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Renting vs Buying for New Home Owners

by Melissa Dierks

Rising rents are increasing at such a significant pace that it’s prompting more Americans in their 20s and early 30s to move toward home ownership.

First-time buyers made up 29 percent of existing-home sales in February, marking the first increase since November, according to NAR. This is notable considering last year the number of first-time buyers sank to its lowest level in nearly 30 years. And in 2014, millennials comprised 32 percent of the U.S. housing market, and are replacing generation X as the largest segment of home buyers, according to the National Association of REALTORS®.

In the Magazine: A First-Time Buyer Comeback?

This shift is likely the result of several factors at play. One of the biggest may be that apartment rents effectively increased 4.6 percent in the fourth quarter from a year earlier, according to MPF Research, an apartment-data firm. Leasing costs have risen year-over-year for every quarter since 2010. 

Also prompting more millennials to move: The Federal Reserve is signaling interest rates will be on the rise soon, which would mark the first increase since 2006. Long-term mortgage rates have been near historic lows in recent years, which has helped lift housing affordability, but that will change once the Fed increases rates.

A strengthening job market for millennials also will likely be a main driver drive of home sales this year. For adults ages 25 to 34, the unemployment rate fell to 5.4 percent in February. In October 2009, it was at a high of 10.6 percent, according to Labor Department data.

The millennials – those born between 1980 and 1995 – are a massive generation of 75 million – a segment of the population that will likely surpass the baby boom generation in numbers this year, according to the Pew Research Center. 

“We’re just now hitting the point that the oldest of millennials are in their early 30s, which would be about time for them to make those moves,” Greg Willett, vice president of MPF Research, told Bloomberg. “The question is, do they have money for a down payment?”

Read more: Why Renters May Be in Trouble

Indeed, that may very well be the biggest obstacle millennials face in making a move toward home ownership. The gap between rents and incomes is widening to “unsustainable levels,” adding to millennials’ struggles in saving for a down payment, according to recent NAR research.

Courtesy of Realtor Magazine

Why Home Owners Need to Get Moving

by Melissa Dierks

Do potential sellers in your market need convincing? An article in CNNMoney recently highlighted several reasons why this spring would be the perfect time for home owners to get off the fence. After all, many markets across the country are still tilting in sellers’ favor. Here’s why:

A Sellers' Opportunity

Home Prices Surge to Fastest Pace in Year

Tight Supplies Put Home Prices on the Move

  • Less competition: A limited number of homes on the market will help sellers nab top dollar, and may even spur bidding wars and multiple offers. The National Association of REALTORS® reports that inventory levels nationwide were at a 4.6-month supply in February. A balanced market is considered to fall between a five- to seven-month supply.
  • Mortgage rate hikes loom: Mortgage rates are still sitting near historical lows, with the 30-year fixed-rate mortgage hovering under 4 percent. The low rates have helped push more buyers into the marketplace, but they could also be a good thing for sellers who are looking to rebuy. However, rates aren’t expected to remain this low for too much longer, which may prompt a rush this spring. "When interest rates are thought to be escalating, we see a wave up activity with people getting off the sidelines," says Budge Huskey, president and CEO of Coldwell Banker Real Estate.
  • Soaring rental costs: Also spurring more potential home buyers off the sidelines: Rising rental costs. Rental prices have increased 15 percent nationwide in the past five years in 70 metro areas across the U.S., according to NAR research. "Every time there's an increase, it triggers the decision processes on whether [renters] should go into the market and buy," Huskey told CNNMoney. "It allows others to move up the chain in the market."

Post TitleMost Millennials Unaware of Closing Costs

by Melissa Dierks

Closing costs might come as a surprise to many buyers, especially young adults. Two-thirds of millennials – those between the ages of 18-34 – who plan to buy a home say they were unaware of closing costs, finds a new survey of more than 1,000 adults conducted by ClosingCorp, a provider of residential real estate closing cost data and technology for the mortgage and real estate industries.

Read more: Mortgage Closings to Get Easier in 2015?

What’s more, more than one-third of potential home owners – across all age brackets – say they’re “not very” or “not at all” aware of closing costs. Closing costs can come as a big surprise, which can often amount to 2 to 5 percent of the total purchase price of a home.

"This study emphasizes the need to better educate millennials, and really all consumers in general, on the real estate closing process,” says Brian Benson, CEO of ClosingCorp. “While interest rates are often the driving force in initiating a real estate transaction, the [real estate agent], lender, title and other settlement fees also have a significant impact on the down payment and cash outflow from the borrower perspective. Not understanding how everything is related can be a real impediment for first-time home buyers who want to get into the market."

Most of the adults surveyed say they end up learning about closing costs first from their real estate agent or by doing their own research. Indeed, millennial home owners said they were more likely to learn about closing costs from a real estate agent than a lender by a ratio of nearly 2-to-1, according to the survey.

"We as an industry should be stepping up our proactive education efforts to ensure home buyers are fully prepared to make the most significant financial transaction of their lives,” Benson says.

The Consumer Financial Protection Bureau is implementing several changes to the disclosure process by August that are intended to make buyers more educated about closing costs. In August, the CFPB will require lenders to provide buyers with new closing disclosures at least three business days prior to closing. The disclosures are intended to be easier for borrowers to understand by providing them more time to ask questions and compare costs.

Post TitleMost Millennials Unaware of Closing Costs

by Melissa Dierks

Closing costs might come as a surprise to many buyers, especially young adults. Two-thirds of millennials – those between the ages of 18-34 – who plan to buy a home say they were unaware of closing costs, finds a new survey of more than 1,000 adults conducted by ClosingCorp, a provider of residential real estate closing cost data and technology for the mortgage and real estate industries.

Read more: Mortgage Closings to Get Easier in 2015?

What’s more, more than one-third of potential home owners – across all age brackets – say they’re “not very” or “not at all” aware of closing costs. Closing costs can come as a big surprise, which can often amount to 2 to 5 percent of the total purchase price of a home.

"This study emphasizes the need to better educate millennials, and really all consumers in general, on the real estate closing process,” says Brian Benson, CEO of ClosingCorp. “While interest rates are often the driving force in initiating a real estate transaction, the [real estate agent], lender, title and other settlement fees also have a significant impact on the down payment and cash outflow from the borrower perspective. Not understanding how everything is related can be a real impediment for first-time home buyers who want to get into the market."

Most of the adults surveyed say they end up learning about closing costs first from their real estate agent or by doing their own research. Indeed, millennial home owners said they were more likely to learn about closing costs from a real estate agent than a lender by a ratio of nearly 2-to-1, according to the survey.

"We as an industry should be stepping up our proactive education efforts to ensure home buyers are fully prepared to make the most significant financial transaction of their lives,” Benson says.

The Consumer Financial Protection Bureau is implementing several changes to the disclosure process by August that are intended to make buyers more educated about closing costs. In August, the CFPB will require lenders to provide buyers with new closing disclosures at least three business days prior to closing. The disclosures are intended to be easier for borrowers to understand by providing them more time to ask questions and compare costs.

Post TitleMost Millennials Unaware of Closing Costs

by Melissa Dierks

Closing costs might come as a surprise to many buyers, especially young adults. Two-thirds of millennials – those between the ages of 18-34 – who plan to buy a home say they were unaware of closing costs, finds a new survey of more than 1,000 adults conducted by ClosingCorp, a provider of residential real estate closing cost data and technology for the mortgage and real estate industries.

Read more: Mortgage Closings to Get Easier in 2015?

What’s more, more than one-third of potential home owners – across all age brackets – say they’re “not very” or “not at all” aware of closing costs. Closing costs can come as a big surprise, which can often amount to 2 to 5 percent of the total purchase price of a home.

"This study emphasizes the need to better educate millennials, and really all consumers in general, on the real estate closing process,” says Brian Benson, CEO of ClosingCorp. “While interest rates are often the driving force in initiating a real estate transaction, the [real estate agent], lender, title and other settlement fees also have a significant impact on the down payment and cash outflow from the borrower perspective. Not understanding how everything is related can be a real impediment for first-time home buyers who want to get into the market."

Most of the adults surveyed say they end up learning about closing costs first from their real estate agent or by doing their own research. Indeed, millennial home owners said they were more likely to learn about closing costs from a real estate agent than a lender by a ratio of nearly 2-to-1, according to the survey.

"We as an industry should be stepping up our proactive education efforts to ensure home buyers are fully prepared to make the most significant financial transaction of their lives,” Benson says.

The Consumer Financial Protection Bureau is implementing several changes to the disclosure process by August that are intended to make buyers more educated about closing costs. In August, the CFPB will require lenders to provide buyers with new closing disclosures at least three business days prior to closing. The disclosures are intended to be easier for borrowers to understand by providing them more time to ask questions and compare costs.

Home Improvement Spending is Booming

by Melissa Dierks

Home Improvement Spending Is Booming

The home improvement industry could see record-breaking spending in 2015, according to a newly released report from the Joint Center for Housing Studies of Harvard University. Since the recession, the home improvement industry has outpaced the broader housing market's recovery.

Biggest remodeling pay-offs at resale2015 Remodeling Cost vs. Value

There are several factors behind the increase, such as the strengthening of the economy, recovering home prices, federal and state stimulus programs that are prompting a rise in energy-efficient upgrades, and rental property owners who are reinvesting in their properties to attract new tenants.

"After years of declining revenue and high failure rates, the home improvement industry is, to some extent, reinventing itself," says Kermit Baker, director of the Remodeling Futures Program at the Joint Center. "The industry is finding new ways to address emerging growth markets and rebuild its workforce to better serve an evolving customer base."

Remodelers point to several growth areas, including retiring baby boomers looking to make accessibility improvements to allow them to age in place, sustainable home improvements and energy-efficient upgrades due to growing environmental awareness, and future projected growth from millennials.

"The millennials' increasing presence in the rental market has already helped to lift improvement spending in that segment," says Chris Herbert, managing director of the Joint Center. "It’s only a matter of time before this generation becomes more active in the housing market, supporting stronger growth in home improvement spending for decades to come."

Most of the increase in home improvement spending has occured in metro areas with higher home values and incomes, the report notes. Owners in metro areas spent 50 percent more on improvement projects, on average, than their non-metro counterparts in 2013.

89% of U.S. Homes Ended with Equity

by Melissa Dierks

89% of U.S. Homes Ended 2014 With Equity

Eighty-nine percent of all U.S. properties with a mortgage — or about 44.5 million — had equity by the end of the fourth quarter of 2014, according to CoreLogic.

Back in the Black

The 'Equity Rich' Home Owner Is Back

The Rise of Equity: Are the Gains Enough?

Home Owners Are Tapping Into Equity Again

If home prices rise by 5 percent, an additional 1 million home owners currently in negative equity could come back into the black.

The majority of properties with equity are concentrated at the high end of the housing market, according to the report. Ninety-four percent of homes valued at more than $200,000 have equity compared with 84 percent of homes valued less than $200,000.

While more home owners are regaining equity overall, the number with negative equity is still high.

"Negative equity continued to be a serious issue for the housing market and the U.S. economy at the end of 2014, with 5.4 million home owners still underwater," says Anand Nallathambi, president and CEO of CoreLogic. "We expect the situation to improve over the course of 2015."

The states with the highest number of properties in negative equity in the fourth quarter were:

  • Nevada: 24.2%
  • Florida: 23.2%
  • Arizona: 18.7%
  • Illinois: 16.2%
  • Rhode Island: 15.8%

On the other hand, the following states had the most homes with (positive) equity:

  • Texas: 97.4%
  • Alaska: 97.2%
  • Montana: 97%
  • Hawaii: 96.3%
  • North Dakota: 96.2%

4 Indicators Show Rising of Millennial Buyers

by Melissa Dierks

The millennial generation is inching their way into home ownership. These millennials, born from the early 1980s through the late 1990s, have largely delayed their entrance into home ownership, saddled by debt and high unemployment in the aftermath of the recession.

Millennial Impact

2015: Year of the First-Time Home Buyer

'Domino Effect' to Set Off 2015 Housing Wave

Millennials Move Toward Home Ownership 

But economists are getting optimistic that the millennials are emerging into home ownership. Jonathan Smoke, realtor.com®’s chief economist, said earlier this year that 2015 will mark an opportunity for younger buyers to enter the housing market, which will fuel a stronger housing recovery.

Here are some indicators that are making economists the most optimistic:

  1. Rising employment: The unemployment rate between 2007 and 2010 among millennials surged to 14 percent (the population as a whole was 9.6 percent), according to Alan MacEachin, the corporate economist for the Navy Federal Credit Union. But as of January, the millennial unemployment rate had dropped to 9.3 percent. The improvement in employment for this generation will bring rising incomes that may push more toward home ownership.
  2. Moving out: More millennials are moving out of their parents’ homes and forming their own households. New household formation is back up to pre-recession levels. Household formation rates generally take three years to recover after a major drop – like seen in the recession, according to researchers at the University of Southern California Lusk Center for Real Estate in Los Angeles.
  3. Low mortgage rates, greater credit availability: Millennials have said that one of the biggest challenges to home ownership is saving for a down payment. Mortgage rates are still near historical lows, which is opening the doors for some. Also, several government programs are helping to increase mortgage availability for first-time home buyers. For example, Fannie Mae and Freddie Mac are now requiring as little as 3 percent down payments for new conforming loans. The Federal Housing Administration has lowered its insurance premiums, which has helped make the loans more affordable to first-time buyers.
  4. They desire to be home owners: Young adults say they want to buy. Thirty-two percent of millennials recently surveyed said they were saving for a house, according to a Bank of America/USA Today survey conducted in November. The real estate brokerage Redfin recently found in its own survey that 38 percent of millennials said they’d be willing to delay their wedding or honeymoon in order to save for a down payment on a home. What’s more, a new Goldman Sachs’ infographic shows that 93 percent of millennials say they want to own a home in the future.

Displaying blog entries 1-8 of 8

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Melissa Dierks
The Regal Team of RE/MAX Professionals
7111 W Bell Road, Suite 101,
Glendale AZ 85308
Direct: (623)229-0154
Office: (623)643-1092
Fax: (623)201-7562

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