(Political humor is posted
without regard to policy or politics of the commentary writer.)
THE DEBT CEILING
* Democrats don't understand
THE DEBT CEILING
* Republicans don't understand
THE DEBT CEILING
* Liberals don't understand THE
DEBT CEILING
* Conservatives don't
understand THE DEBT CEILING
* NO ONE understands THE DEBT
CEILING
SO - Allow me to explain...
Let's say you come home from
work and find there has been a sewer backup in your neighborhood. Your home has
sewage all the way up to your ceilings. What do you think you should do? Raise
the ceilings or pump out the "stuff"? Your choice is coming in
November. Don't miss the opportunity.
Doug T. writes, "There's a
strange new trend in the office: people are putting names on food in the
company fridge to keep them cold. Today I had a sandwich named Kevin."
There are some real estate markets that are anything but cold, but what is a
"hot" housing market? The West Coast has seen an ebbing of all-cash
Asian buyers, but markets are still good. Pro Teck Valuation Services (a national provider of
residential real estate valuations) came up with its definition, and variety of
factors, to determine a "hot" housing market. (Remember that site,
"Am I hot or Am I Not"? That's a whole other topic.)
Back in April Millennials
surpassed Baby Boomers as the nation's largest living generation, according
to population estimates by the U.S. Census Bureau. "Millennials, whom we
define as those ages 18-34 in 2015, now number 75.4 million, surpassing the
74.9 million Baby Boomers (ages 51-69)." That means that rascally
generation is now 19-35. Let's just stick with the Census Bureau's
definition.
Every time I mention
Millennials to my cat Myrtle she gives me a look as if to ask, "How long
will everyone take to realize that Millennials are in no hurry to marry, have
kids, or save up enough money and then finance a house? It will happen
eventually - why are lenders and real estate agents pushing them? Still it
doesn't stop the fascination with their every move but the ones that I talk to
aren't too excited about constantly being under the microscope." Yes, that
was all conveyed by Myrtle's look.
The CPI report indicates apartment rents climbed 0.4%
in May to a record high, marking the 67th consecutive month of
increases. As of the end of 2015 about 37% of households were renters, the
highest level since the 1960s.
Sure enough, the latest
analysis by Pew finds that the most common living arrangements for Millennials
are: living with parents (32%), married or cohabitating (32%), living alone or
with roommates (14%) and other living arrangement (22%). The percentage of
those living at home is the highest on record.
More millennials are living with their parents than
they are with a partner or significant other, for the first time in the modern
era. This is probably a reflection of a lot of things - from the weak economy
to people getting married later in life. However, it does represent pent-up
demand for housing. And eventually Pampers, right? CNBC echoed that more young adults aged 18-34 live at home with Mom and Dad than
in any other arrangement.
Zillow's Chief Economist
writes, "With home prices and rents rising as fast as they are, it's a
common assumption that young adults in many cases cannot afford to live alone.
Though that may be true in some markets, there's still a large number of
amazing places across the U.S. that are prime for millennials to thrive
independently." Those in Richmond and Pittsburgh are bucking the trend
according to data from Zillow. Its data found that 8.9 per cent of millennials
live alone but in Richmond it's 15 per cent and in Pittsburgh 14.3 per
cent. Millennials are also more likely than average to live alone in
Buffalo, NY; Columbus, OH; Virginia Beach, VA; Cleveland; New Orleans; Austin,
TX; Kansas City, MO; and Oklahoma City.
Let's track them every
month through "Big Data!" The recent Ellie Mae Millennial Tracker, which shows that among
primary millennial borrowers that are women, more than 60 percent are single
while only 38 percent are married. This is a striking difference from male
primary borrowers, where just 41 percent are single. Women were listed as the
primary borrower on nearly one-third (32 percent) of closed loans. What
are the top MSAs by percentage of millennial loans closed? Columbia,
Mo., Jonesboro, Ark. and Sioux Falls, S.D. Ellie Mae perused its database and
found that FHA loans continued to be popular among millennials, making
up 37 percent of their closed loans (which is significantly higher than the 23%
FHA loans for the general population). But check this out: in its database
Ellie Mae found that the average FICO score (how about credit score?) was 722
for all closed Millennial loans in May.
Speaking of
Millennials, the high student loan debt is causing lower credit scores.
The average credit score for the 18-34 age cohort is 625, compared to the
national average of 667. Almost a third of that age cohort have sub-600 scores.
Good luck getting a loan with that. Finally, all of the new post-2008
regulations have added anywhere form 50k-100k to the cost of building a starter
home, making it difficult for builders to make homes that are affordable for the
first-time homebuyer.
If they can purchase,
what kind of houses are they buying? A tight supply of starter homes is pushing prices up 9% per year in
that segment, more than double the price appreciation at the high end. This is
a combination of lower foreign demand for luxury homes and increasing demand by
Millennials who want to buy.
Mark Fowler with The Futures Company, writes, "2016 is the year that Millennials
said goodbye to their teenaged years-the cohort is now 20-37 years old and runs
the gamut of graduating college to buying a home to starting a family. In
short, it's no longer acceptable to think of Millennials as kids or youth. That
title goes to the Centennials, the generation made up 78 million consumers aged
0-19.
"It's no secret that
Millennials are a demographically-diverse group, but their diversity among life
stages makes them an even more complex cohort. At The Futures Company, we often
divide Millennials into two segments; Emerging Millennials (20-28) and Adult
Millennials (29-37). Younger Emerging Millennials are just beginning to form
their worldviews, while Adult Millennials have a much more concrete vision of
their future.
"Adult Millennials
are right in the midst of life stage transitions that make them an incredibly
attractive marketing target: they're buying homes (in many instances, their
first); they're getting married; they're having children; they're settling into
career paths and building wealth.
"Financially,
Emerging Millennials are still struggling to find a foothold, build their
savings and contribute to the economy, with a Median Household Income of
$47.7K. Adult Millennials with a Median Household Income of $72.6K are
fueling the economic engine while juggling expenses for houses, spouses, kids
and careers. Specific to Mortgage, 17% of Emerging Millennials have a
mortgage where 37% of Adult Millennials have a mortgage.
"However, both
groups of Millennials they still face rather grim economic realities. 58% of
the Millennials feel they are living paycheck to paycheck. Nearly 1/3 of
Millennials are experience severe or high levels of economic anxiety. 40% of
Emerging Millennials are worried about paying their monthly bills and 60% are
worried about paying off their student loans."
Some companies are
certainly paying attention to the trends. A recent press release noted that
millennials currently account for one in three home purchases, and this rate is
expected to increase in the coming years. By some estimates, Millennials will
spend up to $2 trillion in real estate purchases over the next five years. In
an effort to reach this target audience, National MI has partnered with Cultural
Outreach Solutions, LLC (COS) founded by Kristin Messerli. This partnership
allows National MI to offer its lender customers training on attracting
Millennial home buyers to help its employees and customers target and connect
with the Millennial generation. COS and National MI develop content and informational sessions that
illustrate what Millennials expect from the home purchase process, and how
mortgage professionals can build trust and collaborate effectively with this
home-buying generation.
Turning
to the capital markets, no one is complaining about rates, unless you're having
to fork over money for early payoff penalties, or coughing up money for margin
calls to broker-dealers. But Wednesday rates stopped heading downward after the
ISM Services Index blew past expectations for June. And the minutes from the
FOMC's June meeting showed that the committee wanted to see more information
before hiking rates again - particularly following the May jobs data. The good
ol' 10-year T-Note hit a low yield of 1.32% and then shot up to 1.40%
The FOMC minutes for
June, pre-Brexit of course, showed that most participants judged that, in the
absence of significant economic or financial shocks, raising the target range
for the federal funds rate would be appropriate if incoming information
confirmed that economic growth had picked up. Real GDP was projected to rise a
little slower in the second half of this year than in the previous forecast and
to increase at about the same pace thereafter.
Today, ahead of the jobs data
tomorrow, we've already had the June Challenger Job Cuts (38k, pretty low),
June ADP Employment Change (172k, higher than forecast), and Initial Jobless
Claims for the week ending 7/2 (-16k to 254k). After these numbers we find
the 10-year yielding 1.39% after closing yesterday at 1.39% and agency MBS
prices worse a shade versus yesterday's closing levels.
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