Weekly Mortgage and Real Estate Report – Week of October 9, 2017

ECONOMIC COMMENTARY
The Story Continues 

With the release of last month’s job numbers, we were able to get a glimpse of the major effects of three major hurricanes hitting within a few weeks. We have seen many pictures of devastation from Texas to Puerto Rico. The jobs report was one more picture which has made the national numbers look bad, even considering the drop in the national unemployment rate, but the national numbers still dwarf the drastic effects upon the local economies and millions of lives.

This story will not be a short story. It will be a novel with many chapters. It starts with mass devastation and the delivery of food and water, as well as other supplies of survival. It will end differently for many. Some will relocate and many others will be part of the rebuilding process. That rebuilding process will create thousands upon thousands of jobs. This is likely to result in construction job shortages in other parts of the country.

How long will it take to recover? No one knows the answer to that question. Many economic reports will be skewed as these regions go through the process. Even the federal budget deficits will be affected by a slowing economy and increased funds spent on recovery efforts. Along with the budget deficits, there will be a spike in mortgage defaults. But again, the housing stock will be rebuilt. For market analysts, this will be a very interesting story, but not nearly as meaningful as those affected locally.

REAL ESTATE NEWS
  An adage in the legal profession goes, “A man who represents himself has a fool for a client.” In the housing industry–particularly realtors–feel the same way about those who attempt to sell their own homes. And yet, For Sale By Owner, or FSBO, persists, with the temptation to cut out an agent and the typical 6 percent commission that comes with them. Trulia, San Francisco, estimated 6.2 percent of all home listing in the U.S. are FSBO. But with such temptation comes risk, Trulia said. When it comes to actually listing the home, Trulia reported FSBO sellers are slightly more optimistic about the value of their home and list their homes at a 2 percent premium nationally. “This sounds like great news for sellers, but there is a risk: FSBOs often see their homes sit on the market longer than agent-listed homes, sometimes by more than a month,” Trulia said. So, is FSBO worth it? “Ultimately, it’s not unreasonable for sellers to consider a FSBO listing considering the potential payoff,” Trulia said. “But it’s important to remember the value agents bring to the table. They have access to more listings and buyers, know a market’s ins and outs and have experience negotiating a deal.” More importantly, a listed price in many markets is just a starting point,” Trulia said. “In some markets, properties can be priced lower to start bidding wars,” it said. “FSBOs also run the risk of underpricing their homes.” Additionally, Trulia said FSBO properties run the risk of languishing–perhaps due to the inexperience of the seller in finding and negotiating with a potential buyer. Source: The Mortgage Bankers AssociationAmericans with an education level of bachelor’s degree or higher are more likely to own a home by age 30, according to a new study from the Federal Reserve Bank of New York. That’s regardless of their student debt situation too, the study finds. Researchers who tracked college attendance and homeownership rate by age for those born between 1980 and 1986 concluded that college graduation is associated with higher homeownership rates. By age 33, the homeownership rate for those who did not attend college trails about two years behind those who did attend college with debt but did not graduate, the study showed. “Past research has not been able to disentangle how different types of educational attainment and student debt interact to impact the likelihood of owning a home,” according to a blog post at Liberty Street Economics. “Because we observe not only whether an individual owes student debt and has attended college but also graduation status, level of degree obtained, and homeownership status, we are able to further disentangle the relationship between different education levels and homeownership.” Yet, the amount of student debt a person has is related to homeownership rates, the study concluded. Americans carrying more than $25,000 of debt are less likely to own a home than those with smaller debt numbers. Source: RIS Media

Recent housing data point to house buying as actually being cheaper than renting, but the demand for apartments reached a record high over the second quarter of the year. Nationwide, apartment demand increased by a third in the second quarter year over year, according to a recent RealPage report. “Today’s strong demand for apartments reflects the combination of solid job formation and widespread availability of appealing new apartments,” said Greg Willett, chief economist for RealPage. There were 175,645 apartments completed last quarter – exceeding 86,431 units completed in the same period in 2016. Mid-year apartment occupancy stood at 95% but still stood a bit shy from mid-2016’s 95.3% rating, according to Axiometrics. Source: MPA

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Weekly Mortgage and Real Estate Report – Week of October 2, 2017

ECONOMIC COMMENTARY
Clouded Jobs Report 

The jobs report is a very significant economic indicator. Yet, it seems that every monthly jobs report takes on some extra form of significance. This one is certainly no exception, with the report coming in the midst of the recovery from two natural disasters hitting major population centers within the United States. Hurricanes Irma and Harvey caused major damage to some of the largest states in America — Florida and Texas — as well as affecting several other population areas.

Along with major damage, lives were changed radically. It is anticipated that we will certainly see the effects of these disasters in our economic numbers, and the jobs report should be the first major indicator. It was no surprise that initial claims for unemployment were up in the weeks after the hurricanes hit and that these additional claims were concentrated in the affected areas. The numbers may not be affected radically on a national level, but there are likely to be major changes regionally and these will affect the national numbers. How much? We will know by Friday.

The good news is that these numbers should be temporary, as many jobs will be created in the rebuilding of affected areas. So, the markets will be prepared for one or two down months, but should be anticipating a rebound pretty quickly. The Federal Reserve Board meets two more times this year and most are expecting one more rate increase in December. The size and extent of the damage and rebound may very well be one of the determining factors in this decision.

REAL ESTATE NEWS
  A new report projects that U.S. housing starts will reach a total of 1.6 million units in 2021 as strengthening consumer finances boosts construction. The “Housing: United States” report, released recently by Freedonia Focus Reports, showed that single-unit conventional housing represents the largest and fastest-growing segment. Starts for such units will be driven by growing household creation and gains in the economy. The report also said that the projected improvement in single-unit starts comes as many consumers have a preference for detached homes and other types of single-unit housing. Other housing options will dampen demand for single-unit housing, however, according to the report. These options include manufactured housing, which offers a substitute at a lower cost. Single-unit demand will also be affected by the availability of multiple-unit housing options like condominiums. The report further said that the number of young people based in urban areas who want to live in or near downtown will be a factor in single-unit demand as space in such areas for single-unit housing developments are unlikely to exist. Source: Mortgage Professional AmericaHispanics are increasingly making up what’s considered the typical American home buyer, Curbed.com reports. Latinos are expected to make up 52 percent of new home buyers between 2010 and 2030, largely driven by the country’s 14.6 million Latino millennials. Since 2000, the number of Hispanic households has jumped by 6.7 million, which comprises 42.5 percent of the country’s overall household growth. Hispanics’ “fervent desire to own a home” has fueled homebuying by Latinos across the country, demographers note. “The fact is, the majority of Latinos want to be home owners and will make up half of all new home buyers in the next 20 years,” Scott Astrada, director of federal advocacy at the Center for Responsible Lending, told NBC. “They have a central place in the housing market and finance system.” Harvard University Joint Center for Housing Studies’ “State of the Nation’s Housing” study predicts minorities overall will drive three-quarters of the gains in U.S. households. Latinos will likely account for one-third of those increases alone. Source: Curbed.com

Open floor plans, which typically combine the kitchen, living room, and dining room in one large, open area, have dominated home design trends in recent years. But now, buyers may be starting to shun this type of layout. “While [the open floor plan] was successful in allowing multiple generations to congregate, it also led to consolidated visual chaos,” New York-based designer Phillip Thomas said. Some designers say the “helicopter” parenting style—parents seeking to keep a more watchful eye over their children—may have led to the open floor plan’s popularity. But some parents may find they need more personal space. Jen Altman, a child and family psychologist in Ho-Ho-Kus, N.J., says the pendulum is beginning to swing away from helicopter parenting, with many of her adult clients saying, “I just need 10 minutes to myself.” Such an attitude may be influencing a rise in the “broken floor plan,” which London architect Mary Duggan describes as large spaces with an element such as a three-quarter height wall to section off areas. Some designers may also use barn doors or pocket doors (sliding doors that tuck inside walls) to close off an open floor plan when needed. Pivoting glass and curtains are other ways to section off space. Source: The Wall Street Journal

Weekly Mortgage and Real Estate Report – Week of September 25th, 2017

ECONOMIC COMMENTARY
Amazing Resiliency 

Earlier this month, the bull market in stocks became the second strongest in history with a gain of over 260% from the bottom reached in 2009. It was already the second longest bull market in history. This is still way short of the strongest bull market in history, which achieved gains of almost 600% for the period of 1987 to 2000, but still very, very impressive. The secret to this market’s success? Steady growth with low inflation. Of course, you can also add that this bull market followed precipitous drops during the financial crisis and thus much of it was clawing its way back up.

Regardless of where it has come from, stocks have moved a long way through significant challenges and the question on everyone’s mind is — how long can this rally go on? As you would guess, there are opinions on both sides, with many analysts saying there is room to run, and others saying that stocks are being inflated by artificially low rates courtesy of the Federal Reserve Board.

The Fed met last week amid this rally, but at the same time also had to consider additional challenges, such as national disasters and a ramp-up of international tensions. The Fed’s decision to keep short-term interest rates unchanged and begin the paring of assets in October was right in line with pre-meeting expectations, though some had hoped for a delay based upon the recent challenges. Is the Fed justified in keeping rates so low, or should they hold off on the next hike expected in December — until they see how well our economy recovers longer-term from the hurricanes which have hit so hard? Only time will tell, as we cannot predict the future any better now than we could in 2009.

REAL ESTATE NEWS
  National residential lenders are easing credit standards to keep the housing market moving, though the changes bring lending nowhere near the ultra-loose credit environment that sparked the financial crisis. Fannie Mae and Freddie Mac – the government-controlled companies that purchase home loans from lenders to keep the market on even keel – are rolling out new programs to encourage homeownership. Earlier this year, the GSEs flagged affordability challenges as the biggest barrier to housing growth. In response, Fannie Mae is now allowing borrowers to have higher debt levels and still qualify for a home loan. This includes raising the debt-to-income ratio limit to 50% of pre-tax income from 45% previously for manually underwritten loans — loans not approved through their automated underwriting system. The nation’s three major credit agencies – Equifax, TransUnion and Experian – are also dropping tax liens and civil judgments from some consumers’ credit profiles. This will enable more Americans to qualify for a home loan. More recently, Fannie Mae and Freddie Mac also announced programs to allow for purchase loans without appraisals, although the loans that qualify are limited to start out with. Sources: GoRion, Fannie Mae and Freddie MacImmigration is among the most hotly debated issues in America right now, but regardless of the political arguments about how to manage the country’s borders, there’s no denying that an uptick in foreign residents in the U.S. is a boon for real estate, according to Alex Nowrasteh, immigration policy analyst with the Cato Institute’s Center for Global Liberty and Prosperity. “No other market is more affected by immigration than real estate,” Nowrasteh said at a session called “Housing Markets Are International” at the Realtors® Legislative Meetings & Trade Expo. “The effect of immigration on the labor market is, at worst, one-tenth the size that it is on real estate.” He noted that immigrants gravitate toward construction jobs at a much higher rate than American-born citizens. When immigration rates increase, the homebuilding industry may benefit. Nowrasteh also said the Cato Institute research has shown that on a local level, a 1 percent rise in the immigrant population corresponds to a 1 percent hike in rental rates. And with 22.6 percent of the U.S. population—or 43.3 million people—being foreign-born, according to Census Bureau data, the economy is getting a huge influx of cash. In 2012, Nowrasteh noted, immigrants added $3.1 trillion to U.S. housing wealth, mostly in mid- to low-income counties. According to the NAR’s latest research on international buying activity in the U.S. in 2016, foreign buyers purchased $102.6 billion worth of U.S. real estate. Source: Realtor® Magazine.

A Redfin report said for every dollar of home equity single men earned over five years, single women earned just 92 cents. Redfin examined nearly 200,000 home sales in 18 large metros in 2012, of which nearly 40 percent were purchased by single women. On those home purchases, women earned a median $171,313 of home equity over five years, compared to $186,403 of equity earned by men–a difference of $15,090 or 8.1 percent. Redfin Chief Economist Nela Richardson attributed the disparity in home equity to gaps in pay, lower down payments made by women and higher student debt among women. “Despite differences in equity appreciation, purchasing a home can help level the playing field between men and women,” Richardson said. “In addition to setting labor standards that encourage pay equity, more can and should be done at the federal and local levels to support female homeownership through affordable housing policies like down payment assistance.” Redfin blogger and editor Natalie Schwab said the first major cause behind the home equity accumulation gap is income. She noted women’s median income has flattened since 1979, according to the National Bureau of Economic Research. Coupled with a continuing gender pay gap in the workplace, women are typically unable to save and therefore spend as much as men on housing. Source: The MBA

Weekly Mortgage and Real Estate Report – Week of September 17, 2017

ECONOMIC COMMENTARY
Significant News for the Fed 

Meetings of the Federal Reserve Board are very news worthy for the markets by themselves. On the other hand, thinking about how much news and data the Fed has to consider before they make a decision regarding interest rates and other activities is almost mind boggling. It is not as if they look at the jobs data and make a decision based upon that report. There are hundreds, if not thousands, of points of data to consider.

Add the current events happening today, and one would not want to be in that decision-making position. Between Korean nuclear tests, Hurricane Harvey, Hurricane Irma, legislative and administrative actions, and more; there is no lack of information which might influence the Fed. In other words, the economic data is very complex, but adding all these other factors make the decision-making environment totally convoluted.

Before the current events intervened, the betting line was that the Fed would announce tomorrow that they will start paring down their assets — most likely starting in October. They were expected to hold open the possibility of raising rates again before the end of the year, but were not likely to act at this meeting. We believe that the current events make it even less likely that the Fed will raise rates at today’s meeting and the decision to start paring down in October may still stand, but even this expected move could be delayed.

REAL ESTATE NEWS
  Zillow Inc., Seattle, said home listings across the U.S. that receive 30 or more “favorites” on Zillow within their first week on the market sell in under two weeks and for more money, which Zillow Chief Economist Svenja Gudell said is a sign of how competitive the housing market has become. Conversely, Zillow said homes that get 10 or fewer favorites in their first week go for less money and take more than a month to sell. “Favoriting” a home on Zillow is a way for shoppers to save homes they’re interested in coming back to later, making it easy to show a friend, partner or real estate agent. And as home buyers skew increasingly younger and more savvy on social media, the language of social media counts for something. According to the Zillow Group Consumer Housing Trends Report, nearly 70 percent of sellers say seeing how well their home is performing compared to similar homes on the market is an important way for them to gauge interest. About 60 percent of sellers say an important way for them to gauge interest is to know how many people have looked at their home online. Source: ZillowThe United States is going through an energy revolution that within 20 years will reshape people’s homes and communities, experts said at the National Association of Realtor®’ 2017 Sustainability Summit in Washington, D.C. Most people aren’t aware of the revolution right now, but that will change as the cost of alternative sources of energy, such as solar panels, plummets and the use of smart technologies—particularly LED lighting—goes mainstream. “Smart cities are already here, but they’re unevenly distributed right now,” said Geoffrey Kasselman, executive managing director of commercial real estate advisory firm Newmark Knight Frank. Kasselman and other experts were on hand at the summit to give real estate professionals a better understanding of how sweeping changes in energy use and technology will impact what people want in their homes and communities. “Consumers are already telling us they want sustainable features in their home,” NAR President-elect Elizabeth Mendenhall said at the meeting. “What consumers don’t know is how to make their home more energy-efficient and what to ask for, and that’s where Realtors® can help.” “We’re transitioning from a petroleum- to a solar-based global economy,” Kasselman said. “We might never see a barrel of oil over $50 again. A new world order is emerging.” Source: Realtor® Magazine

The U.S. homeownership rate, which fell in 2014 to a 20-year low, is poised to recover some in the next few years, buoyed by positive underlying fundamentals, said First American Financial Corp., Santa Ana, Calif. The company’s annual Homeownership Progress Index noted that the homeownership rate fell under 64 percent in 2014, the lowest level since 1994, after peaking the previous decade at a record 69 percent. Despite some volatility since 2014, First American Chief Economist Mark Fleming said that the Millennial generation is now poised to boost homeownership over the next several years, noting increasing educational attainment indicates prospects for higher income–and subsequently, homeownership demand. “Even as Millennials continued to delay marriage and family formation and pursue higher education levels, the Homeownership Progress Index only declined moderately from 2015 to 2016,” Fleming said. “Yet, the prospect for future homeownership demand looks hopeful, as more households increase their educational attainment level and thus their prospect for higher income.” The Homeownership Progress Index measures how a variety of lifestyle, societal and economic factors influence homeownership rates over time at national, state and market levels. Source: Mortgage Bankers Association

Weekly Mortgage and Real Estate Report – Week of September 11, 2017

ECONOMIC COMMENTARY
America is Tested Again and Again 

All through our economic commentaries we always are fearful of making predictions. No matter how much information we have, there are always unknown factors which can change the future to a significant degree. There is no better example of this than what Texas and Louisiana just faced with Hurricane Harvey. An entire region of our country devastated with an amazing amount of support pouring in throughout the country.

There is no doubt about the fact that this natural disaster will have a major effect upon our economy — as well as Irma and whichever storms follow. From the devastation of local economies to gas prices, there will be a multitude of factors we will be facing. In the long-term there will be an economic revival as we rebuild lives, houses and infrastructure. We have rebuilt successfully before and we will rebuild again. America has always demonstrated our resiliency.

However, there are major questions which will remain far beyond this event. For example, we all know that houses are expensive to build and “excessive” regulations are part of that equation. On the other hand, as the insurance companies continue to point out, the lack of adequate building and zoning standards in some areas of the country have increased the cost of rebuilding significantly. In other words, we have some very hard questions to address, questions which are very difficult to answer. And coming out with the right answers will help us pass this test in the future long after we rebuild this time around.

REAL ESTATE NEWS
  In the wake of Hurricane Harvey, the Insurance Information Institute (I.I.I.) released a primer on the difference between water damage covered under a homeowners policy and damage covered by flood insurance. The Institute reported 40% of homeowners think that standard homeowners insurance covers flood damage caused by heavy rain, which it does not. “Hurricane Harvey has, once again, shown that tropical storm systems are often major rain events, rather than wind-related. This brings strong motivation for everyone to consider flood insurance, even if their mortgage lender does not require it,” said Loretta Worters, vice president of Media Relations with the I.I.I. According to the I.I.I.’s May 2016 Consumer Insurance Survey, only 12% of homeowners have flood insurance nationally, the lowest number since 2010 and down from 14% in 2015. Standard homeowners and renters insurance will cover wind damage from Hurricanes. Flood coverage, however, is excluded and is available in the form of a separate policy from the federal government’s National Flood Insurance Program (NFIP) and a few private insurers. The NFIP provides coverage for up to $250,000 for the structure of the home and $100,000 for personal possessions. Replacement cost coverage is available for the structure of a home but only actual cash value coverage is available for possessions. Excess flood insurance provides protection above the NFIP limits. It is available from private insurers for higher valued properties and for those living in a community that does not participate in the NFIP. Source: Builder More Americans are staying put. The overall mobility of the U.S. population is at its lowest level and has fallen by nearly half since its most recent peak in 1985. Americans who live in rural areas are not moving. The rate of people who moved across a county line in rural America was just 4.1 percent, down from 7.7 percent in the late 1970s, according to the analysis. The mobility rate in rural areas has fallen faster than metro areas. “We’re locking people out from the most productive cities,” said Peter Ganong, an assistant professor of public policy at the University of Chicago. “This is a force that widens the urban-rural divide.” It can stymie economic growth, adds David Schleicher, a professor at Yale Law School. The immobility of rural residents is preventing them from getting higher paying jobs and could even be choking off the labor supply for employers in areas where jobs are plentiful. Economists have indicated that the decline in rural mobility is mostly due to the escalating cost of housing. Small-town home prices have modestly recovered from the housing market crisis, while restrictive land-use regulations in metro areas have driven up prices. Source: The Wall Street Journal

More generations are sharing a roof as a growing number of adult children move back in with their parents and aging parents move in with their grown children. Nearly one in five Americans are now living in a multigenerational household (defined as a home with two or more adult generations or grandparents living with grandchildren). The number of multigenerational households in the U.S. has bloomed to the highest level since 1950. About 60.6 million adults, or 19 percent of the population, were residing with their extended family in 2014, according to data from the Pew Research Center on multifamily households. The number has increased from 57 million in 2012. Economists say the main reasons for the uptick are rising home prices, higher child care expenses, increasing college debt, longer life expectancies, and the growth in diverse communities. Multigenerational living is more prevalent among certain ethnicities and cultures. For example, 28 percent of Asians live in a multigenerational household; that number is 25 percent for both Hispanic and African American families. Whites have the fewest multigenerational households at 15 percent. Builders have been responding to the trend, constructing homes with more square footage and that contain a separate wing for extended family members. Source: realtor.com®

Weekly Mortgage and Real Estate Report – Week of September 4, 2017

ECONOMIC COMMENTARY
More Jobs News

 

Last month we spoke about the data that will be coming out before the Federal Reserve Board meets towards the end of September. These economic reports included jobs, inflation, the quarterly reading on economic growth and more. The August job numbers released just before the Labor Day weekend was expected to be one of the major determinants contributing to the decision by the Fed — along with unexpected events that might come up. Certainly, the massive stormed named as Harvey has been a major example of such an unexpected event.

Until now, most analysts were betting that the September Fed announcement would include an October start to the Fed’s previously announced program of paring down mortgage and government bonds. While the markets are dreading such a plan, because it could potentially raise long-term interest rates — the paring down is expected to be gradual. In addition, the Fed is not expected to raise short-term rates in September, but leave open the possibility of such a move before the end of the year.

Did the numbers released strengthen these assessments, or could there be another course for the Fed? The increase in jobs of 156,000 was seen as disappointing, especially when coupled with the downward revision of the numbers for the previous two months. The unemployment rate moved up slightly to 4.4% and wage inflation continued to be tame. The bottom line? Along with the devastating effects of the storm, this further decreases chances for a rate hike this month, but may not deter the Fed from starting to pare down their assets.

REAL ESTATE NEWS
  Median home prices in the second quarter eclipsed a record high set in 2016, jumping 6.2 percent year over year as the inventory crunch continues to push property values higher, according to the National Association of Realtors®. The national median price for an existing single-family home was $255,600, up from $240,700—the previous high—in the second quarter of 2016, NAR reported. Prices for single-family homes rose in 87 percent of U.S. housing markets; 23 metros saw double-digit increases. “The 2.2 million net new jobs created over the past year generated significant interest in purchasing a home in what was an extremely competitive spring buying season,” says NAR chief economist Lawrence Yun. “Listings typically flew off the market in under a month—and even quicker in the affordable price ranges—in several parts of the country. With new supply not even coming close to keeping pace, price appreciation remained swift in most markets.” Yun continues to urge for more new-home construction to meet the demand in the housing market. Source: NARBaby boomers are expected to sell their homes in large numbers over the next decade. Arthur C. Nelson, a University of Arizona professor, predicts the “great senior sell-off” will occur in the mid to late 2020s. It’s a few years later than what Nelson had originally predicted in 2013 (he originally said by 2020). He says baby boomers are living in their homes longer, holding off on selling in the hopes of netting an even higher price later on. Indeed, homeowners are holding onto their properties significantly longer than they used to—now about nine to 10 years. With ample housing shortages across the country, they are having a tough time finding a replacement home—but they may also be waiting to recover even more in value from what they may have lost in the Great Recession, Nelson notes. “It’s not that boomers are going to ‘age in place,’” says Nelson. “They’re going to be stuck in place, and they’re going to make the best of it.” He says that those who can afford it will opt to remodel. But Nelson says it may not be easy for boomers to sell their homes. Millennials—who are largely expected to be the buyers of boomers’ homes—have differing tastes, with more opting to live in central cities or in the oldest, closest suburbs, or they’re showing preferences for smaller homes and not sprawling McMansions in the exurbs. Nelson says the surrounding cities likely will be the toughest for boomers to sell their homes in. Source: The Atlantic CityLab

A dearth of suitable land for residential development is posing a big challenge for the real estate market. The 2017 REALTORS® Land Institute (RLI) survey shows that the overall number of land transactions over the past year for residential use is up, clocking in at 25 percent of the total. Prices are rising, too. The survey shows a 5 percent increase in total dollar volume of closed residential land transactions compared to the previous year. Prices are rising, too. The survey shows a 5 percent increase in total dollar volume of closed residential land transactions compared to the previous year. “One challenge will be finding enough affordable land on the outskirts of populated areas,” says Jessa Friedrich, marketing manager for RLI, who recently blogged about the upswing in residential land transactions for RLI. “On the other hand, all of this is great news for current landowners and land real estate investors looking to sell, as well as those who serve them in those markets.” RLI expects this trend won’t wane in the coming year, either. “The lack of housing inventory across the country and the demand for residential land for new-home construction will continue to drive up land prices through 2018,” Friedrich says. Source: REALTOR® Magazine

Weekly Mortgage and Real Estate Report – Week of August 28, 2017

ECONOMIC COMMENTARY
Fall Forward

 

Though the calendar states that fall comes later in September, Labor Day weekend is actually the real end of summer for most Americans. It means back to school for the kids and the end of vacation season. Congress is back in session after their August recess. Though many think that Congressmen go on vacation during recesses, most are back in their districts meeting with their staffers and gauging the temperature of their constituents.

Fall starts the second homebuying season of the year. Though not as strong as the spring season, the fall is a time that people list their homes and want to be settled in a new home before the holiday season arrives. This fall we are hopeful that more are listing their homes because the market has been constrained by a listing shortage.

Before we go out to enjoy the Labor Day weekend, we will have something of an economic report anomaly. Since the first day of September is on Friday, the employment report will be released early before the holiday weekend starts. Many will be on vacation this week and others will be leaving early for the holiday. Thus, the markets may be prone towards more volatility if there is a surprise in the report. If there is a surprise, it will be like saying — Surprise, we had ___ jobs added. Have a nice holiday weekend to think about it!

REAL ESTATE NEWS
  Parents who would like to see their adult children leave the nest are increasingly buying their offspring their own places. Once upon a time, Mom and Dad would wait until their kids were starting their own families to help them buy a house or apartment, if they offered any help at all. But now, that kind of assistance is coming earlier and earlier — and continuing longer and longer. Leonard Steinberg, president of the New York real estate chain Compass, sees this trend as the vanguard of an enormous shifting of assets that will happen over the next 20 years, as wealth accumulated by baby boomers is transferred to their heirs. How much wealth? A staggering $30 trillion, Steinberg says, adding that it will be “the greatest transfer of generational wealth ever.” And this isn’t an isolated occurrence — it’s a real trend, says Steinberg. While the trend is nationwide, Steinberg says it is more concentrated among larger cities where the cost of renting is sky-high. The reasoning: Why waste enormous amounts of money on rent — a “reckless” expenditure, in Steinberg’s words — if a parent can help a child get started in homeownership instead? Hopefully, doing so will give the children a leg up on all the financial benefits from building equity, and foster values necessary to homeownership, like commitment. It also helps grown kids who have gotten themselves into the financial netherworld of bad credit — perhaps due to the burden of scholastic debt — or who have no debt, or credit history, at all. In those cases, their debt-to-income ratio is either so high or so nonexistent that it’s all but impossible for them to qualify for financing on their own. It may sound as though this kind of maneuver is the exclusive province of millionaires, but Steinberg says he sees it over all niches of wealth. “A $50,000 cash infusion can make all the difference,” he says. Source: Lew Sichelman, Uexpress — Want an article which explains how parents can help their children purchase? Contact us.The vast majority of Americans say that homeownership is a good investment but many are concerned about affordability. A new survey from the National Association of Realtors shows that, while 84% of respondents agree that owning a home is a good investment, the highest level since 2007. Most respondents said that building equity in a home, rather than boosting the bank accounts of landlords, was their primary reason for viewing homeownership as a good investment. The second highest reason given was a debt-free home to boost retirement wealth. Affordability is an issue for many though, with 40% of white Americans and more than half of non-white Americans saying a lack of affordable housing is a big problem. The issue is bigger in the top 25 densest markets and among the working class (65%) and public servants (55%). “Despite the growing concern over affordable housing, this survey makes it clear that a strong majority still believe in homeownership and aspire to own a home of their own. Building equity, wanting a stable and safe environment, and having the freedom to choose their neighborhood remain the top reasons to own a home,” says NAR president William E. Brown. Source: National Mortgage Professional

If your home has two master bedrooms, you may very well have a highly desired feature that many couples want in their next home and are willing to pay extra for. Among the top 10 percent of markets nationwide, active listings that include multiple master bedrooms are priced, on average, about 9 percent higher than those with just one master, according to a realtor.com® analysis. Luxury home builders are taking notice of the growth in demand. A 2016 survey by John Burns Real Estate Consulting found that nearly one in three potential home buyers in the $2 million and above price range said they wanted dual master bedrooms. “This was the first survey where we asked about a dual master—prior to this year, it wasn’t on the radar at all,” says Pete Reeb, a principal with John Burns Real Estate Consulting. Some couples are finding separate bedrooms a must. “There has been this stigma about people sleeping apart,” says Wendy Troxel, a clinical psychologist and senior behavioral scientist at the Rand Corp. “But perhaps we are moving more toward this acceptance that there is not one-size-fits-all.” Some people desire two masters because they’re struggling to get to sleep, such as due to insomnia, snoring, or REM sleep behavior, says Rafael Pelayo, a clinical professor of psychiatry and sleep specialist at Stanford Sleep Medicine Center. Also leading to higher demand for extra masters: multigenerational living. Elderly parents and boomerang offspring are expressing more desires for larger separate bedroom areas, housing analysts note. Source: The Wall Street Journal