Banks Causing Housing Slowdown?

Banks Causing Housing Slowdown? Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Some analysts are blaming the slowdown in the housing market on banks that are preventing too many prospective buyers from getting a mortgage.

“It is difficult for any home owner who doesn’t have pristine credit these days to get a mortgage,” Federal Reserve Chairwoman Janet Yellen said in June.

Bank giants have been confirming that in recent months. John Stumpf, CEO of Wells Fargo & Co., the nation’s largest mortgage lender, said that the lender was unwilling to lend to lower-income borrowers or those with low credit scores. That won’t change unless government regulators make it more difficult for investors to force banks to repurchase securitized loans.

“If you guys want to stick with this program of ‘putting back’ any time, any way, whatever, that’s fine. We’re just not going to make those loans, and there’s going to be a whole bunch of Americans that are underserved in the mortgage market,” Stumpf said, referring to loan-purchase demands by Fannie Mae, Freddie Mac, and private investors.

In July, JP Morgan Chase & Co. CEO James Dimon said that the bank’s volume of loans insured by the Federal Housing Administration was way down for the year.

“We want to help the consumers there, but we can’t do it at great risk to J.P. Morgan, so until they come up with some kind of safe harbors or something, we’re going to be very, very cautious in that line of business,” Dimon said.

Mortgage lending has been slowing. The Mortgage Bankers Association predicts the volume of mortgage-loan originations to fall 12 percent this year, despite interest rates being at yearly lows.

“The lowest quarter of the housing market [by price] will see less demand, fewer sales, less increases in price, and more decreases in price,” unless banks change their mortgage-lending policies, says David Blitzer, the managing director and chairman of the Index Committee at Dow Jones S&P Indices.

Lawrence Yun, chief economist for the National Association of REALTORS®, says that 15 percent more mortgage applications are being denied this year than in 2000. But he says that is “relatively normal” for the housing market.

Still, “a robust recovery is not occurring,” Yun says. “We are projecting a slow recovery in home-sales activity because of the current tight underwriting standards.”

Source: “Opinion: When the Next Housing Bust Hits, Blame the Bankers,” MarketWatch/The Wall Street Journal (Sept. 4, 2014)

Where Homes Are Most Affordable

Where Homes Are Most Affordable. Image courtesy of Pixomar / FreeDigitalPhotos.net

Home affordability varies greatly depending on where a buyer lives, as well as other factors. Using RealtyTrac’s income-to-price affordability ratios from more than 2,000 counties, 24/7 Wall St. pinpointed where home affordability is highest. In fact, in some markets, home owners may need to use only about 3 percent of their income to afford a median-priced home.

Unsurprisingly, San Francisco County in California had the least number of affordable homes in the nation. In San Francisco, the median selling price for houses and condos recently reached the million-dollar mark.

But on the opposite end of the spectrum, the following seven markets are considered some of the most affordable in the nation. (The affordability rate is the percentage of the county’s estimated median household income needed to make monthly payments — including mortgage, property taxes, and homeowners insurance — on a median-priced residential property.)

1. Chattooga County, Ga.
   Affordability rate: 3.75%
   Household median income: $41,864
2. Lake County, Tenn.
   Affordability rate: 5.75%
   Household median income: $33,512
3. Edgecombe County, N.C.
   Affordability rate: 6.17%
   Household median income: $40,726
4. Upson County, Ga.
   Affordability rate: 6.31%
   Household median income: $37,601
5. Barnwell County, S.C.
   Affordability rate: 6.81%
   Household median income: $35,219
6. Obion County, Tenn.
   Affordability rate: 6.88%
   Household median income: $45,919
7. Lamar County, Ga.
   Affordability rate: 6.92%
   Household median income: $33,661

Source: “The 10 Most Affordable Markets in America,” 24/7 Wall St. (Sept. 4, 2014)

Is This the Nation’s Next Housing Crisis?

Is This the Nation’s Next Housing Crisis? Image courtesy of cooldesign / FreeDigitalPhotos.net

The lack of affordable, accessible, and well-located homes is failing to meet the needs of an aging population and could be the nation’s next housing crisis, a new report suggests.

A new study by the Harvard Joint Center for Housing Studies and AARP Foundation points to three main issues: The cost of renting and home ownership is too high; many homes and apartments lack basic accessibility features; and older Americans say they want to “age in place” in their current home but are living in car-dependent suburbs and rural towns that can make it more difficult.

“If things don’t change, low-income older people will be compromising their well-being in many respects,” says Chris Herbert, acting managing director of the Harvard Joint Center for Housing Studies. “It’s an issue that will affect us all.”

In 15 years, one in five Americans will be 65 or older, according to the report.

“You’ve got a scenario with the largest generation we’ve ever had moving into their senior years combined with the fact that longevity is increasing,” says Jonathan Smoke, chief economist at realtor.com®. “And we’re fairly ill-prepared to address the housing needs and challenges of them.”

Incomes for seniors are not rising, but home prices are, says Smoke. Millions of low-income older adults are sacrificing spending on other necessities — such as health care and food — to pay for higher housing costs, according to the Harvard study.

Also, the study shows that the majority of people in their 50s and 60s live in rural areas or car-dependent suburbs with no access to public transportation. This will make it challenging for seniors to stay in their current residences if they become unable to drive.

“It’s a conundrum. Seniors today — and most likely tomorrow — are living in places that are not ideal to enjoy fulfilling lives as we age,” says Smoke.

Also, only 1 percent of U.S. housing units have all five of the “universal design” features: no-step entry; single-floor living; extra-wide doorways and halls; and accessible electrical controls, switches, and lever-style door and faucet handles, according to the report.

The main reason so many homes lack such accessibility? It can be expensive to install them. For example, adding a ramp can cost $2,400, and a stairlift can cost up to $12,000.

According to the study, change is slowly occurring to address such issues. States such as Ohio have offered tax credits of up to $5,000 to help home owners make their residences more accessible, and Massachusetts is providing loans of up to $30,000 so home owners can add accessibility features. Also, some states, such as Colorado, Massachusetts, Mississippi, Missouri, Oregon, Texas, and Utah, are offering developers more incentives to build affordable housing near mass transit.

“Addressing the needs of seniors will improve communities for everyone,” says Smoke. “I don’t think you want to be a community that screams: ‘If you’re over 65, you’ll want to leave here.'”

Source: “The Next Housing Crisis: Aging Americans’ Homes,” Forbes.com (Sept. 2, 2014)

Sluggish Housing Market Blamed for Drop in Title Insurance Volume

Sluggish Housing Market Blamed for Drop in Title Insurance Volume. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Title insurance premium volume has fallen 16.6 percent during the second quarter of this year compared to last year, according to the American Land Title Association.

“A lackluster spring home buying season that was weaker than anticipated, coupled with a substantial decline in refinance activity, resulted in the drop in title insurance premium volume,” says Michelle Korsmo, ALTA’s CEO. “Despite the lull in the housing market, the title insurance industry remains in a strong financial position posting more than $90 million in net income this quarter. … For more than a century, title insurance companies have protected the interests of home buyers through a process that has given Americans a sense of security in what is almost always their most significant investment – their homes.”

During the second quarter of 2014, the title insurance industry generated $2.7 billion in title insurance premiums, compared with $3.3 billion during the second quarter of 2013, according to ALTA.

The title insurance companies that have the largest market share in the industry are Fidelity Family (34%); First American Family (27%), and Old Republic Family (14%).

Meanwhile, the following states generated the most title insurance premiums in the second quarter of 2014:

• Texas: $430 million, down 1.5% from the second quarter of 2013
• California: $354 million, down 21.5%
• Florida: $264 million, down 10%
• New York: $225 million, down 0.6%
• Illinois: $101 million, up 2.9%

Source: American Land Title Association

Millennials and Boomers Trading Places

Millennials and Boomers Trading Places. Image courtesy of stockimages / FreeDigitalPhotos.net

As the economy improves, Millennials and Baby Boomers are on the move, but they’re heading in opposite directions, according to a new analysis by real estate data firm RealtyTrac.

Each year, 17 million Americans (or about 6 percent of the population) move into a different county, according to Census Bureau data. RealtyTrac’s analysis found Millennials (considered born between 1977 to 1992, in this survey) to be the most mobile generation, moving away from counties with populations of 178,000 or fewer and moving into counties with larger populations (500,000-plus).

“The Millennial generation is generally moving from lower-priced to higher-priced markets for both buying and renting, with the tradeoff being more jobs (lower unemployment) and higher median incomes in the markets they are moving to,” the report revealed.

On the other hand, Baby Boomers (defined as being born between 1945 to 1964) are moving away from higher-priced markets with large populations to lower-priced markets in smaller counties. Baby Boomers are gearing up for retirement and are less concerned about the job market and more concerned with living in an affordable place, the report says.

According to RealtyTrac’s analysis, here’s where Millennials are heading:

1. Fayette, Ga. (Atlanta)
2. Citrus, Fla. (Homosassa Springs)
3. El Dorado, Calif. (Sacramento)
4. Yavapai, Ariz. (Prescott)
5. St. Clair, Mich. (Detroit)
6. Livingston, Mich. (Detroit)
7. DeKalb, Ill. (Chicago)

RealtyTrac’s analysis shows Baby Boomers are moving away from at the fastest rates:

1. Fulton, Ga. (Atlanta)
2. Arlington, Va. (Washington, D.C.)
3. DeKalb, Ga. (Atlanta)
4. Wayne, Mich. (Detroit)
5. Clayton, Ga. (Atlanta)
6. Alexandria, Va. (Washington, D.C.)
7. Milwaukee, Wis. (Milwaukee)

Where are the Boomers heading then? The highest percentage of Baby Boomers are moving to Florida, near Punta Gorda, Orlando, and Cape Coral, according to the report. Also, a high percentage of Boomers are heading to counties near Prescott and Phoenix, Ariz., and Hilton Head, S.C., according to the report.

Source: “10 Places Boomers and Millennials Are Escaping From the Fastest,” The Wall Street Journal (Aug. 17, 2014)