New Research Shows Housing Is Affordable For First-Time Buyers

New Research Shows Housing Is Affordable For First-Time Buyers | Simplifying The Market

Home prices have been on the rise for the last seven years, leading many housing market analysts to conclude that first-time homebuyers are being shut out of the market due to affordability concerns.

The National Association of Realtors (NAR) reports on the percentage of First-Time Home Buyers (FTHB) on a monthly and yearly basis. Their latest report shows that FTHB’s made up 33% of buyers in March, which matches their reported share in 2018.

NAR uses survey data from their members to come up with this statistic, so their results do not include every transaction completed. Rather, they only the transactions reported by members who complete the survey.

The other entity that reports on FTHB share is the American Enterprise Institute (AEI). The AEI uses data from mortgage applications that define an FTHB as “any borrower who did not have a mortgage for the preceding three years.”

This means the AEI measurement also includes former homeowners who transitioned out of a home they previously owned and re-entered the market after at least 3 years. The latest FTHB share data from AEI shows that first-time buyers made up 57.5% of all mortgages in August 2018. NAR’s data shows a 31% share for the same time period.

New research from the New York Federal Reserve shows that these traditional reports on FTHB share have been unable to give an accurate depiction of this group’s involvement in the market.

The NY Fed was able to take consumer credit data and identify when a mortgage payment entered a consumer’s credit report to determine when a first-time home purchase was made. Using this data, they were able to show that AEI’s reported FTHB share was consistently 10% higher. The NAR reports were right on par with their findings until 2010, when NAR’s share dropped to the 11% gap seen today.

So, what does this all mean?

First-time home buyers have not disappeared from the market as many analysts had believed. Buying a home is very much a part of the American Dream for younger generations, just like it had been for their parents and grandparents.

This also means that rising prices have not scared buyers away from the market. Many first-time buyers are making sacrifices to save their down payment and make their dream a reality.

Bottom Line

If you are one of the many renters who is scrolling through listings on your phone every night dreaming of buying your own home, there are opportunities in every market to make that dream a reality!

 

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A Lack of Inventory Continues to Impact the Housing Market

A Lack of Inventory Continues to Impact the Housing Market | Simplifying The Market

The housing crisis is finally in the rear-view mirror as the real estate market moves down the road to a complete recovery. Home values are up and distressed sales (foreclosures and short sales) have fallen to their lowest point in years. The market will continue to strengthen in 2019.

However, there is one thing that may cause the industry to tap the brakes: a lack of housing inventory! Buyer demand naturally increases during the summer months, but supply has not kept up.

Here are the thoughts of a few industry experts on the subject:

Lawrence Yun, Chief Economist at National Association of Realtors

“Further increases in inventory are highly desirable to keep home prices in check, the sustained steady gains in home sales can occur when home price appreciation grows at roughly the same pace as wage growth.”

Jessica Lautz, Vice President of NAR

“There’s a supply-demand mismatch… More inventory is needed at the lower end and a price reduction may be needed at the upper end.”

Danielle Hale, Chief Economist of Realtor.com

“Heading into spring, U.S. prices are expected to continue to rise and inventory is expected to continue to increase, but at a slower pace than we’ve seen the last few months as fewer sellers want to contend with this year’s more challenging conditions… A buyer’s experience will vary notably depending on the market and price point they’re targeting.”

Bottom Line

If you are thinking of selling, now may be the time! Demand for your house will be strong at a time when there is very little competition. That could lead to a quick sale for a really good price!

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Mainstream Concerns about an Economic Slowdown Revisited

Mainstream Concerns about an Economic Slowdown Revisited | Simplifying The Market

Recently, we reported that many believe a recession could happen within the next two years. We explained that 70% of economists and market analysts surveyed last year believe that a recession will occur in 2019 or 2020 and that 42% of consumers currently looking to purchase a home also agree that a recession will occur this year or next.

However, the U.S. economy has performed well in the first quarter of 2019 and that has caused some experts to change their thinking on an impending economic slowdown.

Here are a few notable examples:

Anthony Chan, Chief Economist at JPMorgan Chase

“I feel really comfortable that the economy is slowing down this year, but not going into a recession… It doesn’t look, to me, like the odds of a recession in 2020 are there.”

Dean Baker, Senior Economist at the Center for Economic & Policy Research

 “To sum up the general picture, the U.S. economy is definitely weakening… However, with wages growing at a respectable pace, and job growth remaining healthy, we should see enough consumption demand to keep the economy moving forward. That means slower growth, but no recession.”

Lisa Shalett, Chief Investment Officer, Wealth Management at Morgan Stanley

“I’m not convinced a recession is coming soon… I see an improving housing market (low rates help), a rebound in bank lending, a tight labor market, higher oil prices and well-behaved credit markets. All these point to a stable U.S. economic outlook.”

Bottom Line

We are seeing a stronger economy than many had predicted. That has caused some experts to push off the possibility of a recession further into the horizon.

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Home Buyers are Optimistic About Homeownership!

Home Buyers are Optimistic About Homeownership! | Simplifying The Market

When we consider buying an item, we naturally go through a research process prior to making our decision. We ask our friends and family members who have made similar purchases about their experience, we get opinions and insights, and we read reviews online. There’s no difference when considering a home purchase!

Most homebuyers start by listening to the news to hear what is being said about the real estate market. They check with family and friends about their experience. They spend time online reading reviews about their desired neighborhood.

The challenge is that comments from the news and those closest to us can contradict the data and reports. One source says one thing, while another source says something completely different.

There is a group of homebuyers that are not allowing comments about an upcoming recession to interfere with their decision to buy a home. According to a survey by realtor.com®,

Nearly 70 percent of home shoppers this spring think the U.S. will enter a recession in the next three years, but that hasn’t stopped them from trying to close on a home…Despite the fact that they foresee an economic downturn, they generally expressed confidence that a future recession will be better than 2008 for the housing market.”

The report provides more insights from the survey:

  • Nearly 30% of the active home shoppers* surveyed expect the next recession to begin sometime in 2020.
  • 56% of shoppers believe home prices have hit their peak.
  • 41% believe housing will fare better than 2008.
  • 45% of home shoppers feel at least slightly more optimistic about homeownership.
  • 33% reported no impact on their feelings about homeownership.

Homebuyers are aware and making decisions with their eyes wide-open. As the report mentioned,

“The fact that some [36%] home shoppers expect the next recession to be harder on the housing market than the last recession suggests that they are buying homes with eyes wide-open and very sober, if not slightly pessimistic, views of the housing market.

This is a stark contrast to the years leading up to the last recession when ‘irrational exuberance’ was more common and yet another reason to expect that the next downturn will be very different for the housing market than the last.”

Bottom Line

If you are considering buying a home, let’s get together to help you understand our local market and determine if buying a home is the right choice for you now.

*Active home shoppers are those consumers who responded that they plan to purchase their next home in 1 year or less.

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The Cost of Renting vs. Buying This Spring [INFOGRAPHIC]

The Cost of Renting vs. Buying This Spring [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Historically, the choice between renting or buying a home has been a tough decision.
  • Looking at the percentage of income needed to rent a median-priced home today (27.7%) vs. the percentage needed to buy a median-priced home (17.5%), the choice becomes obvious.
  • Every market is different. Before you renew your lease again, find out if you can put your housing costs to work by buying this year!

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Your Fabulous New Dream Home is Now Available

Your Fabulous New Dream Home is Now Available |Simplifying The Market

Over the last several years, many “baby boomers” have undergone a metamorphosis. Their children have finally moved out and they can now dream about their own future. For many, a change in lifestyle might necessitate a change in the type of home they live in.

That two-story, four-bedroom colonial with three bathrooms no longer fits the bill. Taxes are too high. Utilities are too expensive. Cleaning and repair are too difficult. When they decide to travel to be with friends and family, locking up the house is too time-consuming and worrisome.

Instead, a nice ranch home with 2-3 bedrooms and two baths might better fulfill their new needs and lifestyle. The challenge many “boomers” have faced when trying to downsize to the perfect new home has been a lack of inventory.

The average number of years a family stays in their home has increased by fifty percent since 2008, causing fewer houses to come to the market. During the same time, new home builders were concentrating most of their efforts on large, luxury, expensive houses.

However, that is starting to change.

According to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, sales of newly built, single-family homes rose to a seasonally adjusted annual rate of 692,000 units in March. The great news is that more of those homes were sold at the lower end of the price range.

In a press release last week, the National Association of Home Builders (NAHB) explained that:

“The median sales price was $302,700, with strong gains in homes sold at lower price points. The median price of a new home sale a year earlier was $335,400.”

NAHB Chief Economist Robert Dietz offered further detail:

“We saw a large gain at lower price points where demand is strong. In March of 2019, 50% of new home sales were priced below $300,000, compared to 39% in March of 2018.”

Bottom Line

If you are a “boomer” thinking of selling your old house in order to buy a new home that better fits your current lifestyle, now may be the perfect time!

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2 Trends Helping Keep Housing Affordable

2 Trends Helping Keep Housing Affordable | Simplifying The Market

Two positive trends have started to emerge that impact the 2019 Spring Housing Market. Mortgage interest rates for a 30-year fixed rate loan have dropped to new lows, right as reports show that wages have increased at their highest rate in decades!

These two factors have helped keep housing affordable despite low supply of houses for sale driving up prices. First American’s Chief Economist, Mark Fleming, explains the impact,

“Ongoing supply shortages remain the main driver of the performance gap as the housing market continues to face an inventory impasse – you can’t buy what’s not for sale.

 However, an unexpected affordability surge, driven primarily by lower-than-anticipated mortgage rates, rising wages and favorable demographics, has boosted housing demand.”

Mortgage interest rates had been on the rise for most of 2018 before reaching their peak in November at 4.94%. According to Freddie Mac’s Primary Mortgage Market Survey, interest rates last week came in at 4.20%.

Average hourly earnings grew at an annual rate of 3.2% in March, up substantially from the 2.3% average pace seen over the last 10 years.

These two factors contributed nearly $6,000 worth of additional house-buying power for median households from February to March 2019, according to First American’s research. Fleming is positive about the prolonged impact of lower rates and higher wages.

“We expect rising wages and lower mortgage rates to continue through the spring, boosting housing demand and spurring home sales.”

Bottom Line

Low mortgage interest rates have kept housing affordable throughout the country. If you plan on purchasing a home this year, act now while rates are still low!

 

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What Would Make You Sell Your House?

What Would Make You Sell Your House? | Simplifying The Market

There are many reasons why a homeowner decides to sell their house and move. The latest Generational Trends Report from the National Association of Realtors asked recent home sellers to share their reason for moving.

The younger the respondents, the more likely their top response centered around needing a larger home (ages 29 to 53). Relocating for a job was the top reason for those ages 54 to 63 and the second most popular response for those under 53. The chart below shows the breakdown for these two reasons.

What Would Make You Sell Your House? | Simplifying The Market

For homeowners over the age of 64, wanting to be closer to friends and family served as the top motivator to move. Downsizing to a smaller home or moving due to retirement came in as a close second and third.

What Would Make You Sell Your House? | Simplifying The Market

Have you outgrown your current house? Are you a homeowner who can relate to wanting to be closer to family and friends? Is your house becoming a burden to clean now that the kids have moved out?

Bottom Line

Let’s get together to set you on the path to selling your current house and finding the home that fits your needs, today!

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How Quickly Can You Save Your Down Payment?

How Quickly Can You Save Your Down Payment? | Simplifying The Market

Saving for a down payment is often the biggest hurdle for a first-time homebuyer. Depending on where you live, median income, median rents, and home prices all vary. So, we set out to find out how long it would take to save for a down payment in each state.

Using data from HUD, Census and Apartment List, we determined how long it would take, nationwide, for a first-time buyer to save enough money for a down payment on their dream home. There is a long-standing ‘rule’ that a household should not pay more than 28% of their income on their monthly housing expense.

By determining the percentage of income spent renting in each state, and the amount needed for a 10% down payment, we were able to establish how long (in years) it would take for an average resident to save enough money to buy a home of their own.

According to the data, residents in Kansas can save for a down payment the quickest, doing so in just over 1 year (1.12). Below is a map that was created using the data for each state:

How Quickly Can You Save Your Down Payment? | Simplifying The Market

What if you only needed to save 3%?

What if you were able to take advantage of one of Freddie Mac’s or Fannie Mae’s 3%-down programs? Suddenly, saving for a down payment no longer takes 2 to 5 years, but becomes possible in less than a year in most states, as shown on the map below.

How Quickly Can You Save Your Down Payment? | Simplifying The Market

Bottom Line

Whether you have just begun to save for a down payment or have been saving for years, you may be closer to your dream home than you think! Let’s get together to help you evaluate your ability to buy today.

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Existing Home Sales Slow to Start Spring [INFOGRAPHIC]

Existing Home Sales Slow to Start Spring [INFOGRAPHIC] | Simplifying The Market

Existing Home Sales Slow to Start Spring [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Existing Home Sales slowed to an annual pace of 5.21 million home sales in March.
  • Low inventory levels are still impacting home sales! The current month’s supply of homes for sale is 3.9-months.
  • Median home prices were up 3.8% over last March at $259,400. This marked the 85th consecutive month with year-over-year price gains.

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