Builder confidence in the housing market for those 55 years of age and older is slipping, highlighting a recent trend showing that Baby Boomers are staying put rather than downsizing. According to the latest Housing Market Index from the National Association of Home Builders, sales of single-family homes to those over age 55 declined seven points to 60 in the third quarter. But builders aren’t completely down on the market as a reading above 50 indicates that the sentiment is good, whereas a score below 50 means confidence is poor. All three measurements of the single-family market for the 55-plus set saw a decline. NAHB's 55+ Housing Industry Council Chairman Chuck Ellison said part of the problem is that some builders are having trouble producing homes in the budget for prospective buyers in this age bracket. A study released by Trulia in September revealed that seniors are holding off on downsizing, with just 5.5% of those surveyed saying they had moved. Of those who did, the split between single-family and multifamily dwellings was pretty even. A second study released earlier this month by First American revealed that the median tenure for homeownership has jumped to 10 years, up 10% from last year. First American Chief Economist Mark Fleming also pointed to rising rates as the culprit and suggested it will increase the incentive to use a home equity line of credit for renovations. “As rates rise, many existing homeowners are increasingly financially imprisoned in their own home by their historically low mortgage rate,” Fleming said, adding homeowners who choose to stay put might look to access their equity in other ways."
With more and more renters feeling the affordability crunch, there seemed to be some light on the horizon recently with the steady rise in rents appearing to finally slow down over the last few months. Nevermind. As it turns out, rents are still going up and just hit an all-time high, again. According to the Census data, the median asking rent during the third quarter was $1,003, an increase of $52 over the second quarter and an increase of $91 over the same time period last year. (Click to enlarge. In the Northeast, the median asking rent rose from $1,134 in the second quarter to $1,210 in the third quarter. The largest year-to-date increase is actually in the South, where rents have climbed from $907 in the first quarter to $973 in the third quarter, an increase of $66. Rents in the West have also risen, from $1,345 in the first quarter to $1,382 in the third quarter, an increase of $37 this year. So, despite falling in the Midwest and the Northeast, rents went up in the South and West, and all that added up to a $49 increase in rents this year. The median asking sales price for homes is going up as well.
The homeownership rate increased slightly in the third quarter, driven primarily by a jump in first-time homebuyers. This is up slightly from 64.3% in the second quarter and from 63.9% in the third quarter of 2017. “Their homeownership rate is up a whopping 1.2% since Q3 2017 to 36.8%.” Homeownership among those under age 35 increased from 35.6% in the third quarter 2017 and 36.5% in the second quarter this year to 36.8% in the third quarter 2018, the report showed. Meanwhile, those ages 35 to 44 years dropped from 60% in the second quarter to 59.5% in the third quarter. This is also still up from 69.1% in the third quarter of 2017. Those ages 65 years and older saw an increase from 78% in the second quarter to 78.6% in the third quarter this year, however this is down slightly from 78.9% in the third quarter of 2017. That is more than the pace of household formation over the same period, meaning that the transition from renting to own is the more powerful driver of housing demand.” “That has also been an important and often overlooked reason for the rapid rise in home prices, as more buyers came into the market,” Liu said. These events caused the homeownership rate and home sales to diverge this quarter.” The Hispanic homeownership rate saw a quarterly drop as it fell from 46.6% in the second quarter to 46.3% in the third quarter. Among whites, the homeownership rate increased from 72.5% in the third quarter of 2017 and 72.9% in the second quarter this year to 73.1% in the third quarter of 2018. Blacks also saw an increase from last quarter, rising from 41.6% to 41.7%, however the rate dropped from last year’s 42%.
The report, which covers the residences of 82% of the U.S. population in 358 MSAs, also forecasts an average rise in property values of 4.5% for the 100 most populous of them, a tenth of a percent increase over last quarter's number. In the top markets the housing supply is very low, which puts project price changes at the high end of the report. The Bremerton market remains one of the strongest markets in the country, with its extremely low 1.4-month supply of homes struggling to fill the demands of its growing population. Its predicted 11.7% appreciation is six-tenths of a percent higher than the top-ranked market in our VeroFORECAST reports in first and second quarter 2018. Here are the 10 markets at the top of the VeroFORECAST for the year beginning September 1, 2018: Bremerton-Silverdale, Washington, 11.7% Boise City-Nampa, Idaho, 11.2% Las Vegas-Paradise, Nevada, 10.8% Bellingham, Washington, 10.6% Olympia, Washington, 10.3% Carson City, Nevada, 10.1% Reno-Sparks, Nevada, 10% San Francisco-Oakland-Fremont, California, 9.6% Denver-Aurora-Broomfield, Colorado, 9.5% Seattle-Tacoma-Bellevue, Washington, 9.3% We predict that both single-family residences and condos/townhomes in the Bellingham, Washington MSA will appreciate on average by 10.6% over the next 12 months. The other three or four spots have been divided each quarter among the same five states: California, with an MSA in each quarter's Top 10, and Colorado, Idaho and Oregon with an MSA in two of the three reports. With Boise City-Nampa, Idaho jumping into the Top 10’s second spot with a projected appreciation rate of 11.2%, we see an indication of Idaho's changing economy. In California, the San Francisco-Oakland-Fremont MSA has a 9.6% appreciation rate forecast, while Colorado's large Denver-Aurora-Broomfield MSA is predicted to see average real estate prices go up by 9.5%. Eric Fox is VP of Statistical and Economic Modeling at Veros Real Estate Solutions.
The study compares changes in the number of renters in five income levels between 2006 and 2016 with changes in the number of unites that would be affordable for people in that income range over the same period of time. However, these high-income renters are not in a crisis. Not an option for lower income families. Housing is a growing, the real struggle is for low-income renters, who did not just outpace the rate of rental unit growth – they actually saw a decrease in the number of units they can afford. Click to Enlarge “New supply is clearly not coming online at these low rent levels,” JCHS stated in its report. “Moreover, not enough existing units are filtering down to counter those lost to abandonment, higher rent levels, or conversion to higher-end condominiums. In September, the national average rent decreased, if only just slightly, for the first time in eight months. However, as interest rates make buying a home even less affordable, more and more consumers may be turning to renting as their only option. This could create even more pressure in an already competitive market. “We’ve seen supply finally start to catch up at the high end,” Schuetz said.
Each quarter, LendingTree compares average down payment percentages and conventional 30-year, fixed-rate purchase mortgage offer amounts across the country. According to the report, despite a decrease in payment amount, down payments as a percentage of purchase price remained relatively the same. The report indicates that the average down payment percentages for conventional 30-year, fixed-rate purchase mortgage offers rose 0.03 percentage points, inching forward from 18.02% to 18.05%. Furthermore, the average loan amount offered to potential homebuyers fell from $285,903 in Q2 to $257,749 in Q3, dropping around $28,000. Alaska’s down payment percentage was 15.41%, averaging $36,476. West Virginia’s down payment percentage was 15.44%, averaging $21,415. Mississippi’s down payment percentage was 15.78%, averaging $22,964. California’s down payment percentage was 21.44%, averaging $97,809. Hawaii’s down payment percentage was 21.32%, averaging $69,923. Delaware’s down payment percentage was 21.29%, averaging $51,678.
The company works with homebuyers and their real estate agents to provide home sellers with a guaranteed sale, providing sellers with an all-cash offer regardless of where the buyer is in the mortgage process. Basically, if a homebuyer can’t close on their mortgage in time, instead of losing out on the house of their dreams, Ribbon will buy and reserve the home on their behalf. The buyer then rents the home from Ribbon until they get their financing in order. The program offers appeal for both sides of the deal. The company is still in its early stages, operating only in a few markets in North and South Carolina, but it has big plans for growth. Ribbon announced Thursday that it raised $225 million in a combination of debt and equity financing. The company said that it is “focused on markets where homebuyers are having the hardest time securing their new homes and face stiff local competition from investors and corporate buyers.” The company claims that its process gives homebuyers a greater than a 90% chance of having their offer accepted, while also saving thousands of dollars in cash discounts and receiving a 100% on-time closing. “Buying a home is a milestone to be celebrated and enjoyed. “For the first time, we are bringing simplicity to the real estate transaction by absorbing all risk, so buyers, sellers and Realtors can focus on the joy of the home buying and selling experience.” And Ribbon is free to homebuyers. “Unlike other valuation tools, Ribbon backs their valuations by committing to buy the home up to the Ribbon Max Value.” According to the company, which does not list its management or executives on its website, the company is led by “top technology and real estate professionals from major startups, such as LendingClub, Airbnb, Spotify, Twitter, Blue Apron, Invitation Homes and American Homes for Rent.” In this latest round of funding, the company received money from existing investors Bain Capital Ventures, Greylock, NFX, and NYCA, but the company did not provide any more financial details beyond that.
As mortgage rates continue to climb in expensive coastal cities, more and more people are migrating to affordable markets, according the latest data collected from Redfin. According to Redfin’s latest migration analysis, in the third quarter of 2018 people continued to relocate from costly coastal markets like San Francisco, New York, Los Angeles and Washington, D.C. Now, cities like Atlanta, Phoenix and Sacramento are enticing thousands of potential new buyers due to their affordability. The report revealed that across the country, 25% of home searchers looked to move to a new non-coastal metro in Q3, citing affordability as a driving factor. “Rising mortgage rates are exacerbating affordability issues that have been driving people out of expensive coastal metros for the past few years,” Redfin Chief Economist Daryl Fairweather said. In these cities, the exodus of residents is larger than those looking to call them home. (The graph below shows the net outflow of residents year over year.) Throughout the past year, Sacramento, Atlanta, Phoenix, Portland and San Diego have attracted the biggest inflow of residents searching for “relatively” affordable homes and economies. In these cities, median home prices average around $150,000 below prices in metro areas with the largest net outflow, according to the report. (The graph below shows the net inflow of residents year over year.) In order to calculate net inflow and outflow, Redfin took the number of users looking to leave the metro area and subtracted the number of users looking to move to the metro area from another metro area.
Unfortunately, Michael is just one of many storms to slam the nation's coasts in 2018, and experts are expecting more by year’s end. As more of these catastrophic storms terrorize our nation, homeowners in storm prone areas are looking for new ways to keep their families and homes safe. According to an article written by Christina Scolar for CNBC, Brooklyn-based SG Blocks is leading a new wave of construction to withstand these storms: steel housing. From the article: "The challenge for people living in America is that we have a very vulnerable housing class right now — whether it's people living on limited incomes or fixed incomes. Many of them are forced to live in areas where there are persistent climate threats from the ocean, tornadoes and hurricanes,” SG Blocks CEO and chairman Paul Galvin said. According to the article, Galvin said the company is interested in housing families in steel structures rather than wood structures. SG Blocks claims container prices range from $2,500 to $5,000, and the final product, is about 10% less expensive than traditional construction. It also frees up to 50% of building time, the article stated. This could prove to be important, especially as homebuilders struggle to stay afloat amidst rising building costs. Earlier this month, data from the National Association of Home Builders/Wells Fargo Housing Market Index revealed that although homebuilder confidence increased it was only a slight change.
With home prices and interest rates both on the rise, will more people look to renting as their only “affordable” option for housing? That’s more than six years of monthly price gains, and it’s putting a squeeze on housing affordability. Combine steadily rising home prices with recent record-high interest rates and now people can’t afford as much house as they could just a few months ago. Instead, Terrazas said that the “recent sluggishness” in home sales seems to be driven by decreasing demand driven by rising interest rates and rents that are finally moderating (or perhaps even slowing down). And that could keep people renting for the foreseeable future as renting appears to be more affordable than buying for many people now. “Rising interests rates coupled with increasing home prices are keeping first-time buyers out of the market, but consistent job gains could allow more Americans to enter the market with a steady and measurable rise in inventory,” Yun said. A new survey from Freddie Mac shows that a whopping 78% of renters believe renting is more affordable than owning, which is up by 11 points from just six months ago. That’s despite the majority of renters (66%) reporting difficulty in affording their rent at some point during the past two years. It increased in the other major age groups as well. So even though the majority of renters have had “difficulty” paying their rent, they still view renting as a more affordable option that buying.