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I was interviewed on the Daily Ticker by Yahoo! Finance’s very sharp Lauren Lyster on a USAToday story that Millennials now entering the housing market. Basically I agree but we are very early in the process. Household formation has been restrained since the financial crisis began 5 years ago but rising rents and falling mortgage rates are perhaps forcing the issue.
Tags: Lauren Lyster, Yahoo! Finance, Daily Ticker, USA Today
A study by PMI Mortgage Insurance Co. found that piggyback loans may pose risk to the mortgage system; especially vunerable are high priced housing markets. The borrower can use a second mortgage to “finance” a portion of the down payment. This creative financing technique has allowed more purchasers to be more highly leveraged. The study suggests that higher priced housing markets, where the gap between affordability and price is wider, are seeing more of this type of financing and are therefore subject to greater risk in a housing downturn.
[USA Today](http://www.usatoday.com/money/perfi/housing/2005-07-27-risk-real-estate-usat_x.htm) put together the results of the PMI study in the following table.
The [PMI Risk Index](http://money.cnn.com/2005/08/03/real_estate/buying_selling/pmi_riskiest-markets/) predicts the risk of home-price declines over the next two years using local economic forecasts.
Piggyback loans — so called because a second mortgage is piggybacked on to a first to compensate for a smaller down payment — have become common in recent years as housing prices have appreciated. Approximately 42 percent of home purchase mortgage loan dollars involved piggyback loans during the first half of 2004, up from 20 percent in 2001.
Here is the [PMI Report [Note: PDF]](http://www.pmigroup.com/lenders/media_lenders/pmi_eret05v3s.pdf)
Local media coverage based on risk:
High Risk
[San Diego, CA Note: Subscription](http://www.mercurynews.com/mld/mercurynews/news/12243396.htm)
Low Risk
[Phoenix, AZ](http://phoenix.bizjournals.com/phoenix/stories/2005/08/08/daily17.html)
[Pittsburgh, PA](http://www.pittsburghlive.com/x/tribune-review/trib/newssummary/s_362867.html)
Tags: USA Today, PMI Mortgage Insurance, Risk
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Jonathan Miller is President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm he co-founded in 1986. He is a state-certified real estate appraiser in New York and Connecticut, performing court testimony as an expert witness in various local, state and federal courts. He holds the Counselors of Real Estate (CRE) and Certified Relocation Professional (CRP) designations. He is an Appraiser “A” Member of the Real Estate Board of New York and a member of Relocation Appraisers and Consultants, Inc.
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