Today is Lei Day in Hawai'i.  I guess Zillow doesn't consider Honolulu a "Metro Area". Recently Zillow Research analyzed property taxes in the "largest metro areas" across the U.S., not including places like Honolulu (population 375k) but including places with fewer people like St. Louis or Pittsburgh. (I am sure their analysts have a reason.) To compare property taxes among a variety of areas, Zillow calculated the median property tax for single-family homes by county in 2013 and then created an inferred tax rate, dividing the median tax paid by the median home value in the country to compare tax burdens nationwide. The cities with the most expensive property taxes include areas in New York City where taxes are more than 2 percent of a home's value.

Did someone say, "Rent is going to drive the Millennials to buy!"?  Maybe. In spite of earthquakes, no water, and locked in by water on three sides, the average San Francisco rent hit a shocking new high: $3,458.

According to an interview with The Collingwood Group's chairman, Tim Rood, homeownership is one of the last legitimate wealth creation opportunities and is worth the investment for Millennials. The rate of home appreciation has been on the rise and most homeowners are expected to gain equity within a year of purchasing their home and then at least five to ten percent appreciation after that. Due to the favorable living conditions of urban areas, many Millennials are drawn towards city life but the higher rental price tag leads to the inability to save enough for a down payment.   This has triggered government entities to promote programs that remove the economic barriers to homeownership with lower down payment options. Tim Rood explained that when there is an excess of inventory there is less urgency to buy, making renting a more sensible approach. If inventory is low, which is what we are currently experiencing, it's smart to buy a home now and take advantage of low interest rates. It's projected that buying now will lead to a four to five percent appreciation for the next three to four years. To read more about Tim Rood's interview, click here.

Rental vacancy rate reached its lowest point in over 20 years, just 7 percent, in the fourth quarter of 2014, according to the census. Meanwhile, homeownership dropped to 64 percent, the lowest since 1990.

Recently the U.S. Census Bureau released its 4^th quarter Housing Vacancies and Homeownership for 2014. The Housing Vacancies and Homeownership stats provide current information on the rental and homeowner vacancy rates, and characteristics of units available for occupancy. The data showed a dramatic increase in household formation, which has been virtually stagnant since 2008. Hovering around 0.5% for several years, the household formation rate jumped to >1.5% for 2014 with much of the increase happening in just the last three months of the year and driven completely by an outsized jump in occupied rental properties. Such a correction would bring the household formation rate back in line with pre-crisis averages and if it proves to be real and sustainable, may indicate the start of a new recovery paradigm for housing sector.

But rents around the nation are really working in lender's favors - kind of. Eventually it drives renters to become owners. As rent prices increase, the decline in rental affordability is further burdening households, preventing some from engaging in the home buying process. Zillow conducted a survey asking renters nationwide how burdensome their rent is, how much of their income they're willing to pay for rent and why they rent. More than one quarter (26 percent) of renters said their monthly rent is either not affordable and struggle to pay rent every month or only borderline affordable, sometimes difficult to pay. For households with an annual income of less than $35,000, more than one-third said their rent is not affordable or borderline affordable and 70 percent of households who said income and affordability is their main reason for renting, said their rent is not affordable or only borderline affordable. On average most Americans would be willing to pay almost 40% of their income on rent.  More than half (54 percent) of those surveyed said they rented due to a lack of income for homeownership affordability. For renters between 35 and 54 years old, 60 percent said income and affordability is their main reason for renting, compared to 50 percent of those aged between 25 and 34 years old. Among those surveyed, 19 percent of those living in the West and 16 percent living in the South said they rented because they could not qualify for a mortgage. To read more about Zillow's findings, click here.

The Mortgage Bankers Association's March 6^th chart of the week categorizes the number of renter households by income and their level of housing cost burden. According to Harvard University's Joint Center for Housing Studies and the American Community Survey, in 2011 there were more than 10 million households earning less than $15,000 per year. About 83 percent of these households paid 30 percent or more of their income on housing. For those earning less than $15,000 per year in 2011, more than 70 percent experienced severe rental cost burden (spending 50 percent or more of their income on housing).  Another 9.6 million households earned anywhere from $15,000 to $30,000 per year, and of this, 75 percent spent 30 percent or more of their income on housing, with about 30 percent of this income bracket experiencing severe rental cost burden in 2011. With the increase in rent prices and stagnant income growth, more households are facing moderate or severe rental burdens. In a ten year timespan, between 2001 and 2011, there was an increase of 4.2 million renter households in the U.S. earning less than $30,000 per year. Click here to read more about the MBA's article.

A while back the group also posted its Single-Family Rental Survey for December. The December Renter Demand Index decreased 1.1 points YoY to 64.3 and tenant turnover was down 200 BPS YoY to 22%. Leasable occupancy was at 95.4% and vacant rental supply remained at 47.7 in December. Blended rent inflation grew 50 BPS to 3.2% in December; new move-in growth increased 40 BPS from a year earlier to 3.9% and renewal growth stayed at 2.8%. Investor demand index dropped to 50.2, the lowest mark since March of 2012. Pricing power increased to 61.2 in December, with markets in Texas, Florida and California demonstrating the strongest pricing power. The home price appreciation outlook remains at 4% in December, a slight decline from 5% last year.

But that was December - what about more recently? Zelman and Associates published their Single-Family Rental Survey, indicating that in February, the blended rent growth improved for the ninth consecutive month to 3.4%, up 60 basis points YoY. This was largely due to new move-in growth of 4%, up 30 basis points YoY and renewal growth of 3% up 70 basis points from last February to the highest level since May 2013. Revenue growth reached 4.1% in February and survey respondents expressed confidence and expected new move-in rent growth of 4.2% over the next year. Reluctant landlords are also more interested in selling their homes, which would further reduce rental supply but would increase for-sale inventory. Renter demand has remained the same at 67.6 out of a scale of 100 and the most robust demand is seen in Arizona, California and Texas. Vacant rental supply is below average at 43.7 in February, down from a year earlier and availability of investor financing increased to 68.9 from 67.4 a month earlier. To read more about the survey please email Ivy Zelman at ivy@zelmanassociates. com.

The markets? There isn't too much report. Yes, rates have trickled higher, but probably because they weren't going to go any lower, nor were bond prices going to remain at the same levels forever. Even though a June increase in short term rates has pretty much been ruled out, there is still a large number of people who believe that the economy is not doing well enough for the Fed to raise them at all. We'll see.

Jobs (and housing) are critical, and we learned that Initial Jobless Claims declined to 262,000 for the week ending April 25 - the lowest Initial Claims number since April 2000. The four-week moving average is holding at 15-year lows. Layoff activities have clearly improved. We also had a small sign of inflation: the Employment Cost Index increased 0.7% in Q1 2015 after increasing a downwardly revised 0.5% (from 0.6%) in Q4 2014. And the Chicago PMI increased to 52.3 in April from 46.3 in March.

For today there are no early news items, but later we will have April's ISM Index, March's Construction Spending, and the University of Michigan Consumer Sentiment numbers - none of which usually move rates. For gauges we closed the 10-yr Thursday at 2.05% and this morning we're at 2.06% with agency MBS prices are worse about .125.

Jobs and Announcements

Things are always changing in our industry, but there are some things that don't. Sonya Brewer of The Mortgage Recruiter writes, "My advice for talented employees searching for something new would be to look at the makeup of the prospective company and its leadership. Does it seem they are investing more resources into one channel or another? Ask questions! We have seen recently that Top candidates seem to be overly confident, and Companies seem to think that they are 'THE company to work for'.  While, the reality is, both are oblivious as to what is happening around them. We are fortunate to have relationships around the country who respect us, appreciate our ability to recognize talent: 'Total Package' talent as we call it. A candidate that is an asset to our client consists not only of their production, but their work ethic and history. It is NOT about job hoping for the next best thing; it is about asking someone to join your family Brand. The talent pool is dating the companies now, and the marketplace is no longer a pick-up bar where the next candidate will be found readily for a nice steak dinner and drinks. (The Mortgage Recruiter is trying to fill slots for DE/VA LAPP Underwriters, Wholesale Account Executives regardless of geographical markets, and a Director of Secondary in the Chicago market - contact Sonya Brewer.)

And AnnieMac is continuing its growth. "AnnieMac Home Mortgage partners with the fastest growing real estate productivity platform in the country! More referral partners leads to more business and AnnieMac's goal is to increase market share organically by providing new Realtor® relationships to their originators. AnnieMac's exclusive partnership with the nation's leading Realtor® Productivity Firm is why real estate brokers love AnnieMac. AnnieMac Home Mortgage is a FNMA, FHLMC, GNMA direct lender AND self-servicer headquartered in Mount Laurel, NJ. We are expanding nationally, opening new markets with a powerful launch sequence that includes the pairing of new Realtor® offices with your branch. If you are looking to grow your businesses then contact us to learn more." Contact Paul Zinn, National Director of Business Development at 856-252-1531."

Hamilton Group Funding continues its rapid growth and expansion by announcing the following appointments. Tammy Scott has been promoted to Vice President, Chief Compliance Officer and  Rob Cosentino and Myriam Nunez have each been named to the new position of Vice President, National Production Executive. These three executives report to Mark Korell, President and CEO.  Hamilton Group Funding is also pleased to announce the hiring of Kevin Butler as Vice President, Regional Sales Manager. Butler is an accomplished mortgage sales leader with a proven 30 year track record and will be based in Baltimore, Maryland.