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The Student Loan Bubble and Path Forward for Graduates

America’s total household debt increased by $193 billion (1.5%) to $13.15 trillion in the fourth quarter of 2017 according to the Federal Reserve. Student loan debt ranks as the second largest household debt falling behind mortgage, and in front of auto loans, credit cards and home equity loans.

Household Debt and Credit Developments as of Q4 2017

*Change from Q3 2017 to Q4 2017

**Change from Q4 2016 to Q4 2017

A closer look at student loan debt.

44.5 million student loan borrowers in the U.S. owe a total of $1.5 trillion as of March 2018 according to the Federal Reserve. And, the average college graduate with a bachelor’s degree left school with $28,446 in student debt in 2016 according to Institute of College Access & Success. In 2018, the Federal Reserve Bank of New York, reports 37.5% of Americans with student loan debt are under the age of 30. Compared to 62.5% of Americans with student loan debt are 30 years old or older.

CNBC recently reported “average debt at graduation is currently around $30,000, up from $10,000 in the early 1990s. The country’s outstanding student loan balance is projected to swell to $2 trillion by 2022, and experts say a large portion of it is unlikely to ever be repaid; nearly a quarter of student loan borrowers are currently in a state of delinquency or default.”

Although outstanding student loan balances have increased, student loan delinquency flows declined slightly but remain at a high level, according to the Federal Reserve. NerdWallet reports the following status on student loan repayments, painting a grim picture for some borrowers.

  • 3.3 million federal loan borrowers have loans in deferment.
  • 2.6 million federal loan borrowers have loans in forbearance.
  • 4.7 million federal loan borrowers have loans in default.

Will the student loan bubble burst?

Robert Farrington with Forbes explains how the student loan bubble will not burst, but instead will cause a slow market stagnation that we will see over time. “Student loans are a collateral on earnings, as long as there is earning potential, the ability to have the loans quickly “pop” via any financial mechanism is rare. Yes, bankruptcy for student loan debt is possible, but once again – rare… The net effect of this student loan crisis won’t be a bubble popping – it will be slow drag on the economy.” Discretionary income that would traditionally go to consumer goods and household spending stimulated by homeownership will instead be going to student debt repayment because there simply is not a discretionary income. This could cause a decline for some industries.

How student loans effects home ownership.

Student debt significantly cuts into future homeowners’ budgets and for many, making it difficult to buy a home. According to the Federal Reserve for every 10 percent in student loan debt a person holds, their chance of home ownership drops 1 to 2 percentage points during their first five years after school. According to the National Association of REALTORS more than 80 percent of non-homeowner younger millennials (born between 1990-1998) cite student loan debt as delaying a home purchase, compared to 86% of older millennials (born between 1980-1989).

What does this mean for graduates today?

NerdWallet recently analyzed the most recent numbers and issues concerning graduates, and conducted a survey by The Harris Poll in May 2018. In analyzing the data, Brianna McGurran, NerdWallet Student Loans Expert, believes the outlook for graduates is not gloom and doom stating, “New grads are in the best position of all: They have the chance to save smart from the beginning.”

Here is what they found for the Class of 2018 Money Outlook:

  • Percentage of recent graduates with student debt: 45%
  • Percentage of recent graduates with student debt who believe they’ll be able to pay it off in 10 years: 39%
  • Age at which graduates of the Class of 2018 can expect to retire: 72
  • Age at which the Class of 2018 can expect to purchase their first home with a 20% down payment: 36

As with any loan, whether for a student loan or a home, approach it as an educated consumer, here are some tips for paying off student loans for future graduates.

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SOURCE:
https://research.stlouisfed.org/publications/page1-econ/2018/10/01/get-an-education-even-if-it-means-borrowing
https://www.nerdwallet.com/blog/loans/student-loans/student-loan-debt/
https://www.newyorkfed.org/microeconomics/databank.html
https://studentaid.ed.gov/sa/about/data-center/student/portfolio
https://www.nerdwallet.com/blog/2018-new-grad-money-outlook/
https://www.cnbc.com/2018/09/21/the-student-loan-bubble.html
https://www.federalreserve.gov/econresdata/feds/2016/files/2016010pap.pdf
https://www.federalreserve.gov/econresdata/feds/2016/files/2016010pap.pdf
https://www.forbes.com/sites/robertfarrington/2018/12/12/student-loan-bubble-wont-burst/#3f9bf00f6768
https://www.newyorkfed.org/newsevents/news/research/2018/rp180213
https://www.forbes.com/sites/robertfarrington/2018/11/27/student-loans-and-bankruptcy/#41ee1633f45d
https://thecollegeinvestor.com/9664/student-loan-bubble-looks-like/
https://www.bankrate.com/loans/student-loans/repay-college-loans-fast/

Austin No. 1 City Gaining Company Migrations from California

Austin continues to grow from California residents and business relocations. A recent study by Joseph Vranich of Spectrum Location Solutions revealed more than 13,000 companies have left California for friendlier locations, with Austin being the No. 1 city to gain the California migrations. The study also ranked Texas as No. 1 in the Top 10 states gaining the most from California business relocations, a distinction Texas has held for the past decade.

“During the study period, $76.7 billion in capital funds were diverted out of California along with 275,000 jobs – and companies acquired at least 133 million sq. ft. elsewhere – all of which are greatly understated because such information often went unreported,” according to the study.

The Austin Business Journal summarized that “Departures are understandable when year after year CEOs nationwide surveyed by Chief Executive Magazine have declared California the worst state in which to do business,” said Vranich, a corporate relocation expert who jokes that he loves California’s weather, but not its business climate. Until recently, Spectrum and Vranich were based in Irvine, Calif. Texas, on the other hand, consistently ranks as one of the best states to do business in.”

The top 10 states starting in the order of those that gained the most from California business relocations were:

  1. Texas, which has held the first-place distinction for at least a decade
  2. Nevada
  3. Arizona
  4. Colorado
  5. Oregon
  6. Washington
  7. North Carolina
  8. Florida
  9. Georgia
  10. Virginia

The top 10 cities gaining company migrations from California were:

  1. Austin
  2. Reno, Nev.
  3. Las Vegas
  4. Phoenix
  5. Seattle
  6. Dallas
  7. Portland, Ore.
  8. Denver
  9. San Antonio
  10. Scottsdale, Ariz.


The report’s ranking is based only on cities, not metro areas. Fort Worth, Houston, Pittsburgh, Atlanta, Indianapolis and Nashville also ranked among the top twenty.

Vranich further details the Texas metro market migrations in the Austin Relocation Guide. Metropolitan areas benefiting from California divestment events show Austin-Round Rock-San Marcos in the top spot, followed by No. 2 Dallas-Fort Worth-Arlington, and No. 10 San Antonio, which was tied with Salt Lake City. Of the Top 15 destination metropolitan communities benefiting from out-of-California Austin tops the list, followed by No. 6 Dallas, No. 8 San Antonio, No. 11 Houston, No. 13 Irving and Plano (tied) and No. 14 Fort Worth.”

The new 2018 Migration Trends study by residential real estate brokerage site Redfin shows California is the top source of people from other metro areas shopping for homes in Austin. KVUE reported that in the Austin area, the biggest generator of inflow (more people seeking to move to area than leave it) was from San Francisco, unsurprising considering both cities are hubs for the technology sector. In Dallas, the L.A. area produced the most potential newcomers.

With the California migrations, it begs the question, how is Austin doing today?

The Austin Chamber of Commerce recently reported:

  • Austin added 36,800 net new jobs, growth of 3.5%, in the 12 months ending in December, making Austin the fourth fastest growing major metro.
  • In Austin, the industry adding the most jobs and growing the fastest is wholesale trade which grew by 6,900 jobs or 12.8% over the last 12 months. Also growing at faster-than-average rates are construction and natural resources (8.1% or 5,000 jobs) and other services (4.4% or 2,000 jobs).
  • Austin’s seasonally adjusted unemployment rate is 2.9%, up from 2.8% in November. Unemployment has been at or below 3.0% for the last 16 months.
  • For new home construction Austin ranked number 1 in the nation in per capita building permits through midyear 2018 with a projected increase over 2017.
  • Home prices are rising with a median home price increase of approx. 4% in 2018.
  • Incomes are rising with total personal income in the Austin metro growing by 6.4% in 2017, the 5th fastest growth rate among major metros.

We continue to see growth in Austin, and we welcome California transplants to make Austin their home.

For more stories like this, please subscribe to Tandy on Real Estate.

Resources:

Austin Business Journal – https://www.bizjournals.com/austin/news/2018/12/13/1-800-companies-left-california-in-a-year-with.html 

The Kumar Law Firm – https://thekumarlawfirm.com/lawyer/2018/12/31/Business-Law/California-Businesses-Flock-to-Texas_bl36525.htm

KVUE – https://www.kvue.com/article/news/local/california-homebuyers-continue-coasting-into-austins-real-estate-market/269-608008889 

PRWeb – https://www.prweb.com/releases/record_number_of_companies_departing_california_study_urges_more_to_leave/prweb15977005.htm

Redfin – https://www.redfin.com/blog/2018/10/q3-2018-migration-report.html

Culture Map – http://austin.culturemap.com/news/real-estate/10-25-18-homebuyer-interest-in-austin-california-san-franscisco-redfin/

Austin Chamber of Commerce – https://www.austinchamber.com/blog/01-22-2019-job-growth-unemployment

Austin Chamber of Commerce – https://www.austinchamber.com/economic-development/business-climate/economic-perspective

Austin Relocation Guide – http://www.austinrelocationguide.com/Austin-Wins-Big-as-Companies-Leave-California/

State and Local Taxes Influence Homebuyer Migration

Overall taxation increasingly determines where people and companies choose to relocate. Last week Rob Chrisman talked about what makes homebuyers move in his daily newsletter. According to MarketWatch jobs are the determining factor for someone to relocate, second to state and local taxes.

ATTOM Data Solutions, national property database provider, released its 2017 property tax analysis for more than 86 million U.S. single family homes which shows that property taxes levied on single family homes in 2017 totaled $293.4 billion, up 6 percent from $277.7 billion in 2016 and an average of $3,399 per home — an effective tax rate of 1.17 percent.

For Daren Blomquist, Attom’s senior vice president, the story of national property taxes is the story of migration around the country. Blomquist told MarketWatch that taxes are “the icing on the cake” in areas that are seeing strong population inflows anyway.

“Among the counties that saw the biggest percentage of in-migration in 2017, according to Census data, all are in Texas, Florida, Georgia, or the Carolinas. Texas doesn’t have particularly low property taxes, but it has no personal income tax, making the overall tax burden much more manageable,” said Andrea Riquier of MarketWatch.

Texas is a pro-business state that continues to attract business and population.

Business Facilities Magazine ranked Texas as the top state in the nation for the Best Business Climate in the magazine’s 13th Annual Rankings Report. Out of all 50 states, Texas achieved the best overall performance in the 2017 State Rankings Report.

According to Texas Governor Abbott, “economic liberty is why Texas leads in job creation and in corporate expansion and relocations.  Restrained government, lower taxes, smarter regulations, right-to-work laws and litigation reform—these are the pro-growth economic policies that help free enterprise flourish and that attract business to Texas from states that overtax and overregulate.”

Austin continues to attract businesses, and is a hub for corporate and regional headquarters, including AMD, Apple, Bazaarvoice, Cirrus Logic, Dell, Dimensional Fund Advisors, eBay, Facebook, Freescale, General Motors, Hanger, Hewlett-Packard, HomeAway, Home Depot, IBM, LegalZoom, National Instruments, Oracle, Whole Foods, and Visa. Check out the  Austin Chamber of Commerce Austin’s major employers map.

Best and worst business climates.

24/7 Wall Street ranked best and worst business climates looking at nearly 50 measures of doing business, including economic conditions, business costs, state infrastructure, the availability and skill level of the workforce, quality of life, regulations, technology and innovation, and cost of living.

Massachusetts ranked No. 1 with a well-educated population that is a boon for state businesses. Such a population presents a more flexible and skilled talent pool for employers. Also, people with college educations tend to have higher incomes, which means they have more disposable income to spend. A nation-leading 42.7% of Massachusetts adults have a bachelor’s degree, compared to 31.3% of adults nationwide. The typical state household earns $75,297 a year, the fourth highest median income of any state and over $17,000 greater than the national median.

And, Louisiana ranked last. Working-age Louisianans are less likely than working-age Americans to have the qualifications for higher-skilled, higher-paying jobs. Just 23.4% of adults in the state have a bachelor’s degree, nearly the lowest percentage of all states. Unlike most states, Louisiana’s working-age population is also declining. In the Census’ American Survey of Entrepreneurs, 46% of state businesses reported unpredictable conditions having a negative impact on their business, and 48% reported slow business or lost sales, each among the highest shares in the country.

Texas ranked among the top states at No. 13.

  • 1-yr. real GDP change: -0.3% (7th largest decrease)
  • salary: $53,838 (12th highest)
  • Adults w/ bachelor’s degree: 28.9% (tied — 22nd lowest)
  • Patents issued/100,000 people: 35.7 (18th most)
  • Working-age population change, 2020-2030: -14.9% (4th largest growth)

According to USAToday, “like North Dakota and a few other oil-producing states, Texas’ economy has taken a beating from the more-than-three-years-long stretch of depressed crude oil prices. However, the state’s economy is more diverse than that of North Dakota, and GDP has contracted by just 0.3% in the most recently reported year. Credit agencies Moody’s and Standard & Poor’s clearly recognize the state’s stability and rate its debt a perfect AAA and Aaa, respectively, with a stable outlook. The state’s businesses not only benefit from a stable economy, but also from a growing labor force. Texas’ working age population is projected to grow by 14.9% between 2020 and 2030, the fourth most of any state.”

Austin MSA stands out with 42.8% having a bachelor’s degree or higher, as compared to 28.9% in Texas, and 31.3% in the United States. And, WalletHub ranked Austin-Round Rock No. 9 in the Most & Least Educated Cities of America.

SOURCE: U.S. Bureau of the Census, American Community Survey

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SOURCE:
http://www.robchrisman.com/daily-mortgage-news-commentary/page/2/
https://www.marketwatch.com/story/americas-new-great-migration-in-search-of-lower-property-taxes-2018-04-05
https://www.attomdata.com/news/market-trends/home-sales-prices/attom-2017-property-tax-data-analysis/
https://gov.texas.gov/news/post/texas-ranked-top-state-for-business-climate-by-business-facilities-magazine
https://businessfacilities.com/2017/07/business-facilities-13th-annual-rankings-report/
https://www.austinchamber.com/upload/files/ed/MajorEmployersMap.pdf
https://www.usatoday.com/story/money/business/2018/03/05/economic-climate-best-and-worst-states-business/376783002/
https://www.austinchamber.com/economic-development/austin-profile/population#Educational%20Attainment
https://wallethub.com/edu/most-and-least-educated-cities/6656/

Impact of the new 2018 tax law on real estate owners and on 1031 tax deferred exchanges

History is being made. According to Asset Preservation Inc., “Congress has approved sweeping tax cuts and tax reform that have not been tackled by the federal government in over 30 years (since the Tax Reform Act of 1986.). The new tax law, formally referred to as “The Tax Cuts and Jobs Act,” will go into effect in less than two weeks on January 1, 2018. This article has the most up-to-date information along with a summary of how the new tax law provisions will affect homeowners and real estate investors who own all types of investment property.”

Click here to learn what real estate owners need to know about the new tax cuts and reforms.

 

A vision for homebuilding

At the National Association of Real Estate Editors (NAREE) Conference in Denver, Douglas Yearley, CEO of Toll Brothers presented the Keynote Address “A Vision for Homebuilding”. Here is a snapshot of his state of builder/buyer.

Business is good
Toll Brothers announced earlier this summer that they had the best spring selling season that it has had in the past ten years. This can be attributed to many things:

  • Low interest rates
  • Rising home values
  • Consumer confidence
  • Improving job growth, along with wage growth

There are low inventories in most markets in used homes, and we finally have release of pent up demand. As the economy improves and personal balance sheets improve, pent up demand could bring people off the sidelines.

A slow recovery
According to Toll Brothers, we have seen a slower recovery than past cycles:

  • Key metrics are improving
    • Number of households has grown 98% since 1970.
    • 1980 – 1989 – 1.49 million housing starts
    • 2008 – 2016 – .85 million housing starts
    • Home ownership peaked in 2004 at 69%.
    • Today’s home ownership rate is at 63.6%.

We are not quite where we should be. We are still behind the demand, but this only leave room for growth.

Buyers buying new and where the sun shines
There is a 32% premium from a new home to used home. The average is 18%. People are gravitating to buying new homes as the used inventory is older. And, energy efficiency and the opportunity to customize home is driving the premium.

More than 50% of Toll Brothers’ business in done in the West. Denver to the West is where builders are focused. Builders are focused on pro-business states, where land is available and where people want to live – where the sun shines. Boomers are buying in Florida, no big surprise here. And, Texas, a pro-business state, is doing very well in Dallas.

Demographics – the Boomer is driving growth
Baby boomers continue to drive Toll Brothers’ business. As they did for years when they moved to suburban areas to “move up”, and still today as they downsize and prepare for the next stage of their life. Many are buying into active-adult communities or are buying second homes in Palm Springs, Florida and Scottsdale, Arizona.

Design trends – casual family-friendly spaces
According to Toll Brothers the open, casual living with free flow indoor and outdoor space has completely caught on. People want casual environments where living space is connected. And, where the outdoors is a continuation of the home. Where the back of the home will be one big wall of glass making the outdoors, the indoors.

There is also a trend for multi-generational living. With additional living space with a sitting area, little kitchen area, direct access outside and separate entry in the home for older generations living with their family.

And, smart home solutions are evolving and expanding with the ability to remotely control the home.

Labor on the rise
We went from two million houses a year to 500,000. Labor dramatically went away. And, every market has a different issue; there is no national plumber. As we get further into recovery, we are seeing improvements and a return of the builder labor market. Contractors are ramping up their businesses. There is still cost pressure, but according to Yearley, it is definitely less now than it was a year or two ago.

Getting creative with land acquisition
For Builders it is all about the land – whether you are building one home or a master-planned community. You are stuck with the land once you buy it. Builders have to be much more creative in how they look for buy land because people want to live differently. Buyers want to live in a more connected community. And, creativity comes into play due to the availability of land in urban areas. An example of this creativity in land acquisition is buying a car dealership and renovating it. Or, building a park with the mixed use and condo development as part of the sales price for the land, like Maxwell House, former Maxwell House Coffee plant, in Hoboken, NJ. This was the largest in the world and a landmark on the Hudson River since 1939. What was a tragedy for Hoboken is now a trendy redevelopment leveraging both the best of the outdoor and the indoor space.

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SOURCE:
National Association of Real Estate Editors (NAREE) Conference
Toll Brothers
https://www.upi.com/Archives/1990/06/27/Landmark-Maxwell-House-plant-to-shut-down/2261646459200/

 

 

 

The housing shortage

At the National Association of Real Estate Editors Conference (NAREE) in Denver this month “The housing shortage: dealing with barren inventory” was presented. The panel presenting included Thomas O’Grady, Pro Teck Valuation Services; Aaron Terrazas, Zillow; and Javier Vivas, realtor.com. Here is a snapshot of what was covered.

According to the panel we have had 23 months of historic low home sales. With 200K fewer homes for sale, and 150K of the homes being in the mid- to low-tier. We are losing inventory at record pace and in a segment where we are seeing the most demand – in the entry-level buyer. The shortage is national, and in smaller square footage homes.

When looking at the inventory shortage, there are two factors to consider:

  1. Homes hitting the market are selling fast.
  2. There are not enough homes entering the market.

What’s causing the inventory shortage?

  1. New construction has lagged among existing home sales. Homebuilders are not building at the levels they were.
  2. Homeowners have negative equity in some markets.
  3. There is a shift of owner occupied stock to rented occupied stock with 6.3 million more renter-occupied.
  4. The power of psychology. There is a psychology of market for seller; they are holding on to homes to see what kind of gains they can get.

The homebuilder blame game

Homebuilders are getting a lot of the blame, particularly for affordable homes. 24% of all home building costs is put towards regulations – making it expensive for builders to build. And, there is a ack of labor and a high cost of acquiring land. Smaller builders are also having issues will accessing financing.

Housing trends:

It’s hard to move up in a rising market

People aren’t selling because they cannot replace what they have. Buying up is becoming out of people’s grasp in some markets. There is a fear that I can’t put my house in market because I won’t be able to find anything to buy. This is the inverse of what we had in the boom. Appreciation and run upon price is going to hit into affordability, and as always, people want to get a deal.

A rise in home equity

In appreciating markets where the homeowners have equity and a low interest rate, we are seeing homeowners tap into equity and make home improvements versus putting their homes on the market. 40% of home owners have more than 20% equity. And to further support this, people are staying in homes for 10 years which is an all-time high. This stat used to be only 6 years.

Homeowners in love with their loans Many homeowners are locked in by their super affordable mortgage rate. REALTORS® are starting to say that they have more people in love with their loan than with their home. Many homeowners do not want hassle with competitive market.

Investors are staying in the market

Investors propped up the market by buying homes in the crash. People thought they would sell them but they have been making so much money that they aren’t selling. Rental securitizations are bringing a lot of liquidation. We are seeing this more in urban areas.

Seasonal adjustment disorder

Spring buying season started in the winter this year. This is a very big trend this year. Spring home buying season started 3 weeks earlier based on online activity and market velocity. We typically see a spike in online activity in January. This year we saw a peak at the second week of January. This is important because we saw buyers earlier. 1 in 4 homes are selling in less than a month – typically the housing market hits that in March, but this year we hit it in January. And, some of this seasonal adjustment disorder is attributable to the shift in the population demographics. Younger buyers are not held to seasonality and schools.

The urbanization of employment

Job growth – employment growth over past decade has been concentrated in urban areas. There is an employment drive in a lot of markets. The panel called this the Urbanization of employment – creating white collar jobs.

Creating “gray space”

We are seeing people moving further out and now seeing commuting as a more viable solution for home ownership. A good example of this is people moving from San Francisco to Antioch.

In Nashville the population grew by 10%, but housing stopped and home prices went up. People can’t afford to live there anymore. The Mayor is trying to put housing along transit roots to make more affordable home options.

There is an urban, suburban myth. Will urban searchers ever compromise on their urban dream, or will they move to the “gray space”? These are the “gray spaces” between urban and suburban popping up and picking up in demand. The future of housing could be the Long Island’s of the U.S.

Building wealth and potentially frustration

There is a shadow buyer demand – a lot of renters who got in their rental really wanted to buy. They had no other option and needed the extra space. People want the white picket fence, and are almost frustrated that they cannot get it.

Boomers have preached that the best way for middle class to build wealth is through home ownership. Buyers not yet on the market are asking themselves, “Will I have less wealth because I entered the market later in life compared to the baby boomer?” There is a common legacy of thinking that owning a house is a big deal, and we will see frustration around this.

It is getting harder to get into the market. Many potential homebuyers know that the longer they wait the harder it will be to get into the housing market. The market at the entry level is very competitive. The high end the market is slowing down a bit.

All of this will resolve itself through natural evolutions. LA was a low-cost alternative to NY. And now, Dallas is a low cost alternative to LA.

Ways of adapting to the shortage

  • Seeing more multigenerational, joint home investments.
  • The spillover effect – people will move further out and commute longer.
  • Mermaid effect – people are falling in love with their 2nd and 3rd home choices.
  • Macroeconomic play in effect that will make us have to wait it out.
  • Only feasible relief is through the homebuilders.

Despite all of this according to the panel, the U.S. real estate is one of the most attractive asset classes.

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SOURCE:
https://www.proteckservices.com/category/home-value-forecast/
https://www.zillow.com/research/about-us/aaron-terrazas/
http://research.realtor.com/

 

NAR HOME survey says 71 percent of homeowners believe it’s a good time to sell

The National Association of REALTORS® released their quarterly Housing Opportunities and Market Experience (HOME) survey yesterday, and “71 percent of homeowners believe it’s a good time to sell.”

This is not surprising with the rising home prices.  This is up from 69% last quarter and 61% more than a year ago.

The survey also revealed that 42 percent of respondents believe homes are affordable for almost all buyers, with those living in the Midwest being the most likely to believe homes are affordable (55 percent) — and not surprisingly — West respondents (29 percent) being least likely to think homes are affordable. And, 20% would consider moving to a more affordable community. Twenty-seven percent of these buyers make under $50,000 a year versus 16% who make more than $100,000.

According to Lawrence Yun, NAR chief economist, in the NAR press release “it’s apparent there’s a mismatch between homeowners’ confidence in selling and actually following through and listing their home for sale. There are just not enough homeowners deciding to sell because they’re either content where they are, holding off until they build more equity, or hesitant seeing as it will be difficult to find an affordable home to buy. As a result, inventory conditions have worsened and are restricting sales from breaking out while contributing to price appreciation that remains far above income growth.

Yun went on to say, “Perhaps this notable uptick in seller confidence will translate to more added inventory later this year. Low housing turnover is one of the roots of the ongoing supply and affordability problems plaguing many markets.

Click here to see the full press release on the survey’s findings, or here for the full survey.

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SOURCE:
https://www.nar.realtor/news-releases/2017/06/71-percent-of-homeowners-believe-it-s-a-good-time-to-sell-economic-and-financial-confidence-dips
https://www.nar.realtor/infographics/home-survey-june-2017
https://www.nar.realtor/reports/2017-q2-homeownership-opportunities-and-market-experience-home-survey

 

 

 

Cybersecurity: How businesses can help protect the consumer

A cybersecurity plan is not something that you create once. As a business owner and even a smart consumer, you should be aware of current cybersecurity issues, what to watch for and how to help protect yourself and your business. And, as we know in the real estate industry that if one of our real estate partners is at risk, everyone in the transaction can be exposed.

At the recent National Settlement Services Conference in San Antonio, TX on June 8th, the Federal Trade Commission and SunTitle presented on cybersecurity. Here is an overview of what was presented along with tips and tricks to help protect your business and your customers.

According to the panel:

  • 70% of organizations have been hit by cyberattacks in the past 12 months.
  • 60% of all targeted attacks strike small and medium businesses.
  • 50% of attacks result in insolvency within 6 months.

Companies have a blind spot both culturally and procedurally. Fraudsters are smart, connected and according to the FTC have unlocked the last few pieces of our business processes to fully understand how we do business. Fraudsters are playing the long game. After a data security breach they typically wait 200 days before acting. Fraudsters are in the system prior to fraud on average 150-180 days.

First they learn your business, look for opportunities they have while biding their time, and then sweep in. Recently the Wall Street Journal reported that out of all emails with attachments; 50% are malicious. This number is staggering. And, to top it off, fraudsters are preying on the social relationship.

We need to understand what we are up against. There are several types of fraud, including:

  • System penetration
  • Malware/ransomware
  • Social engineering

Threats to your business

Technological threats:

  • Brute force attacks (low tech solution – tries to get into your network by continuing to use credentials)
  • Targeted penetrations
  • The “entry point”
  • Installation of malware or ransomware
  • Screen scraping, mirroring, etc.

Process threats:

  • Timing
  • Inadequate funding and ID verification procedures
  • Acceptance of “new” information through a different process or that you are not expecting (This is the biggest concern right now for our industry.)

People threats:

  • Social engineering and Business Email Compliance (BEC)
  • “I got tricked”
  • Real-time interaction and compelling manipulation strategies

Tips

  • Hover over hyperlinks, do not just click links in emails.
  • Educate yourself, your employees and your real estate partners.
  • Review and implement the Federal Trade Commission Protecting your Personal Information: A Guide for Business
  • Create a culture of compliance:
    • Take stock – know what personal information you have in your files and on your computers.
    • Scale down – Keep only what you need in your business. Identify how long do you need the info, and understand that data is a liability.
    • Lock it – protect the information you keep (Physical security, electronic security, Employee training (biggest vulnerability), vendors
    • Pitch it – properly dispose of what you do not need.
  • Plan ahead – Create a plan for responding to security incidents.

Layer on Best Practices

To help defend your security and data, the panel recommended to layer on Best Practices for hardware, software, people and processes to protect your business. Please see the outlined best practices below:

Technological Best Practices:

  • Secure remote access and active sessions
  • Encrypt data in transit and at rest
  • Segregate data
  • Tether machines
  • Install firewall, VPN’s and other devices (Needs to be a pre-vetted device with VPNs. Can use multiple firewalls. Create a honey pot – a rouse to draw in fraudsters to keep info safe and protected.)
  • Don’t share devices
  • Restrict device activity
  • Third party penetration testing (ABSOLUTE MUST: Need to understand where your vulnerabilities lie. Vendors that can provide you a report.)
  • Complex passwords
  • 3rd party password manager
  • 2FA (2-factor authentitifcation)
  • Monitor networks in real time
  • Use email “spam” service
  • Limit permissions and rights

Process Best Practices:

  • Policies and procedures:
  • System access
  • Password management
  • Information receipt, custody, retention and destruction
  • Wire and ID confirmation
  • Restrictions on access
  • Suspicious and “surprising” emails must be screened and verified
  • Educate yourself and train your people

People Best Practices:

  • A culture of compliance and curiosity
  • Observe and react in real time
  • Never enter login info
  • Don’t click on attachments without verifying
  • Save information on the server not the computer
  • Secure all information
  • Be curious, skeptical and think before you act

Here are a few resources for you as you create your cybersecurity plan:

Don’t forget, your cybersecurity plan is not a “one and done”. It is a living document that continuously changes and is updated.

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RESOURCES:
http://ns3thesummit.com/
https://www.ftc.gov/tips-advice/business-center/privacy-and-security/data-security
https://www.ftc.gov/tips-advice/business-center/guidance/protecting-personal-information-guide-business
https://www.ftc.gov/tips-advice/business-center/guidance/start-security-guide-business
https://www.ftc.gov/tips-advice/business-center/guidance/copier-data-security-guide-businesses
https://www.ftc.gov/system/files/documents/plain-language/pdf-0154_data-breach-response-guide-for-business.pdf
https://www.ftc.gov/about-ftc/bureaus-offices/bureau-consumer-protection/small-business
https://www.ftc.gov/news-events/blogs/business-blog

 

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