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Apache is functioning normally

August 18, 2023 by Brett Tams

The Economy, Though Volatile, Has Shown Resilience in the Face of Rising Interest Rates

The housing market has also been impacted by high rates as millions of homeowners locked into previously low mortgage rates and are content to remain in their current homes, therefore helping to keep inventory low

The U.S. economy has been resilient in the face of rising interest rates and grew at its long-run average rate of 2% during the first quarter of 2023. The labor market remains strong with an unemployment rate below 4% and rising labor force participation for the 25–54-year-old age group. The housing market has also been impacted by high rates with millions of U.S. homeowners locked into previously low mortgage rates and content to remain in their current homes, helping to keep inventory low and the balance tilted in favor of home sellers over buyers in most markets. In this month’s spotlight we show that this “mortgage rate lockin effect” is the largest ever in U.S. history, and is likely to impact the housing market for years to come.

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Recent developments in the U.S. economy

Per the U.S. Bureau of Economic Analysis, the third and final estimate of first quarter 2023 Real Gross Domestic Product (GDP) was much stronger than previously reported. Quarterly growth was revised up 0.7 percentage points to an annualized rate of 2%. While real GDP was revised upwards, the pace of growth continues to slow mainly due to the drag from the interest rate-sensitive sectors such as residential fixed investment and business investment. But the undaunted U.S. consumer has remained resilient, and consumer spending grew at an annualized rate of 4.2% in the first quarter, contributing to the upward revision of real GDP growth.

Consumer confidence and sentiment play a pivotal role in boosting consumer spending. The Conference Board’s June 2023 measure of consumer confidence jumped to the highest level since January 2022, reflecting improvements in the current conditions as well as in the future expectations. Expectations of inflation fell in June to 6%, the lowest reading since December 2020.

On the labor market side, according to the Bureau of Labor Statistics Employment Situation Summary for June 2023, the economy added 209,000 jobs in June led by the government, health care, social assistance, and construction sectors. The unemployment rate ticked down to 3.6% to remain near 50-year lows. The prime age (25–54-year-old) labor force participation rate has been rising and is now at the highest level since April 2002 (Exhibit 1). This suggests that the tight labor market is bringing many of the younger workforce, who were on the sidelines, back into the market.

The economy added 209K jobs in June, and the unemployment rate ticked down to 3.6% to remain near 50-year lows.

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Inflation has been cooling in recent months, and the measure tracked by the Federal Reserve, the U.S. Bureau of Economic Analysis’ “core” price index for personal consumption expenditures, excluding food and energy (Core PCE), came in at 4.6% year-over-year in May. While housing continues to be the largest contributor to the increases in inflation and prices, it has started to cool off. Another inflation measure that the Federal Reserve has been tracking recently is the supercore service inflation (core services excluding energy and housing). Supercore inflation has been decreasing and the year-over-year change in May 2023 came in at the lowest since March 2022.

Inflation has been cooling in recent months, and the U.S. Bureau of Economic Analysis’ “core” price index for personal consumption expenditures came in at 4.6% year-over-year in May.

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Recent developments in the U.S. housing market

The divergence between existing home sales and new home sales has grown wider in recent months. Existing home sales receded 20% from a year ago, while new home sales surprised on the upside and increased 20% from a year ago in May. The mortgage rate lock-in effect continues to impact the listings of existing homes, which are down 35% as of April 2023, compared to the pre-pandemic average between 2016-19 (Exhibit 3). Pending home sales, which are a forward-looking indicator for existing home sales, also declined during May and were down 2.7% over the month and 22.2% over the year according to the National Association of Realtors^®.

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On the other hand, according to the NAHB/Wells Fargo Housing Market Index builder confidence improved to the highest level in nearly a year due to continued housing demand and easing of supply chain issues, as well as the lower level of existing homes for sale. All three subcomponents of the HMI increased: the sales expectation component saw the greatest increase of 6 points to 62, current sales conditions increased 5 points to 61, and buyer traffic rose 4 points to 37.1 The current sales conditions and the sales expectations rose to levels above 60 for the first time in a year as homebuyers warm up to mortgage rates in the 6-7% range.

This increased builder confidence was also reflected in the housing starts, which jumped 21.7% in May. Furthermore, the monthly increase in total starts at 291,000 units was the highest in over three decades. Permits also increased over the month of May and were up 5.2% on a month-over-month basis, despite being down 12.7% year-over-year.

House prices may have bottomed and continue to firm up in the short run. Per the FHFA’s Purchase- Only House Price Index, house prices increased nationally 0.7% from March to April 2023. While house prices increased across all the divisions over the month of April—ranging from +0.1% in the Pacific division to +2.4% in the New England division—the variation is wider when we consider the house price appreciation as compared to a year ago. The 12-month changes ranged from -3.8% in the Pacific division to +6.1% in the East South-Central division.

Recent developments in the U.S. mortgage market

The 30-year fixed-rate mortgage as measured by our Primary Mortgage Market Survey^®, settled at 6.7% in June, partly due to the Federal Reserve’s decision to pause increases in the Fed Funds Rate. Partially in response to the stabilization in mortgage rates, purchase applications increased 7.1% over the month of June, while refinance applications increased 2.8%, both after seasonal adjustment according to the Mortgage Bankers Association Weekly Applications Survey.

Delinquency rate went down 11 basis points in May to 3.1%, close to the historical low of 2.92%; foreclosure starts remain 41% below 2019 levels.

With respect to mortgage performance, the delinquency rate, as measured by loans 30 or more days past due went down 11 basis points in May to 3.1%, close to the historical low of 2.92%, according to Black Knight’s May Mortgage Monitor. Serious delinquent loans (90 or more days past due) also fell by 18,000 over the month and are down around 30% since May 2022. While foreclosure starts increased 2.2% over the month of May, they remain 41% below 2019 levels.

The outlook

The outlook remains volatile as we enter the second half of the year. The Federal Reserve’s pause on interest rate hikes after ten consecutive increases since March 2022 was a welcome breather for the economy. The labor market remains strong with low unemployment and inflation appears to be moderating. Downside risks as a slowing economy could tip into recession, but on balance our outlook is cautiously optimistic.

General economy, rates, inflation

The U.S. economy will continue to grow, unless consumers pause their spending. While the labor market is gradually moderating, it remains sufficiently tight, and combined with consumers’ excess savings and recent wage gains, consumers will continue to spend and the economy will continue to expand, although at a reduced pace.

While the labor market is gradually moderating, consumers will continue to spend, and the economy will continue to expand, although at a reduced pace.

Under our baseline scenario, we expect inflation to continue cooling as the long and variable lags of monetary policy work through the economy. The slowing growth in prices of goods and services will further reinforce consumers’ purchasing power. However, even though inflation is expected to slow it will be gradual and the pressure on long term rates including mortgage rates will not likely abate this year. Therefore, we expect mortgage rates to stay above 6% for the second half of 2023. High mortgage rates will increase the cost of owning a home, likely leading to a reduction in other spending. However, savings from cooling inflation could be enough to offset the increased housing costs. If this is the case, consumers will keep spending, and the economy will continue to grow unless the labor market further moderates significantly.

Home sales

On the housing front, home sales are plagued by a combination of a lack of inventory of existing homes and high mortgage rates. Due to the mortgage rate lock-in effect (described further below), many existing homeowners are unwilling to list their homes for sale, and we do not expect sufficient existing homes to come on the market any time soon to significantly boost existing home sales. Therefore, we expect existing home sales to remain low through the rest of 2023. However, new home sales are expected to pick up through the rest of the year. Although new home sales’ contribution to the total sales has been increasing in recent months, they are a fraction of the total home sales, we expect total home sales to remain muted for the rest of the year.

Home prices

Our official corporate forecast for the next 12 months has house prices falling by 2.9% and an additional 1.3% over the subsequent twelve months. However, given the current housing market conditions with historic low inventory and an early read on our data, we will likely revise our home price forecast in the next iteration of the Economic, Housing and Mortgage Market Outlook. We expect tight inventory will push sales volume down, and we expect it to keep home prices up.

Mortgage originations

Due to lower home sales, purchase origination volumes are expected to remain muted this year, while high mortgage rates keep refinance activity low. As homebuyers get accustomed to the new normal in terms of mortgage rates, we expect home sales to pick up and purchase originations to resume modest growth in 2024.

JULY 2023 SPOTLIGHT:

Mortgage rate lock-in and the housing market

The recent rapid increase in mortgage rates from historical lows to 20-year highs has created a scenario that we have not seen in more than 40 years. Because so many households have a fixed-rate mortgage, which exists in part because of financing from Freddie Mac and Fannie Mae, they were able to refinance into low interest rates in recent years. This contrasts with variable-rate mortgages, which have increased significantly as a result of rising mortgage rates. Nearly 6 out of 10 borrowers now have a mortgage rate at or below 4%. Given current market rates, many of those homeowners have locked in payment savings, but they also may have locked themselves into a forever home. Throughout this spotlight we use the term “mortgage rate lock-in effect” to refer to the ownership of a mortgage on favorable terms compared to current market interest rates.

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Nearly 6 out of 10 borrowers now have a mortgage rate at or below 4%. While those homeowners have locked in payment savings, they also may have locked themselves into a forever home.

The mortgage rate lock-in effect is a benefit to homeowners with fixed-rate mortgages. To illustrate the benefit of the mortgage rate lock-in effect, suppose a lucky homeowner has refinanced their mortgage of $250,000 at 2.65% in January of 2021. Their current monthly principal and interest payment would be $1,007 and after 29 months of payment their current outstanding balance would be $236,379. If the borrower obtained a new 30-year mortgage of $236,379 at the prevailing market interest rate of 6.81%, their monthly payment would increase to over $1,500 a month.

Following Quigley², we compute the net present value of the mortgage rate lock-in effect by taking the difference between the outstanding balance of the mortgage and the present value of the mortgage at prevailing market interest rates.³ The value of mortgage rate lock-in is $86,136 in our example.⁴

Except for certain limited cases, the mortgage is not portable or assumable. In today’s market, most mortgages have due-on-sale clauses, requiring the borrower to terminate the mortgage when they sell the property. To enjoy the benefit of the value of their low mortgage rate, the borrower must continue to live there, maintain it as second home, let it sit vacant or rent it out. In our example, the homeowner is only going to be willing to sell their current home, and thus give up their low mortgage rate, if the net benefit of a move is worth at least $86,136. For some households who are pursuing a new job opportunity or moving to be closer to family the move could be worth it, but others may opt to stay put.

The national average mortgage rate lock-in effect for 30-year and 15-year fixed rate loans is $55,000.

For each 30-year and 15-year fixed rate loan in Freddie Mac’s portfolio active as of June 2023, we computed the value of the mortgage rate lock-in effect.⁵ Per these calculations, the national average mortgage rate lock-in effect is $55,000 per household but because of differences in average loan sizes and the timing of originations and the history of refinance activity, the average value varies considerably across the country and by year of origination. Across geographies the average mortgage rate lock-in effect varies from a high of $91,000 in Hawaii to a low of $32,000 in West Virginia. Considering year of origination, the highest average values are for loans originated in 2020 and 2021 with average mortgage rate lock-in effect of $77,000 and $85,000, respectively. But, as rates continue to increase, even mortgages originated in 2023 have an average mortgage rate lock-in effect of $10,000.

To get a sense of how significant the mortgage rate lock-in effect is for the U.S. economy, we can sum the mortgage rate lock-in effect over the Freddie Mac portfolio. Considering only 30-year and 15-year fixed-rate mortgages financed by Freddie Mac, the aggregate mortgage rate lock-in effect for borrowers in Freddie Mac’s portfolio is substantial. We estimate that, considering the company’s single-family mortgage portfolio, homeowners with fixed-rate mortgages financed by Freddie Mac have locked in savings of a collective $700 billion dollars in total value. This is equal to about 25% of the outstanding unpaid principal balances in Freddie Mac’s single-family mortgage portfolio.

Our aggregate estimate of 25% of outstanding mortgage balances is significant and shows that many have truly benefitted from their fixed-rate mortgage when rates hit record lows. For comparison, Quigley calculated the average mortgage rate lock-in effect equal to $1,800 in 1981 for households with mortgages, which represented about 5% of outstanding mortgage balances versus about 25% today.⁶ In Exhibit 4 (on the following page) we show a time series of quarterly average mortgage rate lock-in effect in the Freddie Mac portfolio since 2018. From March 2019 through December 2021, the average lock-in effect was negative, meaning that the average borrower had significant incentive to refinance. But since March 2022, the average lock-in effect has surged, reaching over $50,000 in each
of the past four quarters.

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The mortgage rate lock-in effect is already having a significant impact on the U.S. economy and will likely continue to do so for years to come. One of the major challenges to the current U.S. housing market is a lack of available-for-sale inventory. The lock-in effect is yet another layer contributing to the dearth of available inventory. How much so is an active area of research.

Footnotes

1 The Housing Market Index is a diffusion index normalized so that a value of 50 indicates sentiment balanced between positive and negative. Any value above (below) 50 indicates that on average survey respondents have a positive (negative) sentiment. For more information on the index see https://www.nahb.org/news-and-economics/housing-economics/indices/housing-market-index.

2 Quigley, J.M., 1987. Interest rate variations, mortgage prepayments and household mobility. The Review of Economics and Statistics, pp.636-643.

3 The net present value of the mortgage rate lock-in effect is denoted by V and computed by using the value of the current mortgage balance (B) and the present discounted value of the payments (P) using prevailing market interest rates (r) discounted over the remaining (n) periods of the loan:

4 In our example, the borrower’s current balance B is $236,379, but the present value of the monthly payments (P=$1,007) discounted for the remaining (n=331) months at 0.005675 (r=6.81/1200) equals $150,243. Thus, the value V is $86,136 ($236,379-$150,243) which represents the value the borrower gets by having locked in a low mortgage interest rate.

5 Due to curtailment, or early payment of principal, our formula is slightly more complicated than the one presented above. To adjust for cases of curtailment we use the modified formula:

Where n is now the remaining months left adjusting for curtailment and F is the residual partial payment due in period n to pay off the remaining balance.

6 Per the 1981 American Housing Survey (https://www2.census.gov/prod2/ahsscan/h150-81a.pdf page 10 Table A-2) there were about 27 million households with a mortgage in the U.S. Multiplying $1,800 by 27 million gives us a little less than $50 billion in aggregate mortgage rate lock-in effect in 1981. Per the Financial Accounts of the United States, the total mortgage debt outstanding on 1-4 family housing was $1 trillion in 1981. $50 billion / $1,000 billion = 5%.

Prepared by the Economic & Housing Research group

Sam Khater, Chief Economist
Len Kiefer, Deputy Chief Economist
Ajita Atreya, Macro & Housing Economics Manager
Rama Yanamandra, Macro & Housing Economics Manager
Penka Trentcheva, Macro & Housing Economics Senior
Genaro Villa, Macro & Housing Economics Professional

www.freddiemac.com/research

Source: freddiemac.com

Apache is functioning normally

August 17, 2023 by Brett Tams

In the hillside neighborhood of Los Feliz, in the greater Hollywood area of Los Angeles, California, lies a unique architectural property that’s been holding headlines for decades.

With its distinct design and colorful history, the striking Sowden House is a stunning example of Mayan Revival American architecture, bound to capture the attention of anyone passing it by.

Also known as the “Jaws House” – due to its unusual facade that many say resembles the gaping open mouth of a great white shark – or the “Franklin House”, the property has gained a much darker notoriety over the years, now often being referred to as as the “Black Dahlia house” – and for good reason.

So let’s take a closer look at the grim history of the Sowden House, the unique 6,000-square-foot neo-Mayan mansion set in the heart of modern Hollywood.

^{The Sowden House at 5121 Franklin Ave, Los Angeles, Calif. Photo credit: Los Angeles, CC BY-SA 3.0, via Wikimedia Commons}

It was designed by Frank Lloyd Wright’s son

If the house looks eerily similar to legendary architect Frank Lloyd Wright’s projects – particularly the Ennis House (aka the Blade Runner house) – there’s a good reason for that.

The Sowden House owes its unique design to Lloyd Wright, the son of legendary architect Frank Lloyd Wright.

Carrying on the legacy of his father, who worked with molded concrete tiles and blocks to create structurally innovative buildings, Lloyd Wright used concrete textile blocks to erect the Sowden House. The technique, just like in the case of his father’s best works, created a unique structure that’s reminiscent of ancient Mayan temples.

Infamous for its distinctive design, the 1926-built Sowden House is rectangular in shape, with four connected wings looking in on an enclosed central courtyard.

^{The Sowden House, pictured in a 1940 Historical American Buildings Survey photograph. Photo via Wiki Commons}

Lloyd Wright built the unique house for his personal friend John Sowden, a painter and photographer who wanted a showplace where he could entertain his friends in the Hollywood film community.

So Wright fitted it with a stage, secret room, central courtyard, and ornamented concrete blocks. But despite the architect’s stellar work, John Sowden didn’t live long in the Franklin Ave. house. By 1930, Sowden was likely fed up with the public’s reaction to his uniquely designed house and sold it.

Related: The Derby House, the second most famous home ever designed by Lloyd Wright Jr.

The house traded hands a few more times before its most famous owner took residence here.

The Black Dahlia house: the property’s ties to one of the most famous unsolved murder mysteries in history

Fifteen years after Lloyd Wright’s friend, John Sowden, parted ways with his unique Los Feliz abode, the Sowden House was purchased by Dr. George Hodel.

Hodel had a thriving practice as a physician and was well-connected within social and intellectual circles in Los Angeles.

He was known for his eccentric behavior and interests, which reportedly included an affinity for the arts and surrealism. George Hodel had ties to people in the entertainment industry and reportedly hosted gatherings at his residence that attracted a mix of artists, writers, and socialites.

With its unconventional design and purported secret passageways, the Sowden Houses added to the air of mystery surrounding Hodel.

^{Photo credit: Wright, LloydMoore Public domain, via Wikimedia Commons}

A controversial figure (his own 14-year-old daughter once accused him of assault and incest), Hodel was known to throw sex parties in his Hollywood abode, giving way to many rumors surrounding his wild lifestyle.

The Sowden House became intertwined with the Black Dahlia case due to claims and rumors that George Hodel may have been involved in the murder of Elizabeth Short. These claims were made by Hodel’s own son, Steve Hodel, who was a retired Los Angeles Police Department detective.

Steve Hodel alleged that his father, George Hodel, was responsible for the Black Dahlia murder and possibly other unsolved crimes — and even write a series of books about his suspicions and findings, called Black Dahlia Avenger.

He pointed to various pieces of circumstantial evidence, including alleged connections between George Hodel and Elizabeth Short, as well as interpretations of surrealist art and photographs that he believed implicated his father.

^{Inside the Sowden House at 5121 Franklin Ave in Los Angeles. Photo credit: Wright, LloydMoore, Public domain, via Wikimedia Commons}

Later on, it was discovered that Hodel had indeed been investigated in the Black Dahlia case.

However, it’s important to note that the claims made by Steve Hodel are highly controversial and have been met with skepticism from other investigators and experts. The Los Angeles Police Department has never officially named George Hodel as a suspect in the Black Dahlia case, and the case remains officially unsolved.

The connection between the Sowden House and the Black Dahlia murder remains largely speculative and has generated considerable public interest and media coverage over the years — so much so that people have started calling the Lloyd Wright-designed home “the Black Dahlia House”.

But despite the intriguing theories and allegations, the true identity of Elizabeth Short’s killer has never been definitively proven, and the case continues to be a subject of fascination and mystery.

The Sowden House in recent years

While the structure at 5121 Franklin Ave in Los Angeles — which is now known as Lloyd Wright Jr’s best work — retains its unique facade, many things have changed at the Sowden House.

Designer Xorin Balbes purchased the property in 2001 for $1.2 million, then invested an additional $1.6 million to restore and upgrade it. According to Atlas Obscura, Balbes restored the stonework, converted the three-room kitchen into one, installed a pool and spa in the central courtyard, and added new upscale bathrooms.

Following Balbes’ renovations, the house traded hands quite a few times in recent years.

Now a 4-bedroom, 6-bath home worth over $6 million, the Sowden House is owned by Nate Daneshgar, whose family owns Grand Central Market in downtown Los Angeles. Daneshgar paid $6.16 million for Lloyd Wright’s neo-Mayan masterpiece back in 2022.

Movies and TV shows filmed at the Sowden house

The Aviator – Martin Scorsese’s Academy Award Winning Hollywood biopic includes scenes at the Sowden House, with scenes filmed here featuring Kate Beckinsale and Leonardo Di Caprio (as Ava Gardner and Howard Hughes). The property played the part of Ava Gardner’s (Kate Beckinsale) house in The Aviator.
L.A. Confidential (1997), the classic film noir directed by Curtis Hansen filmed two scenes at the Lloyd Wright-designed home, including a dramatic scene set in the kitchen of the house.
I Am the Night limited series starring Chris Pine and directed by Wonder Woman director Patty Jenkins, which tells the story of Fauna Hodel — an American author and motivational speaker who wrote the true-crime memoir One Day She’ll Darken: The Mysterious Beginnings of Fauna Hodel. Fauna was Dr. George Hodel’s granddaughter.
The 1998 adaptation of Aldous Huxley’s dystopian novel Brave New World starring Peter Gallagher and the late Leonard Nimoy was also filmed here – and the design of the house is very fitting for the futuristic totalitarian utopian society Huxley envisioned.
Other movies and TV series that filmed scenes here include Ruby Sparks (2012), America’s Next Top Model (Episode: The Top Thirteen Are Chosen, 2006), Nip/Tuck (Episode: Gala Gallardo, 2006), and Studio 60 on the Sunset Strip (Pilot episode, 2006).

More stories

Frank Lloyd Wright’s Taliesin house and its three (tragic) lives

Infamous JonBenét Ramsey house in Colorado is on the market for $7 million

13 Real-Life Houses Haunted by Their Dark Past

Source: fancypantshomes.com

Apache is functioning normally

August 17, 2023 by Brett Tams

If you could time travel back to October 20th, 2022, you’d find mortgage rates that are just a hair higher than today’s at most lenders, but the difference is now too small to care about. Not only that, but many scenarios at many lenders would be slightly worse today.

The unfortunate thing about a rate being higher than it was on October 20th, 2022 is that you’d have to go back more than two decades to see anything higher.

Placing our existing pain in a historical context doesn’t offer much incremental benefit. How about understanding WHY rates continue rising regardless of progress on inflation–the thing that was supposed to be the key motivation for the spike.

Motivations are ongoing/general and new/specific. Today’s didn’t actually add much to the bigger picture. Economic data wasn’t highly consequential, but it offered no objection to the notion that high rates have failed to cause significant economic pain outside rate-sensitive industries.

Even in the VERY rate-sensitive housing market, this morning’s data conveyed another in-trend result for residential construction, with housing starts and building permits coming in very close to forecasts just over an annual pace of 1.4 million units.

Why does that matter? Because, as the Fed reminded us via today’s release of the “minutes” from their last meeting, they want to see some ill effects of their rate hikes on the economy before they consider cutting rates. Bottom line: we’re no longer just waiting for inflation to fall back to target levels, but also for economic data to take a turn for the worse.

Source: mortgagenewsdaily.com

Apache is functioning normally

August 16, 2023 by Brett Tams

Bungalow, a new residential real estate platform, recently launched, announcing it has secured $64M in funding: a $14M Series A led by Khosla Ventures, Atomic VC, Founders Fund, Cherubic Ventures, and Wing Ventures, alongside a $50M debt facility.

Over the past several decades the price of rent has dramatically decoupled from income while student loan balances have reached record highs, putting new strains on early career professionals. Not only is housing this group’s largest expense, but the rental experience remains outdated. Though many early career professionals aren’t looking to live alone, finding roommates on traditional ad platforms is fraught with financial and personal risks. Plus, the existing housing stock is dominated by studios and one bedrooms built when most early career professionals lived with spouses.

“My co-founder and I felt the pain of renting in a new city. It was hard to find a great home and even harder to build a supportive community away from friends and family,” said Andrew Collins, co-founder and CEO of Bungalow. “We founded Bungalow to give early career professionals the ability to live in a beautiful and affordable home, in the neighborhood they want, and with a great community surrounding them.”

Bungalow utilizes existing housing supply by signing long-term leases with homeowners, and offers beautiful, multi-bedroom homes in some of the most desirable neighborhoods in cities throughout the U.S. Bungalow expertly matches potential roommates, provides furnished common areas, and takes care of utilities including WiFi and monthly cleaning services. The company also hosts monthly events for its residents, creating an instant community for those new to a city or who are looking to expand their social circle. This two-sided platform significantly reduces the friction of the rental process for both residents searching for a home and homeowners looking for a source of income without taking on the responsibilities of a landlord.

“One major challenge of today’s residential real estate market is the lack of desirable and accessible rental options for young people in urban areas, a problem that will become more pervasive in years to come,” said Keith Rabois, managing director at Khosla Ventures. “Bungalow is taking a full-stack approach that uniquely addresses the rapidly evolving needs of both renters and homeowners, while creating economic value by more effectively utilizing housing inventory.”

Bungalow has been quietly operating for the last year and a half after its founding in early 2017. Since beginning operations, the company has quickly scaled to hundreds of properties and over 750 residents across five urban areas including: the Bay Area, Los Angeles, New York, San Diego, and Seattle. Today, the company is announcing two new markets to its platform: Portland and Washington, D.C. Bungalow is currently on track to be in 12 major U.S. metro markets by the end of 2018 with plans for global expansion in 2019.

“Bungalow is taking on the $650 billion rental market for early career professionals and it may prove to be a bigger total market size than travel and taxis,” said Jack Abraham, founder and managing partner at Atomic. “By leveraging the existing housing stock and connecting demand with compelling long-term leases, Bungalow is poised to continue its growth to the rest of the country and around the globe.”

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].

Apache is functioning normally

August 16, 2023 by Brett Tams

When it comes to your money, safety first. Understand what bank accounts are FDIC-insured to ensure your deposits are protected.*

August 16, 2023

Bank failures aren’t common—but they can happen, typically when a bank is no longer able to cover its liabilities. If depositors get nervous about the viability of their bank, they might withdraw money en masse, known as a bank run. Bank runs can accelerate a bank’s failure, and ultimately the Federal Deposit Insurance Corporation (FDIC) will take control of the bank.

But depositors can rest easy if their bank is FDIC-insured. FDIC insurance is a program managed by an independent agency of the United States government designed to protect customers in the event of bank failure. The standard FDIC insurance amount is $250,000 per depositor, per insured bank, per account ownership category. That maximum amount of $250,000 applies for each bank you have a qualified account with, as long as the bank is an FDIC member. (Discover Bank is an FDIC member.)

So, what bank accounts are FDIC-insured? If you’re opening a bank account, it’s important to understand what FDIC insurance is and what it covers.

What is the history of FDIC insurance?

The Banking Act of 1933 was passed in response to the bank failures of the Great Depression. In addition to other reforms, the act created the Federal Deposit Insurance Corporation. In 1935, the government made the FDIC permanent and tightened its standards.

Banks must be able to prove that they meet certain eligibility requirements to qualify for FDIC insurance, which is funded by payments from covered banks. In the rare event of a bank failure, those funds are used to reimburse the insured accounts of customers at that bank, with certain limits and restrictions.

What are FDIC insurance limits?

Today, FDIC deposit insurance covers up to $250,000 per depositor, per insured bank, for each account ownership category. Coverage wasn’t always that high, however.

When the FDIC was established, accounts were only insured up to $2,500. Over the course of the century, the covered amount was gradually raised in an attempt to keep pace with inflation. According to the FDIC, the most recent coverage increase occurred in response to the 2008 financial crisis, when the covered amount went from $100,000 to the current $250,000.

How do account ownership categories affect FDIC insurance limits?

You can increase your FDIC coverage by opening multiple account ownership categories at the same bank. For example, if you open a business account and a personal checking account at the same bank, each would be covered up to the maximum per law.

A joint bank account, meanwhile, will also be insured separately from a single-ownership account and for each owner of the account. That means if you open an individual checking account and a joint checking with your partner, those two accounts would qualify for $750,000 of total insurance.

Note, however, that this applies to different ownership categories but not to all different types of accounts. That means an individual savings account and an individual checking account belonging to the same owner at the same bank will qualify for a total of $250,000 in FDIC insurance.

Are checking accounts FDIC-insured?

Checking accounts at FDIC-insured institutions are among the deposit products covered by FDIC deposit insurance, according to the FDIC. For your checking account to be eligible, there’s nothing you need to do. The funds you deposit into a checking account at an FDIC-insured bank are automatically protected up to the maximum per law.

Is an online savings account FDIC-insured?

All savings accounts offered by FDIC-insured institutions, including online savings accounts, are covered up to the maximum per law. For all FDIC-covered accounts, both the original deposit amount and the accrued interest within the limit will be protected.

When opening an online account, it’s especially important to double-check that the type of account you’re opening is FDIC-insured. For example, according to the FDIC, crypto savings accounts are not protected by FDIC insurance, even if offered by an institution that is otherwise FDIC-eligible.

Legitimate financial institutions should make clear which accounts are FDIC-insured on their websites. To be certain, always contact the financial institution directly.

Are high-yield savings accounts FDIC-insured?

High-yield savings accounts at FDIC-insured institutions are protected up to the maximum per law, according to the FDIC. If the interest on a savings account causes it to grow beyond $250,000, only the funds up to the limit will be guaranteed protection.

As with checking accounts, if you want to protect more than $250,000 in savings, you’ll need to open accounts under different ownership categories or have accounts at multiple banks.

Is a money market account FDIC-insured?

According to the FDIC, funds deposited into money market accounts offered by FDIC-insured institutions are protected up to the maximum per law, just like FDIC-insured savings accounts.

Money market mutual funds, however, are not protected by the FDIC. Why not? Money market accounts are a type of savings account, while money market mutual funds are a type of investment account. Investments are generally not eligible for FDIC protection.

Is a certificate of deposit (CD) FDIC-insured?

Certificates of deposit at insured institutions are covered by the FDIC up to the maximum per law.

A CD can offer better rates than a high-yield savings account, but CDs work a little differently than savings accounts. With a CD, your money is earning interest at a fixed, guaranteed rate, but if you withdraw the money before the end of its term, you may pay a penalty.

Are Individual Retirement Accounts (IRAs) FDIC-insured?

IRAs, or Individual Retirement Accounts, are also covered up to the maximum per law at FDIC-insured institutions.

For an account to be covered, it generally needs to be “self-directed,” meaning the account holder chooses how their contributions are applied. This could include 401(k)s offered through a job or IRA saving accounts that you choose to open on your own.

IRAs can also include CDs and money market accounts. Retirement CDs, money market accounts, and similar financial products are eligible for coverage.

While stock and bond investments are a common feature of many retirement plans, they are not eligible for FDIC coverage. That means it’s possible that only a portion of your 401(k) or IRA will be covered.

If you’re uncertain if a retirement account or asset is covered, check with the institution providing it.

Can you increase your coverage by adding beneficiaries?

It’s possible to increase your coverage by creating a revocable trust account with multiple beneficiaries.

Trusts are accounts that pay out to a designated beneficiary or beneficiaries after the account holder passes. FDIC coverage applies to each beneficiary for up to five beneficiaries. In other words, a trust account with one owner and five beneficiaries could be covered up to $1,250,000.

If the trust is jointly held between two owners, the FDIC will provide up to $250,000 in coverage per beneficiary per account holder. That means if you want to maximize your coverage to the absolute limit, it would be possible to create a jointly held trust with five beneficiaries insured up to $2,500,000 in total.

It’s important to note that this information is all according to FDIC rules taking effect on April 1, 2024. Under current rules, irrevocable trusts, which cannot be altered after they’re created, can only be insured up to $250,000 regardless of the number of beneficiaries. The new rules treat both types of trusts identically and add the five beneficiary cap for calculating coverage.

Because we’re talking about potentially millions of dollars, it’s all the more essential to consult a financial planning professional about your personal situation.

Will the FDIC insurance limits ever change?

While FDIC insurance limits have been set at $250,000 since 2008, it’s always possible that the insurance limit could be increased in 2023 or down the road, according to Bankrate.

Whether or not that happens in the near future will likely depend on how the current economic and political situation unfolds. If the past decades are any indication, Congress will probably need to raise the limit eventually to account for inflation and other factors. But it’s unclear when that might happen, and savers shouldn’t assume it will be any time soon.

You can contact the FDIC if you have any questions or use their coverage calculator to determine how much of your funds are insured.

What else can you do to protect your money?

Opening an account with an FDIC-insured institution is a wise decision. But bank failures are just one risk to manage. You might also worry about scammers and fraudsters who want access to your hard-earned cash. Learn how to protect your bank account from fraud in 6 steps.

Articles may contain information from third-parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third-party or information.

* The article and information provided herein are for informational purposes only and are not intended as a substitute for professional advice. Please consult your financial advisor with respect to information contained in this article and how it relates to you.

Source: discover.com

Apache is functioning normally

August 16, 2023 by Brett Tams

One of the venture capital firms represented in the Geek Estate Mastermind, HousingTech Ventures, has partnered with the San Francisco Bay Area corporate law firm, Montgomery Pacific LLP and employment law firm, Daijogo & Pedersen, LLP to provide a brief presentation on critical issues that startups should be considering as the country and the economy face many unknowns due to COVID-19. Topics covered will include:

How should your Board exercise its fiduciary duties, including its duty of oversight, in the current environment?
In the face of this unprecedented disruption, are contractual obligations modified in any way?
How should you care for employees and stay in compliance with employment laws?
What additional risks does remote working pose?

Webinar will take place on April 9th, at 2 PM EST // 11 AM PST.

Montgomery Pacific’s founding partners Kathy Woeber Gardner and Karen Masterson Dienst and Daijogo & Pedersen’s founding partner Maki Daijogo will apply their decades of experience of working with startups to frame issues and questions that the COVID-19 situation presents to early-stage companies.

Please reply here to register and you will be sent a link.

Request an Invite

Source: geekestateblog.com

Apache is functioning normally

August 16, 2023 by Brett Tams

The Federal Housing Finance Agency’s move toward advanced credit scores represents a big change for two mortgage-related government-sponsored enterprises and home finance. While many in the mortgage industry fear that the planned timeline for implementation isn’t sufficient, those who have worked with those measures in other industries share the FHFA’s more optimistic view.

“They’re going to have two years to do this, it’s not like they were given a week,” said John Ulzheimer, a professional witness who previously worked in the credit reporting and scoring industry. “It’s a matter of prioritizing programming and risk management resources.”

That said, it’s a bigger deal for the mortgage industry than others to shift to FICO 10T and VantageScore 4.0, those outside of it acknowledge.

“It’s a pretty considerable change,” Ulzheimer said. “The entire industry is going to catch up on basically two decades of technology when they flip the switch.”

The move to advanced scores is more complex for the FHFA because it is less a lender-by-lender decision but involves a large player that serves as a central hub for many stakeholders, said Joanne Gaskin, vice president of scores and data analytics at FICO.

“There’s a difference in how the mortgage industry is interconnected, versus the credit card lenders, where there’s one party that has to make the decision,” she said. “With mortgage lending, you’ve got the originator, GSEs, investors, and maybe there’s a broker, rating agency or private mortgage insurer. It’s just much more complex.”

But this isn’t the first time the mortgage industry has had to deal with a change in the broader credit reporting system and some of that past experience is somewhat heartening because it boosted leads for home loans.

Consumer Financial Protection Bureau found increases in first-lien mortgage inquiries during the first quarter after medical collections records were removed from the credit reports from the three main bureaus. Inquiries also went up during the last quarter in which a medical collection tradeline gets reported.

With the change estimated to remove one medical collections tradeline from 22.8 million people and remove all such records for 15.6 million, it appears it likely has or is creating a group of more mortgage-ready customers in cases where that’s enough to raise their scores sufficiently.

That suggests VantageScore’s claims that it could bring in at least 10 million mortgage customers in line with FHFA use of the model and FICO’s estimate for a 5% increase also could materialize, depending on the execution.

Granted the medical collections change was much different than the larger transition underway at the FHFA, the former being a largely a matter for the credit bureaus rather than the mortgage industry, for one. And mortgage professionals interviewed for this series had mixed opinions about whether it made a difference as far as borrower interest.

But it does show how moving some ad-hoc practices used in mortgage underwriting into credit reporting and scoring can be a natural progression.

While the medical reporting removal does have its skeptics who think its longtime inclusion in reporting and scoring may mean it has been predictive of credit concerns, mortgage lenders say they had some comfort with it because there have been some exceptions for it in underwriting.

“The Federal Housing Administration in particular and conforming markets as well have stated some conditions where medical collections don’t apply in their credit risk factoring,” said Dustin Martin, a mortgage underwriting training manager at Embrace Home Loans.

Fannie Mae, the larger of the two major government-sponsored enterprises buying U.S. mortgages and one the FHFA’s charges, has used the kind of trended data and rental payment information and on a one-off basis in underwriting.

That could give the industry some comfort in the FHFA transition. Those two types of data primarily distinguish the advanced credit scores the FHFA will be adopting and other consumer finance industries like credit cards have been using them to good effect, Gaskin said.

“We know that rental data, assuming the consumer is paying as agreed, can be a real positive,” Gaskin said, noting that the same is true for trended data, which involves tracking the payment histories in credit accounts over time rather than based on snapshots of activity.

Updating the scores is much more powerful than just using certain new data elements within them separately in underwriting, said Rikard Bandebo, chief product officer at VantageScore.

“The first thing [lenders] check is a person’s credit score, then they go through the underwriting process. So if all these people that have rental data, but it wasn’t included in the credit score yet, they can’t get past whatever the threshold is. Let’s say it’s a 620 and they had a 605. They can’t get past the point, right? That’s why so many millions of consumers are being excluded today from this system,” he said.

There are generally certain trends seen when credit measures get updated in consumer finance, according to Ulzheimer. While mortgages usually have a higher payment priority than other loan types that could cause them to differ, they’re likely to follow the same pattern.

“Normally, the way it works, when you compare score distributions from newer versions relative to older versions is there’s this flattening of the curve, where you have more people scoring in the tails and fewer people scoring in the meaty part,” said Ulzheimer.

Source: nationalmortgagenews.com

Apache is functioning normally

August 16, 2023 by Brett Tams

Alexander Chudik and Anil Kumar

August 15, 2023

The housing and real estate sectors attract outsized attention during a period of quickly escalating interest rates such as the Fed’s ongoing tightening cycle that began in March 2022.

Housing and real estate, because of their rate sensitivity, are among the first influenced by interest rate changes because the sectors are a primary transmission channel for monetary policy throughout the economy. Moreover, home equity is a significant share of Americans’ wealth and an important source of collateral.

Further, declining house prices can lead to decreased consumption as individuals’ net worth falls and their ability to borrow becomes constrained. Related sectors, such as construction, also likely experience downturns, which in turn can broadly affect employment. Thus, the role of individual housing markets and their sensitivity to mortgage rate changes play an important part in understanding the impact of higher rates.

Mortgage rates influence house-price movement

Mortgage rate changes can help predict house-price movements, based on quarterly data covering 384 U.S. metropolitan areas from first quarter 1975 to second quarter 2023. For every 1-percentage-point (100-basis-point) increase in 30-year fixed-rate mortgage rates, a -1.6 percent adjustment in house prices on average is expected in the following year (Chart 1).

This response seems remarkably persistent, becoming a 2.5 percent decline in two years and a 3.1 percent drop in three years. Over a 10-year period, the cumulative effect is considerable, amounting to about a 4.4 percent fall in house prices.

These estimates, based on historical data over the past five decades, are subject to a great deal of uncertainty. Besides the usual statistical sampling uncertainty, the estimates depend on the house-price model chosen as well as the nature of the shock causing the mortgage rate increase.

Evolving house-price sensitivities emerge in recent period

One notable concern is that historical relationships could have changed over such a long time. Splitting the estimation sample in two halves reveals that the expected response of house prices has likely increased in magnitude in the more recent period (Chart 2).

House-price sensitivity to mortgage rates has likely risen because of multiple factors. First, the 2000s housing bubble, along with a sharp decline in mortgage rates, produced a period of elevated house-price sensitivity. Secondly, a long-term increase in the investor share of home purchases may have further contributed to the increased sensitivity of housing demand to changes in mortgage rates.

Lastly, previous research shows that housing supply elasticity has decreased over time due to tighter state and local land-use requirements. When the housing supply is limited, fluctuating demand because of mortgage rate changes leads to larger swings in house prices.

These findings align closely with those from prior research, which has revealed a considerable range in the estimated responses of house prices to changes in mortgage rates.

Some recent research suggests that the amount potential homeowners are willing to pay for a house decreases by 5 percent if mortgage rates rise from 4.5 percent to 6.5 percent. However, other studies indicate a range of effects, with some finding a 1-percentage-point increase in mortgage rates can lead to house-price reductions of between 1 percent and 9 percent, and others suggesting impacts as large as 20 percent.

Regional factors contribute to varying interest rate sensitivities

Importantly, regions within the U.S. differ widely in their sensitivities to interest rates. This differential sensitivity can arise from a multitude of factors. For example, states with a larger manufacturing sector may be more sensitive given manufacturing’s particular vulnerability to interest rate changes.

Additionally, the distribution of firm sizes and bank sizes can also influence sensitivity, as credit availability typically more intensely affects smaller firms and exerts a relatively larger impact on small banks.

The regional distribution of housing market sensitivity to mortgage rate changes, which often track general interest rate changes, is another crucial consideration. These regional disparities of interest rate sensitivity influence the aggregated effect of monetary policy. While discussions often focus on the overall impact of monetary policy, various regions’ reaction to monetary policy changes will shape the aggregated outcome. Thus, regional differences can have macroeconomic implications.

Data suggest significant variations in how regional house prices react to mortgage rate changes, demonstrating a notable heterogeneity (Chart 3).

To be sure, the variability in mortgage rate sensitivity might also partially reflect disparities in regional economic conditions, such as job growth, GDP growth, inflation and unemployment, which simultaneously evolve with changing mortgage rates. Differences in regional housing supply elasticity also play a role in the disparities.

It’s worth noting that these estimates do not account for other factors affecting house prices when mortgage rates fluctuate. Mortgage rates, while a significant determinant of housing demand, are just one component of the overall cost of homeownership. Other factors such as down payment requirements, the discount rate, property taxes, maintenance and insurance costs, expected house-price appreciation and mobility also shape the user cost of housing and, hence, house-price growth.

Still other considerations, such as changing mortgage credit standards, might also be at play. After controlling for some of these, previous research has found that mortgage rates may have a relatively restrained effect on house prices.

Monetary policy transmission affected

Differences in how regional house prices respond to mortgage rate changes have implications for the impact of monetary policy across regions. When monetary policy tightens and mortgage rates increase, differing regional house-price declines will result in unequal changes in home equity.

The disparities in home equity changes directly affect the refinancing transmission channel of monetary policy. Regions more sensitive to mortgage rate changes will experience larger declines in house prices and home equity, reducing their borrowing capacity in the face of an economic slowdown.

On the other hand, less-sensitive regions will experience smaller impacts. This differential sensitivity thus contributes to an uneven distribution of economic slowdown, and regions with greater mortgage rate sensitivity are likely to suffer more adverse effects.

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About the authors

Alexander Chudik is an economic policy advisor and senior economist in the Research Department at the Federal Reserve Bank of Dallas.

Anil Kumar is an economic policy advisor and senior economist in the Research Department at the Federal Reserve Bank of Dallas.

The views expressed are those of the author and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System.

Source: dallasfed.org

Apache is functioning normally

August 16, 2023 by Brett Tams

A beautifully appointed home that bears the signature of popular house flipper, Jeff Lewis, is officially on the market.

Lewis, whose popular BRAVO show, Flipping Out, ran for 11 seasons and was watched by millions of households around the world, has been designing, remodeling, and building homes for more than two decades.

Known for creating stylish interiors that feature a warm, neutral palette and his signature approachable style, Jeff Lewis has been running his own design firm since 2009.

One of Lewis’ most recent projects is on the market for $4,495,000, listed with Steve Marin and Or Brodsky at Compass.