Baby boomers chart new direction in housing

August 23, 2016

NEW YORK – Aug. 22, 2016 – Economists are having a tough time figuring out what housing market moves baby boomers will make next. Americans over the age of 55 are veering from previous generations, opting not to retire but instead launching second or even third careers. They are shunning the traditional patterns of retirement, and that could have a big impact on their housing choices, according to a Freddie Mac Insight report.

Baby boomers are a critical piece to the housing market puzzle. Americans over the age of 55 make up a quarter of the population and control about two-thirds of the single-family home equity in the nation. Sixty-five-year olds who, on average purchased a home 35 years ago now tend to have a home value that is likely 3.7 times the purchase price.

Nearly a quarter of baby boomers recently surveyed by Freddie Mac say they need major renovations in their current home in order to stay there as they age – and many say they face financial constraints to take on those remodels. And some of the baby boomers may be underestimating the financial costs of outfitting their home with age-in-place features, says Sean Becketti, Freddie Mac’s chief economist.

As a result, about 18 million homeowners over the age of 55 may be shopping for another house in the next few years, according to the Insights Report.

Unlike earlier generations, however, baby boomers’ main reasons to move aren’t due to downsizing. Instead, the survey showed the key influences making these generations move are: Affordability of the community, the need for retirement amenities and a home with less maintenance.

Bottom line, the authors note: The 55-plus population is likely to be an active part of the housing economy for years to come still.

Source: “Boomers Ignoring Conventional Housing Wisdom,” Mortgage News Daily (July 19, 2016)

© Copyright 2016 INFORMATION, INC. Bethesda, MD


Home sales and taxes: How much will you owe?

June 22, 2016

NEW YORK – June 21, 2016 – One of the questions readers ask most often is how much of their gain will go to Uncle Sam if they sell their home. Tax rules are highly favorable for homeowners. Most sellers wind up owing no capital-gains tax on their profits, according to a spokesman for the National Association of Realtors.

However, there are important exceptions, such as for those with exceptionally large gains who live in high-tax areas.

Married couples filing jointly typically can exclude as much as $500,000 of the gain on the sale of their primary residence. Singles can exclude up to $250,000. In most cases, they can qualify for the maximum exclusion amount if they have owned their home – and used it as their main home – for at least two of the five years before the sale date.

Sellers who do not qualify for the maximum exclusion still may be eligible for major relief depending on several factors, such as why they sold – like a work-related move, health reason or unforeseeable events.

Source: Wall Street Journal (06/12/16) Herman, Tom

© Copyright 2016 INFORMATION, INC. Bethesda, MD


Americans Are Feeling Wealthier, More Upbeat

June 17, 2016

Fannie Mae’s Home Purchase Sentiment Index zoomed to an all-time high in May as consumers get more upbeat about their paychecks and home selling. In May, the index reached a reading of 85.3, which follows an 18-month low reached in March.

Three of six components the index measures registered increases last month, led by a 7 percentage point increase in the number of consumers reporting significantly higher income than a year ago. Also, the number of consumers who expect home prices to increase over the next 12 months rose 5 percentage points. Consumers were also upbeat that mortgage rates would decrease over the next year as well.

That said, the index indicator on whether it’s a “good time to buy” dropped 1 percentage point to an all-time survey low in May.

“Continued home price appreciation has been squeezing housing affordability, driving a two-year downward trend in the share of consumers who think it’s a good time to buy a home,” says Doug Duncan, senior vice president and chief economist at Fannie Mae. “The current low mortgage rate environment has helped ease this pressure, and fewer than half of consumers expect rates to go up in the next year. While the May increase in income growth perceptions could provide further support to prospective home buyers as the spring/summer homebuying season gains momentum, the effect may be muted by May’s discouraging jobs report.”

Here’s a closer look at additional findings from Fannie Mae’s latest index reading:

  • 29 percent of Americans say now is a good time to buy a home, a drop of 1 percentage point from March and an all-time survey low for the second consecutive month.
  • 52 percent of consumers believe now is a good time to sell a home – an all-time survey high.
  • 42 percent of Americans believe that home prices will go up.
  • 72 percent of Americans say they are not concerned with losing their job, a drop of 2 percentage points from March.
  • 18 percent of Americans say their household income is significantly higher than it was a year ago, up 7 percentage points from March and at an all-time survey high.

Source: Fannie Mae


Fla.’s recent housing success

June 7, 2016

NEW YORK – June 6, 2016 – Clear Capital’s Home Data Index (HDI) Market Report releases recent and granular data each month. The HDI Market Report provides insights into housing price trends and other leading indices for the real estate market at the national and local levels.

Florida’s markets continue to recover from the devastating lows of the housing market crash, and an increase in baby boomers provides key insight into the market’s future, according to Clear Capital.

Survey results

  • Regionally, the West continues to dominate quarterly growth as it hovers around a 1.1 percent quarter-over-quarter price increase, though that’s a downtick of 0.1 percent from last month. Growth rates in the South remain unchanged at 0.7 percent quarter-to-quarter growth, while Northeast and Midwest regional growth continues to lag behind the rest of the nation at 0.1 percent.
  • Nationally, quarterly market performance remains fixed at 0.6 percent with no change month-to-month.
  • The Seattle and Tampa MSAs tied for the top spot on the Highest Performing Major Metro Markets for June, each reporting a quarter-to-quarter price increase of 2.0 percent.
  • Tampa isn’t the only Sunshine State metro area to make the high-performers list. It also includes Orlando (1.7 percent quarterly price growth), Jacksonville (1.7 percent quarterly price growth), and Miami (1.4 percent quarterly price growth).

The most recent quarterly growth figures for the Floridian markets fit into a longer-term pattern of growth and recovery for the state, according to Clear Capital, and each major MSA has “experienced incredible gains since the market lows of 2011, recovering at least 30 percent or more of the individual market value.”

Jacksonville and Orlando home prices have increased 33 percent and 44 percent respectively; Tampa and Miami home prices have skyrocketed by almost 56 percent and 57 percent, respectively.

The baby boomer influence

Clear Capital compared Census Bureau data on baby boomer moves to the price increase from its index, calling the growth in both an “interesting phenomenon that may be contributing to the stellar price growth in the region.”

The most recent data from the U.S. Census Bureau indicates that this segment of the market – homeowners aged 55 to 74 – has increased more than 2.5X the overall population of homeowners in each of the top four Florida markets since 2011. In Miami and Jacksonville, the increase in homeowners of this generation is more than 500 percent greater than the overall increase in the total population of homeowners.

“It’s evident that the baby boomer demand for housing in the (price growth metro areas) is a significant contributing factor in the market’s overall success,” the report concludes. “In Orlando, the trend is quite similar as the ratio of baby boomer homeownership growth to overall homeownership growth is over 400 percent.”

“Florida has traditionally been regarded as prime real estate by those retirees who may be looking to migrate from colder areas of the nation such as the Northeast to a warmer and sunnier alternative for their golden years,” says Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital.

“As the top Floridian housing markets continue to grow and return impressive price gains – Tampa is currently reporting 12.2 percent annual price growth – it’s no surprise that this generation continues to invest in real estate in the region,” he adds. “The baby boomer share of homeowners is clearly on the rise here, and as more and more of this generation nears retirement age, Florida markets may be in for a boost in performance if tradition continues and retirees demand homes in the region.”

© 2016 Florida Realtors®


Banks rush to offer 3% downpayment loans

June 1, 2016

NEW YORK – May 31, 2016 – As some banks veer from Federal Housing Administration (FHA) loans, they’re offering their own low downpayment mortgages to appeal to home shoppers struggling to save enough to buy a home. Wells Fargo made headlines this week when it debuted its 3 percent downpayment loan.

JPMorgan Chase also announced its offering called the “Standard Agency 97percent” program, a 3 percent down payment loan geared for first-time home buyers and requires a FICO score of 680. Chase also has a loan program called “DreaMaker Mortgage,” which offers a 5 percent down payment – 3 percent of which can come from the borrower as well as flexible funding options for closing costs and reduced mortgage insurance requirements.

Other banks have recently announced their low downpayment offerings.

Earlier this year, Bank of America began offering a 3 percent downpayment loan that did not involve the Federal Housing Administration and does not require mortgage insurance. The bank requires a minimum FICO score of 660.

Wells Fargo’s newly launching lending program, “yourFirstMortgage,” requires a 620 FICO minimum score and minimum downpayment of 3 percent for a fixed-rate conventional mortgage of up to $417,000. Downpayment assistance also can come from gifts and community assistance programs. Customers who complete a homebuyer education course can earn a 1/8 percent interest rate reduction, although the course is not required.

Brad Blackwell, executive vice president and portfolio business manager at Wells Fargo, says the monthly payment for the loan will be less than a government-insured FHA loan.

“We’ve taken all the complexity of the home mortgage lending process, removed it from the front-line consumer, so that it’s easy for them to understand and Wells Fargo is taking care of all the capital markets and other types of complexities behind the scenes,” says Blackwell.

Bank giants have been leery of FHA loans lately, with JPMorgan Chase CEO Jamie Dimon’s calling FHA lending “too costly and too risky” to pursue extensively.

“We have dramatically reduced FHA originations,” Dimon wrote in his yearly letter to shareholders. “Currently, it simply is too costly and too risky to originate these kinds of mortgages. Part of the risk comes from the penalties that the government charges if you make a mistake – and part of the risk is because these types of mortgages default frequently.”

Dimon acknowledges Chase’s new low downpayment lending program also carries some of those risks, but he believes it responds to customers’ needs.

“Mortgages are important to our customers,” Dimon wrote in the letter. “For most of our customers, their home is the single largest purchase they will make in their lifetime. More than that, it is an emotional purchase – it is where they are getting their start, raising a family or maybe spending their retirement years. As a bank that wants to build lifelong relationships with its customers, we want to be there for them at life’s most critical junctures.”

Source: “Wells Fargo Launches 3% Down Payment Mortgage,” CNBC (May 26, 2016) and “Chase Quietly Launches Its Own 3% Down Mortgage Lending Program,” HousingWire (May 26, 2016)

© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688


Pending home sales at a 10-year high

May 27, 2016

WASHINGTON – May 26, 2016 – Pending home sales rose for the third consecutive month in April and reached their highest level in over a decade, according to the National Association of Realtors® (NAR).

All major regions saw gains in contract activity last month except for the Midwest, which saw a meager decline.

The Pending Home Sales Index – a forward-looking indicator based on contract signings for homes that have not yet sold – hiked 5.1 percent higher to 116.3 in April from an upwardly revised 110.7 in March. Year-to-year, it’s 4.6 percent above April 2015 (111.2).

After last month’s gain, the index has now increased year-over-year for 20 consecutive months. Vast gains in the South and West propelled April’s pending sales in April to its highest level since February 2006 (117.4), says Lawrence Yun, NAR chief economist.

“The ability to sign a contract on a home is slightly exceeding expectations this spring, even with the affordability stresses and inventory squeezes affecting buyers in a number of markets,” Yun says. “The building momentum from the over 14 million jobs created since 2010 and the prospect of facing higher rents and mortgage rates down the road appear to be bringing more interested buyers into the market.”

Mortgage rates have remained below 4 percent in 16 of the past 17 months, but Yun says it remains to be seen how long they will stay this low. Along with rent growth, rising gas prices – and the fading effects of last year’s cheap oil on consumer prices – could edge up inflation and push rates higher. For now, Yun foresees mortgage rates continuing to hover around 4 percent in coming months, but inflation could potentially surprise the market and cause rates to increase suddenly.

“Even if rates rise soon, sales have legs for further expansion this summer if housing supply increases enough to give buyers an adequate number of affordable choices during their search,” adds. Yun.

Following the housing market’s best first quarter of existing-sales since 2007 (5.66 million) and a decent increase (1.7 percent) in April, Yun expects sales this year to climb above earlier estimates and be around 5.41 million – a 3.0 percent boost from 2015. After accelerating to 6.8 percent a year ago, national median existing-home price growth is forecast to slightly moderate to between 4 and 5 percent.

Pending sales in the Northeast climbed 1.2 percent to 98.2 in April, and are now 10.1 percent above a year ago. In the Midwest, the index declined slightly (0.6 percent) to 112.9 in April, but it’s still 2.0 percent above April 2015.

Pending home sales in the South jumped 6.8 percent to an index of 133.9 in April – 5.1 percent higher than last April. The index in the West soared 11.4 percent in April to 106.2, and it’s now 2.8 percent above a year ago.

© 2016 Florida Realtors®


Pending Home Sales Tick Up in December

February 19, 2016

WASHINGTON (January 28, 2016) — Pending home sales were mostly unchanged in December, but inched forward slightly, fueled by a large increase in the Northeast that outpaced declines in the other three major regions, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, crawled 0.1 percent to 106.8 in December from a downwardly revised 106.7 in November and is now 4.2 percent above December 2014 (102.5). The index has increased year-over-year for 16 consecutive months.

Lawrence Yun, NAR chief economist, says contract activity closed out the year on stable footing but lost some momentum, except for in the Northeast. “Warmer than average weather and more favorable inventory conditions compared to other parts of the country encouraged more households in the Northeast to make the decision to buy last month,” he said. “Overall, while sustained job creation is spurring more activity compared to a year ago, the ability to find available homes in affordable price ranges is difficult for buyers in many job creating areas. With homebuilding still grossly inadequate, steady price appreciation and tight supply conditions aren’t going away any time soon.”

According to Yun, although healthy labor market conditions will persuade more households to buy, it’s possible overall demand could be somewhat curtailed in coming months. The stock market’s sizeable losses since the start of the year and the effect slowing manufacturing activity is having in some areas — especially in the energy sector — could cause some to hold off on buying.

“The silver lining from the market turmoil in recent weeks is the fact that mortgage rates have slightly declined,” says Yun. “Buyers looking to close on a home before the spring buying season begins may be rewarded with a mortgage rate at or below 4 percent.”

Existing-homes sales this year are forecast to be around 5.34 million, an increase of 1.5 percent from 2015. The national median existing-home price for all of this year is expected to increase between 4 and 5 percent. In 2015, existing-home sales increased 6.5 percent and prices rose 6.8 percent.

Rents — which have far outpaced wages in recent years — are expected to slightly slow to 3.3 percent growth in 2016 from 3.6 percent a year ago. Multifamily housing starts are expected to reach 420,000 units this year, the highest level since 1987.

The PHSI in the Northeast increased 6.1 percent to 97.8 in December, and is now 15.3 percent above a year ago. In the Midwest the index decreased 1.1 percent to 103.6 in December, but is still 3.6 percent above December 2014.

Pending home sales in the South declined 0.5 percent to an index of 119.3 in December but are 1.0 percent higher than last December. The index in the West decreased 2.1 percent in December to 97.5, but remains 3.4 percent above a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

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*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

NOTE: Fourth quarter of 2015 metropolitan area home prices will be released February 10, Existing-Home Sales for January will be reported February 23, and the next Pending Home Sales Index will be February 29; release times are 10:00 a.m. ET.