Americans Hoarding #Money in Banks, So, Why Aren’t More People Buying #Homes

Posted on in Government, Housing, Mortgages, TV Appearances

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Cash is king again.


Enjoying a steady job market but reluctant to spend freely due to economic uncertainty, a wide swath of middle-class Americans are hoarding money in banks.

Total bank deposits rose 6.6% last year to $10.7 trillion, extending steady growth seen in recent years, data from the Federal Deposit Insurance Corporation show.

Deposits measured as a percentage of bank assets are 77.6% in the first quarter of 2017, the highest since 2006, according to data economic research firm Moebs Services.

“The mortgages and housing industries are missing out big time as Americans hoard cash in banks, and we only have ourselves to blame,” says the Collingwood Group Chairman Tim Rood.  “Due to a lack of supply of starter homes and competition from cash buyers, first-time buyers and millennials can’t get into the market at reasonable prices. The industry and lawmakers must work together to fix this. It will not only help millennials participate in the American Dream and related wealth creations — it will help the mortgage and housing industries and give the general economy a much needed boost.”

Home-Price Rebound Helps Banks Dodge Loan Mess
Rising home prices have turned the great home-equity-line reset into a small setback rather than a disaster for the banking industry.

Banks let home-equity lines of credit, or Helocs, flow freely in the run-up to the financial crisis, often to borrowers with bad credit or living in overvalued homes. Typically, the borrowers were allowed to pay back only the interest for 10 years. In recent years, banks worried those borrowers wouldn’t be able to keep up when the lines reset, which can raise monthly payments by hundreds of dollars.

Now, more than halfway through the problem resets, banks are more optimistic. Borrowers with Helocs taken out in early 2007 are falling behind at lower rates than the Helocs that reset over the past three years, according to data provided to The Wall Street Journal by credit-reporting firm Equifax .

About 3.8% of borrowers who signed up for Helocs in early 2007 were a month or more late on their payments four months after the lines reset, according to Equifax. That delinquency rate had been above 4% for each of the past three years, moving as high as 4.43% for loans made in 2004.

What’s changed: The economy and jobs picture have improved and the housing market has recovered enough in recent years to give borrowers more flexibility. Specifically, it has become less common for mortgage borrowers to owe more than their house is worth, a condition known as being “underwater” that makes it harder for Heloc borrowers to handle a reset.

In the first quarter, 9.7% of U.S. properties with a mortgage were seriously underwater, according to research firm Attom Data Solutions. In early 2014, that proportion was 17.5%. The firm defines seriously underwater as loans where the borrower owes at least 25% more than what the home is worth.
read more: Wall St Journal

Citi, Wells Fargo Report Stronger-Than-Expected Earnings
Citigroup and Wells Fargo joined J.P. Morgan Chase in reporting stronger-than-expected second-quarter profits.

Citigroup reported a surprising increase in revenue as its trading desk saw a smaller-than-anticipated drop-off in activity. Profit still fell 3% from a year ago but beat analyst expectations.

Wells Fargo’s profit rose as the nation’s third-largest bank tries to regain its footing and grow again nearly a year after its sales-practices scandal.
read more: WSJ

How CRE & Retail Can Learn A Great Deal from Barber Shops …

While many in the retail industry are taking a “haircut,” barber shops are not getting “clipped” but are adapting and becoming a “cut” above much of retail.

Retailers are shuttering stores in record numbers, but a cultural resurgence of men’s grooming, estimated to reach $26 billion by 2020, has barbers, brokers and landlords lining up to get their cut.

“Landlords love barber shops and shave shops because they see the industry as exempt from competition from e-commerce, a necessity service that provides a customer experience,” says Situs Executive Managing Director Steven Bean. “There is obviously no way to get a haircut online yet.”

Bean jokes, “Even if somebody were to invent a cyborg to give power shaves, people would still have to show up at the barber shop. It’s all part of the experience.”

Surprisingly, according to the Bureau of Labor Statistics (BLS), barbering is on track to be one of the fastest-growing profession in the U.S. With added amenities and higher price points, luxury barber shops can even match the rents of a high-end salon.

“What landlord wouldn’t appreciate a barber shop bringing ‘clean-cut’ clientele into their shopping areas to spend money on other things,” asks Situs’ Bean.

… Speaking of Haircuts and Making Money
As a young man, Warren Buffett estimated he could save $300,000 over his lifetime by adjusting his haircut schedule.

Americans looking for ways to buy homes or contribute to retirement funds can similarly look to their daily purchases — such as their morning cup of coffee — for potential savings, according to a Vanguard Blog for Advisors post by Frank Kinniry.

“By pocketing the $3.50 for coffee each day and investing it instead in a low-cost, diversified Roth IRA, you’d have an estimated $106,000 after 30 years,” writes Kinniry. “I don’t think anyone would pay $106,000 for coffee!”

This type of incremental savings plan is also endorsed by David Bach, author of “Smart Couples Finish Rich.”

“Becoming rich is nothing more than a matter of committing and sticking to a systematic savings and investment plan,” he writes. “You don’t need to have money to make money. You just need to make the right decisions — and act on them.”
read more: Business Insider

Apartment Vacancy Rates Remain in Low Single Digits in Gateway Markets
Vacancy rates for rental apartments remain low in the top six U.S. markets, despite an influx of new development.

“All of these markets continue to register very favorable supply/demand dynamics,” says Greg Willett, chief economist with RealPage, parent company to MPF Research.

The strongest four markets in the country — New York, San Francisco, Los Angeles and Boston — seem almost impervious to shifts in new supply. Vacancy rates are still very low overall, though certain neighborhoods arguably have too many new super-luxury apartments all leasing at the same time. Seattle and Washington, D.C., also have strong demand for apartments that has kept up with a flood of new units so far.

In fact, new construction can make these core markets seem even more attractive, according to at least one source. “More residents in urban areas [do] create a virtuous cycle: amenities improve to serve the affluent newcomers, which in turn attracts more affluent newcomers,” says John Affleck, a research strategist with the CoStar Group.

Developers have opened about twice as many new apartments as usual in the top six coastal markets over the past four to five years, according to RealPage. In San Francisco and Seattle, developers have opened a little more than twice the historical average number of apartments. In Boston and Washington, D.C., they have opened close to the historical average. In Los Angeles and New York, they have opened slightly less than the historical average, says Willett.

Despite this, the percentage of vacant apartments remains stubbornly low: in five of the six markets, the vacancy rate ranges from 2.0 percent to 3.0 percent. In Washington, D.C., the vacancy rate has risen to 4.0 percent, according to RealPage.
read more: NREI

Startups Help Landlords Turn Apartments Into Hotel Rooms
A handful of startups are betting they can help apartment-building owners convert empty units into hotel rooms, a controversial practice that could help landlords generate more revenue.

The rise of home-sharing services such as Airbnb Inc. has been a boon for owners of single-family homes looking to make extra money by renting out properties. But the services have been met with fierce resistance by local governments and some tenants worried that large residential buildings could morph into hotel-like properties brimming with tourists and other transients.

Yet some startups contend they can navigate these potential pitfalls.

Arlington, Va.-based WhyHotel aims to turn apartment buildings into pop-up hotels, complete with front desks and maid services, to help owners generate revenue while they are in the midst of finding full-time tenants.

YouRent.com of Miami leases sections of apartment buildings or even entire properties, bringing in designers to transform the units into hotel rooms. A soon-to-be-launched startup Parallel similarly will rent blocks of units from landlords, decorate them and rent them out to overnight guests with an in-house hospitality team.

Pillow Residential, which last month raised $13.5 million in funding, offers a platform that allows building owners to access information about Airbnb guests and see which units in their building are being rented out and when.

The services are sprouting up just as the red-hot U.S. apartment market is beginning to cool.
read more: Wall St Journal

Lumbering Tariff Warnings
Homebuilders are quickly feeling the impact of the coming rise in Canadian lumber tariffs.

At the end of June, Secretary of Commerce Wilbur Ross announced another proposed Canadian lumber tariff in addition to the tariff the Trump administration announced in April on Canadian softwood lumber imported into the U.S.

According to the May 2017 survey for the NAHB/Wells Fargo Housing Market Index, the availability of building materials, especially framing lumber, significantly jumped on the list of homebuilder worries.

“It is certainly concerning that we have seen such a large jump in reported framing lumber shortages in a relatively short period of time,” said National Association of Home Builders Chief Economist Robert Dietz. “The rising reports of shortages, along with the recent increases in softwood lumber prices, can almost certainly be related to the ongoing softwood lumber trade dispute between the U.S. and Canada.”

Best Cities for Millennials
Arlington, Virginia, has moved up one spot from last year to become the best city for millennials. With more than 220,000 people, Arlington is only about five miles away from Washington, D.C.

“Jobs for college graduates are abundant,” wrote one Niche.com user about Arlington. A search for Arlington restaurants on Yelp.com yields nearly 5,000 results.

Cambridge, Massachusetts, has fallen one slot from last year to take second place. Home to Harvard and MIT, Cambridge’s identity is highly associated with academia, and more than 110,000 people call it home. Niche.com users praise the city for its diversity, which some say is a consequence of its top-notch universities.

San Francisco is the highest-ranked West Coast city, coming in at third. Its economy is on fire, but some residents lament that the tech boom is carrying cost of living to exorbitant new heights. Housing prices are even driving some to move from San Francisco to the city that’s number six on Niche’s list, Seattle.

How about the Midwest? Minneapolis ranks fifth. The city of nearly 400,000, where winter temperatures of 10 degrees aren’t uncommon, has vibrant nightlife, according to Niche.com’s analysis.
read more: Niche

Secret App Makes Manhattan Skyscrapers Change Color
On warm nights, Bobby Francis and his three roommates like to hit the balcony of their Manhattan apartment, pull out their phones and change the color of the New York City skyline.

With a few taps, spires atop two Midtown skyscrapers flicker blue, red and orange.

“It doesn’t feel like something I should have access to at all,” said Mr. Francis, who turns 23 on Wednesday. The consultant sleeps in the former kitchen of a converted two-bedroom apartment.

Yet he does. Mr. Francis and his roommates are members of New York’s latest exclusive club: Spireworks, a much whispered-about free app that allows users to change the colors of the spires atop two of New York’s tallest buildings.

The only way to join is to be invited by a current user, so access has spread through an unlikely network of colleagues, friends and denizens of the city’s rooftop bars. Among fans, invites remain a precious commodity, creating a new class of haves and have-nots.

The have-nots plead their case on social media, and a black market for invitations has opened up on Craigslist.org and other websites, where they sell for $100 and up. The app owners recently asked Tinder, the dating app, to take down a profile hawking a Spireworks invite for $1,000.
read more: WSJ

Have a prosperous day and hope you “light up” the week ahead.

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Lou Giserman
Senior Media Consultant
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