TheMReport — News and strategies for the evolving mortgage marketplace.
Issue link: http://digital.themreport.com/i/699063
16 | TH E M R EP O RT COVER STORY insights report says that millen- nials would prefer to wait and save longer and skip that starter home, so that's 75 percent. But they're also very cautious, having watched their families go through the housing and economic crisis, to make sure they have all of the facts before they make a decision. So education has been a big push for us. And when I say educa - tion, it's also dispelling the myths that exist with homeownership. You don't have to have 20 percent down, you don't have to have an 850 FICO score, and you can have student loans—so it's just really finding that comfortable mortgage payment for you. Also, many of the millenni - als had trouble landing a good- paying job after they got out of college into the economy. They're still trying to make sure they're on stable ground. And finally, I think there are a lot of folks that are waiting for that life event to trigger their need or their desire to buy. And it really just hasn't occurred yet for this age group— specifically marriage and children. People anticipate that buying a home isn't going to be an easy process, and they'd rather not have to repeat it anytime soon. Folks are waiting longer to get married. Some of the stats I have are that the average marriage age today is 27 for women and 29 for men. That's up from 1990, which wasn't that awfully long ago, when it was 23 for women and 26 for men. Same thing with chil - dren. Women are waiting to have their first child. As of 2013, the av- erage age of first child is 23 years old. That's up from 1980, when the average age was 22.7. Definitely a difference in those life-changing events, and when those are occur - ring from an age perspective. That could also explain why people are saying, "You know what? I want to skip the starter home, because I know that my needs are going to be—with a family—not long after I get the home." MREPORT // How does afford- able housing or the lack thereof affect lenders? How can lend- ers help buyers in a constricted market? KC // The lack of affordable housing puts pressure on us to help get buyers prequalified. So one of the things that does help a buyer when they're out shopping in a competitive market is to have a preapproval by a lender. Essentially what that means is their credit's preapproved and they are able to go bid on a home knowing that the financing's going to be there, barring any major variances in what we qualified them for. It's important to make sure homeowners understand that if they're in a competitive market that they might want to look at a lower priced home, knowing that they could get into a bidding war. San Francisco's a perfect example, where it's not uncommon to go 110 percent over the listing price. So really just making sure that you help back them into a com - fortable mortgage payment. MREPORT // Some say we're experiencing a housing short- age—do you think there is one, and if so—how is the industry addressing it? KC // From a lender's perspective, we're trying to prepare buyers best as we can. We're arming them with information. We're trying to get them preapproved for their credit before they go out and start participating in bidding wars. The housing shortage is definitely very real in many markets. But it's not in all markets, so it's really geographical. During the housing downturn, part of what happened is there were a lot of investors that went into cities—I'm located in Charlotte, so it's a perfect example. We had an investor come in and buy more than 500 affordable homes, and they put them in their business model as rental units. They're renting these homes out. They bought these large chunks of homes that were in foreclosure, and they turned them into rentals. That takes inventory out of the market. We've also got a situation where it's costly to get the land developed on buildable properties. The land itself is usually 20 to 25 percent of the total building costs. That's substantial. The more it takes to get that land to a place where it's developable is definitely a cost-prohibitive factor for builders. The other thing that I think is really driving this is for those investors who bought those big blocks of investment properties for rentals. But until there is a more meaningful alternative for them to actually earn money through other investment avenues, they're probably going to hold on to those properties. Now there may be some more stable invest - ment options that pop up in the future, but right now if you look at the stock market, it's all over the place. I think that's the other thing that's kind of driving—from my perspective—the limitations with the product offerings that we can have. Right now, you've got the agen - cies (Fannie and Freddie), you've got FHA, you've got VA. But gone are those private mortgage-backed security investors who were will- ing to actually buy blocks of loans with certain criteria, so that's limit- ing in nature as well. That takes out the competition in the second- ary market. It's not necessarily a bad thing when you talk about trying to stabilize the market, and correcting it from just a credit-risk appetite perspective, but it is some - thing that's a limiting factor. MREPORT // Homeownership has been looming in the same general area, leveling out for quite some time. How can the industry get those numbers mov- ing upward? KC // That has been something that people have been questioning "[E]ducation has been a big push for us. And when I say education, it's also dispelling the myths that exist with homeownership. You don't have to have 20 percent down, you don't have to have an 850 FICO score, and you can have student loans..."