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Why the share of first time homebuyers continues to fall

(REAL ESTATE) First time homebuyers are interested in buying, but several internal and external factors are limiting their ability.

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first time homebuyers

The share of first-time homebuyers continues to fall, amidst rising interest rates and home prices, and diminishing inventory levels, despite “notable interest” in buying, according to the National Association of Realtors (NAR). The share dipped to 33 percent (down from 34 percent last year), not hitting 40 percent or higher since the homebuyers credit ended in 2010.

“With the lower end of the housing market – smaller, moderately priced homes – seeing the worst of the inventory shortage, first-time homebuyers who want to enter the market are having difficulty finding a home they can afford,” said NAR Chief Economist Lawrence Yun. “Homes were selling in a median of three weeks and multiple offers were a common occurrence, further pushing up home prices. These factors contributed to the low number of first-time buyers and the struggles of would-be buyers dreaming of joining the ranks of homeownership.”

Housing starts remain lower than the market demands and student loan debt continues to keep interested buyers in the rental market. Half of those surveyed indicated that student loan debt restricted their ability to save for a down payment or a home purchase, and one quarter carry student loan debt of around $28,000 while 40 percent carry a median of $30,000 in student loan debt.

“Even with a thriving economy and an abundance of job opportunities in many markets, monthly student loan payments coupled with sky-high rents and rising home prices make it exceedingly difficult for potential buyers to put aside savings for a down payment,” said Yun.

The average size of a down payment rose to 13 percent in 2018 (up from 10 percent last year, and the highest since 2005), with first time buyers putting down a median 7.0 percent (up from 5.0 percent last year), the highest since 1997.

Most buyers (58 percent) cite personal savings as their primary source of a down payment, and 24 percent of first time buyers were the most likely to use a gift from a friend or relative (24 percent).

A bright spot of NAR’s newest data is that single female buyers are a “strong force in the market,” accounting for 18 percent of all buyers, the second most common buyer behind married couples (63 percent). Single male buyers account for 9.0 percent of all homebuyers, but tended to purchase more expensive homes (median price of $215,000 versus single females’ $189,000 average price).

“Low inventory, rising interest rates and student loan debt are all factors contributing to the suppression of first-time home buyers,” said Yun. “However, existing home sales data shows inventory has been rising slowly on a year-over-year basis in recent months, which may encourage more would-be buyers who were previously convinced they could not find a home to enter the market.”

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

Real Estate Big Data

‘Boom, boom, boom,’ Kudlow declares this a ‘housing boom’ as sales fluctuate

(REAL ESTATE) Existing home sales slide for the month but surge for the year – challenges remain, but Kudlow declares this a “housing boom.”

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existing home sales

Existing home sales (contracts signed) dipped 1.3% in January, following the current trend of “a fluctuating pattern of monthly increases and declines,” according to the National Association of Realtors (NAR).

NAR points to sluggish sales in the Western region as dragging down the national average, while other regions saw little to no change last month.

The good news, however, is that year over year, existing home sales actually surged 9.6%. Also hopeful is the news this week that housing permits hit a 13-year high, and housing starts recently hit a 13-year high as well.

Although affordability and tight inventory levels continue to hold back the housing market, Larry Kudlow, Director of the United States National Economic Council calls this a “housing boom.”

In jest, when Fox News began to ask about existing home sales, Kudlow interrupted with the words “boom, boom, boom.”

“Whatever the question is, the answer is boom. We’re in a housing boom,” Kudlow asserted.

NAR Chief Economist, Dr. Lawrence Yun calls the outlook for 2020 home sales “promising despite the drop [in existing home sales] in January.”

In a statement, Dr. Yun said, “The trend line for housing starts is increasing and showing steady improvement, which should ultimately lead to more home sales.”

The median existing home price rose 6.8% from January 2019 to hit $266,300. Supply conditions are driving price grown, notes Dr. Yun, adding that low mortgage rates have aided with affordability.

The average days on market fell to 43 days in January (down from 49 in January 2019). Fully 42% of all homes sold in January 2020 were on the market for less than a month.

On Wednesday, Dr. Yun called the housing start and building permit data “jumpy,” which is proving to be applicable to current home sales as well.

It’s this muddy mix of monthly setbacks with wildly successful annual increases. Spring sales are set to similarly trend positively, so long as starts and permits continue to fuel what Kudlow calls a “housing boom.”

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Real Estate Big Data

Get in on alternative data – an inventive new way to market

(REAL ESTATE BIG DATA) Alternative data is a wild ride with surveillance planes, satellite images, and specially equipped helicopters, and it’s not stopping anytime soon.

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Alternative data

The road less traveled has always been a little stranger and trust me, alternative data is a little strange. Buckle-up your seatbelts, it’s going to be a wild ride.

Data has always been a hot commodity. The digital world has made it easier than ever for investors to get their hands on all kinds of data. The problem is, if one person can gain access to a data set then nearly everyone else can too. So, how are investors supposed to get an edge over their competitors and make the best decisions in their power? Please welcome, alternative data to the stage.

First of all, what the heck is alternative data? According to alternativedata.org, it refers to “data used by investors to evaluate a company or investment that is not within their traditional data sources.” Alternative data is the road less traveled. It offers investors a way to add new and unique variables to the mix.

This data can be anything from private aircraft surveillance to satellite images of parking lots. Every bit of data that investors can gather to determine their next course of action has value. It gets wild, y’all.

In the oil and gas industry, one company uses helicopters decked out with infrared beams to estimate the amount of oil in storage tanks. It may sound like something out of a silly movie, but it’s actually quite clever.

So, is alternative data just an industry fad? Probably not, but what qualifies as this kind of data will evolve over time. As certain practices become more mainstream, they will lose that “alternative” edge. Kind of like when the band you’ve been following for years gets a hit song and now, they’re everyone’s favorite band.

What’s already clear is alternative data is not pixie dust. These creative data sets can provide an interesting insight, but it shouldn’t be the sole basis of any decisions. At the end of the day, alt data points are just more variables on the table. It’s best to not get caught up in the sexiness of private jets and satellites.

One thing is for sure, we will be seeing more creative uses of alternative data in the future.

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Real Estate Big Data

‘Jumpy’ data: Housing starts dip 3.6%, permits hit 13-year high

(REAL ESTATE) Housing starts fall, but experts say the market is *almost* firing on all cylinders. Spring could be rough, but summer looks strong.

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housing starts + construction

Housing starts (construction on new homes) fell 3.6% in January across America, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

This sounds scary, but is barely a blip after skyrocketing at the end of 2019, when housing starts hit a 13-year high.

Also hitting a 13-year high (read: pre-housing crash levels) is applications for building permits, up 9.2% in January, a promising sign for future growth.

National Association of Realtors (NAR) Chief Economist, Dr. Lawrence Yun said, “this housing data is quite jumpy,” but assures people that the 3.6% dip in housing starts is “nothing to be concerned about,” as housing starts are “on an upward path,” continuing to trend positively overall.

Dr. Yun has long pointed to home builders as the secret ingredient for a healthier housing market, as it positively impacts restrictive inventory levels, and allows in otherwise pushed out buyers, particularly first timers.

“More construction will mean more housing inventory for consumers in the later months of this year,” he notes, adding that spring could still be tough for buyers with perpetually tight inventory levels, but “as trade-up buyers move into these new completed homes in the near future, their existing homes will be released onto the market.

Joel Kan, AVP of Economic and Industry Forecasting at the Mortgage Bankers Association (MBA) calls today’s data “another step in the right direction,” noting that despite the December surge followed by the January retraction, “the current pace is still over 1.5 million units – remaining close to the highest levels since 2006.”

Kan points out that while single-family starts are down, they’ve exceeded an annual pace of 1M+ units for a second consecutive month, the first time since 2007. Further, he points out that multifamily just had their strongest month of production in 34 years.

“The success of the spring buying season greatly depends on how much new and existing inventory is on the market,” said Kan.

It could still be a tight market in coming months, but today’s data offers hope for a less “jumpy” market.

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