First-Time Buyers Not Picking “Starter Homes”

Daily Real Estate News | Tuesday, July 19, 2016 The “starter home” trend may be fading in real estate. Prior to the housing bubble, first-time buyers with average incomes would shop for a more affordable, smaller house with the idea of moving on to a larger home in a few years. Starter Homes: Are They Over? New Homes Are Getting Bigger and Pricier Builders Shy Away From Starter Homes Today’s first-time buyers want a home that meets their needs now and in the future. Seventy-five percent of first-time buyers say they prefer to skip the starter home and find a house that meets their long-term needs, according to a survey commissioned by Bank of America in early 2016. Thirty-five percent say they even intend to stay in that home until they retire. First-time buyers nowadays tend to be higher earners, and due to rising home prices and tighter housing inventories they are wanting to buy a home where they can stay put for a long time. In 2013, first-time buyers purchased homes with an average of 1,845 square feet. The average home in the U.S., meanwhile, is just 1,819 square feet, according to BuildZoom, a real estate construction firm’s analysis of data from the Census Bureau. "So those home buyers who probably would have been looking for the lowest-end homes 10 years ago during the housing boom are today just not able to buy. And those that are able to buy are looking further upmarket," says Issi Romem, chief economist for BuildZoom. Many first-time buyers aren’t planning to upgrade and move on in five years, like they once did. They plan to stay put. "When they do purchase, they're planning on living there longer than buyers that we've seen in the past," says Jessica Lautz, NAR’s managing director of survey research. "They're expecting to live there 10 years." Source: “More First-Time Buyers Skip Starter Home Stage for Bigger, Better,” USA Today (July 17, 2016)

Builders Ramp Up Production This Summer

Daily Real Estate News | Wednesday, July 20, 2016 Builders are finally adding more homes into the pipeline. Housing starts across the country rose in June, ticking up 4.8 percent month over month to a seasonally adjusted annual rate of 1.19 million units, the Commerce Department reports. Permits, a sign of future construction, also rose, up 1.5 percent in June, and is at a seasonally adjusted annual rate of 1.15 million units. Buyers Want New Homes... New-Home Sales Surge to Post-Recession High Builders: Lot Shortages at Record Highs The West Drives New-Home Sales Jump “This month’s uptick in production is an indicator that the housing market continues to move forward,” says National Association of Home Builders Chairman Ed Brady. “At the same time, builders are adding inventory at a cautious pace as they face lot shortages and regulatory hurdles.” Single-family housing starts climbed 4.4 percent in June to a seasonally adjusted annual rate of 778,000 units. Multifamily production rose 5.4 percent to 411,000 units. “The June report is consistent with our forecast for a gradual but consistent recovery of the housing market,” says Robert Dietz, chief economist of the NAHB. “Single-family production should continue to strengthen throughout the year, buoyed by job growth, new household formations, and low mortgage interest rates.” By region, single- and multifamily housing starts posted the highest month-to-month gains in the Northeast, rising 46.3 percent in June, followed by a 17.4 percent increase in the West. On the other hand, the Midwest registered a 5.2 percent decrease in starts last month, while the South saw a 3.4 percent drop. Despite the overall drops, all regions of the country saw an increase in single-family production. Source: National Association of Home Builders

Student Housing Is Booming

Daily Real Estate News | Wednesday, July 13, 2016 The student-housing sector is reaching new highs. In the first quarter of this year, capital pouring into student housing reached a record $2.6 billion, according to commercial real estate services firm JLL. Sales volume for the student-housing sector was up 66.2 percent year-over-year. "We are seeing more direct deals by foreign investors this year," says Lucy Fletcher, a managing director and international capital expert at JLL. About half of the volume — or $1.4 billion — came from offshore investors, Fletcher says. Get Educated About Opportunities in College Towns 7 Most, Least Affordable College Towns 10 Best College Towns for House Flippers Help Parents—or Yourself—Tackle Rising College Costs Land lease agreements are also growing in popularity for campuses that need repositioning or that have been vacant, adding fuel to the boom, the National Real Estate Investor reports. "Investors are buying into really well-managed platforms. There is large pent-up demand across the entire sector of core products," says Scott Streiff, JLL executive vice president. Class-A products are deemed as those having enrollment of 30,000 students or more. "We are seeing investors chasing core products that deliver attractive cap rates with projected student enrollment increases." The student-housing sector tends to be recession-proof, and investors are viewing it as safer than some other investment classes. "I don't know if there will ever be a point of supply and demand meeting in this sector," adds Jaclyn Fitts, national director of student housing at real estate services firm CBRE. Student housing reached a new record in the 2014-15 academic year, adding about 60,000 beds, according to CBRE data. CBRE predicts another 45,000 student-housing beds will be added in 2016-17. "There will continue to be investment opportunities in 2017 and 2018," Fitts told the National Real Estate Investor. "We will continue to see new development in 2017. Additionally, purpose-built student housing properties completed in the 2000s are primed for repositioning, so we will continue to see opportunity there in rehabbing first-generation purpose-built [properties] and raising rents." Source: “Student Housing Sector Continues to Outperform,” National Real Estate Investor (July 12, 2016)

Millennials Want Suburbs That Feel Like a City

Daily Real Estate News | Wednesday, July 20, 2016 Millennials may be drawn from pricey city centers to the less expensive suburbs, but nonetheless say they want a suburb that still has the look and feel of a big city in some ways. Some suburbs are finding means to cater to that desire and promoting the amenities they can offer to attract more younger people. The Next Big Thing: The 'Burbs A Model for the Future Millennials Want the 'Anti-Suburb Suburb' Smart Growth: Where Do You Start? For example, some are touting their specialty shops, dining options, and the plentiful sidewalks, bike lanes, and trails. The bike lanes and trails may be one of the biggest lures. Homes near walkable — and bikeable — trails get a premium boost of 5 percent to 10 percent, according to a study by Headwaters Economics, a research group focused on land management and community development. “What’s happening is, a little bit of the city is following people into the suburbs,” says Ed McMahon, senior resident fellow at the Urban Land Institute. “Almost all the successful suburbs are building walkable, mixed-use [i.e., a housing and shopping combo] centers.” Also possibly getting more millennials relocating to the suburbs, more companies are either moving or expanding to suburban areas to lower their operating costs. “What millennials want are places that have a vibrancy, where you … can shop, go out to bars, walk, and bike,” says Lynn Richards, president and CEO of the Congress for the New Urbanism. Suburban communities across the country are spending more money to overhaul their Main Streets and make their downtown more walkable, says Brett Schwarz, program manager at the National Association of Development Organizations. They’re installing bike paths and trails that link to neighborhoods or nearby towns. In the past year alone, 136 communities nationwide applied to be designated as bicycle-friendly communities through the League of American Bicyclists (63 were suburbs, while 17 were rural towns). Bicycling is becoming the fastest-growing form of transportation in the country, according to McMahon. In 1983, more than 87 percent of 19-year-olds had a driver’s license. By 2014, that percentage has dropped to 69 percent. Source: “Bike Lanes Are Bringing More Millennials to the Suburbs,” realtor.com® (July 20, 2016)

Housing Is for Everyone — No Exceptions

Daily Real Estate News | Wednesday, July 20, 2016 At the “Opening Doors” panel during the “Housing for All” conference sponsored by NAR, moderator Sherri Meadows, 2016 NAR vice president, discusses issues with panelists (from left) Megan Hustings, interim director with the National Coalition for the Homeless; Marietta Rodriguez, vice president for national homeownership programs with NeighborWorks America; and Diane Yentel, CEO of the National Low Income Housing Coalition. What a difference a roof makes. At a symposium in Washington, D.C., this week, the National Association of REALTORS® shed light on the plight of individuals and families facing homelessness and housing insecurity. “Tonight, you and I will lay our heads on a pillow with a roof over our heads, yet 500,000 people in our nation will not,” said NAR Vice President Sherri Meadows, citing data on homelessness from the U.S. Department of Housing and Urban Development. The 2015 HUD report showed the number of homeless was declining, Meadows told symposium participants, yet the number of U.S. families living with housing insecurity is on the rise. “According to the Center for Housing Policy’s Housing Landscape 2016 Report, in 2014, some 17.6 million households were severely burdened by housing expenditures, spending more than half of their income on housing costs,” she said. Meadows, an Ocala, Fla., practitioner, spearheaded the July 18–19 symposium, which focused on finding solutions and opening hearts. Panelists explored the causes of homelessness and discussed creative approaches to expanding affordable housing. Participants toured a supportive housing facility, which combines housing with social services, and packed more than 30,000 meals in a “Meals of Hope” food packing event. Speakers included Dick Larimer, senior content manager for Make Room, a project that gives voice to renters and elevates rental housing issues, and Jeremy Cowart, whose Purpose Hotel kickstarter campaign is an intersection between philanthropy, entrepreneurship, empowerment, and design. Opening the conference, NAR President Tom Salomone said, “We are honored to join forces with so many housing industry leaders, practitioners, and others who are making strides to fight homelessness and to develop effective affordable housing solutions. As REALTORS®, we see it as our job to help build and maintain healthy and strong communities that are accessible and welcoming for everyone, no matter the income level.” Focus on Action Matching words to action is a hallmark of REALTORS®. After the 2008 market crash, the National Association of REALTORS® worked closely with lawmakers and regulators to drive a housing recovery and seek relief for Americans who were underwater. But in recent years, with rents and housing prices soaring in many parts of the country — in many cases beyond their pre-crash peak — the recovery has left millions of Americans struggling to find safe, affordable housing. REALTORS® see those struggles every day, and in May, NAR’s Housing Opportunity Committee proposed, and the board of directors approved, a policy supporting “cost-effective” and “evidence-based” approaches to ending homelessness. A fall REALTOR® Magazine article (“A Dream Too Far,” November/December 2015) highlighted some of the causes, chiefly the economic disparity that’s at the root of housing insecurity. In that article, NAR Chief Economist Lawrence Yun commented on the growing income gap and its effects on homeownership: “It’s certainly not in the interest of broader America,” Yun told managing editor Meg White, “and it’s something that everyone should be concerned about.” Meadows said she felt charged by the association’s decision to take up the cause. “Years ago, we were talking about the housing ladder and the importance of getting on that first rung of homeownership,” Meadows said. “Well, we need to lower that first rung because too many of our families and our veterans are without a roof over their heads — or they’re just a paycheck or two from homelessness.” In fact, REALTORS® around the country are leading the charge on housing opportunity, often with the support of NAR grants. In Austin, Texas, REALTORS® have been helping to meet the housing needs of veterans. In Central Virginia, REALTORS® helped Culpeper County officials update a 1964 comprehensive housing plan. In Florida, Meadows made reducing family homelessness one of her key priorities when she led the Florida REALTORS® in 2014. These and other efforts are discussed in depth in the summer issue of NAR’s On Common Ground magazine. What real change can REALTORS® hope to make? Meadows pointed to speaker Jeremy Cowart’s remarkable “I’m possible” video for a lesson on what one person can accomplish. “It’s about the effort,” she said. “I like to use the Mother Teresa quote: ‘I alone cannot change the world, but I can cast a stone across the waters to create many ripples.’”

Measuring Progress in the Housing Market

HUD’s housing scorecard provides a monthly snapshot of our nation’s housing market and measures how the Administration’s initiatives are serving Americans. Looking back on May, we witnessed notable progress among key indicators: sales of new and existing homes hit high levels and newly initiated foreclosures have remained below the pre-crisis monthly average for more than a year now. While housing is being reenergized, there is still a need to support programs that help more Americans recover from the Great Recession. Here’s a look at some of the top trends: April purchases of new homes surged to the highest pace in eight years. New home sales climbed 16.9 percent in April to 610,000 (SAAR)–the highest level since January 2008–and were 23.8 percent above a year earlier. In addition, March sales, at 531,000 units, were stronger than previously reported. New home sales have been higher than the 500,000 mark for the past six consecutive months. Monthly data on new home sales can be volatile, however, and are often revised. (Source: HUD and Census Bureau). Sales of previously owned (existing) homes reached a three-month high in April. The National Association of Realtors® (NAR) reported that sales of existing homes (including single-family homes, townhomes, condominiums, and cooperatives) rose 1.7 percent in April to 5.45 million (SAAR) from a 5.36 million pace in March and were 6.0 percent higher than a year ago. Sales in the Midwest jumped 12.1 percent to a 1.39 million pace; purchases were also up in the Northeast. Existing home sales have been above the 5.0 million mark for 13 of the past 14 months. Foreclosure starts and completions fell in April. Lenders started the public foreclosure process on 43,793 U.S. properties in April, a decrease of 8 percent from March and 15 percent from a year earlier. Newly initiated foreclosures have been below the pre-crisis (2005 and 2006) monthly average of 52,280 for more than a year. Lenders completed the foreclosure process (bank repossessions or REOs) on 33,518 U.S. properties in April, a decrease of 1 percent from the previous month and 26 percent less than a year ago. This is the second annual decline in foreclosure completions in the past 14 months. The Administration’s foreclosure mitigation programs continue to provide relief for millions of homeowners as the recovery from the housing crisis continues. In all, more than 10.5 million mortgage modifications and other forms of mortgage assistance arrangements were completed between April 2009 and the end of April 2016. More than 2.6 million homeowner assistance actions have taken place through the Making Home Affordable Program, including nearly 1.6 million permanent modifications through the Home Affordable Modification Program (HAMP), while the Federal Housing Administration (FHA) has offered more than 3.2 loss mitigation and early delinquency interventions through April. These Administration programs continue to encourage improved standards and processes in the industry, with lenders offering families and individuals more than 4.7 million proprietary modifications through March (data are reported with a two-month lag). This is just a brief overview of the May Housing Scorecard. For more information about the health of the housing market and how Administration programs are helping families please visit: www.hud.gov/scorecard. Katherine O’Regan is the Assistant Secretary for the Office of Policy Development and Research.

Older Americans Ready to Tackle Housing Market, Survey Says

Older Americans Ready to Tackle Housing Market, Survey Says Three out of four homeowners born before 1961 are confident they will have a financially comfortable retirement according to the Freddie Mac 55+ Survey, a comprehensive survey of the housing perceptions and preferences of Americans over the age of 55. The first Freddie Mac 55+ Survey also found that the majority of homeowners in this age group were very satisfied with their homes, their communities and their quality of life. Consistent majorities also said homeownership makes financial sense at almost every stage of adult life, whether or not a person is married or has children. “The overwhelming message of the Freddie Mac 55+ Survey is that homeownership works. The American Dream delivered greater financial stability and satisfaction to the homeowners who lived through every recession since the 1970s, including the housing crisis of 2008,” says Dave Lowman, executive vice president of Single-Family Business at Freddie Mac. In addition, while many over the age of 55 would prefer to age in their current home, nearly 40 percent said they would prefer to move at least one more time, and 70 percent of those said they are likely to purchase their next home. According to Lowman, this will create significant opportunities and challenges for the industry for years to come. “The decisions the nation’s Baby Boomers and other older homeowners make will have an enormous impact on the demand for housing and new mortgage credit for the foreseeable future,” Lowman says. “Whether they buy new homes or decide to refinance and renovate their current ones, the size of this generation and the fact that they hold close to two-thirds, approximately $8 trillion, of the nation’s home equity makes it very important that we watch what they do.” Overall, 76 percent of homeowners over the age of 55 are confident they will have a financially comfortable retirement, according to the Freddie Mac 55+ Survey. Majorities in every demographic group surveyed share this confidence to varying degrees: African-Americans (77 percent), Hispanics (64 percent), Asians (80 percent), homeowners who are currently working (74 percent), as well as homeowners earning less than $30,000 (55 percent). The Freddie Mac 55+ Survey also shows consistently strong links between homeownership and a person’s satisfaction with their home, community and financial situations. Specifically, 59 percent of homeowners are “very satisfied” with their communities, 64 percent with their current home, and 54 percent with their quality of life. A majority also believe homeownership makes financial sense for most Americans. Specifically, 96 percent feel homeownership makes financial sense for people who are either married with children or between 35-49 years of age. Smaller majorities said homeownership makes sense for people over 55 (87 percent), married couples without children (85 percent), single people with children (79 percent), and single people without children (53 percent). In terms of helping others become homeowners, nearly 25 percent of the respondents say they have already helped someone financially with a down payment. Why Baby Boomers Drive the Housing Market for Millennials The Freddie Mac 55+ Survey also identified a number of other opportunities and challenges for the housing industry that will stem from the decisions Baby Boomers and other older homeowners make over the next few years. For example, 63 percent of the 55+ homeowners surveyed say they prefer to age in place if they had complete control over it. However, nearly 40 percent indicate they would prefer to move at least one more time. This suggests nearly 27 million homeowners over age 55 may move again. When asked when they expect to move next, 13 percent think they will move within four years. Of those homeowners who would consider moving, 12 percent believe their next home will be more expensive than their current one, while 37 percent believe it will be in the same price range, and half believe it will be less expensive. At the same time, 23 percent of homeowners say they would have to make major renovations in order to age in place. 55+ers cite cost and convenience as the top factors influencing whether to move and where to live: affordability of living in a particular community (46 percent); having the amenities needed to live there for many years after I retire (44 percent); less maintenance (41 percent); having a place where I was no longer responsible for caring for the property (e.g. yard work, snow removal) (30 percent); proximity to other family members (31 percent); being in a walkable community (28 percent); having abundant services for adults my age (25 percent); access to public transportation (17 percent); warmer climate (19 percent); having a place that is smaller than my current home (e.g. downsizing) (19 percent). For more information, visit www.freddiemac.com.