Morning Briefing: Homeownership rate may be overly pessimistic says Freddie

by Steve Randall13 Oct 2016
Homeownership rate may be overly pessimistic says Freddie
Homeownership rates have been trending lower for more than a decade but the gloomy predictions for rates below 60 per cent may be missing some important factors.

Freddie Mac says that there are some elements that may change the pessimistic outlook including the future shape of housing finance, potential changes to millennials’ life decisions, and overcoming challenges to homeownership for minority demographics.

"Twenty years in the future, today's Millennial 35-year-olds will not act exactly like today's Baby Boomer 55-year-olds. Or perhaps they will. And this is where experts from the Joint Center on Housing Studies and the Urban Institute begin to part ways in their projections of the homeownership rate,” commented Freddie Mac chief economist Sean Becketti.

He added that neither of the outlooks claims to incorporate macroeconomic factors which could change homeownership but he highlights that, in the case of minorities, they will collectively make up such a large proportion of the US population as to make them “increasingly expensive to overlook.”

Becketti says that mortgage lenders and banks will be keen to find solutions to serve those who may currently find homeownership unattainable.
Mortgage applications dropped last week
Mortgage applications took a tumble last week with the Mortgage Bankers’ Association’s index down 6 per cent in the week to Oct. 7 compared to the previous week.

The drop was the same on both a seasonally adjusted and unadjusted basis with the refinance index down 8 per cent to its lowest level since June. The share of refinance mortgages was down to 62.4 per cent of all applications from 63.8 per cent a week earlier.

The purchase index was down 3 per cent adjusted and 2 per cent unadjusted; however, it was 27 per cent above the same week of 2015.
Most 39 year olds are juggling multiple loans
A new international study shows that by the age of 39 many people are juggling multiple loans.

The report by Finaccord looked at borrowing across 8 countries including the US and Canada and found that those in North America are most likely to have a mortgage, compared to those in France and Germany who are more likely to have bank overdrafts.

“As an average across the eight countries researched, over two thirds of individuals aged 39 are paying off at least one loan, which is very often a mortgage”, observed Claire Michaud, Consultant at Finaccord.

“However, 31 might be considered the peak age for borrowing as close to one in five individuals are servicing three or more loans at that age – potentially including student loans, vehicle finance contracts and other types of loan, as well as mortgages – although this ratio then declines gradually up to the age of 55 after which individuals are a lot less likely to need to borrow from multiple sources.”



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