Despite only half of all surveyed households believe that the economy is currently improving, the majority still view homeownership as part of the American Dream, with almost all young renters indicating they aim to buy a home some day. This, according to the National Association of Realtors’ (NAR’s) new quarterly survey, Housing Opportunities and Market Experiences (HOME), released for the first time today.
The association has surveyed over 9,000 renters and homeowners on the topic of homeownership, the economy and their personal financial outlook.
As part of this survey, a new index has been unveiled to track the financial outlook of households found that compared to earlier this year. This first index revels that an increasing share believes their personal financial situation will improve in the months ahead.
NAR says they’ll add new questions to the survey each quarter to reflect timely topics impacting real estate.
Young people actually do want to own
In recent years, it has become commonly accepted that millennials don’t wish to own a home, yet the HOME survey says otherwise: An overwhelming majority of current renters who are 34 years of age or younger want to own a home in the future (94 percent). Overall, 83 percent of polled renters have a desire to own, and 77 percent believe homeownership is part of their American Dream.
Dr. Lawrence Yun, NAR chief economist, says the survey’s findings debunk the notion that young adults aren’t interested in buying a home.
“Despite entering the workforce during or immediately after the worst of the financial and housing crisis, the desire to become a homeowner appears to be a personal goal for a convincing majority of young renters,” Dr. Yun said.
“Furthermore, there appears to be sizeable, pent-up demand for buying that currently remains untapped because of a variety of economic and personal reasons impacting many households.”
So why don’t renters currently own?
We recently dug into rentership, noting that by the technical definition of “affordable,” most renters can’t afford their rent.
This lines up perfectly with the HOME survey result, wherein renters indicated that they don’t own because they believe they can’t afford it (53 percent), and the need for flexibility (19 percent).
When asked what would likely be the main reason for buying in the future, renters cited lifestyle considerations such as getting married, starting a family or retiring (33 percent) and an improvement in their financial situation (26 percent).
“A combination of factors such as rising rents and home prices, limited supply, repaying student debt, and getting married and having children later in life has more to do with the currently underperforming share of first-time buyers than the idea that buying a home is not as desirable as it used to be,” adds Yun.
Are we optimistic about the economy or not?
One of the most fascinating aspects of the study is that Americans are split, with nearly half saying the economy is improving, while roughly half say we are in a recession.
Renters were more optimistic, but only slightly, with 57 percent believing the economy is improving. Over three-quarters (76 percent) of those who don’t think the economy is improving still want to eventually buy a home.
“The promising stretch of job creation in several parts of the country in recent years has the housing market in 2015 on track for its best year of sales since the downturn,” says Dr. Yun.
“However,” he added, “that only half of surveyed households believe the economy is improving can be attributed to the fact that some areas have been slow to recover and wages have yet to grow in a meaningful way for far too many families.”
Adds Yun, “With roughly 26 million more people in the U.S. compared to the peak year of home sales in 2005 (7.08 million), the pace of existing sales would likely be more robust if not for the economy’s subpar growth since the downturn and wage gains that have failed to keep pace with rents and home prices.”
The dream of homeownership is alive
Despite the spit over the economy’s performance, roughly 85 percent of all households believe that homeownership is a good financial decision and part of their personal American Dream, and when asked if they believe this strongly or moderately, 76 percent who believe it’s a good decision feel strongly about it.
The appeals of homeownership include a place to raise a family (36 percent), owning their own place (26 percent) and a nest egg for retirement (14 percent). The majority believe it’s a good time to buy, but two-thirds believe it would be difficult to obtain a mortgage. That said, only five percent of renters have attempted to obtain a mortgage and failed, debunking the common talking point that the economy has kept rejected borrowers in a rental situation.
Financial outlook on the rise
With 89 percent saying home prices in their area have risen or remained the same, 91 percent believe this trend will continue.
The new HOME survey also calculates a monthly Personal Financial Outlook Index measured by household type, age, income and type of location. Since tracking began in March, the index representing all households has slowly trended upward to its highest current reading in December – reflecting stronger confidence that respondents’ financial situation will be better in six months. Currently, renters, younger households and those living in urban areas are more optimistic about their future financial situation.
“Young adults, who make up the majority of all renter households, are typically more optimistic about their future,” adds Dr. Yun. “As more of them settle down and begin plans to start a family, the allure of owning their own home as well as the long-term financial stability homeownership provides will drive their emergence into the housing market.”
“However, the extent to how fast this occurs will greatly depend on more entry-level housing supply coming onto the market and needed improvements in affordability conditions,” Dr. Yun concludes.
Home sales on the rise – don’t call it a comeback (okay, do)
(REAL ESTATE) Inventory levels continue to fall as prices rise, making for a competitive market. After a tough winter, February saw considerable gains in home sales.
For years, inventory levels have been sinking, and prices have been growing, making the home buying process increasingly complex and sometimes discouraging. But after two consecutive months of declining sales, existing-home sales made a comeback in February, rising 3.0 percent, according to the National Association of Realtors (NAR). Sales are now 1.1 percent higher than February of last year. #GoodNews
Although home sales in the Midwest and Northeast saw a dip in this period, the South and West regions skyrocketed, boosting the national numbers.
Dr. Lawrence Yun, NAR’s Chief Economist noted that “The very healthy U.S. economy and labor market are creating a sizeable interest in buying a home in early 2018. However, even as seasonal inventory gains helped boost sales last month, home prices – especially in the West – shot up considerably. Affordability continues to be a pressing issue because new and existing housing supply is still severely subpar.”
Added Yun, “The unseasonably cold weather to start the year muted pending sales in the Northeast and Midwest in January and ultimately led to their sales retreat last month. Looking ahead, several markets in the Northeast will likely see even more temporary disruptions from the large winter storms that have occurred in March.”
In February, the median home price rose to $241,700, a 5.9 percent increase from February 2017, and the 72nd straight month of annual gains. The average days on market fell to 37, down from 41 in January, and 45 last February. That’s what we call a competitive market.
NAR President Elizabeth Mendenhall comments on the difficulty first-time buyers are seeing in this competitive market. “Realtors® in several markets note that entry-level homes for first-timers are hard to come by, which is contributing to their underperforming share of overall sales to start the year. Prospective buyers should start conversations with a Realtor® now on what they want in a new home. Even with the expected uptick in new listings in coming months, buyers in most markets will likely have to act fast on any available listing that checks all their boxes.”
Regional performance varied, with sales in the West outperforming all other regions. While sales fell in the Northeast by 12.3 percent, and dropped 2.4 percent in the Midwest, they skyrocketed 11.4 percent in the West, and 6.6 percent in the South.
Existing home sales surged in October, what’s next?
(REAL ESTATE NEWS) Existing home sales rose in October despite continually tight inventory levels and rising home values.
Despite the challenges of ongoing political uncertainty, extremely tight inventory conditions, and home values that continue to rise, existing home sales rose 2.0 percent in October, according to the National Association of Realtors (NAR).
This marks the strongest home sales pace since June, yet are 0.9 percent below October 2016. October’s average days on market was 34, down from 41 days on this month last year.
The median price has risen 5.5 percent in the last year to $247,000 with October marking the 68th consecutive month of annual increases. Nearly half of all homes on the market in October sold in under 30 days.
Dr. Lawrence Yun, NAR Chief Economist said, “While the housing market gained a little more momentum last month, sales are still below year ago levels because low inventory is limiting choices for prospective buyers and keeping price growth elevated.”
Added Yun, “The residual effects on sales from Hurricanes Harvey and Irma are still seen in parts of Texas and Florida. However, sales should completely bounce back to their pre-storm levels by the end of the year, as demand for buying in these areas was very strong before the storms.”
Regional performances varied with sales rising in the Northeast by 4.2 percent, in the West by 2.4 percent, the South by 1.9 percent, and 0.8 percent in the Midwest.
Prices also varied depending on region, with the median price in the West rising 7.8 percent above October 2016 (to $375,100), 6.6 percent in the Northeast (to $272,800), 7.1 percent in the Midwest (to $194,700), and 4.6 percent in the South (to $214,900).
Dr. Yun expects conditions to remain competitive through the winter, but housing is experiencing a tremendous hanging chad right now – what will politicians do to the tax deductions that incentivize homeownership in the first place?
NAR President Elizabeth Mendenhall, says the pending tax reform legislation in both the House and Senate is a direct attack on homeowners and homeownership, with the result being a tax increase on millions of middle-class homeowners in both large and small communities throughout the U.S.
“Making changes to the mortgage interest deduction, eliminating or capping the deduction for state and local taxes and modifying the rules on capital gains exemptions poses serious harm to millions of homeowners and future buyers,” said Mendenhall. “With first-time buyers struggling to reach the market, Congress should not be creating disincentives to buy and sell a home. Furthermore, adding $1.5 trillion to the national debt will raise future borrowing costs for our children and grandchildren.”
Sustained lull in signed contracts means pullback in home sales
(REAL ESTATE NEWS) Existing home sales aren’t looking super hot this month, but it’s not the bad news that you’re thinking – let’s discuss!
Existing home sales slide in June
Low supply has kept home sales muted, with existing home sales dipping 1.8 percent in the month of June, albeit 0.7 percent above June of 2016, according to the National Association of Realtors. The Midwest region is the current bright spot as the only area sales actually rose during this period.
Dr. Lawrence Yun, NAR Chief Economist, says the previous three-month lull in contract activity translated to a pullback in existing sales in June.
“Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that’s straining their budget,” said Yun.
He added, “The demand for buying a home is as strong as it has been since before the Great Recession. Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines.”
There’s a silver lining
“The good news is,” observes Yun, “that sales are still running slightly above last year’s pace despite these persistent market challenges.”
The median price for an existing home rose 6.5 percent over the last year to $263,800, surpassing May as the new peak, and the 64th consecutive month of year-over-year gains.
Housing inventory declined 0.5 percent from the previous month, and 7.1 percent over the last year. Average days on market rose one day from May to 28 in June, which is down from 34 days in June 2016.
Supply and demand challenges
First time buyers were 32 percent of sales in June, down one percent from both in May and a year ago. Yun says “It’s shaping up to be another year of below average sales to first-time buyers despite a healthy economy that continues to create jobs,” said Yun.
“Worsening supply and affordability conditions in many markets have unfortunately put a temporary hold on many aspiring buyers’ dreams of owning a home this year,” noted Yun.
Spicy sales in the Midwest
In the Midwest, sales rose 3.1 percent from May but remain unchanged from this time last year. The median price rose 7.7 percent in the last year to $213,000.
In the Northeast, existing home sales actually fell 2.6 percent, but are 1.3 percent above a year ago (the median price was $296,300, up 4.1 percent for the year).
The South saw a 4.7 percent dip in sales ((unchanged from a year ago) and the median price in the South was $231,300, up 6.2 percent from a year ago.
Sales in the West declined 0.8 percent but are 2.5 percent above June 2016. The median price in the West was $378,100, up 7.4 percent from June 2016.
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