Tag Archives: Millennial

US Pending Home Sales Fall 9.5% YoY In December To Lowest Level Since 2014 As Fed Unwinds

As The Federal Reserve continues to unwind its balance sheet, pending home sales YoY declined 9.5% YoY, the worst since 2014.\

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Pending home sales got a big boost from The Fed’s third round of asset purchases (QE3), but PHS are feeling the pain of The Fed’s unwind.

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Source: Confounded Interest

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US Pending Home Sales Crash Most In 5 Years

Following Case-Shiller’s report that home price gains are the weakest in four years, Pulte Homes’ CEO admission that 2019 will be a “challenging year,” and existing home sales carnage, Pending Home Sales were expected to very modestly rebound in December.

But they didn’t!

Pending home sales dropped 2.2% MoM (versus a 0.5% expected rise) to the lowest since 2014…

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This is the 12th month in a row of annual sales declines… and the biggest annual drop in 5 years…

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Yet another sign the housing market is struggling amid elevated property prices and borrowing costs – but there’s always hope…

“The stock market correction hurt consumer confidence, record high home prices cut into affordability and mortgage rates were higher in October and November for consumers signing contracts in December,” NAR Chief Economist Lawrence Yun said in a statement.

But with mortgage rates declining recently and the Fed less likely to raise borrowing costs, “the forecast for home transactions has greatly improved.”

Finally,  the Realtors group forecasts a decline in annual home sales to 5.25 million this year from 5.34 million in 2018, which would mark the first back-to-back drops since the last recession.

Source: ZeroHedge

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Roughly Half Of Millennials Have No Money Saved For A Down Payment

Millennials are on the cusp of surpassing baby boomers as the largest generational demographic in the US, yet a startling plurality of them are woefully under prepared to assume the typical trappings of adulthood – like starting a family and buying a home.

And in a detailed report published this week, analysts at ApartmentList illustrated just how wide of a gulf lies between millennials and their economic and financial goals. Perhaps the most surprising finding: Nearly half of millennial renters have zero money saved for a down payment – which doesn’t bode well for the housing market, where home prices have surpassed their pre-crisis highs (though signs of weakness are starting to emerge). And just 11% say they have $10,000 saved.

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To wit, 72% of millennial renters cite “affordability” as the biggest factor barring them from home ownership. Student debt is another factor: While 23% of college graduates might be able to scrape together enough for a down payment, that figure falls to 12% for those who are currently paying off student loans.

But these aren’t the only factors holding millennials back from home ownership. A handful of macroeconomic trends are also to blame: Much of the generation came of age during or in the aftermath of the Great Recession, resulting in limited opportunities and stagnant wage growth in the crucial early stages of millennials’ careers. Construction of new single-family homes has lagged significantly in recent years, leading to a severe shortage of starter homes.

Roughly 9 in 10 millennial renters want to purchase a home; but just 4.4% plan to do so within the next year:

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The “burden of affordability” primarily manifests in millennials inability to scrape together enough money for a down payment:

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And even if they can manage to save some money, the amount needed for a down payment is often larger than they think:

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And at the present average savings rate, most millennials will need more than two decades to save up enough for a down payment.

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Ironically, millennials with the highest incomes receive the most help from family for their down payments.

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And as we mentioned above, student-loan debt is one of the biggest obstacles absorbing all of the money that would otherwise be saved for a down payment.

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The upshot of this is that, instead of accumulating wealth in a home – which has always been the primary source of value for American families – millennials will continue throwing it away on rent, which offers them no return and no security later in life.

Source: ZeroHedge

New York Millennials Paying $1800 Per Month To Cram Into 98-Square-Foot Rooms

Millennials in New York are known for living in a state of perpetual brokeness – between student loans, $20 nightclub drinks and $15 avocado toast, it’s easy to understand why 70% of millennials have less than $1,000 in savings. 

Now we can add expensive, glorified closets to the mix, as the Wall Street Journal reports.

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30-year-old marketing manager Scott Levine lives in an $1,800 per month, 98-square-foot room in a postage-stamp of an apartment – “basically, a kitchen” – with two roomates. Every week, someone from Ollie – his property manager, stops by to drop off towels and toiletries. 

A “community-engagement team” at Ollie helps plan Mr. Levine’s social calendar. A live-in “community manager”—sort of like a residential adviser for a college dorm—gets to know Mr. Levine and everyone else living on the 14 Ollie-managed floors of the Alta LIC building, known as Alta+, and finds creative ways to get them engaged in shared activities, like behind-the-scenes tours of Broadway shows or trips to organic farms. –WSJ

“Life in general can be a bit of a headache,” says Mr. Levine. Thanks to Ollie, he adds, “Everything is done for you, which is convenient.”

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Ollie’s business model is all about convenience and roommates – usually single people in their 20s and 30s who have all amenities provided for them, while sharing a kitchen and common area. 

For city-dwellers accustomed to living cheek-by-jowl with people whose names they’ll never bother to learn, this might seem strange. But for young people still forming their postcollege friend groups—in an era when participation in civic life is down and going to a bar can mean huddling in a corner swiping on Tinder—it makes sense. So much sense that people put up with apartments so small they’re called “micro.” But hey, free shampoo. –WSJ

Meanwhile, startups such as Ollie and Common are competing with big-city real-estate developers. Common manages 20 co-living properties in six cities where roommate situations are more common, such as New York, Los Angeles and Washington DC. They have approximately 650 renters according to CEO Brad Hargreaves. 

“Our audience is people who make $40,000 to $80,000 a year, who we believe are underserved in most markets today,” Mr. Hargreaves says.

Other startups are managing existing homes and apartments, “Airbnb-style” as the WSJ puts it. 

Bungalow, which just announced $64 million in funding, wants property owners to offer space to “early-career professionals” looking for a low-maintenance place to stay. It charges rent that’s “slightly higher” than what it pays those owners, a company spokeswoman says. It currently maintains over 200 properties—housing nearly 800 residents—across seven big cities, says co-founder and CEO Andrew Collins.

As with Common and Ollie, Bungalow advertises that it furnishes the common areas in its homes, installs fast free Wi-Fi, and cleans them regularly. The company also organizes events and outings to help you “build a community with… your new friends.” –WSJ

One of the underlying aspects of the co-living startup models is a technology platform that both advertises to prospective tenants and takes care of their needs once they’re living on-site. Ollie’s “Bedvetter” system, for example, shows apartments to potential tenants – and shows who’s already signed up to live there with links to their personal profiles in order to match roommates. Bedvetter also matches people into “pods” of “potential roommates” before they begin an apartment hunt. 

“It’s like online dating,” says Levine – while his roommate, Joseph Watson, 29, compares it to eHarmony or Match.com vs. Tinder, as it’s designed for long term pairings.

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“Micro Economics” 

While millennials in New York and other urban areas scramble to make ends meet, developers are making hand over fist on the co-living movement – even though the renters themselves are paying less than they would for a private studio. 

The Alta LIC building also has conventional apartments, but the co-living units are filling up faster, says Matthew Baron, one of the Alta LIC building’s developers. What’s more, he adds, he can get more than $80 a square foot for Ollie units compared with around $60 a square foot for the others, even though the Ollie ones are on the lower, less-desirable floors. –WSJ

Another complication with co-living arrangements is tricky community management. L.A.’s PodShare, for example, vets potential tenants beforehand – however issues with problem tenants are unavoidable. “We’ve hosted 25,000 people at this point, so there’s bound to be some problems,” says founder Elvina Beck. 

Common building tenant Teiko Yakobson said that the “community vibe broke down after Common eliminated the paid “house leader,” complaining that “We all just became strangers, and it was no better than living in any other apartment.” Common instead replaced the program with “centralized” community managers at the corporate level – which Hargreaves says is “more coherent” for them. 

It’s not all bad, however…

When it does work, co-living can re-create the kind of communities tenants seek online—ones grounded in common interests and shared socioeconomic status.

Mr. Levine, who not only lives in a co-living building but also works in a co-working space—and in whose social circle most people do either one of those or the other—is aware that, while this isn’t for everyone, he is hardly a standout. “One thing I’ve heard before is that I’m a stereotype of a New York millennial,” he says.

Just make sure you have earplugs in case your roommate is able to get laid in their respectively expensive, tiny room. 

Source: ZeroHedge

The Millennial Crisis

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There is a serious economic crisis brewing that few seem to be paying attention. According to a new survey from Zillow Group Inc. (ZG  Get Report), approximately 22.5% of millennials ages 24 through 36 are living at home with their moms or both parents, up nine percentage points since 2005  which was 13.5% and the most in any year in the last decade. Between the student loans which cannot be discharged thanks to the Clintons (to get the support of bankers) even after they find that degrees are worthless when 60% of graduates cannot find employment with such a degree and the fact that taxes have escalated to nearly doubling over the last 20 years that is predominantly state and local, the affordability of buying a home has been fading fast. Despite the fact that millennials are eager to enter the real estate market, they’re bearing the brunt of the challenge directly caused by the combination of taxes and non-dischargeable student loans.

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Now 63% of millennials under the age of 29 cannot even afford the cost of home ownership, according to a CoreLogic and RTi Research study. The expense, in fact, is their number one reason for remaining a renter. In their research, they concluded that one-third of millennial renters reported feeling they cannot afford a down payment to buy a home. This is a sad response that is not being taken into consideration by governments.

Where home prices have not risen sharply, taxes have. First-time home buyers face ever-growing challenges to find and buy affordable entry-level homes as the economics of inefficient governments at the state and local levels have refused to reform and raise taxes to meet pension costs they promised themselves. Politicians from London to Vancouver have increased taxes to try to bring home prices down rather than looking at the problem objectively. All they are accomplishing is punishing people who have owned homes and destroying their future when home values were their retirement savings.

California and Illinois are just two major examples at the top of the list of grossly mismanaged state governments. It is this net affordability factor that has begun to encumber sales of real estate, softening prices and turning many millennials into renters rather than home buyers. Then add the rise of interest rates and we have an economic cocktail of taxes that is beginning to kill the real estate market in a slow death drip by drip. Depressions take place when the debt and real estate markets collapse – not equities and commodities. The amount of money invested in debt markets dwarfs equities, It is ALWAYS the debt market that you undermine when you want to destroy an economy.

Taxes and the rise in interest rates will further erode affordability and is beginning to slow existing-home sales in many markets already. As this trend continues, home prices and mortgage rates over the next couple of years will likely dampen sales and home price growth. There was another study conducted by Freddie Mac which also found that affordability challenges are contributing to a downtrend in young adult home ownership. Long-term, real estate prices will decline as taxes and interest rates rise. The next crop of buyers is being culled and as that unfolds, real estate cannot rise when banks also begin to curtail the availability of mortgages.

Source: by Martin Armstrong | Armstrong Economics

Millennials: We Have No Savings, But Want To Retire At 61

Failing to save for retirement tends to be the biggest financial regret among Americans but millennials still want it all, they want it quickly, and without much sacrifice, data from a recent Bankrate.com study suggests.

Perhaps unsurprising given the older generation’s general stereotyping of millennials as having less ambition and work ethic combined with an immediate gratification self-pitying me-first perspective on life, the survey finds that Americans ranging in age between 18 to 37 say that while they don’t have much savings, they still want to retire early. Well perhaps there’s ambition of a sorts, but ambition without the work and preparation. 

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Of those millennials already saving, the median retirement account balance is about $19,100. But overall, roughly two-thirds of millennials have nothing saved so far — concludes a National Institute on Retirement Security report (NIRS).

The data shows that “younger Americans are hoping to retire in their early 60s, according to Bankrate’s survey. For millennials, 61 is the ideal retirement age.”

This is especially surprising given that as we’ve discussed time and time again, America’s millennial generation is burdened by debt, effectively precluded from home ownership and increasingly disgruntled and pessimistic about their future prospects for wealth and happiness. But perhaps they are also a bit delusional or at least less than realistic at times, especially on the topic of personal finances and the future.  

Add to this that it’s no secret that people are living longer and many are staying in the workforce long past the traditional retirement age of 65, but it appears there’s a vast disconnect between millennials’ goals and their preparations to reach those goals.

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Though stating that obviously “early retirement is something that seems very appealing,” the Bankrate study analysts conclude:

If only wishing made it so. Of those millennials already saving, the median retirement account balance is about $19,100. But overall, roughly two-thirds of millennials have nothing saved so far, according to a February report by the National Institute on Retirement Security.

And a bit more modest, the study further finds “half of baby boomers think it’s best to retire at age 65 or older. Nearly 1 in 5 (17 percent) Americans ages 73 and older say you should wait until you’re at least 70 to retire.”

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Among the data used by Bankrate is from the National Institute on Retirement Security (NIRS), which recently found that about 66 percent of people between the ages of 21 and 32 have yet to save a single dollar toward their retirement fund, based analyzing Census data collected in 2014.

Researchers for NIRS cite the “harsh economic landscape” millennials encountered when they first entered the workforce, especially the years between 2008 and 2012.

“Reality begins to set in as you advance toward retirement age,” observes Bankrate’s chief financial analyst, Greg McBride, who concludes, “I think that’s why you see those in the Silent Generation having the highest age estimate and the boomers being the next highest. A lot of those Gen Xers and millennials that say 60 or 61 today, they may put a different number on that and in another 20 years.”

Source: ZeroHedge

New Game Show Gives Millennials A Chance To Eliminate Student Loan Debt

Overinflated college tuition facilitated by a bottomless ocean of cheap student loans has so far trapped forty-five million Americans with a record $1.48 trillion in non-dischargeable debt – an amount which has more than doubled since the 2009 lows.

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As we reported in January, approximately 40 percent of student loans taken out in 2014 are projected to default by 2023 according to the Brookings Institute.

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However, a new game show on TruTV offers millennial contestants a chance to answer trivia questions – and if they win, the game show will pay off their student debt.

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“Paid Off,” a new trivia game show that premiered this week tries to illuminate the student debt crisis that has entrapped countless millennials. To get the balance right, the show’s producers partnered with a nonprofit group called Student Debt Crisis.

Its executive director and founder, Natalia Abrams, gave this advice to producers: “Every step of the way, from signing up for college to paying back their loans, it’s been a confusing process. So make sure that there’s some heart to this show.”

Video: Paid Off with Michael Torpey Season 1 Trailer 

Michael Torpey, a New York-based actor (“Orange is the New Black”) who is the host of the show, acknowledges that student debt is a crisis and one of the most difficult financial issues plaguing millennials in the gig economy.

“We’re playing in a weird space of dark comedy,” said Torpey, who developed the show with TruTV producers and various nonprofit groups. “As a comedian, I think a common approach to a serious topic is to try to laugh at it first.”

Video: Paid Off with Michael Torpey – The Story Behind Paid Off with Michael

The rules of game show are simple: Three millennial contestants, all of whom have an exorbitant amount of student debt, go head-to-head in a few rounds of trivia questions, hoping that their useless liberal arts degree enables them to answer enough questions right. If they win, well, the show will cover 100 percent of their outstanding student loans.

“One of the mantras is ‘an absurd show to match an absurd crisis,’” Torpey told The Washington Post. “A game show feels really apt because this is the state of things right now.”

Earlier this year, the show had a casting call in Atlanta – this is what the casting flyer stated: “truTV’s new comedy games show PAID OFF is going to do something the government won’t – help people get out of student loan debt! If you’re smart, funny, live in the Atlanta area and have student loan debt, We Want You!”

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Video: Paid Off with Michael Torpey – Finger The Masters

Torpey told NBC that “he strives to balance the light hearted trappings of a game show with an earnest, empathetic look at the student debt issue.”

“I want to be very respectful of the folks who come on our show, who opened their hearts and shared their struggles with us,” Torpey said. “I hope this show de-stigmatizes debt. I mean, there are 45 million borrowers out there. It is a huge number of people!”

Google searches for “paid off game show” have been rising since June.

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Meanwhile, “student loans forgiveness” searches have been surging over the cycle.

Source: ZeroHedge

“This Isn’t Fake, This Is Real”: Millennials Resort To Cyber Begging To Finance Down Payment

We imagine there are millions of American millennials who have made it through college, found a job, got married and would like to take their next crucial step on the way to adulthood: Buying a home. There’s only one problem: Thanks to stagnant wages and onerous student loan debt (factors that have helped jack up spending even as incomes have languished) most millennials don’t have any money.

Indeed, for the first time ever, millennials with student debt now have a negative net worth.

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While most Americans borrow when buying their homes, millennials can’t even afford the down payment that lenders typically require so that their customers have some “skin in the game.”

Yet, while most lenders view this fact as a risk (borrowers typically need to put up 20% of the price), a growing number of enterprising lenders see these broke borrowers as an opportunity. The latest example of this ill-advised trend was highlighted by the Wall Street Journal on Friday, with the absurdity inadvertently laid bare by WSJ’s social media team.

As WSJ explains, enabling millennials to buy homes they can’t afford risks igniting a re-run of the housing crisis – an outcome made more likely by the fact that home prices have already surpassed their excesses from the pre-crisis era. The phenomenon has been exacerbated by a shortage of homes that has persisted for years.

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But what’s even more alarming than the fact that lenders are out there chasing this business (despite the fact that nearly 40% of renters ages 25 to 34 said they save nothing every month for a down payment) are the schemes that some lenders have devised to help their borrowers “fund” their down payments.

To wit, CMG Financial created HomeFundMe, a service it launched last year. As its name would imply, HomeFundMe helps would-be borrowers beg for cash from their friends and family by sending passive aggressive emails.

Reese and Kyle Rademacher weren’t sure how they would afford a down payment to buy a home until their real-estate agent mentioned an offbeat idea: crowdfund the money from friends and family.

Mrs. Rademacher, a 28-year-old construction technician, set up an online profile with a program called HomeFundMe to solicit donations. Her parents and a few others responded, and in March the Rademachers closed on a $320,000 home in Cheyenne, Wyo.

HomeFundMe, a service launched by lender CMG Financial last year, is among a growing suite of services that help borrowers cobble together the funds to buy homes. These companies — startups and established players in the housing market alike — say they’re offering options for borrowers who have good credit and income but are struggling to save.

About 400 borrowers have used HomeFundMe to help buy homes since the program launched in October. On average, they raise about $2,500, though CMG also can kick in matching grants, and most borrowers have some of their own money saved as well, said chief marketing officer Paul Akinmade. Friends and family can also make their gifts conditional, meaning borrowers won’t get the money unless they actually purchase the home.

Mrs. Rademacher said she felt uncomfortable at first asking for help through HomeFundMe. But the Rademachers’ budget was tight after paying for their wedding, and a credit union had already denied their mortgage application because they didn’t have enough in savings.

“Whenever I emailed people the link, I would explain, ‘This isn’t fake, this is real,'”Mrs. Rademacher said. Now, some of her friends are interested in following suit. “It just worked out so well,” she said, “that people were like, ‘No way, I want that!”

One startup lender called Loftium will supply $50,000 for a down payment, on the condition that the home buyer agrees to rent out a room a Airbnb.

Erik and Rafaela de los Reyes considered applying for an FHA loan to buy a home in Seattle but were put off by the mortgage insurance and other costs. They instead got $28,000 from Loftium, the startup that offers funding in exchange for a cut of their Airbnb income. The couple have pledged to rent out their mother-in-law suite for three years.

“If you don’t have the down payment, it’s a great way to start,” said Mrs. de los Reyes, a 29-year old flight attendant. She and Mr. de los Reyes had never been Airbnb hosts before, so they were apprehensive. But as for their guests, Mrs. de los Reyes said, “we barely see them.”

Yifan Zhang got the idea for Loftium after renting out a spare room in her Seattle home. One of her goals, she said, is to even the playing field between millennials whose parents can help them buy their first home and those who are trying to save on their own.

“If you’re willing to kind of sacrifice and generate this extra income, then you should be able to have this leg up in homeownership,” said Ms. Zhang, the company’s CEO and co-founder.

Perhaps these lenders have forgotten the most enduring lesson from the financial crisis: When borrowers don’t have “skin in the game” – ie they’re playing with “other people’s money” – they’re much more likely to walk away when home prices fall.

Economists caution that actions such as loosening credit standards or supplying borrowers with more down payment money worsen the problem by creating more demand in a supply-constrained market, leading to a further overheating of home prices. And if home prices later fall, borrowers with little of their own money invested are more likely to simply walk away, they say.

These aren’t the only options for young people. And as we’ve previously pointed out, Freddie Mac recently revised its “3% down” mortgage program to eliminate pesky income restrictions and geographic restrictions allowing a new wave of “income-challenged” Americans to rush into already-hot housing markets. The Federal Housing Administration has a similar 3%-down program.

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Then again, while some people are turned off entirely by the GoFundMe concept, the idea isn’t so hard to rationalize: Why shouldn’t boomers pitch in to help millennials make their down payments? After all, they’re the ones who wrecked the economy and the housing market, right?

Source: ZeroHedge