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Is The Homeownership Rate Bouncing Back?

Since peaking at nearly 70 percent in 2004, the homeownership rate has been falling. In fact, it fell to a 48-year low during the second quarter of last year. Of course, there are many factors that contributed to the drop off. But, according to a recent study, the changes that have taken place over the past 12 years can be seen most dramatically when looking at the numbers generationally. For example, the study found that the homeownership rate has seen its biggest decline among Americans between the ages of 35 and 44. Among that group, the number of homeowners is 11 percent below its peak. Comparatively, the rate among consumers under the age of 35 is 9 percent off its peak and the rate among Americans 65 and older has actually risen 2 percent. In other words, most of the drop in homeownership has been among Americans 44 and younger. The encouraging news is that many would-be buyers on the younger end of that spectrum have expressed an interest in homeownership and are planning to buy once they’ve put together some savings. The situation among 35-to-44 year olds, however, may be a bit more complicated. This is due to the fact that many of them are boomerang buyers who bought their first home just before home prices plummeted. Over the past few years, as home values have bounced back, more of these potential buyers have seen their financial situation improve, which may help lead them back down the path of homeownership. More here.

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Mortgage Rate Drop Stirs Demand

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates dropped sharply last week from the week before. Rates were down across all loan categories, including 30-year fixed-rate loans with both conforming and jumbo balances, mortgages backed by the Federal Housing Administration, and 15-year fixed-rate loans. MBA economist Joel Kan told CNBC the decline was brought on by recent comments from Fed Chair Janet Yellen. “Rates fell last week as a more cautious message from Chair Yellen about the economic outlook and continuing concerns about weaker growth abroad kept demand for U.S. Treasurys high,” Kan said. “The 30-year fixed mortgage rate dropped 8 basis points, the largest single week decline in eight weeks.” Falling rates spurred demand for mortgage applications. In fact, overall demand was up 2.7 percent over the week before – driven by a 7 percent surge in refinance activity. And though purchase demand was down 2 percent from one week earlier, it remains 11 percent higher than at the same time last year. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

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Most Renters Want A Single Family Home

A new survey of consumer preferences found that an overwhelming majority of current renters say, if they were to move, that they’d prefer to buy a single-family home. In fact, a full 75 percent of renters who responded to the National Association of Realtors quarterly Housing Opportunities and Market Experience survey said they’d like to own a home and just 21 percent of them said they’d prefer to buy in an urban area. Lawrence Yun, NAR’s chief economist, said the fact that most Americans prefer a larger home outside of the city isn’t exactly news. “The American Dream for most consumers is not a cramped, 500-square-foot condo in the middle of the city, but instead a larger home within close proximity to the jobs and entertainment an urban area provides,” Yun said. “While this is not a new discovery, supply and demand imbalances and unhealthy levels of price growth in several metro areas have made buying an affordable home an onerous task for far too many first-time buyers and middle-class families.” But while a majority of renters and younger buyers said they’d prefer a larger home in the suburbs, respondents over the age of 65 were the most likely to consider buying a condo and almost as likely as respondents under the age of 35 to say they’d consider buying in an urban area. More here.

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Latest Jobs Report Hints At Building Boom

The March jobs report from the U.S. Bureau of Labor Statistics contained good news for the economy, as the number of jobs created rose by 215,000. In addition, labor force participation improved for the fourth consecutive month. But the report also offered a glimpse of a potentially positive trend for the housing market. When it comes to the market for single-family homes, affordability conditions have garnered a lot of attention this year. That’s because, in a lot of markets, the number of homes available for sale hasn’t kept up with the number of Americans who are interested in buying a house. Naturally, when there are more buyers than homes for sale, home prices go up. And, while that has been good news for current homeowners – and especially those that fell into negative equity following the housing crash – home price increases and lack of inventory are now a concern for the growing number of potential buyers hoping to purchase a home this year. However, the jobs report shows construction employment rose by 37,000 in March, including a 12,000-worker increase in residential specialty trade contractors. This improvement could be an indication that home builders are beginning to build more new homes, which will help alleviate upward pressure on prices, balancing the market and leading to more favorable conditions for buyers this year. More here.

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Optimistic Outlook Sees Brighter Days Ahead

According to Freddie Mac’s March Outlook, the housing market is poised to have its best year since 2006. The optimistic forecast is based on the belief that an improved job market – combined with low mortgage rates and a growing number of housing starts – will help boost sales this year and build momentum for 2017. “Housing markets are poised for their best year in a decade,” Sean Becketti, Freddie Mac’s chief economist, said. “In our latest forecast, total home sales, housing starts, and house prices will reach their highest levels since 2006. Low mortgage rates, robust job growth and a gradual increase in housing supply will help drive housing markets forward. Low levels of inventory for-sale and for-rent and declining housing affordability will be major challenges, but on balance the nation’s housing markets should sustain their momentum from 2015 into 2016 and 2017.” According to the outlook, Freddie Mac expects housing starts to increase this year, which will help slow down the rate at which home prices have been increasing. In fact, the outlook says annual house price appreciation will be 4.8 percent in 2016. In 2015, it was about 6 percent. More here.

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What Neighborhood Features Hurt Home Values?

When searching for a house to buy, it’s easy to focus in on the home itself and forget to have a look around the neighborhood. But, as the saying goes, real estate is all about location. So, in addition to everything else there is to consider as a prospective home buyer, keeping an eye on the surrounding neighborhood is always a good idea. For example, a recent article on Realtor.com looked at certain neighborhood features and determined which are most likely to drag a home’s value downward. Not surprisingly, bad schools led the list. In fact, when comparing homes in a zip code with bad schools as others in the same county, home prices were 22.2 percent lower in areas with subpar schools. Strip clubs were also near the top of the list, dropping prices by nearly 15 percent in surrounding neighborhoods. The analysis found a high concentration of renters, homeless shelters, and cemeteries were some of the other things buyers should watch out for when surveying a neighborhood. Each of those traits caused neighborhood houses to be more than 10 percent lower than surrounding areas. Less concerning but still a drag on values, funeral homes, power plants, shooting ranges, and hospitals also all took a toll on the value of homes in the vicinity. More here.

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Mortgage Rates Rise As Spring Season Begins

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates moved up last week from the week before. Rates increased for 30-year fixed-rate loans with conforming balances, mortgages backed by the Federal Housing Administration, and 15-year fixed-rate loans. Interest rates for jumbo loans fell slightly. Despite higher interest rates, however, there is evidence that the spring buying season has begun. In fact, demand for purchase applications was up 2 percent from the week before and is now 21 percent higher than at the same time last year. The improvement was welcome news during a week when overall mortgage application demand was down 1 percent due to dropping refinance activity. But – though higher rates have contributed to fewer homeowners looking to refinance their loans – Lynn Fisher, MBA’s vice president of research and economics, told CNBC that recent comments from Federal Reserve Chair Janet Yellen indicate that the Fed likely won’t raise interest rates again any time in the near future. “As the market incorporates beliefs about a lower rate path in the wake of chairwoman Yellen’s comments, mortgage rates are likely to follow the 10-year Treasury yield downwards this week,” Fisher said. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

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Buying Still Affordable In Majority Of Markets

RealtyTrac’s Q1 2016 Home Affordability Index looked at median home prices and average wage data in 456 counties across the country to determine how affordable buying a home was now compared to historic norms. According to the results, just 9 percent of counties were less affordable now than previously normal. But – though that means the vast majority of markets are more affordable than they normally are – the number of counties that are now less affordable climbed to 43 from 10 at the same time last year. Daren Blomquist, RealtyTrac’s senior vice president, says if home prices continue to rise faster than wages, that number will grow. “While the vast majority of housing markets are still affordable by their own historic standards, home prices are floating out of reach for average wage earners in a growing number of U.S. housing markets,” Blomquist said. “The recent drop in interest rates has helped to soften the blow of high-flying price appreciation in some markets, but the affordability equation could change quickly if interest rates trend higher and home prices continue to rise faster than wages.” By comparison, 99 percent of analyzed counties were less affordable than normal at the height of the housing bubble. When prices hit their low in 2012, only two of the 456 included counties exceeded historically normal affordability levels. More here.

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Pending Home Sales Improve In February

Pending sales refer to the number of contracts to buy homes signed during the month. Because they track signings – and not closings – they are considered a good indicator of future existing home sales. In other words, any increase in pending sales will likely be reflected in upcoming home sales numbers, as those buyers complete the closing process. For this reason, the National Association of Realtors’ Pending Home Sales Index is closely watched by analysts and industry experts. In February, the index rose 3.5 percent and hit a seven-month high. According to Lawrence Yun, NAR’s chief economist, the results are a good indication that the real estate market is beginning to heat up. “After some volatility this winter, the latest data is encouraging in that a decent number of buyers signed contracts last month, lured by mortgage rates dipping to their lowest levels in nearly a year and a modest, seasonal uptick in inventory,” Yun said. “Looking ahead, the key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what’s being scooped up by a growing pool of buyers. Without adequate supply, sales will likely plateau.” A look at regional results shows February’s improvement was driven primarily by an 11.4 percent gain in the Midwest. However, contract signings also rose in the South and West. The Northeast, on the other hand, was relatively flat, falling just 0.2 percent. More here.

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Wages, Home Prices Key To Housing Growth

Last year, high hopes for the housing market looked bleak during what turned out to be a slow winter. Harsh weather stalled activity in some parts of the country and the experts and analysts began to question their optimistic outlook for the year. As spring rolled in, however, sales picked up and 2015 turned out to be a strong overall year for the residential real estate market. This year got off to a similarly slow start. But, according to Fannie Mae’s most recent Economic and Housing Outlook, financial market conditions now appear to be improving and, though challenges remain, strong consumer and business spending combined with a healthy labor market is expected to keep the economy stable. Doug Duncan, Fannie Mae’s chief economist, says that, while the economy has regained its footing, many Americans aren’t seeing similar gains in their income and – along with higher home prices – it’s beginning to cause concern. “A less optimistic outlook for future wage gains, especially among small business employees, coupled with continued strong home price appreciation boosted by lean inventory, is adding to the housing affordability challenge,” Duncan said. “Our latest Home Purchase Sentiment Index shows that high home prices are a top reason for consumers’ perception that it’s a bad time to buy a home. However, low mortgage rates should help support moderate housing expansion as we move through the year.” More here.