Mortgage Market: Why Are We Not Booming Yet?
The mortgage market is currently exhibiting a unique conundrum. Mortgage Rates, near lows of 2012-2013 or the mortgage market, even as stock markets continue to rise. Home values are increasing throughout the country. The mortgage market is hot and in many areas of California, Florida, Illinois, Texas, Georgia, Michigan, Indiana, North Carolina, Nevada, Wisconsin, Missouri, New Jersey, Colorado, Washington, Oregon, Alabama, Kentucky, Tennessee, Arkansas, Arizona, Utah, Minnesota, Oklahoma, West Virginia, Virginia, North Dakota, South Dakota, Idaho, New York, Montana, and Delaware are seeing double appreciation in the past three years. Inventory is relatively low, and the rental prices are going up to levels that would make purchasing more attractive than ever before. Credit criteria has opened up to allow borrowers with marginal credit scores to qualify. So with the hot mortgage market why not a boom yet?
Millennials And Mortgage Market
For one millennials who would make up the generation fitting the first time buyer demographic, are not not buying at levels that the Y, X and previous generations were. Although they are more educated in terms of their education level attained, their tuitions are not paid for. Many have debt well over six figures, and even though the job market is improving, the wages supporting that job market are not increasing fast enough. As we become more transient, the idea of settling down does not seem as attractive to millennials who would rather stay home with their parents and save and be more frugle. They prefer not to leverage themselves anymore than they already are. Seeing what their parents or older siblings went through in the last financial crisis only reinforces that widely held belief many have not to own a property which may break their bank. Many pre-approvals are out there, but the lack of inventory makes getting these contracts secured a challenge to lenders and realtors alike.
Empty Nesters And Mortgage Market
Empty nesters are buying, but in areas with warmer climates, lower taxes. They are typically buying cheaper, and not more expensive. States like Arizona, Tennessee, Texas, have values that are going up. For the states with colder climates and higher taxes/cost of living, they are losing this demographic forever. Gone are the days of the snow birds traveling back and forth between seasons, as many are electing to sell the house up north and live down in the south/southwest for good. This presents a permanent loss of revenue for these states once reliant on a older demographic to be consumer based, at least in retail, as well as housing. Many would prefer not to pay high taxes to support great schools when their children are grown up and live elsewhere.
Compliance And Over Regulations
Mortgage Compliance and over regulation have a negative affect on pushing volume. Low inventory, and the border line sensitivity these borrowers have to rates have an affect on qualification. When you have a ton of borrowers who are at a max DTI, loans cannot afford to go up, since not only is their purchasing power diminished, but the deal may die altogether. Qualifying bank statements, when these people are being giftedtheir down payment money, take longer and have cash involved. This can be a challenge to trace the cash’s origin, and hence may not be used to qualify, further delaying the process.
Instability In Mortgage Market?
Finally, people ask what has been holding rates back for so long? Market? Instability? Strong dollar? Many economists point to the fact wages have not increased enough to show an inflationary market. That number is changing according to many sectors who report. These sectors previously did not raise wages either because their margins were lower or, they did not have to. Many also paying for a portion of the benefit costs (unemployment insurance, health insurance, etc.), which continued to outpace inflation. These figures show an upward trend. The labor participation rate, which most experts agree is the greatest indicator of a growing but sustainable economy, is still at 63%. This percentage needs to show go up by at least a couple percentage points. Then we can safely assume the economy is growing at a sustainable level.
Account Executive | Plymouth Title Guaranty Corp
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