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Updated: 25 min 17 sec ago

Latest Diffusion Index of Foot Traffic

Tue, 02/25/2014 - 09:22

For the second consecutive month foot traffic as measured by NAR’s Research diffusion index for foot traffic fell sharply. While bad weather may have played a role in this trend, the effect is widespread and significant. This movement suggests that the year-over-year decline in existing home sales, which was just 0.6% in December, is likely to soften further in January and February ahead of the spring market. A slowdown in demand would help to buttress inventories which are at 5-year lows, moderating price growth.

Every month SentriLock, LLC. provides NAR Research with data on the number of properties shown by a REALTOR®. Lockboxes made by SentriLock, LLC. are used in roughly a third of home showings across the nation. Foot traffic has a strong correlation with future contracts and home sales, so it can be viewed as a peek ahead at sales trends two to three months into the future. For the month of January, the diffusion index for foot traffic fell 10.1 points to 17.6 after declining 21.1 points in December.

The index is well below the “50” mark which indicates that more than half of the roughly 200 markets in this panel had weaker foot traffic in January of 2014 than the same month a year earlier. This reading does not suggest how much of a decrease in traffic there was, just that the majority of markets experienced less foot traffic in January of 2014 than 12 months earlier.

This trend is significant, but relatively new. Higher mortgage rates combined with two years of steady price growth have weigh on affordability. Affordability is still strong by historical standards, but bidding wars, tight credit and lingering sequester-related job uncertainties have weighed on consumers. A rise in inventories would help to normalize the market, but given that sound underwriting is in place with the new qualified mortgage rule, a loosening of credit overlays would also benefit the spring market.

A closer look at the latest EHS release

Sun, 02/23/2014 - 09:26

Taking a closer look at Existing Home Sales price data reveals an interesting trend going on in the market…

  • As shown in the chart below, while sales in the lower home-price tiers are falling, sales at the upper end are rising, quite swiftly at the highest end.
  • One impact of the fact that home sales are rising at the high end but falling at the low end is that the mix of homes may be changing. In addition to fewer distressed properties, homes selling now may have more bedrooms, square footage, and other valuable amenities than homes that were sold last year.
  • This shift in the mix of homes selling has the effect of pushing up the price of the median home sold, which is simply the price of the home where 50 percent of all homes sold were priced above and 50 percent were priced below that sales price.
  • In spite of this drawback in the median home sales price, it has advantages of being able to be produced quickly and being a remarkably good leading indicator for other price measures that are less susceptible to the mix of homes issue.

Why we don’t read about skyrocketing home sales every March

Fri, 02/21/2014 - 10:11

by NAR Research economists Danielle Hale and Hua Zhong

Home sales vary in (mostly) predictable patterns based on the month of the year and the days of the week in each month. Find out what data is the best estimate of real trends and not noise in the housing market in this article.

With the January Existing Home Sales data release, NAR Research released revised seasonal adjusted annual rate (SAAR) data for the last 3 years because we re-estimate and forecast new seasonal adjustment factors. Seasonal adjustment factors are used to try to extract a meaningful trend from the noisy home sales data that has mostly predictable big seasonal moves.

Imagine the headlines: “Home sales plummet 20 to 30 percent in January from December!” followed by “A recovery of 20 to 40 percent in home sales from February to March!” Those would have been the stories every year for the last decade if home sales data were not seasonally adjusted. But how helpful would that information have been for figuring out what was going on in the housing market?

In this article, we present answers to commonly asked questions (particularly from Wall Street analysts and journalists) on seasonality in housing data and a brief discussion of why seasonal factors don’t line up from year to year.

What is affected by the seasonal adjustment revision?
Only the monthly SAAR data change as a result of this revision. The monthly unadjusted data does not change and since the annual data is the sum of the monthly unadjusted data, that is also unaffected. Thus, the total sales for the year will not change but we may realize that June sales were a little worse than we thought before while November sales were a little better.

Why seasonally adjust the data?
In short, we seasonally adjust because the housing market has a fairly predictable pattern of many sales in the spring/summer and fewer sales in the fall/winter. See this commentary for a fuller discussion or click here to see several other articles discussing seasonality in home sales.

Why aren’t seasonal factors the same for each month every year?
Like many organizations, NAR employs a model for seasonal adjustment developed by the Census Bureau called X-12. Using this model, in addition to month to month seasonal effects discussed above, economists can estimate and adjust for trading day (weekend vs weekday or day of week effects) and holidays. To see why such an adjustment might be helpful in smoothing the data, let’s take a look at some closing data from January 2014 from a handful of MLSs that are part of the EHS program.

As shown in the chart above, there are 6 major spikes for closings clustered at: the middle of the month, the end of the month, and on Fridays. There are also considerably fewer closed sales on Saturdays and Sundays—less than 4 percent of the whole month’s closings even though they were more than a quarter of the days in the month. Without evaluating the reasons for those spikes (paychecks, moving and working schedules, amortization, etc.) we know that this pattern holds and the seasonal adjustment process adjusts for it in addition to the month-to-month seasonal trend.

How much of a difference could it make? While the days of the week don’t vary much year to year and month to month (all months have either 4 or 5 of each weekday per month) the total work days in a month can vary from 20 to 23 depending on the month, and holidays can eat even further into that variation. For an extreme example, February 2017, which begins on a Wednesday, has 20 working days one of which, Monday, February 20, 2017 is the Federal Holiday for Washington’s Birthday aka President’s Day. The following month, March 2017, which also begins on a Wednesday, has 23 working days, none of which is a Federal Holiday (perhaps to the dismay of the Irish). Given that the majority of transactions fall on weekdays, having 3 or 4 fewer of them in February vs. March can have a dramatic effect on the number of closings that happen.

Sometimes these day-of-week variations line up in funny ways year to year. For example, November 2013 had 21 working days (not counting holidays) 5 of which were Fridays. By comparison, November 2014 will have only 20 working days and only 4 Fridays. This affects the seasonal adjustment factor for November 2013 vs November 2014, by as much as 4 to 6 percent depending on the region.

So what’s the major take away?
Home sales vary in (mostly) predictable patterns based on the month of the year and the days of the week in each month. NAR releases seasonally adjusted home sales data because this is the best estimate of real trends and not noise in the housing market. This doesn’t mean that the data is completely free of noise, but the SAAR is the best picture of national and regional trends in the housing market.

Positive Data Released Today: Fewer Jobless Claims and Tame Inflation

Thu, 02/20/2014 - 13:10

Data released today on the number of unemployment insurance claims for the week ending February 15 and January inflation data are positives for the housing sector.

  • Job stability continues to improve in 2014. Initial claims for unemployment insurance in the week ending February 15 totaled 336,000, a decrease of 3,000 claims from the previous week’s unrevised figures. Claims have been trending down since 2012 and the direction in 2014 appears to be headed further downward. On a year-to-date basis, the average number of claims filed in 2014 is lower than that in 2012-2013.

  • Inflation remains subdued. In January, overall prices rose 1.6 percent from a year ago. Prices of most commodities rose modestly while the shelter index was up at 2.6 percent compared to a year ago on account of higher rents. Higher rents make homeownership a more attractive option. A low overall inflation rate will also preserve household income. A low inflation rate will also keep interest/mortgage rates low for the time being.

  • What this means for REALTORS®: The economy is off to a good start in 2014. Jobs are holding steady and the unemployment rate is trending down. The tame inflation rate will keep interest rates low for the time being. Under the current favorable conditions, NAR forecasts about 5.1 million sales of existing homes in 2014.

January Housing Starts

Wed, 02/19/2014 - 10:51

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest housing starts data.

  • New home construction fell notably in January, partly due to inclement weather conditions. Housing starts dropped 16 percent from the prior month, to a seasonally adjusted annual rate of 880,000 units. Activity plunged 70 percent in the frozen Midwest. The West region, less impacted by the weather, experienced a 17 percent decline.
  • One major bottleneck to the housing recovery is the lack of inventory. The supply of existing home inventory (2 million listings) has been bouncing along at a 13-year low, while new home inventory (180,000 listings) is essentially at a 50-year low. Consumers, including many trade-up buyers, want to see more listings before deciding to make the transition.
  • The supply can be genuinely relieved from increased new home construction. As people trade-up into new homes, they will open up existing homes on the market. Based on historical trends, housing starts should be at least 1.5 million annually. We are well short of that today. Many small local builders have been complaining about the difficulty in obtaining construction loans. Local community bankers in turn have complained about burdensome new financial regulations coming out of Washington that make it difficult to lend for the construction of new homes. The large publicly-listed builders who can tap Wall Street funds are taking advantage of the fact that the smaller guys are shut out of the market.
  • The housing starts forecasts are for 1.2 million in 2014 and 1.4 million in 2015. That is still not sufficient. Home prices will be moving higher as a result.
  • Several fanciful new homes were built on the northern side of the DMZ line in Korea many years ago. They were purposely built to be seen from South Korea with plain binoculars, showing presumably a higher standard of living in the North. A closer look, however, reveals only pure facades with hollow interiors. As everyone knows now, South Korea has economically taken off while North Koreans face constant fear and live daily on the edge of starvation. South Koreans could easily be living under the same inhumane horrible conditions had it not been for the U.S. who came through during the Korean War. Over 30,000 Americans gave their lives with many not knowing why they were halfway around the world in a strange country. To those affected families, I hope they get some comfort in knowing at least 50 million South Koreans are living comfortably. One testament of the prosperity is the country’s ability to spend on leisure and recreation, including participating in the Olympics. The sound of Olympic skates cutting through ice, from the author’s point of view, is a tribute to all U.S. servicemen and women.

INFOGRAPHIC: 4th Quarter 2013 Metro Area Home Prices and Affordability

Tue, 02/18/2014 - 13:35

Last week, NAR released its latest quarterly metropolitan price and affordability figures. The lion’s share of metropolitan areas continued to experience strong year-over-year price growth in the fourth quarter. A companion metro area annual affordability report shows less favorable conditions, particularly in the West.

The median existing single-family home price increased in 73 percent of measured markets, with 119 out of 164 metropolitan statistical areas (MSAs) showing gains based on closings in the fourth quarter compared with the fourth quarter of 2012.

NAR’s national annual Housing Affordability Index, with breakouts for metropolitan areas, fell to 175.8 in 2013 from a record high 196.5 in 2012. For first-time buyers making small downpayments, the affordability levels are relatively lower. The index is calculated on the relationship between median home price, median family income and average effective mortgage interest rate. The higher the index, the stronger household purchasing power; recordkeeping began in 1970.

To see the full release, click here. The data can be found on this page. And if you prefer the highlights all in one location, check out our latest infographic below:

National Income

Tue, 02/18/2014 - 12:56

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses national income.

  • Personal income for the country in 2013 rose modestly by 2.8 percent. The aggregate rental income increased much faster at 9 percent due to the combined effects of rises in rents and from more people renting.
  • Wages and salaries are following the path of job creation.  So they rose as the economy added 2.2 million net new jobs in 2013.
  • Farm income is beginning to soften following the huge surge in 2012.  Farm land prices therefore may be peaking.  Meanwhile, entrepreneurs’ income is showing a solid uptick.  It is a good early indicator of rising demand for retail, office, and other commercial spaces.  Income from unemployment checks are falling, and the reasons behind that are the cut-off to extended unemployment benefits and, more importantly, from job creations.
  • Rents are likely to accelerate further in 2014. Aside from falling vacancy rates, some of the new tax levy on landowners will get steadily passed on to renters.  There is a new 3.8 percent tax levy on rental income, dividends, and other “non-labor passive” income for those in the high income tax bracket to partly fund the Affordable Care Act.  The logics of economics suggest that there will be tax shifting to consumers in the form of higher prices (rents) if the new supply cannot easily reach the market.  In the case of apartments and single-family rental homes, there is a great difficulty of obtaining construction loans to add new supply.  Moreover, the continuing difficulty in accessing mortgages to buy a home for moderate income households will keep many renters at their current status.

Planning Done: Measuring the QM Rule’s Impact

Sat, 02/15/2014 - 10:12

The qualified mortgage (QM) rule was implemented in January of 2014. It is the first of two rules that came from the Dodd–Frank Wall Street Reform and Consumer Protection Act that will impact the housing market. This law is intended to protect consumers by strengthening underwriting standards, but some have argued that the rules will raise costs and reduce access for consumers. To gain insight on the impact of the new law, NAR Research surveyed a sample of lenders with questions about the impact of the lending on their business and how the rule could in turn impact consumers.

On Friday, January 10th, 2014, the requirements of the ability to repay and qualified mortgage (QM) rule went into effect. The Dodd-Frank act requires that originators make a good faith effort to verify a borrower’s ability to repay (ATR) their mortgage and imposes stiff penalties if they do not. The QM rule allows for varying degrees of assumed compliance with the ability to repay rule, which is advantageous to lenders as it allows them to minimize and to budget for potential penalties and litigation expenses. All mortgage applications received on or after January 10th are required to comply with the QM rule which includes full documentation of income, assets and employment, a maximum of 3% for points and fees, a cap of 43% on the back-end debt-to-income ratio, and limitations on the type of mortgage products that qualify and prepayment penalties among other requirements.

Here are some highlights from the survey:

  • When asked about the extent of the QM rule’s impact, 55% of survey respondents indicated that the QM rule would affect 2.6% to 20% of their originations.
  • The 3% cap on points and fees was the feature of the new rule that most concerned respondents as 60% indicated that they were “very concerned”.
  • A strong majority of respondents indicated that they would defer to investors preferences on how to treat non-QM loans, but 45% indicated that they would not originate non-QM mortgages.
  • Roughly a fifth of respondents did not know whether or not they would charge non-QM borrowers higher rates, but the most frequently cited change for prime and near-prime borrowers was an increase of 50 to 75 basis points and 150 basis points for sub-prime.
  • Relative to 2013, respondents indicated a high reluctance to originate mortgages with non-QM features and their aversion toward originating non-QM loans increased as credit scores declined. They also indicated an elevated reticence to originate mortgages that fit into the rebuttable presumption definition of the QM rule and even some hesitance to originate safe harbor QM mortgages.
  • A significant share of respondents indicated that they would impose buffers in advance of the 43% back-end debt-to-income ratio, the 3% cap on points and fees, and the limitation on the annual percentage rate to within 150 basis points over the average prime offer for eligibility with the safe harbor definition of the QM.
  • In response to the new rule, the vast majority of respondents plan to increase staff and expenditures on compliance software. In addition, 11% will shutter affiliated title insurance or other companies.
  • Finally, 16.7% of respondents indicated that they had already adapted to the rule, while 44.4% would be ready within three months. Nearly a third of respondents indicated that it would take three to six months before they had adapted, but all would be ready within one year.

What does this change mean for REALTORS and consumers? Consumers should expect to have to document their income, employment and resources. If your client has a high debt-to-income ratio, the FHA as well as Fannie Mae and Freddie Mac will be more lenient than private financers. However, if your client falls under one of the other aspects of the non-QM space or even the rebuttable presumption portion of the QM space (e.g. high fees, subprime, interest only, etc.) your client might require help finding a specialty lender. Consider finding a few lenders who specialize in financing these special cases at affordable rates so that you can meet your client’s needs if the time comes.
For the full survey, click here

Planning Done: Measuring the QM Rule’s Impact

Fri, 02/14/2014 - 14:22

The qualified mortgage (QM) rule was implemented in January of 2014. It is the first of two rules that came from the Dodd–Frank Wall Street Reform and Consumer Protection Act that will impact the housing market. This law is intended to protect consumers by strengthening underwriting standards, but some have argued that the rules will raise costs and reduce access for consumers. To gain insight on the impact of the new law, NAR Research surveyed a sample of lenders with questions about the impact of the lending on their business and how the rule could in turn impact consumers.

On Friday, January 10th, 2014, the requirements of the ability to repay and qualified mortgage (QM) rule went into effect. The Dodd-Frank act requires that originators make a good faith effort to verify a borrower’s ability to repay (ATR) their mortgage and imposes stiff penalties if they do not. The QM rule allows for varying degrees of assumed compliance with the ability to repay rule, which is advantageous to lenders as it allows them to minimize and to budget for potential penalties and litigation expenses. All mortgage applications received on or after January 10th are required to comply with the QM rule which includes full documentation of income, assets and employment, a maximum of 3% for points and fees, a cap of 43% on the back-end debt-to-income ratio, and limitations on the type of mortgage products that qualify and prepayment penalties among other requirements.

Here are some highlights from the survey:

  • When asked about the extent of the QM rule’s impact, 55% of survey respondents indicated that the QM rule would affect 2.6% to 20% of their originations.
  • The 3% cap on points and fees was the feature of the new rule that most concerned respondents as 60% indicated that they were “very concerned”.
  • A strong majority of respondents indicated that they would defer to investors preferences on how to treat non-QM loans, but 45% indicated that they would not originate non-QM mortgages.
  • Roughly a fifth of respondents did not know whether or not they would charge non-QM borrowers higher rates, but the most frequently cited change for prime and near-prime borrowers was an increase of 50 to 75 basis points and 150 basis points for sub-prime.
  • Relative to 2013, respondents indicated a high reluctance to originate mortgages with non-QM features and their aversion toward originating non-QM loans increased as credit scores declined. They also indicated an elevated reticence to originate mortgages that fit into the rebuttable presumption definition of the QM rule and even some hesitance to originate safe harbor QM mortgages.
  • A significant share of respondents indicated that they would impose buffers in advance of the 43% back-end debt-to-income ratio, the 3% cap on points and fees, and the limitation on the annual percentage rate to within 150 basis points over the average prime offer for eligibility with the safe harbor definition of the QM.
  • In response to the new rule, the vast majority of respondents plan to increase staff and expenditures on compliance software. In addition, 11% will shutter affiliated title insurance or other companies.
  • Finally, 16.7% of respondents indicated that they had already adapted to the rule, while 44.4% would be ready within three months. Nearly a third of respondents indicated that it would take three to six months before they had adapted, but all would be ready within one year.

What does this change mean for REALTORS and consumers? Consumers should expect to have to document their income, employment and resources. If your client has a high debt-to-income ratio, the FHA as well as Fannie Mae and Freddie Mac will be more lenient than private financers. However, if your client falls under one of the other aspects of the non-QM space or even the rebuttable presumption portion of the QM space (e.g. high fees, subprime, interest only, etc.) your client might require help finding a specialty lender. Consider finding a few lenders who specialize in financing these special cases at affordable rates so that you can meet your client’s needs if the time comes. For the full survey, click here.

Industrial Production

Fri, 02/14/2014 - 12:50

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses industrial production.

  • Factory production fell somewhat in December in the U.S. and has essentially been neutral in the past 5 months, rather than increasing as would be the case in an expanding job-creating economy. But due to good activity in last year’s summer months overall production is up by nearly 3 percent from 12 months ago.
  • Note that after the steep fall in production during the harsh recession of 2008-09, which took down jobs with it, manufacturers have been steadily increasing output. The increased production in turn has helped more jobs be created. The neutral activity of the past three months should therefore raise concerns about the strength of the economy. Job creation could be soft in the upcoming months.
  • The production of oil and gas has been booming. Job creation therefore has been strong in Texas and North Dakota. But the production of home-related items such as furniture, appliances, and carpeting has yet to move higher. Many new household items are being imported from foreign countries. Hence, job creation in Greensboro and Hickory (North Carolina) will be slow.
  • Looking at the long-term chart, the U.S. became the undisputed economic superpower because of the five-fold increase in production since the end of the Second World War. But the rate of expansion has markedly slowed in the recent past decade. In the 19th century, Britain was the economic power with massive industrial production, leading to massive exports, before succumbing to slower production in the 20th century.
  • Long ago, civilization flowed from Athens. Alexander the Great subsequently spread his campaign for more territory to parts of Asia and to Egypt. That is why the famous Egyptian Queen, Cleopatra, was of Greek heritage. But the Greeks were to soon lose out to the Romans who had better production capacity. The manipulating Cleopatra, however, was determined to be on the winning side and hence seduced Julius Caesar. When Caesar died of stab wounds, this woman of infamous beauty successfully tempted Mark Anthony. When Anthony lost the Roman civil war to Augustus, Cleopatra then tried her charms on Augustus.  After Cleopatra failed to win his heart, she promptly took her own life. Now who is Katy Perry trying to emulate?

December Housing Affordability Index (HAI)

Thu, 02/13/2014 - 13:23

At the national level, housing affordability is down slightly for the month due to a small gain in prices as rate gains remain low, causing affordability to be down for the year. What is affordability like in your market?

  • Housing affordability is down for the month of December as the median price for a single family home in the US increased slightly by 1.3% from November. In spite of the decrease, the median single-family home price is $197,900 up 9.8 % rounding off the year with another year of strong price growth.
  • Home prices remained high and mortgage rates are up 28.6% from last year, nationally, affordability is down from 204.4 in December 2012 to 168.1 in December 2013.
  • Mortgage rates are expected to slow down before they gradually rise again. Income levels are up 1.7% from last year, upward movement in job gains should provide investment flexibility for 2014.
  • By region, affordability is down from one month ago in all regions except the Northeast which had the only gain in affordability at 2.7%. It was the only region to experience a decline in home prices and mortgage rates. From one year ago, affordability is down in all regions. The West saw the biggest decline in affordability as a result of having the largest price gain at 15.1%.
  • Mortgage rates are still expected to increase over the next few months but the raise may not be immediate. Consumer confidence needs to improve along with job gains and income growth. For a look at how the housing market might respond to a change in rates, I recommend this Stress Test by Chief Economist Lawrence Yun.
  • What does housing affordability look like in your market? View the full data release here.
  • The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principle and interest payment to income). See further details on the methodology and assumptions behind the calculation here.

Mortgage Applications

Wed, 02/12/2014 - 13:29

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses mortgage applications.

  • People held back from applying for mortgages in the past week. Applications to buy a home fell 5 percent from the prior week, even after accounting for normal seasonal patterns. From the beginning of the year, these home purchase applications have been running around 10 to 15 percent below last year’s figures.
  • Home buying momentum is no longer there for now. Some snow and cold winter weather could be a factor. But the predominant reason is likely due to less affordable conditions. Home prices have been rising much faster than income in many markets. Furthermore, institutional investors are likely stepping away from buying (though not yet selling). It would not be a bad thing if institutional investors start to unload in fast appreciating markets because Phoenix, Las Vegas, and Ft. Myers are facing acute inventory shortages.
  • Another reason for this year’s decline could be due to new federal regulations that caps mortgage origination fees. Price control leads to less being available. For some mortgage lenders, the 3 percent cap does not allow enough of a compensation to originate low dollar amount loans. The new mortgage rules that went into effect early this year could also be giving pause to lenders, as they would not want to face lawsuits for going outside the rules.
  • There is also a possibility that the data is not capturing the full market. Mortgage Bankers Association, which collects the data, indicated oversampling of large lenders and under-representation of smaller-size lenders. So the decline in mortgage purchases may not be as large.
  • All-cash deals for home sales still remain extraordinarily high – roughly one-third of all sales. Home sales can still hold even with falling mortgage approvals if cash deals can fill the gap.
  • Refinance activity was also lower in the past few weeks. Compared to one year ago, refi business has fallen by more than 60 percent. Higher rates are not conducive for refinances. At least in regards to home sales, it is possible that lenders give a second and deeper look at all home purchase applications since the refinance volume is dying off.
  • Though the new federal mortgage rules were well-intended, the consequence is a widening split in wealth. Renters have little net worth. Homeowners have wealth tied mostly to their homes, with a typical homeowner accumulating $32,000 in housing equity over the past two years. A good renter who converted to a homeowner would have that wealth. But the excessively tight underwriting standards are leaving behind many good renters, preventing them from having a chance to participate in the housing wealth recovery. Rather, many investors and multiple property owners have benefited. America is getting more unequal in wealth distribution as a result.

The Qualified Mortgage Rule: Impact on Lending and the Consumer

Wed, 02/12/2014 - 13:12

Executive Summary
The qualified mortgage (QM) rule was implemented in January of 2014. The law is intended to protect consumers by strengthening underwriting standards, but some have argued that the rules will raise costs and reduce access for consumers. This survey queries a sample of mortgage lenders about the rule’s impact on their business and how the rule could in turn impact consumers.

Highlights of the Survey

  • When asked about the extent of the QM rule’s impact, 55% of survey respondents indicated that the QM rule would affect 2.6% to 20% of their originations
  • The 3% cap on points and fees was the feature of the new rule that most concerned respondents as 60% indicated that they were “very concerned”
  • A strong majority of respondents indicated that they would defer to investors preferences on how to treat non-QM loans, but 45% indicated that they would not originate non-QM mortgages
  • Roughly a fifth of respondents did not know whether or not they would charge non-QM borrowers higher rates, but the most frequently cited change for prime and near-prime borrowers was an increase of 50 to 75 basis points and 150 basis points for sub-prime
  • Relative to 2013, respondents indicated a high reluctance to originate mortgages with non-QM features and their aversion toward originating non-QM loans increased as credit scores declined. They also indicated an elevated reticence to originate mortgages that fit into the rebuttable presumption definition of the QM rule and even some hesitance to originate safe harbor QM mortgages.
  • A significant share of respondents indicated that they would impose buffers in advance of the 43% back-end debt-to-income ratio, the 3% cap on points and fees, and the limitation on the annual percentage rate to within 150 basis points over the average prime offer for eligibility with the safe harbor definition of the QM
  • In response to the new rule, the vast majority of respondents plan to increase staff and expenditures on compliance software. In addition, 11% will shutter affiliated title insurance or other companies.
  • Finally, 16.7% of respondents indicated that they had already adapted to the rule, while 44.4% would be ready within three months. Nearly a third of respondents indicated that it would take three to six months before they had adapted, but all would be ready within one year.

The Qualified Mortgage Rule and Its Impact
On Friday, January 10th, 2014, the requirements of the ability to repay and qualified mortgage (QM) rule went into effect. The Dodd-Frank act requires that originators make a good faith effort to verify a borrower’s ability to repay their mortgage and imposes stiff penalties if they do not. The QM rule allows for varying degrees of assumed compliance with the ability to repay rule, which is advantageous to lenders as it allows them to minimize and to budget for potential penalties and litigation expenses. All mortgage applications received on or after January 10th are required to comply with the QM rule which includes full documentation of income, assets and employment, a maximum of 3% for points and fees, a cap of 43% on the back-end debt-to-income ratio, and limitations on the type of mortgage products that qualify and prepayment penalties among other requirements [1].

When asked to what extent the QM rule would impact their business, the most frequent responses were 10.1% to 20% and 90.1% to 100% with each garnering 20% shares of the responses. However, 55% of the responses clustered between an impact on 2.6% and 20% of production. The significant share of responses indicating 90 to 100% impact was likely an indication of heightened underwriting for all mortgages regardless of QM status.

Of the new rules, the 3% cap on fees and points was by far of greatest concern with 60% of respondents indicating that they were “very concerned” about that feature. Also of high concern were the limitations on the annual percentage rate relative to the average prime offer rate for the general QM standard and the FHA’s QM standards. The limitation on the back-end debt-to-income ratio of 43% garnered high concern as did the documentation requirements. However, respondents seemed to shake off the limitations on product features as 50% of respondents indicated that they were “not concerned” and no respondents indicated they were “very concerned” about these restrictions. With the exception of interest only jumbo loans, there has been little production with these features in recent years.

When asked how they would respond to the new regulations, 65% indicated that their response would depend on the requirements of investors, while 45% indicated that they would not offer non-QM mortgages. In addition, 20% would limit offerings of non-QM loans to high quality borrowers, 5% would charge higher rates and 10% would cease originating to conduits or partners. No respondents indicated that non-QM loans would be treated the same.

When asked how non-QM status would impact mortgage rates, respondents indicated that mortgage rates would rise for all non-QM borrowers, but that the rate increase would vary based on credit quality. One third of respondents indicated that rates for borrowers with non-QM loans and FICO scores between 640 and 720 as well as those with scores greater than 720 would face rate increases of 50 to 75 basis points, but the distribution of respondents suggested better pricing for prime borrowers as compared to near prime. However, 50% of respondents indicated that borrowers with FICO scores of 640 and below would face rate increases of 150 basis points or more and no respondents indicate the rate increase would be less than 50 to 75 basis points. A significant share indicated that they did not know how much rates would rise for the various degrees of credit quality, but no respondent indicated that rates would not rise for non-QM borrowers.

When asked about their willingness to lend to particular borrower types, the majority of originators indicated that they would be “much less likely” to make loans with non-QM product features as compared to 2013. Similar to results shown earlier, originators indicated that they would be much less likely to lend to borrowers with lower credit scores in the non-QM space and this reticence increased as credit quality diminished. Finally, more than half of originators indicated that they were either “less likely” or “much less likely” to originate QM loans that fell under the rebuttable presumption definition of compliance with either the QM standard or the FHA’s QM standard. In contrast, 85% and 95% of originators indicated that they would be “as likely” or more likely to originate mortgages that met the safe harbor definition of the standard QM rule and the FHA’s QM definition, respectively.

Survey participants were asked whether they would introduce precautionary buffers in advance of certain limitations of the QM rule. More than half of respondents indicated that they would not include a buffer in advance of the 3% cap on fees and points, but slightly less than half indicated that they would implement a buffer. Roughly a third of respondents indicated that they would implement a buffer of either 2.8% or 2.9% and 10.5% indicated that the buffer would be as low as 2.6%. The use of buffers on some safe harbor QM loans corroborates the finding earlier that some lenders would be less likely to originate even safe harbor QM loans relative to last year.

With respect to the maximum back-end debt-to-income ratio of 43%, 68.4% of respondents indicated that they would not have a buffer in advance of that restriction. However, 15.8% indicated that they would impose a modest buffer at 42.5%, while an additional 10.6% of respondents indicated that they would impose buffers of 41% or 42%.

With respect to the limit on the annual percentage rate to less than 150 basis points over the average prime offer rate for safe harbor eligibility, roughly 60% indicated that they would not impose a buffer on pricing, but 18% indicated that they would impose a buffer of 5 basis points for both FHA and general QM safe harbor mortgages and 12% indicated that they were not sure.

Nearly 70%, 69.2%, of respondents indicated that a residual income test would be required for borrowers that fell into the FHA’s definition of rebuttable presumption, while 84.6% would require a test of non-FHA rebuttable presumption borrowers. Just 15.4% of respondents would require a residual income test for mortgages that met the FHA’s QM definition of safe harbor, while only 7.7% of respondents would require the test for mortgages that met the general QM safe harbor. However, 38.5% of respondents indicated that they would require a test for non-QM borrowers. This low relative response for non-QM mortgages, which are also bound by the ability to repay rule and would necessitate a residual income test, is likely a reflection of the small share of originators who indicated their willingness to originate non-QM loans.

When asked how concerned they were that their systems and staff were not adequately prepared for the implementation of the QM rule only 15.8% indicated they were not concerned, 52.6% were somewhat concerned, and 31.6% responded that they were very concerned. When asked if they were prepared for the litigation risk, 5.3% indicated that they were not prepared, 52.8% responded “somewhat prepared”, 10.5% were “well prepared”, and 31.6% were unable to answer or did not know. Finally, when asked about the impact on staffing and costs, no respondents indicated that there would be little or no cost, while 42.1% indicated that the impact would be manageable and 57.9% indicated that the impact would be significant.

In response to the new QM rule, 83.3% of respondents indicated that they would add compliance staff and 72.2% indicated that they would invest in compliance software. Slightly more than 11% would close their title or other affiliated practices, which may reflect a low share that had affiliated business prior to the rule’s implementation, and 22.2% would cut staff to save costs. Only 11.1% indicated that there would be no operational changes.

Finally, when asked how long it would take to adjust to the new requirements of the qualified mortgage rule, 16.7% of respondents indicated that they were already adapted, while an additional 44.4% indicated that it would take less than 3 months. Those that felt it would take three to six months only 27.8% of the sample and 11.2% of the sample indicated that it would take either six to nine months or nine months to a year. No respondents indicated that it would take longer than a year to adjust to the changes.

Appendix A: About the Survey
In January of 2014, NAR Research sent out a survey to a panel of 53 different mortgage originating entities. The survey instrument was sent by email on Monday the 6th of January and closed on Monday the 20th. Questions in the survey instrument covered the characteristics of the originators (see appendix B), their general market concerns, and a subset of questions focused on the qualified mortgage rule. There were 27 responses to the survey for a response rate of 51% and a margin of error of 13.7%. NAR will query the sample a second time in the future to measure how firms adjust to the new regulations.

Appendix B: About the Sample
The survey was sent to 53 unique firms with relatively close ties to REALTOR® members. Mortgage bankers dominated the sample with 77.8% followed by non-mortgage banks at 7.4%. Joint venture between a REALTOR®-brokerage firm and a retail lender made up 11.1% of the sample and independently owned mortgage brokers made up 3.7%. No credit unions or savings and loans were represented in the sample responses. This sample is in sharp contrast to the universe of originators reported in the 2012 data collected in compliance with the Home Mortgage Disclosure Act (HMDA). There, 59.1% of all institutions were banking, while an additional 27.1% were credit unions and 2.9% were an affiliate of a banking operation. Just 11% of the lending institutions were mortgage companies (including mortgage banks as defined by HMDA).

Because of the close ties to REALTOR® members, the firms in this sample tend to specialize in purchase originations as 96% of the originators in the sample indicated having 70% or more of their originations as for purchase. A full 28% of the sample indicated that 90% to 100% of their lending was for the purchase market.

Though small in numbers, mortgage companies tend to dominate the volume of originations on a per institution basis. In the 2012 HMDA dataset, 50% of mortgage companies originate 1,000 or more mortgages compared to just 10% and 8% for banks and credit unions, respectively. This pattern is not new. As noted by Avery, Brevoort, and Canner, “In 2005, for example, nearly 80% of the 8,850 reporting institutions were depository institutions but together they reported only 37% of all the lending-related activity.” [2] In this NAR survey of mortgage originators, 92% of respondents originate more than 1,000 mortgages on average, 4% with 500 to 1,000 originates, and only 4% with fewer than 500. The latter point is important as it is one of the exemptions for compliance with the qualified mortgage rule. Finally, 24% of the sample originated 5,000 or more mortgages annually.

Mortgage originators in this sample tend to sell the bulk of their mortgages to aggregators or conduits with an average share of 84% of their production handled in this way. However, respondents designate a significant portion of their originations on average to be sold directly to Freddie Mac or Fannie Mae, 9% and 24% respectively, while only 8% on average were securitized directly through Ginnie Mae and 6% were held in portfolio. With respect to mortgage servicing rights (MSRs), the vast majority, 81.8%, sold 90% or more of their MSRs, while 9% held 10% to 30% and an additional 9% held more than 50% of MSRs in their originations.

On average, a 56% majority of originations were conventional, conforming while 26% were for the FHA. Conventional jumbos were 5% and non-conventional jumbos were 7%. VA and RHS made up 10% of production on average, while subprime production was negligible.

Regulations ranked relatively high on respondents list of concerns. However, tighter margins and higher production costs ranked at the top of the list slightly ahead of the new QM requirements and other regulations. This ranking might reflect unease over the current competitive landscape as compared to a regulatory process that is not set in stone and can be fluid to some extent. Events that would raise loan pricing, including G-fee increases, loan level pricing adjustments, and representation and warranty risk also ranked high as did stalled employment growth and troubles finding credit qualified borrowers. Lenders were less concerned about mortgage rates, perhaps suggesting that the Federal Reserve’s taper or economic growth is priced in. Concerns about investor demand were low. Likewise, there was only moderate concern for lower FHA loan limits and changes from Basel III requirements, the former reflecting higher pricing at the FHA and new alternatives for financing, while the latter may reflect the dominance of non-depositories in this sample.

Geographically, survey respondents operate in nearly all states and regions. A few states in the mountain region, North and South Dakota as well as Montana, as well as Hawaii, Guam and the Virgin Island were not represented in this sample.

Questions can be directed to:
Ken Fears
Senior Economist,
Director, Housing Finance and Regional Economics
The National Association of REALTORS®
kfears@realtors.org
(202)383-1066

Kenneth R. Trepeta Esq.
Director – Real Estate Services
National Association of REALTORS®
500 New Jersey Ave, NW
Washington, DC 20001
(202) 383-1294

[1] For a more in-depth discussion of the new rules see http://www.realtor.org/articles/summary-of-new-qualified-mortgage-qm-rule
[2] Robert B. Avery, Kenneth P. Brevoort, and Glenn B. Canner. “Opportunties and Issues in Using HMDA Data.” 2007. JRER, Vol. 29, No. 4. 2007

Remarks on Housing from Janet Yellen, New Federal Reserve Chairman

Wed, 02/12/2014 - 10:53

In spite of rising mortgage rates housing has “good fundamentals” and is expected to continue to improve – that is the remark from the new Federal Reserve chairman.

After a little more than a week in her role as the fifteenth, and first female, Chair of the Board of Governors of the Federal Reserve, Janet Yellen testified to the House Committee on Financial Services Tuesday in a lengthy, 6-hour long session punctuated by a few recesses.  The major takeaways of her testimony are (1) that monetary policy will continue on its current path of a gradual reduction in quantitative easing as long as there is no notable change in the economic outlook, (2) the current outlook is for continued economic improvement, and (3) the Fed will monitor the outlook and adjust the path of monetary policy in line with expectations.

This means that as long as the economy continues to improve, we can expect continued tapering and gradual upward movement in mortgage and other interest rates with minor fluctuations up or down.  However, if the outlook for the economy improves notably, as happened last summer, mortgage rates could spike up more suddenly.  If the outlook for the economy were to deteriorate substantially, the Fed would likely alter its course expected course of tapering and tightening.

As a key interest rate sensitive sector of the economy, housing was mentioned throughout the testimony and question and answer period.

More detail from the Written Testimony:

Policy Continuity
In her written testimony, Yellen confirmed much of what many analysts expected, that she anticipates a great deal of continuity of Bernanke’s legacy regarding the openness and communication of the Fed[1] and monetary policy[2] since she was involved as Vice Chair when much of the current policy was shaped.

Economic Outlook and Housing
As far as the economic outlook is concerned, Yellen noted that growth largely picked up in the second half of 2013 with the slowing recovery in the housing sector in response to somewhat higher mortgage rates being an exception.

Quantitative Easing and Housing
In reviewing the benefits of the Fed’s quantitative easing program, Yellen noted that rising house prices have brought buyers out from underwater situations, increased security for households, and boosted the economy with the wealth effect—as household wealth improves, households spend some of their new wealth.

Question and Answers on:

Policy Continuity and the Fed’s Dual Mandate
In the question and answer session, Yellen reiterated some of the themes in the written testimony, again saying that the Committee will be outlook driven in making decisions regarding the future course of monetary policy.  In response to a question about the Fed’s mandate for full employment, Yellen acknowledged the importance of looking at broader measures of unemployment, such as the number of long-term unemployed and those employed part time for economic reasons, when considering labor market including.

Recent Economic Data and the Course of the Taper
Regarding recent economic news, Yellen admitted that she was surprised by the reported pace of job creation in December and January, but noted that weather and other factors could be affecting the data.  She insisted that more data would be needed to determine whether this should affect the economic outlook since monthly data is variable. In response to a question about what might cause the Fed to slow or pause the current tapering, Yellen answered that a notable change in the economic outlook would be needed.

The Housing Market
Regarding housing, Yellen mentioned that she believed that the spike in mortgage rates in Spring/Summer 2013 was due to a reevaluation in strength of the economy (i.e. it was better than most had previously thought).  Yellen said that she is hopeful that housing will continue to support the recovery as there are “good fundamentals,” and the recent slowing in housing market growth was a good sign that mortgage rates do have an effect on activity.

[1] “First, let me acknowledge the important contributions of Chairman Bernanke. His leadership helped make our economy and financial system stronger and ensured that the Federal Reserve is transparent and accountable. I pledge to continue that work.”  Chair Janet L. Yellen.  Semiannual Monetary Policy Report to the Congress. Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.  February 11, 2014.

[2] “Turning to monetary policy, let me emphasize that I expect a great deal of continuity in the FOMC’s approach to monetary policy. I served on the Committee as we formulated our current policy strategy and I strongly support that strategy, which is designed to fulfill the Federal Reserve’s statutory mandate of maximum employment and price stability.” Chair Janet L. Yellen.  Semiannual Monetary Policy Report to the Congress. Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.  February 11, 2014.

Labor Turnover Rate

Tue, 02/11/2014 - 12:59

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the labor turnover rate.

  • If people stay put in one job then they are less likely to seek out a new residence. In recent years, Americans have been less mobile largely because of a lower job turnover rate. However, the number of new job openings and new quit rates has been slowly rising. The rise in quit rate in particular is a good sign regarding the economy and portends well for home sales. Most workers would only quit if they have a better job lined up.
  • A total of 2.4 million workers quit their jobs in December, a steady rise from the cyclical low of a 1.6 million monthly quit rate in 2009. The increase in the quit rate is being driven by the general upward trend in job openings. In November and December, there were 4.0 million new openings in each month, compared to 2 – 2.5 million openings several years ago. There is still further room for improvement in the quit rate, however.
  • The construction industry is experiencing a rise in job openings but with no meaningful change in the quit rate. That’s a good thing as more construction is needed in the homebuilding industry. Aside from the difficulty of obtaining construction loans by small local homebuilders, the difficulty of finding skilled construction workers has hindered expansion in new home construction. At least 1.5 million new housing starts are needed this year, but only 1.2 million may be possible due to the above mentioned reasons. Less than a million new housing units were added last year, which was insufficient and led to a housing shortage.
  • The Winter Olympics remind us that Russia is a vast territory. This was not always the case. Around the time of Manifest Destiny in the United State and the extension of U.S. territory to the Pacific Ocean by going west, Russia also had its Manifest Destiny of reaching the Pacific Ocean, though by going east. Russia not only reached the Pacific Ocean, but claimed Alaska first. All this was accomplished by liberating Russian serfs, which allowed them to quit working for their masters (at about the same time as Lincoln’s Emancipation Proclamation speech). Many former Russian serfs then chose to participate in the Russian Manifest Destiny with some even reaching Alaska. We should be ever grateful that more people around the globe have the freedom to quit old jobs in order to seek out better opportunities.

92% of REALTORS® Expect Prices to Increase in Next 12 Months

Tue, 02/11/2014 - 07:39

Prices are still expected to generally increase, although at a slower pace. About 92 percent of REALTOR® respondents expect constant or higher prices in the next 12 months (90 percent in November). Prices are expected to increase modestly at a median expected price increase of 3.7 percent [1]. Local conditions vary. See the December REALTORS® Confidence Index Survey report for more information.

Improved inventory conditions, lower volume of distressed sales, and the pick up in interest rates are factors that will create an environment for modest price growth. Some REALTORS® saw the slowdown as a welcome break to the rapid home price growth amid the modest growth in consumer incomes and jobs.

[1] The median expected price change is the value such that 50 percent of respondents expect prices to change above this value and 50 percent of respondents expect prices to change below this value.

First Time Buyers: 27 Percent of Residential Buyers

Mon, 02/10/2014 - 07:21

Approximately 27 percent of REALTOR® respondents reported that their last sale in December was by a first time home buyer [1] (28 percent in November). REALTORS® continued to report about the difficulty of home buyers in accessing credit and that first time buyers who generally use mortgage financing are finding it hard to compete against investors who typically pay cash. About 21 percent of respondents reported a sale to an investor. See the December REALTORS® Confidence Index Survey report for more information..

[1] First time buyers account for about 40 percent of all homebuyers based on data from NAR’s Profile of Home Buyers and Sellers.

Latest Jobs Report

Fri, 02/07/2014 - 11:35

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest jobs data from the Bureau of Labor Statistics (BLS).

  • Data from the Bureau of Labor Statistics (BLS) showed that 113,000 jobs were added to the economy in January—a disappointing figure after December’s sub-100,000 jobs release. Job gains had averaged 200,000 per month in the 15 months prior to December. January’s report showed only minor upward revisions to previous figures.
  • In January, job growth occurred in the private sector (+142,000), while government lost jobs for the month (-29,000). The biggest job gains went to the construction (+48,000), professional and business services (+36,000), leisure and hospitality (+24,000), and manufacturing industries (+21,000).
  • On net, private industries have increased payrolls by 2 percent from one year ago, but some industries have exceeded this average. Construction employment is up 3.1 percent from a year ago, real estate jobs have increased by 2.7 percent, professional and tech services have increased by 2.7 percent, and leisure and hospitality jobs are up 3.1 percent. Perhaps the biggest gainer was temporary help services, up 9.0 percent in the year in spite of relatively small gains in January. By contrast, federal government employment fell 3 percent over the year while state and local government employment grew slightly, by 0.4 and 0.1 percent, respectively.
  • The household survey showed more positive figures. The unemployment rate was 6.6 percent, which the BLS classifies as essentially unchanged from last month’s 6.7 percent. This figure is notably lower from November when unemployment was 7.0 percent and also much improved from a year ago when unemployment was 7.9 percent.
  • What does this mean for markets? The unemployment rate is now also closer to the 6.5 percent threshold that the Fed has set for considering rate increases in addition to the taper of asset purchases which the Fed began in December. The Fed will have to consider weaker than expected payroll data against an improving unemployment rate. Inflation expectations seem to be well anchored and inflation is, for now, under the 2 percent target. While the Fed set a 6.5 percent unemployment rate threshold for rate increases, it’s widely expected that they will taper the bulk of asset purchases before increasing rates, suggesting that the first rate increase is still about 6 months off. Mortgage rates could move suddenly higher in anticipation of rate increases, much as they did last summer when refinance and transaction activity was high, but if purchase transaction volume steadies as it has in recent months and refinance volume evaporates, mortgages rates may adjust in a more gradual fashion.
  • Just last week, Janet Yellen became the first ever female Chair of the Board of Governors of the Federal Reserve System. While feminists share in the joy of her accomplishment, from a policy perspective the change may not be noticeable. Because she has been a member of the FOMC since she joined the Board of Governors in October 2010, Janet Yellen is expected to maintain much of the policy that she helped to shape as Vice Chair of the board.

Prospect of Homeownership for Millennials

Thu, 02/06/2014 - 09:21

Under QM regulations that took effect in January, one of the underwriting criteria for a loan to be originated as a Qualified Mortgage is that the borrower must meet a monthly debt to income ratio (DTI) of no more than 43 percent [2]. The monthly debt payments include recurrent debt obligations such as student loans, auto loans, revolving debts, and any existing mortgages not paid off before getting a loan [3].

The chart below shows NAR Research’s calculations of the debt to personal income ratio for student debt, auto, and credit card debt with mortgage debt (red ) and without (blue) across age groups based on household debt and income data in 2012 [4]. Using income data for persons with at least an Associate degree, all age groups will meet the 43% DTI except for the “21 to less than 30 year old” group. For this age group, the monthly student, auto and credit card debt payments are about 30 percent of income. Now, with mortgage payments for a starter price home of $149,425 in 2012 at 10% down payment and a 30-year fixed term [5], the debt to income ratio (red) increases to 61 percent.

The implication for millennials is that a home purchase may be pushed back and borrowing ability is adversely affected. Assuming that this group’s income grows at 5% per year, they will meet the 43% DTI in seven years. With an average student debt of $21,402, their current borrowing ability declines by the same amount [6].

What does this mean for REALTORS®?

REALTORS® may need to provide some insight to first-time homebuyers and options for addressing this issue.
1. Working with the buyer to get an overall financial picture of what can be done.
2. Looking for alternatives may be necessary—rentals, rent to buy, assuming a mortgage, exploring financial options.

[1] This blog benefited from the comments of Dr. Jed Smith, Managing Director, Quantitative Research, NAR-Research.
[2] The 43% DTI only applies to qualified mortgages (QM) which are mortgages that provide protection to creditors against consumer’s claims regarding inability to repay. Creditors can still provide mortgages that are not QM but must follow ability to repay guidelines.
[3] “Ability to Repay and Qualified Mortgage Rule Small Entity Compliance Guide.” Consumer Financial Protection Bureau. http://files.consumerfinance.gov/f/201304_cfpb_compliance-guide_atr-qm-rule.pdf
[4] Household debt data is from the Federal Reserve Bank of New York Household Debt and Credit Report Q3 2013 at http://www.newyorkfed.org/microeconomics/data.html. Personal income data for persons over 21 years with an Associate degree or higher is from the American Community Survey, 2012, 1 year estimate. http://www.census.gov/acs/www/data_documentation/pums_data/
[5] Based on NAR’s Affordability Index estimates for first-time homebuyers found on Haver.
[6] A $21,402 student debt translates to a monthly payment of $244.11 at 6.6 percent interest payable over 10 years. The present value of these payments at 4.1% interest is $ 23,998 and at 90% LTV, the amount borrowed is $ 21,597.80.

State and Metro Employment Conditions

Wed, 02/05/2014 - 13:26
  • Want a job? Go to the frozen tundra of North Dakota. Massive oil and gas production has helped the unemployment rate to fall to 2.6 percent.   Starting wages for flipping burgers is said to run $15 to $18 an hour, while a truck driver can net near a six figure income. There is no need for complaint  about the minimum wage in a state economy that creates jobs at a rapid pace.
  • North Dakota is by far the leader of the pack in terms of job creation over the past 12 months. Florida, Georgia, Oregon, and Texas round out the top five job creating states.
  • Though not a state, at the other end of the spectrum, Puerto Rico is bleeding badly. A total of 25,000 fewer people are working there now compared to a year ago. Its bond has not been officially classified into junk status.
  • Jobs will be ever more important for home buying as affordability conditions have been coming down. Home prices are rising much faster than income. Moreover, mortgage rates will likely rise over the course of the year.
  • The table below lists the full ranking of job growth rates by states and U.S. territories.
  • President Obama made the following comment in his recent State of the Union speech: “One of the biggest factors in bringing more jobs back is our commitment to American energy. The all-of-the-above energy strategy I announced a few years ago is working, and today, America is closer to energy independence than we’ve been in decades.” Irrespective of whether the President or private oil producers should get the credit, America is importing much less oil now than in any recent memory. Let’s hope that some of the big oil winners do what Rockefeller, the first U.S. oil producer, did with his oil money. He gave a sizable chunk to charities, including setting up many historically African American institutions of higher learning like Spelman College in Atlanta. As a result, many African American teachers graduated from there and passed on knowledge to poor rural schools across the South. The literacy rate among African Americans went from 20% before the giving to over 80% by the time of Rockefeller’s passing.


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