MReport May 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

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54 | 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 Why is Homeownership Declining in Metros? Household income and family dynamics could be changing buying patterns. O wning a home might be the American Dream, but a recent Trulia report on home - ownership trends between 2000 and 2016, shows that there has been a sharp decrease in home- ownership in some of the largest cities in the country. Trulia analyzed census data for this report from 2000 to 2016 collected every decade. This time period is quite rich for the analy - sis since it has seen the complete cycle—expansion, recession, and recovery. While 2004 marked a boom with the highest home - ownership rate of 69.2 percent; it showed a bust with homeowner- ship falling to 62.9 percent. The biggest decrease in home- ownership rate was recorded for Glendale, Phoenix from 92.6 per- cent in 2000 down to 50.5 percent in 2016. A major reason behind this enormous slump is the con- struction of new apartment units. The highest switch from renting to homeownership is in Georgia Tech neighborhood in Atlanta (ZIP code 30313). This change can be attributed to average household income that increased from 13.1 percent in the year 2000 to 32.5 percent in 2016. Upon careful study of home - ownership data, Trulia noted that not only are there visible homeownership patterns within the states and cities but there are also patterns to be observed within ZIP codes. For instance, New York and Houston showed ownership trends dropping in cer - tain zip codes while picking up in others. The overall homeowner- ship rate in the two states is fairly close to that in 2000. There are two major factors that define changes in homeownership pattern—household income and family dynamics. In smaller areas such as North San Jose, Riverview, St. Louis and Maryvale, Phoenix, the income increase shows a gap of average 6.8 percent when compared to their metropolitan surrounding areas. Another key factor that should be taken into account when pre - dicting household trends is the type of new construction—multifamily or single family. North San Jose and Maryvale also comprise of a large number of multifamily units, which accounts to lower homeownership. The Cascading Impact of Wages The rise in jobs and wages reported by the Bureau of Labor Statistics is affecting the housing market in good and bad ways. T he rise in jobs and wages reported by the Bureau of Labor statistics in late January is affecting the housing market in good ways and bad, according to the latest Real House Price Index data released by First American. The index measures the price changes of single-family housing across the country adjusted for the impact of income and interest rate changes on consumer house- buying power (how much one can buy based on changes in in - come and interest rates) over time and across the U.S. at a national, state, and city level. The data, which was released for December 2017 showed that homes are 5 percent more expen - sive than they were a year ago. Real house prices on the index increased 0.4 percent in December 2017 month over month. The index indicated that house buying power of consumers in - creased 5.6 percent on a year-over- year basis and by 0.1 percent from November 2017 to December 2017. "Household income varies substantially by the housing mar - ket, so comparing house-buying power with house prices by the market can provide perspective on housing affordability," said Mark Fleming, Chief Economist at First American. "Earlier this month, the Bureau of Labor Statistics reported that average hourly earnings increased in January by 2.9 percent compared with a year ago. Rising wages mean homebuyers can bor - row more." However, the rising wages also raised concerns that infla- tion would rise and the Federal Reserve would increase rates at a faster pace than previously ex- pected. "Consequently, the 30-year, fixed-rate mortgage rate increased to 4.4 percent last week," said Fleming. "So, on the one hand, rising mortgage rates reduce the affordability of housing, as the cost of borrowing increases. But, on the other hand, rates are increasing be - cause wages are rising faster than expected. Wage growth simulta- neously helped and hurt housing affordability." The data indicated that house prices still exceed house buying power in hot markets like San Jose, San Francisco, New York, and Los Angeles. But metros like Washington, D.C., Boston, and Denver are more affordable than may believe with house prices in the $400,000 range compared to a median range of $1.2 million in San Jose or $1 million in San Francisco. There are two major factors that define changes in homeownership pattern—household income and family dynamics.

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