Trulia’s American Dream Survey
Trulia released the results of its American Dream Survey Wednesday, tracking American attitudes toward homeownership since 2008, revealing that 58 percent of Americans think prices will return to their peak within 10 years, 78 percent of renters plan to buy someday, and interest in supersized homes (3,200+ sf) nearly doubled in the last year.
Trulia’s Chief Economist, Dr. Jed Kolko projects that at its current pace of recovery, the housing market will be back to pre-recession normal by 2016, as will the turnaround rate for renters waiting to become homeowners.
Despite recent reports that the recession cut Americans’ net worth in half, Dr. Kolko reports that there is renewed optimism “for a good reason,” even if there are unrealistic price expectations in the market, particularly in the hardest hit areas. The top three key optimism drivers for consumers are lower foreclosures and delinquencies (which have dropped 24 percent from its worst point during the recession), increased sales (up 10 percent in the last year), and lower vacancy rates (rental vacancies have hit ten year low).
“Optimism is essential for housing recovery,” said Dr. Kolko, “but too much optimism could lead to next bubble. Right now, optimism is outpacing the reality of what is on the market.”
Optimism outpacing the market realities
Trulia reports that sales prices of homes on their site have risen quarter over quarter in 86 of the 100 largest U.S. metros as of May, and cites that 61 percent of Americans believe home prices in their local market will rise in the next year.
“American’s hope for a real estate market bounce-back may be too high,” the company reports. “Even though prices in many markets reached unprecedented and unsustainable levels during the boom, 58 percent of Americans believe home prices in their local markets will return to their previous high in the next 10 years.”
During the recession, Americans got quite realistic about what their next home looked like, and as housing shows signs of improvement, even though slight, the affinity for big homes is on the rise.
According to the survey, more than one in four Americans who believe home ownership is part of achieving their personal American Dream said that their ideal home size is over 2,600 square feet – up from 17 percent in 2011. In fact, interest in homes of more than 3,200 square feet nearly doubled in the last year from 6 percent in 2011 to 11 percent in 2012.
Dr. Kolko noted that “developers are on top of this trend and are responding” by increasing the size once again of new homes being built. We have not seen a dramatic increase in the size of homes built this year, but Dr. Kolko points out that builders are shifting their plans.
Starter home reality check
Homeownership remains central to the American Dream. Fully 72 percent said owning a home is part of achieving their personal American Dream, and the number of renters saying they’ll never buy a home has fallen.
This take us back to unrealistic optimism, as future homeowners were asked what would make them fall in love with a home if they were in the market for a home today. The top amenities were a master bathroom (62 percent), walk-in closet (56 percent) and gourmet kitchen (50 percent), but only 26 percent of homeowners said that they had an en-suite master bathroom in their first home, while just 35 percent had a walk-in closet and 9 percent had a gourmet kitchen.
It is our assertion that these expectations could be set not only by optimism about housing, but with the improving multifamily units coming online, as renters in many markets are getting used to luxury amenities, and wishing for them in their first home. Additionally, overall optimism is naturally fueled by the bargains being found in short sales and foreclosures, setting consumers’ expectations high that they too will get a good deal, then wait out the recovery to gain equity.
Returning to normal by 2016?
“As the economy recovers, people are dreaming bigger, but most won’t realize their dreams anytime soon,” said Dr. Kolko. “Few homebuyers – and even fewer first-timers – can afford 3,000 square feet and a gourmet kitchen. Buyers need to take a hard look at what they can actually afford, and give themselves some cushion in case a Euro crisis or federal budget battle pushes us back into recession.”
Trulia reports that a year ago, housing was at 20 percent of its normal, pre-recession rate, which has risen to 37 percent this year. At the current pace, Trulia predicts a housing recovery, or a return to “normal” to be achieved by 2016, but cautions that the hardest hit cities like Las Vegas may not match the national norms.
Additionally, 78 percent of renters plan to buy someday, but when exactly is “someday” for them? New data from Freddie Mac reveals that 1.5 million households moved to rental units in the last year, and as rents rise, vacancies continue to drop, so how will the market recover as we become a renter nation?
Dr. Kolko tells AGBeat, “Credit is still tight and rising rents are hurting renters’ ability to save for a down payment. Recovery is several years away, and the turnaround rate [for renters to become homeowners] is closer to 2016 as well.”
American Dream Survey
About the survey: Harris Interactive conducted this online survey on behalf of Trulia among 2,205 U.S. adults, age 18 and over, between May 22 – 24 and among 2,230 U.S. adults, age 18 and older, between June 4-6, 2012.
Is the real estate industry endorsing Carson’s nomination to HUD?
(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?
NAR strongly backs Dr. Carson’s nomination
When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”
At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?
The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.
In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…
Job openings hit 14-year high, signaling economic improvement
The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.
Job openings hit a high point
To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.
The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.
Good news, bad news, depending on your profession
That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.
Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.
If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.
If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.
Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.
Gas prices are down, so are gas taxes about to go up?
Do low gas prices mean higher gas taxes are on the way? Budgeting for 2015 just got a bit more complicated, if some politicians have their way.
Gas taxes and your bottom line
Many industries rely heavily on time in their vehicle, not just truck drivers and delivery trucks. Sales professionals hop in their vehicles throughout the day, as do many other types of professionals (service providers like plumbers, and so forth). For that reason, gas prices and taxes are a relevant line item that must be budgeted for 2015, but with politicians making the rounds to push for higher gas taxes, budgeting becomes more complicated.
Gas prices are down roughly 50 cents per gallon compared to a year ago, which some analysts say have contributed to more money in consumers’ pockets. Some believe that this will improve holiday sales, but others believe the timing is just right to increase federal taxes on gas. The current tax on gas is 18.40 cents per gallon, and on diesel are 24.40 cents per gallon.
Supporters and opponents are polar opposites
Supporters argue as follows: gas prices are low, so it won’t hurt to increase federal gas taxes, in fact, those funds must go toward improving our infrastructure, which in the long run, saves Americans money because smoother roads mean better gas mileage and less congestion.
Gas taxes have long been a polarizing concept, and despite lowered gas prices, the controversial nature of the taxes have not diminished.
While some are pushing for complete abolition of federal gas taxes, others, like former Pennsylvania Governor, Ed Rendell (D) tell CNBC, “Say that cost the average driver $130 a year. They would get a return on that investment” in safer roads and increased quality of life, he added.
The Washington Post‘s Chris Mooney points out that federal gas taxes have been “stuck” at 18 cents for over 20 years, last raised when gas was barely a dollar a gallon and that the tax must increase not only to improve the infrastructure, but to “green” our behavior, and help our nation find tax reform compromise.
Is a gas tax politically plausible?
Mooney writes, “So, this is not an argument that a gas tax raise is politically plausible — any more than a economically efficient tax on carbon would be. It’s merely a suggestion that — ignoring politics — it might be a pretty good idea.”
Rendell noted, “The World Economic Forum, 10 years ago, rated us the best infrastructure in the world,” adding that we “need to do something for our infrastructure, not in a one or two year period, but over a decade.”
Others would note that this rating has not crumbled in just a few years, that despite many bridges and roads in need of repair, our infrastructure is still superior to even the most civilized nations.
Regardless of the reasons, most believe that Congress won’t touch this issue with a ten-foot pole, especially leading up to another Presidential campaign season starting next year.
“I think it’s too toxic and continues to be too toxic,” Steve LaTourette (the former Republican congressman best known for his close friendship with his fellow Ohioan, Speaker John Boehner) tells The Atlantic. “I see no political will to get this done.”
Whether the time is fortuitous or not, and regardless of the positive side effects, many point to a fear of voters’ retaliation against any politician siding with a gas hike, so this matter going any further than the proposal stage is unlikely.
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