– Represents $517 Billion in Unpaid Principal Balances
- Florida FEMA-designated disaster areas related to Hurricane Irma include over 3.1 million mortgaged properties
– Irma-related disaster areas contain nearly three times as many mortgaged properties as those connected to Hurricane Harvey, and nearly seven times as many as those connected to Hurricane Katrina in 2005
– The $517 billion in unpaid principal balances in Irma-related disaster areas is nearly three times the amount as in those related to Harvey and more than 11 times of those connected to Katrina
– Irma-related disaster areas now include more than 90% of all mortgaged properties in Florida
The Data & Analytics division of Black Knight Financial Services, Inc. released a preliminary assessment of the potential mortgage-related impact from Hurricane Irma. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, both the number of mortgages and the unpaid principal balances of those mortgages in FEMA-designated Irma disaster areas are significantly larger than in the areas impacted recently by Hurricane Harvey. While the total extent of the damage from Hurricane Irma is still being determined, it is clear that the size and scope of the disaster is immense,” said Graboske. “Indeed, in terms of the number of mortgaged properties and their associated unpaid principal balances, Irma significantly outpaces even the number of borrowers impacted by Hurricane Harvey. With FEMA expanding the number of Irma-related designated disaster areas late Wednesday, Sept. 13, to a total of 37 Florida counties, more than 90% of all mortgaged properties in the state now fall into such areas. More than 3.1 million properties are now included in FEMA-designated Irma disaster areas, representing approximately $517 billion in unpaid principal balances. In comparison, Harvey-related disaster areas held 1.18 million properties – more than twice as many as with Hurricane Katrina in 2005 – with a combined unpaid principal balance of $179 billion. Irma-related disaster areas now contain nearly seven times as many mortgaged properties as those connected to Katrina, with more than 11 times the principal balances.
“As Irma forged its path of destruction through the Caribbean, one relatively positive development was that Puerto Rico escaped the direct hit many had predicted. From a mortgage performance perspective, this was particularly good news, as delinquencies there were already quite high leading up to the storm. At more than 10%, Puerto Rico’s delinquency rate is nearly three times that of the US average, as is its 5.8% serious delinquency rate. In contrast, the disaster areas declared in Florida have starting delinquency rates below the national average, providing more than a glimmer of optimism as we move forward.” By the Numbers:
– Total mortgaged properties in Hurricane Irma-related FEMA disaster areas: 3,140,000
– Total mortgaged properties in Hurricane Harvey-related FEMA disaster areas: 1,180,000
– Total mortgaged properties in Hurricane Katrina-related FEMA disaster areas: 456,000
– Total unpaid mortgage balances in Hurricane Irma-related FEMA disaster areas: $517 billion
– Total unpaid mortgage balances in Hurricane Harvey-related FEMA disaster areas: $179 billion
– Total unpaid mortgage balances in Hurricane Katrina-related FEMA disaster areas: $46 billion
Jeremy G. Philips – what Jamie Dimon is missing about Bitcoin
JPMorgan Chase’s chief executive, Jamie Dimon, is the most successful banker of his generation. He has successfully navigated a challenging environment over more than a decade, and his firm is stronger than ever. So naturally, given his status and success, his recent comments that Bitcoin was a “fraud” were taken seriously. Mr. Dimon’s comments may have come as a surprise to the dozens of employees at his bank working on projects related to blockchain, the bookkeeping technology underpinning digital currencies. And the comments must have been especially jarring to those employees who were holding a forum for hedge funds interested in Bitcoin— whose market value stood at about $70 billion at that moment. It’s no secret that Bitcoin and other digital currencies may dramatically fall in value at any time. How can an asset whose value jumps by 20% some days, and which no one can accurately value, plausibly not also suffer huge declines? But that’s a long way from Bitcoin being a worthless fraud. While we are still in the early stages of digital currencies, and much can still go wrong, Mr. Dimon’s rationale for his negativity was curious. His core problem with Bitcoin? “You can’t have a business where people are going to invent a currency out of thin air,” he said. Yet as one of the world’s foremost bankers, Mr. Dimon is plainly aware that countries also create fiat currencies out of thin air. (In Latin, fiat means “let it be done.”) It has been more than four decades since Richard Nixon removed the American dollar from the gold standard. And in any event, most of gold’s value doesn’t arise from its physical attributes, since it doesn’t have any magical ability to create usefulness or generate financial dividends despite its attractive shiny yellow hue. It’s instead because investors have believed in its value for thousands of years.
Of course, fiat currencies like the dollar have the backing of a sovereign nation. Digital currencies are obviously far more speculative, have been around for only a few years, and don’t have a government’s underlying support. But almost all currencies today are conjured up from nothing — the euro didn’t even exist 20 years ago — and their value is largely dependent on trust. Naturally, most people have more trust in the “full faith and credit of the United States” than in an anonymous distributed group of miners and traders. But trust in digital currency is clearly building over time and is a self-reinforcing network. And one of the advantages of Bitcoin is that its total supply is fixed. A fiat currency, on the other hand, can be devalued by centralized monetary policy. In his comments, Mr. Dimon cited the famed investor Howard Marks, who in a July memo to his clients referred to Bitcoin as an unfounded fad. But he seems to have missed Mr. Marks’s subsequent backflip in which, while remaining a skeptic, the hedge fund mogul wrote, “There’s absolutely no reason why Bitcoin — or anything else — can’t serve as a currency if enough people accept it as such.” Mr. Dimon is also too modest about JPMorgan’s own achievements in this arena. His firm conjured up its own currency: Chase Ultimate Reward points, its credit card loyalty program. Millions of customers have accumulated billions of points, trusting in Chase’s promise that this currency can be converted into cash or used for travel and other delights. And they hope that Chase won’t unilaterally choose to devalue them, while living with the risk that, unlike their bank accounts, the Federal Deposit Insurance Corporation provides no insurance for this valuable currency.
JPMorgan is even working on its own blockchain project, Quorum, which is built on the publicly accessible Etherereum network. Presumably, Mr. Dimon doesn’t think Etherereum, whose value is up more than 2,000% over the last year, is also a modern version of tulip mania. In Mr. Dimon’s telling, Bitcoin has value only for people who want to bypass the traditional banking system for illicit purposes, including “murderers and drug dealers,” or people living in countries with repressive governments like North Korea and Venezuela. He doubts that this is a large market opportunity, though perhaps he may concede that there are inherent difficulties in accurately sizing up markets where participants like to keep a low profile. Part of the promise of the blockchain, and associated digital currencies, is the absence of a central authority. It’s fair to say that the cult of decentralization may have run too far, with some enthusiasts imagining it as a panacea for every business problem. Centralized networks work well for many functions, like trading stocks or managing flight reservations. But new use cases for digital currencies are just starting to take shape. They are now being used to create value in the way that Silicon Valley has traditionally done so: regulatory arbitrage.
Ride-hailing got its start avoiding onerous taxi medallion costs; Airbnb avoided hotel taxes and regulations; and YouTube played fast and loose with copyright rules. Similarly, some entrepreneurs are using the blockchain as a way to avoid certain regulatory requirements for raising capital. As a rule, Silicon Valley prefers to ask for forgiveness rather than permission. Companies are also creating tokens to align incentives around decentralized efforts like open source software or distributed storage networks. Undoubtedly, there will be plenty of hits and misses, as one would expect in the early days of a new technology. And there will be some outright scams as well. But the toothpaste is now out of the tube, and there is sufficient momentum for legitimate use cases to develop. Presumably, that’s why JPMorgan itself is investing resources in developing these technologies and applications. Economists use the term “cheap talk” for words that don’t have any payoff. Despite his withering Bitcoin critique, Mr. Dimon also said, “Don’t ask me to short it. It could be at $20,000 before this happens, but it will eventually blow up.” Mr. Dimon added that he would fire any employee who traded Bitcoin. But he didn’t say how he would deal with an employee who publicly identifies a $70 billion fraud — then doesn’t find a way to make a dime out of it.
US homebuilder sentiment falls in September
US homebuilders are feeling less optimistic about their sales prospects, reflecting concerns that rebuilding efforts following hurricanes Harvey and Irma will drive up costs for construction labor and materials. The National Association of Home Builders/Wells Fargo builder sentiment index released Monday slipped to 64 this month. That’s down three points from a downwardly revised reading of 67 in August. Readings above 50 indicate more builders view sales conditions as good rather than poor. The index has been above 60 since September last year. The latest index fell short of analyst predictions, which called for a reading of 67, according to FactSet. Readings gauging builders’ view of sales now and over the next six months declined from last month. A measure of traffic by prospective buyers also fell.
Pittsburgh’s self-driving car boom means $200,000 pay packages for robotics grads
– At least four self-driving car companies are battling for robotics talent in Pittsburgh
– These types of salaries were “unheard of for any role until recently”
– By year-end, Argo expects to have 200 employees, with Pittsburgh as one of its main centers
There’s a war for talent in Pittsburgh’s booming autonomous car market. It started with Uber and now includes Argo AI, which is majority owned by Ford, and a start-up called Aurora Innovation. With so much hiring, it’s a good time to be at the city’s prized academic institution, Carnegie Mellon University. Andrew Moore, the dean of Carnegie Mellon’s computer science school, said that computer vision graduates right out of college are commanding pay packages of $200,000, which he described as “unheard of for any role until recently.” In addition to Uber, Argo and Aurora, Moore said there’s a fourth self-driving car company in Pittsburgh that’s not yet talking publicly. “One of the effects is this dramatic salary rise for anyone with robotics engineering skills,” said Moore, whose background is in artificial intelligence and robotics. “It does feel very much like a gold rush town at the moment.” Moore, who previously spent eight years at Google and ran the company’s Pittsburgh office, estimates that there are 1,000 to 2,000 people in the city working on autonomous driving. Pittsburgh has become the de facto capital for self-driving car development, thanks to Carnegie Mellon’s top-ranked robotics program and the city’s openness to partnering with tech companies on risky endeavors. Despite all of Uber’s legal, cultural and management troubles, the ride-hailing company is aggressively hiring in Pittsburgh. Uber currently has 60 job openings there in its advanced technologies group, which houses the self-driving engineering team.
Aurora has 12 listings for both Pittsburgh and Palo Alto, the two cities the company calls the “nerve centers of self-driving technology.” It has another opening in Pittsburgh for a vehicle operator manager. The start-up’s creators came from Google, Uber and Tesla, where they were all working on related projects. According to an April story in Fortune, Aurora will work with auto manufacturers and suppliers to build a “mix of sensors, software, and data services needed to deploy fully autonomous vehicles.” Argo captured headlines in February, when Ford announced a $1 billion investment for a majority stake in the company. Argo was founded by Carnegie Mellon alumni, who also happen to be former Google and Uber employees. Ford said that by the end of the year, Argo expects to have more than 200 people in Pittsburgh, Michigan and the Bay Area. The company has job openings in Pittsburgh for software engineers, hardware engineers, vehicle operators and other positions. “There is a healthy amount of poaching between the self-driving car companies in Pittsburgh,” Moore said. “Overall, it’s really good for the city because there are constantly new people moving in.”
NAR – student debt delaying millennial homeownership by 7 years
Despite being in the prime years to buy their first home, an overwhelming majority of millennials with student debt currently do not own a home and believe this debt is to blame for what they typically expect to be a seven-year delay from buying. This is according to a new joint study on millennial student loan debt released today by the National Association of Realtors® and nonprofit American Student Assistance®. The survey additionally revealed that student debt is holding back millennials from financial decisions and personal milestones, such as adequately saving for retirement, changing careers, continuing their education, marrying and having children. NAR and ASA’s new study found that only 20% of millennial respondents currently own a home, and that they are typically carrying a student debt load ($41,200) that surpasses their annual income ($38,800). Most respondents borrowed money to finance their education at a four-year college (79%), and slightly over half (51%) are repaying a balance of over $40,000. Among the 80% of millennials in the survey who said they do not own a home, 83% believe their student loan debt has affected their ability to buy. The median amount of time these millennials expect to be delayed from buying a home is seven years, and overall, 84% expect to postpone buying by at least three years. “The tens of thousands of dollars many millennials needed to borrow to earn a college degree have come at a financial and emotional cost that’s influencing millennials’ housing choices and other major life decisions,” said Lawrence Yun, NAR chief economist. “Sales to first-time buyers have been underwhelming for several years now1, and this survey indicates student debt is a big part of the blame. Even a large majority of older millennials and those with higher incomes say they’re being forced to delay homeownership because they can’t save for a down payment and don’t feel financially secure enough to buy.”
According to Yun, the housing market’s lifecycle is being disrupted by the $1.4 trillion of student debt US households are currently carrying2. In addition to softer demand at the entry-level portion of the market, a quarter of current millennial homeowners said their student debt is preventing them from selling their home to buy a new one, either because it’s too expensive to move and upgrade, or because their loans have impacted their credit for a future mortgage. “Millennial homeowners who can’t afford to trade up because of their student debt end up staying put, which slows the turnover in the housing market and exacerbates the low supply levels and affordability pressures for those trying to buy their first home,” added Yun. In addition to postponing a home purchase, the survey found that student debt is forcing millennials to put aside several additional life choices and financial decisions that contribute to the economy and their overall happiness. Eighty-six% have made sacrifices in their professional career, including taking a second job, remaining in a position in which they were unhappy, or taking one outside their field. Furthermore, more than half say they are delayed in continuing their education and starting a family, and 41% would like to marry but are stalling because of their debt. Even more concerning, according to Yun, is that it appears many millennials are putting saving for retirement on the backburner because of their student debt. Sixty-one% of respondents at times have not been able to make a contribution to their retirement, and nearly a third (32%) said they were at times able to contribute but with a reduced amount. “Being unable to adequately save for retirement on top of not experiencing the wealth building benefits of owning a home is an unfortunate situation that could have long-term consequences to the financial well-being of these millennials,” said Yun. “A scenario where only those with minimal or no student debt can afford to buy a home and save for retirement is not an ideal situation and is one that weakens the economy and contributes to widening inequality.”
The financial pressures many millennials with student debt are now experiencing appear to somewhat come from not having a complete understanding of the expenses needed to pay for college. Only one-in-five borrowers indicated in the survey that they understood all of the costs, including tuition, fees and housing. “Student debt is a reality for the majority of students attending colleges and universities across our country. We cannot allow educational debt to hold back whole generations from the financial milestones that underpin the American Dream, like home ownership,” said Jean Eddy, president and CEO at ASA. “The results of this study reinforce the need for solutions that both reduce education debt levels for future students, and enable current borrowers to make that debt manageable, so they don’t have to put the rest of their financial goals on hold.” “Realtors® are actively working with consumers and policy leaders to address the growing burden student debt is having on homeownership,” President William E. Brown, a Realtor® from Alamo, California. “We support efforts that promote education and simplify the student borrowing process, as well as underwriting measures that make it easier for homebuyers carrying student loan debt to qualify for a mortgage.” In April 2017, ASA distributed a 41 question survey co-written with NAR to 92,419 student loan borrowers (ages 22 to 35) who are current in repayment. A total of 2,203 student loan borrowers completed the survey. All information is characteristic of April 2017, with the exception of income data, which is reflective of 2016.