Home Ownership Rate Forecast

The U.S. home ownership rate stands at a 15-year low with the latest figures showing 65.6 percent of Americans living in owner-occupied homes.  At peak in 2004 the ownership rate was a hair shy of 70 percent.  Over the next two years it may fall further, possibly to 64 percent before stabilizing.  But the falling homeownership rate will not mean fewer home sales.  The dynamics is such that both the rental and ownership households will rise, though the proportion will be such that the home ownership rate will fall.

Ownership over the years (US)

Though ownership and rental demand at first appear to be a trade-off in most years, the net number of homeowners and renters also rises simultaneously in most years.  It is a natural outgrowth of about 3 million additional people living in the country each year, which generally leads to about 1.1 to 1.3 million net new household formations each year.  From the 1960s on, the number of home-owning households rose on average by about one million each year while the number of rental households rose by 300,000 to 400,000.  In some years, there are distinct tradeoffs between owning and renting with one rising while the other falls.  The starkest example of this are the years since the housing bubble crashed.  The number of homeowners fell from 2005 to today while the number of renters rose quite significantly.  The key reason for this prolonged multiyear trade-off development arose because of a sharp slowdown in household formation.  Household formation in the past 5 years has been only the half the normal rate.  It is understandable, given the difficult economic conditions of the past several years, for many young adults to move into their parents’ home or find extra roommates to share the living costs.  But a return to normal household formation will finally mean a rise in the net new numbers of homeowners and renters, as has been historically the case.  In a more optimistic scenario, if the household formation burst out in order to compensate for the prolonged suppression, to say something like 1.5 million annually over the next few years, then the increase in net new homeowners and net new renters could both be higher than their historic average gains.

This article was forwarded to us be someone in the industry and didnt have a source to quote from. PrivoCorp does not claim ownership of the article and regrets the inability to provide the source. However, it does seem like the article has made reasonable assumptions which are true and can only be an indicator of things to come. One thing is that the article does not provide any information on what the home ownership rates will "stabilize" to. This would be helpful in making some meaningful projections. Either way, this could only be beneficial for a contract mortgage processing company like Privo Corporation!

Long-Term Rate-Indicative Yield Returns to Its Record Low

The benchmark 10-year Treasury’s yield on Monday morning matched its all-time low of 1.44%, putting more downward pressure on long-term mortgage rates.The 10-year last was this low on June 1, according to Yahoo Finance. Subsequently in June it had rebounded to levels as high as 1.65% or so, hovering around 1.6% until July got underway. After July hit, it began sliding toward 1.5%. The downward trend in the rate-indicative bond yield began intensifying during the latter half of last week, when the yield started to dip below 1.5%.

Zuckerberg’s Loan Gives New Meaning to the 1%

Billionaire Mark Zuckerberg is giving new meaning to the term “the one percent.”

The Facebook Inc. (FB) founder refinanced a $5.95 million mortgage on his Palo Alto, California, home with a 30-year adjustable-rate loan starting at 1.05 percent, according to public records for the property.While almost all lending rates have reached historical lows this year, the borrowing costs available to high-net-worth individuals are even lower if the person is willing to bear the risk of monthly interest rate adjustments, said Greg McBride, senior financial analyst with Bankrate Inc., a North Palm Beach, Florida-based firm that tracks interest rates. Large increases are unlikely anytime soon with the Federal Reserve signaling it will keep interest rates near zero for at least two years.

“When you can borrow at a rate below inflation, you’re borrowing for free,” McBride said in an e-mail. “This is the concept of using other people’s money and it preserves financial flexibility for the borrower.”

“The one percent” is a phrase popularized last year by the Occupy Wall Street movement to protest growing U.S. income inequality. The top one percent of Americans earns a fifth of the country’s income and controls more than a third of its wealth, according to Joseph E. Stiglitz, a Nobel Prize-winning economist, whose book “The Price of Inequality,” was published last month.

The average rate on a one-year adjustable mortgage was 2.69 percent on July 12, up from a record low 2.68 percent a week earlier, according to Freddie Mac, the McLean, Virginia-based mortgage-finance company. The average rate for a 30-year fixed loan fell to a record low 3.56 percent on July 12. Freddie Mac doesn’t survey rates for loans that adjust monthly.

This is from Bloomberg online ... and more information can be got from http://www.bloomberg.com/
 

Wells Fargo Calls it Quits on Wholesale Lending

Wells Fargo — the nation's largest funder of home mortgages through loan brokers — is calling it quits on wholesale lending, dealing yet another devastating blow to this struggling origination channel.

"We will still fund loans through correspondents," a Wells spokeswoman confirmed to National Mortgage News, "but for independent mortgage brokers things will change."
She said the cut-off date is Friday, July 13. Further clarification on the issue will come later today.
According to NMN and the Quarterly Data Report, Wells ranked first in 1Q in wholesale lending, table funding $7.3 billion of mortgages through brokers. Provident Funding Associates, Burlingame, Calif., ranked a close second with $7 billion.
After those two, the next largest player is Flagstar Bank FSB with $2.9 billion.
Wells' decision to exit the channel comes in the wake of a fair lending settlement with the Justice Department. "While not part of the DOJ settlement, Wells Fargo, on its own volition, also announced today that on July 13 it will discontinue funding mortgages that are originated, priced and sold by independent mortgage brokers through its mortgage Wholesale channel," the company said in a press statement.
It added: "Mortgages sold by independent brokers in this manner currently represent five percent of the Company's home mortgage funded volume. Mortgage brokers operate as independent businesses and are not employed by Wells Fargo. Therefore, Wells Fargo cannot set loan prices for independent mortgage brokers nor control the combined effect of the negotiations that thousands of these independent mortgage brokers conduct with their customers.
After July 13, 2012, the Company will no longer accept new applications for loans originated by independent mortgage brokers through its Wholesale channel, but will work to ensure existing applications are processed and closed."

Wells Fargo economists see 'budding recovery' in housing, but don't get too excited

Wells Fargo Securities senior economists Mark Vitner and Anika Khan say the nation's housing market is improving, but that new home sales and construction are nowhere near what they once were. It is really great to hear economists "observe" that new home sales are "improving" - but I dont think it takes a major MBA and a fancy corner office to determine that they are "nowhere what they once were". My fourth grader  - if given the numbers - might be able to deduce that one number is greater than the other.

"Even with the overall economy slowing, the budding recovery in the housing market appears to be gradually gaining momentum," the two economists say in a July 5 report to Wells Fargo (NYSE: WFC) clients. "We have continuously stressed the need to keep the recent improvement in the housing market in perspective. Even with the recent gains, new home sales and residential construction remain shadows of their former selves."

In January, Vitner made headlines, at least in the San Francisco Business Times, by saying a "true" housing recovery could be a decade away. He's sticking to that prediction. At least that's what he told me when we met over coffee earlier this week. He was visiting from Charlotte, where the heat wave was shattering records, so he was eager to share with me his immediate impressions of the Bay Area: the weather's cool and the economy's hot.