DS News

31 » VISIT US ONLINE @ DSNEWS.COM STUDY COMPARES LENDING POLICIES Some market analysts have pointed to looser lending standards as the reason why unqualified buyers received mortgages before the housing crash. However, a recent research paper detailed that banks' "looser lending" policies were also geared towards construction firms. e research paper, titled Economic Growth and Financial Statement Verification and written by MIT Sloan Assistant Professor Andrew Sutherland, discussed the position banks played in the financial crisis of 2008 in other industries in relation to the construction industry. e paper sources a study using previously unreleased banking industry data on loans to the U.S. construction industry from 2002 to 2011, which found that banks cut standards significantly and exposed them to default and outright fraud. Information used in the paper was obtained by researchers who found financial data on borrowers and lenders from the Risk Management Association and compared lending standards banks used for construction industry firms with the standards applied to firms in the mortgage industry. Researchers found that banks relaxed standards significantly more for construction firms, the paper stated. In the wake of President Donald Trump's recent Dodd-Frank executive order, the paper discusses risk management and regulatory compliance within the mortgage banking sector. Former House Rep. Barney Frank (D-Massachusetts), author of the Dodd-Frank Act, spoke to DS News on February 3, stating that Trump's latest executive order confirms his suspicions that he has no intention of maintaining strong regulatory controls over the financial industry. "He's not worried about a repeat of 2008," Frank said. "I think this is just confirmation that he believes we shouldn't regulate the financial industry. Instead, he's going to make people in business very happy." Sutherland stated that although additional policies have been put in place since the crisis, it is imperative that regulators "remain cognizant of how lending standards vary over an industry's economic cycle." He continued, "When times are good, banks often cut their lending standards, and we can see the consequences. Many banks in our study either failed or required massive capital injections." WHICH REGION HAS THE BEST SUBURBS? In a market plagued by low inventory and rising prices, suburbs have become a hot spot for young families and first-time buyers alike, and the proof is all in the numbers. According to Realtor.com, suburbs are seeing high growth across the nation. In fact, between 2013 and 2016, suburban listing prices grew about 6.7 percent a year, compared to the 9-percent jump of urban listings. As a result, household growth has been stronger in the suburbs, with a nearly 8-percent hike since 2010. Urban household growth was only 6.6 percent for the same time frame. "Suburbs are traditionally viewed as a mecca for young families willing to trade in shorter commute times and urban nightlife for better schools and larger homes, but the relationship between the suburbs and urban areas is far more intertwined," said Jonathan Smoke, Realtor. com's Chief Economist. "In recent years, rising home prices and inventory shortages in urban centers have made affordable suburban home prices more appealing for buyers." e top metros for suburban household growth were all in the Southern U.S., with the top five including Austin-Round Rock, Texas; San Antonio-New Braunfels, Texas; Oklahoma City; Jacksonville, Florida; and Houston-e Woodlands-Sugarland, Texas. Austin-Round Rock saw a 26.7-percent jump in suburban household growth—more than 10 percent higher than its rate of urban growth. Top suburban listing growth was seen in Cincinnati, Milwaukee, Indianapolis, Miami, and Riverside-San Bernardino, California. Suburban listing prices grew nearly 10 percent in Cincinnati. Overall, the metros where suburban "hotness" outpaced that of more urban areas were Nashville-Davidson-Murfreesboro- Franklin, Tennessee; Charlotte-Concord- Gastonia, North Carolina and South Carolina; Portland-Vancouver-Hillsboro, Oregon and Washington; Rochester, New York; and Indianapolis-Carmel-Anderson, Indiana. According to Realtor.com, "hotness" scores reflect age of inventory, listing view, speed of supply growth, and market demand. Realtor.com also ranked the top 10 hottest suburban ZIP codes in the United States. ese included 80239 (Northeast-Montbello, Colorado), 75098 (Wylie-St. Paul, Texas), 94568 (Dublin-Dougherty, California), 78724 (Daffan- Hornsby, Texas), 33619 (Orient Park-Palm River-Clair Mel-Progress Village, Florida), 32829 (Vista East, Florida), 33189 (Cutler Bay- Lakes by the Bay, Florida), 95035 (Milpitas, California), 37129 (Williamsburg-Waterhill- White Haven-Blackman, Tennessee), and 27502 (Friendship-Apex, North Carolina). Among the top 10 ZIP codes, households have jumped an average of 18.8 percent since 2010. Altogether, they boast a combined 92.6 on Realtor.com's hotness index.

• Cover