The future of the market is uncertain, with the main reason being the unsteady financial footing of cash strapped, debt-loaded millennials. In a webinar hosted by the FORCE, Ed Delgado President and CEO of The Five Star Institute, began by discussing the more stable corner stones of the economy, namely the declining unemployment rates. The Trump Administration has promised to increase jobs, but there’s little room to go with an unemployment rate of 4.7 percent. There is room for improvement though. “Where there is enormous opportunity, is in correcting the underemployment of the labor sector in the U.S.,” Delgado said.
Another major corner stone of added stability to the current market is the declining rates of 60-day and 90-day delinquencies. “If we go back as near as three years ago, we had about 4.5 percent of 60-days past due of the total population of mortgages in the U.S. Today that number rests at a three year, it’s probably at an eight-year low, at 2.29 percent,” Delgado said.
One interesting variance Delgado pointed to however was the rising average debt per borrower. Financial stress is increasing in American households even though delinquency is at a pre-crisis low. If the debt continues to increase, there may soon be an uptick in delinquencies.
The homeownership rate is dropping. In fact, it’s hit the lowest point in 50 years at about 60 percent. “Do we think we’re at the bottom?” Delgado asked. First time home buyers in the millennial cohort are sitting on an average of $37,000 in student debt. The amount of federal student debt is at a staggering $1.3 trillion. “There’s no end in sight as it relates to student debt in this country,” Delgado said. With interest rates set to rise, even hardened mortgage professionals will have difficulty convincing millennials to buy.
Other unknowns in the mix is the uncertain future for Dodd-Frank and the Consumer Financial Protection Bureau. How the market will react to all these factors remains unclear for now. Perhaps with a little more time, the uncertainty will calm down.
Editor’s Note: The Five Star Institute is the parent company of DS News and DSNews.com