- Utah has taken the lead in job creation. North Dakota, Wyoming, Georgia, and Florida round out the top-five. At the other end, West Virginia, Montana, Maine, Mississippi, and Rhode Island are barely creating jobs.
- Due to the falling oil prices North Dakota lost its #1 ranking after many years of being on top. The other energy-producing states like Texas, Louisiana, and Oklahoma are also experiencing a deceleration in job gains – fewer job additions now compared to prior months.
- The low oil prices are a net positive for the country as a whole since consumers have additional money to spend and many companies’ bottom line improves. For example, both North Carolina and South Carolina have quickly made it into the top-10 as job creations have significantly strengthened lately.
- Among the large metro markets, the technology companies are madly hiring in the San Jose region where jobs have expanded by 5.4%. Atlanta and Louisville are speeding at 4.6%. The national average is 2.3%.
- Among the smaller markets, there are many markets that have vacation homes. Here are the numbers:
- Why is Utah doing well? This is a self-serving announcement but a factual one. The current governor of Utah is a former REALTOR® and well knows the importance of real estate to the economy. Governor Gary Herbert had served in many of NAR’s committees in the past. Utah as a state, furthermore, plays an outsized role in terms of RPAC contribution (REALTOR Political Action Committee). Something for other states to think about.
Some people who should not buy a house: for example, anyone who is planning to move in a few years. People with overextended credit are also probably not good candidates for homeownership. However, home ownership—instead of renting–appears to be a good idea for many people—particularly at a time of rising rents.
The graph from a presentation by NAR Chief Economist Dr. Lawrence Yun shows that families with homeownership have a much higher net worth than is the case for renters. Growth in mortgage equity and longer term price appreciation are the major assets for the middle class. The homeowner with a 30 year mortgage payment has a paid-off home after 30 years; the renter has a nice stack of 360 rental receipts.
And, of course, there are many lifestyle/social benefits that homeownership creates for families—better educational achievement by children, better neighborhoods, increased community involvement, among others.
These are good answers to the question of “Why not rent?”
- Due to the strengthening in the U.S. dollar the prices of imported goods are falling. That is helping the overall consumer prices to be tame. Low inflation means interest rates can remain low for a longer period.
- In the latest month, import prices fell for the 8th time in the past 9 months. As a result, import prices were 10.5 percent below one year ago. Despite much increased oil production in the U.S. in recent years, principally from new oil wells in North Dakota and Texas, America still imports about half of its oil consumptions (though not the two-third from imports as had been just a decade ago). Therefore, falling global oil price also significantly impacts U.S. import prices.
- Low import prices filters into the broad consumer prices. Today, there is virtually no inflation to speak of. The top line consumer price inflation was in fact precisely zero in February over the past 12 months. The core inflation – that is, not including the volatile food and energy prices – was also tame with only 1.7 percent growth. The core inflation rising above 2 percent on a consistent basis would cause the Federal Reserve to raise interest rates.
- The relationship between core inflation and mortgage rates are shown below. As can be seen, high core inflation means much higher mortgage rates and vice versa.
- The U.S. dollar is strong against nearly all other foreign currencies. There is one major exception. The Chinese currency – Yuan – has been stalking the dollar and is actually getting stronger. One dollar used to command 8.5 yuan at the turn of the century but now gets only 6 yuan. Given the large trade surplus China has with the U.S. the Chinese currency is likely to strengthen even further in coming years.
- It is hard to imagine not too long ago China was insignificant on the world stage. Most were living in dire poverty from communal ownership of property with no incentive to work hard. There were even trade restrictions of not importing communist Chinese products into the U.S. Once there was a big fight among State Department officials over eggs that were brought into the U.S. from Hong Kong. It was unclear whether these eggs had been originally imported from the mainland China or if the eggs had been laid in the British Hong Kong. Was it a free world egg or a communist egg? One was considered safe while the other very dangerous.
Using NAR Research to Address Prospective Buyer Concerns “What Will Housing Prices Do? Is it Safe to Buy?”
No one really knows what housing prices will do in the short run: to quote J.P. Morgan on the stock market, “They will fluctuate.” Experience during the Great Recession showed how markets become unpredictable during a crisis. However, for a number of the underlying drivers of housing prices the longer-run outlook appears good:
- Jobs: The U.S. continues to add jobs. Real estate and jobs vary together. A growing economy helps home sales.
- Households: Home sales were slightly under their year 2000 level in 2014, but the United States added an additional 17 million households over the intervening time period. As the millennials mature their demand for apartments is expected to decline as they move into homes.
- Housing Supply: The country needs to add 1.5 million housing units a year to accommodate population growth and housing demolitions. However, housing additions have recently been under 1 million a year: there are fewer available homes, which is a positive for home prices.
Three major drives of home prices seem to support current and rising home price levels. All real estate is local; in fact, in some areas of the country home prices appear to be increasing at a rate that may be too high. Put differently, everyone needs to live some place, and right now housing markets are tight in some areas—inventories of homes for sale are low. Homeowners tend to hold onto their homes for approximately 10 years after purchase. So housing market trends and an extensive holding period suggest that worries about short term temporary price fluctuations do not appear to be of great importance.
NAR’s economic outlook is at http://www.realtor.org/research-and-statistics.
Based on information gathered from the REALTORS® Confidence Index Survey in the months of December 2014–February 2015, 66 percent of first-time homebuyers made a down payment of 0 to 6 percent.  Although this is a decline from the 77 percent figure in early 2009, this is an improvement over the 61 percent figure at the beginning of 2014.
REALTORS® have reported that the reduction in FHA’s monthly mortgage insurance premium (from 1.35 percent to 0.85 percent) is likely to help homebuyers. FHA insures loans that allow a 3.5 percent down payment. Fannie Mae and Freddie Mac have also reinstated the 3 percent down payment program early in 2015, and the down payment can all come from gifted funds. Meanwhile, 100 percent financing has always been available to members of the U.S. military and their surviving spouses.
A low down payment enables homebuyers to purchase a home sooner and start building equity rather than saving up for a few more years. However, a lower down payment may not necessarily make a home mortgage more affordable because of the effective increase in the mortgage rate arising from risk adjustment fees. REALTORS® have reported that the increase in mortgage cost from the risk adjustment is blunting the intended effect of the GSE’s 3 percent down payment loan program.
 Based on the REALTOR® respondents’ most recent sales for the survey months, which altogether are viewed to be a representative sample of all sales for these months.
 GSEs charge fees on the amount of the loan for risk factors such as low down payment (loan level pricing adjustments or LLPA). On top of the LLPA, borrowers obtaining a loan with less than 20 percent equity also need to get private mortgage insurance.
Interest rates are in the news: Projected to rise from their historically low levels as the Federal Reserve winds down Quantitative Easing. Is this a major problem for the prospective buyer? The Answer: “Probably Not.”
Obviously, buying a home sooner rather than later in a rising interest rate environment may be a good idea. However, it is unlikely that changes in interest rates of the magnitude currently expected will have a controlling impact on the home purchase decision.
What do rising interest rates mean? As of March, the 30 year mortgage interest rate was approximately 3.8 percent. On a median priced $202,000 house, monthly payments would be approximately $1231 per month (P&I: $847; Taxes: $219; Insurance $75; PMI $90). A .5% interest rate increase to 4.3 percent would raise payments to $1,284.Rather than worrying about interest rates– over which they actually have little control outside of shopping around among lenders– potential home buyers need to focus on the availability of a mortgage money—typically regional and community banks and credit unions as well as national lenders–and staying within a reasonable budget.
REALTORS® can use NAR Research information to give the customer a different perspective on the question of whether to buy: the press encourages clients to think in terms of price. Price is important, but the main reason clients want a home is lifestyle—i.e., for family and living purposes. Like most economic questions, there are two answers to the question of whether it is a good time to buy: “Yes” and “No”. Put differently, “Yes, it is always a good time to buy if you need a home for your or your family.” The answer is “No if you are over-extending your financial capabilities, speculating on changing home prices, or expect to need to move in the near future: that is how people get in trouble.”
NAR has detailed the major benefits achieved by homeownership:
- Higher student test scores by children.
- Higher rate of high school graduation thereby higher earnings.
- Children more likely to participate in organized activities–less television screen time.
- Homeowners take on a greater responsibility such as home maintenance and acquiring the financial skills to handle mortgage payments and those skills transfer to their children
- Lower teenage delinquencies.
- General increase in positive outlook to life.
- Homeowners reported higher life satisfaction, higher self-esteem, happiness, and higher perceived control over their lives.
Quality of life is a major benefit from homeownership—which is why a prudent home purchase by someone who is financially responsible makes sense at almost any time.
In the February 2015 REALTORS® Confidence Index Survey, NAR asked REALTORS® what problems they encountered in their most recent contract that either went into settlement or was terminated in the past 3 months.
Among contracts that were terminated (7 percent of REALTORS® reported contracts that went into settlement or were terminated), the major problem encountered was home inspection issues, cited in 29 percent of reported contract terminations. Obtaining financing was the next major problem cited for a contract termination (25 percent). Meanwhile, only 8 percent of terminated contracts had appraisal issues, indicating that although appraisal issues can be a problem, they are less likely to lead to contract terminations than home inspection or financing problems.
What this Means for REALTORS®: Home inspection issues are the biggest reasons for contract termination. Work with the seller to fix potential home inspection issues (e.g. structural, water damage, mold, lead paint, etc.) before putting the house on sale.
Qualifying for a mortgage is still generally difficult, although becoming easier, according to the February 2015 REALTORS® Confidence Index Survey.
About 52 percent of REALTORS® providing transaction credit score information reported FICO credit scores in the range of 620-740; in 2013, the share was hovering at about 40 percent. About 2 percent of REALTORS® reported a purchase by a buyer with credit score of less than 620, up from about 1-2 percent in 2012-2014. In a normal market, the share of credit scores below 620 would be closer to 5 percent.
Potential buyers facing credit limitations might want to consider a mortgage origination by community banks, local banks, and credit unions.
- Job growth slowed markedly in March. It is likely a one-month hiccup. The broad job market conditions will likely re-strengthen in the upcoming months simply because the number of new filing for unemployment insurance has been rapidly declining. In the construction industry, there was no net job over the month implying a weather-related halt. There is, however, an evident shortage of skilled construction workers since the wages in the sector are rising much faster than in other industries.
- Diving into the numbers, only 126,000 net new jobs were added to the economy in March compared with the monthly average of 268,000 over the prior 12 months. The 12-month job gain is still impressive with 3.1 million net new job additions. Jobs in the construction industry fell by 1,000 (even after accounting for the normal seasonal patterns.) This is a clear case of temporary condition from excessive cold weather this year since many homebuilders would like to ramp up production by hiring more workers. There were 11,000 fewer workers in the mining and oil exploration. This is not a temporary cut but a possible start of deeper reduction related to lower oil prices.
- The unemployment rate did not change and stood at 5.5 percent. But the employment rate – counting how many of the adult population have jobs rather than counting how many do not have jobs – is barely improving and still crawling along the bottom. Only 59.3 percent of adult population is working, compared to 62 to 64 percent in more normal times.
- The average worker wage rose by 2.1 percent in March. Depending on a given month, it could be a little better or a little worse than the broad consumer price inflation. In other words, workers in general are not getting ahead and just spinning the wheel like a hamster. The construction industry is one of the few areas where wages are comfortably rising above consumer inflation. In March, construction workers commanded nearly a 3 percent higher pay to $27.23 per hour. The other industry that is quickly raising wage rates is in the leisure and hospitality industry, where wage rose by 3.6 percent to $14.23 per hour, a sign more workers are needed to cater to wealthy travelers.
- Those workers who are also homeowners are feeling a little better despite the lackluster wage growth since the typical home value has increased by around $30,000 over the past three years. Sadly though from a societal point of view, we have fewer homeowners and many more renters. That is one big reason why America has become more unequal financially. Finally, for those few with a big exposure to the stock market – about 10 percent of American families – the wealth gains have been more than nice with the stock market having almost tripled from the lows of few years ago. They therefore have been buying vacation homes. Indeed, a very happy life on the top of the world for the few.
In a monthly REALTORS® Confidence Index Survey, NAR asks REALTORS® “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?”.
The map below shows the median days on market of respondents about their sales from December 2014-February 2015. Properties in Washington, D.C., California, Nevada, North Dakota, Texas, and Louisiana typically sold within 30 to 45 days (red). Properties in these states have experienced the strongest job growth in the nation, mainly from the technology and oil-gas sectors. Data shows that despite the drop in oil prices, the economies are still going strong. Properties in Washington, Oregon, South Dakota, Nebraska, Florida, Georgia, and Massachusetts typically sold within 2 months (pink). Properties in Montana and Vermont took the longest time to sell at 3 months or longer (blue).
All real estate is local: state-level data is provided to enable a comparison of local market trends against the state and national summary.
 The median days on market is the number of days below which 50 percent of properties sold. So this means that half of all properties sold in these states sold below the median days.
Every month NAR produces existing home sales, median sales prices and inventory figures. The reporting of this data is always based on homes sold the previous month and the data is explained in comparison to the same month a year ago. We also provide a perspective of the market relative to last month, adjusting for seasonal factors, and comment on the potential direction of the housing market.
The data below shows what our current month data looks like in comparison to the last ten February months and how that might compare to the “ten year February average” which is an average of the data from the past ten February months.
- The median home price this February is higher than the ten year February average median price for the US and all regions except the Northeast which was down slightly and the Midwest which was level to the average. The median price of a home in February of 2015 was higher only in the US and South the compared to 2005 while the other regions experienced declines in price. The Northeast had the biggest drop in prices at 7% while the West and the Midwest had minor declines.
- Comparing February of 2005 to February of 2015 fewer homes were sold in 2015 in the US and all regions, with the Northeast undergoing the biggest decline of 48.7%. The South, still leading all regions in home sales had the smallest drop in sales at 19.2% over the ten year period. Families on average are now staying in their home for ten years which is a sizable time period shift, from seven which could contribute to less homes sold.
- The total number of homes sold in the US for February 2015 is lower than the ten year February average. Regionally, only the South had higher than average home sales while the Northeast, Midwest, and West show current home sales below the ten year February average. While the South was above the average by more than 6%, all other regions were within 5% except the Northeast which was actually more than 17% lower than the February average.
- The median price year over year percentage change shows that home prices began to fall in 2007, but did not fall considerably in most areas until around 2009. Home prices began to stabilize in 2012, only the South and West regions showed slight price gains. The West had the largest gain in price growth of 22% in 2013, while the Northeast had the smallest gain at 5%. This February the Midwest had the highest year over year price percentage change over the US and the other three regions.
- There are currently fewer homes available for sale in the US this February than the ten year February average. In 2005 the US had the fastest pace of homes sold relative to the inventory while during the bubble in 2008 the US had the slowest pace taking 9.8 months to sell the supply of homes on the market. Relative to all supply, the condo market had the biggest imbalance in 2009 when it would have taken 14 months to sell all available inventory at the prevailing sales pace.
- The ten year February average national months supply is 6.7 and this February we are at 4.6 months supply. The ten year average month supply for February for condos is 8 and the single family supply is 6.5.
- Consumers are becoming ever more confident. That is a very good sign for home sales. Only by believing in a better future will consumers make expenditures that are longer-lasting.
- In March, the consumer confidence index rose to 101.3. An index reading of 100 or better is a terrific sign that a majority of people in the country believe in a better future. January’s figure was also above 100. The last time consumers were this happy was prior to the Great Recession in 2007.
- One can be rich, but if they have anxiety about the future then they will not spend or invest. Conversely, one may not be rich but if they are confident of a better condition in the future then they will spend –even if it means borrowing money. Academically talented students have no qualms about borrowing to attend medical school, for example, as long as they believe there will be a nice future payoff. Renters with a good credit and enough financial resources will also want to borrow to buy a house if they believe in a better future. With home prices rising in many areas of country, consumers evidently are becoming more confident of the housing market.
- REALTORS® are also expressing increased confidence no doubt based on many interactions with their clients. Particularly they are expressing better times for single-family home sales.
- Without hope, what is there to get people out of bed in the morning? There is nothing possibly worse than not believing in better times ahead. The sharp retort “Frankly, my dear, I don’t give a damn” in the ending of Gone with the Wind is said to be one of the most memorable movie phrases of all time. The headstrong Scarlett was not going to let that be the final word, however. She said to herself “After all, tomorrow is another day.” American consumers in 2015 have finally shaken off their depressive feelings.
- Today, Case Shiller released their housing price index data for January 2015 which showed that house prices rose 4.4 percent from December one year ago for the 10-city composite, 4.6 percent for the 20-city composite, and 4.5 percent for the national index.
- Last week NAR reported growing prices in January and February. Price growth in the year ended February 2015 was 7.5% after rising 5.2% in January. FHFA January data showed a gain of 5.1% for the year ended January 2015.
- Case Shiller’s city by city data show some areas are increasing at a faster pace in January over December though this trend is not yet evident in the headline figures. Fourteen cities saw accelerating prices including Chicago (2.5% from 1.4%), Boston (4.7% from 3.8%), and Charlotte (4.3% from 3.5%). The biggest weakening in year over year growth rates was seen in previously hot areas San Francisco (7.9% from 9.4%), Las Vegas (5.9% from 6.9%), and Tampa (5.7% from 6.4%).
- While the previous cities had the biggest changes in year over year growth rate, others top the list of areas with the fastest overall growth rates: Denver (8.4%), Miami (8.3%), and Dallas (8.1%) had the fastest growth in the year ending January 2015. By contrast, Washington DC (1.3%), Cleveland (1.6%), and New York (2.1%) had the slowest year over year growth. Therefore, it is critical that home sellers in slow appreciating markets properly price their home (not too high) in order to attract buyers.
- Case Shiller data, like NAR data is showing more even price growth across regions as prices picked up in previously slow growing areas and slowed down a bit in previously hot areas.
- NAR reports the median price of all homes that have sold while Case Shiller reports the results of a weighted repeat-sales index. Case Shiller uses public records data which has a reporting lag. To deal with the lag, Case Shiller data is based on a 3 month moving average, so reported January prices include information from repeat transactions closed in November, December, and January. For this reason, the changes in the NAR median price tend to lead Case Shiller and may suggest that a slight pick-up in prices will be seen in the next few months.
- NAR released a summary of pending home sales data showing that February’s pending home sales index is up 3.1% from last month and improved 12.0% from a year ago which is a good start for the spring months.
- Pending sales are homes that have a signed contract on them but have yet to close. They tend to lead Existing Home Sales data by 1 to 2 months.
- February’s data shows a sixth consecutive month of year over year gains.
- Regionally, the West saw the biggest gain from a year ago at 18.3% while the Northeast had the smallest gain at 4.1%.
- From last month only two regions had an increase; the Midwest had the largest gain at 11.6% while the Northeast had the biggest decline in pending sales at 2.3%. The pending home sales index level was 106.9 for the US. A level of 100 is consistent with the existing home sales figures around the 5 million level in a healthy housing market.
In a monthly REALTORS® Confidence Index Survey, NAR asks REALTORS®: “How do you view buyer traffic in your market?”. The map below shows the buyer traffic index by state. An index above 50 indicates that more REALTOR® respondents viewed traffic conditions as “strong” compared to those who viewed conditions as “weak.”
In many states, there were more local markets where buyer traffic was viewed as “strong” than “weak” over the period from December 2014-February 2015 (orange). The states with “weak” buyer traffic (blue) were mostly in the Northeast and Mid-Atlantic which were hit by an unusually harsh winter. Buyer traffic was also reported to still be generally “strong” in Texas, North Dakota, Oklahoma, Colorado, and Louisiana despite the deceleration in oil/gas exploration. However, buyer traffic was reported to be generally “weak” in Wyoming and South Dakota.
The Federal Reserve Board of New York released its update to the Survey of Consumer Expectations this morning. Consumer optimism toward housing has improved significantly at the lower credit spectrum from last spring, and remains robust at the middle and upper credit tiers. The positive trend relative to a year ago points to sustained improvement in demand for housing in 2015.
The share of lower-FICO borrowers who applied for a mortgage in February was 5.9%, up from 4.2% four months earlier and more than doubling the figure from February of 2014. As the survey data is not seasonally adjusted, it’s better to track the year-over-year trend. The share of borrowers in the middle tier of FICOs also rose from a year ago. However, the share of high-FICO borrowers fell modestly over this period.
More importantly, over the next 12-month period, borrowers in all credit tiers expect to apply for mortgage credit at higher rates than they did last February. Lower-credit borrowers expect to apply at a 75% higher rate than a year earlier, while middle and upper credit borrowers expect to apply at 40% higher and 14% higher rates, respectively. This across-the-broad improvement bodes well for a robust housing market in 2015. It also suggests improved millennial participation and household formation, which is likely fueled by improved employment trends. The improvement at the lower credit spectrum also likely reflects concerted efforts on the part of the administration to improve credit access via new low-down payment products from Fannie Mae and Freddie Mac, better pricing from the FHA and relaxation overlays by the retail operations of some banks that have resulted from changes to the rep and warrant framework. Constrained supply and supply miss-match remain a headwind to home sales, though.
Confidence about the outlook for the next six months improved across all property types, according to the February 2015 REALTORS® Confidence Index Survey.
In the single family market, the REALTORS® Confidence Index - Six-month Outlook increased to 75 (72 in January 2015; 68 in February 2014). For the first time, the index for townhomes and condominiums also hit the 50 mark. An index of 50 means that the number of respondents who view the market as “strong” outnumber those who view the market as “weak.”
REALTORS® reported that the 0.5 percentage points reduction in the monthly mortgage insurance premium and the offering of the 3 percent down payment loan were likely to help homebuyers. However, REALTORS® in states with large oil/gas industries (TX, OK, ND) expressed concern about the impact of the low oil prices on their economies.
 For loans originated starting January 26, 2015, FHA charges a monthly mortgage insurance premium of 0.85 percent on the outstanding loan balance, down from 1.35 percent. The GSEs (Fannie Mae and Freddie Mac) also increased the maximum loan to 97 of the house’s value, up from 95 percent. However, loans with lower down payment are charged higher extra fees (a.k.a. loan level pricing adjustments) for the increased risk.
- The number of people losing jobs continues to remain on a downtrend. Initial unemployment insurance claims that were filed during the week that ended March 21 totaled 282,000 (seasonally adjusted), fewer by 9,000 claims from the previous week’s unrevised level. A decline in the number of unemployment claims indicates fewer job losses and greater job stability.
- Based on latest state data (February 2015), almost all states have seen a decline in the number of unemployment claims (about 10 percent drop nationally), except in LA, TX, ND, OK and WY where their oil/gas industries are being buffeted by the steep drop in oil prices.
- Despite the job losses in the oil and gas sector, these states appear to be coping up at this point, generating jobs on a net basis. Jobs are growing comparatively strongly in Texas (3.5%), and North Dakota (4.3%), above the national average of about 2.3 percent, although at a subdued pace in Oklahoma (1.5%), Wyoming (1.6%), and Louisiana (1.3%).
- NAR expects the economy and job growth to strengthen in 2015 to levels which can support 5.3 million existing home sales in 2015, up from 4.9 million in 2014.
- Contracts to buy a newly constructed home soared in February, portending a solid demand going into the spring home buying season. One reason is due to builders bringing less-expensive homes onto the market.
- Diving into the numbers, new home sales hit 539,000 (annualized pace), which is a big increase of 25 percent from one year ago and marks the highest sales pace since February 2008. The median price of a new home was $275,500, which is less than $300,000 of recent past months. This implies that slightly lower price points are very popular with buyers.
- Even with the latest big gain, new home sales and housing starts (the construction of all new homes) remains well below the levels of 2000. There is indeed much room for further growth. NAR expects new home sales to rise 30 to 35 percent in 2015.
- The average time to move a property is quick. It took only 3.5 months to find a buyer.
- The gap between new home price and existing home price is still rather large. This is good news for homeowners since it is implying that existing home price is in a better position to rise in order to close the gap. The higher cost of construction makes it difficult to lower the price of new homes.
- New home sales data does not measure closing activity. Rather it measures contract signings, much like NAR’s pending home sales data. Also, not all single-family housing starts lead to new home sale contract signings. Those new homes initiated at the owner’s request are not included in the new home sales data though are included in the housing starts data.
- Home prices for both new and existing homes have been rising much faster than income. Moreover, rent gains have also been easily outpacing income growth. The only way to tame the strong rise in housing costs is to produce more new homes. Unfortunately, many small-sized local homebuilders are still having hard time obtaining construction loans (even though homes are selling quickly and therefore carrying very low risk of a default). Local community banks have indicated burdensome new regulations arising out of Dodd-Frank rules as to the reason why construction loans cannot easily be made. Since one of the original goals of Dodd-Frank was to prevent systemic risk in the financial sector, there could be an exemption to regulation for smaller-sized lenders. After all small banks are in a very competitive industry and bankruptcies by a few small banks do not cause a systemic risk of taking down the whole economy. The exemption of small banks from Dodd-Frank rules should therefore be seriously considered. Otherwise, many Americans could choke on rising housing costs.