Discussing the increase in low down payment mortgages, affordable housing and residential segregation, the American Dream has changed, the uneven recovery, the housing market continues to improve and more!
Low Down Payment Purchase Lending at Seven-Year High
From Black Knight Data & Analytics Executive Vice President Ben Graboske in the latest Black Knight Mortgage Monitor:
Over the past 12 months, approximately 1.5 million borrowers have purchased homes using less-than-10-percent down payments. That is close to a seven-year high in low-down-payment purchase volumes.
The increase is primarily a function of the overall growth in purchase lending, but, after nearly four consecutive years of declines, low-down-payment loans have ticked upwards in market share over the past 18 months as well. In fact, they now account for nearly 40 percent of all purchase lending.
This may sound distressing to some but as Graboske points out, lending standards and credit scores are much different today than before the housing market meltdown.
How Affordable Housing Can Chip Away at Residential Segregation
From The Conversation:
With the health care debate stalling, Republicans are beginning to make more noise about tax reform. President Donald Trump has promised to make his bid to alter the code his next big battle, as has House Speaker Paul Ryan.
Though the low-income housing tax credit could land on the chopping block, it’s probably safe due to its history of bipartisan support. Along with politicians from both sides of the aisle, developers and many banks and nonprofits embrace it because the tax credit makes creating new affordable housing units financially feasible and less risky. Yet the program, which is the only significant federal subsidy for building affordable housing, could be in jeopardy as lawmakers seek to close tax loopholes and lower tax rates.
With the dire need for affordable housing, any attack on the low income tax credit seems kind of short sighted.
Not that we can expect politicians to do anything logical…
Society Will Collapse Within 30 Years as Robots Put Half of Humans Out of Work
A former Facebook executive has quit his job and now lives as a recluse in the wilderness – because he is convinced that machines will take over the world. Antonio Garcia Martinez worked as a project manager for the social media giant in Silicon Valley but became terrified by the relentless march of technology. He reckons that machines will have taken half of humanity’s jobs within 30 years, sparking revolt and armed conflict.
I have not seen the BBC documentary this comes from yet but I wonder why they selected this guy? Being employed at Facebook might mean you are an expert on invading people’s privacy but how does it make you an expert in predicting the collapse of society?
There is no doubt that substantial changes are coming due to technology and the best you can do is start preparing now.
The Transformation of the ‘American Dream’
Language is important, but it can be slippery. Consider that the phrase, the American Dream, has changed radically through the years.
This drift in meaning is significant, because the American Dream — and international variants like the Australian Dream, Le Rêve Français and others — represents core values. In the United States, these values affect major government decisions on housing, regulation and mortgage guarantees, and millions of private choices regarding whether to start a business, buy an ostentatious home or rent an apartment.
Conflating the American dream with expensive housing has had dangerous consequences: It may have even contributed to the last housing bubble, the one that led to the financial crisis of 2008-9.
Long time readers know I always suggest buying a home that is very affordable to you. Trying to boost your self esteem by overspending can destroy your finances.
The Roosenvelt Institute just released a paper that discusses whether or not the economy is operating at it’s potential. Check out a few of their arguments:
GDP remains well below both the long-run trend and the level predicted by forecasters a decade ago. In 2016, real per capita GDP was 10 percent below the Congressional Budget Office’s (CBO) 2006 forecast, and shows no signs of returning to the predicted level.
The fall in the employment-population ratio over the past decade is not due to demographics.
The exceptionally slow productivity growth of the past decade can be understood as the result of weak demand, including the equally exceptionally weak growth of investment spending.
Now look at the chart showing real per capita GDP and the long run trend. Notice anything?
I noticed a trending topic on Twitter about Our Broken Economy and most of the tweets were bots talking about how great things are. These tweets are a rebuttal to a NYT article that had this chart:
Obviously, some people have recovered quite nicely while others have not…
But we have come so far from where we were when the SHTF. If you think everything is fantastic today, I suggest you remember how bad things were and how quickly things can turn bad.
As always, hope for the best but plan for the worst.
The Major Flaw in Big Banks’ Argument Against the Leverage Ratio
From American Banker:
Excessive leverage was a primary cause of the financial crisis, and yet big banks and even some government officials appear eager to relax rules that limit leverage at the largest U.S. financial institutions. But banks’ argument for why such reform is necessary doesn’t hold water.
Large banks say the risk-insensitive nature of the Basel III Supplemental Leverage Ratio (SLR) restricts market liquidity by increasing banks’ cost of holding so-called safe securities and derivatives for market-making activities. A proposed change to the leverage ratio would remove those assets from the SLR calculation. But the proposed change would allow more leverage which could amplify the alleged liquidity problem.
These rules were changed for a reason. A very very good reason…
Housing Market Continues to Make Gains Though Permits Fail to Keep Pace
In a further sign that the housing sector is continuing to gain momentum, nearly 300 markets nationwide posted an increase in economic and housing activity from the first to the second quarter according to the NAHB/First American Leading Markets Index (LMI) released today.
The LMI measures current home price, permit and employment data to plot the economic health of an individual market. Based on the 337 markets tracked by the index, nationwide markets are now running at an average of 102% of normal housing and economic activity.
However, individual components of the LMI are at different stages of recovery. While employment has reached 98% of normal activity and home price levels are well above normal at 152%, single-family permits are running at just 54% of normal activity.
Yet another cause of the low inventory issue is the lack of new homes being built. Imagine how much stronger the economy would be if the construction of single family homes was closer to normal?
It isn’t just the lack of new homes being built that is causing the inventory problem…
Trulia recently reported that “U.S. home inventory has tumbled 8.9% over the past year and has now fallen for nine consecutive quarters.” Nationally, there are 20% fewer homes for sale than there was five years ago.
Check out the chart showing the reduction in homes for sale by type:
While Trulia is talking about the entire US, some of the conditions in the chart above are similar to the Anderson SC area. Demand for ALL types of homes is strong and if you have any questions about selling a home in the Anderson area, shoot me an email!
Fannie and Freddie Could Need Another $100 Billion Bailout
According to the results from the annual stress test of Fannie Mae and Freddie Mac conducted by the FHFA, the GSEs would need as much as $100 billion if we encounter another big economic crisis. Fannie and Freddie are required by the Dodd-Frank Act to face annual tests of their ability to withstand a major recession.
The key thing to remember this is talking about IF we see another massive housing meltdown. However, since we are aware of this potential problem, don’t you think steps should be taken NOW to prevent another massive bailout paid for by taxpayers?