30-Year Fixed Mortgatge Rates Plunge to Lowest Rate in 16 Months

Post author: Prashant Gopal

U.S. mortgage rates plunged, sending borrowing costs for 30-year loans below 4 percent for the first time in 16 months, as signs of a slowing global economy drove investors to the safety of government bonds.

The average rate for a 30-year fixed mortgage dropped to 3.97 percent, the lowest since since June 2013, from 4.12 percent last week, Freddie Mac said in a statement today. The average 15-year rate fell to 3.18 percent from 3.3 percent, the McLean, Virginia-based mortgage-finance company said.

Mortgage rates are following a slide in 10-year Treasury yields as weaker-than-expected economic data fromGermany to China combine with concern about a spreading Ebola virus, sparking demand for safe investments. Borrowing costs for home loans have fallen for four straight weeks, offering a break to buyers and giving owners a new opportunity to refinance.

“Domestically, there is no evidence that the economy is weakening in the manner of the rest of the world,” saidMillan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York. Lower borrowing costs “will make it a more favorable environment for housing if the U.S. fundamentals hold up.”

A gauge of U.S. mortgage refinancing jumped 10.6 percent last week, the most since early June, the Mortgage Bankers Association said yesterday. The share of home-loan applicants seeking to refinance climbed to 58.9 percent, the highest since mid-February, from 56.4 percent, the group said.

Rates for 30-year loans began rising from a near-record low of 3.35 percent in May 2013 after the Federal Reserve signaled it would start to unwind its stimulus plan aimed at keeping borrowing costs down. Traders cut bets that the Fed will raise interest rates by September 2015 to a 31 percent chance today from 78 percent odds at the end of last month, according to federal fund futures data compiled by Bloomberg.

To contact the reporter on this story: Prashant Gopal in Boston at pgopal2@bloomberg.net

To contact the editors responsible for this story: Kara Wetzel at kwetzel@bloomberg.net Christine Maurus

Doubled-up for Dollars

(This article continues one of the themes considered in my previous post. - Martha)

Post Author: Skylar Olsen

• Nationally, 32 percent of working-age adults – aged 23 to 65 – live in doubled-up households, up from 25 percent in 2000 and 26 percent in 1990.
• Employed U.S. adults in doubled-up households make 76.3 percent as much as employed adults in general, or roughly 76 cents for every dollar made by all adults.
• The proportion of adults doubling-up is higher in more expensive markets.

As rents rise and income growth remains flat in many areas, renters are increasingly forced to devote an ever-larger share of their monthly income towards rent. In the second quarter, a typical American renting household spent 29 percent of their income on rent, compared to 25 percent in 1990 and 24 percent in 2000.

There are a number of strategies to cope with rising rents and stagnating incomes, including moving to a smaller home and/or moving to a cheaper area. But the likely first choice for many is to add more roommates to the household in order to spread the costs around, which creates more doubled-up households nationwide. Nationally, 32 percent of working-age adults – aged 23 to 65 – live in doubled-up households, up from 25 percent in 2000 and 26 percent in 1990.

We define a doubled-up household as one in which at least two working-age, unmarried or un-partnered adults live together. Under this definition, a 25-year-old son living with his middle-aged parents is a doubled-up household, as is a pair of unmarried 23-year-old roommates. This definition captures the households that under different circumstances contain adults who could or would choose to live apart. 

Some individuals do choose to live with others for companionship and camaraderie. But the relatively lower individual incomes of employed adults living in doubled-up households, and the strong relationship between rental affordability and the share of adults in doubled up households over time and across metro areas suggests that sharing living expenses is more than a matter of taste.

Nationally, employed adults in doubled-up households make 76.3 percent as much as employed adults in general, or roughly 76 cents for every dollar made by all adults. By doubling-up, a combined income is better able to compete for housing with individuals and families in a position to forgo doubling.

Corroborating the relationship between the tendency to seek roommates and housing affordability, as the share of household income needed for rent increases over time, so too does the share of adults doubling (Figure 1). Likewise, while employed individuals in expensive markets make more money than employed individuals in less expensive markets (top plot, Figure 2), the proportion of doubling is also higher in expensive markets (bottom plot, Figure 2). This suggests that higher incomes are not enough; individuals still need to pool their earnings and double-up to afford rent in expensive markets like San Francisco, Los Angeles and New York.

The share of working-aged adults living in doubled-up households is a custom analysis of individual census survey responses available in the Integrated Public Use Microdata Series.[1]

[1] Steven Ruggles, J. Trent Alexander, Katie Genadek, Ronald Goeken, Matthew B. Schroeder, and Matthew Sobek. Integrated Public Use Microdata Series: Version 5.0 [Machine-readable database]. Minneapolis: University of Minnesota, 2010.

About the author
Skylar Olsen is an Economist at Zillow. To learn more about Skylar click here.

Are You a Landlord Yet?

The rental housing boom continues to bring more small investors into the business. A recent survey by the California Association of Realtors shows that the vast majority of landlords represented by Realtors own less than 5 properties, and that detached single family homes comprise 85% of the properties managed. Realtors and other small investors are buying investment homes, and upsizers are keeping their former homes to rent out. Most Realtors now participate in property management with at least some percentage of our business, as clients ask us to find a renter or we buy properties ourselves. In my local ofice, the majority of agents own at least one rental property.

Vacancy rates are some of the lowest in history. Increasingly, in many markets, landlords have their pick of tenants and need to do very little to compete. This graph from Rent.com tells a striking story of the sea-change in property managers' concessions an a National scale.

Pressures on the market have created opportunity for many small investors. However, what happens to people priced out by the current market?

According to the 2014 "State of Homelessness in America" by the National Alliance to End Homelessness, homelessness continues to decrease. However, numbers of new homeless continue unchanged. Cities have simply gotten better at re-housing people. Cultural behavioral shifts also appear. Families stay together longer. People double-up. More spaces are being rented out. People have gotten more creative about housing. Behaviors such as the ones long evidenced in markets like San Francisco and New York have begun to appear in rural areas and small cities across the country.

U.S. Criticized for Lack of Action on Mortgage Fraud

Post author: Matt Apuzzo

Attorney General Eric H. Holder Jr.

Attorney General Eric H. Holder Jr. announced in 2012 that prosecutors had charged 530 people in cases related to mortgage fraud that had cost homeowners more than $1 billion, figures that turned out to be highly inflated.

Four years after President Obama promised to crack down on mortgage fraud, his administration has quietly made the crime its lowest priority and has closed hundreds of cases after little or no investigation, the Justice Department’s internal watchdog said on Thursday.

The report by the department’s inspector general undercuts the president’s contentions that the government is holding people responsible for the collapse of the financial and housing markets. The administration has been criticized, in particular, for not pursuing large banks and their executives.

“In cities across the country, mortgage fraud crimes have reached crisis proportions,” Attorney General Eric H. Holder Jr. said at a mortgage fraud summit in Phoenix in 2010. “But we are fighting back.”

The inspector general’s report, however, shows that the F.B.I. considered mortgage fraud to be its lowest-ranked national criminal priority. In several large cities, including New York and Los Angeles, F.B.I. agents either ranked mortgage fraud as a low priority or did not rank it at all.

The F.B.I. received $196 million from the 2009 to 2011 fiscal years to investigate mortgage fraud, the report said, but the number of pending cases and agents investigating them dropped in 2011.

“Despite receiving significant additional funding from Congress to pursue mortgage fraud cases, the F.B.I. in adding new staff did not always use these new positions to exclusively investigate mortgage fraud,” the report says.

Mortgage fraud was one of the causes of the 2008 financial collapse. Mortgage brokers and lenders falsified documents, sometimes to make mortgages look safer, other times to make the property look more valuable.

The inspector general focused much of its report and most of its recommendations on fixing internal systems that produced inaccurate data that wildly overstated the government’s results.

Mr. Holder, for example, announced in 2012 that prosecutors had charged 530 people over the previous year in cases related to mortgage fraud that had cost homeowners more than $1 billion.

Almost immediately, the Justice Department realized it could not back up those statistics, the inspector general said. After months of review, it became clear that only 107 people were charged.

The $1 billion figure, it turned out, had been drastically inflated. It was actually $95 million, the inspector general said. Yet Justice Department officials repeated those claims for months, even after it was obvious the figures were wrong, the inspector general said.

The Justice Department contested the inspector general’s findings, noting that the number of mortgage fraud indictments and convictions roughly doubled from 2009 to 2011. In 2012, the government reached a $25 billion civil settlement with the nation’s five largest mortgage servicers.

“The facts regarding the department’s work on mortgage fraud tell a much different story than this report,” a department spokeswoman, Ellen Canale, said. “As the report itself notes, even at a time of constrained budget resources, the department has dedicated significant manpower and funding to combating mortgage fraud.”

Last year, the Justice Department announced a $13 billion settlement with JPMorgan Chase over the bank’s questionable mortgage practices.

The Justice Department agreed with the recommendations to improve the record keeping that produce such figures.

Members of Congress and others have criticized the Obama administration for going too easy on Wall Street banks and not taking mortgage fraud seriously enough.

“The inspector general’s report sheds light on what looks like an attempt by the Justice Department to pull the wool over the public’s eyes with respect to its efforts to go after the wrongdoers involved in mortgage fraud,” Senator Charles E, Grassley, Republican of Iowa and the ranking member on the Senate Judiciary Committee, said in a statement. “According to the inspector general, the department wasted time cooking the numbers about the cases it pursued, when it should have been prosecuting cases.”

Study: Middle Class Poorer, Earned Less in 2000's

Post author: Lynne Sladky, AP

For the first time since at least World War II, middle-class families finished the first decade of the 21st century poorer and with lower incomes than they had 10 years earlier.

And 85% of those surveyed say that in the 2000s, it was harder than before to maintain a middle-class lifestyle, according to a study out Wednesday by the Pew Research Center's Social and Demographic Trends project.

Median household income dropped nearly $3,500 for a three-person middle-class household, to $69,487 a year, after adjusting for inflation, the Pew study said. The median household's net worth dropped 28% to $93,150. Incomes have dropped since 2000, while wealth rose modestly early in the decade before gains were wiped out by the recession that began in 2007 and the financial crisis sparked in 2008, said Paul Taylor, a Pew executive vice president.

"That the middle class always enjoys a rising standard of living is part of America's sense of itself, and it has always been true — until now," Taylor said in an interview, describing the 2000s as a "lost decade" for the middle class. "It's been 11 years since the peak in household incomes, and that covers the early part of the decade as well."

The middle class grew smaller, poorer and more pessimistic during the decade, Pew said after analyzing both its own polling data and a raft of government and private economic reports. The results show even a weakening of Americans' traditional faith that their children will be better off than their parents, Taylor said: 43% of respondents think their children will be richer than they are, down from 51% in 2008.

In 2011, just over half of the nation (51%) was defined as middle class, having annual incomes between $39,000 and $118,000 for a three-member household, said Pew. That's down from 61% in the early 1970s. All the financial figures in Pew's report are adjusted for inflation and calculated in 2011 dollars.

More than half of the shrinkage in the middle class came from families that moved upscale, joining the households, now about 20% of the total, that earn more than twice the national median income, Pew said. About two households in five that left the middle class moved below Pew's cutoff, which is an income at least two-thirds as high as the national median.

For the first time in at least 40 years, late in the decade the total percentage of national income earned by the middle class fell behind the share earned by the upper cohort, Pew said. In 2010, upper income households claimed 46% of household income, vs. 45% for the middle class. The top tier's share has risen by half since 1980.

Who's to blame?

The biggest culprits in Pew's surveys were Congress, which was blamed "`a lot" by 62% of respondents for middle-class decline, and banks at 54%. More people placed a lot of blame on the George W. Bush administration (44%) than President Obama (34%). Only 8% said the middle class should primarily blame itself for its falling prospects.

Pew said neither the president nor Republican challenger Mitt Romney has "sealed the deal" with middle-class voters, but its respondents said Obama's policies were better for the middle class than Romney's by a 52% to 42% margin.

The numbers are consistent with other polling and with data reported by the Federal Reserve and other agencies.

By Timothy Mullaney, USA Today

The Federal Reserve said in June that the financial crisis had wiped out middle-class gains in net worth since 1992, thanks mostly to a $7 trillion post-crash decline in home equity, while wealthier households quickly recovered their lost wealth as stock markets recovered. Pew says the median household net worth for middle-income families is 2.3% higher, about $2,100, than in 1983, after taking inflation into account, while the wealth of upper-income households climbed 87% to $574,788.

"What we find in our surveys is pretty much exactly that," said Jim Clifton, chairman of theGallup Organization, which does public-opinion research for clients, including USA TODAY. "Both sides of the political aisle agree the middle class is getting hollowed out."

Clifton said unemployment, underemployment, and people who leave the labor force because of poor prospects all contribute to the middle class' distress. Combined, those three groups are nearly 20% of the U.S. labor force, he said, a figure slightly higher than estimates by the U.S. Bureau of Labor Statistics.

Studies by the New America Foundation and consulting firm Sentier Research have also confirmed the recent drop and a longer-term stagnation in middle-class wages, as do federal data.