Analyzing Millennial Homeowners’ Credit Profiles

first_imgHome / Daily Dose / Analyzing Millennial Homeowners’ Credit Profiles March 22, 2019 1,110 Views Demand Propels Home Prices Upward 2 days ago Radhika Ojha is an independent writer and copy-editor, and a reporter for DS News. She is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her masters degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha, also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Houston, Texas. About Author: Radhika Ojha Even though they are the largest group of homebuyers, what is keeping millennial renters from buying real estate? A study by LendingTree set to answer this question by analyzing the credit profiles of millennial homeowners and comparing them with those of renters in the same age group.The study found that millennial homeowners had a higher credit profile than renters, with a median credit score of 671 compared with 582 for nonhomeowners. The study found that this was one of the key reasons that kept renters from becoming homeowners as higher scores make homeownership more accessible.It also found that homeowners had more accounts than renters. While the average homeowner had around nine accounts, renters or nonhomeowners had an average of four accounts.The higher credit scores also helped homeowners to borrow more, according to the analysis. This included the nonmortgage categories where homeowners had a median balance of $6,633 in credit card balances, compared to $2,218 for renters. As a result, only 64 percent of renters had a credit card balance compared with 92 percent homeowners.”This reflects the higher credit scores of homeowning millennials, as they are able to obtain more credit accounts. Many renters may face difficulty accessing credit due to their lower credit scores,” said Tendayi Kapfidze, Chief Economist, LendingTree.Despite lesser access to credit, the analysis found that renters’ median utilization of their available credit was 58 percent, “almost double the 31 percent for homeowners.”While homeowners and renters owed almost an equal amount in student debt, at 37 percent, the analysis indicated that homeowners were more likely to have an auto loan as well as personal loans. However, renters had more trouble servicing their debt, “with an average of eight negative marks on their credit profiles compared with just three for homeowners,” Kapfidze said.Renters were late on 4.6 percent of all payments over four years, with homeowners late on just 1.5 percent of payments. Credit Scores debt hoemowners LendingTree loans Millennials Renters 2019-03-22 Radhika Ojha Share Save The Week Ahead: Nearing the Forbearance Exit 2 days ago Tagged with: Credit Scores debt hoemowners LendingTree loans Millennials Renters The Best Markets For Residential Property Investors 2 days ago in Daily Dose, Featured, Market Studies, News Related Articles Data Provider Black Knight to Acquire Top of Mind 2 days agocenter_img The Best Markets For Residential Property Investors 2 days ago  Print This Post Analyzing Millennial Homeowners’ Credit Profiles Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Demand Propels Home Prices Upward 2 days ago Servicers Navigate the Post-Pandemic World 2 days ago Data Provider Black Knight to Acquire Top of Mind 2 days ago Servicers Navigate the Post-Pandemic World 2 days ago Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Sign up for DS News Daily Previous: What Will Hold Back Home Sales? Next: Housing Market Needs New Construction Subscribelast_img read more

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Could Fed Policy Inadvertently Disrupt the Housing Market?

first_img The Best Markets For Residential Property Investors 2 days ago The Best Markets For Residential Property Investors 2 days ago Share 1Save Servicers Navigate the Post-Pandemic World 2 days ago Sign up for DS News Daily Governmental Measures Target Expanded Access to Affordable Housing 2 days ago Related Articles Demand Propels Home Prices Upward 2 days ago The seeming disconnect between the economic tumult created by the COVID-19 pandemic and the record-high levels for the Dow Jones Industrial Average and the S&P 500 Index can be explained when held up against the performance of the mortgage market, according to an op-ed piece authored by Brian Chappatta, a columnist with Bloomberg.Chappatta observed that 30-year mortgage rates “slowly but surely dropped to record lows throughout the pandemic, touching 2.78% earlier this month, according to Freddie Mac data.” As a result, an increasing number of homeowners sought to refinance their mortgages, with the goal of either lowering their monthly payments or tapping into their property’s equity. Former Federal Reserve Chairwoman Janet Yellen referred to this as a “savings glut” and Chappatta noted this helps mitigate much of the financial trauma fueled by the pandemic.“With more cash in their pockets, these people have kept spending levels relatively steady while also socking money away or investing in stocks or other assets,” he said.Simultaneously, Chappatta continued, was the Federal Reserve’s efforts to bolster the economy in what he dubbed “pushing the $6.8 trillion mortgage-backed securities market to extremes.” He also warned that the Fed will create even greater problems for the economy if it steps away from this strategy.“As it stands, the Fed has bought more than $1 trillion of mortgage bonds since March, a record pace, and now holds $2 trillion of the securities on its balance sheet,” he explained. “That easily eclipses the previous high during the last economic recovery. Central bankers have pledged repeatedly to keep adding bonds each month ‘at least at the current pace,’ which is often quoted as $40 billion. But that’s actually a net figure: Total monthly purchases tend to be closer to $100 billion because borrowers’ principal repayments take out some debt already on the Fed’s balance sheet.”Chappatta highlighted the central bank’s decision on Oct. 29 of purchasing conventional 30-year securities with a 1.5% coupon, a historic low percentage. Because of this action, Chappatta theorized the Fed will not raise interest rates in the coming years – which, he argued, creates another problem.“All of this serves to squeeze mortgage-bond investors in higher-rate securities,” he stated. “Most of them bought the debt at a premium, and the constant reduction in lending rates leaves them vulnerable to prepayment risk as homeowners refinance and pay off their existing obligations at par. But it would be arguably even more painful if investors are herded into ultra-low coupon MBS, only to see rates rise.”Chappatta cited the threat of extension risk, where “fund managers left holding 1.5% or 2% MBS could be saddled with huge losses if longer-term interest rates start to increase next year as the U.S. economy rebounds and inflation starts to pick up on the back of a COVID-19 vaccine.”As for the homeowners taking advantage of ultra-low mortgage rates, Chappatta cautioned that a rapid economic recovery in 2021 will cause spikes in longer-term Treasury yields and the benchmark 30-year mortgage rate, which would disrupt the advantages that homeowners are currently enjoying – which Chappatta predicted would create “at least a hiccup in the U.S. housing market and an implosion at worst.”“If there’s a modest correction in housing prices, that shouldn’t be too disruptive for the economy as a whole,” he said. “Rather, it’s the second-order effects of higher mortgage rates that should concern investors … The refinancing boom the central bank engineered has helped countless Americans get through the pandemic. But it can’t afford to see it go bust. Most likely, the Fed won’t be able to extricate itself from buying mortgage bonds for at least the next several years, and possibly longer, or else risk toppling the entire house of cards it built.” Could Fed Policy Inadvertently Disrupt the Housing Market? Subscribe in Daily Dose, Featured, Government, News November 20, 2020 1,224 Views Home / Daily Dose / Could Fed Policy Inadvertently Disrupt the Housing Market?  Print This Post 2020-11-20 Cristin Espinosa Previous: Forbearance Volumes Change Course Next: The Week Ahead: A Breakdown of Delinquency Statistics Phil Hall is a former United Nations-based reporter for Fairchild Broadcast News, the author of nine books, the host of the award-winning SoundCloud podcast “The Online Movie Show,” co-host of the award-winning WAPJ-FM talk show “Nutmeg Chatter” and a writer with credits in The New York Times, New York Daily News, Hartford Courant, Wired, The Hill’s Congress Blog and Profit Confidential. His real estate finance writing has been published in the ABA Banking Journal, Secondary Marketing Executive, Servicing Management, MortgageOrb, Progress in Lending, National Mortgage Professional, Mortgage Professional America, Canadian Mortgage Professional, Mortgage Professional News, Mortgage Broker News and HousingWire. Data Provider Black Knight to Acquire Top of Mind 2 days ago Servicers Navigate the Post-Pandemic World 2 days ago About Author: Phil Hall Data Provider Black Knight to Acquire Top of Mind 2 days ago The Week Ahead: Nearing the Forbearance Exit 2 days ago Demand Propels Home Prices Upward 2 days ago Governmental Measures Target Expanded Access to Affordable Housing 2 days agolast_img read more

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