Millennials Delay Weddings for Home Ownership

Daily Real Estate News | Tuesday, February 17, 2015 

 

Home ownership may be worth putting off love, at least for millennials. Thirty-eight percent of American millennials (those aged 18-34) say they would – or have – delayed a wedding or honeymoon so they could afford to buy a home, according to a survey of more than 2,000 adults conducted by Harris Poll, on behalf of the real estate brokerage Redfin.

Saving for a down payment may take precedence over saving for a wedding. Saving for a wedding has gotten pricier – recently hitting an all-time high of $29,858 last year, according to TheKnot.com.

Many millennials say they’ll delay a marriage to lessen the financial burden of paying for a wedding and a home within the same year, says Clayton Jirak, a Redfin real estate professional in Chicago.

“This is becoming a popular option for couples who are prioritizing home ownership over marriage,” he says.
They may choose to commit to a mortgage and home together before the walk down the aisle. And such a commitment into home ownership together can be a big first step too – and better yet, if it’s a lasting one.
“Breaking up is hard to do, but splitting financial assets makes it even harder especially considering the fees and closing costs that are associated with buying and selling a home, which if done too soon can wipe out all the equity accumulated,” said Redfin chief economist Nela Richardson. “A house for most people is a long-term asset, which it should be if you are looking for a return on your investment.”

Source: “First Comes Love, Then Comes Mortgage,” Redfin Blog (Feb. 13, 2015)

Home Owners, Appraisers Align on Price

Daily Real Estate News | Wednesday, February 18, 2015 

 

Appraisers’ opinions of home values are mostly falling in line with home owners’ estimates, according to the latest reading of Quicken Loans' Home Price Perception Index. Indeed, appraisers’ opinions of home values were only 0.18 percent higher than home owners – the closest the two opinions have been since September 2013. The previous month, the difference between appraiser and home owners’ price opinions was 1.43 percent.

While the value perception is closing, home values have also been on the rise. The national median single-family home price at $208,700 in the fourth quarter, up 6 percent year-over-year, according to the National Association of REALTORS®.

Quicken Loans, the nation’s second largest retail mortgage lender, uses its index to evaluate perceptions of the housing market. Appraisers in more than 74 percent of the metro areas the company examined continued to have higher opinions of home values than the home owners – which means that many may have more equity in their home than they realize.

“Interest rates have dropped and we have seen more and more Americans refinance their mortgage,” says Bob Walters, chief economist for Quicken Loans. “These consumers have been watching their local housing market and realizing their home’s true value more accurately than any time in the last year and a half. This is encouraging, but I urge home owners to continue to watch the ebbs and flows of the market, especially in their neighborhood, so they understand the direction of home values in their community when it comes time to sell.”



Source: “Quicken Loans Study Shows Appraiser and Homeowner  Opinions in January Nearly Equal,” Quicken Loans Press Room (Feb. 10, 2015)

FHA launches historic homebuyer ‘care package’ for 2015

Reductions in annual premiums signal savings for consumers

 

After several years of lackluster participation in the housing market, first-time homebuyers are getting a boost from the Federal Housing Administration (FHA) this year.

Last year, the percentage of homes sold to first-time buyers remained at 29 percent for the second straight year, which represented that demographic’s lowest market share since 1987, according to a study from the National Association of Realtors (NAR). In addition, overall existing-home sales dropped 3.1 percent from 2013, although median home prices increased to their highest level since 2007. On Jan. 8, in a move expected to bolster homeownership, President Obama and the FHA announced that they were cutting annual mortgage insurance premiums (MIP) for new borrowers.

Effective Jan. 26, the annual premium decreased from about 1.35 percent of the loan balance down to 0.85 percent, depending on loan parameters. The FHA predicts this will save the average FHA homebuyer roughly $900 a year. These estimates may be on the low side, however, particularly for buyers with larger mortgage balances. For instance, this past third quarter, the median home sales price in the New York City metropolitan area was $410,800. At the previous MIP, a homebuyer at this price would pay $5,445.35 in MIP annually; a buyer who purchases that same home with the new reduced MIP, however, will pay only $3,428.55 annually, a savings of more than $2,000. Of course, even at just $900 annually, the reduced premiums could mean saving as much as $27,000 over the life of a 30-year mortgage.

While these numbers are encouraging, this reduction may mean more than just a lower monthly bill for potential buyers. Annual premiums are included when calculating borrowers’ debt-to-income ratio, and the lower rates could help borrowers who previously did not qualify to meet the 43 percent FHA limit for the debt-to-income ratio. In addition, the subsequent savings may also help homebuyers qualify for larger purchases, allowing them to get more house for their money. By lowering the cost of homeownership, the FHA may increase the pool of potential homebuyers, particularly in the previously sluggish first-time homebuyer market.

With slow wage growth and tightened credit standards in the past several years, borrowers with lower down payments and credit scores have struggled to qualify for homeownership. Even FHA loans, which are designed to help this market segment, were unable to reach many potential borrowers due to decreased loan limits and increased premiums. This latest move by the FHA, however, seems to be acknowledging the need for additional help to jump-start the first-time homebuyer market. In fact, the FHA estimates that, over the next three years, this reduction will spur 250,000 new buyers to purchase their first home.

Real estate agents working with first-time homebuyers or borrowers with lower credit scores should be aware of how these MIP reductions affect their clients’ purchasing power. In addition to offering lower-cost mortgages with down payment requirements as low as 3.5 percent, the FHA’s mortgage programs offer a variety of products and support that eases the way for underserved borrowers who would otherwise be shut out of homeownership. FHA-insured mortgages may be the answer for many of these potential homebuyers.
As the year progresses and first-time buyers come back into the market, it could create a ripple effect throughout the industry. If demand for starter homes increases, it may incentivize more move-up buyers as well, and 2015 could see an increase in overall sales as fresh buyers and sellers come off the sidelines.

Ray Brousseau serves as executive vice president of Carrington Mortgage Services.
Email Ray Brousseau.

Home Buyers Put Down More Money in 2014

Daily Real Estate News | Thursday, February 19, 2015 

 

Home buyers showed the money in 2014. The share of buyers using low down payment loans plunged to an 11-year low last year, according to a new analysis of nearly 20 million purchase loans for single-family homes and condos nationwide.

In 2014, 25 percent of home buyers using conventional or Federal Housing Administration loans put less than 3 percent down when purchasing a home – that’s down from 37 percent in 2006 before the housing crisis, RealtyTrac reports in its analysis.

So how much did home buyers put down? In 2014, the average down payment percentage was 15.4 percent, averaging $58,496 on an average purchase price, according to RealtyTrac’s data.
The average percentage down payment over the last decade has hovered in the 13 percent and 15 percent range, according to RealtyTrac. But down payments reached an 11-year high in 2013 when it reached 15.6 percent, as the housing rebound was occurring, says Daren Blomquist, RealtyTrac’s vice president.
That means in 2013 on an average purchase price of $291,428, and an average loan amount of $232,527, that translated into an average down payment of $58,900 – the highest of any year since 2004. The average down payment fell only slightly in 2014 to $58,496, for comparison.

Not surprising, the report also confirmed that lower down payment buyers tend to be first-time, entry level buyers. For home purchases with a down payment of less than 3 percent (but more than 0 percent), the average sales price was $190,304. On the other hand, in 2014, borrowers who put down 50 percent or more tended to have an average sales price of $502,213.

Senior loan officer Kathleen Kramer with JMJ Financial in California says it’s too early to tell if the recent changes by mortgage-finance giants Fannie Mae and Freddie Mac to allow 3 percent down payment loans will make an impact. Currently, she says there hasn’t been too much activity on the loans yet because they still have strict requirements on who can qualify for them. However, recent changes with the FHA in lowering its annual mortgage insurance premiums by 0.5 percentage points – a savings of about $900 annually to borrowers – has already shown to have an imprint, she says. The move by FHA, which took effect at the end of January, has sparked a string of refinancers and purchasers due to the loans now being cheaper and more affordable to get, Kramer says.

Source: “Share of Low Down Payment Loans at 11-Year Low,” RealtyTrac (Feb. 17, 2015)

After Baby Boomers, What’s Next for Housing?

Daily Real Estate News | Thursday, February 19, 2015 

 

As baby boomers age, the decline of this mammoth generation will have a “dampening effect on household growth,” according to a new report by Harvard’s Joint Center for Housing Studies. However, this decline in growth will occur over several decades and may be offset by the millennial generation starting households of their own.

But the big question is whether the housing left by baby boomers will be desirable to younger generations?
“Many homes vacated by aging seniors will not be in demand by tomorrow’s young adults, being in the wrong part of the country or otherwise unsuitable,” according to JCHS researchers. “Some will be simply too expensive. Some ‘affordable’ vacated homes in desirable locations will be torn down and replaced by larger and more energy efficient/amenity rich houses targeted to older buyers. Many houses will sit on the market for long periods of time before sellers are willing to recognize that they are overpriced. Some homes in declining communities will become abandoned.”

As such between now and 2030, new construction will be needed to meet the housing demand from the large number of those under the age of 30 that are currently in the pipeline – which will be even further escalated due to future immigration trends, researchers note.

Later this decade, the adult population growth is expect to turn sharply, according to recent Census Bureau population projections. Growth in the population age 20 and older is expected to see a 40 percent decline, gradually falling to about 1.5 million per year by 2050.

“Despite their improving life expectancies, the oldest baby boomers will soon turn 70, and begin to die off in ever-greater numbers,” notes JCHS’ report. “Today, there are about 2.6 million deaths every year, but this number will rise to over 4 million a year by 2050.”

Baby boomers have long had a thirst for real estate. As they aged, the share heading an independent household rose from 53.4 percent in 1990; 56.1 percent in 2000; and 58.5 percent in 2010.
On the other hand, younger age groups have been slower to enter the housing market. “Higher minority shares and delayed marriage have had a negative effect on headship rates, as has the Great Recession’s impact on employment and income,” JCHS researchers note.

So what does this mean for the future of housing?

“Projected declining adult population growth because of increasing deaths will have several effects on housing markets,” JCHS researchers predict. “But it will not have an immediate and proportional impact on household growth for a variety of reasons. First, many initial baby boomer deaths will occur to married couples, leaving the surviving spouse to continue to head a household. Many deaths will also occur to people who do not head a household, but rather live in a household headed by children or other relatives, or in institutional settings (assisted living or nursing facilities).”

The decline in household growth due to the aging baby boomers will occur over many decades. By then, aging millennials could cause “the changing age structure effect to be more positive, similar to what baby boomers exerted as they passed into middle age, offsetting the effects of declining adult population growth.”

Source: “What Will Happen to Housing When Baby Boomers Are Gone?” Harvard Joint Center for Housing Studies’ Housing Perspectives Blog (Feb. 17, 2015)

The Hottest Winter Home Markets

Daily Real Estate News | Tuesday, February 24, 2015 

 

While most of the United States is currently under a deep freeze, real estate markets in many cities across the country are heating up, according to the recent Hotness Index compiled by realtor.com®.
Not surprisingly, warm locations continue to be hot spots for winter buyers. Miami, Las Vegas, Phoenix, Raleigh, and San Diego rank highest on the Hotness Index, and see busy Spring level home-buying activity earlier than other cities across the country.

To compile the Hotness Index rankings, economists from realtor.com® looked at 2014 monthly search volume on realtor.com®, adjusted for population, and combined climate data from the National Oceanic and Atmospheric Administration.

"The correlation between warmer metropolitan areas and more January searches makes sense, as it’s easier to get out and go house hunting in these cities," said Jonathan Smoke, Chief Economist for realtor.com®. "In these markets, looking for a home in November or January makes as much sense as August."
Winter home-buying activity isn't just booming in cities with balmy climates. Chicago is a surprisingly hot real estate market in the winter months, according to the Hottest Index. Despite Chicago's frigid temperatures, their prime buying season actually begins in January and home showings during snowstorms are the norm.
Some suggest that what's driving this push towards an earlier Spring buying season is the lack of inventory in many metropolitan areas.

"Prices are appreciating and homes are selling more quickly," Smoke said. "These are the criteria that we use to define a healthy market. When inventory is growing as well, the hot market can keep its momentum, which benefits both sellers and buyers."

Bet on These Home Improvements in 2015

Daily Real Estate News | Thursday, February 19, 2015 

 

If you're considering giving your home an upgrade this year, it can be overwhelming to choose what home features need an overhaul. Trends seem to change all the time, and the last thing you want is to spend money on costly improvements that will soon be out of date.

Real estate brokerage Redfin recently analyzed home features that are most desirable to potential home buyers. First, they asked local real estate agents to take note to what features were cropping up the most on home tours. Then they searched for those design keywords and took note of what trends experienced the most growth in popularity in the last five years.
So what seven home improvements made their list of the safest bets?

1. Quartz Countertops: For years it was all about the granite counters, but it appears that quartz is all the rage these days for buyers. According to Redfin, quartz has experienced a huge increase since 2012, due to its durability and overall buyer granite fatigue.
2. Smart Homes: While Smart Home design is overall still a niche with buyers, it's a phrase that has experienced an explosion in listing mentions since 2012. Redfin agents caution that buyers really need to choose a smart home system with the most up-to-date software since smart home technology is rapidly evolving.
3. Stainless Steel Appliances: This trend is here to stay, and it has only increased in popularity since 2011. According to a Redfin agent, stainless steel is "the gold standard for kitchens these days" and it appears to be a very safe home improvement bet.
4. Fire Pits: Buyers are still interested in turning their backyards into relaxing areas with multiple focal points that encourages interaction and socializing, and adding a fire pit remains a popular upgrade.
5. Tasting Rooms: In the high-end and luxury market, the term "tasting" has slowly increased in listings over the last five years. In the past, buyers hid their wine cellars away from the main focal point of the house, but these days they're requesting tasting rooms that are adjacent to the main socializing rooms of the house, such as the kitchen and living rooms.
6. Outdoor Kitchens: Along with fire pits, outdoor kitchens and multi-use backyard areas have only gained in popularity, especially for high-end buyers who mention socializing in the home as a priority. According to Redfin, "Backyards are becoming places to lounge during the summer, with full kitchens, fireplaces and televisions."
7. Freestanding Tubs: The days of the space-saving combined shower and tub are over, at least for luxury buyers. Redfin reports that the term "freestanding tub" has increased dramatically since 2011, as buyers want a bathroom that's more reminiscent of a spa.

And lastly, one trend that is seemingly on its way out? Exposed brick. According to Redfin, mentions of exposed brick in listings peaked back in 2013, and they caution that other than loft homes, buyers' interest in exposed brick is waning.

Source: "7 Home Improvement Projects That Are a Safe Bet for 2015," Redfin (Feb. 4, 2015)

House Flipping Gains Traction for Investors

Daily Real Estate News | Thursday, February 19, 2015

 

Investors bidding on property online and at live events are showing a preference for flipping over a hold-to-rent strategy, even as demand for rental housing continues to surge in many markets, according to the January 2015 Real Estate Investor Activity Report from Auction.com.

“Considering recent reports that have sggested a shortage of rental units in some metropolitan areas, we'd expect to see more investors starting to move toward a buy-and-hold strategy to address this market opportunity,” says Rick Sharga, executive vice president at Auction.com. “We know anecdotally that some flippers purchase homes specifically to sell them to other investors who repurpose the properties as rental units. But, it will be interesting to see if more investors move away from flipping and towards rental strategies over the next few months if demand for rental housing continues to rise.”
Investors bidding at live auction events showed more propensity toward flipping properties purchased than those who purchased properties online. The trend was evident across states Auction.com looked at, except in two states where hold-to-renting strategies prevailed at live auctions – Georgia and Missouri.
Also, investors who were making a one-time purchase at an auction tended to prefer a hold-to-rent strategy, while those who identified themselves as full-time “real estate investors” tended to say they were working on behalf of another investor who favored flipping.

Source: “Real Estate Investor Activity Report,” Auction.com (Jan. 22, 2015)

What Has 63.5 Bathrooms and Costs $205.5 Million? The 5 Most Expensive Homes for Sale in California

By Dennis Robaugh (Patch National Staff) February 27, 2015 at 1:10pm

Live like a king or queen, or at least rule over your own private realm, in one of these California properties listed among the priciest homes now on the market, according to Zillow.com.

1. $49.5 million

• 2431 Riviera Drive, Laguna Beach
• 6 bedroom, 8 bathrooms, 10,000 square feet

One of only 5 beachfront homes in the exclusive gated community of Irvine Cove, this six-bedroom estate is the ultimate in beachfront living and was handcrafted to marry the splendor of the sea with modern luxury living. The house features more beach frontage than any of the 19 other guard-gated properties in north Laguna. A three-story staircase adorned with fossilized stone depicting ancient marine life is a stunning reminder of this property’s unique connection to its saltwater neighbor. » more via Zillow

2. $42.5 million

• 9904 Kip Drive, Beverly Hills
• 10 bedrooms, 22 bathrooms, 24,260 square feet

A long, private drive leads to a property beautifully landscaped for maximum privacy and security just minutes from the Beverly Hills Hotel. Designed by KAA Associates, this house provides for large-scale entertaining and boasts a world-class art collection. All principle rooms face manicured gardens and grounds with spectacular views of city lights and ocean as background. » more via Zillow

3. $39.5 million

• 2936 Ocean Front, Del Mar
• 5 bedrooms, 6.5 bathrooms, 8,925 square feet

Elegant oceanfront estate is one of the most exclusive properties in San Diego. This beach home features three kitchens, a large media room, separate guest quarters and a four-car garage. The outdoor entertainment areas feature a professional chef’s kitchen, swimming pool, jacuzzi and oversized patio. » more via Zillow

4. $39 million

• 2701 Broadway St., San Francisco
• 7 bedrooms, 7 bathrooms, 4 half-baths, 16,400 square feet

The manor sits at one of the highest elevation points in Pacific Heights, providing unparalleled panoramic views stretching from the Golden Gate Bridge to the San Francisco City skyline. Originally built in 1910, the home has undergone a full restoration preserving its classic architecture yet instilling a modern style. Comprised of five levels encompassing over 16,000 square feet, the home includes two kitchens, two family rooms, two offices, three rooftop terraces and a basketball/sport court. » more via Zillow

5. $35 million

• 10771 Bellagio Road, Los Angeles
• 11 bedrooms, 18 bathrooms, 20,866 square feet

“The Bellagio House” dwells in a trophy compound in the heart of Bel-Air. Originally designed by Paul Williams and expanded by William Hefner, with a two-story entry hall and floating staircase, the 1.2 acre property includes a gorgeous formal lawn, paddle tennis court and sunlit pool. Plus, views to Century City and Bel-Air Country Club. Enjoy life in your own screening room, wine cellar or beauty salon. » more via Zillow

House Flipping Gains Traction for Investors

Daily Real Estate News | Thursday, February 19, 2015 

 

Investors bidding on property online and at live events are showing a preference for flipping over a hold-to-rent strategy, even as demand for rental housing continues to surge in many markets, according to the January 2015 Real Estate Investor Activity Report from Auction.com.

“Considering recent reports that have suggested a shortage of rental units in some metropolitan areas, we'd expect to see more investors starting to move toward a buy-and-hold strategy to address this market opportunity,” says Rick Sharga, executive vice president at Auction.com. “We know anecdotally that some flippers purchase homes specifically to sell them to other investors who repurpose the properties as rental units. But, it will be interesting to see if more investors move away from flipping and towards rental strategies over the next few months if demand for rental housing continues to rise.”
Investors bidding at live auction events showed more propensity toward flipping properties purchased than those who purchased properties online. The trend was evident across states Auction.com looked at, except in two states where hold-to-renting strategies prevailed at live auctions – Georgia and Missouri.
Also, investors who were making a one-time purchase at an auction tended to prefer a hold-to-rent strategy, while those who identified themselves as full-time “real estate investors” tended to say they were working on behalf of another investor who favored flipping.

Source: “Real Estate Investor Activity Report,” Auction.com (Jan. 22, 2015)