Leonard H. Craver

Leonard H. Craver
Leonard H. "Tony" Craver

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.

Did You Know ...?

The Small Business Survey came out with their list of the ten best cities in the country for Millenial Entrepreneurs.  Durham made the list! What was even more interesting was that most of the cities in their top ten were in the South.  Joining Durham were Birmingham, Nashville (not the TV show), Charleston, Knoxville, and Richmond.  Our next goal is to convince Millenials that they need to save money and buy houses.