January 2016 — Rising home prices over the last few years are finally putting more money back into home sellers’ pockets, a trend that should continue through 2016. Homeowners who sold during the latter part of 2015 saw an average price gain of $40,658 — or 17 percent — from the purchase price of their property — the highest average price increase for sellers since the third quarter of 2007, according to RealtyTrac’s 2015 U.S. Home Sales Report.
“An increasing number of home owners have been cashing out the home equity they’ve gained during the housing recovery of the past three years,” says Daren Blomquist, vice president at RealtyTrac. “That may be a good decision because the data points to a plateauing market going forward. Home price appreciation is slowing, a trend that will continue if interest rates rise in the coming months as expected. Meanwhile the threat of rising interest rates combined with lowered premiums for buyers using FHA loans is spurring more demand.”
January 2016 — Several home features are gaining momentum in real estate, according to CBSHome.com, including these four you may want to talk up in your listings:
Energy efficiency. Bigger used to be better in real estate, but the cost of maintenance and particularly the heating of bigger homes has prompted some buyers to be less tempted to supersize their digs. Many buyers are being swayed toward homes that are more economical to maintain and also have a warmer, cozier vibe. Solar power is also inching up on the desirability scale, as homebuyers are seeing the advantage of reducing their electric bills.
Modern, up-to-date kitchens. Remodeling a kitchen can be one of the costliest home improvement projects to take on. That’s why many buyers are looking for a kitchen that already has been updated. They’re looking for a sleek, modern-looking kitchen with stainless steel appliances.
January 2016 — Once all the rage, for sale by owner transactions are declining steadily in the face of a revived market, according to the NAR’s 2015 Profile of Home Buyers and Sellers report. Nearly 90 percent of respondents surveyed say they worked with a real estate agent to buy or sell a home.
That has pushed for-sale-by-owner transactions to the lowest share ever, according to the survey. Eighty-nine percent of sellers said they sold their home with an agent, while for-sale-by-owner sales only accounted for about 8 percent of transactions (down from 9 percent the last three years).
“Although the Internet and digital technology have created several channels for sellers to market their listings to a wider cast of potential buyers, the preference to use an agent to sell a home has never been stronger,” says Chris Polychron, NAR’s president.
The majority of homebuyers reported that the Internet was their first step in their home search. Still, 88 percent of buyers who searched for homes online ended up purchasing through a real estate agent.
January 2016 — The share of first-time buyers declined for the third consecutive year and remained at its lowest point in nearly three decades. The overall strengthening pace of home sales over the past year was driven more by repeat buyers with dual incomes, according to an annual survey released recently by NAR.
In this survey, the share of first-time buyers declined to 32 percent in 2015 (from 33 percent a year ago), which is the second-lowest share since the survey’s inception (1981) and the lowest since 1987 (30 percent). Historically, the long-term average shows that nearly 40 percent of primary purchases are from first-time homebuyers.
Lawrence Yun, NAR chief economist, says the housing recovery’s missing link continues to be the absence of first-time buyers.
“There are several reasons why there should be more first-time buyers reaching the market, including persistently low mortgage rates, healthy job prospects for the college-educated, and the fact that renting is becoming more unaffordable in many areas,” he says.
January 2016 — The low end of the market is where it’s at. That according to data from Clear Capital’s Home Data Index (HDI) Market Report, which found there are drastically different dynamics going on at the extremes of nearly all markets.
“As the housing recovery continues to unfold, we are clearly seeing a growing dichotomy between the low price tier and top price tier market performance,” says Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital.
“By and large, the low price tiers of the Top and Bottom Metro Statistical Areas (MSAs) are significantly outperforming their top tier counterparts. For both first time homebuyers and investors, this should signal a major opportunity in these lower tiers. For any buyers of high end properties this clear trend signals the need to be highly vigilant with investment strategies in this market segment.”
December 2015 — Historically the common market pattern is for home inventories to rise sharply, February through April, max out July or August and slide back down into the holidays and the new year; 2015 is no different in this respect.
The good news is that 2015 showed a more robust personality in the number of homes sold and the market price of those sales. Because homes were selling for more money, housing affordability slipped as a result, but only slightly. The average homebuyer earns roughly 1 1/2 times the money it takes to afford the average house selling in September; that is in line with the market for the past three years.
Comparing year over year the “Month’s Supply Inventory” is significantly lower for 2015 than it was in 2011, 2012 and 2013. In those years, peaking in the summer of 2011 at the rate homes were selling it would have taken almost 2 years to sell off the housing stock on the market in any given month. For 2015 Month’s Supply is edging down toward 10 months on hand. Prices are up and inventories are keeping a healthy pace with demand.
December 2015 — The housing market is poised for one of its largest expansions in history. By 2024, demographic and economic changes are forecasted to bring 15.9 million additional households on board, according to a new study released by the Mortgage Bankers Association.
That means an average of 1.6 million additional households per year, sparking “housing market growth over the next decade that would be among the strongest the U.S. has ever seen,” according to the report.
The MBA report says the bulk of that growth will be from increases in the number of households that are headed by those age 60 and older and households headed by age 45 and younger. Those age group increases are expected to mitigate the decline among households age 45 to 60.
“An aging population should gradually increase demand for home ownership, partially offsetting the influence of a more racially and ethnically diverse population on home ownership rates,” the MBA report notes.
December 2015 — The single-family rental market will continue to stay strong for years to come, according to Frank Nothaft, chief economist for CoreLogic and former chief economist at Freddie Mac.
Nothaft is bullish on the sector because the largest demographic group is 22- to 25-year-old millennials who are getting ready to form new households. The average age of first-time homebuyers, on the other hand, has moved up into the 30s.
“Since the great recession began, household formation has been anemic,” Nothaft notes in a column for HousingWire. “But this year household formation will be at its highest point in 10 years — close to 1.7 million new households — many of which will be renters.”
More than 5.8 million homeowners lost their homes to foreclosure during the housing crisis over the last seven years. Many have become renters, which has boosted growth of the single-family detached rental stock. For example, Nothaft singles out markets like Phoenix and Las Vegas, which faced a significant plunge in home values during the housing crisis, that have had an increase in its single-family rental stock by up to 80 percent.
December 2015 — More consumers are scoring 800 or above on their FICO credit scores—19.9 percent today vs. 19.6 percent just six months earlier. Nearly one in five has joined the elite FICO 800 club.
At the same time, fewer are scoring below 550. In fact, there’s been a clear pattern of decline in this segment since the low point of the economy in late 2009/early 2010, reports Fair Isaac Corporation.
Some of this trend may be a result of the lowest-scoring consumers “dropping out” from traditional credit usage, and by extension no longer having valid FICO Scores. Still, this decline is encouraging. It indicates that overall more consumers using credit are managing it responsibly enough to not be among the lowest scorers.
December 2015 — Half of all American adults now live in one-person households, a rapidly growing number, according to the Bureau of Labor Statistics. The singles demographic is likely to reshape multifamily communities and single-family home designs going forward, according to Builder Online.
In 1976, only 37 percent of adults were single. As of this past summer, that percentage has bloomed to 50.2 percent, or about 124.6 million singles. It marks the first time that single Americans make up the majority of the adult population since the government began tracking such data.
“Analysts project that this group of adults will job hop more often, bring new types of living arrangements into the housing market (think friends buying homes together), and expect their environments to adapt to their frequently changing lifestyles. As a result, floor plans will go from static to flexible as living arrangements change more frequently,” said Susan Yashinsky, vice president of innovation trends for Waterford, Mich.-based Sphere Trending, LLC.
Affordability will be key, since single homebuyers will have less income per household than dual-earner couples.
December 2015 — Thanks to loosening mortgage requirements and depreciating values, buyers may finally find greater selection and tempering prices in the coming year.
More lenders say they’re easing up some of their lending standards across all loan types, according to Fannie Mae’s recent Mortgage Lender Sentiment Survey. The survey shows the gap between lenders who are reporting an easing in credit as opposed to those who are reporting a tightening climbed 20 percentage points. Additionally, more lenders say they plan to ease credit standards over the next three months.
“For the first time in seven quarters, we see a pronounced increase in the share of lenders, particularly medium- and larger-sized lenders, reporting on net an easing of credit standards in both GSE eligible and non-GSE eligible loan categories,” says Doug Duncan, Fannie Mae’s chief economist.
“This is a significant result in light of public discourse on credit availability and standards. We expect lenders’ tendency toward easing credit standards, together with relatively low mortgage rates, to support buyers and thus housing market expansion,” said Duncan.
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