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Homeownership

Gen X has the most student loan debt, buys the biggest share of homes #GenerationalStats

(REAL ESTATE NEWS) Gen X is often left out of the conversation about homeownership yet accounts for the biggest share of purchases this year despite student loan and equity challenges. Let’s discuss generational trends.

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Survey finds serious generational differences

In studying generational differences of recent home buyers and sellers, the National Association of Realtors (NAR) found that millennials are moving to the suburbs, younger generations are more likely to use a real estate agent, a growing number of millennials and younger boomer buyers have kids living at home, and student debt is common in Gen X and boomer households. Whew, that’s a mouthful.

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NAR points out that while much focus has centered around millennials’ homeownership challenges, Gen X is often lost in the discussion, a generation that fueled the greatest share of purchases in the past year.

Gen X has the most student loan debt

NAR Chief Economist, Dr. Lawrence Yun notes that this generation started families, entered the middle part of their careers, and bought homes, only to be rattled by job losses, slipping home values, and overall economic uncertainty during and after the Great Recession.

In the past year, Gen X households experienced equity challenges, and were the most likely generation to have previously sold a distressed property and the most likely to want to sell earlier but were underwater and couldn’t.

The survey found that Gen X had the most student loan debt this year ($30,000) and delayed buying a home longer than millennials because of equity and debt challenges.

“Gen X sellers’ median tenure in their previous home was 10 years, which puts many of them selling a property they bought right around the time home values were on the precipice of declining,” said Dr. Yun. “Fortunately, the much stronger job market and 41 percent cumulative rise in home prices since 2011 have helped a growing number build enough equity to finally sell and trade up to a larger home. More Gen X sellers are expected this year and are definitely needed to ease the inventory shortages in much of the country.”

An uptick in purchases from Gen X

Despite the equity and student loan debt challenges, the uptick in purchases from Gen X buyers (28 percent) was the highest level in three years.

Millennials were the largest group of recent home buyers (34 percent) followed closely by boomers (30 percent) and the silent generation accounted for 8.0 percent of home purchases.

Younger boomers focused on adult children

This year, NAR points out a rising trend – younger boomers increasingly considering their adult children as they buy. Because rents are soaring nationally, younger boomers were the most likely to purchase a multi-generational home (20 percent, up from 16 percent in 2016), citing adult children moving back in or never having left as the top reason.

Meanwhile, household formation rates remain delayed, dragging down homeownership rates and shifting how older generations buy homes in preparation.

“The job market is very healthy for young adults with a college education, but repaying student debt and dealing with ever-increasing rents on an entry-level salary are forcing many to either shack-up with several roommates or move back home,” said Dr. Yun.

Moving on to millennials

The NAR survey indicates that millennials have more kids in tow (49 percent have at least one child, up from 43 percent just two years ago), demanding more space at an affordable price, pushing them to the suburbs. Only 15 percent of millennial buyers bought in an urban area, down from 21 percent two short years ago.

“Millennial buyers, at 85 percent, were the most likely generation to view their home purchase as a good financial investment,” added Yun. “These strong feelings bode well for even greater demand in the future as more millennials settle down and begin raising families. A significant boost in new and existing inventory will go a long way to ensuring the opportunity is there for more of them to reach the market.”

Demand for real estate professionals

Regardless of age, buyers and sellers continue to see real estate agents as an integral part of a real estate transaction.Click To Tweet

In this year’s survey, nearly 90 percent of respondents said they worked with a real estate agent to buy or sell a home. This kept for-sale-by-owner transactions down at their lowest share ever (8 percent).

#GenerationalStats

Homeownership

The phrase ‘starter home’ is overrated and overused

(HOMEOWNERSHIP) You see the term in the MLS for fixer uppers, you hear it when Realtors are working with first time buyers. But the term “starter home” shouldn’t be in anyone’s vocabulary. Here’s why.

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Just words

Collins English Dictionary defines a starter home as a “small, new house which is cheap enough for people who are buying their first home to afford.” You won’t find the phrase too often outside of the real estate industry.

There isn’t much about the etymology of the phrase, but most likely, it’s a marketing ploy to get people to buy into the idea of purchasing another home in a few years.

Grind your gears

Mark Greutman, husband to Lauren Greutman, believes that the term “starter home” should bother people. The phrase implies that you will upgrade later.

Your starter home isn’t good enough for the rest of your life. And not to get into how well Americans have it, what about people who will never be able to afford anything more? Is it an insult to them?

Do you really need two living rooms?

Older generations bought one home and lived in it until they could no longer be independent. In today’s world, we buy a starter home, then upgrade to have more space, to live farther away from our neighbors, to have rooms that are only used once or twice a year, and to make sure you have a 2 or 3 car garage to hold your vehicles and more stuff, some of which isn’t taken out very often.

But consider this: You could pay off your starter home in 15 to 20 years, if you budget right.

You could be out from under a mortgage and have money to travel, send the kids to college, or even retire early. When you think about what led to the financial crisis in 2008, isn’t it better to have a smaller house where you can make the payments than worry about losing your house?

Be content where you are

Realtors are motivated to make sure that they have customers. If people buy one home with the intent to stay, will the market dry up? Probably not, because people move and a new generation will be ready to purchase homes for their own family.

Let’s think about that phrase, “starter home.” It fuels consumerism and discontentment. Don’t call cheaper houses starter homes, but just a home.

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Homeownership

The remodeling projects with best ROI that actually increase home value

(HOMEOWNERSHIP) Knowing which remodeling projects to tackle when a home is being put on the market can save a lot of wasted effort and money.

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If you’re looking to help your clients to identify which projects to tackle before putting their home on the market, look no further: the National Association of Realtors surveyed thousands of real estate agents, industry professionals, and consumers on interior and exterior house remodeling projects, and these are the best projects for upping a home’s value before listing it on the market, ranked on the most value and cost recovery a homeowner can get.

  • Refinishing hardwood floors. Start from the bottom to earn top dollar. Refinishing floors transform a home from worn-out and aging to vibrant and inviting, and only costs about $2500 according to the National Association of the Remodeling Industry (NARI). The project also increases a home’s value by that same amount, meaning a homeowner can recover 100 percent of the costs. Pretty sweet deal.
  • Upgrading insulation. Because it’s what’s inside that counts. This project costs about $2100 based on NARI Remodeler’s estimate and increases a home’s value by $2000 according to Realtors surveyed. That’s a 95% cost recovery.
  • Adding new wood floors. If you don’t have wood floors to refinish, add them in! This costs about $5,500 according to NARI Remodelers, and the increased sales value is $5000. A homeowner can recover 91% of costs from a new wood floor addition.
  • Replacing HVAC system. A new HVAC system adds energy efficiency and refreshes the entire home, and NARI Remodelers estimate doing so costs $7000. The increased value for sellers is $5000 according to NAR REALTORS, meaning an easy breezy 71% cost recovery for homeowners.
  • Converting a basement into a living area. Not only is this cost and space-efficient, it’s also undeniably trendy. A basement makeover costs about $36,000 according to NARI Remodelers estimate and increases value for sellers by $25,000 according to Realtors surveyed. That comes out to a cost recovery of 69%.

Which projects are the most costly?

In case you’re curious, these are some of the most expensive remodeling projects:

  • New master suite. More like master $uite – this costs about $112,500 with a cost recovery of 53%. 
  • Converting an attic into a living area. Cute idea, but also a $65,000 one with a 61% cost recovery. One might say the price is through the roof.
  • Complete kitchen renovation. This project costs an estimated $60,000 with a 67% cost recovery. Even more if you want to throw in a brick oven, and you probably do.
  • New bathroom. With an estimated cost of $50,000 and a 52% cost recovery, make sure you aren’t flushing money down the drain with your bathroom addition!

These trends change over the years, so make sure your knowledge is up to date locally since we all know local trends trump national. Hopefully today you’ve garnered some ammo to help clients better understand how to improve their home’s value!

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Homeownership

How to inform clients about well-known homebuyer scams

(HOMEOWNERSHIP) Real estate scams continue to victimize people, but Realtors are in a position to better protect homebuyers. Here are some tips.

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Despite warning after warning and news story after news story, homebuyers keep getting their money stolen in real estate wire transfer schemes. Some blame the mortgage and real estate industries for not doing enough to educate and protect their clients. Others say the people committing these crimes are getting more and more sophisticated. No matter who’s to blame, there’s no arguing that this crime is on the rise.

What exactly do these real estate scams look like? These criminals usually hack into a business’s emails, often a title company, and get all the pertinent information they need. They then steal and copy that company’s letterhead, and the email addresses, signature blocks and any other relevant information they will need to fool the homebuyer. The homebuyer then gets an email that appears to be from the title company, asking them to wire money, often tens or sometimes hundreds of thousands of dollars.

So, you’re probably wondering right now: What can I do? You want to know how to warn and protect your clients and keep your reputation intact (and avoid costly lawsuits). The following safeguarding tips can help keep cash out of cyberthieves’ hands:

1. Pick up the phone. If you’re closing on a home and receive an email with instructions on how to transfer money to your closing company or lender, take a few minutes to call your agent or broker to make sure it’s legit. Yes, this might be a bit annoying, but not as annoying as losing thousands of dollars in an email scam.

2. Be aware. These scammers usually send emails that look like the real thing. If you’re a homebuyer, look for weirdly timed emails (sent in the middle of the night) or spelling and punctuation errors. Is there a sense of urgency to the email?

3. Educate your clients. If you’re a real estate professional, make sure your clients know about this scheme. Not everyone is aware they could be a target (which is why it keeps happening). Set up a specific passcode for each client.

4. Consider using ClosingLock and asking your title company to use this technology for all of their transactions… What’s ClosingLock (previous name was BuyerDocs), you ask? This tech startup provides secure document delivery for closing companies and homebuyers. The company says it has protected more than $5 billion in wire transfers and works with big and small businesses across the country.

Scams will never be eradicated, but it is part of your job to know the current scams and how to protect transactions against shady folks.

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