MReport September 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

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74 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA U.S. Household Debt Approaches New High The amount of Americans' total household debt attributable to mortgage is lower than in 2008. C onsumer debt is ap- proaching new highs with the current household debt set to be $1 trillion above the peak debt level of 2008 by the end of June 2018, according to a study by LendingTree. In the second quarter, consumer-debt levels are approaching $15.7 trillion compared with $14.7 trillion a decade ago, the study found. Unlike the last high in 2008, this time around, mortgages are responsible for a smaller share of total household debt, even though they comprise the largest amount of debt. "As measured by a percentage of disposable income, outstanding mortgages comprise less of a liability," the LendingTree study noted. Current levels of mortgage bal - ances consist of around 68 percent of disposable income, while credit card balances are less than 7 per- cent of income. In 2008, balances were as high as 98 percent and 10 percent, respectively. "While nominal total debt levels now exceed 2008 levels, households are much better situated to handle debt then they were a decade ago," the study said. The current mortgage bal - ances levels have also resulted in rising home equity, the study found. "Homeowners today on average have significant equity in their homes. Ten years ago, equity was virtually nonexistent," LendingTree said. In fact, household net worth as measured by the Federal Reserve Financial Accounts reached $100 trillion for the first time last quarter. The study noted that assets, which primarily consisted of financial instruments and real estate, gained more than $1.07 tril - lion in the first quarter, outpacing the additional debt Americans accumulated. "Nonetheless, liabilities have been steadily increasing in recent years. But unlike a decade ago, mortgages aren't the culprit," LendingTree said. Instead, non - mortgage related debt such as that for student loans, credit cards, and auto loans have been growing. "By the end of the second quarter of 2018, we'll have $1 trillion more in household debt than we did in 2008 and none of it is attributable to housing," LendingTree said. According to the study, mortgage-related household debt has fallen by 5.5 percent since the third quarter of 2008. On the other hand, consumer credit has increased by 45 percent. The study found that while credit-card debts were still low, student-loan debts were growing the fastest, rising 130 percent since 2008. Mortgage, Housing Optimism Stays Strong for Now Inventory is still the main determiner in real estate markets. W hen it comes to Americans' optimism about buying homes, Q2's numbers might as well be cribbed from the National Association of Realtors' Q1 report. NAR's second-quarter Housing Opportunities and Market Experience (HOME) survey found that 68 percent of people think it's a good time to buy— statistically, pretty much the same as in the first quarter. That optimism has remained steady among homeowners in particular. As with last quarter, 39 percent strongly agree that now is a good time to buy, while 29 percent moderately agree. Among renters, however, those positive feelings dropped from 55 to 49 percent in Q2. Optimism is highest among older buyers (65 or over) and those living in the South and Midwest regions (73 and 71 percent, respectively). NAR Chief Economist Lawrence Yun said affordability and low inventory are eroding buyer confidence. "Inventory remains the driving force in real estate, affecting everything from rising prices to household formation. Improving supply conditions is critical to improving buyer optimism and helping to remove some of the barriers holding back potential first-time buyers," Yun said. Sixty-eight percent of those surveyed said they believe home prices have gone up in their area within the last 12 months. That's up from 63 percent last quarter. Meanwhile, 55 percent also believe home prices will keep climbing in their communities through year's end. That's about where it was last quarter, too. Those numbers also largely mirror optimism about the economy in general. According to the report, almost 60 percent said the economy will stay strong. Most of the optimists are in rural areas, where 63 percent said the economy is improving. The largest change in perception from Q1 regarded mortgages. Forty-six percent of those surveyed said they do not believe it would be difficult to obtain a mortgage. While still less than half, that number is up from 36 percent last quarter. "This is most likely a reflection of the current positive outlook on the direction of the economy," Yun said. "Healthy job creation and faster wage growth mean that homeownership is viewed as a more attainable goal than it was a year ago." But optimism for several years ahead was a little less bouncy. Asked if homeownership will be easier or harder to attain for future generations, 73 percent said it will be harder for future generations to purchase a home, compared to 11 percent who said it will be easier. On the other side of the table, 75 percent believe that now is a good time to sell. Twenty-nine percent overall said that now is not a good time to sell a home. Among homeowners, that number was 19 percent. "Hopefully, this strong seller optimism will lead to an increase in inventory later on in the year," said Yun.

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