Texas and Florida: 44% of top 25 fastest growing cities over the 2010's

WalletHub analysis of US Census Bureau data show that Texas and Florida have 11 out of the top 25 fastest growing cities over the past decade.

Zillow: Latinx Americans are Driving U.S. Homeownership Gains, But Wide Gaps Remain

Zillow recently investigated Latinx American home ownership using data from the Federal Reserve Board Survey of Consumer Finances.  On a positive note, we're seeing the highest share of Latinx households owning their homes since 2008, although a wealth disparity remains.  What jumped out at was a chart showing the share of net worth held in the homes of Latinx, as well as Black, homeowners - 1.69x and 1.46x greater than white home owners respectively.  

The economic well-being of these folks are significantly more exposed to changes in home values. We may well be in for a likely bumpy ride ahead for housing in post-forbearance 2021, especially in the lower end, where the home owners have been hit harder and have less in built-up home equity.

LinkedIn migration data

Cities with the highest relative levels of net migration based on changes in LinkedIn profiles over the last twelve months. It’s Austin by a mile, 50% higher than runner-up Charlotte. Thematically, towards the Southern/Mountain states and away from the coasts with Seattle being the sole outlier.

Meanwhile, here are the cities with the greatest relative net loss in migration over the preceding twelve months. What this tells me is that college grads tend to leave their college towns after they graduate. 

Oh great and holy LinkedIn, can you reveal to us the truth about the change in velocity of migration over the past twelve months? Just asking...

WSJ: Where Trump and Biden Stand on Mortgage Finance

Figuring our what to do with Fannie Mae and Freddie Mac "remains the largest single piece of unfinished business from the 2008 financial crisis." Both are under Federal Housing Finance Agency conservatorship, recipients of about $200 billion in government bailout to prevent failure during the mortgage crisis at the time. Since then, the two agencies have sent back over $300 billion in the form of dividends to the U.S. Department of the Treasury. #housing #mortgage #housingmarket #realestate #homeownership

State of play: US commercial real estate 3Q20

State of play in commercial real estate across six key US cities courtesy of Savills. All 3Q20 data except for Dallas where I used 2Q20 data.

Some observations:

1. Leasing activity fell like a rock as expected. Deep freeze in SF while Manhattan's drop was surprisingly the lowest in the peer set.
2. While asking prices did not weaken more than you'd imagine, the sublease share of available inventory in SF (52%) and Manhattan (27%) has gotten, um, substantial.
3. I'm frankly surprised at LA's performance given the state's covid lockdowns. Of course, it's hard to generalize given the heterogeneity of the market.
4. Dallas, and Houston to a lesser extent, seem to be the overachievers in this peer set. Anecdotally, I've seen less of a discontinuity in commercial development in DFW. There have even been a number of new restaurants that recently opened.

Forbearance: A rather miniscule "jump," but wait, there's more...

 

That “jump” works out to be a 0.6% blip. 

More importantly for those paying attention...

1. While the overall rate is 6.8%, over 11% of FHA and VA loans are in forbearance. The Fannie and Freddie contingent is now under 5%.
2. Over 3 out of 4 loans in active forbearance had their terms extended at some point since March.

A good portion of homeowners initially choosing forbearance had continued to pay on time and subsequently exited after their initial, mainly 3-month, terms had expired. Those remaining really do need the plans.

More details from Black Knight

Regional differences in the financing of new home sales

The National Association of Home Builders analysis of the 2019 U.S. Census Bureau Survey of Construction data shows that the share of non-conventional (i.e., Fannie Mae and Freddie Mac mortgages) financing for new home sales accounted for 35%, up from 29% in 2018.

Eye-opening is the level of significant regional differences. Of particular note, nearly one in ten new homes in New England were purchased with cash. Given the level of mortgage rates, why is this cohort of home purchasers resorting to cash (or equivalent)?  Is this an indication of a product-market mismatch? 

Approaching an apples-to-apples comparison of home prices with Common Haus Price Index (CHPI)

The inimitable Case-Shiller family of regional real estate indices adopt a repeat sales methodology to control for the ever-changing composition of housing stock, but still lack a measure of geographic transitivity that challenges comparisons across markets. Haus.com’s Common Haus Price Index (CHPI) normalizes for housing stock tracked across regions by focusing the asking price of the “most common American home: a three-bed, two-bath, 1,600-square-foot home built in 1977 on a 7,500-square-foot lot.” Moreover, the lag between measure and report is just over two weeks, versus the 1-3 month lag of most other home indices.

While there are a number of considerations, including the supply of the “most common American home” within specific markets and the focus on asking price, this is a very intriguing step forward in transforming home indices from essentially descriptive to something approaching prescriptive.

OCC: Seven national banks servicing over a million seriously delinquent loans?

The 2Q20 Office of the Comptroller of the Currency mortgage metrics report show that among the seven national banks with large servicing books, over 1 million loans (or 6.8% ) were seriously delinquent, a 4.7x increase from the quarter before. 

Some points for added context...

• Reason for concern: The banks (Bank of America, Citi, HSBC, Chase, PNC, U.S. Bank and Wells Fargo) have limited exposure to FHA/VA mortgages which, as a group, have seen more distress than the Freddie or Fannie mortgages that predominate their books.
• Reason for hope: There is no mention of loans in forbearance programs. Recent research by dv01 highlighted material reporting discrepancies in privately securitized pools. Could there be an overlap between loans in serious delinquency and those in forbearance?

UWM to go public

United Wholesale Mortgage to go public through a SPAC, merging with the Gores Holdings IV Inc. affiliate of The Gores Group. The combination will operate under the United name listed on the NASDAQ under the UWMC ticker. The transaction is valued at $16.1B or 9.5x the estimated 2021 Adjusted Net Income of $1.7B.

High speed train, Texas style

Texas Central Railway gets Federal approval. Cue the inevitable California-Texas comparison... Phase 1 of the California High-Speed Rail, scoped at 520 miles of tracks, is currently projected to take 2.5x the time, at 2.26x the cost/mile when compared to the Texas Central Railway. In any event, I predict the most popular bird by the banks of the Brazos will soon be the (construction) crane.

WSJ: Household Net Worth Highest Ever

The Wall Street Journal reports that US household net worth hits highest level ever.  The 6.8% jump between 1Q20 and 2Q20 masks the roller coaster dip of 6% followed by a rapid ascent of 14% in the interim. I’d be interested in seeing the distribution since we’ve been told that 1 in 5 Americans have zero or negative net worth. How are they doing these days?

WSJ: Wall Street landlords ready for the millions of house-rich, cash-poor, in-distress

What to do when homeowner equity on mortgage properties head towards $10 trillion yet over 9% of homeowners are either in forbearance plans or delinquent, meaning they have no good way of extracting that excess equity? Single family rental outfits like Invitation Homes, American Homes 4 Rent and EasyKnock are bringing to market sale-leaseback products that can help these homeowners as their forbearances start ending early next year. If these options take off, mortgage servicers may see less loss mitigation challenges, but may also lose out on these customers who claw their way back yet are sufficiently impaired that they’re essentially stuck in their mortgages.

What to do with urban parking garages?

“The pandemic has left many of these parking garages mostly empty as more people work remotely. But even before the pandemic, ride-hailing services like Uber and Lyft and the rise of urban bicycling infrastructure had been leading to a decline in car ownership in the city. Now, developers are targeting urban parking garages as prime sites for redevelopment.”

The number of parking garages and lots increased by a third since 2000.

Banks retreat again from residential servicing

Chris Whalen delves into why bank servicing of residential mortgages have fallen in 2020 even as origination volume is set to increase by 40% year-over-year.

1. Nonbank lenders have been taking the lion’s share of the volume expansion, most notably in refinance activity, which is set to roughly double year-over-year.
2. A “handful of hyper-efficient lenders” have become quite quite good at recapturing the refinance activity, which stems the pressing leak in the servicing portfolio during these refi waves.

Observations...

1. Those institutions with leading recapture capabilities are increasingly able to articulate a platform-driven value proposition (see Rocket Mortgage)
2. The share of servicing done by nonbanks lender will likely continue to grow, may have long-term systemic implications since these shops are borrowing short term to hold long term without the permanent government support accorded to banks

Showdown at Big Data Gulch

Great power rivalry in the post-industrial era.  “There’s a shift from the weaponization of supply chains toward the weaponization of data and platforms. There hasn’t been much medium-to-long-term thinking about it yet -- but that’s starting to happen.”

Mortgages boom amidst Coronavirus-driven economic gloom

$1.1 trillion in mortgages were issued in the first quarter of the pandemic era (2Q20). To put in perspective, the entirety of 2020 saw $2.5 trillion in originations. Refinances were up 200% while purchase mortgages were down 8% from the year earlier.

But it’s not all good news... “This boom in mort­gage orig­i­na­tions isn’t nec­es­sar­ily go­ing to be that awe­some for the broader econ­omy,” said Ralph B McLaughlin, chief econ­omist at Haus.com a home-fi­nance startup. “There is less of a mul­ti­plier ef­fect in the econ­omy when some­body refinances ver­sus buy­ing a house.”

Ginnie Mae refis no longer tracking their Fannie and Freddie brethren

The August edition of the Urban Institute's always interesting housing finance chartbook has an exhibit that shows the refi share of Ginnie Mae (FHA/VA) loans no longer tracking the equivalent share Fannie and Freddie loans after having had a predictable trailing relationship for most of the past decade. 

A major factor has been the pandemic’s disparate negative impact on the less creditworthy (average credit scores nearly 80 points lower) that constitutes the core of Ginnie Mae borrowers.

Zillow: Rental concessions on the rise

“Concessions can often be a leading indicator of a coming price drop in that landlords will often offer them first, before reducing rent.”

The percentage of rental listings with concessions nearly double between February and July as annualized rent growth drops by 75% over the same period, but situation is disproportionately impacting multifamily rentals common in urban cores.

“Renters in multifamily and other home types are more likely to receive some sort of concession than those in single-family rentals: 63% of multifamily renters report getting at least one, as do 59% of renters in other home types. Only 35% of single-family renters reported receiving any concessions.”

Recovery in employment rates since March/April

1. Yet more data points for those wondering why housing and equities have been on such a tear of late.
2. Clear correlation between CARES stimulus and a meaningful steadying of the economy

Source: Opportunity Insights