Leonard H. Craver

Leonard H. Craver
Leonard H. "Tony" Craver

Saturday, March 5, 2016


Did you wonder why mortgage rates fell again slightly right after the
Fed raised the discount rate? Weren’t they suppose to rise? There are
several factors here for you to remember. The Fed rate is what the Fed
charges banks to borrow money. When the rate rises it directly effects
the amount of interest you pay on credit cards and non-mortgage related
bank loans. Mortgage rates are far more independent of the Fed rate
even though historically they follow the same trend. The big factor currently,
according to economists, is the lack of inventory in the real estate
market. There is a lot of competition for good properties making certain
markets look robust when the overall real estate market is mediocre at
best. For the time being these factors are holding down mortgage rates.


I am fortunate enough to be writing this newsletter from my hotel
room in San Antonio, Texas where my wife is attending several days of
meetings. We came down a few days early so we could see the city and
what it has to offer. This is the only major city in the continental US that I
had never visited. After all, it is not “on the beaten path”. I am still not
convinced I would want to be here in the summer, but when you can dine
outside next to flowing water in a short sleeve shirt in February, there is
something special going on here.
Did you know that San Antonio is now the seventh largest city in the
US? It also is the oldest continuous municipality in the country. Sorry Saint
Augustine. San Antonio was a city long before it became a part of the US.
What this town has done with its Riverwalk is amazing and you must take
the full river tour to appreciate it. A lot of cities have a nice specialty feature
but none are as extensive as the Riverwalk. The San Antonio river is
not a large river, barely wider than two passing water taxis’. They have
made 10 plus miles of it a park running through the city with beautifully
landscaped paths on both sides. In the center city area there are several
miles of the Riverwalk lined with restaurants with indoor and outdoor
seating. If you have not been here in a few years you will not believe how
much it has changed. What makes it so cool is that the river is over ten
feet below the city street level. This means you are in another world when
you stroll or dine along Riverwalk. This other world is a combination of
fine European architecture and cuisine and Disney World.
Our Texas daughter and her family joined us for two days. When we
told the grandchildren we were going to tour The Alamo, one of them said
“what’s that?”. That is like saying, “who was John Wayne?”. The Alamo
was a great tour and I certainly learned a lot of history. If you have read
these newsletters for a long time you know I occasionally like to tell you
about interesting places to visit. I especially like memorable meals and
special tables. Last night we ate at Las Canarias on the Riverwalk and it
was truly an all time top five dining experience complete with a top five
table. I can only hope that you get a chance to visit San Antonio some
day, but if you don’t, “Remember the Alamo”.


Every four years is a special year. We have elections and Olympics.
The Olympics are far more fun to watch. The only fly in the ointment
this year is actually a mosquito invading Rio with the Zika virus. I think I
will watch the Olympics on TV. The elections will be far more important
and will perhaps, more than ever, determine the direction this country
takes going forward. I am at least smart enough not to offer any direct
political opinions in this newsletter, but we will explore some of the issues
that effect your desire to own real estate.
I am going to discuss what is going on with the economy by dividing
the discussion into national issues and local issues. Nationally our biggest
economic problem is the looming national debt. 8 years ago our
debt was 40 % of GDP (total goods and services we produce). Today the
debt is 75% of GDP. There have always been economists who have
equated equal GDP and debt as the mystical economic cliff, but they
really never thought we would get there. In the last quarter of 2015 our
GDP grew at a pathetic 0.7% when 3% is our goal. The US has the only
economy on the planet on the plus side, however, even if barely.
Did you know that only 37% of adults have enough savings to pay a
$500 car repair bill? Nationally we need millennials to get involved with
the economy and the housing market, but they are struggling. Rents
across the nation are averaging $1,180 a month, an all time record. Purchasing
a house is even tougher for these newcomers to the workplace.
In two of the best markets for millennials, Charlotte has an average
house cost of $180K which requires a salary of $49K a year and Raleigh’s
average house is $230K, which requires a salary of $63K per year.
In the Triangle we have been blessed with an above average economy.
Rapid population growth has overcome many negative effects of a
slow national economy. United Van Lines says North Carolina is the 5th
leading place where folks move. There is an endless lists of “best of’s”
where various Triangle towns appear. One of my recent favorites was
Forbes Magazine naming Durham as the #1 city in the US for working
women. The average income for a working adult in North Carolina is
$44,969. A survey of each of the 100 counties in the state shows that
Durham, Orange, Wake and Mecklenburg (Charlotte) counties’ average
income is more than 10% above the state average. Forsyth County
(Winston-Salem) was the only other county above the state average.
The nation may be walking a tightrope economically but the Triangle
is a solid investment. For the time being mortgage interest rates
seem to want to be slow to rise while home prices are increasing at a
solid pace. This of course means it is a good time to buy. And with inventories
at record lows it is a good time to sell. In the long run your home will
 continue to be your best investment.


FHA loans have been accounting for over 30% of home loans for a
long time. These loans offered a 3% down payment that was very
attractive except for the years prior to the real estate financial bust in
2008-2009, when you could borrow anything while having any job
whether you intended to pay it back or not. Once lending became
scarce the FHA became a preferred loan. A few years ago the 3% down
payment became 3.5% but no one cared because it was still the best
deal around.
Bank of America last year got penalized to the tune of $800 million
for errors while dealing with FHA. They were not alone. BofA announced
this week that they are starting a new 3% down payment
mortgage program without the dreaded FHA private mortgage premium.
This promises to be a hit in the market place. They are avoiding the
backing of FHA by using Freddie Mac and Self Help Ventures Fund, a
non-profit, from Durham, NC. I do not know what the real motive was
to create this program but it will be a big boost for Durham and for
home buyers everywhere.


Here is another group I have never heard of: Conde Nast Traveler.
They , however, have come up with a list of the 20 most beautiful college
campuses in the U S. They came up with a pretty good list, so I will have
to learn more about them. I do question their rankings however. They
have Duke 5th and UNC 12th. Those of us who live around here rank them
one and two depending on your preferred shade of blue.

Sunday, November 29, 2015

More From the Guru

In our last issue I told you of a number of economic insights taken from a published report by the renowned chief economist of the National Association of Realtors, Dr. Lawrence Yun. Since that time I have had the pleasure of speaking with Dr. Yun in person and listening to him give an update on the economy to the annual convention of the North Carolina Association of Realtors.  I want to share with you some more of his wisdom.

  • He started off by saying that he wanted to clear up one common misunderstanding about the housing collapse in '08 and '09 which is commonly blamed on lenders loaning 100% loans to any and every one.  The VA lending program has historically made 100% loans to veterans and he said that this was the only group that almost 100% of the time makes their payments.  Our service men and women were not to be blamed.
  • Even though the overall rate of manufacturing in this country is in decline, the areas of growth are in the South with Houston moving up to number three nationally in having the most manufacturing jobs.  In the last ten years the Charlotte area has added 200,000 new jobs bringing its total job count to 1.1 million jobs. The Triangle is right behind adding 140,000 new jobs in the last ten years. Looking forward he says the top three job growth areas in the country will be San Jose, Austin and the Triangle. The top state expecting growth is Utah with North and South Carolina in the top ten.
  • Globally, and our economy is now affected by the rest of the world, he says the biggest factor is that the Chinese stock market is down between 30 to 40 percent.  The U.S. needs a 3% growth in GNP (Gross National Product...the sum of all goods and services produced) annually just to stay even.  We have been under that figure for 10 straight years. Our GNP is $1.7 trillion below what it should be. That's the bad news. We are currently at an annual GNP growth rate of 2%. What makes that good news is that he says we are the only nation in the world above 0% growth. He had a great analogy when he described the U.S. economy as the cleanest shirt in a dirty laundry basket.
  • On the domestic front, in the 1950's over 90% of Americans thought their kids would live a higher standard of life than they did. Today it is less than 50%. He thinks, however, that four of the next five years will see an improving economy. He did not say which year would be the down year but I suspect it will coincide with when the Fed finally decides to raise interest rates. Recently they did the only thing Washington seems to know how to do and that is to kick the can down the road by delaying a decision. I was happy to hear him say what I have been telling you for years and that is that the unemployment rate is a bogus number and is constantly being readjusted for political reasons. The important number is the employment number. Before the current recession began in late 2008 68% of our population was employed. Today the figure has dropped to 58%. He said we have too many people not even looking for work.
  • How does all of this effect you? North Carolina is currently outpacing the nation in job growth. As previously stated the jobs are coming here in the future. Inflation is staying low due to low oil prices. If prices stay too low, US exploration of oil will slack off so prices need to reach a level that will provide a combination of stable inflation and continued use of our oil reserves, the world's largest. If the Fed raises the discount rate slowly enough not to scare the stock market too badly, Dr. Yun does not think it will cause a rapid rise in the home mortgage rate.
  • As for your real estate in particular, rent prices are rising at a seven year high. He says we are becoming a renter nation. Home sales activity is rising but sales remain below what they were before the bubble. The first time home buyer purchase rate is not growing but remains flat. New construction growth rates are low due to difficult new construction financing and a simple shortage of workers. Since according to Yun so many millenials are becoming renters, they are not gaining equity. That does not bode well, he says, for the future of the middle class.
  • In summary the current facts may seem a bit pessimistic when they are laid out in front of us, but I, for one, believe that growth and jobs are the answer. It is not too late to turn things around.

Saturday, November 7, 2015

The Fed is After Your Wallet, Again

If you have not heard of the term TRID, you will the next time you are involved in a real estate transaction.  By the way, note that TRID spelled backwards is DIRT.  TRID is an acronym for how the FED has totally redesigned the loan application and closing process.  I recently attended a seminar where the panel consisted of four of the most prominent real estate attorneys in the area.  This will be a summary of what you can expect.

Expect your loan application process to go smoothly because lenders are used to being well educated in what you need to do.  You will find a real urgent requirement for you to do your part right away.  Most of the changes seem to affect the closing process which the FED expects us all to refer to from now on as the "Consummation". I refuse.

Attorneys are being required to reconfigure their offices, sometimes to the tune of tens of thousands of dollars. These changes are required to ensure that the Buyers and Sellers are unable to meet. The other attorneys in the offices who practice different types of law even cannot be exposed to you either. Real estate attorney files must be kept under lock and key. I am not making all this stuff up. The amount of paper work for closing attorneys has increased so much that your attorney fees for closing will go up. Starting immediately, closing fees that used to range from $600 to $650 are now going to cost between $1000 to $1500.  Wired funds will be required. The consumer pays for that too. There are many more changes but more on this later.