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The most recent housing and mortgage data indicate that foreclosure rates are declining nationwide with the exception of certain markets. This is welcome news even as those rates are expected to rise slightly in another year or two. Although home price appreciation remains strong, foreclosures and other factors are putting some constraints on the current housing market.

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The U.S. economy continues to move in the right direction in spite of a stock market correction and some threats related to overseas trade wars. The truth is that employment figures are up as is consumer confidence related to housing. While this is good news for now, rising home prices and soaring interest rates are already having an impact on the loan market.

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Multiple factors are affecting rent versus buy trends across the nation, including age group, local real estate market conditions, and taxes.

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The United States has once again entered a seller's market, with homeownership on the rise. While we haven't seen numbers that rival pre-recession levels, young adults are increasingly fueling this housing market as the economy improves. Homeownership rates among Millennials is now at 36 percent, which is the largest gain within any demographic group in 2017. Lenders must be ready to meet the needs of these young adults as they look to purchase their first homes.

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Millennial Homeowners Are Coming of Age

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The total household debt in the United States advanced 1.5% in the last quarter of 2017. Total household debt climbed $193 billion to reach $13.15 trillion, a new record. The figure closed 2017 as the fifth consecutive annual increase in debt growth.

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A rise was seen across almost all loan types. Mortgages rose a significant $139 billion quarter over quarter, even as the median credit score shown by new applicants dropped. Auto loan and student loan balances also increased. Auto loan balances have now gone up steadily for the sixth consecutive year.

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President Donald J. Trump recently announced a plan to impose tariffs on imported steel and aluminum. The announcement was big news simply as a major policy initiative by the administration. In terms of the financial industry, though, it’s important to look at the potentially significant effect on the U.S. housing industry and the American consumer.

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Loan payments of all types fare very differently during periods of economic growth than they do during periods of recession. The reason is simple. Businesses or consumers make loan payments, and because of a strong economy, they are more likely to make them without difficulty.

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Banks and other lending institutions are affected by changes in the business cycle, simply because lending during growth periods is very different than lending during recessions. A recession can lead to a tightening of the purse strings, while a positive business environment can result in an increase in lending.

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To see clearly where we are and where we might be headed economically in the near future, it’s a good idea to look back at the economic cycle.

The Four Phases of a Business Cycle: Expansion, Crisis, Recession, Recovery

Business cycles, in general, have four main phases.

The first phase is expansion...

Expansion is characterized by an increase in the gross domestic product (GDP), business production and prices, and by low interest rates.

The United States Federal Open Market Committee (FOMC), which is charged with the level and direction of interest rates, uses interest rates as a tool in business cycles. They are kept low so that the borrowing cost to business is relatively low, and businesses can expand. GDP rises as a result.

Businesse...

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After the 2008 financial crisis, the United States entered the Great Recession, with unemployment rates as high as 10 percent and GDP growth contracting at -2.8 percent in 2009. The country entered the expansion business phase in the third quarter of 2009 when the GDP growth rate was once again positive at 1.3 percent.

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