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Millennials struggle to buy homes, despite preference to own

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NEW YORK (6/3/14)--Despite an overwhelming preference to buy, only 36% of those in the U.S. under the age of 35 are homeowners, the lowest number since 1982, according to recent data from the Census Bureau ( CNNMoney.com June 2).

A recent survey by Fannie Mae found that nearly 90% of millennials, or those born between the early 1980s and early 2000s, would rather buy a home than rent.

But because of high levels of student loans, tight lending standards, recent upticks in home prices and a leaner housing inventory, millennials largely haven't been able to scrub clean their credit or save enough for a down payment to make a purchase.

"When we surveyed millennials, they cited several barriers to homeownership, especially access to financing," Steve Deggendorf, Fannie Mae senior director, told CNNMoney.com .

While the ability to buy a home appears to be lagging, the interest in doing so remains strong, according to the Fannie Mae survey.

Nearly 60% of "younger renters" said they would rather own a home than rent. And more than 85% of "younger owners" said they'd prefer to continue to own a home.

Perhaps contributing to the dearth of young homeowners is that many potential homebuyers are wary of securing a mortgage.

In a survey released Monday by the National Foundation for Credit Counseling, 1 in 5 respondents said they don't believe taking out a mortgage is worth the risk.

Another factor perhaps keeping young people out of the housing market is their lack of confidence in being approved for a mortgage.

The Fannie Mae survey found that younger renters continue to be pessimistic about their chances of securing a mortgage, likely stemming from the fact that many are still paying off student loans.

That pessimism only climbed as income levels among those surveyed fell.

Further, the majority of younger renters reported not having enough cash or assets to cover even a 5% down payment plus closing costs on a starter home.

In the face of these obstacles, though, the majority of younger renters said that purchasing a home is still in their plans, with roughly half reporting that they plan to buy the next time they move.

Drivers hit the gas for higher loan terms, payments: Experian

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COSTA MESA, Calif. (6/3/14)--While the housing market has remained sluggish in recent months, auto loans have boomed, as buyers borrowed at a record pace in the first quarter, according to a report by Experian Automotive ( CNBC.com June 2).

The average monthly payment on a car loan jumped to $474 during the quarter, an all-time high, while the percentage of long-term loans with payment terms between six and seven years is also the highest it's ever been.

Nearly a quarter of all auto loans now fall into the long-term category.

"I'm not surprised consumers are borrowing more or taking out longer auto loans," said Melinda Zabritski of Experian Automotive ( CNBC.com ). "With relatively low interest rates, buyers are more comfortable taking out longer loans so they can keep their monthly payment as low as possible."

Also to post record highs for the quarter: the total amount of auto loans in the United States ($100.7 billion); the average length of loan term (5 1/2 years); and the average auto loan amount, which climbed $964 to $27,612.

"Consumers are really relying on financing as the price of new vehicles continues to move higher," Zabritski said.

Consumers may be more willing to take out longer-term loans because they're confident they'll hold on to the vehicle longer than they have in the past. The average length of ownership, according to IHS Automotive, has risen to six years and one month, which is nearly two years longer than levels seen a decade ago.

Meanwhile, increases in automobile prices have driven consumers to pursue leases where monthly payments tend to be lower over several years as well ( CNBC.com).

For example, the average monthly payment for those buying a Honda Civic in the first quarter was $347, according to Experian's numbers. The average monthly lease payment for a Civic was $251, nearly a $100 drop-off. 

News of the Competition (06/03/2014)

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  • SAN FRANCISCO (6/3/14)-- Jim Smith, executive vice president and head of the digital channels group at Wells Fargo, has created a Big Data Lab at the bank . It will be used for the study of emerging technology and data science and of ways to drive customer experience, prevent fraud and develop customer insights ( American Banker June 2). Smith said that although he has been at Wells Fargo as part of its Internet banking group for 20 years, he believes there is a lot more that can be done with mobile banking and with all the information companies now have on their customers.  In 2013, Wells Fargo had a number of digital accomplishments. Among them, a redesign of its website, the launch of a service that allows check deposit via smartphones, and the addition of a person-to-person nationwide payments system for mobile devices, which uses and email address or mobile phone number. The areas that Wells' team thinks will be hottest over the next five years all relate to mobile technology, according to Smith ...
  • WASHINGTON (6/3/14)-- The Federal Deposit Insurance Corp.'s Quarterly Banking Profile for the first quarter of this year, released last week, included something new--a section focused exclusively on the 6,234 smaller banks that control just 14% of industry assets . Agency officials said the small-bank section will be a permanent feature going forward. The quarterly report will still contain the comprehensive data on all 6,730 banks, but Diane Ellis, who directs the FDIC's insurance and research division, said that when the data is presented only as a whole, the numbers for smaller institutions sometimes get obscured by changes and trends at the biggest banks ( American Banker June 2). For instance, community banks were hurt like everyone else by lower mortgage revenues caused in part by a refinancing slowdown, but because their business is more "relationship-based" than is that of larger brethren, small institutions showed higher loan-balance growth, net interest-income gains and lending margins. Community banks' total loan growth was nearly double that of the industry as a whole, when compared with 12 months earlier ...