IMMIGRANTS KEY TO HOMEOWNERSHIP GROWTH

Source: Urban Land Institute 

The housing and neighborhood location choices of immigrants will have a significant impact on urban growth in the U.S. for decades to come, particularly as more foreign-born residents seek to own homes in suburban communities, according to new research from the Urban Land Institute’s Terwilliger Center for Housing. Homebuilders and developers who can deliver the housing options immigrants want and need stand to benefit in the years to come.

Immigrants in general have strong aspirations for single-family homeownership. They're also increasingly targeting the suburbs in search of greater employment opportunities and lower-cost housing, the study notes.

Making sense of the story
• Nationally, the homeownership gap between all households and black and Latino households has changed little since 1970.

• Without growth of the foreign-population, regions with strong housing markets such as San Francisco would not have recovered as quickly following the recession; and markets that continue to struggle in the recession’s aftermath such as Buffalo would have experienced even weaker growth.

• Immigrants have strong aspirations for single-family homeownership, and homeownership rates for immigrants rise with their length of time in the U.S. This suggests that immigrants will be a key driver for owner-occupied housing for years to come.

• Immigrants seeking to own homes as well as those renting homes are increasingly drawn to the suburbs in search of employment opportunities, lower-cost housing and a higher quality of life. Suburbs are home to high-income, high-skilled immigrants as well as lower-income, lesser-skilled immigrants.

• While immigrants represent a key source of demand for new housing, a substantial share of immigrant housing demand will be met through purchases of existing homes. Sellers of these homes – many of whom will be baby boomers seeking to downsize – will create a strong market for smaller units.

Full story
https://uli.org/press-release/immigrants-housing-demand-report/

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RENTERS NOW RULE HALF OF U.S. CITIES

Detroit was once known as a city where a working-class family could afford to own a home. Now it’s a city of renters.

Just 49 percent of Motor City households were homeowners in 2015, down from 55 percent in 2009 and the lowest percentage in more than 50 years. Detroit isn’t alone, of course: The rate of U.S. home ownership fell steadily for a decade as the foreclosure crisis turned millions of owners into renters and tight housing markets made it hard for renters to buy homes. Demographic shifts—millennials (finally) moving out of their parents basements, for instance, or a rising Hispanic population—further fed the renter pool.

Fifty-two of the 100 largest U.S. cities were majority-renter in 2015, according to U.S. Census Bureau data compiled for Bloomberg by real estate brokerage Redfin. Twenty-one of those cities have shifted to renter-domination since 2009. These include such hot housing markets as Denver and San Diego and lukewarm locales, such as Detroit and Baltimore, better known for vacant homes than residential development.

While U.S. home ownership ticked up in the second half of 2016, there are reasons to think the trend toward renting will continue. A 2015 report from the Urban Institute predicted that rentership would keep rising through 2030, thanks to demographic trends that include aging baby boomers who downsize into rentals.

In the shorter term, housing market dynamics will also play a role. Fewer than 1 million homes were on the market in the first quarter of 2017, the lowest number since Trulia began recording inventory data in 2012. The shortage makes it harder for renters to buy. Meanwhile, rental landlords, including large Wall Street players and mom-and-pop investors, continue to plow cash into single-family homes.

Those shifts are likely to present new challenges for cities unequipped to handle high rental populations. Detroit Future City, a nonprofit that highlighted Detroit’s shift in a report earlier this month, argues that the city needs an intentional strategy for dealing with the rising population of such households.

That could include providing new protections for renters or creating resources to help landlords keep properties in good repair. On a grander scale, the Center for Budget Policy & Priorities, a Washington-based research institute, published a proposal this month calling for a new tax credit for low-wage workers, seniors, and people for disabilities.

Most low-income families don’t rent by choice, said Nela Richardson, chief economist at Redfin. And plenty of higher-income households rent because they can’t afford to buy. “We don’t have enough affordable supply in either rental or for-sale markets,” said Richardson, adding that cities interested in promoting renter-friendly policies can rethink their zoning policies to encourage more construction.

At an even more basic level, city leaders should check old assumptions about the role renter households play in their communities, said Andrew Jakabovics, vice president for policy development at Enterprise Community Partners, an affordable housing nonprofit.

Homeowners have traditionally been regarded as more engaged, with more at stake in the long-term prospects of their neighborhood, Jakabovics said. That view can unfairly shortchange renters.

“It goes a long way just to make sure you’re valuing renters and making sure voices are heard when it’s time to allocate resources to schools or parks or transit lines,” he said.

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HERE'S THE REAL REASON WHY HOMEBUYERS JUST DON'T FULLY UNDERSTAND MORTGAGES

A new study by Fannie Mae examines homebuyer education, and explains why many buyers aren’t being educated.

Most consumers interviewed in the study had little or no awareness of pre-purchase homeownership education classes unless they were required to take one.

For this study, Fannie Mae conducted 54 individual in-depth interviews and eight two-hour mini-group discussions across four markets, among lower-income first-time homebuyers as well as professionals, real estate agents and loan officers, who have experience working with lower-income first-time homebuyers and homeownership education or counseling.

Despite the low amount of participation in educational programs, the study showed all participants agreed homeownership education gives borrowers knowledge, confidence and employment to be financially and emotionally prepared for homeownership.

However, homeowners rarely participate in these programs unless they are required to take educational courses and were referred to by loan officers for loan qualification requirements or benefits such as down payment assistance programs, the study showed. In fact, very few even knew the range of programs offered.

“There is considerable fragmentation in the HE landscape,” the study states. “Virtually no consumers and only a few professionals understand the range of HE providers and HE offerings.”

So why is there such a lack of education in the market? Fannie Mae’s study explains that as well. Here are the results for homebuyers, lenders and real estate agents:

• Homebuyers: HE involves time and inconvenience. It's “another hoop to jump through” during an already stressful time. It sounds like school and involves coming up with more money if a fee is involved.

• Lenders: HE is one more thing on the long list of paperwork to make the deal happen. Loan officers have a deal-centered, transactional mindset. Some are concerned that borrowers will learn something that could kill the deal or lead them to other lenders.

• Real estate agents: There is an overall “not my job” mindset. Real estate agents have no concrete incentive or motivation to refer their clients to HE. They view lenders as experts on loan-related steps and process and want to guide or control their clients themselves. Like loan officers, they are concerned that borrowers might connect to another real estate agent or deal.

However, while there may or may not be an incentive to educate homebuyers on an individual deal, there is certainly incentive to having an overall higher-educated industry.

United Wholesale Mortgage recently called out lenders for not educating consumers more after a study from the National Association of Realtors showed 87% of non-homeowners think they need at least 10% down in order to purchase a home.

But the study shows lenders and consumers alike don’t see the personal incentives to educating homebuyers.

“There is almost no voluntary participation by consumers or professionals,” the study states. “Consumers see the value in these programs only after the fact and will not be motivated to participate without concrete incentives.”

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AMERICANS FEEL MORE CONFIDENT ABOUT THE ECONOMY

A barrage of U.S. economic data was released recently, including statistics on the state of the housing market, consumer-confidence figures, and numbers that show the spending and income of Americans. The data show that, while Americans might be optimistic about the job market, there could be a gap between economic expectations and economic reality.

Making sense of the story

• Hiring numbers have been fairly steady, and Americans are buying houses despite the Fed’s recent interest-rate hike. The S&P/Case-Shiller U.S. national home-price index, which looks at housing prices in 20 cities, saw a 5.9-percent increase. According to a report by the National Association of Realtors, the demand for housing is strong: Its pending home-sales index, which looks at contracts signed in February, jumped 5.5 percent to a 10-month high. Experts believe that the strong housing numbers are because people believe the labor market is strengthening.
• Initial unemployment claims are another reason for optimism: The number of Americans filing new unemployment claims dropped to 258,000 last week. While that decline is less than anticipated, these initial claims have been below 300,000 for over 100 weeks. That’s the longest streak at that level since the 1970s, and the figure is at its lowest level in four decades. The decline in claims suggests a healthy labor market, and is often seen as a proxy for companies avoiding layoffs. But the fact that the indicator isn’t falling as much as expected has experts questioning whether the labor market might be losing momentum.
• Consumer-confidence figures—which measure how Americans feel about their economic future—provided similarly mixed messages: On Tuesday, the Conference Board reported that consumer confidence was at a 16-year high.*However, the University of Michigan’s Consumer Sentiment Index, which measures consumer confidence via phone interviews, showed a lower-than-expected reading.

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CALIFORNIA PENDING HOME SALES DIP SLIGHTLY IN JANUARY; SOUTHERN CALIFORNIA MARKET CONTINUES TO OUTSHINE OTHER REGIONS

Following relatively strong closed escrow home sales over the past few months, California pending home sales slipped negligibly from a year ago, which suggests a softening in the housing market in the upcoming months, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said.

Making sense of the story
• Based on signed contracts, statewide pending home sales decreased in January on a seasonally adjusted basis, with the Pending Home Sales Index (PHSI)* slipping 0.2 percent from 107.4 from January 2016 to 107.2 in January 2017. On a monthly basis, California pending home sales were down 9.2 percent from the December index of 118.0. 
• Only the Southern California region posted a year-over-year improvement in pending sales last month, rising 8.1 percent from January 2016 and increasing 10.5 percent on a monthly basis. Riverside County led the region in pending sales, posting a 16.2 percent increase from a year ago. Los Angeles, Orange, and San Diego counties also posted modest year-over-year increases of 7.1 percent, 8.0, and 4.0 percent, respectively. San Bernardino County was the only area within Southern California that saw pending sales lower on an annual basis by 2.8 percent.
• For the San Francisco Bay Area as a whole, tight housing supplies and low affordability contributed to a fall in pending sales of 9.7 percent compared to January 2016. Only San Mateo County posted an annual increase, rising 5.3 percent from January 2016 after posting a significant double-digit annual decline (35.3 percent) in December. Pending home sales decreased 21.2 percent in San Francisco County, 7.1 percent in Santa Clara County, 24.9 percent in Monterey, and 4.8 percent in Santa Cruz County. A shortage of homes on the market and poor affordability will likely persist throughout the year, and impact Bay Area home sales.
• Pending sales in the Central Valley fell 7.9 percent from January 2016 and were up 2.2 percent from December. Within Central Valley, pending sales were down 14.6 percent in Kern County and 11.8 percent in Sacramento compared with a year ago.

Full story

http://www.car.org/aboutus/mediacenter/newsreleases/2017releases/jan2017pendingsales

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SPRING HOUSING ALREADY OVERHEATING – THINK 60 OFFERS ON ONE HOUSE

The spring housing market started early this year, not because of higher-than-average temperatures but because of hotter-than-average demand and overheating home prices.

This year may be the starkest example of a post-recession reality that is redefining housing as we know it.

"This spring housing market is shaping up to be another doozy for homebuyers," said Ralph McLaughlin, chief economist for home-listing website Trulia. "Housing affordability is the key to helping break yet another year of gridlocked inventory, but all signs are showing that homes this spring will be much less affordable than last year."


Affordability is being hit on several fronts: The foreclosure crisis is over, but it left behind an entirely new landscape for potential buyers. Entry-level homes are scarce because investors bought tens of thousands of them during the crisis and turned them into rentals. The number of single-family rentals jumped to more than 15 million, up from about 11 million in 2009, according to the U.S. Census.

Homebuilders continue to operate well below normal levels because of higher costs and a lack of labor, and thousands of construction workers left the business during the recession, never to return. Builders don't focus on entry-level homes because the margins are simply too tight, and prices for new construction are also rising at a fast clip.

What's more, credit is still tight, and the youngest cohort of buyers, the millennials, are delaying marriage and parenthood, the two biggest drivers of home ownership. The shortage of homes for sale has now pushed prices to a 30-year high, according to S&P CoreLogic Case-Shiller. Rising mortgage rates only add to the pressure.

"Home prices continue to advance, with the national average rising faster than at any time in the last two-and-a-half years," said David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. "With all 20 cities [in the S&P/Case-Shiller Index] seeing prices rise over the last year, questions about whether this is a normal housing market or if prices could be heading for a fall are natural."

At a Sunday open house in Los Angeles this weekend, nearly a dozen house hunters showed up before the scheduled start. The three-bedroom, two-bathroom home was reasonably priced, in a desirable neighborhood and move-in ready.

Emily Leach, 35, knows that story all too well. She has been looking for a few months, hoping that by getting in before spring she might have a better chance at an affordable home. So far, that has not been the case.

"We actually had a house that we saw that we really liked in South-Central Los Angeles, and we tried to make a move on that and we got outbid. South-Central!" she laughed.

Michelle and Derrick Jacob have been trolling the market for six months. They have a strict budget with little leeway, making it difficult for them to compete.

"The ones we want seem to be purchased in a snap, over asking price most of the time, well over asking price," Derrick Jacob said.

Housing demand climbed considerably this year, even compared with last year, as the leading edge of the largest generation finally moves into homebuying and a stronger job market supports them. A monthly demand index from Redfin jumped to the highest level since January 2013, when the index began. Compared to January 2016, homebuyer demand was up 23 percent, led by a 26 percent annual increase in homebuyers requesting tours and an 18 percent increase in buyers making offers.

"Soaring stock markets, still-low mortgage rates, and a steady economy bolstered homebuyers at the start of 2017," said Nela Richardson, Redfin chief economist. "Homebuyers were not just window shopping. They were serious about making offers and getting to the closing table. However, this uptick in homebuyer enthusiasm won't guarantee strong sales in the coming months. With pending home sales down across the country in January despite strong demand, the lack of supply is a formidable foe for buyers this year."

Higher home prices in some areas are supported by improving local economies and employment, but in other markets, too much demand pitted against too little supply is resulting in overheated housing. Dallas, Las Vegas, Phoenix, and Portland, Oregon, are overpriced by 10 to 14 percent, according to a recent report from Fitch Ratings, which considers markets overheated when they exceed the areas' supporting economic fundamentals. Los Angeles, Miami and Tampa, Florida, are close to 10 percent overvalued.

Analysts at Fitch don't predict when any of these bubbles will burst, but they do point to certain warning signs.

"For Dallas, the current unemployment rate in the Fort Worth [Texas] region is 3 percent. You'd have to go back 30 years to go that low. We think it's not sustainable. The business cycle will turn. Eventually, when it does, home prices will come down," said Samuel So, director of research at Fitch.

Potential buyers today are facing tough new realities. Some houses are clearly overpriced, and renting is still a better financial option in some markets. Competition is fierce for the best homes, and buyers have to be ready to pull out all the tricks.

"You have to make an introductory letter, little story about yourself and you just hope that the home that you're buying is not being sold by a flipper because they are much more neutral," Leach advised. "If you have a home that's being sold by the previous owners, you might be able to get that emotional human connection."

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WHAT HOME BUYERS WISH THEY'D KNOWN

Nearly half of American homeowners recently surveyed said they would do something differently if they were to go through the homebuying process again, according to the NerdWallet’s Home Buyer Reality Report, which analyzed the steps more than 2,200 Americans took to homeownership.

What are the top things consumers say they regretted?
•  20 percent wished they had saved more money before buying a home •  13 percent would do more research on the mortgage-lending process •  14 percent would have shopped around more for a mortgage •  13 percent would research the homebuying process more
Full story 

https://www.nerdwallet.com/blog/mortgages/2017-home-buyer-reality-report/

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