Affordability got better for mortgage borrowers at the start of 2019, but housing inventory constraints limited the degree of improvement, according to the National Association of Home Builders and Wells Fargo.
Falling mortgage rates, lower home prices and considerable income growth helped push up homebuyer affordability on a consecutive-quarter basis; but low levels of housing supply, particularly where starter homes are concerned, didn't change levels much from an annual perspective.
As a result, 61.4% of all homes sold between January and March were affordable to households earning the national median income of $75,500, according to NAHB and Wells Fargo's joint Housing Opportunity Index. This share is up from 56.6% in the fourth quarter, but is pretty much unchanged from 61.6% in 1Q18.
"While the recent rise in affordability is welcome news, builders continue to struggle with rising construction and development costs stemming from excessive regulations, a lack of buildable lots and a shortage of construction workers," NAHB Chairman Greg Ugalde, a Torrington, Conn.-based homebuilder and developer, said in a press release. "This means that housing affordability is going to continue to be a challenge throughout 2019, particularly in high-cost markets."
The national median home price did dip down to $260,000 in the first quarter from $262,500 in the fourth as interest rates declined 25 basis points to 4.64%. But property values are still up year-to-year due to inventory concerns that include high land prices and increasing costs to build.
"Though the Federal Reserve's more dovish monetary policy stance has lowered interest rates, income growth still has not kept up with rising construction costs and home price appreciation in recent years," said NAHB Chief Economist Robert Dietz. "Today four out of every 10 new and existing home sales are not affordable for a typical family."
Nonbanks, beneficiaries of a post-crisis capture of mortgage lending market share, have seen momentum ebb in the face of sluggish existing-home sales.
With new single-family home inventory a bright spot in the consumer real estate market, lending against the construction of new homes offers one of the few ways to expand.
It's an area nonbanks have traditionally ceded to depositories because of the latter's advantages in risk management and capital access. Now, that situation is starting to change.
For nonbank lenders to gain traction in this part of the market, they will need more than just a real estate development tailwind to make it happen. Factors that will come into play range from those that any mortgage lender would be familiar with (think scale and liquidity here) to those with which many have little experience (think specialized underwriting, risk management and even marketing here).
To be sure, there is a strong tailwind. At 1.25 million in 2018, production of total, privately owned housing starts have more than doubled since hitting a post-crisis low in 2009, according to the Census Bureau. Single-family housing starts account for more than half of that total and also have grown.
The Consumer Financial Protection Bureau proposed steps Thursday to ease reporting requirements under the Home Mortgage Disclosure Act, just days after the agency announced it was eliminating an online platform for analyzing raw HMDA data.
The bureau released a new notice of proposed rulemaking that would raise the thresholds for collecting and reporting data on both closed-end mortgages and open-end lines of credit. The agency said more regulatory relief was necessary to clarify provisions of the financial reform law enacted by Congress last year.
The proposal combined with the agency's elimination of HMDA Explorer, which allows users to access and make queries on data, were seen by several observers as significant steps that could weaken the impact of the disclosure law.
"This could be an extensive rollback," said Richard Horn, managing member of Garris Horn and a former CFPB official, of the proposal to raise the thresholds. "The increase in the thresholds for HMDA is also rolling back the HMDA rule to some extent because fewer people would be reporting under HMDA."
In the wake of the massive data breach at Equifax, it was not surprising that financial consumer complaints sent to the Consumer Financial Protection Bureau shot up by nearly a quarter in 2017. But last year, complaints kept climbing.
The CFPB received over a quarter-million complaints in 2018 — a record — which was a 6% increase from the previous year, according to a new report by the U.S Public Interest Research Group.
The analysis by U.S. PIRG's Education Fund comes as the consumer advocacy organization and others like it urge the CFPB to continue allowing the public to view the complaint database. PIRG has released a total of 14 reports about the complaint database since 2013.
“Going forward, we encourage the CFPB to maintain public access to a vibrant, transparent, and complete consumer complaint database that encourages consumers, competitors, academics and other researchers, and the complained-about companies themselves to study ways to reform the marketplace.” the report said.
Millennials have long been blamed for pushing transgenerational businesses to extinction. Even financial institutions with storied pasts have not emerged unscathed, forced to scramble to create app-based offerings, branded credit cards and zero-commitment products to suit changing preferences. Banking analysts have been quick to assign blame, pegging millennials as a dark cloud hanging over the industry.
Yet, not only was the forecasted doom and gloom massively overblown, but a unique opportunity has emerged from its shadow. If housing numbers tell the story, then the U.S. is on the brink of a massive millennial population shift that could bring tremendous growth to local, regional and community banks the likes of which haven't been seen in decades.
The most important thing to consider is that this generation still has a strong desire to chase the American dream, despite being hindered. In order to achieve what past generations have, they've got to do things differently. That means exiting large, expensive cities — and the banks that serve them — in favor of so-called secondary markets. And so far, some of the most appealing markets appear to be in Rust Belt cities that have rounded the corner for revitalization.