Yes, the combination of rising mortgage rates and house prices are probably insurmountable for many young homebuyers. But new research has found that what’s really holding many of them back is the truckload of debt they’re carrying.
Nearly 3 out of 4 Millennials have some form of non-mortgage debt, with the average approaching $117,000, according to Real Estate Witch, the research arm of agent-matching service Clever Real Estate.
With that heavy a debt burden, how are they ever going to buy a house? According to the survey, 3 out of 10 don’t think they ever will.
Two-thirds of debt-laden Millennials carry credit card balances, often from one month to the next and rarely, if ever, paying them off. And almost half have student loans averaging nearly $127,000.
Will the Biden administration’s proposal to forgive $10,000 in student debt for a large share of borrowers and $20,000 for a lucky few who came from poor backgrounds help the situation? We’ll have to wait and see.
Slowing Price Rises Not Hurting Owners
The rapid run-up in house prices is slowing. Even so, most homeowners aren’t losing any money when they sell. Even when they cut their asking prices, sellers are likely to walk away with fat wallets.
According to analytics company Attom, sellers knocked it out of the park in 2022’s second quarter. Profit margins on the median-priced house and apartment hit a new record of 55.5 percent, the firm reported.
That comes on the heels of what some called a lackluster first quarter, when sellers earned a measly 48.3 percent profit at the median – the largest gain ever, until the April-June period. In monetary terms, Attom says the typical seller nailed $123,869 in gross profits in the second quarter vs. $103,750 in the first quarter.
If only owners who sold in the earlier months of the year had waited just a few more weeks! Boo-hoo.
Servicers Get More Info on Borrowers
Santa knows if you’ve been bad or good – and soon, lenders might, too. With new software coming to the market, they’ll also know when you lost your job, welcomed a new baby or had a heart attack.
With its new automated alert program, Sales Boomerang will notify lenders and loan servicers when a borrower or a prospect in their customer database experiences a major life change that could alter their financial situation. The software mines public records for common life events affecting individuals and households, such as marriage, divorce, childbirth, high school graduation or a death in the family.
Lenders that use the Life Events Notification System will be able to quickly reach out to congratulate – or console – a borrower about a recent event and offer personalized advice for achieving their next homeownership goal.
For example, if a divorce triggers a notice, the lender can reach out to provide customers with options for dealing with their mortgage. Or when a borrower’s child graduates from college, the lender can suggest ways they can downsize their loans or their living arrangements. And if you suffer a major financial or health-related setback, you can bet the lender will be reaching out.
What a Difference a Decade Makes
Here’s how wild the housing market was before the midsummer slowdown took hold: In May 2011, according to the National Association of Realtors, houses were on the market for a median of 101 days before going under contract. In June of this year, “sold” signs were going up in a median of just 14 days.
Another way to look at the phenomenon: 11 years ago, a median of 24 percent of all houses sold in under a month. As of June, that number was 88 percent.
In other words, back then, buyers could pretty much take their sweet time making a decision. For the last 18 months or so, though, if buyers blinked, they likely had to move on.
Respite from Materials Price Hikes?
The cost of building materials is still rising, but the slowdown in new-home sales should bring builders some relief – maybe even to the point that new-home prices could start falling.
Since January 2020, prices on the myriad products that go into a new house have surged 35.7 percent. And roughly 80 percent of that has occurred since January 2021. But Matt Saunders, who handles building products research for the John Burns consulting firm, believes a respite is in sight.
Saunders expects prices to drop in framing lumber, kitchen products, decking and windows, among other categories. But on the flip side, building product dealers will see their revenues dwindle, especially if they get too far out over their skis.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at email@example.com.