Tag Archives: Home-ownership

Millennials have different views on Home Ownership

Millennial’s have different views on Home Ownership

Here’s a look at what Millennial’s want in a new home and why:

Contrary to reports that the recession left Millennials disillusioned about owning a home, 75 percent believe homeownership is an important long-term goal and 73 percent see real estate as a good investment. About a quarter already own a home and 60 percent plan to purchase in the future. According to estimates, Millennials aged 25-plus account for 15 percent of new home shoppers. Lending constraints, student debt and down payments are still hurdles, but as the economy and jobs continue to improve, substantially larger numbers of these buyers will shop for homes. Over the next five years, Millennials are expected to account for about two-thirds of new households.

Millennials have long been touted as the generation that prefers city over suburbs, but multiple recent studies show that city living only appeals to a small portion, from 5 to 16 percent (depending on the study), while 55 to 66 percent say they prefer the suburbs. On the other hand, younger Millennials who are renting definitely favor urban settings.

Three-quarters want a single-family home. When asked about home size, 2,475 square feet is what a majority would like to have. Two-story homes (52 percent) and open concept floor plans (78 percent) were also preferences in recent NAHB’s research. For bedrooms, 81 percent said they wanted either three or four and two or two and a half baths would be fine.

“Home design is one of the top motivating factors,” says Mollie Carmichael, a principal in John Burns Consulting. Design emerged as the No. 1 trend for Millennials. Also topping the list was a focus on function over size.

The most desired feature? It’s a laundry room, with 55 percent of Millennials saying they just wouldn’t buy a new home without one. Surprisingly, exterior lighting came in second, with 88 percent saying it was essential or desirable. Storage is also important, with linen closets, a walk-in pantry and garage storage making the top 10 most desired features.

About half of those under 35 report that their current use for outdoor space is limited to grilling, yet a majority want their space to feel like a relaxing retreat for entertaining. And they were more likely than older generations to use their outdoor space for meals and to decorate as they would their living and dining rooms.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 4.50 MBS) lost -17 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move slightly higher for the week.

Overview:  MBS dropped for the third straight week which has caused fixed mortgage rates to slowly rise during that period.  GDP and Trade Talk were the main focus of the markets, with the European Central Bank also receiving some attention.

Gross Domestic Product: The 1st QTR GDP had its final revision and it moved up from 2.0% to 2.2%. We got our first look ( we will see this number revised several times) the 2nd QTR GDP, and it basically matched expectations with a 4.1% reading, which is very strong. The surprise came in the Price Index which jumped 3.2% vs estimates of 2.3%. Consumer Spending “popped” with a huge surge of 4.0% vs est of 2.9%.

Consumer Sentiment:
 The final July University of Michigan reading came in at 97.9 vs est of 97.1

Durable Goods: The very volatile report showed that the June data increased and had major upward revisions to May’s data. The Headline reading showed a 1.0% MOM gain vs est of 3.%. But the reason for the miss was the large revision from -0.6% to -0.3% in May. When you strip out the transportation sector, orders rose by 0.4% which was close to expectations of 0.5%. May was revised upward from -0.3% all the way up to +0.3%. So actually that ex-transport number was a beat.

Central Bankpaloza: The European Central Bank and its President Mario Draghi kept their rates unchanged and basically used the exact same policy statement as their last one. They continued to pledge that their QE bond buying program would end this year (unless they needed it to go longer) and that they would keep rates as-is until next Summer. In his live comments, Draghi said that there is still uncertainty over trade issues but that the direct effects of implemented tariffs is limited.

Trade Wars: On the other trade front, President Trump met with Jean-Claud Junker, the EU Commission President face-to-face to talk trade. During their joint press conference Junker said that the only reason that he traveled to the White House was to make a trade deal.  Here are some of the highlights:

  • Europeans agreed to work on more U.S. LNG exports
  • Europeans agree on lowering industrial tariffs
  • EU agrees to align regulator standards on medical products
  • EU agrees to import more U.S. soybeans

China announced a fiscal stimulus plan that is designed to front-run an excepted economic slowdown due to the trade war with the U.S. The fiscal package contains measures that included giving an additional tax cut of 65 billion yuan ($9.6 billion) to companies with R&D expenditure, expediting non-budgeted special bond sales to assist local government infrastructure financing and easing restrictions on banks’ issuance of financial bonds for small firms.

In what seems like a direct response to China’s stimulus plan, the White House announced a $12 billion “short-term” stimulus plan to help US farmers hurt by China’s retaliatory tariffs. The package will consist of direct payments, food purchases and trade development – under a program already authorized under the Commodity Credit Corp act, which means Congressional approval is not required. Further details on the program will come by Labor Day.

What to Watch Out For This Week:

The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets.  Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

Best Cities for First Time Homebuyers

Best Cities for First Time Homebuyers:

The housing market has recovered from the crisis of 10 years ago like it never even happened. National home prices have surpassed their prior peaks, and homebuyers are faced with bidding wars as inventory is low. These challenges are more onerous for first-time homebuyers who do not have the advantage of another home to sell (that has likely appreciated) to help with funding the down payment for a new home. It’s not all doom and gloom though, and some cities have more favorable conditions for first-time buyers than others.

In a new study, Lending Tree decided to rank the best cities for first-time homebuyers in the nation’s 100 largest cities. The factors that made a housing market favorable were:

Average down payment amount. The big initial pile of cash is something most first-time buyers struggle with and takes years of savings for many.

The share of buyers using an FHA mortgage. Buyers using FHA financing are required to put down as little as 3%, and have higher limits on the debt-to-income ratios. These and other loan features increase the likelihood of being approved for a mortgage while still getting competitive mortgage interest rates.

Average down payment percentage. Lower down payments increase access for first-time buyers. Down payments are one of the main obstacles to home ownership, as many renters can afford the monthly mortgage payment.
Percentage of buyers who have less than prime credit (below 680). First-time buyers often have lower credit scores than repeat buyers so are more competitive in areas without as many prime borrowers.

The share of homes sold that the median income family can afford (Housing Opportunity Index). Many cities have become too expensive for the median family. This measure of affordability in our ranking elevates cities that are still affordable for median income families.

Average FHA down payment as a percentage of average down payment for all loans: The lower down payment for FHA loans is more valuable in some areas than others. This measure of the FHA benefit tells us how much FHA borrowers truly saved on down payments.

Lending Tree ranked the following cities the top 10 most accessible:
Little Rock, Ark.
Birmingham, Ala.
Grand Rapids, Mich.
Youngstown, Ohio
Winston, N.C.
Dayton, Ohio
Scranton, Pa.

Source: Lending Tree

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) gained +9 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move sideways for the week.

Overview: Mortgage backed securities sold off for much of the week on higher inflationary data (bonds hate inflation) but we got a nice (and temporary) bounce on Friday due to parking over the long holiday weekend with the world’s two largest economies shut down (U.S. and China).

Inflation? You bet. The Consumer Price Index readings for January were higher than expected with the Headline YOY CPI hitting 2.1% vs est. of 1.9% which is a big beat. Core (ex food and energy…everything that actually matters) CPI YOY increased by 1.8% vs est. of 1.7%. The Producer Price Index readings for January were double than expected when looking Core PPI MOM (0.4% vs est. of 0.2%). The YOY PPI Headline data hit 2.7% vs est. of 2.5%.

In another inflationary report, Import Prices MOM jumped by 1.0% vs est. of 0.6% and the prior month was doubled from 0.1% to 0.2%. YOY, Import Prices were up by 3.6% vs est. of 3.0%.

Retail Sales: The headline data was disappointing. January was lighter than expected (-0.3% vs est. of +0.2%), plus December was revised lower from 0.4% down to 0.0%. When you strip out Autos, Retail Sales were flat at 0.0% vs est. of a gain of 0.4%.

Taking it to the House: The NAHB Sentiment Index remained at 72 which is an extremely high reading and was not impacted by rising mortgage rate expectations. New Housing Starts in January were much higher than expected with 1.326M vs est. of 1.234M. Building Permits were also stronger than expected (1.396M vs est. of 1.300M). SFR were basically at the same pace as the prior month, the beat was due to a surge in Rental Properties which is not good news for the housing market.

Jobs, Jobs, Jobs: Initial Weekly Jobless Claims matched expectations with a low 230K reading. The more closely watched 4 week moving average is still below 230K with a 228,500 reading.

Philly Fed: Their February Business Outlook Survey jumped to an extremely high reading of 25.8 which handily beat out expectations of 21.1. New orders, at 24.5, are surging and unfilled orders, at 14.5, are piling up fast. Hiring is so far keeping up, at 25.2.

Consumer Sentiment: The Preliminary February University of Michigan’s national survey was red hot with a reading of 99.9 vs est. of 95.5. The one year inflation expectations were at 2.7%, the 5 to 10 year outlook was at 2.5%.

What to Watch Out For This Week:

Homeownership preferred to renting in 78 out the 100 Largest U.S. Cities

Home-ownership preferred to renting in 78 out the 100 Largest U.S. Cities:

However, 22 out of the largest 100 cities are seeing more renting households. RENTCafé has released their analysis based on American Community Survey archives from the US Census Bureau’s public database. The analysis compared the number of people living in renter and owner-occupied housing units in 2006 and 2016.

The analysis found that the renter population increased by more than 23 million over the period, growing by more than a quarter. Meanwhile, the overall homeowner population increased by less than 700,000 – a virtual standstill compared to the growth in renter population.

Although the US is far from becoming a renter nation, the changes in populations were enough to shift the balance in some of the largest cities that were previously dominated by homeowners. From only 20 out of the 100 largest cities dominated by renters in 2006, there are now 42 such cities.

The analysis found the biggest change in renter share in Toledo, Ohio, where the percentage of renters increased 31.1% over the decade from 38.3% in 2006 to 50.3% in 2016. Memphis, Tenn.; Tampa, Fla.; Hialeah, Fla.; and Stockton, Calif., rounded out of the top five new renter-dominated cities in terms of renter share change.

In other large cities, the renter-homeowner population ratio has changed dramatically, despite the renter population continuing to trail homeowners. The analysis found that all large cities recorded increases in the rentership rate, with only Anchorage, Alaska; Irving, Texas; and Winston-Salem, N.C., posting decreases.

What Happened to Rates Last Week?

Mortgage backed securities (FNMA 3.50 MBS) lost -102 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move higher for the week.

Overview:  The combination of a more “hawkish” tone from the Federal Reserve and very strong manufacturing, wages and jobs data continued to brighten the economic growth outlook.  Bonds do not perform well in a growing economy and continued their downward trend that we have seen all year which has meant a steady upward march in fixed mortgage rates.

The Talking Fed: The FOMC voted 9-0 to keep their Fed Fund Rate unchanged at 1.25% to 1.50%.
You can read the official statement here.
They had a more noticeably more “hawkish” tone in this statement.  In December they said that inflation would “remain somewhat below 2% in the near term”.  That is now “Inflation on a 12 month basis is expected to move up this year”.
They also said that:
– Economy to warrant further gradual increases in rates
– Market based inflation compensation gauges rose in recent months
– Gains in employment, spending and investment has been solid.
– Janet Yellen’s last day is Saturday.  Jerome Powell will be sworn in on Monday.

Jobs, Jobs, Jobs:

January Non-Farm Payrolls 200K vs est of 180K
December NFP revised upward from 148K to 160K
November NFP revised downward from 252K to 216K
The three month rolling average is now 192K!
Average Hourly Wages YOY hit 2.9% vs est of 2.6% (increase of 0.75 per hour)
Average Hourly Wage MOM 0.3% vs est of 0.3%
Average Hourly Wage is now $26.74
The headline Unemployment Rate remained at 4.1% which matched expectations.
The participation rate remained at 62.7% vs est of 62.8%

Manufacturing: The January ISM Manufacturing data was very strong and beat out expectations handily with a 59.1 vs est of 58.8 reading. But the real story is ISM Prices Paid which shot up to a crazy 72.7 vs est of 68.0.

The January Chicago PMI was very robust and handily beat out expectations with a reading of 65.7 vs est of 64.1. Keep in mind that ANY reading above 50.0 is expansionary and readings above 60.0 are crazy hot growth. December’s block-buster reading of 67.6 was not a fluke or error, in fact it was actually revised even higher to 67.8.

What to Watch Out For This Week: