speaking of this age group, join Data Facts this Monday, March 21 at 10AM EDT, 7AM PDT, for a complimentary webinar 'Changes in Residential Lending that Should be on the Radars of LOs to CEOs.' I am honored to discuss interest rates, "Know Before You Owe" issues, the merger and acquisition environment, marketing service agreements, hiring Millennials, the continuing QM versus non-QM discussion, measuring borrower satisfaction, using trended credit data, and more.
And the MBA is offering up its Warehouse Lending Series on Tuesday March 22nd and then March 29th. "Are you a bank or mortgage banker interested in some of the finer points of warehouse lending, such as the key success factors, the key fraud risks and mitigants, and the key warehouse providers and the products that they offer? How about warehouse lender hot buttons, the key legal structures for warehouse lines, and the strengths and weaknesses of each? Warehouse lines for mini-correspondent lending, the key "red flags" for warehouse lenders, the risks warehouse lenders face with non-QM loans, the proper steps for successful wind-downs and workouts, and much more? Mike McAuley from our friends at Garrett, McAuley & Co. will be leading the webinar, along with Tom Kelly of Dorsey & Whitney. Registrants receive a comprehensive slide deck and access to a recording of the webinar for up to one year, in case you aren't able to attend the live session.
The National Reverse Mortgage Lending Association's senior staff will be conducting a webinar on recently implemented changes to HECM and Reverse Mortgage Lending. Learn from industry experts as to how these changes will impact your business. For companies that currently do not offer HECM products, this webinar will help you gain a better understanding of the current benefits of adding these products to your portfolio mix and questions you need to be asking. Register today for the April 18th webinar at MBA Education.
And Indecomm is offering up a free, "TRID for Settlement Agents" webinar on Wednesday, April 6th. "Do you wish you could share your TRID training with your settlement agents? Now you can. Indecomm has created a webinar that is written specifically for settlement agents and will present the free webinar -TRID for Settlement Agents on April 6th. This webinar is designed to provide additional support and training for those settlement agents you use on a regular basis. Feel free to share this information with settlement agents and join them as we provide best-in-class TRID education."
Returning to the Millennial theme, plenty of them, and others, are perfectly happy living in apartments. Nearly 100,000 apartments became available in the third quarter of 2015, which is 21 percent more than a year earlier and 73 percent more than two years ago. Due to high demand, more than 80 percent of these new apartments are rented within a year. Nearly half to two-thirds of apartments completed in a given quarter rent within three months and that share increase to 70 to 80 percent within six months. New apartments completed in the third quarter of last year were evenly divided between studios/one-bedroom units and units with two or more bedrooms, with affordable apartments in high demand as 76 percent of the least expensive new studios/one-bedroom apartments rented within 3 months, compared to 58 percent of the most expensive units. Of the 32 metros that were analyzed, 17 markets experienced a slowing of the rental market, whereas it had increased in 14 markets. In one metro, Portland, Oregon, the rental market has remained constant. The hot rental markets include Baltimore, Richmond, Las Vegas, Orlando, Raleigh, Phoenix and San Diego. The markets where the rental pace has declined are San Francisco, New York, Chicago, Des Moines, Atlanta and Washington DC. To read more about Zillow's article, click here.
Zillow recently analyzed the dynamics of American households today, as a larger share of households has three or more generations of the same family living under the same roof. This trend was common in the 19th and early 20th century, and then waned when baby boomers looked to form their own households. The current growth in multi-generational living is due to economic, cultural and social implications. As a result of the recession, the share of households with three or more generations living under the same roof increased and has remained high. Those living in farming communities and markets in the Southwest have larger shares of multi-generational households and the metro areas with the greatest proportions of multi-generational households have more residents that work in agriculture. Hispanics and Asians have the highest share of multi-generational households, while there has been a decline in these households among African-Americans and a slight rise among Caucasian households. Interestingly enough, multi-generational households do have higher combined incomes than smaller households but have lower incomes per capita. These types of households are also more common in less affordable markets for Hispanic, Asian and African-American households and multi-generational households tend to reside in homes with less than one bedroom per person.
The rise in home values is pushing one in four buyers towards purchasing a home due to the high cost of renting, according to a recent Redfin survey. This number is up from November when one in five buyers believed purchasing a home made more economic sense than renting, and jumped from one in eight buyers in August. Affordability was the main reason for buyers to purchase a home, followed by a major life event such as marriage or having a kid. Yet buying has become a competitive process due to low inventory and bidding wars in some areas. Already, 20 percent of buyers fear the pool of homes to choose from is going to get smaller and 16 percent felt there was too much competition. For example, 60 percent of buyers said they'd stay disciplined if in a bidding war, but pay a little more, 27 percent said they would back out to avoid over paying, and 12 percent said they would compromise on a lower-priced or less-competitive home. Thirty-one percent of buyers said they feel a greater urgency to buy now due to low interest rates and before home prices rise with 67 percent of buyers citing mortgage rates as a vital component when deciding to purchase a home, and 53 percent of buyers expect home prices to increase.
As rent prices have increased beyond income growth, saving for a down payment on a home has become even more difficult. To the surprise of no one households with above-average rent burdens save less money. Among employed renters, an increase of five percentage points in a household's income that goes to rent equals a savings rate that is 0.8 percentage points lower. For example, if 30 percent of income goes towards rent instead of 25 percent, renters should save about $460 less per year. For renters who have a smaller share of their income go towards rent (less than 13 percent), 29 percent of renters report no savings. A higher rent burden does make it harder to save as 60 percent of households in this category, paying 36 percent of their income on rent, save nothing at all. Looking at all renters as a whole, 36 percent report saving nothing.
And don't forget that Fannie Mae's chief economist said that housing affordability will continue to be a challenge in 2016. Income growth, eased lending standards coming, but so are price increases. The economy will continue growing, mortgage lending standards will ease and household income will rise in 2016, but housing affordability will continue be a challenge thanks to the continued increase in house prices, Fannie Mae said in a new report. "Despite our expectation of only a small rise in mortgage rates, home price and income dynamics should inhibit home purchase affordability," Duncan said.
The markets? Rates go up, rates go down, and successful LOs and companies almost don't care. Thursday rates decided to head lower. The 10-year note rate hit an overnight low just ahead of the US open of 1.854% before backing up on stronger economic data, notably the Philly Fed, and drifting back near 1.90% around which it oscillated from mid-morning into the close. The 10-year note closed 10 ticks higher to yield 1.90% whereas current-coupon agency MBS prices improved between 4-8 ticks better - a tick being 1/32.
Friday's economic calendar has just one scheduled data release: the March University of Michigan Survey of Consumer Sentiment figure at 10AM EDT. In the early going the 10-year is has improved a little to 1.88% and agency MBS prices are a shade better.
Jobs and Announcements
American Bancshares Mortgage out of Miami Lakes, Florida is expanding its footprint in the North and South Eastern states. "ABSM is a 21 year old direct seller/servicer committed to exceptional service with extraordinary employees. We have a strong company culture and have made a commitment to service levels, said John Cosculluela, CMB, CEO and President. We are looking for Successful Branch Managers, Sales Managers and Loan Officers who are passionate about their job and want to belong to a team of professionals that excel on every level. To learn more about ABSM's aggressive marketing and technology efforts, competitive commission structure and first time home buyer outreach programs contact Sandy Garcia, VP of Production.
Indecomm Global Services, a leading provider of mortgage technology, training, and outsourcing services is seeking an experienced UW Project Manager. Clients include prominent top tier, mid-tier lenders, and regional lenders as well as title and settlement companies. The successful candidate will oversee and manage the daily activities and facets of UW Due Diligence and Quality Control projects that include the tasks relative to loan underwriting reviews. These projects can be long or short term. This position is based out of St. Paul, MN. The ideal candidate should have 3 years minimum, 5 years preferred, of continuous UW and QC experience. Interested candidates should send their resume to HR Manager Candy Mechels.
And iServe Residential Lending is looking for Branches and Loan Originators across the U.S., with emphasis in Florida, Texas, California, Tennessee and Arizona who share the same philosophy for a rewarding lifetime career. "Looking for a stable and reliable lender to grow your book of business? You see me mention this company regularly. The measure of a successful lender is simple: longevity of the branch, operations, sales and management teams, controlled growth and happy, satisfied professionals with a voice in their future. This unique blend for success stems from the Operations and Sales Team working in a true partnership with the same goal in mind; closing loans with speed and ease. Contact Rick Trew at 615-869-0408 for the Eastern U.S. or Allen Friedman at 415-298-2500 for the Western U.S. (iServe also has immediate openings for Senior Underwriters with all designations (including VA). Remote office is acceptable.)
Congrats to Barbara Johnson! Online home mortgage lender AmeriSave announced that she has joined the company as its new chief operating officer.