Great Recession

Apache is functioning normally

Apache is functioning normally

If you think home prices are too expensive, you wouldn’t be the only one.

A new analysis from First American revealed that housing affordability is the lowest it has been in more than three decades.

In other words, it hasn’t been this expensive to purchase a home since the 20th century.

The title and settlement company’s Real House Price Index (RHPI) determines house-buying power using median household income, mortgage rates, and home prices.

And they found that real house prices, adjusted for these factors, were up nearly 17 percent year-over-year in July.

Blame Higher Mortgage Rates and Home Prices for a Lack of Affordability

As for why housing affordability continues to erode, it’s a combination of factors.

The first and most obvious issue is markedly higher mortgage rates, with the 30-year fixed mortgage now priced above 7%, assuming discount points aren’t paid.

Per Freddie Mac, rates on this most-popular loan program are up about 1% from year-ago levels. First American pegs the annual change at a higher 1.4 percentage point increase.

And if we zoom out a bit more, this key interest rate was in the 3% range to start out 2022.

So interest rates alone have wreaked havoc on housing affordability and home buying power.

Just consider a loan amount of $400,000 at a 3% rate versus 7% rate. We’re talking about a monthly principal and interest payment of $1,686 vs. $2,661.

That’s nearly $1,000 based on the interest rate increase alone. Then you have to factor in higher property taxes, higher insurance premiums, and so on thanks to a higher purchase price.

Yes, despite higher interest rates, nominal home prices have also risen year-over-year.

While people logically think there’s an inverse relationship with home prices and mortgage rates, this isn’t always true.

Per First American, nominal home prices (not adjusted for inflation) were also up 4% year-over-year.

This means a prospective home buyer faces both a higher purchase price and a significantly higher mortgage rate.

And though household income increased 3.7% since July 2022, it wasn’t enough to offset the higher costs associated with the jump in rates and rising nominal home prices.

Real Home Prices Are Now Above the 2006 Peak

If you recall the year 2006, you might remember that home prices peaked and then began to fall.

Back then, unsustainable home price gains were fueled by exotic financing.

Many home loans were underwritten via stated income or no documentation at all, while the products offered may have been option ARMs and other adjustable-rate mortgages.

Additionally, the typical down payment was at or close to zero, while the loan-to-value (LTV) ratio was often 100% when it involved a mortgage refinance.

In other words, home prices were too high, borrowers had little to no skin in the game, and many weren’t even qualified to be homeowners.

Without the widespread use of loose underwriting, home prices would not have been able to continue rising as high as they did.

As we know, the housing bubble burst set off the Great Recession, leading to double-digit home declines and scores of short sales and foreclosures.

Today, unadjusted home prices are 53.7% above those during the peak in 2006, while real prices are 0.7% higher than that housing boom peak.

While this might be reason to worry, consider the new mortgage rules that were born out of that crisis.

The Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule) essentially outlawed much of what I just mentioned.

Borrowers today must be fully qualified when taking out a mortgage, and the vast majority are going with a 30-year fixed-rate mortgage.

Gone are the days of stated income underwriting and negative amortization. That makes the current situation more of an affordability crisis than a housing bubble.

It is driven more by a lack of supply than it is loose financing, with not enough inventory to meet demand.

Housing Is Overvalued Nationally, But Some Markets Remain Affordable

As noted, the July 2023 Real House Price Index (RHPI) increased about 17% from a year ago.

This meant the median sale price was roughly $345,000, while the median house-buying power was just $337,000.

Since house-buying power is below the median price, it means housing is overvalued. In an ideal world, it should be at or below the median.

However, that applies to the national median price of real estate. Only 24 of the 50 top markets tracked by First American are overvalued by this measure.

Granted, it has worsened over time, as only 15 markets were considered overvalued last July.

At the moment, San Jose, California is the most overvalued metro, with the median sale price nearly $1,440,000 and consumer house-buying power just $700,000.

San Francisco and Los Angeles were also quite overvalued by this measure, though to a lesser degree.

Meanwhile, some undervalued markets still exist, if you can believe it. The metros of Detroit, Philadelphia, and Cleveland are undervalued by roughly $126,000.

How Do We Fix the Unaffordable Housing Market?

We know home prices are out of reach for many, but how do we fix it? Well, the Real House Price Index (RHPI) takes into account home prices, mortgage rates, and incomes.

So if you want housing to be more affordable, you need relief via those three elements.

This means either mortgage rates need to fall, home prices have to come down, or incomes must increase.

Or you get some combination of the three, such as a 1% drop in mortgage rates and a pullback in prices, which boosts affordability.

The problem at the moment is mortgage rates might be higher for longer, and home prices are pretty sticky due to a major lack of inventory (why are there no homes for sale?).

Incomes also don’t look to be increasing by a material amount, making it difficult for prospective buyers to get in the door.

One exception is new home sales, which have relied heavily on temporary and permanent mortgage rate buydowns to tackle the financing piece.

But there are only so many new homes for sale, and such sales only typically account for 10% of the overall market.

This explains the current housing market dynamic. Ultimately, there aren’t many existing homes on the market, not a ton of demand, and not a lot of sales.

And until something changes, this will likely be the status quo.

Read more: Why are home prices so high right now?

Source: thetruthaboutmortgage.com

Apache is functioning normally

Apache is functioning normally

HELOC, Manufactured, Technology, Marketing, and Digital Tools; Central Banks and Inflation

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HELOC, Manufactured, Technology, Marketing, and Digital Tools; Central Banks and Inflation

By:
Rob Chrisman

7 Hours, 56 Min ago

If you want something sobering, almost mesmerizing, here’s a short drone video of the flood damage in Libya (at the 15 second mark you can see how it tore through the city). Fortunately not so sobering are some stats out of the United States. The U.S. homeownership rate in 2022 was even higher than before the COVID-19 pandemic at 65.8 percent compared to 64.6 percent in 2019. That rebound was driven largely by those aged 44 and younger. And who says Millennials aren’t buying homes? Homeownership continued to climb from the foreclosure crisis (2004) and Great Recession (2008), when rates dipped as low as 63.4 percent in 2016. Homeownership rates recovered approximately half of the 5.6 percent decrease from 2004 to 2016. In Hawai’i the homeownership rate is 59 percent, I bring up the Aloha State because American Savings Bank, First Hawaiian Bank, and Central Pacific Bank joined Hawaiʻi Community Lending, a Hawaiʻi-based nonprofit community development financial institution, in pledging to provide mortgage forbearances to Maui families impacted by the recent wildfires. (Today’s podcast can be found here and this week’s is sponsored by the Trade-In Mortgage powered by Calque. Homeowners can buy before they sell, make non-contingent offers, and tap their home equity to fund the down payment on their next home. Lenders can help their clients negotiate a lower purchase price, reduce their interest payments, and eliminate PMI. Today’s podcast features Greg Korn and Ben Petit in an interview from the New England Mortgage Bankers Conference.)

Lender and Broker Software, Products, and Services

In an era defined by technological advancements, Dark Matter Technologies LLC emerges as a transformative force in the mortgage origination landscape, marking its evolution from Black Knight Origination Technologies. Under the Perseus Operating Group of Constellation Software Inc., Dark Matter Technologies remains steadfast in its commitment to pioneering innovation. CEO Rich Gagliano aptly sums up the company’s vision: “Dark Matter Technologies is on a mission to revolutionize the mortgage origination business by supporting, growing, and aggressively innovating new and existing products.” With over 1,300 dedicated mortgage technology experts and a portfolio that includes Empower, AIVA, Exchange, and more, Dark Matter Technologies is poised to lead the industry into a new era of unparalleled transformation. Learn more about Dark Matter Technologies and their mission, here.

There is approximately $9T in agency or government MSR outstanding. Billions of dollars are being transacted daily and this volume requires disciplined loan accounting processes to record loans accurately, produce investor reporting, and power business decisions. SBO from SitusAMC is a comprehensive loan accounting and master servicing platform that reconciles daily and monthly servicer cash collections down to the penny, aiding in the discovery of potentially misplaced funds and enhancing the financial integrity of the entire process. Servicers using SBO produce accurate and timely details providing confidence that their investor reporting obligations are being met. Schedule a demo of SBO with SitusAMC’s client-focused experts.

“Did you hear Capacity’s big announcement at TMC Fall? We’ve acquired Denim Social! Together, we’re building a support automation platform that helps you automate support, connect more authentically with your borrowers, and close more loans, faster. Read the press release to learn more! We also gave away a personalized AI Assessment worth $10,000 to help mortgage lenders identify opportunities for improving their business with AI. Plus, our new GSE Search feature pulls accurate, up to date GSE regulations within seconds using generative AI. Want to join the AI in mortgage revolution? Meet the Capacity team today.”

A new era in loan origination has arrived. Mortgage Machine Services, an industry leader in digital origination technology to residential mortgage lenders, announced the launch of its namesake platform Mortgage Machine™, an out-of-the-box, all-in-one LOS designed to accelerate lenders’ operational velocity and support an end-to-end digital origination process. Developed by digital mortgage pioneer and industry veteran Jeff Bode, Mortgage Machine utilizes intelligent automation, configurable business workflows and a cloud-based infrastructure to optimize the entire loan lifecycle and create a seamless lending experience. Key platform features include AI-powered task automation, a scalable cloud-based infrastructure, flexible APIs, pre-configured workflows for retail and TPO channels, integrated document management and POS functionality. Mortgage Machine also offers all-in-one eClosing capabilities, including an eClose room, eNotes, eVault and RON, and utilizes MISMO SMART Doc® data and security standards. Visit here to get started on your digital transformation journey.

Blend Labs continues to be the mortgage industry’s leading technology platform. Core to the platform is Blend’s unique integration with Desktop Underwriter® (DU®) and LPA. These integrations help streamline your approval process for borrowers, with all the conditions lined up for your fulfillment team. Add in intelligent and automated follow-ups and you’ll get to the closing table faster and more efficiently. Putting this information at the loan officer’s fingertips creates a streamlined process and eliminates manual work which equals lower costs, higher pull-through, and increased revenue. See more ways that Blend is committing to innovation and continues to lead the way.

Looking for timely advice on how to capture more loan volume and improve your bottom line in a down market? Now is the time to explore ways to tap into new markets. Expanding your mortgage footprint through new products and channels or by reaching new geographies insulates your business against economic and interest rate volatility by diversifying your sources of volume and revenue. By setting the groundwork to connect with new borrower markets now, you’ll open new revenue possibilities for when the market inevitably recovers, positioning your business to hit the ground running and beat out the competition. Download this informative eBook from mortgage solutions provider Maxwell for actionable advice, including how to create your expansion plan and choose the offerings best suited to the markets you want to pursue. Click here to download Growing Your Mortgage Footprint: How to Launch New Loan Products, Channels & Geographic Expansions.

Broker and Correspondent Products

Build your book with AFR Wholesale® (AFR)! Now, get the chance to listen from and ask questions directly to AFR and Freddie Mac to turn those prospects to active pipeline at the next Why Wait webinar series covering Manufactured Home Financing on Wednesday, September 20th at 1 PM EST. Register here today! Have you and your borrowers looked into Manufactured Housing as an option? With unbeatable affordability, customization options that are very tailored, quick installation and trusted quality, manufactured homes are worth exploring. Especially with a top lending partner in AFR who has been an industry leader for over 25 years. This is a live webinar, and a recording will not be provided so make sure to join and get great insight and have the opportunity to ask questions and listen to scenarios! Visit AFR Wholesale, email [email protected], or dial 1-800-375-6071. AFR Wholesale® – Don’t wait. Register today!

“With Cash-Outs on the decline during this high interest rate environment, it is important to present your borrowers with different cash-out options. That is why Vista Point is announcing a brand new HELOC product coming soon, in addition to our existing Closed-End Second. Our HELOC product is being designed as a complement to our Closed-End Second to provide a full suite of Equity Solutions. Our HELOC will provide a specific solution for borrowers that want the optionality of an interest-only payment, or the ability to draw up and buy down their line during the 5-year draw period with no Appraisals up to $250k. Just like on our Closed-End Second offering, with HELOC loan amounts up to $550K and combined lien amounts up to $2.5M, your borrowers can get the cash they need without sacrificing their advantageous 1st mortgage rate. HELOC will be available for full doc and bank statements on OO and 2nd homes. For more information, reach out to us, or meet us at the Philly MBA to discuss.”

Capital Markets

We learned last week that prices in August rose by the largest monthly percentage in 15 months. However, that month-over-month inflation was widely expected due to a surge in gasoline prices. Underlying oil prices are also pointing towards further increases in September. Meanwhile, core prices were up 0.3 percent and core goods prices declined by 0.1 percent. Over the last three months core prices have increased at an annualized pace of 2.4 percent, the lowest three-month pace since March 2021. Retail sales rose faster than analysts’ expectations in August, also due to higher gas prices. Many analysts expect consumer spending to slow as excess savings built up over the pandemic have materially declined and credit is increasingly costly and difficult to obtain. Additionally, the resumption of student loan payments is expected to cut into discretionary spending. It will take more than expectations of slower spending before the Federal Reserve feels inflation is firmly under control.

What could move mortgage rates this week? The U.S. Federal Reserve, Bank of England, Bank of Japan, and the central banks of Norway, Sweden, and Switzerland are all announcing rate decisions after a spate of recent inflation data shows that price increases are alive and well. The Fed’s Federal Open Market Committee (FOMC), the action arm of “the Fed,” is not expected to raise rates. It’s unlikely that the commentary around the commitment to keep fighting inflation and higher rates for longer will change either, but it could tilt a little more to the hawkish side after a stronger-than-anticipated inflation report for August.

The week could also see some extra drama on the political front as the countdown continues toward a potential government shutdown on October 1 in addition to the battle between the United Auto Workers (UAW) union and Detroit automakers. The auto worker strike could complicate Fed Chair Powell’s bid for a soft landing. Union leaders are asking for a 36 percent wage increase over four years, to match the similar recent pay increase for top executives. The union also wants pay to rise automatically with inflation in the future, as it did before the financial crisis.

This week brings the aforementioned FOMC meeting that begins tomorrow and concludes on Wednesday with the Statement, updated SEP (where fed funds projections will be closely scrutinized), and Chair Powell’s press conference. The treasury will also be in the headlines with more coupon auctions scheduled: $13 billion reopened 20-year bonds tomorrow and $15 billion reopened 10-year TIPS on Thursday. The only scheduled, probably non-market moving, news out today is the NAHB Housing Market Index for September. We begin the week with Agency MBS prices roughly unchanged from Friday, the 10-year yielding 4.34 after closing last week at 4.33 percent, and the 2-year is at 5.00 percent.

Employment

Are you more energized, more encouraged, and more motivated to succeed today than yesterday? Zig Ziglar famously stated, “People often say that motivation doesn’t last. Well, neither does bathing; that’s why we recommend it daily.” “As an industry leader, Thrive knows that motivation, discipline, and belief in your ability to succeed is critical,” stated Randell Gillespie, National Sales Leader for Thrive Mortgage. “There is no better time than now to find ways to continually motivate your team, which is why we put so much focus on daily opportunities like these at Thrive. Through our weekly High-Performance Coaching Calls, our very own nationally-recognized Marketing Master, James Duncan, leads these motivating and educational experiences for results. The biggest names in the mortgage industry and thought-leadership have been part of our Thrive Nation broadcasts. We want everyone to be better today than yesterday. Start a conversation with us and find out how.

“The fall season is here, and now more than ever is the time to build rapport with your referral partners and clients to maintain a steady stream of business. At Guaranteed Rate Affinity, not only do we have the greatest number of products, but we have the tech platform for our loan officers to do business from anywhere. With PowerVP, you can do anything from creating loan applications to sending pre-approval letters all from your mobile phone. Anything you could do from your desk, you can now do on the go with PowerVP. Gone are the days of being chained to your desk and missing out on important moments. Primarily, it gives you a work-life balance you never thought possible. Luckily, we’re hiring the best of the best loan officers to leverage our tech platform to grow their business. Ready to learn more? Contact Tim McGraw to get started.”

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

The question many in capital markets have been asking since the GSEs were put into conservatorship is this: Without Fannie, Freddie, or the Fed, who will buy the agency MBS? Today we are seeing this play out with a shortage of MBS buyers to the tune of about $2 billion in demand per day.

Supply and demand — when demand is low, MBS prices will drop at sale and the corresponding yields will rise.

Late last year, Laurie Goodman, the famed MBS expert and a leader at the Urban Institute in Washington, penned an article in Barrons to explain why rates were so high. She gives a very thorough explanation as to why the 30/10 spread is so high, stating, “Before and during the Great Financial Crisis, the Fannie Mae and Freddie Mac portfolios essentially served as shock absorbers, buying mortgage-backed securities, or MBS, when spreads were wide, selling when they narrowed.

“In 2009-2010, the combined portfolios were over $1.5 trillion. In the wake of the Great Financial Crisis, Fannie and Freddie have been mandated to reduce their portfolio size. The two portfolios together are now under $200 billion. Meanwhile, the Federal Reserve was a fairly consistent buyer of MBS after the financial crisis, as part of its quantitative easing strategy. But as of June 2022, the Fed began to allow its portfolio to run off.”

Today, as Laurie points out, the GSEs are restricted in what they can buy. Per the 4th amendment to the PSPA (preferred stock purchase agreement), essentially the governing document for the two companies in conservatorship, it is stated clearly. Historically, the GSEs could make up for the short in demand if needed.

For example, if the current short was absorbed by GSE purchases, the spread between 30-year mortgages and and the 10-year treasury would likely collapse to it’s more normalized level, likely bringing mortgage rates down about 100bps +/-.

But the PSPA 4th amendment states the following: “Limit Future Increases to the Retained Mortgage Portfolio: The PSPA cap on the GSEs’ retained mortgage portfolios will be lowered from the current cap of $250 billion to $225 billion by the end of 2022, aligning with the FHFA conservatorship cap the GSEs are required to comply with today, while providing the GSEs with flexibility to manage through the current economic environment. As of November 2020, Fannie Mae’s mortgage portfolio was $163 billion, and Freddie Mac’s mortgage portfolio was $193 billion.”

So why haven’t we seen spreads wider more often since conservatorship in 2008 until now? It’s simple really, the Federal Reserve engaged in three rounds of quantitative easing post-2008 during the Great Recession and then another massive round in the spring of 2020 due to COVID-19 recession fears. They created the short in supply that pushes prices up and yields down.

The problem now is that we have the greatest quandary in the markets. We are missing the two largest buyers of MBS on this planet. And to top it off, the FDIC is auctioning off the MBS and Treasury portfolios of the failed SVB, Signature, and First Republic Bank, which only increases supply into the market.

In a recent article in International Banking, Viral V. Acharya, C.V. Starr professor of economics, department of finance, New York University Stern School of Business (NYU-Stern), and Satish Mansukhani, managing director, investment strategy at Rithm Capital, state, “The Fed is thus caught between a rock and a hard place, with the demand- and supply-side effects of its tightening working in opposite directions. Which way will the pendulum swing? It is hard to know, but this may precisely be why interest-rate volatility has remained high.”

This is not a small market. Agency MBS is the dominant feature of the mortgage market with an approximate $9 trillion in outstanding volume. The hole being created here is enormous.

So what are the options?

First is to just leave this alone and let the markets function without interference. This would likely be the goal of fiscal conservatives who have argued that this excessive involvement by the Fed and the GSEs over decades has resulted in the market dysfunction we see today. Industry vet James Johnson penned a great piece for Rob Chrisman’s daily report in which he describes the current supply/demand conundrum and calls the period we are in as the “great reset,” a very appropriate reflection on the scenario today.

But there are other options to consider, and the reason to consider other options is because this excessive mortgage spread is hurting the people that this current administration is the most concerned with protecting.

High rates make affordability a significant barrier to homeownership. And with no end in sight, we as a nation are likely to only widen the opportunity gap between wealthier Americans and those with less means. First-time homebuyers and people of color who often have less inherited wealth and lower wages are the ones impacted the most in a time like this.

More importantly, this scenario is the unfortunate outcome of putting too much stimulus into the economy during COVID-19 combined with supply chain shortages that resulted in hyper inflation, leading us to todays scenario.

So option No. 2 is this: let the GSEs use their roughly $119bb available in remaining capacity within the limits of the PSPA to begin some purchase activity. And if there was a modification to the PSPA to allow a slightly higher balance, the GSEs could do what they have done all during the Great Recession and the COVID-19 pandemic and act as a “shock absorber” as Laurie Goodman describes. They could become tools to help stabilize a scenario, much of which was the result of the same set of agencies that produced the environment we are in today.

The unfortunate reality is that the FHFA would likely come under fire for using the permissible balance sheet to at least help temporarily. And those attacks would be something the administration would like to avoid in a heated election period. But this is an option and one that could help — particularly those who need the help the most and are now victims of hyper inflation that they did not participate in creating.

America is a great nation that has risen to beat back the Great Depression, two world wars, a variety of other conflicts, the oil patch crisis, and more leading up to the Great Recession and the COVID-19 crisis. But for the American dream, now threatened by this supply/demand imbalance, actions by federal agencies that played a partial role in the current scenario are also the ones that can help to balance out this dysfunction. And the ones who would be most impacted to the better would be those that need the help from our nation the most as they have been literally priced out of the housing market altogether.

And yes, there are other challenges, beginning with this terrible dearth in housing supply. But to use other variables as an excuse to not help here is a difficult argument to justify.

The bottom line is this, we have lost the biggest buyers of MBS in the world and this could keep rates artificially higher than would be the case in a more balanced supply versus demand environment. This is a project for the Biden administration to lead, which should include the NEC, Treasury, the Fed, HUD, and FHFA.

David Stevens has held various positions in real estate finance, including serving as senior vice president of single family at Freddie Mac, executive vice president at Wells Fargo Home Mortgage, assistant secretary of Housing and FHA Commissioner, and CEO of the Mortgage Bankers Association.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the author of this story:
Dave Stevens at [email protected]

To contact the editor responsible for this story:
Sarah Wheeler at [email protected]

Source: housingwire.com

Apache is functioning normally

At Promenade Towers, a Bunker Hill apartment complex with 611 units that bills itself as “an urban oasis in the heart of downtown,” tenants received 371 eviction notices from late January through July.

At 1600 Vine, a Hollywood building with 375 units that’s been known for attracting social media influencers who have posted from its balconies and manicured courtyard, 313 notices were issued in that period.

Across Los Angeles, more than 40,000 eviction notices, the vast majority of which were three-day notices to pay or move out, have been sent to tenants since late January. They were issued at buildings across the city, for amounts ranging from $0 to $561,700. The 10 buildings sending the most notices to their tenants — more than 150 each — were upscale apartments in places such as downtown, Hollywood and Woodland Hills.

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Details about the notices, which are a precursor to an eviction lawsuit, were collected by the city for the first time this year and made public by the city controller’s office. They shed light on a key step in the eviction process that until now has been shrouded in secrecy, offering a glimpse at how often tenants across the city are met with the threat of eviction.

While public perception is that tenants in low-income and gentrifying communities are most threatened with eviction, the data are in line with research showing that large property management firms tend to automate their processes and initiate eviction proceedings at higher rates, said Kyle Nelson, a senior policy and research analyst at the nonprofit advocacy group Strategic Actions for a Just Economy.

“You have extremely high-rent tenancies with extremely inflexible landlords,” said Nelson, who has been studying evictions in L.A. County for a decade.

The 40,000 notices were sent to residents of about 8,400 buildings. Roughly 94% of them were notices that give tenants three days, not including weekends or court holidays, to pay any outstanding rent, fix other issues or move out, according to an analysis by the controller’s office; 96% were issued for nonpayment of rent.

The data do not capture all the eviction notices issued by landlords through the end of July. The housing department has an estimated backlog of 5,000 paper copies received in the mail it needs to enter into its database, said spokesperson Sharon Sandow. The city plans to catch up no later than October.

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Some landlords said they automatically issue the notices when rent is late.

“Rent is due on the 1st and considered late on the 4th with ‘3-day pay or quit notices’ sent after the 4th as a reminder that rent is due and unpaid,” said Thomas Meredith, senior business manager for 1600 Vine. “These were only notifications that the tenant’s rent was past due.”

But by law the notices are more than reminders. They are the legal demands that come before a court case that could ultimately force a tenant from their home.

Landlords who serve notices don’t necessarily follow up with a lawsuit, however, and it’s unknown how many of the notices have translated to court action.

Representatives of Symmetry Apartments, a 431-unit complex in Northridge that issued 152 eviction notices, said it’s had 28 actual evictions this year, and not all were for nonpayment of rent. The complex had $2.2 million unpaid rent from the pandemic and began issuing eviction notices again in February when local emergency tenant protections ended, the landlord’s representatives said.

When those protections expired, the city adopted new rules meant to shield at-risk renters from a wave of evictions.

Among those rules is one that bars tenants from being evicted for less than one month’s fair market rent, which is determined by the number of bedrooms in an apartment and based on figures from the U.S. Department of Housing and Urban Development for Los Angeles.

According to the data, landlords issued 4,300 eviction notices for amounts below that cutoff since March 27 when the ordinance went into effect.

The rule only applies to rent debt incurred after that date and the data do not specify when the debt was incurred, so it is difficult to say whether landlords are complying with the rules.

Symmetry Apartments issued seven notices for amounts lower than the fair market value threshold. Representatives said they were all “sent erroneously” and they did not file lawsuits in those cases.

At 1600 Vine, about 35 three-day notices were mistakenly issued for amounts below the threshold because of a clerical error and none resulted in an eviction, Meredith said.

Citywide there were about 1,300 cases in which nonpayment of rent was cited as the reason for an eviction notice even though the rent owed was listed as $0. More than 400 were issued for amounts less than $500.

There were also a sizable number of notices sent for very large amounts. Seventeen properties saw notices issued for more than $100,000 in back rent.

Since eviction notices were not previously collected in Los Angeles, it’s not known how the number of notices compares with the past.

But court filings show that eviction lawsuits are rapidly increasing across the region.

Before plummeting during the pandemic, eviction numbers in Los Angeles had been on a gradual downward trend since the Great Recession. That direction appears to be reversing as pandemic restrictions end and landlords move to file a backlog of cases.

From January through June 2023, there were more than 23,000 eviction lawsuits filed in L.A. County, a 74% increase over the first half of 2022 and the highest first half total since 2016, according to court data collected by Nelson, the research analyst.

The building that issued the most eviction notices in the period reflected in the data was Promenade Towers, where the least expensive one-bedroom was advertised for $2,487 a month as of Wednesday, 50% higher than the median comparable listing citywide, according to the real estate website Apartment List.

The building issued 371 notices to 170 units, more than a quarter of the total in the complex, according to the city housing department. Since July, the landlord, Goldrich Kest, which owns more than 100 apartment complexes across the country, has given out an additional 16 notices at the property, city records show.

Normally, eviction lawsuits are sealed for privacy purposes unless a landlord wins a judgment. But The Times reviewed nine eviction cases filed by Promenade Towers in August.

One was served to a 49-year-old woman living in one of the units reserved for low-income tenants. The woman, who requested anonymity out of concern for her future housing prospects, said her temporary job in property management ended soon after she moved in in early 2022. Since then, she has struggled to find consistent employment and has never paid rent.

“I haven’t been able to afford to move out,” the woman said. “Otherwise, I would have been long, long, long gone.”

All nine eviction lawsuits are for rent allegedly owed in 2022.

The City Council passed renter protections that now discourage landlords from filing eviction claims against tenants for 2022 rent not paid because of the COVID-19 pandemic. The protections are intended to shield such tenants from eviction until February 2024 provided that COVID affected their ability to pay. It’s unclear whether that’s the case for the Promenade Towers residents.

Goldrich Kest officials did not answer a written list of questions from The Times, but maintain that the eviction cases it filed are valid.

“Without getting into the particulars, Promenade Towers is in full compliance with city and county ordinances,” said Love Zepeda, a company regional director.

Niv Davidovich, an attorney representing Goldrich Kest, said that his firm has won cases despite the pandemic restrictions even when the housing department objected.

“Such evictions were entirely legal and well within landlords’ rights to file and pursue, and these judgments prove this to be the case,” Davidovich said.

Park La Brea, a rent-stabilized community that is the largest apartment complex west of the Mississippi with 4,245 units, is another hot spot for eviction notices, according to the city data.

The Times analysis counted notices given at individual addresses. While none of Park La Brea’s addresses were in the top ten for most eviction notices, collectively the complex saw hundreds.

The 10 addresses with the most eviction notices spanned several neighborhoods, with four in the San Fernando Valley and six in the Los Angeles Basin.

In many cases, the buildings had several things in common: relatively high rents and residents who said management used eviction notices as a warning after late payments.

At Motif in Woodland Hills, where at least 183 eviction notices went out this year, resident Tracey was in the process of moving out.

When paying rent in Motif’s online portal, she said, tenants are given a five-day grace period. “The second you don’t pay there’s an eviction letter on your door,” Tracey said. Prior to moving out, Tracey racked up five eviction notices for being, she said, “like a second late” on payment, often while traveling.

“They’re really big on eviction letters,” she said, declining to give her last name for fear of retaliation by the property management company she will rely on in her new complex.

Stephanie, who declined to give her last name, was walking her dog at Reveal in Woodland Hills, where at least 233 eviction notices went out this year.

The building’s lease says the landlord can serve a three-day notice any day after the first of the month.

A seven-year resident of the complex, Stephanie said she understands why people get behind on rent.

“It’s really expensive and prices go up every year in this market,” she said.

Times assistant data and graphics editor Iris Lee contributed to this report.

Source: latimes.com

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Changes in interest rates set by the Federal Reserve are a tool the central banks use to control inflation. Of course, these changes also tend to have a direct and immediate impact on mortgage rates. When the bank raises rates to discourage inflation, rates for borrowing, including mortgages, also rise, increasing the cost of buying a home.

During the Great Recession from December 2007 to June 2009, interest rates plunged and have remained at very historically low levels ever since.

Are Rising Rates on the Horizon?

Last December, the Fed raised rates for the first time, but very modestly, only 1/4 to 1/2 percent. It also announced it will increase the interest rates more in the future if necessary to lower the inflation rate to 2 percent. However, the Fed made it very clear that it will take its time doing so.

The Fed’s Open Markets Committee said that it expects that “economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”

In the months since interest rates have declined. A less than vibrant economy, the economic instability created by Britain’s vote to exist the EU, and continued low inflation convinced the Fed not to raise rates even modestly at its April and July meetings.

The outlook for September did not improve with the release of the second-quarter gross domestic product report.

“Despite the more hawkish language in last week’s FOMC statement, the GDP data have significantly reduced the chances of a near-term rate hike,” said Andrew Hunter, economist at Capital Economics told Marketwatch. To move, the Fed would want to see clear signs of an acceleration before they green light the next rate hike, Hunter said. “That would appear to rule out a September rate rise since the third-quarter GDP data will not be available until late October,” Hunter said.

On the other hand, conditions might strengthen enough for a modest increase.

What does that mean for buyers?

For home buyers, the outlook is comforting. The forecast for a September increase is slight and even should one occur, it would make very little if any difference on the interest rates borrowers pay on mortgages. Today’s terrific rates will almost certainly continue through the fall and perhaps carry us through the end of 2016.

Source: totalmortgage.com

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Colorado Springs-area home sales fell again last month and prices remained flat as the local housing market continued to feel the effects of spiking mortgage rates.

According to a new Pikes Peak Association of Realtors market trends report that examined home sales last month that took place mostly in the Springs and surrounding El Paso County:

• Single-family home sales totaled 1,067 in August, a nearly 22% decline from the same month last year and the 15th consecutive month that local sales have fallen on a year-over-year basis.

• Homes spent an average of 29 days on the market in August before they sold, an increase from 17 days during the same month last year.

• The median price, or midpoint, of homes that sold in August was $480,000, a 0.1% drop from $480,592 in August 2022. Home prices had increased each month from December 2014 to November 2022, but began to slide late last year and now have declined on a year-over-year basis in eight out of the last nine months.  

• The supply of homes listed for sale totaled 2,420 in August, down 8.3% from the same month last year. On the one hand, August’s listings were the most for any month since November, yet they remained far below pre-Great Recession years, when August inventories often topped 3,000 and 4,000.

The Springs-area housing market, like that of many other cities, has done an about-face since the second half of last year because of higher long-term mortgage rates.

For years, historically low rates in the neighborhood of 3% for a 30-year, fixed-rate loan helped spur a furious demand for single-family homes. That demand, coupled with a shortage of properties for sale, sent Springs-area median home prices soaring over several years; in June 2022, they hit a record high of $495,000.

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After the Federal Reserve began to hike interest rates last year to tamp down surging inflation, mortgage rates rose, too, and roughly doubled to more than 6% for 30-year loans by the end of last year.

That trend of high rates continued through the first several months of this year. In mid-August, long-term mortgages topped 7%; last week, the national average for a 30-year, fixed rate mortgage was 7.18%, according to mortgage buyer Freddie Mac.

Higher rates have priced many homebuyers out of the market and sent sales plunging.

Local real estate agents, however, have said that the demand for homes remains relatively strong. As a result, and combined with tight inventories, prices haven’t plunged, though they are down from their record highs.   

The new home side of the Springs-area housing market also has felt the effects of higher mortgage rates.  

In August, 127 permits were issued for the construction of single-family, detached homes, according to a new Pikes Peak Regional Building Department report. August’s tally was up 15.5% compared with the same month last year.

But the pace of home construction through the first eight months of this year remains well behind the same period in 2022, Regional Building Department figures show. Through August of this year, single-family detached permits totaled 1,655, down 36.4% from 2,604 on a year-over-year basis.

Source: gazette.com

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An abrupt change of plans A major renovation to the place turned it into a reproduction of the historic home of George and Martha Washington, where her parents also lived with her and her husband. “We couldn’t find an old house to renovate,” she said. “We ended up building a replica of Mt. Vernon and … [Read more…]

Apache is functioning normally

In a new report from First American, Chief Economist Mark Fleming reveals that two of the three key drivers of the Real House Price Index (RHPI), nominal house prices and mortgage rates, dragged affordability lower in June. The 30-year, fixed mortgage rate increased by 0.3 percentage points and nominal house prices accelerated by 0.8% compared with May.

The Three Key Drivers of the RHPI:

  1. Median Household Income is one of the fundamental factors determining the amount of housing a particular consumer can afford. incomes can be tracked over time to demonstrate how rising/falling incomes impact consumer house-buying power.
  2. Interest rates drive how much a home buyer can leverage their median household income to purchase more or less housing. As interest rates fall, consumers are able to purchase a more expensive house due to lower borrowing costs. The opposite is true for rising rates.
  3. House price levels are measured using a weighted repeat-sales house price index that tracks how prices of single-family residential properties rise and fall over time and across numerous geographies.

While household income increased by 0.4%, it was not enough to offset the affordability-dampening impact from higher mortgage rates and prices. Consumer house-buying power declined by nearly $9,000 compared with May and remains $32,000 lower than one year ago. Fleming predicts the outlook for house-buying power to be heavily dependent on the path for mortgage rates, and that path is highly uncertain.

“It’s likely that mortgage rates continue to hover in the 6.5-to-7.5% range for the remainder of the year, which means affordability will remain a challenge for many homebuyers,” said Fleming.

How High Will Mortgage Rates Go?

The RHPI can be referenced to model shifts in income and mortgage rates to see how they impact consumer house-buying power or affordability. Rising incomes and falling mortgage rates each boost house-buying power, while falling incomes and rising mortgage rates each sap house-buying power.

As of mid-August, the average mortgage rate nationally sits at approximately 7%. In June of last year, the average mortgage rate nationally was roughly 5.5%. Holding incomes constant at their June 2023 level and assuming a 5% down payment, the increase in mortgage rates alone reduced house-buying power by nearly $57,000.

An average of several industry forecasts projects that mortgage rates will end the year lower, at 6.1%. If those forecasts are correct and the average mortgage rate decreases from the 7% level to 6.1%, house-buying power increases by nearly $32,000. However, if mortgage rates drifted upward to 7.5%, house-buying power would fall by an estimated $16,000.

Uncertain Outlook for Mortgage Rates

The 30-year fixed mortgage rate is loosely benchmarked to the 10-year Treasury bond. Since the end of the Great Recession, the 30-year fixed mortgage rate has on average remained 1.7 percentage points (170 basis points) higher than the 10-year Treasury bond yield. The spread usually widens during periods of economic or geopolitical uncertainty, as is the case in today’s market.

As the industry forecasts predict, it’s reasonable to assume that the spread and, therefore, mortgage rates will moderate later in the year if the Federal Reserve stops further monetary tightening and provides investors with more certainty. However, it’s unlikely that mortgage rates will revert to the 5.5% levels of 2022 until inflation has moved closer to the Federal Reserve’s 2% target and it begins loosening monetary policy, or there’s a significant economic downturn.

To read the full RHPI, click here.

Source: themreport.com

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AA stimulus package is a set of financial measures put together by central bankers or government lawmakers with the aim of improving, or “stimulating,” an economy that’s struggling.

Individuals in the U.S. during the past two decades have witnessed two major periods when government stimulus packages were used to boost the economy: first, after the 2008 financial crisis, and second, following the 2020 outbreak of the Covid-19 pandemic.

While viewed by some as key to reviving growth, economic stimulus packages are not without controversy. Here’s a closer look at how they work, the different types of stimulus packages, and their pros and cons.

Government Stimulus Packages, Explained

What is a stimulus package? The foundational theory behind these economic stimulus packages is one developed by a man named John Maynard Keynes in the 1930s.

Keynes was a British economist who created his theory in response to the global depression of the era. His conclusion was that, when a government lowers taxes and increases its spending, this would stimulate demand and help to get the economy out of its depressed state.

More specifically, when taxes are lowered, this helps to free up more income for people; because more is at their disposal, this is referred to as “disposable income.” People are more likely to spend some of this extra money, which helps to boost a sluggish economy.

When the government boosts its spending, this also puts more money into the economy. The hoped-for results are a decreased unemployment rate that will help to improve the overall economy.

Economic theory, of course, is much more complex than that, and so are government stimulus packages.
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Different Types of Stimulus

Monetary Stimulus

To get a bit more nuanced, monetary stimulus is something that occurs when monetary policy is changed to boost the economy.

Monetary policy is how the supply of money is influenced and interest rates managed through actions taken by a central agency. In the U.S., that agency is the Federal Reserve Bank.

Ways in which the Federal Reserve can use monetary policy to stimulate the economy include cutting policy rates, which in turn allows banks to loan money to consumers at lower rates; reducing the reserve requirement ratio, and buying government securities.

When the reserve requirement ratio is lowered, banks don’t need to keep as much in reserve. That means they have more to lend, at lower interest rates, which makes it more appealing for people to borrow money and get it circulating in the economy.

Fiscal Stimulus

Fiscal stimulus strategies focus on lowering taxes and/or boosting government spending. When taxes are lowered, this increases the amount of money that people have left over from a paycheck, and that money could be spent or invested.

When money is spent on a greater amount of products, this increases demand for those products — which in turn helps to reduce unemployment because companies need more employees to make and sell them.

If this process continues, then employees themselves become more in demand, which makes it more likely that they can get higher wages — which gives them even more funds to spend or invest.

When the government spends more money, this can increase employment, giving workers more money to spend, which can increase demand — and so, it is hoped, the upward cycle continues.

In the U.S., a federal fiscal package needs to be passed by the Senate and the House of Representatives — and then the president can sign it into law.

Quantitative Easing

Quantitative easing (QE) is a strategy used by the Federal Reserve when there is a need for a rapid increase in the money supply in the United States and to boost the economy.

For example, on March 15, 2020, the Federal Reserve announced a $700+ billion program in response to COVID-19. In general, QE involves the Federal Reserve buying longer-term government bonds, among other assets.
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Pros and Cons of Stimulus Packages

There are advantages and disadvantages to economic stimulus packages, including the following:

Benefits

The goal of a stimulus package, based on Keynesian theory, is to revive a lagging economy and to prevent or reverse a recession, where the economy is retracting rather than expanding. This is a more immediate form of relief as the government also uses monetary, fiscal, and QE strategies to boost the overall economy.

This might include the Fed cutting interest rates, which lowers the rate at which banks loan money to consumers. That can encourage individuals to borrow money, which gets it circulating in the economy.

Taxes may also be lowered, which means workers have more money from each paycheck to spend. That spending may, in turn, increase the supply and demand for products, which can help both employees and businesses.

Risks

However, there are also risks to implementing stimulus packages. An economic theory that runs counter to Keynesian theory is the crowding out critique. According to this thinking, when the government participates in a deficit form of spending, labor demands will rise, which leads to higher wages, which leads to lower bottom lines for businesses.

Plus, these deficits are initially funded by debt, which causes an incremental increase in interest rates. This means it would cost more for businesses to obtain financing.

Other criticisms of stimulus spending focus on the timing of when funds are allocated and that central governments can be less efficient at capital allocation, which ultimately leads to waste and a low return on spending.

Another risk is that the central bank or government over-stimulates the economy or prints too much fiat currency, leading to inflation, or rise in prices. While a degree of inflation is normal and healthy for a growing inflation, price increases that are rapid and out of control can be painful for consumers.

Previous Economic Stimulus Legislation

Perhaps the most sweeping stimulus bill ever created in the United States was signed into law by President Franklin Delano Roosevelt on April 8, 1935.

Called the Emergency Relief Appropriation Act and designed to help people struggling under the Great Depression, Roosevelt simply called it the “Big Bill”; it is now often referred to as the “New Deal.” Five billion dollars was provided to create jobs for Americans, who in turn built roads, bridges, parks, and more.

The Works Progress Administration (WPA) came out of the New Deal, ultimately employing 11 million workers to build San Francisco’s Golden Gate Bridge, LaGuardia Airport in New York, Chicago’s Lake Shore Drive, about 100,000 other bridges, 8,000 parks, and half a million miles of roads, including highways.

Another agency, the Tennessee Valley Authority, collaborated with other agencies to build more than 20 dams, which generated electricity for millions of families in the South and West.

More Recent Stimulus Packages

Additionally, there was the American Recovery and Reinvestment Act (ARRA) in 2009. This was passed into law in response to the Great Recession of 2008 and is sometimes called the “Obama stimulus” or the “stimulus package of 2009.” Its goal was to address job losses.

This Act included $787 billion in tax cuts and credits, as well as unemployment benefits for families. Dollars were also provided for infrastructure, health care, and education, and the total funding was later increased to $831 billion.

More recently, the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act, was passed by the United States Senate on March 25, 2020. On March 27, 2020, the House of Representatives passed the legislation and the President signed it into law the same day.

And in March 2021, the American Rescue Plan was passed by the House and the Senate and signed into law by President Biden. This emergency relief plan included payments for individuals, tax credits, and grants to small businesses, among other things.

The Takeaway

Stimulus packages are used to prop up economies when they are struggling or on the brink of a major recession, or even depression. While in recent decades, such stimulus packages have been credited by some for helping the U.S. economy out of the 2008 financial crisis and 2020 Covid-19 pandemic, others worry that the increase in government deficit is unhealthy, and all that spending could lead to inflation.

For individuals, devising a strategy to help save and invest during times when the economy is struggling — and in general — can be important to achieving their financial goals. Chatting with a financial planner about those goals may be helpful for some when it comes to putting together a plan to save for the future.

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FAQ

Are there stimulus packages for small businesses?

Yes. For example, as part of the American Rescue Plan, small businesses that closed temporarily or had declining revenues due to COVID were extended a number of tax benefits to help with things like payroll taxes. There were also funds put toward grants for small businesses as part of this economic stimulus package.

How do stimulus packages fight recessions?

Economic stimulus packages are thought to help fight recessions by lowering taxes and increasing spending. The idea is that these measures would boost demand and improve the economy, and thus help avoid or fight recession.

What disqualifies you from getting a stimulus package?

Some reasons that could disqualify you from getting a stimulus package include having an income that’s deemed too high, not having a Social Security number, or not being a U.S. citizen or U.S. national.

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When Warren Buffett-led conglomerate Berkshire Hathaway (BRK.A -0.07%) (BRK.B -0.11%) recently released an updated look at its massive stock portfolio, we learned that Buffett and his team added shares of not one, but three different homebuilders. Berkshire bought D.R. Horton (DHI 0.59%), NVR (NVR 0.96%), and Lennar (LEN 0.01%), with a combined investment value of nearly $800 million.

While these are all excellent homebuilders with strong track records of growth, as well as attractive valuations, there’s one homebuilder stock I’ve been buying in my own portfolio that I believe could perform even better for patient long-term investors. Here’s a rundown of why Buffett might be so attracted to homebuilder stocks right now, and why I prefer to invest in the homebuilding industry with smaller player Dream Finders Homes (DFH 0.80%) instead.

Why homebuilders?

Let’s not sugar-coat it. The real estate market in the United States is pretty bad right now. A combination of soaring home prices and mortgage rates at multi-decade highs has pushed many would-be homebuyers to the sidelines.

However, there are always some people who need homes. People still get transferred to a different part of the country for their jobs, and some people need to move to be closer to relatives or friends. And this is where homebuilders are winning.

In simple terms, existing home inventory is extremely low. Roughly half of pre-pandemic levels. Millions of homeowners have mortgages with 3% (or even lower) interest rates and don’t want to give them up. So, new homes are making up a disproportionate percentage of available homes on the market. Not only that, but homebuilders have the ability to offer incentives – including promotional mortgage rates – that private sellers can’t.

Why Dream Finders Homes?

There are two key factors that make Dream Finders stand out.

First, Dream Finders uses the same land-light business model that NVR uses. The short version is that unlike most homebuilders, Dream Finders and NVR don’t buy any land until they’re ready to start building a home on it. They don’t buy large tracts of land to gradually build on. This keeps capital requirements low and allows the business to regularly generate returns on equity of 40% or more.

Second, Dream Finders is in the relatively early stages of growth and focuses on some of the fastest-growing Sun Belt housing markets in the United States. In addition to its home market of Jacksonville, Dream Finders also has a large presence in Orlando, the Carolinas, Texas, and other markets where homes are still (relatively) affordable, and job and wage growth exceeds the national average.

The company’s track record has been impressive so far. Founder and CEO Patrick Zalupski started the building in the wake of the Great Recession in 2009 and has grown it to the point where it expects to close on 6,500 homes this year, despite the difficult market. And speaking of the difficult real estate market, in the second quarter, Dream Finders grew its revenue by 19% year-over-year and ended with a backlog of nearly 5,300 homes.

To be fair, we don’t know for sure that Buffett and his team don’t like Dream Finders. With a market cap of just $2.5 billion, it could simply be too small to attract Buffett’s attention. The smallest of Buffett’s three builders has a market cap that is about eight times Dream Finders’ size. But if you’re a long-term investor, Dream Finders is making all the right moves to evolve into one of the major players in the space in the years to come.

An attractive valuation, even after incredible stock performance

The market has certainly acknowledged Dream Finders’ strong results and the better-than-expected environment for homebuilders in general. Since the beginning of 2023, Dream Finders’ stock price has roughly tripled.

Even so, it looks like an attractive stock at these levels. The real estate market is bad all around – it’s just better for homebuilders than for existing homes, but it’s still not great. There is tremendous appetite for household formation, which could be a massive catalyst for the entry-level homes Dream Finders does so well, once inflation and economic fears normalize. Even after its tremendous performance so far this year, Dream Finders still trades for less than 13 times forward earnings. I’ve added to my own position at these levels, and plan to keep incrementally building it for as long as the company keeps producing strong results.

Matthew Frankel, CFP® has positions in Berkshire Hathaway and Dream Finders Homes. The Motley Fool has positions in and recommends Berkshire Hathaway, Dream Finders Homes, Lennar, and NVR. The Motley Fool has a disclosure policy.

Source: fool.com