American homeownership dream alive and well

Chicago, USA
Chicago, USA

Over half of Americans are likely to buy a home in the next five years, according to new research, which confirms that the American dream of homeownership is alive and well.

In a new survey by BMO Harris Bank Homebuyers, 54 per cent of Americans say they are likely to buy a home between now and 2022 – up 12 per cent from last year, despite rising prices. Americans surveyed are willing to pay an average of $277,000 for a home and will average a 32 per cent down payment.

According to the report, 70 per cent of US homeowners spent six months or less looking for a new home before they made a purchase. In addition, 10 per cent bought their home without participating in an active real estate search – or even any plan to buy at all – because a specific property caught their attention.

“Future buyers are encouraged about their prospects for a home purchase in the near future, and they’re keeping a healthy budget top of mind,” says Steven Zandpour, Senior Vice-President and Head of Retail Banking for Chicago Metro North, BMO Harris Bank. “Home ownership is a fulfilling goal for many and it doesn’t have to be a cumbersome process. Our mortgage specialists aim to walk each of our customers through each step, helping them along the journey and understanding what matters to them the most.”


More US renters put moving plans on hold

21st April 2017

A growing number of renters in the US are putting their moving plans on hold, despite a growing optimism about their financial situation.

New research from Freddie Mac finds that improving financial situations a declining number of renters say they are working toward homeownership, expect to buy a home, or move within the next few years.

Indeed, some tenants are also saying renting is a good choice for them, expect renting to stay affordable, and would move into a smaller rental unit to be closer to a city. While sentiments differ among urban, suburban and rural households, nationally those saying they expect to rent their next home increased to 59 per cent from 55 per cent since Freddie Mac’s last renter survey in September 2016.

“It would appear from our new survey that renters today feel better about their finances, like where they are living, and view renting favorably. This is consistent with findings from earlier surveys that show a steadily growing number of renters have a positive view of renting,” says David Brickman, executive vice president of Freddie Mac Multifamily.

According to the survey released today, renter sentiments about their financial situation have improved since our last survey in September 2016. Specifically, 41 per cent of renters now say they have enough money to last beyond each payday, up from 34 per cent in September, while those who say they cannot afford essentials fell from 20 per cent to 14 per cent. Those saying they have enough to cover their expenses from payday to payday is relatively unchanged at about 45 per cent.

Financial confidence rose for renters in all age groups no matter where they live. The biggest increases were among rural households, up from 27 per cent to 46 per cent, and Baby Boomers, up from 38 per cent to 48 per cent.

But the increase in personal financial confidence, so far, has not triggered an increase in renter moving plans. Rather, the number of renters who don’t know when they expect to move rose to 37 per cent from 30 per cent while those who expect to move during the next two years fell from 38 per cent to 33 per cent since September. What’s more, 55 per cent of all respondents, and 60 per cent of 35- to 49-year olds, say they like where they live and don’t plan to move if their rents rose.

The number of renters who say renting is a good choice for them now rose to 52 per cent from 46 per cent since January 2016.


Wage growth outpaces house prices in most of USA

7th April 2017

Wage growth is now outpacing house price growth in more than half of the USA, according to new research, which is good news for those hoping to get onto the housing ladder.

Rising house prices have left many domestic house-hunters unable to afford a property purchase. Indeed, the latest Q1 2017 report from ATTOM Data Solutions, curator of the nation’s largest fused property database, shows that one in every four county housing markets are less affordable than their historic affordability averages. Nationally, the firm’s affordability index is at its lowest level since Q4 2008 — a more than eight-year low.

Average wage earners would need to spend more than 43 percent of their income — the maximum debt-to-income ratio allowed for a “qualified mortgage” under guidelines from the Consumer Financial Protection Bureau — to buy a median-priced home in 97 of the 379 counties (26 per cent) analyzed for the report.

“Home affordability continued to worsen in the first quarter, not surprising given the continued strong growth in home prices combined with the recent rise in mortgage rates,” said Daren Blomquist, senior vice president at ATTOM Data Solutions.

However, stronger wage growth is the silver lining, says Blomquist. It outpaced home price growth in 53 per cent of markets, the first time since 2012 that this has been true of more than half of markets. Annual wage growth outpaced annual growth in median home prices in 199 of the 379 counties analysed in the report.

“Consumer confidence is increasing, as we are seeing a year-over-year wage increase. The wage increase, coupled with shortage of inventory, is creating a market where we are seeing median home prices increase over historic pricing,” says Matthew Watercutter, senior regional vice president and broker of record for HER Realtors, covering the Dayton, Columbus and Cincinnati markets in Ohio. “This is good news for sellers, but there is still great news for buyers. The percentage of wages needed to buy have decreased, which shows the median wages are growing at a faster pace than the sales prices.”


Young unmarried couples team up to get on US housing

8th February 2017

A growing number of young unmarried couples are teaming up to get on the US housing ladder, as property values continue to climb.

Almost 15 per cent of all young homebuyers are unmarried couples, according to Zillow, up from 11 per cent prior to the recession. This percentage has been on the rise over the past decade, says the US portal, with Washington, D.C. reporting the greatest increase in share – almost 16 per cent of all young homebuyers in D.C. are unmarried couples, up from 7.5 per cent in 2005. Philadelphia and Miami also had large increases in the share of young unmarried couples buying homes together.

“Buying a home is a big part of The American Dream – equally shared by millennials and Baby Boomers alike – but it’s becoming extremely difficult to make it work on a single income,” said Zillow Chief Economist Dr. Svenja Gudell.

Indeed, home values across the country are rising at their fastest pace since 2006, and some of the nation’s hottest housing markets – like Seattle, Denver and Portland, Ore. – have surpassed peak home values reached during the housing bubble. The median home value in the U.S. is now $193,800 – up 7 per cent over the past year.

“Many singles looking to purchase a home on their own may not make enough money to afford or qualify for a mortgage on their dream home,” adds Gudell. “Assuming home value growth continues to outpace income growth, I imagine this trend will continue.”

The percentage of homebuyers who are single, on the other hand, has been declining since 2010.


Cheaper to buy than rent in two-thirds of US

12th January 2017

It is now cheaper to buy a home than rent in two-thirds of the USA.

The new Rental Affordability Report from ATTOM Data Solutions, curator of the nation’s largest fused property database, analysed recently released fair market rent data for 2017 from the US Department of Housing and Urban Development, as well as wage data from the Bureau of Labor Statistics, to determine parts of the country where it is most affordable to get on the housing ladder.

The report found making monthly house payments on a median-priced home — including mortgage, property taxes and insurance — is more affordable than the fair market rent on a three-bedroom property in 354 of the 540 counties analysed.

Among the nation’s most populous counties, those where it is more affordable to buy than to rent are Cook County (Chicago), Illinois, Maricopa County (Phoenix), Arizona, Miami-Dade County, Florida; San Bernardino County, California in inland Southern California; Clark County (Las Vegas), Nevada; Tarrant County, Texas in the Dallas metro area; Wayne County (Detroit), Michigan; Broward County, Florida in the Miami metro area; Bexar County (San Antonio), Texas; and Philadelphia County, Pennsylvania.

Counter to the overall trend, renting is more affordable than buying a home in Los Angeles County, California; Harris County (Houston), Texas; San Diego County, California; Orange County, California; Kings County (Brooklyn), New York; and Dallas County, Texas.

On average across the 540 counties analyzed for the report, fair market rents for three-bedroom properties in 2017 are rising 4.2 per cent compared to 2016 while median home prices in 2016 were up 5.7 per cent from a year ago and average wages were up 2.2 per cent from a year ago in the second quarter of 2016 (the most recent wage data available).

However, the report arrives hot on the heels of the Federal Reserve’s recent decision to raise interest rates for ony the second time since the global financial data. As a result, mortgage rates are expected to begin climbing, following a lengthy period of record lows, which could change the affordability of homes in the USA significantly.

“While buying continues to be more affordable than renting in the majority of U.S. markets, that equation could change quickly if mortgage rates keep rising in 2017,” explains Daren Blomquist, senior vice president with ATTOM Data Solutions, the new parent company of RealtyTrac. “In that scenario, renters who have not yet made the leap to homeownership will find it even more difficult to make that leap this year. Additionally, renting may end up being the lesser of two housing affordability evils in a growing number of high-priced markets.”


Millennials set to push up US homeownership in 2017

23rd November 2016

Millennials are predicted to step up their home buying activity next year, helping to push up homeownership rates from historic lows.

2017 is a year of much uncertainty for all parts of America, as President Donald Trump prepares to begin his term in office. Trump’s policies could impact US housing indirectly, particularly if he sticks to his hard-line stance on immigration, notes Zillow, which could lead to labour shortages for builders. That, in turn, would cause developers to bump up the price of new homes to pass on the increased costs.

Nonetheless, the property firm predicts that first-time buyers will help homeownership to bounce back in 2017. Indeed, nearly half of all buyers in 2016 were first-time buyers, and millennials made up over half of this group of buyers.

“Millennials are also more racially diverse, so more homeowners will be people of color, reflecting the changing demographics of the United States,” comments Zillow.

“There are pros and cons to both existing homes and new construction, and the choice for home buyers can often be difficult. For those considering new construction in 2017, it’s worth considering the added cost that may come amidst ongoing construction labor shortages that could get worse if President-elect Trump follows through on his hard-line stances on immigration and immigrant labor. A shortage of construction workers as a result may force builders to pay higher wages, costs which are likely to get passed on to buyers in the form of higher new home prices,” says Zillow Chief Economist Dr. Svenja Gudell.

US house prices are forecast to grow by 3.6 per cent in 2017, according to more than 100 economic and housing experts surveyed by Zillow, lower than the 4.8 per cent growth recorded so far in 2016. In response, the percentage of people who drive to work will rise for the first time in a decade, as homeowners move further into the suburbs seeking affordable housing – putting them further from adequate public transit options.

Renters, meanwhile, are predicted to have an easier time in 2017, due to income growth and slowing rental appreciation. This would mark a welcome change of pace to 2016, where a large number of renters have struggled to make ends meet, making it harder to save up to purchase a home.


Generation Z still want to own a home, find US agents

9th November 2016

We all know about Millennials, but what about the generation of younger teenagers that follows them?

That was the aim of a recent conference held in the USA by the National Association of Realtors. A panel of young people aged 12 to 18 attending the event to give agents an insight into not just their social media preferences but their views on real estate.

“Generation Z are the teenagers of today that will shape – and are already starting to – the way we live, the way we function and the way we do business,” said Sherry Chris, president and CEO of Better Homes and Gardens Real Estate.

What may be surprising is that even future generations still consider homeownership to be the end goal, despite them growing up in an era of rising rental populations and Airbnb.

According to Better Homes and Gardens Real Estate, 97 per cent of Generation Z believe that they will own a home in the future, and 82 per cent indicate that homeownership is the most important factor in achieving the American Dream.

“That might sound a little traditional, especially when compared to what we’ve seen with millennials, but this is a generation that values homeownership,” commented Chris.

Indeed, all of the panelists at the event expressed a desire to own a home and said they homeownership would certainly be a part of their future. When quizzed about their ideal homes, the panelists varied in terms of where they wanted to live and what style they wanted to decorate in, but all agreed on one thing: size matters.

“I want a big house,” said Cayman, aged 17. “I want a room for each of my kids, a master bedroom, a few guest rooms, a movie room – I want a lot of space.”

Some fittings are also essential, with the youngsters showing a common preference for hardwood floors, granite counter tops and high-end appliances.

“I watch a lot of HGTV, so I know exactly what I want,” said Brooke, also aged 17.

There was also a consensus that, despite the proliferation of the world wide web, and the growth of property portals and online estate agents, an estate agent would be an essential part of the property buying process. Indeed, according to BGHRE, 81 percent of polled Gen Z-ers believe they will work with a real estate agent during the home purchase process.

“Real estate websites might not be as accurate as an expert’s opinion, and you are spending too much money on a house to not have accurate information,” said Thomas, aged 12.

Millennials increasingly using agents in bid to become homeowners

16th May 2016

Millennials are bucking trends set by generations before them in all areas of life, from technology to religion.

Taylor, executive vice president of the Pew Research Center and author of the book “The Next America: Boomers, Millennials, and the Looming Generational Showdown”, noted at a recent National Association of Realtors event that they are less religiously affiliated and slower to marry and have kids. Politically, half of the generation identifies as independent, more than ever have before. The list continues.

While seemingly small differences, these characteristics have very real effects on homeownership. After all, 39 per cent of millennials are still living with a parent or relative, with the record share of young households holding student debt.

Indeed, student debt, flat wages, rising home prices and rising rents (complicating the saving process) are all delaying milestones such as marrying and having children – major events in life that often cause young people to buy a home.

The real estate industry is already feeling the impact of these factors on millennials in regards to home buying. First-time buyers have in the past accounted for about 40 per cent of homebuyers; however, NAR research shows that number has trended downward since 2011 and currently sits at 32 per cent. And while married couples are the largest group of buyers (currently 67 per cent of all buyers), single females make up the second largest group of buyers, and that share has also dropped from 22 per cent in 2006 to 15 per cent in 2015.

“Even with all these statistics showing how things have changed for millennials and the fact that they are worse off financially than previous generations had been, the median age of first-time buyers has stayed relatively unchanged at 31,” comments Jessica Lautz, managing director of survey research at NAR.

“This means that they are ready and willing to buy if they can in fact break into the market. It’s getting more difficult to get to that point, but the desire to do so hasn’t changed.”

To help overcome the obstacles in their way, Millennial house-hunters are looking to a real estate agent in higher numbers than ever before.

“We are seeing that millennials are using agents at much higher rates,” Lautz says. “You might assume that they would prefer to take on a purchase or sell on their own, being raised in the digital age, but instead, we have found that these buyers and sellers want someone to help them through the process, not unlike the way their parents have helped them through their young adult life. Not having been through the process before, they rely on real estate agents to get them through the competitive market and to the finish line.”