Tandy On Real Estate

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Housing – Resale

Finally, More Millennials Are Buying Homes

According to Housingwire Millennials are finally buying homes. Ben Lane reported, “Back in September, after existing home sales fell to a three-year low, it appeared that many younger would-be buyers were turning to renting instead of buying. But things look much different just a few months later.”

The increase is being driven by younger buyers under the age of 44, and yes, that includes the older portion of Millennials. Homeownership among buyers age 35 and under rose from 36% to 36.5% in the last year, while homeownership for those from age 35-44 rose from 58.9% to 61.1% in the same time frame. According to CoreLogic’s Ralph McLaughlin, young households, which represent the largest pool of potential homebuyers in the United States, are starting to enter the homeownership game.

Millennials may have been slow to start, but that seems to be changing. Historically, Millennials have been reported to:

  • Have delayed marriage having kids, but that is finally happening.
  • Wanted to enjoy more experiences than traditional activities of buying a home – but that’s changing.
  • Been happy/content living at home, but they are finally getting tired of that or getting kicked out.
  • Have had student debt challenges, but are finally making enough to be able to handle a home debt. 

By the end of 2018, Millennials represented 45% of all new mortgages, compared to 36% for Generation X, and 17% for Baby Boomers, Realtor.com reported to Housingwire. Millennials have now surpassed older generations in the total dollar amount of mortgages, and represent the largest dollar volume by age group. Javier Vivas of Realtor.com says Millennials are getting older, and have better jobs and deeper pockets, allowing them to get into home ownership. They are, however, focused on home affordability, and shocker, are not always picking the large metros as many may think. Instead, they are looking for strong job markets and lower cost options in more non-traditional areas, i.e. Buffalo, NY. In addition, Millennials consistently made lower down payments than other generations since 2015, which is not surprising as a first-time homebuyer.

More Positive News

In Q1 2019, the U.S. Census Bureau reports a flattening in homeownership at 64.2% year over year, breaking an eight quarter streak of gains. CoreLogic attributes this flattening to an uptick in renters, although owner household growth continues to outpace renters. Ralph McLaughlin of CoreLogic brings us a very positive trend change to watch in his April 25th article:

  • The first quarter of 2019 was the sixth consecutive quarter that owner-occupied households grew by more than a million, at nearly 1.1 million new owner households.  
  • The number of new renter households jumped by close to half a million. This is a significant change in trend, as renter households previously fell six out of seven quarters.
  • Total household growth remains remain strong, topping 1 percent for six straight quarters, and continues the most significant streak of household growth in more than 12 years.

McLaughlin reports that data shows increasing evidence that not only are young homebuyers indeed pursuing the American dream of homeownership, but solid household growth overall should continue to support healthy demand over the next two decades. An estimated 46 million new households under the age of 30 will push up demand for both owner and renter-occupied homes over the next two decades. Despite recent headwinds and signs of a market cooldown, these demographic fundamentals should lead to a healthy housing demand through at least 2040.

This is great news for the housing market.

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SOURCES:

Housingwire – https://www.housingwire.com/articles/48317-homeownership-rate-rises-to-four-year-high-as-millennials-are-finally-buying-homes 

CoreLogic – https://www.corelogic.com/blog/2019/04/homeownership-rate-flat-but-household-growth-booming.aspx

Pew Research – https://www.pewresearch.org/fact-tank/2017/05/05/its-becoming-more-common-for-young-adults-to-live-at-home-and-for-longer-stretches/

Housingwire – https://www.housingwire.com/articles/48259-millennials-have-officially-entered-the-housing-market

Realtor.com – https://www.realtor.com/homemade/fact-or-fiction-millennials-are-the-rent-generation/

U.S. Census – https://www.census.gov/housing/hvs/index.html

Spring Buying Season Is Here

Spring is here. Finally, after a long, cloudy and wet winter we have had a couple sunny days, the bluebonnets are starting to boom, allergies are on high alert, and the Spring buying season is starting. To help you prepare, here is a snapshot of the housing market forecast.

Freddie Mac recently reported, “Mortgage interest rates have been steadily declining since the start of 2019. These lower mortgage interest rates combined with a strong labor market should attract prospective homebuyers this spring and could help the housing sector regain its momentum later in the year.” This is great news as we approach our typical Homebuying Season.

Mortgage interest rates continue to decline

According to Primary Mortgage Market Weekly Survey mortgage rates have steadily declined after reaching a high of 4.94 percent in November of 2018. As of late-March, the 30-year fixed mortgage rate was 4.28 percent, its lowest level since February 2018.

Home sales to slowly regain momentum

Existing home sales nationally fell by 7 percent, to 5.32 million homes, in November compared with November 2017, according to the National Assoc­iation of Realtors. Lawrence Yun, chief economist for the National Association of Realtors, expects sales to be flat in 2019. This spring will be the best measure of whether the housing market is returning from very tight to normal, Yun says.

Freddie Mac reports, “existing home sales slumped to start the year, likely in part due to exceptionally cold weather in January and the temporary effects of the government shutdown. With mortgage rates down significantly from last fall, we expect to see existing home sales bounce back and trend higher for the rest of the year. However, our forecast indicates that total home sales (new and existing) will remain down at 5.94 million in 2019 since home sales are starting the year at such a slow rate, before increasing to 6.14 million in 2020.”

However, home sales for the Austin MSA increased 1.5 percent for 2018 vs 2017. Median home price increased 3.7 percent to $305,900. 

Housing starts
Freddie Mac reports, “Housing starts averaged 1.25 million in 2018. Due to the recent increases in building permits, we anticipate that total housing starts will gradually increase over the next two years with most of the growth coming from single-family housing starts. We forecast that total housing starts will increase to 1.27 million units in 2019 and to 1.33 million units in 2020.”

According to Moody’s Analytics, “homebuilders have been underbuilding for more than a decade. Builders have been hindered by labor shortages, community opposition to high-density projects and growing costs of land, labor and materials. Plus, they’ve been building at the mid-to-high end of the market, not at the entry level. But it’s not all bad news. Builders are offering in­centives to buyers, and they’re slowly starting to build smaller, lower-price homes that are more affordable.”

Locally, Austin single family building permits increased 4.6 percent in 2018 over the previous year. 

Home equity

CoreLogic Homeowner Equity Insights 4th Quarter Report continues to see a rise in home equity. “U.S. homeowners with mortgages (roughly 63 percent of all properties*) have seen their equity increase by a total of nearly $678.4 billion since the fourth quarter 2017, an increase of 8.1 percent, year over year.”

A look at home prices

Home prices started to soften in mid-2018. Kiplinger’s Personal Finance recently reported, “Prices will continue rising, but more slowly, as the housing market regains some balance between buyers and sellers.”

Freddie Mac similarly reports, “After accelerating in recent years, home price growth in the United States has continued to moderate. In line with recent trends, we have lowered our home price growth forecasts to annual increases of 3.5 percent and 2.5 percent in 2019 and 2020, respectively.”

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SOURCES:

Freddie Mac – http://www.freddiemac.com/research/forecast/20190322_economic_growth.page?

Freddie Mac – http://www.freddiemac.com/pmms/

National Association of Realtors – https://www.nar.realtor/

Real Estate Center Texas A&M University – https://www.recenter.tamu.edu/data/housing-activity/#!/activity/MSA/Austin-Round_Rock

Moody’s Analytics – https://www.moodysanalytics.com/

Real Estate Center Texas A&M University – https://www.recenter.tamu.edu/data/building-permits/#!/msa/Austin-Round_Rock%2C_TX 

CoreLogic – https://www.corelogic.com/insights-download/homeowner-equity-report.aspx

Homeownership mortgage source: 2016 American Community Survey – https://www.census.gov/acs/www/data/data-tables-and-tools/data-profiles/2016/

MReport – https://themreport.com/daily-dose/03-25-2019/important-drivers-home-sales

Kiplinger – https://www.kiplinger.com/article/real-estate/T010-C000-S002-where-home-prices-are-headed-2019.html

The Student Loan Bubble and Path Forward for Graduates

America’s total household debt increased by $193 billion (1.5%) to $13.15 trillion in the fourth quarter of 2017 according to the Federal Reserve. Student loan debt ranks as the second largest household debt falling behind mortgage, and in front of auto loans, credit cards and home equity loans.

Household Debt and Credit Developments as of Q4 2017

*Change from Q3 2017 to Q4 2017

**Change from Q4 2016 to Q4 2017

A closer look at student loan debt.

44.5 million student loan borrowers in the U.S. owe a total of $1.5 trillion as of March 2018 according to the Federal Reserve. And, the average college graduate with a bachelor’s degree left school with $28,446 in student debt in 2016 according to Institute of College Access & Success. In 2018, the Federal Reserve Bank of New York, reports 37.5% of Americans with student loan debt are under the age of 30. Compared to 62.5% of Americans with student loan debt are 30 years old or older.

CNBC recently reported “average debt at graduation is currently around $30,000, up from $10,000 in the early 1990s. The country’s outstanding student loan balance is projected to swell to $2 trillion by 2022, and experts say a large portion of it is unlikely to ever be repaid; nearly a quarter of student loan borrowers are currently in a state of delinquency or default.”

Although outstanding student loan balances have increased, student loan delinquency flows declined slightly but remain at a high level, according to the Federal Reserve. NerdWallet reports the following status on student loan repayments, painting a grim picture for some borrowers.

  • 3.3 million federal loan borrowers have loans in deferment.
  • 2.6 million federal loan borrowers have loans in forbearance.
  • 4.7 million federal loan borrowers have loans in default.

Will the student loan bubble burst?

Robert Farrington with Forbes explains how the student loan bubble will not burst, but instead will cause a slow market stagnation that we will see over time. “Student loans are a collateral on earnings, as long as there is earning potential, the ability to have the loans quickly “pop” via any financial mechanism is rare. Yes, bankruptcy for student loan debt is possible, but once again – rare… The net effect of this student loan crisis won’t be a bubble popping – it will be slow drag on the economy.” Discretionary income that would traditionally go to consumer goods and household spending stimulated by homeownership will instead be going to student debt repayment because there simply is not a discretionary income. This could cause a decline for some industries.

How student loans effects home ownership.

Student debt significantly cuts into future homeowners’ budgets and for many, making it difficult to buy a home. According to the Federal Reserve for every 10 percent in student loan debt a person holds, their chance of home ownership drops 1 to 2 percentage points during their first five years after school. According to the National Association of REALTORS more than 80 percent of non-homeowner younger millennials (born between 1990-1998) cite student loan debt as delaying a home purchase, compared to 86% of older millennials (born between 1980-1989).

What does this mean for graduates today?

NerdWallet recently analyzed the most recent numbers and issues concerning graduates, and conducted a survey by The Harris Poll in May 2018. In analyzing the data, Brianna McGurran, NerdWallet Student Loans Expert, believes the outlook for graduates is not gloom and doom stating, “New grads are in the best position of all: They have the chance to save smart from the beginning.”

Here is what they found for the Class of 2018 Money Outlook:

  • Percentage of recent graduates with student debt: 45%
  • Percentage of recent graduates with student debt who believe they’ll be able to pay it off in 10 years: 39%
  • Age at which graduates of the Class of 2018 can expect to retire: 72
  • Age at which the Class of 2018 can expect to purchase their first home with a 20% down payment: 36

As with any loan, whether for a student loan or a home, approach it as an educated consumer, here are some tips for paying off student loans for future graduates.

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SOURCE:
https://research.stlouisfed.org/publications/page1-econ/2018/10/01/get-an-education-even-if-it-means-borrowing
https://www.nerdwallet.com/blog/loans/student-loans/student-loan-debt/
https://www.newyorkfed.org/microeconomics/databank.html
https://studentaid.ed.gov/sa/about/data-center/student/portfolio
https://www.nerdwallet.com/blog/2018-new-grad-money-outlook/
https://www.cnbc.com/2018/09/21/the-student-loan-bubble.html
https://www.federalreserve.gov/econresdata/feds/2016/files/2016010pap.pdf
https://www.federalreserve.gov/econresdata/feds/2016/files/2016010pap.pdf
https://www.forbes.com/sites/robertfarrington/2018/12/12/student-loan-bubble-wont-burst/#3f9bf00f6768
https://www.newyorkfed.org/newsevents/news/research/2018/rp180213
https://www.forbes.com/sites/robertfarrington/2018/11/27/student-loans-and-bankruptcy/#41ee1633f45d
https://thecollegeinvestor.com/9664/student-loan-bubble-looks-like/
https://www.bankrate.com/loans/student-loans/repay-college-loans-fast/

Housing Affordability

A dramatic shift has taken place over the last 7 years in housing affordability.  Home prices in Travis County under $150,000 have dropped from 27% to 2.6% of all sales.  In Williamson County, the drop has been more dramatic going from 36.5% to 2.2%.  And in Hays County, still more so, A dramatic shift has taken place over the last 7 years in housing affordability.  Home prices in Travis County under $150,000 have dropped from 27% to 2.6% of all sales.  In Williamson County, the drop has been more dramatic going from 36.5% to 2.2%.  And in Hays County, still more so, going from 42.3% to 3.2%.
In the $150,000 to $250,000 range, home prices also decreased 30.2% to 24.2% and 43% to 37.4% in Travis and Williamson respectively.  The percentage of homes in this price range increased in Hays County going from 31.1% to 44.7%.

Travis County Stats

Travis County Stats

Williamson County Stats

Williamson County Stats

Hays Stats

Hays Stats

Source: Real Estate Center at Texas A&M

Austin Ranks No. 1 on Nation’s Best Places to Live

Two years running Austin is number one on the nation’s Best Places to Live according to U.S. News and World Report. For those of us who are Austinites and who are working in real estate, we know this to be true.

Austin took the lead again in the magazine’s 2018 edition of its Best Places to Live in the U.S. list, which ranks 125 major metro areas in four categories including desirability, value, job market, quality of life and net migration.

Check out the Top 10 cities.

2018 Top 10 “Best Places to Live”

  1. Austin
  2. Colorado Springs, Colorado
  3. Denver
  4. Des Moines, Iowa
  5. Fayetteville, Arkansas
  6. Portland, Oregon
  7. Huntsville, Alabama
  8. Washington, D.C.
  9. Minneapolis-St. Paul, Minnesota
  10. Seattle

“When deciding on a place to settle down, it’s important to understand that where a person lives can impact their well-being,” said Kim Castro, executive editor at U.S. News. “U.S. News created the Best Places to Live to highlight areas across the country that have the characteristics residents are looking for, including steady job growth and affordability. The top-ranked places are areas where citizens can feel the most fulfilled socially, physically and financially.”

And, Austin is not stopping it’s growth, according to the Austin Business Journal Austin’s population keeps growing. In fact, there were 151 additions to the population a day in 2017, down only slightly from 159 in 2016.

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SOURCE:
https://www.cnbc.com/2018/04/10/us-news-world-report-the-10-best-places-to-live-in-the-us-in-2018.html
https://realestate.usnews.com/places/texas/austin
https://www.bizjournals.com/austin/news/2018/04/10/austin-no-1-again-on-revered-best-places-to-live.html?ana=e_ae_set1&s=article_du&ed=2018-04-10&u=CuOUKGCJY978Qy2wnhw9SA0f338830&t=1523397950&j=80955401
https://www.bizjournals.com/austin/news/2018/03/22/austins-population-keeps-popping-heres-how-many.html

Millennials dive into home ownership

I believe that there are many misconceptions when it comes to Millennials. We have all heard that Millennials are renting longer or live with their parents for a longer amount of time than previous generations, and that they have issues with student debt. These factors, to the general eye, would make it appear that Millennials are not interested in home ownership. But, from my research and experience, this is only part of the story.

So, what gives? According to NerdWallet and their review of recent industry surveys and data from government agencies and corporations “a majority of millennials would prefer owning to renting, but they appear to be postponing homeownership because of real and perceived difficulties in affording it. In fact, our analysis found that millennials, those born from 1981 to 1997, look upon owning a home just as favorably as previous generations.”

Here are a few facts on Millennials and homebuying from NerdWallet:

  • U.S. millennials total 66 million individuals and 24 million independent households.
  • The median age for first-time homebuyers has remained virtually unchanged for the past 40 years: In 2015 it was 31 years old, compared with 30.6 in 1970-74.
  • Two-thirds of millennials haven’t reached that homebuying age of 31, and 22% are under 25 years old.
  • Millennials are renting for a median of six years before buying, compared with a median of five years for renters in 1980.
  • Millennials are expected to form 20 million new households by 2025.
  • The median income for a millennial older than 25 is $38,220.
  • Meanwhile, the number of millennials living with their parents has increased nearly 15% from 2006 to 2013.

Here are a couple positive signs:

  • According to Javier Vivas, manager of economic research for Realtor.com, “Millennials’ home search is on.” Millennials recently became the dominant group of users searching for homes on Realtor.com.
  • Both the National Association of REALTORS® and Gallup Poll surveys of Millennials have shown that Millennials believe real estate is a good long-term investment, that they intend to become homebuyers and are increasingly choosing to buy a home.
  • Americans owe over $1.4 trillion in student loan debt with the average Class of 2016 graduate having $37,172 in student loan debt, up six percent from last year according to com. This can be a contributing factor to delaying home ownership as just released by CNN Money. This, of course, is not good news. The positive side of it is that “with student debt on the rise, there’s been a lot of speculation about whether the cost of a college degree hurts an individual’s ability to buy a home,” says NerdWallet’s Ling. “From what we’ve seen, getting a four-year degree or higher is actually positively associated with homeownership — even when accounting for debt.”
  • CNN Money reports that, “Millennials are the largest group of homebuyers. In January, Millennials represented around 45% of all purchase loans, up from 42% the same month in 2016.” Per CNN Money, Millennials are diving into home ownership, but “the struggle can be real”.

When NerdWallet asked Millennials what they believed were the biggest obstacles to getting a mortgage, millennial renters gave these answers, in order:

  • Insufficient credit score or history
  • Affording the down payment or closing costs
  • Insufficient income for monthly payments
  • Too much existing debt

For many millennials, the data NerdWallet analyzed reveal that these reasons may be more perception than reality. The important thing is to look at your financial position, make positive changes/plans to prepare for responsible home ownership through personal fiscal responsibility.

Millennials have a few things to consider when buying a home:

  • Increasing rents make home ownership more attractive. Money saved was the reason 21% of millennials chose to buy a home per Ellie Mae’s Owners’ Key Insights.
  • This buying season Millennial first-time homebuyers will be up against seasoned repeat homebuyers who have already started their home search last year, so it is good to start the search early and be prepared. Make sure you set your budget and get pre-qualified. Check out the Consumer Financial Protection Bureau(CFPB) Home Loan Toolkit to get started.
  • The home inventory shortage means rising home prices which bring into account home affordability. In response to what is stopping you from buying a home 45% haven’t saved enough for a down payment per Ellie Mae’s 2017 Borrower Insights Survey. CNN Money recommends that Millennials move home for two years to save money, reduce their debt and save for down payments.
  • Lending requirements have tightened. Understand your budget and what you will need to save for your down payment. Click here for Zillow’s Home Affordability Calculator.
  • Interest rates are great for home buying. Rates have gone up 3 times since 2015, but even with these increases rates still make home ownership very attainable.

I am excited to see the rise in home search and ownership in millennials. As with anyone approaching home ownership, it is good to make sure you are an educated buyer, that you understand what you are getting into, and that you have someone you trust to work with as you embark on your journey.

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SOURCE:
http://money.cnn.com/2017/04/03/real_estate/millennial-homebuying/index.html
http://www.gallup.com/poll/190850/americans-say-real-estate-best-long-term-investment.aspx
https://www.nar.realtor/sites/default/files/reports/2017/2017-home-buyer-and-seller-generational-trends-03-07-2017.pdf
https://www.nerdwallet.com/blog/mortgages/millennials-and-homebuying/
http://elliemae.com/millennial-tracker
http://elliemae.com/borrower-insights
http://elliemae.com/about/news-reports/press-releases/homeowners-seeking-both-a-high-tech-and-human-touch-mortgage-experience-ellie-mae-2017-borrower-insights-survey-finds
https://www.zillow.com/mortgage-calculator/house-affordability/
https://s3.amazonaws.com/files.consumerfinance.gov/f/201503_cfpb_your-home-loan-toolkit-web.pdf
http://www.realtor.com/realestateagents
https://studentloanhero.com/student-loan-debt-statistics/
http://money.cnn.com/2017/07/13/pf/college/student-debt-home-ownership/index.html

A vision for homebuilding

At the National Association of Real Estate Editors (NAREE) Conference in Denver, Douglas Yearley, CEO of Toll Brothers presented the Keynote Address “A Vision for Homebuilding”. Here is a snapshot of his state of builder/buyer.

Business is good
Toll Brothers announced earlier this summer that they had the best spring selling season that it has had in the past ten years. This can be attributed to many things:

  • Low interest rates
  • Rising home values
  • Consumer confidence
  • Improving job growth, along with wage growth

There are low inventories in most markets in used homes, and we finally have release of pent up demand. As the economy improves and personal balance sheets improve, pent up demand could bring people off the sidelines.

A slow recovery
According to Toll Brothers, we have seen a slower recovery than past cycles:

  • Key metrics are improving
    • Number of households has grown 98% since 1970.
    • 1980 – 1989 – 1.49 million housing starts
    • 2008 – 2016 – .85 million housing starts
    • Home ownership peaked in 2004 at 69%.
    • Today’s home ownership rate is at 63.6%.

We are not quite where we should be. We are still behind the demand, but this only leave room for growth.

Buyers buying new and where the sun shines
There is a 32% premium from a new home to used home. The average is 18%. People are gravitating to buying new homes as the used inventory is older. And, energy efficiency and the opportunity to customize home is driving the premium.

More than 50% of Toll Brothers’ business in done in the West. Denver to the West is where builders are focused. Builders are focused on pro-business states, where land is available and where people want to live – where the sun shines. Boomers are buying in Florida, no big surprise here. And, Texas, a pro-business state, is doing very well in Dallas.

Demographics – the Boomer is driving growth
Baby boomers continue to drive Toll Brothers’ business. As they did for years when they moved to suburban areas to “move up”, and still today as they downsize and prepare for the next stage of their life. Many are buying into active-adult communities or are buying second homes in Palm Springs, Florida and Scottsdale, Arizona.

Design trends – casual family-friendly spaces
According to Toll Brothers the open, casual living with free flow indoor and outdoor space has completely caught on. People want casual environments where living space is connected. And, where the outdoors is a continuation of the home. Where the back of the home will be one big wall of glass making the outdoors, the indoors.

There is also a trend for multi-generational living. With additional living space with a sitting area, little kitchen area, direct access outside and separate entry in the home for older generations living with their family.

And, smart home solutions are evolving and expanding with the ability to remotely control the home.

Labor on the rise
We went from two million houses a year to 500,000. Labor dramatically went away. And, every market has a different issue; there is no national plumber. As we get further into recovery, we are seeing improvements and a return of the builder labor market. Contractors are ramping up their businesses. There is still cost pressure, but according to Yearley, it is definitely less now than it was a year or two ago.

Getting creative with land acquisition
For Builders it is all about the land – whether you are building one home or a master-planned community. You are stuck with the land once you buy it. Builders have to be much more creative in how they look for buy land because people want to live differently. Buyers want to live in a more connected community. And, creativity comes into play due to the availability of land in urban areas. An example of this creativity in land acquisition is buying a car dealership and renovating it. Or, building a park with the mixed use and condo development as part of the sales price for the land, like Maxwell House, former Maxwell House Coffee plant, in Hoboken, NJ. This was the largest in the world and a landmark on the Hudson River since 1939. What was a tragedy for Hoboken is now a trendy redevelopment leveraging both the best of the outdoor and the indoor space.

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SOURCE:
National Association of Real Estate Editors (NAREE) Conference
Toll Brothers
https://www.upi.com/Archives/1990/06/27/Landmark-Maxwell-House-plant-to-shut-down/2261646459200/

 

 

 

The housing shortage

At the National Association of Real Estate Editors Conference (NAREE) in Denver this month “The housing shortage: dealing with barren inventory” was presented. The panel presenting included Thomas O’Grady, Pro Teck Valuation Services; Aaron Terrazas, Zillow; and Javier Vivas, realtor.com. Here is a snapshot of what was covered.

According to the panel we have had 23 months of historic low home sales. With 200K fewer homes for sale, and 150K of the homes being in the mid- to low-tier. We are losing inventory at record pace and in a segment where we are seeing the most demand – in the entry-level buyer. The shortage is national, and in smaller square footage homes.

When looking at the inventory shortage, there are two factors to consider:

  1. Homes hitting the market are selling fast.
  2. There are not enough homes entering the market.

What’s causing the inventory shortage?

  1. New construction has lagged among existing home sales. Homebuilders are not building at the levels they were.
  2. Homeowners have negative equity in some markets.
  3. There is a shift of owner occupied stock to rented occupied stock with 6.3 million more renter-occupied.
  4. The power of psychology. There is a psychology of market for seller; they are holding on to homes to see what kind of gains they can get.

The homebuilder blame game

Homebuilders are getting a lot of the blame, particularly for affordable homes. 24% of all home building costs is put towards regulations – making it expensive for builders to build. And, there is a ack of labor and a high cost of acquiring land. Smaller builders are also having issues will accessing financing.

Housing trends:

It’s hard to move up in a rising market

People aren’t selling because they cannot replace what they have. Buying up is becoming out of people’s grasp in some markets. There is a fear that I can’t put my house in market because I won’t be able to find anything to buy. This is the inverse of what we had in the boom. Appreciation and run upon price is going to hit into affordability, and as always, people want to get a deal.

A rise in home equity

In appreciating markets where the homeowners have equity and a low interest rate, we are seeing homeowners tap into equity and make home improvements versus putting their homes on the market. 40% of home owners have more than 20% equity. And to further support this, people are staying in homes for 10 years which is an all-time high. This stat used to be only 6 years.

Homeowners in love with their loans Many homeowners are locked in by their super affordable mortgage rate. REALTORS® are starting to say that they have more people in love with their loan than with their home. Many homeowners do not want hassle with competitive market.

Investors are staying in the market

Investors propped up the market by buying homes in the crash. People thought they would sell them but they have been making so much money that they aren’t selling. Rental securitizations are bringing a lot of liquidation. We are seeing this more in urban areas.

Seasonal adjustment disorder

Spring buying season started in the winter this year. This is a very big trend this year. Spring home buying season started 3 weeks earlier based on online activity and market velocity. We typically see a spike in online activity in January. This year we saw a peak at the second week of January. This is important because we saw buyers earlier. 1 in 4 homes are selling in less than a month – typically the housing market hits that in March, but this year we hit it in January. And, some of this seasonal adjustment disorder is attributable to the shift in the population demographics. Younger buyers are not held to seasonality and schools.

The urbanization of employment

Job growth – employment growth over past decade has been concentrated in urban areas. There is an employment drive in a lot of markets. The panel called this the Urbanization of employment – creating white collar jobs.

Creating “gray space”

We are seeing people moving further out and now seeing commuting as a more viable solution for home ownership. A good example of this is people moving from San Francisco to Antioch.

In Nashville the population grew by 10%, but housing stopped and home prices went up. People can’t afford to live there anymore. The Mayor is trying to put housing along transit roots to make more affordable home options.

There is an urban, suburban myth. Will urban searchers ever compromise on their urban dream, or will they move to the “gray space”? These are the “gray spaces” between urban and suburban popping up and picking up in demand. The future of housing could be the Long Island’s of the U.S.

Building wealth and potentially frustration

There is a shadow buyer demand – a lot of renters who got in their rental really wanted to buy. They had no other option and needed the extra space. People want the white picket fence, and are almost frustrated that they cannot get it.

Boomers have preached that the best way for middle class to build wealth is through home ownership. Buyers not yet on the market are asking themselves, “Will I have less wealth because I entered the market later in life compared to the baby boomer?” There is a common legacy of thinking that owning a house is a big deal, and we will see frustration around this.

It is getting harder to get into the market. Many potential homebuyers know that the longer they wait the harder it will be to get into the housing market. The market at the entry level is very competitive. The high end the market is slowing down a bit.

All of this will resolve itself through natural evolutions. LA was a low-cost alternative to NY. And now, Dallas is a low cost alternative to LA.

Ways of adapting to the shortage

  • Seeing more multigenerational, joint home investments.
  • The spillover effect – people will move further out and commute longer.
  • Mermaid effect – people are falling in love with their 2nd and 3rd home choices.
  • Macroeconomic play in effect that will make us have to wait it out.
  • Only feasible relief is through the homebuilders.

Despite all of this according to the panel, the U.S. real estate is one of the most attractive asset classes.

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SOURCE:
https://www.proteckservices.com/category/home-value-forecast/
https://www.zillow.com/research/about-us/aaron-terrazas/
http://research.realtor.com/

 

NAR HOME survey says 71 percent of homeowners believe it’s a good time to sell

The National Association of REALTORS® released their quarterly Housing Opportunities and Market Experience (HOME) survey yesterday, and “71 percent of homeowners believe it’s a good time to sell.”

This is not surprising with the rising home prices.  This is up from 69% last quarter and 61% more than a year ago.

The survey also revealed that 42 percent of respondents believe homes are affordable for almost all buyers, with those living in the Midwest being the most likely to believe homes are affordable (55 percent) — and not surprisingly — West respondents (29 percent) being least likely to think homes are affordable. And, 20% would consider moving to a more affordable community. Twenty-seven percent of these buyers make under $50,000 a year versus 16% who make more than $100,000.

According to Lawrence Yun, NAR chief economist, in the NAR press release “it’s apparent there’s a mismatch between homeowners’ confidence in selling and actually following through and listing their home for sale. There are just not enough homeowners deciding to sell because they’re either content where they are, holding off until they build more equity, or hesitant seeing as it will be difficult to find an affordable home to buy. As a result, inventory conditions have worsened and are restricting sales from breaking out while contributing to price appreciation that remains far above income growth.

Yun went on to say, “Perhaps this notable uptick in seller confidence will translate to more added inventory later this year. Low housing turnover is one of the roots of the ongoing supply and affordability problems plaguing many markets.

Click here to see the full press release on the survey’s findings, or here for the full survey.

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SOURCE:
https://www.nar.realtor/news-releases/2017/06/71-percent-of-homeowners-believe-it-s-a-good-time-to-sell-economic-and-financial-confidence-dips
https://www.nar.realtor/infographics/home-survey-june-2017
https://www.nar.realtor/reports/2017-q2-homeownership-opportunities-and-market-experience-home-survey

 

 

 

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