Mortgage Professionals Should be Optimistic About the Future

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38 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ORIGINATION the latest Forecast: Housing stage set for Millennials Realtor economist predicts millennials will drive two-thirds of household formations over the next five years. t he U.S. housing market is gearing up to be stronger and more expensive in 2015, powered, for the first time, by new millennial buyers, according to's 2015 Housing Forecast. Among its five largest predictions for the year ahead, ex- pects first-time buyers to return to the market in full force after years of retrenchment that has dampened housing's recovery. This push will be led by millennials, now settling into their families, careers, and 30s, who are eager to buy into the American Dream.'s prediction mirrors that of Zillow, which just days prior, issued its own forecast that millennial buyers will become the driving force behind the American housing market in 2015. According to Zillow's report, 42 percent of millennials say they want to buy a home within the next five years. Millennials have, according to most accounts, stayed away from buying because they have eschewed settling into marriages and families until later in their lives. With millennial family growth on the rise and economic condi- tions improving for younger Americans and the nation in general, foresees more buying among the under-35 age group. "In 2015, increases in employ- ment opportunities will empower younger buyers to return to the market and fuel the continued housing recovery," said Jonathan Smoke, chief economist for "If access to credit im- proves, we could see substantially larger numbers of young buyers in the market." Smoke predicts that millennials will drive two-thirds of house- hold formations over the next five years. The anticipated addition of 2.75 million jobs in 2015 and increased household forma- tion will be the two key factors driving first-time buyer sales, he said. "However, given a high dependency on financial qualifica- tions, this activity will be skewed to geographic areas with higher affordability, such as the Midwest and South," Smoke explained. The report ranks Dallas, Atlanta, Denver, Des Moines, and Houston as the most promising growth areas in 2015, with between 5- and 14-percent growth in home sales expected in these areas. And though the Realtor site expects homeownership overall to decrease—even with the predicted increase in ownership for those under the age of 35— predicts existing-home sales will increase 8 percent as buyers be- come more motivated by the belief that rates and prices will continue to rise. The increase in home sales year-over-year will be similar to 2012, but this time the composition of properties sold will be more normal with fewer transactions involving distressed properties, ac- cording to the website's report. Overall, expects home prices to increase 4 to 5 percent nationally, which in turn will make homes 5 to 10 percent less afford- able in 2015. On the mortgage front, Smoke anticipates fixed rates to top out at 5 percent by year's end, and rates on adjustable-rate mortgages to increase only slightly. credit challenges continue for self- employed Borrowers Lenders continue to shy away from seLf-empLoyed Loan appLicants despite their higher earnings and Larger down payments. D espite earning nearly twice as much income on average as other borrowers, self-employed americans continue to experience more difficulties obtaining a loan quote than their counterparts, according to a new report. in a study of borrower profiles and lender behaviors, Zillow found that self- employed loan applicants receive only six loan quotes for every 10 received by non-self-employed borrowers. that's even worse than in June 2011, when the ratio was seven for every 10. while self-employed borrowers tend to earn 81 percent more money annually—$145,000 per household on average compared to $80,000 for those who aren't self-employed— they're being held back by lower aver- age credit scores, Zillow says. "Low credit scores, coupled with a mountain of paperwork lenders must complete specifically for self- employed borrowers, make them unattractive," said erin Lantz, Vp of mortgages at Zillow. "so, despite self-employed borrowers with high incomes appearing on paper to be better situated to repay their loan, they're often overlooked by lenders." according to Zillow's analysis, 47 percent of self-employed borrowers have self-reported fico scores below 720, while 28 percent have scores be- low 680. By comparison, 23 percent of non-self-employed borrowers have scores below 720, and 14 percent have scores below 680. the median u.s. credit score as of april 2014 was 692, according to though their credit scores tend to be lower, self-employed loan ap- plicants beat out their counterparts across most other categories. Besides earning a higher annual income, they also tend to put more money down, paying on average 15.3 percent as down payments compared to 14.6 percent for other borrowers. self-employed borrowers are also more interested in higher-priced homes, the study found. the median property value for mortgage requests by self-employed borrowers on the Zillow marketplace is $352,000 com- pared to $315,000 for those that are not self-employed.

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