CU Data

Ups and Downs

Sometimes we’re escalating, sometimes we’re excavating.

January 12, 2014
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I recently shopped with my nephews and sister-in-law in a large department store that boasted several escalators.

My nephew is a fan of all things mechanical, and the escalators (or “excavators” as he called them) were a big attraction. He asked if I would ride them with him, and away we went.

The initial thrill was deciding when to make the step onto the moving staircase. He watched as the steps opened out and descended. Finally, we counted together—“one, two, three, go!” and he took a giant step out, clutching my hand.

As we jumped away from the stairs at the bottom, he looked up with a big grin and asked if we could ride it again. So, we rode up the adjacent escalator, and down the next one—several times that busy afternoon. I balanced shopping bags and a coffee cup as he tightly held on. I hoped I would not drop items in the wake of our revelry.

The experience on the escalator brings to mind the various ups and downs in our economy. We are all on a bit of a wild ride—sometimes we are escalating, sometimes we are excavating!

Take a giant step into this week’s data on housing trends to determine if we are ascending or descending in the realm of real estate.

‘Well, real estate is always good, as far as I’m concerned.’–Donald Trump

“The real estate recovery will gain momentum in 2014,” says “Emerging Trends in Real Estate 2014” by the Urban Land Institute. This report “provides an outlook on real estate investment and development trends, real estate finance and capital markets, property sectors, metropolitan areas, and other real estate issues.”

Here you will further learn, “All of a sudden, the banks are comfortable with real estate, which scared the daylights out of them from 2007 to 2009,” and “financial organizations that are not traditional banks are starting to make loans again in a significant way.”

Further insight: banks may increase competitiveness with tightening of loan spreads and will gain comfort in underwriting risk. Indeed, 43% of survey respondents expect that debt underwriting standards will be “less rigorous,” and “banks may also undercut each other to refinance floating-rate loans to fixed rates.”

Interestingly, however, “Investors Take a Step Back in More Markets,” reports the National Association of Realtors.

“Rising home prices and limited inventories are prompting some investors to recede in housing markets where they once made up a big share of home buyers.”

Foreclosures are on the decline, and housing prices are on the rise, thus challenging investors seeking bargains in multiple property acquisitions.

Cautious Consumers Stalling Housing Momentum,” say Fannie Mae findings in their November National Housing Survey. “Among those surveyed, nearly two-thirds believe the economy is on the wrong track while the share expecting their personal finances to worsen during the next year has increased during the past few months to 22%.”

Additional survey findings:

Since 2013, “Home values have skyrocketed in many markets, mortgage rates have risen from their bottom, and most recently, negative equity fell at the fastest pace ever,” says Zillow in a look at real estate predictions and 2014 housing market trends.

Zillow expects this upswing to continue, and identifies “four bold housing predictions for 2014:”

Boston College wonders how long homes will be affordable. “There was a silver lining in the recent housing market collapse: prices dropped to more affordable levels.”

Home affordability varies by geography, and purchasing a home is more difficult for residents of Seattle and Dallas than in the early 2000s, for example, but easier to acquire in Chicago or Orlando.

‘Home wasn’t built in a day.’–Jane Sherwood Ace

Two last bits of research on housing and financial health for consumers…

“The foreclosure rate in the United States began to rise rapidly beginning around the middle of 2006 and has remained elevated ever since,” notes “Preserving Homeownership: Foreclosure Prevention Initiatives.” 

This report by the Congressional Research Service indicates there is no consensus with regard to government’s role in foreclosure prevention, nor what it might be.

Prevention initiatives bring challenges in implementation, considerations of likelihood that previous defaulters will have repeat issues, and the setting of precedent in mortgage lending practices.

Read this report to learn about foreclosure trends, loan workouts, current foreclosure prevention initiatives and proposals, and other government influences.

Lastly, read about “Gentrification and Financial Health,” as discussed by the Federal Reserve Bank of Cleveland.

Gentrification, a form of neighborhood change, is affiliated with increased incomes, rising home prices--and occasionally “with changes in the occupational mix and educational level of neighborhood residents.”

Although sometimes perceived a bad thing, gentrification “is actually beneficial to the financial health of the original residents… It is better to be a resident of a low-price neighborhood that is gentrifying than one that is not.”

This article examines gentrification with regard to home values in neighborhoods and considers connections of this wealth status with credit score changes and debt delinquency. It summarizes that “positive change is present for mortgage holders, for nonmortgage holders, for those that stay in the neighborhood,” and those who depart.

My nephew and I probably enjoyed the ups and downs of our escalator tour much more than consumers relish the turbulence of rebounds and step backs in housing economic conditions. But you are there to help your members balance their needs and wants as they consider taking the big step onto the housing escalator, and ensure the ride up is a smooth one.

“One, two, three—go!”






Lora Bray is a research librarian at CUNA.

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