Daily Real Estate News | Wednesday, July 13, 2016

Renters are taking a dimmer view of home ownership as concerns over housing affordability and student debt have a larger influence on their attitudes, according to the National Association of REALTORS®.

NAR’s latest Housing Opportunities and Market Experience (HOME) survey found a growing disconnect in the morale among home owners versus renters about home ownership. The share of renters who think now is a good time to buy a home dropped to 62 percent in the second quarter of this year — down from 68 percent in December 2015 — with those under the age of 35 expressing the least amount of confidence in buying. Eighty percent of home owners, on the other hand, believe now is a great time to purchase a home.

“Existing-home prices surpassed their all-time peak this spring and have climbed, on average, over 5 percent nationally through the first five months of the year — and even faster in areas with severe supply shortages,” says NAR Chief Economist Lawrence Yun. “Most home owners appear to realize that if they’re ready to sell, they’ll likely find a buyer rather quickly and be able to use the sizeable equity they’ve accumulated in recent years towards their next home purchase. Meanwhile, renters interested in buying continue to face minimal choices, strong competition, and home prices growing faster than their incomes. … Given these affordability pressures, it’s no surprise respondents earning over $100,000 and those living in the Midwest — the most affordable region of the country — are the most optimistic about buying right now.”

Student debt is making many people uneasy about taking on additional debt to purchase a home. Two-thirds of non-home owners and half of those under 35 with student debt say they aren’t comfortable adding a mortgage on to their debt load, according to the HOME survey. They also were less likely to believe they’d even qualify for a mortgage.

“It’s becoming very evident from this survey and our research released last month that the financial and emotional impact of repaying student debt is contributing to a delay in purchasing a home for many would-be buyers,” Yun says. “At a time of quickly rising rents, mortgage rates at all-time lows, and increasing housing wealth, a lot of young adults in their prime buying years are struggling to enter the market and are ultimately missing out on the stability and wealth accumulation that owning a home can provide.”

Economists are predicting that strong home-price appreciation will continue in the coming months throughout most of the country. As such, a growing number of current home owners — 61 percent — say they believe it’s a good time to sell compared to 56 percent who said so in the first quarter of this year. Survey respondents who live in the West were most likely to say now is a good time to sell but were also least likely to say now is a good time to buy, according to the survey.

“More home owners acknowledging this pent-up demand may perhaps mean we begin to see more supply come online in the near future,” Yun says.

Source: National Association of REALTORS®

Daily Real Estate News | Thursday, June 16, 2016

The number of luxury homes for sale is growing, and that is unlocking some deals for potential buyers, The Wall Street Journal reports.

Indeed, inventory of homes priced between $500,000 to $750,000 increased nearly 16 percent in March compared to a year ago, according to data from NAR. What’s more, inventory for real estate priced more than $1 million increased 12.6 percent year-over-year.

As more expensive homes linger on the market, buyers are finding more bargaining power.

For sellers, this may be a tough realization that the power is shifting. Shannon Baird, a broker with Living Room Realty in Portland, Ore., says that a major challenge is changing the mindset of home sellers who are hearing news of quick sales and bidding wars. But that’s not the case in the upper price bracket in many markets.

Stock market volatility has made some wealthy buyers more cautious to jump into a big home purchase at the moment. Also, fewer foreign buyers are on the market as the dollar strengthens, says Lawrence Yun, NAR’s chief economist.

“The stock market has come back up, but we don’t know yet if that means the upper-end home buying market will begin to return,” Yun says.

Source: “Lagging Demand for Luxury Homes May Mean Deals for Buyers,” The Wall Street Journal (June 15, 2016)

Daily Real Estate News | Monday, March 07, 2016

Investors are bullish for real estate, but they still have some hesitations, a new study says.

Ninety-one percent of recently surveyed senior commercial real estate executives say they expect real estate fundamentals to be about the same or better this year, according to KPMG’s 2016 Real Estate Industry Outlook Survey. That said, investors say they are growing more cautious about the ability to expand their portfolios and are taking steps to “de-risk” their portfolios, the survey found.

Only 8 percent of investors surveyed by KPMG say they will enter new markets. That is down from 28 percent last year.

“Investors are becoming more cautious in their decision-making as we near the end of the economic cycle, leading to changes in operations, portfolio management decisions, and the timing of their investments,” says Greg Williams, national sector leader, building, construction and real estate. “They need to be prepared for the coming change in momentum.”

Seventy-four percent of survey respondents say they expect foreign investment in U.S. real estate to increase over the next 12 months. They attribute the main reasons behind that expected surge as low interest rates, tax incentives in the U.S., and favorable risk versus return in U.S. real estate markets.

“Strong economic fundamentals, a reliable legal system, and other structural advantages in the U.S. have continued to fuel foreign interest in the U.S. real estate market,” says Williams. “The continued inflow of foreign capital has led to a significant increase in competition for the best investments, leaving many investors with a major challenge in their hunt for yield across a variety of assets and markets.”

Investors continue to be the most bullish about multifamily properties. Also, the senior executives surveyed say they are growing more upbeat about healthcare investment prospects in development, likely due to a rise in healthcare demand from aging baby boomers.

Senior execs surveyed say they are looking for opportunities to add to their portfolios without adding greater risks, however.

“This ‘de-risking’ seeks to balance the sustained interest in U.S. real estate with a growing conviction that the market’s growth trajectory may be turning soon,” says Williams.

Source: KPMG 2016 Real Estate Industry Outlook Survey (February 2016)

Daily Real Estate News | Wednesday, April 29, 2015

Home prices are rising at a more rapid pace than they were just a few months ago, as demand outpaces supply. Existing-home sales surged 9 percent year-over-year in March and home prices were up 8 percent over last year, according to the National Association of REALTORS®. What’s more, with tight inventories plaguing many markets, the median list price in March climbed 11 percent over last year, reaching $220,000, realtor.com® reports.

Existing-home sales report: Home Sales Surge to 18-Month High

With home prices heating up again, could the housing market be heading for another bubble?

“During the peak years of the housing bubble, from 2003 to 2005, the data on supply versus price appreciation looked very similar to what we are seeing now,” writes Jonathan Smoke, realtor.com®’s chief economist, in recent commentary at the site. “But there are key differences, which is why I’m confident that on the national level, this is no bubble.”

Smoke says these home price increases will stick because the market is correcting for severe price declines in the recent past. Prices rose 7 percent and 12 percent in 2012 and 2013, respectively. Median prices have climbed less than 8 percent on a compounded annual basis over the past three years. On the other hand, from 2002 to 2005, median prices rose 10 percent on a compounded annual basis – and had no justification of a bounce from a prior decline, Smoke says.

“On an inflation-adjusted basis, we are 30 percent beneath the peak set in 2005,” Smoke notes. What’s more, “relative to rents or incomes, median home prices are not ‘unhinged’ from long-term averages,” Smoke writes. In 2005, the price-to-rent ratio was 35 percent higher. Currently, the price-to-income ratio is where it was in 2001 and it is about 30 percent below where it was in 2005.

Smoke also notes that during the housing bubble, mortgage financing saw rapid expansion, and flipping activity based on speculative investing soared—neither of which are occurring now.

“Today’s higher prices are only to be expected as the economy improves and first-time buyers gradually return to the market,” Smoke writes. “Eventually, those higher prices should encourage more owners to list their homes and builders to start construction on new housing—which in turn should solve the problem of supply.”

Source: “Home Prices Are Climbing Faster and Faster, but This Is Not a Bubble,” realtor.com® (April 24, 2015)