True or False with Michael Nierenberg, Part 1: First-Time Home Buyers

This is the first article in a series with a collection of true or false questions to analyze trends in the residential mortgage industry. This part begins the series with questions about first-time home buyers.

True or False? — T/F: First-Time Home Buying Trends

Here are eight questions that cover first-time home buyers (answers are shown after all of the true/false questions):

• 1 — Approximately 45 percent of home sales in 2018 were to first-time buyers. — T or F

• 2 — First-time homeowners usually stay in their first home longer than buyers who have previously owned a home. — T or F

• 3 — In 2019, millennials vary from about 23 to 38 years old. — T or F

• 4 — The rising amount of student debt is often cited as a factor that can delay first-time home buying decisions. — T or F

• 5 — Millennials are currently getting married at about the same age as their parents. — T or F

• 6 — Many highly qualified millennial borrowers are unable to obtain a mortgage from traditional lenders such as banks. — T or F

• 7 — The number of renters recently decreased by about 450,000. — T or F

• 8 — In several metropolitan areas, real estate investors are routinely outbidding first-time buyers and other interested parties by offering cash for starter homes. — T or F

Answers and Explanations: Buying a First Home

1 — False. First-time buyers represented 40 percent of home sales during a 15-year period from 1990 to 2005. This rate increased to 50 percent during 2009 but fell to 33 percent in 2018.

2 — False. According to the National Association of Home Builders, the average residency period is about 11.5 years for first-time homeowners and around 15 years for previous buyers.

3 — True. Millennials are usually defined as individuals born between 1981 and 1996. There has been intensive focus on the consumer habits of this age group — such as preferences for buying or renting homes and condos.

4 — True. Total student debt in the United States is about $1.5 trillion (2018 data). Student debt loads have increased by 100 percent since the start of the recent housing recovery. As one example of how student loans can impact buying decisions, most baby boomers (usually considered to be individuals born between 1946 and 1964) had much less student debt in comparison to millennials and contemporary student loans.

5 — False. Marriage and family plans frequently have an immediate impact on the timing for buying a first home. The current average millennial age for marriage is 29 years old — about 10 years later than the previous generation.

6 — True. Getting a traditional qualified mortgage (QM) depends on borrowers meeting rigid lending requirements established by federal housing agencies. Since 2015, a more flexible alternative involving a non-qualified mortgage (non-QM) has been offered by alternative lenders such as NewRez (a subsidiary of New Residential). A non-QM loan has proven to be especially effective for first-time buyers as well as borrowers with a recent bankruptcy and self-employed individuals. NewRez currently operates in 49 states and the District of Columbia.

7 — False. The recent trend went in the opposite direction: renting activity increased by an annualized 450,000 households. However, this should not necessarily be interpreted as a preference on the part of millennials and others to rent instead of buy. For example, in many previously affordable housing markets, home prices rose by 75–90 percent during a recent 7-year period. In multiple housing markets, home builders are primarily building more expensive homes — depleting the inventory of affordable homes. With such conditions, the default decision can easily become renting instead of buying.

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8 — True. For example, the New York Times reported during June 2019 that about 20 percent of starter homes are being purchased by investors. This trend compounds the challenges for first-time buyers.

A reminder — The True or False series will continue with “Part 2: Residential Real Estate in Cincinnati.”

True or False, Part 2: Residential Real Estate in Cincinnati

This is the second article in a three-part series using true or false statements to illustrate critical issues in the residential mortgage sector. The first part examined residential property trends involving first-time home buyers, and this segment will analyze residential real estate and mortgage scenarios in Cincinnati, Ohio.

True or False? — T/F: Residential Mortgages and Property in Cincinnati

Here are seven questions that focus on residential property in the Cincinnati metro area (explanations and answers are shown in the next section):

• 1 — The median listing price in the Indian Hill area of Cincinnati was recently reported to be $1.49 million. — T or F

• 2 — The November 2019 median listing price for Greater Cincinnati is $300,000. — T or F

• 3 — Cincinnati is the 25th-largest city in the United States. — T or F

• 4 — The Greater Cincinnati metropolitan area is the largest metro area located primarily in Ohio. — T or F

• 5 — The Cincinnati market area is the smallest with three major league sports teams in the United States. — T or F

• 6 — The biggest Oktoberfest celebration in the nation is known as Zinzinnati. — T or F

• 7 — Cincinnati is home to three Fortune 500 companies. — T or F

Answers and Explanations: Cincinnati — Residential Real Estate

1 — True. As of November 6, 2019, there were 68 Indian Hill properties included in the multiple listing service (MLS) — with a median listing price of $1,497,000.

2 — False. Based on about 1200 properties listed for sale on the MLS for the Cincinnati area, the recent median price is slightly under $230,000.

3 — False. With a 2019 population of 302,605, the city of Cincinnati currently ranks as the 66th-largest city in the nation and the third-largest city in Ohio.

4 — True. This is probably a surprising statistic for many readers. The Cincinnati metro area is the 29th most populous in the United States with a population of about 2.1 million. This metropolitan area includes counties in Indiana, Kentucky and Ohio. The population total places it ahead of metropolitan areas for both Cleveland and Columbus.

5 — True. With the addition of Major League Soccer to join the Cincinnati Reds (baseball) and Cincinnati Bengals (football), Cincinnati became the smallest metro area with three or more major league franchises. This is not the first time that Cincinnati has been a three-team city. It initially happened when the Bengals were established in 1968. But this did not last for long as the National Basketball Association (NBA) Cincinnati Royals left for Kansas City four years later. By the way, the Royals became the Kansas City-Omaha Kings, then the Kansas City Kings and eventually (1985) moved to Sacramento, California.

6 — True. Zinzinnati usually attracts about 500,000 visitors and was first held in 1976 — it is recognized as the second largest Oktoberfest celebration in the world (after Munich). Cincinnati was also home to the first professional baseball team (the Red Stockings, later the Reglegs and now the Reds) and the first city to have a licensed public television station (WCET). The Cincinnati Zoo and Botanical Garden is the second oldest zoo in the country. Famous people originally from the Cincinnati area include Rosemary Clooney, Neil Armstrong, Steven Spielberg, George Clooney, Ted Turner, Roy Rogers and Doris Day. Cincinnati was originally founded in 1788 and was called Losantiville — this was changed to Cincinnati in 1790. Nicknames include “The City of Seven Hills” (a description also often used for Rome) — and the name of Cincinnati is derived from a Roman general, Cincinnatus.

7 — False. The total of Fortune 500 companies based in Greater Cincinnati was nine in 2018 and dropped to eight in 2019 when Cincinnati Financial Corp. dropped to a ranking of 515. Leading companies include Kroger, Procter & Gamble and Macy’s (all three are ranked in the top 125 positions). Procter & Gamble started in Cincinnati (1837) primarily because of close access to lye needed in the company’s soap making and candle businesses.

True or False, Part 3: Residential Real Estate in Pennsylvania

This is the third segment in a series using a true-or-false format to examine important aspects about the residential mortgage business. The first two parts described residential real estate in Cincinnati and first-time home buyers. This segment will assess property trends in Pennsylvania.

True or False? — T/F: Residential Mortgages and Property in Pennsylvania

Here are 10 questions that will review knowledge about residential mortgages in Pennsylvania (answers and explanations are provided after all of the true or false questions are listed):

• 1 — Based on 2018 population estimates, Pennsylvania is the fourth-largest state. — T or F

• 2 — The median price of homes sold recently in Pennsylvania was about $172,000. — T or F

• 3 — NewRez, one of the leading non-bank residential mortgage lenders in the United States, is headquartered in the Philadelphia area. — T or F

• 4 — Pennsylvania is one of 15 states that have gained population since 2000. — T or F

• 5 — During 2018, approximately 25 percent of residential mortgages in Pennsylvania’s Monroe County were underwater (mortgage balance exceeded value). — T or F

• 6 — In a recent ranking of “hot” real estate markets, the Pittsburgh metropolitan area ranked highest in Pennsylvania. — T or F

• 7 — Pennsylvania is a commonwealth. — T or F

• 8 — The three largest cities in Pennsylvania are Philadelphia, Pittsburgh and Harrisburg. — T or F

• 9 — At one point, the Pittsburgh Steelers and the Philadelphia Eagles merged to become one team. — T or F

• 10 — Pennsylvania is the only colony of the original 13 that does not border the Atlantic Ocean. — T or F

Answers and Explanations: Pennsylvania — Residential Real Estate

1 — False. Pennsylvania ranks fifth with a 2018 population of about 12.8 million residents, considerably behind the fourth-largest (New York) and slightly ahead of the sixth-largest (Illinois).

2 — True. The median sales price was $171,900. In comparison, median listing prices for currently available homes is $219,000.

3 — True. Established in 2008 and previously called New Penn Financial, NewRez is based in Fort Washington and is a subsidiary of New Residential Investment Corp.

4 — False. Twenty states have lost population since 2000, and Pennsylvania is one of them.

5 — True. Monroe County is north of Allentown and Bethlehem and south of Scranton.

The county seat is Stroudsburg and the county’s population is about 168,000. Although the national average of underwater mortgages (negative net worth) had fallen to 9.3 percent, Monroe County had 26.5 percent. At the peak of the housing crisis, the number in Monroe County approached 50 percent. Based on 2018 data, the underwater mortgage rate was 11.6 percent in Philadelphia and 9.6 percent in Pittsburgh.

6 — False. The Philadelphia area ranked 41st in the country and first overall within Pennsylvania.

7 — True. Pennsylvania is one of four states with this designation — the others are Massachusetts, Virginia and Kentucky. The name is derived from a British term for a community founded for the public good. A commonwealth still functions like any other state.

8 — False. Harrisburg, the state’s capital, is ranked 10th. Pennsylvania’s five largest cities (ranked in order) are Philadelphia, Pittsburgh, Allentown, Erie and Reading.

9 — True. During World War II, these professional football teams lost so many players to military service that they merged into a team called the Steagles (in 1943 for one season) — they finished with a winning record.

10 — True. In addition to this interesting real estate fact, Pennsylvania has many other unique characteristics. The nation’s first zoo was started in Philadelphia by Benjamin Franklin. Wanamaker’s, located in Philadelphia, was the country’s first department store. Only one president has been from Pennsylvania (James Buchanan). Pittsburgh was home to the first baseball stadium (Forbes Field, opened in 1909). The first oil well in the world was dug near Titusville, Pennsylvania by Edwin Drake. Two decades later, more than 75 percent of the world’s oil was produced in Pennsylvania. The land that would become Pennsylvania was given to William Penn in 1681 to satisfy a debt that King Charles II had with Penn’s father.

FYI — NRZ and Mike Nierenberg: Residential Mortgage Success

New Residential Investment Corp. (NYSE: NRZ) entered the residential mortgage industry in 2013. The 2018 dividend of $2 per common share (paid quarterly) by NRZ represents a yield of 12.4 percent based on the November 4, 2019 closing price of $16.05. Mike Nierenberg is CEO, President and Board Chairman of New Residential.

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