By Matt Joy, Princeton Mortgage Wholesale
In 2016, refinances made up 50% of mortgage transactions. In 2017 they made up 35% and with rates on the rise in 2018 we’re going to see refi’s make up about 25% of the market… what am I telling you this for? These are things we already knew, right? Margins are down too… tell us something we didn’t know Matt. Well…despite low refi originations and compressed margins, nonbank lenders and mortgage brokerages employed 339,800 employees in February. This was an increase of 2,500 jobs from January… so why the heck are we hiring if refi’s aren’t hanging off the trees? My guess is that we’re preparing for the spring buying season as purchase applications are up 5% from last year, but it’s still unclear how the spring and summer season will shape up. We added construction jobs, but lumber costs are going up. We expect home sales to increase, but there is still shortage… who knows what’s going to happen? All we do know is that some companies are still poised to grow even in this competitive market space. Check out this article that goes into more detail about this topic… here
Okay… so other than rates going up what’s preventing the millennial generation from owning a home? Three words… Student Loan Debt. We’ve talked about this in the past, but as we try to analyze why the purchase market hasn’t taken off we have to look at the next big debt crisis facing the US… student loans. Here are some of the facts:
40 percent of borrowers are expected to default on their student loan debt by the year 2023
The average monthly payment on a student loan is $351 a month…in some instances that is the lion share of new employee’s monthly income
Student loan debt is not collateralized… which means banks hold it against you until it’s paid off (completely).
It’s hard to enter the workforce, pay off your student loan debt… save for a home and oh… you gotta eat too, right? In some place you need a car which means you’ll need insurance… plus you have to pay rent if you don’t want to live with your parent… err I mean roommates. Somethings got to give with this student loan debt. Why would I pay for a $100,000 education to only make $60K a year? You don’t need to pass your Series 7 to know that’s a horrible investment. I think it’s time to take a hard look at the cost to go to college and begin asking the question as to whether it’s even worth it? Honestly, it’s cheaper to learn a trade and join a union… I mean with what’s going on in D.C. and the trade war… we’re going to be utilizing a lot more goods that are made right here in the good ol’ Red, White & Blue. Why not be a part of that?
Talk to you soon!
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.
Picture is courtsey of Gabriel Santiago from Unsplash