YOUNG ADULT HOMEOWNERSHIP DOWN!

Historic Low for Young Adult Home Ownership Rate

DAILY REAL ESTATE NEWS | MONDAY, MAY 05, 2014

Young Americans are putting off home buying at unprecedented levels. The home ownership rate for the Millennial generation age group has fallen to its lowest level since the U.S. Census Bureau started tracking home ownership by age in 1982. 

The home ownership rate in the first quarter of 2014 for Americans 35 and under fell to 36.2 percent, dropping from 36.8 percent in 2013. Broken down even further, Americans in the 25-29 age group had the biggest decline in home ownership rates at 33.3 percent, followed by 47.5 percent for the 30-34 age group.

Granted, home ownership for all age groups has fallen to 64.8 percent, the lowest level since 1995. But Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C., says that high student loan debt and sluggish unemployment are added elements that are keeping many young Americans on the sidelines.

“The labor market for younger people remains pretty bad. Obviously you’re worse off without a college degree, but for people with college degrees, if they have a regular job, often it’s not paying very well and often they are jobs that pay just as well for people who have just a high school degree,” Baker says. “They also have a lot of debt. So it’s not surprising that people in their late 20s or early 30s are less likely to buy a home than what might have been the case 20 or 30 years ago.”

The unemployment rate for those ages 20-24 is 12.4 percent, according to March data from the Bureau of the Labor Statistics. The unemployment rate for Americans 25-34 years old is 7 percent, compared to the national average unemployment rate of 6.7 percent.

“Those stories you hear about people in their 20s or early 30s living with mom and dad, those aren’t just stories, and if people don’t move out, they’re not going to buy a house again because we’re still in the aftereffects of the worst financial crisis in 75 years,” said David Wessel, senior fellow of economic studies at the Brookings Institution in Washington, D.C.

Source: “Homeownership for Millennials Declines to New Lows,” U.S. News & World Report (April 30, 2014)

ADVANTAGES TO YEAR END CLOSE

Five Reasons Why You Need to Close on a Home by the End of the Year

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By Deanna Lawley

If you are debating on whether you should make an offer on a new home before the New Year, now is the time to stop deliberating and submit your bid. Between 2013 tax benefits, and avoiding mortgage rate roulette and changing lending rules, closing before the end of the year can offer significant financial benefits. Top mortgage and real estate experts share five ways you will benefit if you buy a home by December 31, 2013.

1.) Avoid rising rates roulette: Mortgage interest rates, while still attractive, are up 1 to 2 percent over this time last year. It’s possible to lock in a 30-year fixed rate mortgage at about 4.5 percent, says Shari Cashman (Gencor Mortgage). According to the Mortgage Bankers Association’s forecast, mortgage rates will likely rise to about 5 percent in 2014. If you buy now and the rates drop, you can always refinance. If you wait and the rates rise, you are stuck, says Todd Huettner (Huettner Capital).

2.) New Year, new lending rule: Lending rules will change on January 1, 2014 and it could be harder to get a loan. 2014’s rules will allow you to borrow less, at your same level of income, says Huettner. 2013’s current mortgage rules allow for a 45 percent total debt to income ratio (DTI); in 2014, the DTI will go down to 43 percent. What does this mean? You need to make or reduce your debt in order to buy the same house!*

3.) Easier financing: If you are waiting for home prices to decrease, don’t. 2014’s mortgage changes could make it harder to get financing, says Robert J. Spinosa (RPM Mortgage). So if you are looking to save a few dollars by waiting for home prices to drop, you could miss your window to secure a mortgage entirely.

4.) Lower sales could mean higher inventory: It’s an after-Christmas sale before Christmas! While 2013’s housing theme was limited inventory and higher prices, historically, the fourth quarter of the year usually slows down the housing market and this year is no exception, says Greg Cook (First Time Buyers Network). Housing sales have been declining since September so inventory has increased. According to the National Association of REALTORS®, existing-home sales declined for the second consecutive month in October, while constrained inventory means home prices continue to see double-digit year-over-year gains. You may get the deal of December!

5.) Maximize tax deductions: It’s important to remember that if you buy before the end of the year, you can begin deducting interest and building equity immediately, says Cashman. Some closing costs and points are tax deductible in the year you buy a home. Buying now allows you to include them on your 2013 tax return. If you buy even one week later in January, you have to wait a year for your 2014 return to take the deduction, says Huettner.

*If you decide to buy in 2014 and need to lower your DTI, Huettner recommends the below tips:

• Make more or owe less. If you do not project your income to increase, paying down debt is the easiest and fastest way to lower your debt to income.

• Paying off your car loan is one of the best ways to lower your DTI, because it is a short loan with higher payments compared to student loans, home loans, or even credit cards.

• Consolidate debt into a home loan or other loan resulting in a lower payment

The best and safest way to lower your DTI is to simply make sure the lender is calculating your income and debt correctly. Work with an experienced lender, and work together to answer the below questions:

Deanna Lawley is the Public Relations and Social Media Manager for HomeFinder.com. For more information, please visit the HomeFinder.com blog.

RENTERS NOW LOOKING TO BUY

Americans overwhelmingly believe owning a home is a good financial decision and a majority of renters say homeownership is one of their highest priorities for the future, according to a survey by the National Association of REALTORS®.

The 2013 National Housing Pulse Survey also found that renters are thinking more about purchasing a home now than in past years, while the number of people who say they prefer to rent has declined.

“Homeownership matters to Americans who consistently realize the many benefits it provides to communities, families and the nation’s economy,” said NAR President Gary Thomas, broker-owner of Evergreen Realty, in Villa Park, Calif. “Due to high housing affordability and today’s interest rates it makes sense for people to consider homeownership over renting. In fact, in many parts of the country it’s cheaper to own a home than to rent one. Therefore, it’s no surprise that renters recognize that owning a home offers tremendous long-term benefits and is an investment in their future.”

The survey, which measures consumers’ attitudes and concerns about housing opportunities, found eight in 10 Americans believe buying a home is a good financial decision and more than two-thirds (68 percent) said now is a good time to buy a home. Since the last survey in 2011, more renters are now thinking about purchasing a home, up from 25 percent to 36 percent, while those who say they prefer to rent dropped from 31 percent to 25 percent. Half of renters say that eventually owning a home is one of their highest personal priorities, up from 42 percent to 51 percent.

Attitudes toward the housing market have also improved over the years. Nearly four in 10 Americans (38 percent) identified an increase in activity within their local housing market in the past year, compared to just 22 percent who reported a slowdown in activity. By contrast, in 2011 some 51 percent reported a slowdown in activity. There was also less concern than in the past about the drop in home values; a majority said housing prices in their area are more expensive than a year ago.

In addition to these improved attitudes about the housing market, respondents also showed an improved outlook about the national economy. Just under half (48 percent) said job layoffs and unemployment are a big problem, down from 61 percent in 2011. The concern over foreclosures showed a steep decline from 2011 when 47 percent characterized distressed properties as “very” or a “fairly big problem”; today only 29 percent say it’s a problem.

For many Americans, the perceived obstacles to homeownership have remained unchanged over the years; low wages, student loan debt, and little savings for a down payment and closing costs continue to make it difficult for many to become homeowners. Respondents across the board – young and old, college graduates and non-graduates – consider student loan debt to be a large obstacle.

“Student loan debt is a concern for many consumers in today’s market, especially first-time buyers,” says Thomas. “Buyers with student loan debt may find it difficult to access mortgage credit, as well as save for a down payment. Pending mortgage finance regulations requiring higher down payments could also contribute to the already tight lending environment. REALTORS® are working with regulators to address this issue and are committed to making sure those who are willing and able to own a home have the opportunity to pursue that dream.”

When asked for reasons why homeownership is important, respondents’ top reasons underscored basic American values and freedoms; they were building equity, wanting a stable and safe environment, and the freedom to choose where to live. While these reasons have remained virtually unchanged since 2011, they do vary slightly according to demographics. The top scoring reason for African-Americans and Hispanics was that homeownership provides stability and a safe environment; women also placed more emphasis on environmental factors than men. Non-college graduates placed stronger emphasis on public schools, owning a home before retirement, and living in a safe and stable environment.

The 2013 National Housing Pulse Survey is conducted by American Strategies and Myers Research & Strategic Services for NAR’s Housing Opportunity Program, which aims to position, educate and help REALTORS® promote housing opportunities in their community, in both the rental and homeownership sectors of the market. The telephone survey polled 2,000 adults nationwide and has a margin of error of plus or minus 2.2 percentage points.

For more information, visit www.realtor.org.

WHY IT'S A GOOD TIME TO BUY!

Consumer Mortgage Rate Expectations Spike

By Pete Bakel

Potential homebuyers may enter the purchase market sooner rather than later as more Americans expect mortgage rates and home prices to climb, according to results from Fannie Mae’s June 2013 National Housing Survey.

The share of respondents who say mortgage rates will go up during the next 12 months jumped 11 percentage points to 57 percent, the highest level in the survey’s three-year history. Meanwhile, consumers’ home price expectations have stayed strong in the face of rising mortgage rates. The share of respondents who believe home prices will go up in the next year also hit a survey high of 57 percent, while those who say prices will go down stayed steady at 7 percent. Although sentiment toward both the current home buying and selling environments retreated slightly, it remains near the survey highs of last month, with 72 percent saying it is a good time to buy and 36 percent saying it is a good time to sell.

“The spike in mortgage rate expectations this month seems to have had an impact on a number of the survey’s indicators and may increase housing activity in the near term by driving urgency to buy,” says Doug Duncan, senior vice president and chief economist at Fannie Mae. “Consumers may recognize that today’s still favorable mortgage rates and homeownership affordability levels will recede over time. Given rising home and rental price expectations and improving personal financial attitudes, more prospective homebuyers may be deciding that now is the time to get off the fence.”

Among those surveyed, 56 percent say rental prices will go up during the next year – an 8 percentage point increase and the highest level since the survey’s inception – and the average 12-month rental price change expectation jumped 1.2 percent to 4.6 percent. Americans’ outlook on their personal finances also increased significantly in June. The share who expect their personal financial situation to improve during the next year climbed to 46 percent, the highest level since June 2010. The share who say their household income is significantly higher than it was 12 months ago jumped 6 percentage points to a survey high 26 percent.

Homeownership and Renting

• At 3.8 percent, the average 12-month home price change expectation fell slightly from last month’s survey high.
• The share of people who say home prices will go up in the next 12 months hit a survey high 57 percent, while those who say home prices will go down held steady at the survey low 7 percent.
• The share of respondents who say mortgage rates will go up increased 11 percentage points to 57 percent, the highest level since the survey’s inception.
• At 72 percent and 36 percent, respectively, the shares who say it is a good time to buy a house and who say it is a good time to sell a house both fell 4 percentage points from May’s survey highs.
• The average 12-month rental price expectation jumped to 4.6 percent, a 1.2 percent increase over last month.
• Increasing 8 percentage points from May and reaching a survey high, 56 percent of those surveyed say home rental prices will go up in the next 12 months.
• Forty-seven percent of respondents think it would be easy for them to get a home mortgage today, a slight increase over last month.
• The share of respondents who said they would buy if they were going to move decreased slightly to 65 percent.

The Economy and Household Finances

• At 38 percent, the share of respondents who say the economy is on the right track decreased 2 percentage points from May.
• The percentage of people who expect their personal financial situation to get better over the next 12 months jumped to 46 percent, the highest level since June 2010.
• The share of respondents who say their household income is significantly higher than it was 12 months ago rose 6 percentage points to a survey high 26 percent.
• The percentage of respondents who say their household expenses are significantly higher than they were 12 months ago rose to 36 percent.

The most detailed consumer attitudinal survey of its kind, the Fannie Mae National Housing Survey polled 1,007 Americans via live telephone interview to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence. Homeowners and renters are asked more than 100 questions used to track attitudinal shifts (findings are compared to the same survey conducted monthly beginning June 2010). Fannie Mae conducts this survey and shares monthly and quarterly results so that we may help industry partners and market participants target our collective efforts to stabilize the housing market in the near-term, and provide support in the future.

RISING INTEREST RATES MEANS IT'S TIME TO BUY

by Jann Swanson

Rising Mortgage Rates May be Forcing Home Buyers off the Fence: NAR

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Jun 27 2013, 11:00AM

The National Association of Realtors® (NAR) said today that rising interest rates may finally be forcing many hesitant buyers into the market. NAR's Pending Home Sales Index (PHSI) which is based on home purchase contracts, reached the highest in May that it has achieved since late 2006. NAR also announced it was upgrading its price forecast for 2013.
The PHSI increased 6.7 percent to 112.3 in May from April's level of 105.2 (revised down from an original estimate of 106.0.) The May number was 12.1 percent above the PHSI in May 2012 when it was 100.2 The index has been higher than in the corresponding month a year earlier for each of the last 25 months and the May number was the highest for the Index since December 2006 when it was 112.8.
The Index is a forward looking indicator based which has proven to be predictive of home sales. Transactions under contract are generally expected to close within 60 days. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined.   
NAR's chief economist Lawrence Yun said the recent rising interest rates may be creating a fence-jumping effect. "Even with limited choices, it appears some of the rise in contract signings could be from buyers wanting to take advantage of current affordability conditions before mortgage interest rates move higher," he said.  "This implies a continuation of double-digit price increases from a year earlier, with a strong push from pent-up demand."
Yun said he expected the national median existing-home price to rise more than 10 percent to nearly $195,000 by year end.  This would be the strongest increase since 2005 when the median increased 12.4 percent.
Existing-home sales are projected to increase 8.5 to 9.0 percent, reaching about 5.07 million in 2013, the highest in seven years; it would be slightly above the 5.03 million total recorded in 2007.
The PHSI in the Northeast was unchanged at 92.3 in May but is 14.3 percent above a year ago.  In the Midwest the index jumped 10.2 percent to 115.5 in May and is 22.2 percent higher than May 2012.  Pending home sales in the South rose 2.8 percent to an index of 121.8 in May and are 12.3 percent above a year ago.  The index in the West jumped 16.0 percent in May to 109.7, but with limited inventory is only 1.1 percent above May 2012.

National News, but still good news!

Rising Home Prices, Increasing Equity Spark Move-up Sales

By Maria Patterson

This week’s breaking news regarding the significant jump in April home prices – posting record monthly growth and the fastest year-over-year growth in seven years – is just the latest in a series of statistics confirming that the real estate market is primed for the return of home sellers, who are now financially able and emotionally confident to list their current home in order to move up to their next.
The April home-price increase data from S&P/Case-Shiller comes on the tail of a report from CoreLogic earlier this month heralding the return of positive equity for 850,000 more residential properties in the first quarter of 2013, another sign that move-up buyers will become an increasingly prevalent market segment in the months ahead. According to CoreLogic, the national aggregate value of negative equity decreased more than $50 billion to $580 billion at the end of the first quarter from 631 billion at the end of the fourth quarter of 2012.
“It is hard to know market by market exactly how extensive the return to positive equity is, but from published data it looks like the movement is spread across the country,” says RE/MAX, LLC Chairman of the Board and Co-founder Dave Liniger. “In 2012, 1.7 million homeowners who were previously underwater achieved positive equity and about half that number achieved positive equity in the first quarter of 2013. For every home price increase of 5 percent another 1.2 million will reach positive equity. It appears to be a widespread phenomenon and one that will benefit this inventory-starved market.”

SUPPLY AND DEMAND CREATING MULTIPLE OFFERS

Property Values Take Flight: Home Prices Soar by over 20 Percent

“While the combination of rapidly rising home prices in some areas, tight inventory nation-wide and the prospect of rising interest rates certainly warrant close scrutiny, a housing bubble in the immediate future is unlikely, says Kiplinger’s Associate Editor, Gillian White. “Areas such as Phoenix and Las Vegas are seeing price spikes of over 20 percent but home values in those same areas remain more than 40 percent below their peak values and interest rates remain low in comparison with historic averages.”
“When rates do begin to rise, the climb is likely to veer more towards slow and steady rather than rapid and steep. More homeowners will make their way out of underwater mortgages, increasing inventory. And gradually rising rates will cool housing demand, providing a better market equilibrium. If the economy continues to expand, as anticipated, it will give the housing market time to work out some of the concerning patterns that have taken root and likely prevent bubbles in most markets.”