MReport March 2017

TheMReport — News and strategies for the evolving mortgage marketplace.

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50 | 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 DATA THE LATEST Breakeven Point Gets Longer for Homeowners It takes almost two years for owning a home to become more economically viable than renting. B reaking even is taking longer than it used to. In its latest look at what it called the "breakeven horizon," Zillow found that it now takes almost exactly two years, on average, to live in a home before buying it makes more financial sense than renting it. That's three weeks longer than it took in 2015, an offshoot of a year of rising property values all over the United States. Accelerating home prices in many markets last year often offset owners' abilities to recoup larger upfront purchase prices and down payments. "Overall, U.S. home value growth accelerated at the end of 2016, ending the year at a 6.8 percent annual appreciation rate, Zillow reported. "At the same time, rent appreciation slowed significantly, only growing at 1.5 percent annually." At the end of Q 4 2015, it took the average U.S. homeowner a year and 11 months to reach the breakeven point. As of Q 4 2016, that timeframe was a year, 11 months, and 20 days. In more expensive areas such as the Silicon Valley and the Bay Area, the wait time is even longer. According to Zillow, the breakeven horizon in San Jose is almost two years longer than it was at the end of 2015. In San Francisco it is a year-and-a-half lon - ger. Both translate to about a four-year wait time to break even. The same holds true for Los Angeles and San Diego. On the other side of the coin (and the country), Washington, D.C., is seeing its home prices accelerate more slowly of late. Zillow expects the D.C. metro area to remain largely flat in terms of home price value over the next year, meaning less time to reach the breakeven point. Currently, the breakeven horizon in the capital metro is about 3.5 years. Buyers will break even fastest in the South and Midwest, Zillow reported. In Indianapolis, Orlando, Detroit, Atlanta, and Tampa, it takes less than 1.5 years to break even on a home. Head of the Class Graduates from the class of 2008 seen as most likely to buy a high-priced home. T he class of 2008 is the most likely to buy and mortgage a higher- priced home, according to recent data from LendEDU, a student loan debt consolidation company based in New Jersey. With the highest median credit score in the last 10 years, this group of young adults also boasts the highest median home loan debt, at $395,038. According to the data, 2008 graduates outpace other classes in home loan debt by more than $115,000. The classes with the next-highest home loan debts are: 2013, with $279,300; 2016, with $274,384; 2009, with $260,008; and 2014, with $249,100. Classes with the lowest home loan debt were 2010, 2011, and 2015—all of which saw a median debt of $200,000 or below. These results were unexpected, accord - ing to LendEDU. "While we expected to see graduates of earlier class years borrowing more home loans," the report stated, "we instead see a trend indicative of the housing market over time—a peak in 2008 followed by a large recession and tentative recovery starting in 2012." The report also breaks down home loan debts by college degree and, according to the data, gradu - ates with a Master of Business Administration (MBA) have the highest median home loan debt at $445,900. This is followed by Doctor of Pharmacy ($387,625), Juris Doctor ($323,000), Doctor of Philosophy ($262,200), Masters ($260,008), Bachelors ($200,111), and Associates ($164,225). LendEDU's data shows all graduates with at least a Bachelor's degree have a good or very good credit score, something that could indicate the true value of a higher degree. The report explained, "After the recession hit and a college degree no longer guaranteed a job, many began to wonder: what's the real value of a college education? With some patience, perhaps a good credit score." Ultimately, it seems higher education, over time, leads to higher credit scores and therefore larger mortgage loans and higher debts. This means that while this year's class is currently on track for the poorest credit scores in re - cent memory, that doesn't indicate they'll be unable to secure a home in the not-too-distant future. "In general, higher degrees do equate with higher credit scores and bigger home and auto loans," LendEDU stated. "Students who graduated longer ago have better credit scores and bigger loans than current students. The class of 2017 has the poorest scores, but if the trend holds, they'll be back up into the 'good' zone soon enough."

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