Loan accessibility, online retailers shaping homeowner spending
When the Great Recession hit in late 2007, home equity loan numbers plunged from an all-time high of $120 billion earlier that year to less than $10 billion per year in 2009. And although it’s nowhere near the heyday of the early 2000s, 2017 seems on the way back to near $50 billion by the end of this year.
- President Trump struggles to unite
- Amazon’s impact on the U.S. retail sector
- Small-business owners concerned about government inefficiencies
- Urbanization accelerates worldwide
- Women continue to break the glass ceiling
- Where the U.S. economy is headed in 2018
Consequently, home equity lines of credit and cash-out mortgage refinances are coming back in style as home availability shortages are outpacing demand in most parts of the country — a result of increasing employment and rising confidence that an improving U.S. economy is underway.
Home equity line originations rose 8% to nearly $46 billion in the second quarter — the highest level since 2008. Simultaneously, borrowing through cash-out mortgage refinancing hit $15 billion, up 6% from a year earlier, according to data from Freddie Mac, the U.S.-supported financial entity.
The primary thrust behind this skyrocketing demand are home prices rising to near $300,000 at mid-year, up from $190,000 at the start of 2014.
Although increasing concerns are emerging regarding similar factors existent prior to the Great Recession, there is no housing bubble emerging at this time. This is especially true since the nation’s financial institutions have never been under the strict controls existing today.
In fact, the nation’s leading banks are encouraging prospective borrowers to invest in residential expansion and improvements rather than extreme expenditures to add to their purchasing capability. Since a home equity line is similar to credit cards — without limitations, but with the house as collateral — responsible bank management is offering advice to prospective borrowers, even though the recent additional lending is based on the indigenous housing minimal cost justifications.
Even as these loans are becoming increasingly popular due to their as yet limited utilization vis-á-vis their credit capability, the Great Recession still serves as a rational restraint to the full borrowing capability of the potential credit requester.
Therefore, U.S. banks’ holdings of near $390 billion in revolving home equity as of late summer are down more than 35% from a peak of about $610 billion in 2009, according to Federal Reserve data. Home equity organization are up appreciably, but still well below pay downs of old lines, according to major banks, who still have a long way to go before reaching new credit pay down balance.
As the first year of the Trump Administration nears its end, the anticipated reversal of the country’s slip into record 68% consumption of gross domestic product (GDP) is showing few signs of reversal. What is becoming worrisome, regarding the hoped-for success of “Trumpism,” is the president’s growing distraction from working across both sides of the Congressional aisle. This has been further complicated by a growing faction of his own party detracting from Trump’s primary objectives of economic growth revival.
Although the lack of progress so far on many of the key issues of America’s future growth is disappointing, further negativity has been demonstrated by leading Fortune 500 CEOs scuttling President Trump’s manufacturing objectives by liquidating his advisory council’s existence.
While such a state of the Administration’s lack of success is becoming troubling, the total lack of minimal positive initiatives gives President Trump another positive chance in 2018 with the mid-term House and Senate elections in November.
Unfortunately, the further deterioration among opposing social elements at home, and growing ISIS activity abroad in the Mideast and Europe, further complicate the president’s desire to put the dynamic success stamp on his varied domestic and foreign policy objectives.
While Jeff Bezos’ Amazon retail revolution may be considered an unassailable gift to America’s 300-plus million retail product utilizers, this has revolutionized the hundreds of thousands of business entities, large and small, that have catered to neighborhoods in cities, suburbs and rural areas throughout the U.S. and increasingly much of the rest of the world.
In effect, although still in its early stages, Amazon is well on its way toward turning shopping centers large and small, department stores, mail-order enterprises and even specialty stories upside down. Although the major impact of this revolutionary retail technology has already greatly weakened the underpinnings of much of this multi-trillion-dollar segment of the leading U.S. economic sector, it’s only beginning to makes itself felt by retail giants and privately owned neighborhood shops. Amazon’s increasing dynamics are running afoul of President Trump’s employment increase and privately owned independent businesses in all corners of the nation.
It is safe to say that shopping centers, independent specialty businesses and mail-order companies are all being hit hard by Amazon’s ambitions, which appear to have no limits in their extent of depth and breadth.
Despite relatively low interest rates that have persisted since the end of the Great Recession, the U.S. Environmental Protection Agency (EPA) is filling tens of thousands of small business owners with increasing concern regarding government’s long-term attitude toward their very existence.
This became ever more apparent during the two terms of President Barack Obama’s legislative and executive order approach. These tended to favor such legislation as ever-higher minimum wage, shorter work weeks, and support of conglomerates’ relocation of divisions and subdivisions to offshore locations that provided lower costs. These covered a great variety of products and favored the consumption sector while saddling U.S.-based privately-owned businesses with increasingly higher production and distribution costs.
Such concern was further heightened by lower import tariffs and “paperwork costs” that made these small businesses more costly to manage. It became increasingly apparent that the administration’s goal was primarily to boost public consumption and spending to the detriment of factories, distributors and employers.
The increasing concern over the inability of Trump to implement important legislation on topics like taxes, import tariffs and infrastructure expansion has fostered grave concern among many business owners. The original optimism that greeted Trump’s win last November has turned into skepticism by many thousands of private businesses owners who were hoping for a surge of friendly legislation to reverse the 68% gross domestic product percentage of consumption growth — the highest in modern U.S. economic history.
Only a reversal to a more normal dependence on American-based production companies will change this growing pessimism, but Trump’s ability to make this happen continues to generate concern as time goes by.
According to the U.N.’s population division, as of as late as 2011, statistics indicate that even the least developed nations today are speeding up the rural-to-urban switch at lightning speed. This is especially obvious in the world’s most populous countries, China and India, which comprise more than one-third of the world population of 7.5 billion.
With the move to cities being primarily based on a population divergence from agriculture to massive industrial expansion and exports of all types of industrial, commodity, excavation and development jobs, the U.N. claims there are 32 “urban conglomerations” that are expanding with ever-increasing speed. According to experts attempting to decipher this lightning-speed urbanization, they reveal the sociological and physical obstacles needed to overcome this massive trend.
Since this phenomenon cannot be slowed due to economic opportunities that have been granted to these once predominantly rural nations. Southeast Asia, Africa and South America have had to adapt. Those governmental experts attempting to integrate the age-old lifestyles of rural living into urbanized areas are focusing on the greater expansion of existing metropolises as well as tackling the many hang-ups of urban life to which the vast majority of city newcomers are totally unaccustomed.
In some of the world’s most significant “growth cities,” higher wages than what the formerly rural population is have been successfully utilized for the expansion of size and population of these cities themselves.
In the past 20 years alone, such world cities as Cairo, Egypt; Seoul, South Korea; Guadalajara, Mexico; Guangzhou, China; Vinh Long, Vietnam; Pune, India; and Lagos, Nigeria, have seen doubling, tripling, and even more to accommodate the additional metropolitan sprawl that has sprung up in all parts of the world. These have witnessed the greatest and fastest evolution from rural areas to big cities the globe has ever seen.
While such expansion comes with long-term social change, it is the changing nature of these cities and the huge number of gainfully employed new residents that are only at the early stages of the changing lifestyle with which these new occupants will have to cope.
Female leaders are more commonplace than ever, and there is every indication that this trend will expand in the foreseeable future. What has made the big difference in the past generation are the following:
While some male top executives are forced out of their leadership positions at 65, a growing number of highly educated women have found both time and energy to utilize their talents that were previously limited by family responsibilities.
This has made available a growing capability that has propelled a record number of women to the top of such billion-dollar corporate enterprises as IBM, General Motors, Intel, Xerox and more.
Younger women are contributing to the inception and expansion of independent companies.
The acceptance of female leadership is now hardly criticized by even the most “old-fashioned” individuals, who previously would have excluded women from critical professional positions.
With the fourth quarter of the current year reaching its final stages, it seems timely to focus on this first year of the Trump Administration. Although generally disappointing in its overall economic results, there are enough apparent glimmers of hope to anticipate strong forward motion in 2018.
Continuing to hang over the Republicans’ heads in this upcoming mid-term election year are the inabilities of President Trump to get past the “Affordable Healthcare Act” revision, tackle an outdated income tax structure, initiate an update to antiquated national infrastructure and grapple with a continually growing national debt of roughly $19 trillion.
In focusing on the upcoming 2018 mid-term election year, there are growing indicators that a reasonably respectable turnaround is in the works:
Gross domestic product growth. Currently, the upward momentum for 2017 is expected to exceed 2.1% after a paltry 1.5% in 2016. This warrants another upward bump in 2018.
Interest rates. By the end of 2017, interest rates will be up slightly from the year before and will likely rise to a 2.75% average throughout 2018. Meanwhile, the specter of inflation will likely not manifest itself in 2018, trending down slightly from 2.5% in 2016 to 1.5% predicted in 2018.
Unemployment. While millions of willing workers seem permanently sidelined due to a lack of factory jobs that have substantially disappeared in the last 16 years, those most recently unemployed are down to 4.3%, one of the lowest percentages in decades. This low ebb is likely to be maintained in 2018.
Crude oil. Although future growth of production and exports will reach new highs in 2018, worldwide new exploration excess will continue to exceed demand with the price of crude oil remaining in the low $50-per-barrel range throughout 2018, at best.
Manufacturing. Factory closings and heightened factory evolution will slowly enjoy a turnaround during 2018, but only enough to reach a low 2% increase with previously strong automotive production taking a pause in 2018 due to demand slowdown.
Because international hot spots like North Korea, Iran and the Middle East may erupt at any time in 2018, the U.S. foreign policy sector is impossible to certify at this time. Obviously, such military overseas involvement could surely impact the reasonable domestic sector predictions for 2018. Such major overseas policy disruptions would impact a relatively lackluster economic improvement, as the mid-term elections are beckoning in November next year.