Tuesday, May 22, 2012
There are approximately 62 million echo boomers in the U.S. Also called “millennials,” echo boomers are currently ages 17-31. According to the 2011 National Association of Realtors Profile of Home Buyers and Sellers, younger homebuyers – those ages 18-34 – represent 31 percent of all recent home purchases.
“We know that although many young people may be delaying home purchases in today’s economic climate, most of them still aspire to homeownership,” says NAR President Moe Veissi, broker-owner of Veissi & Associates Inc. in Miami and 2002 president of Florida Realtors.
During the session, economists with NAR, the University of Washington and Florida State University presented various research and data that illustrates the future of homeownership from a generational standpoint.
“Demography is destiny,” says NAR Chief Economist Lawrence Yun. “In that vein, demographics can provide very useful insights into the future of housing and homeownership, and the results of these reports indicate that certain generational shifts will have a significant impact on the real estate industry over the next two decades.”
NAR Economist Selma Hepp identified several key demographic trends on both ends of the housing age spectrum. The demand for affordable, accessible housing will increase as the 65-and-over population grows; at the same time, as seniors leave their homes and move into assisted living and other arrangements, they will add to the current supply of housing. Because of their sheer size, however, echo boomers will significantly impact the next two decades in housing.
“Echo boomers represent a long-term opportunity for a housing market recovery, but they are struggling in the current economic crisis,” says NAR’s Selma Hepp. “Consequently, demand for rental housing is likely to climb in the near term.”
As a group, the echo boomers are more racially and ethnically diverse than their baby boomer parents. While 65 percent of baby boomers are Caucasian, only 55 percent of echo boomers are Caucasian. Echo boomers are also more likely to be college educated than previous generations, and they’re remaining single longer.
Glenn E. Crenlin from the Runstad Center for Real Estate Studies at the University of Washington shared his insights into recent declines in homeownership and whether those declines indicate possible generational trends.
“It is worrying that the homeownership rate for those under 35 has fallen more sharply than the rate for older Americans,” says Crenlin. “But I think we need to examine homeownership rates by generation in a more balanced way. Although the Millennial generation does not own homes at the same percentages of those in other generations, many of them are still in the early stages of household formation – in fact, some of them are still in high school.”
Crenlin presented data from the American Community Survey that shows a significant increase in homeownership among millennials when compared to baby boomers at the same age. While 900,000 households in the millennial generation own their own home, only 500,000 baby boomer households owned their own homes at the same point in their lives.
“Given these data, what we’re looking at in terms of the millennial generation is likely only a delay in homeownership of three to five years, not a long-term trend away from homeownership itself,” said Crenlin.
© 2012 Florida Realtors®
Friday, May 18, 2012
Moreover, Yun said the second half of this year could be even better than the first, in part because of continued increases in rental costs and record affordability of homes. “Renters are getting squeezed, and they don’t want to rent anymore,” Yun explained. “This could be the year we see the release of pent-up demand.”
Home prices have been skipping along the bottom for about a year now, Yun said, a trend that has drawn investors into the market. These investors have helped housing through a couple of difficult years and partly mitigated the dysfunctional mortgage market.
“Right now is the time to buy low,” he said. “Investors are coming in to take advantage. Second homes started to recover nicely last year because of investors.”
However, home values are poised for a rebound as more traditional buyers move back into the market, Yun said. In fact, this has already started to happen in areas such as Phoenix and Miami, which have seen year-over-year (March 2011 to March 2012) double-digit percentage increases in home prices.
As real estate improves, consumer psychology around homeownership will change, he added. Coupled with the recent – if relatively modest – job growth and stock market gains, conditions are right for a sustained housing recovery.
Nonetheless, there are issues that could restrain a turnaround in housing. Mortgages are still too hard to come by, the shadow inventory – while declining – remains historically high, and price inflation is rising “above the Fed’s comfort level,” Yun said.
To address that last problem, the Federal Reserve will likely raise interest rates in 2013 and 2014, though Yun contends a modest rise in interest rates wouldn’t necessarily be a bad thing for the housing market because it would cause financial institutions to focus their mortgage servicing departments on purchase loans instead of refis.
The biggest housing market challenge, however, is uncertainty caused by the murky political and regulatory environment, – particularly the repeated threats from legislators and policymakers to alter or eliminate the mortgage interest deduction.
And the country is racing toward a “fiscal cliff.” On Jan. 1, 2013, a federal budget compromise must be approved. If delayed, there will be automatic government spending cuts, which would probably create a fallout effect in the financial markets.
Source: Brian Summerfield, Realtor® Magazine
© 2012 Florida Realtors®
Thursday, May 17, 2012
Special Guest Blog Post
By Tom Miller @ www.NewHomeSource.com
It’s a question as old as real estate itself. Well, perhaps not quite that old, but its one that many a home buyer/seller has pondered. Hiring a Realtor is all about your specific needs. No two transactions are identical. However, most transactions occur in a pattern that a seasoned Realtor has seen before. With their intimate knowledge of the real estate world, there is something to be said for consulting a professional.
Let’s start with the seller’s point of view. You’re trying to sell your home but there are plenty of new terms, piles of paperwork and quite a bit of time involved. What’s more, you have a full time job and you just don’t have the time to figure out the best way to market your home. These reasons alone are enough to consider hiring a Realtor. Not only will your Realtor have an intimate knowledge of the market, they will also know how to expose your home to the widest possible audience. This expertise helps to put the most money in your pocket, as you will likely have a larger number of interested buyers. How does your agent metaphorically cast this larger net? In large part, by exploiting the internet to its full potential. Using their own website, as well as the online MLS, they can reach a wide audience with photos and descriptions of your home. And with 9 out of 10 of all home sales beginning with an internet search, you’re going to want to have your home as visible as possible online.
Let’s look at it from the buyer’s point of view. As the buyer, you want to get the best possible deal on a home. Real estate isn’t cheap, but your Realtor has the skills to help you get the home of your dreams for the budget you can afford. Your Realtor can help you budget your money, search in the right areas, and be very helpful during negotiations. They can talk you through your mortgage, and put you in the right financial standing to purchase the perfect home. Real estate agents are involved in the market every single day, so you can be sure they have a good pulse for where the right home for you is waiting.
Furthermore, whether you are buying or selling, when it comes to negotiations, paperwork, etc., there’s nothing like having solid representation. A good metaphor is going to court without a lawyer. You’re legally allowed to act as your own representation, but hiring a lawyer is always going to be much more effective.
In either case, entering a transaction unrepresented puts you at risk of coming up short in the end. This is a big investment, so its time you treat it as such. Hiring a Realtor will always be the smart option. For more information about your real estate needs, be sure to contact David Greenlees -ABR at Coldwell Banker Residential Real Estate today!
Wednesday, May 16, 2012
U.S. housing market finally reaches a turning point
According to the Institute, the housing market recovery will have “far-reaching impacts in the coming years across the United States and international markets as U.S. consumers increase their spending on buying, renovating, furnishing and maintaining their homes.”
It also won’t be like earlier recoveries, the Institute suggests, with homestead owners leading the way. Instead, real estate investors buying rentals will supply the homebuying demand.
The Institute’s report, The Shifting Nature of U.S. Housing Demand, predicts that average home prices will increase by up to 1 percent in the second half of 2012. By 2014, home prices will increase by as much as 2.5 percent.
From 2015 to 2017, the study projects annual increases between 3 and 4 percent, though unevenly nationwide. The strongest markets “could capture average gains of 5 percent or more in the coming years.”
“In these initial years, the prime driver of recovery won’t be new home construction, but rather demand for rental properties,” says Louise Keely, chief research officer at The Demand Institute and a co-author of the report. “This is a remarkable change from previous recoveries. It is a measure of just how severe the Great Recession has been that such a wide swath of Americans had to delay, scale back, or put off entirely their dreams of homeownership.”
Bart van Ark, chief economist at The Conference Board and co-author of the report, says he doesn’t expect to see the homeownership rate to change.
“Over 80 percent of Americans in recent surveys still agree that buying a home is the best long-term investment they can make,” van Ark says. “What will be intriguing to watch is how their aspirations around homeownership are affected by this period of extended austerity.”
Between 2006 and 2011, some $7 trillion in American wealth was wiped out when home prices dropped 30 percent after dramatic climb in valuations during the housing bubble. Looking forward, the moderate growth expectations for coming years suggest a return to normalcy. As home prices continue to drop and interest rates fall further, first-time buyers and others who remained relatively cautious will be drawn back into the housing market. And, as the market recovers, so too will consumer spending.
“As the U.S. housing market strengthens, almost every consumer-facing industry will be impacted in the coming years,” said Mark Leiter, chairman of The Demand Institute. “Business and government leaders will benefit by fully understanding the nature of this recovery. In doing so they will be better able to anticipate how consumer demand will evolve, and to formulate critical business and policy decisions to lead their organizations.”
In addition to the projected gains in home prices, the report discusses in detail the dynamics at work in the U.S. housing market and the impacts across industries. What follows are highlights from the report:
• The recovery will be led by demand from buyers for rental properties, rather than, as in previous cycles, demand from buyers acquiring new or existing properties for themselves. More than 50 percent of those planning to move in the next two years say they intend to rent.
• Young people and immigrants will lead the demand for rental properties. Developers and investors will fulfill it: developers by building multifamily homes for rent, and investors by buying foreclosed single-family properties for the same purpose.
• Rental demand will help clear the huge oversupply of existing homes for sale. In 2011, some 14 percent of all housing units were vacant, while almost 13 percent of mortgages were in foreclosure or delinquent – increases of 12 and 129 percent respectively over 2005 levels. It will take two to three years for this oversupply to be cleared, and at that point homeownership rates will rise and return to historical levels.
• The housing market recovery will not be uniform. Some states will see annual price gains of 5 percent or more. Others will not recover for many years. The deciding factors will include the level of foreclosed inventory and rates of unemployment.
• There will also be vast differences within states. Here, additional factors count, such as whether local amenities, including access to public transport, are within walking distance of homes. The report looks at seven factors and then sorts cities and towns into four categories, with each category predicting the speed of a local home price recovery.
• The average size of the American home will shrink. Many baby boomers who delayed retirement for financial reasons during the recession will downsize. They will not be alone. Most Americans will scale back their housing aspirations. The size of an average new home is expected to continue to fall, reaching mid-1990s levels by 2015.
• Consumer industries including financial services, home furnishings and home remodeling will experience shifts in demand and new growth opportunities. Part of this spending is linked to increases in wealth from improving home valuations, while an even bigger part is tied to the “transaction” of buying or selling the home which sets in motion increased demand for a wide range of products and services.
• Despite the number of Americans who have been hurt financially by the housing crash, the desire to own a home remains strong. The Institute doesn’t expect to see a long-term drop in ownership rates.
© 2012 Florida Realtors®
Tuesday, May 15, 2012
The Survey of Emerging Market Conditions, conducted quarterly by the Kelley A. Bergstrom Center for Real Estate Studies at UF, found general optimism in the commercial sector based on a falling unemployment rate – down to 9 percent from December’s 9.9 percent – and a boost in rental housing activity, such as lease signings.
The UF Commercial Real Estate Sentiment Index, a measure of the respondents’ personal business outlook, reached its highest level since 2007. Bergstrom Center officials attribute it to a better lending environment with banks, as well as an improving economy.
“With billions of dollars of loans coming due over the next year, the increased lending activity is a welcome sign for real estate owners and investors looking for debt capital to refinance quality properties,” says Timothy S. Becker, director of the Bergstrom Center.
Property fundamentals, including occupancy and rental rates, improved this quarter with progress in single-family and condominium development, apartments, industrial, land investment and capital availability. Occupancy expectations were rated most favorably in the premium office market, with respondents citing the better employment outlook as a reason.
While generally optimistic, respondents said they were still concerned about the possible impact of national policies. Specific concerns include the Bush tax cuts and payroll tax break scheduled to expire at the end of 2012, and $1.2 trillion in spending cuts that take effect in 2013. Since policy changes might not be in place before the November elections, the issues add an element of risk to the market. Respondents also were concerned with artificially low interest rates, inflation and increased gas prices.
Overall, the survey found that a majority of respondents expect a slow and measured recovery until the conclusion of the presidential elections.
A total of 189 Florida professional real estate analysts and investors, representing 13 urban regions of the state and up to 15 property types, participated in the survey.
© 2012 Florida Realtors®
Thursday, May 10, 2012
CoreLogic’s latest home price index, which includes distressed sales, shows a slight month-over-month nationwide increase of 0.6 percent in home prices from February to March. But some markets are seeing much more of a price boost this spring, including Florida, which ranked No. 5 overall for home price increases.
“This spring, the housing market is responding to an improving balance between real estate supply and demand, which is causing stabilization in house prices,” says Mark Fleming, CoreLogic’s chief economist. “Although this has been the case in each of the last two years, the difference this year is that stabilization is occurring without the support of tax credits and in spite of a declining share of REO sales.”
States with highest appreciation
According to CoreLogic, the following states had the highest appreciation in March (this includes distressed sales):
• Wyoming: +5.9%
• West Virginia: +5.3%
• Arizona: +5.1%
• North Dakota: +4.7%
• Florida: +4.5%
States with biggest depreciation
Meanwhile, the states with the greatest depreciation, when also figuring in distressed sales, are:
• Delaware: -10.6%
• Illinois: -8.3%
• Alabama: -8%
• Georgia: -7.3%
• Nevada: -5.8%
Source: Melissa Dittmann Tracey, Realtor® Magazine Daily News
© 2012 Florida Realtors®
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Wednesday, May 9, 2012
The continued stabilization of consumer attitudes coupled with other positive trends should, according to Fannie Mae analysts, positively influence Americans’ decisions making about buying a home.
“This month’s survey shows a continued gradual improvement in consumer sentiment and outlook for home prices,” says Doug Duncan, vice president and chief economist of Fannie Mae. “After flatlining at depressed levels for over a year, a growing share of consumers indicates that it is a good time to sell, suggesting rising optimism for the housing market.” Duncan adds, however, that an improving real estate market is dependent on growth in jobs, and recent reports have been a bit erratic, suggesting “that the housing recovery will remain uneven this year.”
On average, Americans expect home prices to increase 1.3 percent over the next twelve months, the highest value yet recorded, while the percentage of Americans who say it is a good time to sell their home rose to 15 percent in April.
Confidence in the economy’s direction rose to a survey all-time high in April hitting 37 percent, an increase of 2 percentage points from March. Another positive trend is an increased share of respondents who reported their income as “significantly higher” from twelve months ago, taking it to the highest level recorded over the past year and 7 percentage points higher than those who reported income as “significantly lower.”
The economy and household finances
• Confidence in the economy’s direction rose to the highest point in the survey’s two-year history to 37 percent, an increase of 2 percentage points from last month.
• Only 12 percent think that their personal financial situation will worsen in the next 12 months, consistent with February and March as the lowest value in more than a year.
• Twenty-three percent of respondents saw an increase in their personal income from 12 months ago, a 2-percentage point increase from March and the highest level recorded during the past year.
• Thirty-six percent say their expenses have increased significantly over the past 12 months, a 2-percentage point increase from last month and a return to the level recorded in January.
Homeownership and renting
• On average, Americans expect home prices to increase by 1.3 percent over the next 12 months, up 0.4 percentage points since last month and the highest value yet recorded.
• Thirty-two percent of respondents expect home prices to increase over the next 12 months, a slight decline from the sharp spike last month.
• Thirty-nine percent of Americans say that mortgage rates will go up in the next 12 months, consistent with last month’s value.
• The percentage of Americans who say it is a good time to buy decreased by 2 percentage points to 71 percent, while the percentage of respondents who say it is a good time to sell continued to increase this month to 15 percent.
• On average, respondents expect home rental prices to increase by 3.6 percent over the next 12 months, a 0.5 percentage point decrease versus last month.
• Forty-nine percent of respondents think that home rental prices will go up, a 1 percentage point increase from last month and the highest number recorded to date.
• Thirty-two percent of respondents say they would rent if they were going to move, a 2-percentage point increase from last month and the highest level since November 2011.
© 2012 Florida Realtors®