On November 3, 2014, Zero Hedge writes on the Contra Corner:
The Millennials (one of the biggest generations in US history) are just not getting with the status quo program. As we detailed previously, with lower credit scores, less disposable income, and a soaring number of people living with their parents; so it should be no surprise that The National Association of Realtors (NAR) today admitted that first-time homebuyers plunged to the lowest level in 27 years. The blame – of course – rather than low/no-growth fiscal policies, student debt servitude, and inequality-driving cheap-funding monetary policy, is price competition from ‘investors’ and too “stringent credit standards,”perfectly mirroring FHFA’s Mel Watt’s Einsteinian insanity desire to dramatically ease lending standards and slash minimum down-payments (as we noted previously). Perhaps NAR accidentally stumbles on the biggest reason no one is buying in their profiling: the typical first-time buyer was 31-years-old, while the typical repeat buyer was 53 – smack in the middle of the Millennial collapse.
Here is the size of the Millennial generation in context:
With less disposable income, and thus fewer assets, today’s youth is finding it ever more difficult to build up a solid credit history…
… and another logical outcome: fewer can afford to buy homes and start familiies, instead chosing to live in their parents’ basement…
Read more about The Millennials here…
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Which is exactly what is happening (as NAR reports,)
Despite an improving job market and low interest rates, the share of first-time buyers fell to its lowest point in nearly three decades and is preventing a healthier housing market from reaching its full potential, according to an annual survey released today by the National Association of Realtors®.
The long-term average in this survey, dating back to 1981, shows that four out of 10 purchases are from first-time home buyers. In this year’s survey, the share of first-time buyers* dropped 5 percentage points from a year ago to 33 percent, representing the lowest share since 1987 (30 percent).
Who is to blame?…
Lawrence Yun, NAR chief economist, says there are many obstacles young adults are enduring on their path to homeownership. “Rising rents and repaying student loan debt makes saving for a downpayment more difficult, especially for young adults who’ve experienced limited job prospects and flat wage growth since entering the workforce,” he said.
“Adding more bumps in the road, is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions and high mortgage insurance premiums.”
Yun adds, “Stronger job growth should eventually support higher wages, but nearly half (47 percent) of first-time buyers in this year’s survey (43 percent in 2013) said the mortgage application and approval process was much more or somewhat more difficult than expected. Less stringent credit standards and mortgage insurance premiums commensurate with current buyer risk profiles are needed to boost first-time buyer participation, especially with interest rates likely rising in upcoming years.”
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Well, Bloomberg reports that:
“A U.S. housing regulator plans new steps to encourage banks to lend to buyers with less than-perfect credit scores, according to two people with direct knowledge of the matter.
“Watt will also discuss an effort that would allow borrowers to put down as little as 3 percent of the purchase price on loans backed by Fannie Mae and Freddie Mac, the people said.
“Fannie Mae and Freddie Mac (FMCC), which have been under U.S. conservatorship since 2008, buy mortgages and package them into bonds on which they guarantee payments of principal and interest. Watt’s announcement is part of an effort to encourage banks to ease credit and follows a series of steps he first described in May.”
It’s for the good of the people right? He’s a “liberal” so he’s always working for the little guy, right? Wrong.
The best characterization of Mr. Watt I’ve seen comes from realestate.com, here it is:
“While some observers consider Watt’s appointment a significant lurch to the left compared to DeMarco, (he was among those named by the Democratic Socialists of America as a member of their caucus in 2009), Watt himself has raised a tremendous amount of money from banking and real estate-related corporations and trade associations. One report from the Sunlight Foundation found that for 2009, Watt had received some 45 percent of his total campaign funds from donors in the finance and real estate sector.”
This is what all these phony “liberals” do. They pretend to be champions of the poor so that they can fool their clueless constituents and thus serve the oligarchy that much more effectively. This housing plan isn’t about helping families afford homes, it’s about creating artificial demand for overpriced homes so that stuck private equity and hedge fund mangers (who can no longer make it rain in the buy-to-rent trade) have some peasants to sell to ahead of the next crash.
Rule Number 1 of Oligarch Club: Always make sure you sell to the muppets before the music stops. Here we go again.
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Certainly does not look like “The Recovery…” it was penned to be…
The long-term…
The transmission channel is officially broken… so don’t ask for more Fed action!
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Leaving Rudy Havenstein to sum it all up perfectly!!
Increasingly, Americans dependent on low-paying and part-time jobs, and those burdened with consumer debt (including student loans) cannot afford to purchase a home because their income qualification fails to meet the necessary risk of default criteria no matter the level of the interest rate on the mortgage. This will increasingly be a problem for those in the middle-class, even with higher education qualifications, as tectonic shifts in the technologies of production destroy their jobs and devalue the worth of their labor.
When will this nation realize that the impact of technology will continue to shift the production of products and services off of human labor onto non-human productive capital––human intelligent machines, super-automation, robotics, digital computerized operations, etc. No longer will income from a job be sufficient to meet the criteria of purchasing a home on the basis of a home mortgage loan. Fewer and fewer American will qualify. We need to focus on ownership creation in the FUTURE productive capital economic growth of the country and create new individual ownership of the corporations that produce the products and provide the services so that people can benefit financially from a second income and new source of income from wealth-creating, income-producing productive capital assets.
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