WASHINGTON — One takeaway from the Federal Deposit Insurance Corp.’s post-mortem on Signature Bank’s failure this spring was that more than one of the agency’s satellite offices — including the New York regional office that supervised Signature — had persistent staffing shortages up until the bank collapsed.
However, these challenges were not new.
The New York office had repeatedly raised staffing concerns to the regulator’s Risk Management Supervision division as early as 2020, and these concerns persisted for years, according to the FDIC’s post-failure report, which was issued in April.
A number of factors hindered the New York office’s ability to staff-up, the agency said. Those include the high cost of living in the New York metro area, the COVID-19 pandemic as well as competition from other regulators and private firms that can offer more competitive wages and benefits.
The agency increased employee pay and bonus incentives in 2022. Yet, experts and officials agree, this year’s turmoil may necessitate further changes to fill vacancies on teams that supervise large financial institutions.
In order for the agency to attract talent, the FDIC will have to raise wages, which banks would be required to pay for in the form of higher assessment fees, said Mayra Rodríguez Valladares, Managing Principal at MRV Associates.
“I think that there has to be more pay, and with the FDIC, that means you’ve got to raise the [deposit insurance] premium from the banks so that you can pay more, so you can attract caliber,” she said.
Valladares said while most prospective examiners consider far more factors than just pay when accepting a position, the different rates each agency pays affect turnover. Younger employees with less experience are more prone to leave for a higher wage, she said, especially since the pandemic. After all, junior analysts and examiners at the FDIC can earn less than $100,000 annually, short of what is paid in the private sector, or even at other regulatory agencies.
“Typically, the Fed is known to pay more than the OCC and then the FDIC, but there’s other things than pay,” she said. “People who are younger — let’s say they’ve only been there two, three years — and now [in] a situation post COVID, where there’s such demand [for labor], those are the people that tend to be more likely to jump, and go where there’s higher pay.”
An FDIC spokesperson declined to comment at this time on its staffing efforts underway to address the many issues raised by the report.
Agency-generated reports following the historic March bank failures concluded there’s more to effective supervision than staffing, however. The Federal Reserve’s autopsy of Silicon Valley Bank’s demise — another of the major failures of the recent banking crisis — also underscored the need for the agencies to empower examiners when they do identify risks.
The policies of previous administrations may have made some examiners more reluctant to forcefully raise concerns, says Arthur E. Wilmarth, a law professor at George Washington University Law Professor who specializes in banking issues.
He noted that the heads of the FDIC, OCC and Fed during the Trump administration issued a joint statement in September 2018 stipulating that bank examiners could not criticize a bank for violating supervisory guidance, but rather only after institutions behavior met a higher bar: actual violations of laws and regulations.
“That joint statement created considerable uncertainty whether examiner criticisms — such as those contained in matters requiring board attention — would be treated as nonbinding ‘supervisory guidance,’ and the statement could have encouraged bank managements to give short shrift to criticisms contained in bank examinations,” Wilmarth wrote in an email.
According to The Wall Street Journal, during visits with employees, then-FDIC Chair Jelena McWilliams and then-Fed Vice Chair for Supervision Randal Quarles asked bank examiners to be less aggressive when flagging risky practices and pressing firms to change course.
“Both [the FDIC and Fed] reports indicate that [in each case, the agency] did not back up its examiners’ warnings with timely and effective enforcement actions. One can certainly understand why FDIC examiners might become demoralized and more likely to leave the agency. …The Fed’s review of the failure of SVB and the [Government Accountability Office]’s interim review of that failure paint a very similar picture with regard to the actions of the Fed’s examiners and supervisory staff and SVB’s management.”
Valladares says empowering examiners requires more workplace protections so examiners can act without the fear of retaliation.
“They really need a kind of whistleblower protection,” she said. “[At] SVB, those examiners were doing their job. …Someone — either middle management or senior management — stepped in and said ‘it’s OK, let’s give them a higher score, or let’s not push for enforcement.'”
In the middle of the Utah desert, you’ll find one of the most rapidly-growing cities in the nation — Salt Lake City. It’s been growing for years and especially started booming when the pandemic hit in 2020. Many companies became remote-first, allowing their employees to choose where they want to live.
So, people made their way over to the Salt Lake Valley, which has actually driven up its cost of living. This may come as a surprise to those who wonder what the city has to offer. Spoiler alert: There are plenty of reasons to move to Salt Lake City besides green Jell-O and Mormons.
1. Mountain views from every angle
One of the small, daily joys of living in Salt Lake is having a view of the mountains from everywhere. No matter where you find yourself in the valley, you’ll see mountains on all sides. They also change with the seasons and you’ll get to see them transition from green in the summer to orange and yellow in the fall to the white snow-capped wonders in the winter.
2. Best snow on earth
It’s no wonder that the 2002 Winter Olympic Games were held in Salt Lake City — it has some of the best snow on earth. It’s been deemed one of the best places in the world for skiing and snowboarding and there’s no shortage of resorts where you can participate in winter sports. Do you need a better reason to move to Salt Lake City?
3. An airport to get you anywhere in the world
Salt Lake is a traveler’s paradise. The Salt Lake City International Airport can get you a flight to anywhere in the world and because it’s one of the bigger hubs, you can often find direct flights to other countries. Plus, the airport recently underwent a massive rebuild, so it’s now more modern and can accommodate more people and planes than ever before.
4. Sports for every interest
Home to multiple sports teams, particularly the NBA’s Utah Jazz and the Real Salt Lake MLS team, there are sporting events happening year-round that you can grab a ticket to. These games are also fairly affordable to attend, with some tickets priced as little as $10 per person.
5. Community events every weekend
Some see members of the Church of Jesus Christ of Latter-Day Saints as too dominant in the area, they’ve also created a very community-centered culture. Many of these church members are service-oriented and you’ll find that their church events are open to the public for those that wish to attend.
6. You’ll have all 4 seasons
In Salt Lake, you’ll experience rainy springs, hot summers, colorful autumns and snowy winters. Granted, the timing of these seasons will vary from year-to-year and you may see snow in May and warmer temperatures until November, but you’ll still get a little bit of everything at some point!
7. The job market is strong
In recent years, Salt Lake City and nearby surrounding cities have grown significantly thanks to the many tech companies setting up their headquarters in the valley. The nearby Silicon Slopes area has been under constant growth for the last 10 years and the tech companies here are always looking to hire.
8. Live music for every taste
You can always find local artists performing in smaller venues in Salt Lake. And, along with them, you’ll find that plenty of the well-known, mainstream artists are often performing in S.L.C. on their tours.
9. College has an affordable price tag
Utah has always been known for its affordable college tuition and it’s becoming even more appealing as tuition costs are going up in other parts of the country. In many cases, even paying out-of-state tuition is more affordable to students than paying in-state tuition in their home state. And, if you can qualify for in-state tuition, you’ll get a great education at a fraction of the price.
10. Close to national parks
Utah is the home of five national parks — not to mention that there are more than 40 additional state parks to explore. And, the best part is that almost all of these parks are within only a few hours’ drive from Salt Lake City.
11. The magic of downtown S.L.C.
The downtown area of Salt Lake is a unique combination of old, historic buildings and new buildings or massive renovations. These buildings are for new restaurants, entertainment and nightlife. Plus, there’s lots of shopping to do at boutiques and small shops, along with the City Creek shopping plaza that contains more than 100 stores and restaurants.
12. The stars flock to Sundance
Getting tickets to the Sundance Film Festival is extremely difficult due to its popularity and the type of people that attend — which often includes A-list celebrities. Even if you aren’t able to get tickets, the hype around the festival is infectious and there’s a good chance you’ll see a famous actor strolling around the streets of Salt Lake when they have a free moment before or after the festival.
13. Great hiking around every corner
With such close proximity to the mountains, you can find hikes just about everywhere. Many hiking trails start out in Salt Lake City and take you up into the mountains and you may not even need a car to find a trail. There’s also the option of taking a quick drive up one of the many canyons surrounding the city to hike deeper into the stunning mountains and get even better views.
14. A foodie’s paradise
The food scene in S.L.C. is growing a lot and introducing new independent restaurants, along with the recent additions of some well-known restaurants, such as Shake Shack and Popeye’s. You’ll find diverse, authentic flavors from around the world in family-owned restaurants or, if you’re in the mood for something a little more traditionally American, there are plenty of little burger joints where you can give into your cravings.
15. The ease of the grid system
Once you’ve experienced the ease of the grid system, you’ll never be able to live without it. It just makes sense and navigating becomes so simple and quick to do. Everything in the city centers around Temple Square, which effectively is at location zero, and the city has labeled streets moving away from the city center going north, south, east and west, where each numbered street is relative to the location to the center of the city.
It may not seem like much, but when you go from Salt Lake to any other city, you’ll wonder how the rest of the world functions without the grid system.
16. Fry sauce is everything
Yes, it’s true that you’ll find fry sauce in every restaurant in S.L.C. It’s a staple and it does taste better in the Salt Lake valley than anywhere else you find it — just ask the locals. Fry sauce goes well with anything, but the most common place you’ll find it is anywhere that serves french fries and burgers.
17. The thriving local economy
Due to the many new businesses popping up in Salt Lake, it has an incredibly stable economy. It was one of the quickest in the nation to recover after COVID-19 and even surpassed its pre-pandemic employment rates soon after. And, it’s continually one of the highest-ranking states in terms of unemployment, taking the second spot in the nation at just 2 percent unemployment.
18. Public transport will get you places
If you’re looking for public transportation like New York’s subway or Washington, D.C.’s, metro, Salt Lake won’t quite stack up. However, it has a pretty good public transportation system overall, which includes buses, the TRAX light rail for downtown use and the FrontRunner for getting to places further from the city center. While owning a car here is nice, you can easily get by without one.
Is Salt Lake City the place for you?
There are many great things about moving to Salt Lake City, but it’s not everyone’s cup of tea. If you’re looking for a tropical paradise, the dry mountain air and cold winters aren’t something you want to deal with. Use the reasons to move to Salt Lake City we mentioned above to help you decide if it’s the place for you and if you’re up to it, pay a visit and find out why it’s one of Utah’s best cities to live in!
Morgen Henderson is a writer who grew up in Utah. She lived in the Dominican Republic for a year and a half, where she was involved in humanitarian service. Some of Morgen’s work has appeared in State of Digital, The Next Scoop and TechPatio. In her free time, she loves to travel, bake, master DIY projects and improve her Spanish skills.
Mortgage rates strongly increased above 3% in the week ending November 18, according to the latest Freddie Mac PMMS mortgage report.
The 30-year fixed-rate mortgage hit 3.10%, up 12 basis points from 2.98% the week prior. A year ago at this time, the average 30-year fixed-rate loan averaged just 2.72%.
Sam Khater, Freddie Mac’s chief economist, said the combination of rising inflation and consumer spending is driving mortgage rates higher. “Shoppers looking to buy a home are fueling strong demand while ongoing inventory shortages are not improving in the presence of higher home prices,” he said in a statement.
The survey focuses on conventional, conforming, and fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit.
Economists at Freddie Mac said the 15-year fixed-rate mortgage averaged 2.39% last week, up from 2.27% the week prior. It’s also higher than it was a year ago, at 2.28%. Meanwhile, the five-year ARM dropped slightly to 2.49%, down three basis point from last week. A year ago, 5-year ARMs averaged 2.85%.
Lenders – Now is the time to prioritize lead generation
HousingWire Editor-in-Chief Sarah Wheeler and Deluxe Senior Business Development Executive Mark McGuinn discuss the challenges lenders are facing to optimize lead generation, even as mortgage rates continue to change.
Presented by: Deluxe
Mortgage rates tend to move in concert with the 10-year Treasury yield, which reached 2% on Nov. 15, up from 1.89% a week before.
The increase in rates is impacting mainly refi activity. Refinance mortgage loan applications dipped 31% year-to-year on the week ending Nov. 12, according to the Mortgage Bankers Association (MBA). By contrast, purchase applications declined 6% in the same period.
Joel Kan, associate vice president of economic and industry forecasting at the MBA, said refi applications decreased for the seventh time in eight weeks, as mortgage rates increased following two weeks of declines. The MBA projects that by the end of 2022, mortgage rates will approach 4%. The trade organization believes the heavy refi activity that drove the market in 2020 and much of 2021 will give way to purchase business over the next two years.
Just five years young, Home Point Financial has already seen record growth thanks to production across three different lending channels.
Aside from being a retail consumer-direct lender, they are reportedly the second largest wholesale mortgage lender in the U.S. thanks to year-over-year growth exceeding 400%, and also the 13th largest correspondent lender in the nation.
Home Point recently revealed that its loan origination volume has “nearly doubled each calendar year since the company’s launch,” with more than $50 billion in total volume expected for 2020.
As a result, they plan to hire an additional 600 associates to manage the growth before the end of the year.
Home Point Financial Fast Facts
Got started through the acquisition of Maverick Funding in 2015
A top-20 nonbank mortgage lender operating via retail, wholesale, and correspondent channels
2nd largest wholesale lender and 13th largest correspondent lender in the U.S.
Company headquartered in Ann Arbor, Michigan
Has nearly 2000 employees but no brick-and-mortar retail locations
Services loans for roughly 265,000 of its customers
While Home Point Financial doesn’t have a long history, they’ve certainly made a name for themselves in a very short period of time.
In 2014, president and CEO William “Willie” Newman joined forces with Stone Point Capital to create Home Point Capital.
Then Home Point Financial (HPF) was born through the 2015 acquisition of Maverick Funding.
Two years later, the company acquired publicly-traded Stonegate Mortgage Corporation in an effort to quickly build a leader in the mortgage space.
They are now a top-20 nonbank originator and loan servicer, and a prominent warehouse lender thanks to their wholly-owned subsidiary NattyMac.
My assumption is their goal is to become a top-10 mortgage lender sooner rather than later, using their growth in the retail, wholesale, and correspondent channels.
Most recently, they rebranded as “Homepoint” and filed an IPO, for which their common stock will be traded on the NASDAQ Global Select Market under the ticker symbol “HMPT.”
In early April 2023, Homepoint sold its wholesale lending division to The Loan Store, Inc. As a result, it will exit the loan origination business but retain its mortgage servicing rights.
How to Apply with Home Point Financial
You can request a quote by filling out a short form on their website
Or simply click the “apply now” button to get started on your own
You can still call them up directly, have them call you, or chat online instantly
Or schedule an appointment at a time of your choosing to speak with a home loan expert
In terms of applying for a home loan, you can call them directly or have them call you. It’s also possible to request a quote on their website by filling out a short form.
Those who are more confident in the mortgage department can simply hit the “apply now” button on their website and get the ball rolling themselves.
They don’t have brick-and-mortar retail locations at the moment, so you’ll be going through the loan process remotely, which I suppose is a good thing these days.
The online digital mortgage application is powered by fintech company Blend, like many other lenders out there. So you’ll be able to link financial accounts and upload key documents along the way.
If you’re thinking about buying a home, you can take advantage of their proprietary upfront-underwritten mortgage pre-approval known as REALQual.
Before you find a property, their dedicated underwriting team will conduct a comprehensive review of your income, assets, employment, and credit to determine eligibility and maximum purchase price.
Home Point also operates a major wholesale lending division, so it’s possible to get a mortgage from them if you work with a mortgage broker.
Smaller banks and credit unions may also resell Home Point loan products via the correspondent lending channel.
What Types of Loans Does Home Point Financial Offer?
Conventional loans and government loans (FHA, USDA, VA)
Jumbo loans and High Balance loans
Renovation loans (FHA 203k and Fannie Mae HomeStyle)
Non-agency mortgages (bank statement program and asset utilization)
Piggyback second mortgages
Home Point Financial offers tons of loan options to its customers, including home purchase loans, refinance loans, renovation loans, home equity loans, and second mortgages.
You can go the conventional loan route or the government loan route, with FHA loans, USDA loans, and VA loans all available.
Those who need a larger mortgage can take advantage of the company’s High Balance loans or jumbo loans, with loan amounts as high as $2.5 million with just a 661 minimum FICO score required.
It’s also possible to get a mortgage above 80% loan-to-value (LTV) without mortgage insurance.
If you own a fixer-upper or have your eyes on one, you can get a renovation loan such as the FHA 203k backed by the FHA or a Fannie Mae HomeStyle loan.
They also offer a piggyback home equity lines of credit (HELOC) via TCF Bank, as long as the first mortgage is closed in conjunction with Home Point Financial.
Home Point Financial Mortgage Rates
Sadly, the company does not advertise its mortgage rates online or elsewhere to my knowledge.
So it’s impossible to know how competitive they are without first receiving a quote and then comparing it to other mortgage lenders.
Additionally, they do not make mention of lender fees, another important factor to consider when mortgage rate shopping.
As such, you’ll need to collect multiple quotes from other lenders to see how they stack up both mortgage rate- and pricing-wise.
If you don’t, you could be leaving money on the table, as evidenced by studies that prove multiple mortgage quotes leads to money saved.
Home Point Financial Reviews
The company has excellent customer reviews on Zillow, with 4.91 out of 5 stars based on roughly 2,200 reviews.
I perused through many of those reviews and found that some customers indicated that the mortgage rate was higher than expected, while others said the fees/closing costs were higher than expected.
Still, many of these customers still rated Home Point Financial highly, so I suppose the customer service did it for them regardless of cost.
Home Point Financial is a legit company with an A- rating with the Better Business Bureau, though they aren’t accredited.
Their goal is to put the customer first and keep them for life, which explains why they strive to service the loans they originate.
You may just want to keep a close eye on mortgage rates and lender fees to ensure you receive a competitive mortgage relative to other lenders.
Home Point Financial Pros and Cons
The Good
Licensed to do business nationwide
Can apply for a home loan on their website
Offers a digital mortgage experience via Blend
REALQual pre-approval program for home buyers
Services more than 99% of the loans it originates
Free mortgage calculators and how-to guides available on their website
What to Watch Out For
Do not disclose lender fees upfront
Cannot see daily mortgage rates on their website
Some customer reviews indicate higher rates and fees than expected
Just five years young, Home Point Financial has already seen record growth thanks to production across three different lending channels.
Aside from being a retail consumer-direct lender, they are reportedly the second largest wholesale mortgage lender in the U.S. thanks to year-over-year growth exceeding 400%, and also the 13th largest correspondent lender in the nation.
Home Point recently revealed that its loan origination volume has “nearly doubled each calendar year since the company’s launch,” with more than $50 billion in total volume expected for 2020.
As a result, they plan to hire an additional 600 associates to manage the growth before the end of the year.
Home Point Financial Fast Facts
Got started through the acquisition of Maverick Funding in 2015
A top-20 nonbank mortgage lender operating via retail, wholesale, and correspondent channels
2nd largest wholesale lender and 13th largest correspondent lender in the U.S.
Company headquartered in Ann Arbor, Michigan
Has nearly 2000 employees but no brick-and-mortar retail locations
Services loans for roughly 265,000 of its customers
While Home Point Financial doesn’t have a long history, they’ve certainly made a name for themselves in a very short period of time.
In 2014, president and CEO William “Willie” Newman joined forces with Stone Point Capital to create Home Point Capital.
Then Home Point Financial (HPF) was born through the 2015 acquisition of Maverick Funding.
Two years later, the company acquired publicly-traded Stonegate Mortgage Corporation in an effort to quickly build a leader in the mortgage space.
They are now a top-20 nonbank originator and loan servicer, and a prominent warehouse lender thanks to their wholly-owned subsidiary NattyMac.
My assumption is their goal is to become a top-10 mortgage lender sooner rather than later, using their growth in the retail, wholesale, and correspondent channels.
Most recently, they rebranded as “Homepoint” and filed an IPO, for which their common stock will be traded on the NASDAQ Global Select Market under the ticker symbol “HMPT.”
In early April 2023, Homepoint sold its wholesale lending division to The Loan Store, Inc. As a result, it will exit the loan origination business but retain its mortgage servicing rights.
How to Apply with Home Point Financial
You can request a quote by filling out a short form on their website
Or simply click the “apply now” button to get started on your own
You can still call them up directly, have them call you, or chat online instantly
Or schedule an appointment at a time of your choosing to speak with a home loan expert
In terms of applying for a home loan, you can call them directly or have them call you. It’s also possible to request a quote on their website by filling out a short form.
Those who are more confident in the mortgage department can simply hit the “apply now” button on their website and get the ball rolling themselves.
They don’t have brick-and-mortar retail locations at the moment, so you’ll be going through the loan process remotely, which I suppose is a good thing these days.
The online digital mortgage application is powered by fintech company Blend, like many other lenders out there. So you’ll be able to link financial accounts and upload key documents along the way.
If you’re thinking about buying a home, you can take advantage of their proprietary upfront-underwritten mortgage pre-approval known as REALQual.
Before you find a property, their dedicated underwriting team will conduct a comprehensive review of your income, assets, employment, and credit to determine eligibility and maximum purchase price.
Home Point also operates a major wholesale lending division, so it’s possible to get a mortgage from them if you work with a mortgage broker.
Smaller banks and credit unions may also resell Home Point loan products via the correspondent lending channel.
What Types of Loans Does Home Point Financial Offer?
Conventional loans and government loans (FHA, USDA, VA)
Jumbo loans and High Balance loans
Renovation loans (FHA 203k and Fannie Mae HomeStyle)
Non-agency mortgages (bank statement program and asset utilization)
Piggyback second mortgages
Home Point Financial offers tons of loan options to its customers, including home purchase loans, refinance loans, renovation loans, home equity loans, and second mortgages.
You can go the conventional loan route or the government loan route, with FHA loans, USDA loans, and VA loans all available.
Those who need a larger mortgage can take advantage of the company’s High Balance loans or jumbo loans, with loan amounts as high as $2.5 million with just a 661 minimum FICO score required.
It’s also possible to get a mortgage above 80% loan-to-value (LTV) without mortgage insurance.
If you own a fixer-upper or have your eyes on one, you can get a renovation loan such as the FHA 203k backed by the FHA or a Fannie Mae HomeStyle loan.
They also offer a piggyback home equity lines of credit (HELOC) via TCF Bank, as long as the first mortgage is closed in conjunction with Home Point Financial.
Home Point Financial Mortgage Rates
Sadly, the company does not advertise its mortgage rates online or elsewhere to my knowledge.
So it’s impossible to know how competitive they are without first receiving a quote and then comparing it to other mortgage lenders.
Additionally, they do not make mention of lender fees, another important factor to consider when mortgage rate shopping.
As such, you’ll need to collect multiple quotes from other lenders to see how they stack up both mortgage rate- and pricing-wise.
If you don’t, you could be leaving money on the table, as evidenced by studies that prove multiple mortgage quotes leads to money saved.
Home Point Financial Reviews
The company has excellent customer reviews on Zillow, with 4.91 out of 5 stars based on roughly 2,200 reviews.
I perused through many of those reviews and found that some customers indicated that the mortgage rate was higher than expected, while others said the fees/closing costs were higher than expected.
Still, many of these customers still rated Home Point Financial highly, so I suppose the customer service did it for them regardless of cost.
Home Point Financial is a legit company with an A- rating with the Better Business Bureau, though they aren’t accredited.
Their goal is to put the customer first and keep them for life, which explains why they strive to service the loans they originate.
You may just want to keep a close eye on mortgage rates and lender fees to ensure you receive a competitive mortgage relative to other lenders.
Home Point Financial Pros and Cons
The Good
Licensed to do business nationwide
Can apply for a home loan on their website
Offers a digital mortgage experience via Blend
REALQual pre-approval program for home buyers
Services more than 99% of the loans it originates
Free mortgage calculators and how-to guides available on their website
What to Watch Out For
Do not disclose lender fees upfront
Cannot see daily mortgage rates on their website
Some customer reviews indicate higher rates and fees than expected
When the Federal Reserve kicked off its rate-hiking campaign in March last year, the housing market responded predictably — mortgage rates climbed, leading to eventual declines in home prices.
But after 10 rate hikes, the housing market — traditionally one of the most interest-rate-sensitive areas of the economy — is anything but predictable.
“It’s creating a lot of confusion,” said Orphe Divounguy, a senior economist at Zillow.
Mortgage rates have likely peaked — but home prices keep increasing
The Fed has raised its benchmark interest rate by five percentage points since last March to help lower inflation, which was at a 40-year high.
When the Fed raises interest rates, that increases the rates that banks charge each other for overnight loans. Banks and other financial institutions pass on the higher cost of borrowing to consumers by charging them higher rates on mortgages, credit cards, auto loans and other loans. In theory, consumers respond to this by cutting back on spending, which means businesses can’t raise prices as much as they had.
Before the Fed announced its first rate hike on March 16, 2022, average 30-year fixed mortgage rates hadn’t gone above 4% since May 2019, according to data from Freddie Mac. Rates began to increase in anticipation of the Fed’s decision to raise rates and climbed even higher to 4.42% immediately after the first hike. Mortgage rates then continued to climb in tandem with the Fed’s hikes until November, when mortgage rates peaked at 7.08%, despite four subsequent rate hikes since then.
Mortgage rates have been moving higher recently, after weeks of declines. For the week ending July 6, mortgage rates hit 6.81%, the highest level for the year so far, Freddie Mac reported on Thursday.
But the median price of an existing home in May was $396,100, down from 3.1% compared to a year prior, according to data from the National Association of Realtors. However, median prices were up 2.6% for the month, marking the fourth-straight monthly increase. The median price of a new home was $416,300 in May. That’s a 7.6% decline from last May, but a 3.5% increase on a monthly basis, according to US Census Bureau data.
Why did mortgage rates stop responding to Fed hikes?
The Fed’s monetary policy is one of many factors that influences mortgage rates, said Charles Dougherty, senior economist at Wells Fargo.
Another big factor is yields on 10-year Treasury notes, which tend to serve as a bellwether for mortgage rates. But in recent months, the spread between the 10-year Treasury and 30-year fixed mortgage rates has widened.
That’s a product of the uncertain economic outlook, Dougherty said. Inflation remains above the Fed’s 2% target, which means the central bank is likely to implement more rate hikes. But without fully knowing the full effect that more hikes could have on the economy, the Fed may inadvertently invite a recession, he said.
“Long-term interest rates are anticipating not just the Fed’s next move, but the potential path for rates over the next decade,” said Len Kiefer, deputy chief economist at Freddie Mac. “Mortgage rates may respond to the next Fed rate move, but it could seem counterfactual.”
“For example, if the market comes to the conclusion that future rate hikes are less likely, that could put downward pressure on mortgage rates. In that case, mortgage rates could fall, even if the policy rate goes up,” Kiefer told CNN.
Higher mortgage rates have reduced home inventory
In theory, when mortgage rates go up, home prices should fall since it raises the cost of homeownership, thereby reducing demand. But that’s not happening.
That’s partly because the higher mortgage rates that came after the Fed hiked rates created a major lock-in effect, said Kiefer.
At the start of the pandemic, the Fed slashed rates to near-zero levels in hopes of stimulating the US economy as businesses closed and workers stayed home to avoid catching or spreading Covid. With such low rates, homeowners and homebuyers were then able to refinance or buy with rates as low as 2%.
With mortgages now approaching 7%, all that has changed. Selling could mean forfeiting a low mortgage rate for one that’s potentially double.
“Many existing homeowners find it difficult to give up a mortgage under 4% to trade for one over 6%,” Kiefer said. That has contributed to a decline in housing inventory.
And since many homes are still listed above where they were before the pandemic, homeowners have little incentive to sell.
“It seems to be that supply will be stuck for the foreseeable future,” said Dougherty.
Housing inventory, or the number of active home listings, is down by a third from before the pandemic. As of June, there were nearly 614,000 existinghomes listed compared to almost 928,000 in February 2020, according to data from Realtor.com.
In many ways, the housing market is still playing catch-up from the Great Recession, which induced nearly a decade of sluggish new home construction, Divounguy said. When mortgages fell below 3% in 2020, home builders started to pick up — but not fast enough to meet the pandemicsurge in demand.
Home inventory is likely to drop even lower due to the “low flow of listings paired with the demand for homebuying in the spring,” Zillow’s Divounguy told CNN. On top of that, housing demands remain high because the labor market is still so strong and workers continue to earn more than they had before the pandemic, he added.
“That tells the crux of the story for why the housing market seems a bit odd right now,” Divounguy said.
As the pandemic shut down office life in Los Angeles’ downtown financial district, Claude Cognian tried to keep his gastropub Public School 213 open. But the evacuation of white-collar workers made way for an influx of homeless people and drug users — and more than a few troublemakers striding in the front door.
“It was hard to keep hostesses at the door, because they got scared,” said Cognian, chief executive of the restaurant’s parent company, Grill Concepts Inc.
Three break-ins cost as much as $12,000 each time just to repair the windows, all while the bottom line was cratering in the absence of the office employees who used to gather for lunch and after-work drinks. With sales down 75% from pre-pandemic days, his company closed the downtown gastropub in August and is not planning to return.
“Our bet was that downtown was going to come back, and it hasn’t,” Cognian said.
For decades the Los Angeles financial district was the beating heart of downtown, the corporate muscle that gave the city of sprawl a soaring glass skyline. But the pandemic and the wave of remote work hollowed out its skyscrapers and helped shut many restaurants and businesses that relied on crowds of workers. Though the neighborhood shows signs of recovery, few expect it to return to being the bustling hive of suits and ties that it was.
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To many insiders — the urban planners, real estate developers and business owners with interests in it — the area will recover only if its identity grows more textured than a zone of white-collar office space.
Desirable office addresses were already spreading beyond the financial district before the pandemic, as downtown experienced a renaissance in housing, art and entertainment on blocks previously shunned by investors and residents.
To the south, billions of dollars were spent improving the blocks around Crypto.com Arena with hotels, housing and entertainment venues. Obsolete century-old commercial and industrial buildings to the east were renovated into desirable housing and fashionably unconventional offices. Billions more were spent north on Bunker Hill where the Music Center including Walt Disney Concert Hall and office skyscrapers have been joined by museums, apartments and a high-rise hotel.
The housing boom drew residents to the financial district as well, and that has kept it from turning into a ghost town.
But for the area to truly come back to life, many say it will need to follow the path of Lower Manhattan. The financial capital of New York faced an exodus after 9/11, but city officials and investors staved it off by making it a place of more diverse uses. It is still an office district but is far more lively than it used to be since it also became a residential neighborhood with more shops, restaurants, parks and hotels than it had before the attacks. A performing arts center will open in September.
“Cities evolve. That’s what they do,” said downtown L.A. business representative Nick Griffin. “From natural disasters, wars and pandemics. They evolve with market changes, customer preferences and cultural shifts. Downtown has evolved pretty dramatically over the last 20 years and the next five or so are going to be very interesting.”
Many companies have returned to their offices, but on a limited basis as their employees work some days from home. “For Lease” signs clutter building fronts, tacked over restaurants and bars that once served lively hordes of office workers. Graffiti marks windows.
At Public School 213, the chairs are stacked neatly on tables as if it just closed for the night. Other former restaurants have been gutted by their landlords. Sidewalks are quiet, sometimes eerily so.
Downtown’s centers of gravity have shifted numerous times since its days as a remote Spanish pueblo.
The plaza by Olvera Street near the Los Angeles River was el centro until the late 19th century. When the railroads arrived in the American era, the business elite shifted the commercial district south from the plaza toward 1st Street in the Anglo section of the racially divided city, said Greg Fischer, an expert on the history of downtown who worked on planning matters for former City Councilwoman Jan Perry. Main, Spring, Broadway and Hill streets became the business hub.
In the early 20th century, elite social clubs such as the Jonathan Club, the California Club and the Los Angeles Athletic Club erected new buildings on the west side of downtown where property was relatively cheap. Soon the rooming houses, small apartment buildings and ramshackle Victorian homes there gave way. Richfield and other oil companies headquartered there, the seeds of today’s financial district.
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In “the Jetsons era,” as Fischer described the 1960s, corporate leaders viewed the Spring Street-centered office district as increasingly obsolete and passé and moved to newer buildings in the financial district. Downtown lost a lot of itslifeblood during that time, he said.
“In the years after World War II, downtown was a shopping, office and entertainment area,” Fischer said. “By the 1960s the office component had shifted west, most entertainment went to suburbs and housing just evaporated.”
Among the big businesses with offices in the west were the Richfield, Union, Signal, National and Superior oil companies. Pacific Mutual Life Insurance Co. was headquartered there and Bank of America had a big presence.
The boundaries of the financial district are not officially outlined, but property brokerage CBRE defines it as the office center south of Bunker Hill and 4th Street, flanked on the west by the 110 Freeway and on the east by Hill Street and extending south to 8th Street.
By the 1980s, much of downtown was moribund; buildings that once thrummed with commerce were dilapidated and vacant or underused. There were pockets of vibrancy, notably the Jewelry District and a Latino-centric shopping zone that emerged among aging buildings along Broadway in the Historic Core. The Civic Center around City Hallremained one of the largest concentrations of public administrative buildings in the country, employing thousands of workers.
But the financial district was the shinythriving part of the city, a high-rise office park for lawyers, bankers and accountants who piled into their cars for a mass exodus at the end of each workday.
To many, the neighborhood felt like a corporate fortress, invisibly walled off from the rest of downtown. Business leaders were painfully aware that downtown L.A. lacked the vibrancy of other big cities because it had so few residents, but was stuck in a chicken-and-egg dilemma: People didn’t want to live there because it lacked restaurants, grocery stores and other typical city-life amenities, but merchants didn’t want to set up shop because few lived there.
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The stalemate began to break around 2000 with an ordinance that made it easier to redevelop obsolete office buildings into housing. The relocation of the Lakers, Clippers and Kings pro sports teams to the new downtown arena then known as Staples Center brought thousands of sports and music fans and led a wave of development south of the financial district.
Decades of efforts to add rail service and thousands of apartments and condominiums helped create a more vibrant downtown that was taking on the flavor of other big cities before the pandemic.
“All of a sudden people were walking dogs and pushing baby carriages,” architect Martha Welborne said. “New restaurants came in, even destination restaurants that weren’t just for the people who worked downtown or lived there.”
Fortunately for downtown’s future prospects, its apartment towers remain nearly fully occupied. More than 35,000 units were built after 1999, when so few people lived there that downtown didn’t even have a big-chain grocery store.
Three new hotels have recently opened and a 42-story apartment tower will start leasing later this year. Bottega Louie, one of the region’s top-grossing restaurants before it shut down during the pandemic, reopened in 2021. A few blocks away, legendary Beverly Hills steakhouse Mastro’s also opened a seafood restaurant last year near Crypto.com Arena.
And last week, Metro opened its new Regional Connector, a 1.9-mile underground downtown track adding three stations and linking different lines to make travel more seamless.
Though some business owners have abandoned the financial district, others see an opportunity to get in at an affordable price during what they hope is a temporary economic dip.
Restaurateur Prince Riley recently leased a spot on Grand Avenue that was last home to the Red Herring restaurant. He grabbed it because he liked the location and it was already built-out for upscale dining.
“You can see all the love and care that went into this space,” he said. “They were a casualty of COVID.”
Riley and his wife plan to open their restaurant, named Joyce, in July, featuring a raw bar and Southern-style seafood such as crudo and ceviche. They moved into the apartment building upstairs to be close to it.
The couple like being near Bottega Louie, a popular Whole Foods grocery store and the recently opened Hotel Per La, which took over a lavishly refurbished 1920s building last occupied by another hotel that closed early in the pandemic.
“I can see business picking up,” Riley said. “This is an opportunity from a terrible tragedy like COVID. We wouldn’t have had this otherwise.”
A key factor keeping downtown teetering between recovery and a further downward slide appears to be discomfort with the streets and the sense that they are not as safe as they were before the pandemic.
The blocks close to Metro’s underground 7th Street/Metro Center station, where multiple light and heavy rail train lines meet, are among those that have changed the most since the pandemic as the Metro system struggles to combat rampant drug use and serious crimes such as robbery, rape and aggravated assault on its lines.
Thegrowing number of homeless people on the streets has been an issue in other cities too, said Cognian of Public School 213. His company also closed restaurants in Seattle and San Francisco because customers at their urban locations trickled away as unhoused people commandeered the sidewalks.
“Hopefully, we as a city, as a state, find a solution for the homeless,” he said. “If the homeless situation doesn’t get solved in some fashion that allows tourists, office workers and businesses to operate, it’s just going to bring down the area.”
Real estate broker Derrick Moore of CBRE, who specializes in matching restaurant and shop operators with landlords, said leasing of retail space downtown has improved in recent months, especially compared to the dark days of the 2020pandemic shutdown when downtown fell silent.
“It seems like ancient history,” Moore said, “but it was very devastating to one’s psyche.” And to downtown businesses.
In the wake of the COVID shutdown, downtown overall lost more than 100 food and beverage establishments with a combined footprint of more than 1 million square feet, Moore said.
“That’s restaurants, bars and lounges, juice bars, boutique coffee operators and even national brands,” Moore said. “A good portion of those remain vacant.”
Replacement tenants like Joyce restaurant are starting to come in, he said, with leasing and property showings picking up in the first quarter at a “resoundingly” busier pace than early 2022. Moore has taken potential tenants to the empty Public School space, where across the street the failed Standard Hotel just reopened under new management as the Delphi.
Faced with a challenging market, retail landlords have cut their asking rents as much as 50% from pre-COVID prices, Moore said, and more than doubled the amount they are willing to spend on tenant upgrades such as installing restaurant kitchens and restrooms, and providing periods of free rent.
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The financial district also faces a struggle of changing tastes, with many firms bypassing the gleaming skyscrapers that were the height of prestige in the late 20th century in favor of campus-style offices anda more laid-back vibe.
Even legal firms, long a stalwart in the financial district, are turning elsewhere in some cases. One firm established in February recently opted out of putting its office there.
“When we started to look at space it became very clear to us that locating in the financial district was a very different proposition than it used to be,” said Matt Umhofer, a partner at Umhofer, Mitchell & King. “Downtown has changed dramatically, and we wanted to rethink what it means to be a law firm in Los Angeles and let go of preconceived notions of needing to be in the financial district in order to be relevant.”
The fledgling firm opted instead for an office in Row DTLA, a campus of shops, restaurants and offices created out of century-old warehouses near the Arts District, east of the financial center, even though office rents in the Arts District are often higher than they are in the glitzy skyscrapers.
“The short version is, being in the financial district isn’t as cool as maybe it was in the past,” Umhofer said.
The spotty attendance of office workers has changed the character of business centers across the country, said Mark Grinis, leader of consulting firm EY‘s real estate, hospitality and construction practice.
An analysis by EY found that offices are being used at only 25% to 50% of the level they were before the pandemic.
“In some locations, three-quarters of the people that normally would have gone in, didn’t,” Grinis said. “People are not on the subway, ordering sandwiches at lunch or having a drink after work.”
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Vacant offices and storefronts can hinder recovery, he said, because people shy away from empty spaces.
“Three blocks of vacant houses in a residential neighborhood ultimately becomes a negative,” he said. “An office center is not that different.”
The physical appearance of vacancy becomes more alarming when graffiti, litter and grime follow and create a bad “multiplier effect,” Grinis said.
Stopping the spiral starts with making the streets safe and getting homeless residents into better housing, but there are also public policy decisions that could help landlords convert office buildings to housing if they are no longer competitive on the office leasing market.
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And the market has been brutal. Owners of some of downtown’s office high-rises have faced defaults, foreclosures and rushed sales in the face of falling demand, real estate data provider CoStar said.
The owner of two of the financial district’s premier office towers, 777 Tower and Gas Company Tower, said in February that it defaulted on loans tied to the buildings. Other high-rise owners are in similar straits.
In the face of rising vacancy rates, “those defaults could signal pain to come for the 69-million-square-foot downtown L.A. office market,” CoStar said.
Owners of buildings facing foreclosure sometimes don’t have enough money to build out new tenants’ offices, as is customary, which hinders strapped landlords from recovering financially.
Commercial landlords are getting hit on multiple fronts, said Jessica Lall, managing director of the downtown office of CBRE.
“What we’re seeing is a perfect storm when it comes to the office distress in downtown L.A.,” she said.
Loans on large-scale properties are maturing at a time when interest rates are high, making refinancing a challenge, Lall said. There is widespread uncertainty among tenants about how much space they will need to rent in the future if employees work remotely at least some of the time.
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Those issues are compounded by “the general perception around downtown being unsafe,” she said. “All urban centers are grappling with that issue right now.”
The downtown office vacancy rate — the share of total space that is unleased — climbed to 24% in the first quarter, up from 21.1% a year ago, according to CBRE. More empty space is coming, the brokerage said, pushing estimated availability to a daunting 30% as some companies shrink their offices or move away from downtown.
Law firm Skadden, for example, a large longtime tenant in downtown’s Bunker Hill district, has decided to move its offices to Century City .
The landlord of the U.S. Bank Tower, downtown’s tallest office tower at 72 stories, remains bullish on the market in spite of its troubles and recently spent $60 million to make the building more attractive to tenants by adding hotel-like amenities.
“People need offices,” said Marty Burger, chief executive of Silverstein Properties, which owns the tower. “Not every company in every industry needs an office, but the majority of them do.”
Among the reasons for offices are collaboration and education, he said. “How do you mentor the young folks who are coming up in your industry if the older people aren’t in the office for younger people to learn from? There is a whole ecosystem where you need people in an office now.”
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Companies may end up using their offices fewer days of the week than they used to as remote work and shortened schedules grow in popularity, he acknowledged: “Fridays may never be Fridays again.”
Burger says his optimism about downtown L.A.’s potential for improvement has a foundation in New York, where Silverstein built One World Trade Center on the site of the Twin Towers.
“After 9/11, everyone said that no one would ever live there or work there again,” Burger said.
In 2001, the neighborhood had about 20,000 residents and saw little activity after office hours. Now rebuilt, the neighborhood has about 75,000 residents and a greater mix of office tenants including businesses in tech and advertising in what was mostly a banking center before, Burger said.
“It’s a vibrant 24/7 community,” he said.
Many see this as the best future for L.A.’s financial district.
The city’s tight housing market combined with the downturn in office rentals opens the possibility to convert some office buildings into housing or hotels.
More residents and visitors would make the neighborhood more dynamic and better able to support restaurants, shops and nightlife, said Griffin, executive director of the privately funded Downtown Center Business Improvement District, a nonprofit coalition of more than 2,000 property owners.
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“If we trade some office for residential, that’s a good thing.”
The pandemic’s blow to the office market “is an opportunity that none of us ever imagined happening,” Welborne said, “transforming office buildings into residential buildings and reimagining our entire downtown.”
Today we’ll take a good look at Planet Home Lending, a rising star in the mortgage world that’s beginning to make inroads and become a household name.
Founded just 16 years ago, they were able to muster over $26 billion in retail loan origination volume in 2021, per HMDA data.
It was almost perfectly split between conventional loans, FHA loans, and VA loans, with a handful of jumbo loans and USDA loans thrown into the mix as well.
They seem to do the most business in California, Florida, and Texas, despite being headquartered in Connecticut.
True to their name, Planet Home Lending has also partnered with the National Forest Foundation, pledging to plant three trees for every closed loan, up to 30,000 trees in 2020.
Planet Home Lending Quick Facts
Direct mortgage lender founded in 2007, headquartered in Meriden, Connecticut
Operates both a retail and correspondent lending business
Originated more than $26 billion in home loans during 2021
Services more than 250,000 active loans for borrowers
Does majority of business in California, Colorado, Florida, Texas, and Virginia
Licensed in all states other than Hawaii, Massachusetts, New York, Utah, and Wyoming
How to Apply for a Mortgage with Planet Home Lending
You can apply directly online, via smartphone, over the phone, or in-branch
They offer a digital mortgage application powered by AI known as Skymore
Allows you to link financial accounts, upload documents, and track loan progress 24/7
Hybrid eClosings and remote notary services available in select markets nationwide
If you’re looking to purchase a home or refinance an existing mortgage, you can visit the Planet Home Lending website and navigate to the “Get Started” tab on their top menu.
From there, you’ve got the choice to get a mortgage rate quote, apply for a mortgage, find a loan originator, or locate a nearby branch.
Those who have been referred to someone specific can use the loan officer directory to select that individual.
You can also simply call them up directly to speak to one of their mortgage loan specialists to get the ball rolling.
Once you’re set up with a loan officer, you can apply online via a Blend-powered digital mortgage application.
They call it Skymore, an AI-powered personal digital mortgage assistant that allows borrowers to apply via their smartphone if they wish.
You can also link financial accounts, upload key documents, and track loan progress 24/7 as you make your way to the finish line.
Those who want/need a personal touch along the way are also able to lean on their loan officer and processing team.
What Types of Loans Does Planet Home Lending Offer?
Home purchase loans and refinance loans
Rate and term, cash out, and streamline refinance loans
Renovation loans
New construction loans
Loans backed by Fannie Mae and Freddie Mac
Government-backed loans including FHA loans, USDA loans, and VA loans
Jumbo home loans and home renovation loans
They provide financing on primary homes, second homes, and investment properties
They offer both home purchase loans and refinance loans, including cash out refinances if you want to tap your existing home equity, and streamline refinances if you want to lower your monthly payment.
If you’re buying a home, they can get you in the door with as little as 3% down via the Fannie Mae HomeReady loan program, or 3.5% via the FHA loan program.
Borrowers who qualify for a VA loan or USDA home loan can get a mortgage with zero money down as well.
Those who have found or own a not-quite-perfect home can also take out an FHA 203k loan with Planet Home Lending.
Or take advantage of their Jumbo renovation loan program that offers up to $500,000 in cash for home improvements.
You can also get a jumbo loan as large as $3 million, and they’ve got a no-mortgage insurance option as well at high loan-to-value (LTV) ratios, such as just 10% down.
In terms of loan type, they offer the full galaxy of fixed-rate mortgages, including the popular 30-year fixed, 15-year fixed, and terms in between such as a 10-year or 20-year fixed.
They also offer ARMs, including the 5/1 adjustable-rate mortgage, 5/6, 7/6, 10/6, and others.
Beyond that, you can get a home equity loan, bridge loan, and even a non-QM loan such as an interest-only mortgage.
Planet Home Lending Mortgage Rates
Like a lot of other lenders, they don’t advertise their mortgage rates on their website or anywhere else.
As such, I have no idea how competitive they are compared to other lenders out there. That means you’ll need to shop around if working with Planet Home to see how they stack up price-wise.
The same goes for lender fees – no mention of fees on their website, so again no idea what they charge, such as a loan origination fee, processing fee, underwriting fee, etc.
Be sure to find out all these details when gathering a quote from Planet Home to compare with other lenders while mortgage rate shopping.
In this day and age, it’s nice to have transparency when it comes to costs, especially since some lenders like Better Mortgage don’t charge lender fees.
Planet Home Lending Reviews
The company comes highly-rated, with a 4.84 out of 5-star rating on SocialSurvey based on nearly 12,000 customer reviews.
They were also recently rated a top-10 large mortgage company for customer satisfaction by SocialSurvey for 2019.
Planet Home Lending is not an accredited business with the Better Business Bureau, but does have an ‘A+’ rating with the BBB.
And the customer reviews on the BBB website are pretty good, with a 3.98-star rating out of 5 at last glance.
They’ve also got a 4.3 out of 5-star rating on Trustpilot, which is considered excellent, from more than 800 reviews.
Overall, they appear to be a well-liked mortgage lender across all ratings websites.
But with any large lender, customer experiences can vary widely given the many staff and situations involved.
Tip: Visit a Planet Home Lending branch website near you so you can see who works there and access individual loan officer reviews. Then you can choose who to work with and apply directly.
Pros and Cons of Planet Home Lending
The Good
Highly-rated by past customers on both SocialSurvey and Trustpilot
A+ BBB rating
Offer a digital mortgage process via Skymore technology
Lots of fixed-rate and adjustable-rate mortgage options available
Free mortgage calculators on their website
They service their own loans instead of selling them off
Donate 3 trees to the National Forest Foundation for every loan closed (~250,000 trees so far)
Moved 70 million+ pounds of food to hungry families
Endowed a scholarship for military service members
The Maybe Bad
Not licensed in all states
Do not advertise their mortgage rates or lender fees
Some mixed reviews and several complaints via the BBB
The labor market is moderating gracefully, but conditions remain too hot for the Fed’s liking. Job gains were relatively solid yet again in June, with total nonfarm payroll employment reaching 209,000 jobs, compared to 339,000 in May, according to data released Friday by the Bureau of Labor Statistics.
This increase is slightly under the average monthly gain of 341,000 jobs over the past 12 months.
The unemployment rate changed little at 3.6%, compared to 3.7% in May, with the total number of unemployed persons falling to 6 million. The unemployment rate has remained between 3.4% and 3.7% since March 2022.
“The incoming economic data has been filled with conflicting signals,” said Mortgage Bankers Association SVP and Chief Economist Mike Fratantoni in a statement. “Manufacturing activity remains quite weak, while consumer spending has held up somewhat better, and new home construction and sales have picked up. Our forecast is for a slowdown in economic activity in the second half of 2023, with a recovery in early 2024. The June employment report reinforces that forecast.”
While job growth and wage growth are trending down, both are still well above the pace that would be consistent with the Federal Reserve’s inflation target, Fratantoni noted.
“We now expect that the FOMC will raise the federal funds target another 25 basis points at its July meeting.”
The lion’s share of the job growth in June came from gains in the government sector (+60,000 jobs), health care sector (up 41,000 jobs), the social assistance sector (up 24,000 jobs), and the construction sector (up 23,000 jobs).
Employment in the construction industry has increased by an average of 15,000 per month thus far this year, compared with an average of 22,000 per month in 2022. In June, employment in residential specialty trade contractors continued to trend up (+10,000).
Employment in the professional and business services sector and in the leisure and hospitality sector changed little in June.
“The construction industry is very interest-rate sensitive, so many expected job growth to crater. Yet, new-home construction has been supported by the lack of existing-home inventory,” said First American Deputy Chief Economist Odeta Kushi in a statement.
“In the June jobs report, residential building construction employment is up 0.8% year over year, while non-residential is up by 4.8%. Residential building employment is up 11% compared with pre-pandemic, while non-residential building is up 1.8%. Both were up on a month-over-month basis. The fastest monthly growth came from residential specialty trade contractors. This sub-sector comprises establishments whose primary activity is performing specific activities, such as pouring concrete, site preparation, plumbing, painting and electrical work.”
With existing homeowners disincentivized to sell and few homes on the market, consumers may decide to renovate their own home instead of trading up with a new-home purchase, increasing demand for construction workers, economists said.
The number of residential building construction jobs came down from the recent peak in January of this year, but not by much, noted Kushi.
“Residential construction is defying expectations and it’s because the housing market continues to face a housing shortage.”
June’s job report showed the lowest monthly job change since a decline in December 2020, according to Lisa Sturtevant, chief economist at Bright MLS.
“The Federal Reserve has raised interest rates 10 times and it is possible that we are finally seeing the intended slowdown in the economy… Today’s employment report does not provide a clear indication as to what the Federal Reserve will do at its next meeting but the expectation is still for a rate increase when the Federal Open Market Committee convenes again. The modest slowdown in the labor market could give the Fed renewed confidence in its ability to bring the economy in for a soft landing.”
After extraordinary home value growth characterized a frenzied housing market in 2017 and 2018, this year’s slowdown felt like a welcome return to normalcy for many in the industry. And Zillow is predicting more of the same in 2020, with the market set to stabilize near historic norms.
Changing
tastes as millennials make up a growing share of home buyers will
impact the market. Homes will get smaller, bold colors and prints
will return to home designs and demand will stay high as more and
more people reach typical home buying age.
Here’s Zillow’s predictions for housing in 2020:
Homes will continue to shrink
The sprawling, suburban homes that Baby Boomers coveted will increasingly become a relic of the past in 2020 and into the next decade as the median square footage of newly built, single-family homes will fall for the fourth time in five years. The typical U.S. home has shrunk by more than 80 square feet since 2015i. Millennials, the largest group of buyers in 2020, are proving to be have much different tastes and lifestyles than their parents’ generation. Many prefer homes in urban areas with an abundance of amenities within walking distance over the mansions in the exurbs that boomers are vacating.
The U.S. will not enter a recession in 2020
As recently as July, half of experts surveyed by Zillow predicted a recession would begin in 2020. However, the U.S. economy has remained resilient to expected headwinds like ongoing trade volatility and the possibility of a stock market retreat. Consumer spending has picked back up – reflecting healthy consumer confidence – job creation is on a steady path and annual wage growth has stayed at or above 3% since October 2018. Economic and home value growth should continue into 2021, although perhaps at a slower pace than in recent years.
Home value and rent growth will be slower and steadier
Home value growth is expected to grow 2.8% from December 2019 to December 2020, according to a survey of more than 100 housing experts and economistsii. That’s down from 4.7% annual growth in October, the latest month for which data is available. Zillow expects rent growth to continue accelerating into the spring, before dipping below 2% by the end of 2020.
Mortgage rates will stay low, keeping housing demand high
Mortgage rates fell markedly in 2019 and are expected to remain low for the bulk of 2020. That will keep demand strong and continue to fuel decent price growth in the nation’s most broadly affordable markets. But low rates don’t help overcome the upfront hurdle of high down payment requirements, pushing buyers in expensive areas to fan out in search of areas they can better afford.
Sales will climb again after a downturn in 2018
For-sale inventory is near historic lows, but that doesn’t mean a dearth of sales. In fact, the low inventory is largely a result of high demand from buyers that snatch up homes as soon as they hit the market. There are more and more potential buyers as the large Millennial generation is reaching peak homebuying age in greater numbers each year, and they are benefiting from low mortgage rates, an increase in new construction permits and technology – such as Zillow Offers and other iBuyers – that is reducing friction in the market.
Color will make a comeback
Goodbye, Hygge. Hello, color! Fun will return to home design in the form of bold prints, lively wallpaper and brightly hued walls. After a decade of Scandinavian modern design that dominated retail and social media feeds as Americans embraced neutrals, minimalism and clutter-free living, expect a shift toward playful, creative design. Look for color to be injected in unexpected ways in kitchen cabinetry and appliances, in lighting fixtures and on interior doors and moldings.
“With the housing market stabilizing from the drama of the price recovery and the slowdown during 2019’s home shopping season, we have a rare moment of calm to reflect on what housing might look like in the year to come,” Zillow’s Director of Economic Research Skylar Olsen said in a statememt. “If current trends hold, then slower means healthier and smaller means more affordable. Yes, we expect a slower market than we’ve become accustomed to the last few years, but don’t mistake this for a buyer-friendly environment – consumers will continue to absorb available inventory and the market will remain competitive in much of the country. But while the national story is a confident one, housing in some manufacturing-heavy markets may see adversity. The struggle could be even more stark, since similarly affordable housing markets with a more balanced job profile may be 2020’s rising stars.”
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected]