The 2008 financial crisis: Fast forward 10 years later
The 2008 financial crisis: Fast forward 10 years later
“What’s better now?” FOX Business’s Connell McShane asked The Collingwood Group Chairman Tim Rood. “There’s certainly a lot different,” said Rood, reflecting on the state of the economy and housing finance 10 years after the 2008 financial crisis, during a recent interview.
Rood, who formerly served as Director of Strategy and Business Development at Fannie Mae, highlighted some of the more notable changes in the appearance of the mortgage market today. September marks 10 years in conservatorship for Fannie Mae and Freddie Mac. “At the same time that big banks have seen two- to three-times growth, “private capital has stepped back from private label securitization,” said Rood, and “we’re seeing banks step aside and letting independent mortgage companies take their place.” He added, “last but not least those exotic mortgage products have been legislated out of existence.”
To watch the complete interview, click here.
Housing starts roar back even as builder permits fall to 15-month low
Housing starts ran at a 1.282 million seasonally adjusted annual rate in August, the Commerce Department said Wednesday. That was 9.2% higher than July’s pace, and 9.4% higher than a year ago.
Homebuilders broke ground on more homes in August, in good news for the supply-starved housing market. August’s pace beat the MarketWatch consensus of 1.249 million. But they applied for fewer permits: the 1.229 million pace of permits in August was down 5.7% for the month and 5.5% compared to a year ago. August’s pace of permitting was the lowest since May 2017.
Builder confidence is treading water this year, with sentiment unchanged in September, according to the National Association of Home Builders. Strong consumer demand is offset by high input costs, and new tariffs aren’t helping.
Read more: MarketWatch
US homebuyers’ typical mortgage payment up 15 percent year over year – more than double the median sale price’s gain
While the U.S. median sale price has risen by just over 6 percent over the past year the principal-and-interest mortgage payment on that median-priced home has increased more than 15 percent. Moreover, the CoreLogic Home Price Index Forecast suggests U.S. home prices will be up 4.7 percent year-over-year in June 2019, while some mortgage rate forecasts suggest the mortgage payments homebuyers will face at that point will have risen almost twice as much.
One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the “typical mortgage payment.” It’s a mortgage-rate-adjusted monthly payment based on each month’s U.S. median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment. It does not include taxes or insurance. The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced U.S. home.
The U.S. median sale price in June 2018 – $233,732 – was up 6.3 year over year, while the typical mortgage payment rose 15.1 percent because of a .67-percentage-point rise in mortgage rates over that one-year period.
Read more: CoreLogic
Trump’s latest Chinese tariffs are a $1 billion tax on housing
Homebuilders are worried about affordability, but firm demand is holding that concern in check, for now.
Homebuilder sentiment in September held steady at 67 on the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index, or HMI. Anything above 50 is considered positive sentiment.
Homebuilder sentiment is up from 64 one year ago, but down from its most recent high of 70 in May. Confidence among builders has been under pressure from rising costs and a continued shortage of skilled labor.
“Despite rising affordability concerns, builders continue to report firm demand for housing, especially as millennials and other newcomers enter the market,” said NAHB Chairman Randy Noel, a custom homebuilder from LaPlace, Louisiana. “The recent decline in lumber prices from record-high levels earlier this summer is also welcome relief, although builders still need to manage construction costs to keep homes competitively priced.”
While lumber prices are down from their record highs last spring, the survey was conducted just as the threat of new tariffs on Chinese products was rising. That concern is now a reality and has builders are faced with even higher costs.
Of the nearly 6,000 products listed in the latest tariffs from the Trump administration, a preliminary look by the NAHB found about 600 products either connected to home construction or to tools used to build apartments or homes. That represents $10 billion in goods, which at a 10 percent tariff rate puts a $1 billion tariff on housing. This includes appliances and other kinds of home furnishings products.
Read more: CNBC
Hurricane Florence creating housing shortage for displaced North Carolinians
Finding temporary housing for thousands of North Carolinians displaced by Hurricane Florence could prove more difficult than it was for those uprooted by other recent US storms and hurricanes.
That is because Florence’s path blew through some of the state’s smaller cities, where much of the rental housing stock is owned by mom-and-pop landlords. Places like Wilmington and Fayetteville have fewer than 1,500 empty apartment units each, according to apartment research firm RealPage Inc.
The figure is less than half the number of vacant units in a larger center like Charleston, S.C. Houston, which was suffering from a rental glut before Hurricane Harvey hit last year, had some 70,000 available units just before the storm. Fewer available units in North Carolina could lead to a severe apartment crunch.
Making matters worse, much of the rental inventory in places like Wilmington and Fayetteville is in single-family homes, analysts say. This type of housing is more vulnerable to storm damage than higher-rise apartment complexes.
Read more: Wall Street Journal
Quicken Loans’ prescription for mortgage lenders
When Quicken Loans introduced Rocket Mortgage in a 60-second commercial during the 2015 Super Bowl, Bill Emerson had to convince regulators that digital mortgages wouldn’t create another financial crisis.
“I can’t tell you how many folks I had to go talk to in Washington, D.C., to try to explain what was really going on here,” said Emerson, the vice chairman of Quicken Loans and its parent company Rock Holdings Inc. “That the world wasn’t going to end again. That we were really just taking the current underwriting model and making it simpler and easier for human beings. That we created a better, safer and simpler process for everyone to participate in the mortgage space.”
Emerson also had to defend himself to industry insiders.
“If I had a dime for every time that someone told me while we were at an industry event that we were crazy for having a centralized model, for not having feet-on-the-street loan officers. If I had a dime for every time someone told me that, ‘Wait till rates go up, wait till the market shifts, you guys won’t be around anymore,'” Emerson said.
Read more: American Banker