Monthly Archives: April 2016

Increase The existing home sales

Existing home sales increased in September driven mainly by the drastic increase in first-time homebuyers, which reached the highest share of homebuyers in four years, according to a new report from the National Association of Realtors.

Total existing home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 3.2% to a seasonally adjusted rate of 5.47 million in September. This is up from a downwardly-revised 5.3 million in August. Sales are actually at their highest pace since June, and 0.6% above last year’s 5.44 million.

“The home search over the past several months for a lot of prospective buyers, and especially for first-time buyers, took longer than usual because of the competition for the minimal amount of homes for sale,” NAR Chief Economist Lawrence Yun said.

“Most families and move-up buyers look to close before the new school year starts,” Yun said. “Their diminishing presence from the market towards the end of summer created more opportunities for aspiring first-time homeowners to buy last month.”

First-time homebuyers increased to 34% of the market share, the highest share since July 2012. It is up from 31% in August and 29% last year.

A new survey from Zillow shows the importance of Millennials in the housing market. This new generation may not only be fueling the housing market, but also changing it, according to the survey.

“There’s hope the leap in sales to first-time buyers can stick through the rest of the year and into next spring,” Yun said. “The market fundamentals – primarily consistent job gains and affordable mortgage rates – are there for the steady rise in first-timers needed to finally reverse the decline in the homeownership rate.”

All major regions saw an increase in closings in September, according to the report. Furthermore, distressed sales fell to a new low of 4% of market sales.

The median existing home price also increased 5.6% annually for all housing types in September to $234,200, up from $221,700 last year. This is the 55th consecutive month with year-over-year gains.

“The result of increasing housing demand coupled with limited supply is that house prices are rising, as indicated by all measures of house price appreciation,” NationwideChief Economist David Berson said. “While house prices are highly seasonal, compared with prices from a year ago, median existing home prices are up solidly.”

“The downside of above-average house price gains is that affordability suffers, although the other elements of housing demand are offsetting this,” Berson said. “The upside of above-average house price gains is that current homeowners, about 63% of all households, are wealthier. This is a big reason why the Federal Reserve noted that household assets and net worth have risen to all-time highs.”

Housing inventory actually increased monthly in September by 1.5% to 2.04 million homes for sale. This is still down 6.8% from last year’s 2.19 million. This marks the 16th consecutive annual decrease in inventory. Unsold inventory is at a 4.5-month supply at the current sales pace, which is down from 4.6 months in August.

“Existing inventory in September rebounded from record lows in August, when controlling for seasonality and household formation, Trulia Chief Economist Ralph McLaughlin said. “That said, September was the second lowest on record.”

Millennial homebuyers

To some degree, the Millennial homebuyer market (especially the first-time homebuyer) must seem like the Holy Grail or a unicorn herd to mortgage lenders. It’s a large segment — about one quarter of the American population at about 80 million people. Some estimate that at about $200 billion in purchase power. Plus, it’s only now growing into its purchase potential. It’s reaching an average age when Americans traditionally begin purchasing homes. And yet, by all accounts, they’re not. Not yet.

The peripheral numbers add up for potential. The Deloitte Millennial Survey, 2016, asserts that Millennials want to, at some point, be homeowners.

Survey respondents indicate little desire to be famous, have a high profile on social media, or accumulate great wealth. Instead, in broad terms, Millennials’ personal goals are more traditional. They seek a good work/life balance, they want to own their own homes, they desire a partner for life, and they strive for financial security that allows them to save enough money for a comfortable retirement.

However, a recent Forbes survey of influential Millennial-aged professionals suggests that Millennials are in no rush to purchase a home, even if it is a long-term goal. Only 19% told Forbes that their highest financial priority involved purchasing a home. Conversely, 44% stated that “funding an entrepreneurial venture” was, instead, their highest financial aspiration.

Similarly, the same survey suggested that, while 80% of respondents still “believe in the American Dream,” only 5% reported that they felt that dream was “owning your own home.” In contrast, 33% felt that “owning your own company” is, in fact, the American dream.

There are numbers to be found for and against the argument that Millennials will be settling into the role of traditional homebuyers any time now. However, what we do know for sure about this generation is that it isn’t like any previous consumer generation we’ve seen. As a result, it’s time to ask what — if anything — will provide the “typical” Millennial incentive to accelerate her home purchase plans.

So what do we know about the Millennial (or, at least, what seems reasonably established if we are to paint 80 million people with broad strokes)?  A 2015 survey by Elite Daily set forth findings that seem to confirm some of the assumptions we’ve seen made about Millennials. Dan Schwebel, a contributor to Forbes, summarized some of these findings:

  1. Millennials would rather buy a car and lease a house.
  2. Millennials were hit hard by student debt, compounded by the consequences of the “Great Recession.” As a result, they tend to be debt-averse.
  3. They are virtually oblivious to traditional advertising, preferring authenticity and referral to sales pitches and puffery.
  4. They do not base purchases upon their potential, but rather need and value.
  5. They expect brands to give back to society, but are loyal to brands that do.
  6. They are early adopters when it comes to technology.

So what does this mean for those seeking to sell mortgage loans to Millennials? We’d suggest the following:

1. Income only represents part of the picture when choosing your target demographics.

No matter what study or survey we read, it’s apparent that, if there is such a thing as a “typical” Millennial, he/she is more concerned about larger social issues than personal status. This generation, it would seem, tends to be community-driven. It has been burned, collectively, by debt and economic downturn — especially a recession perceived to have been driven by greed.

As a result, “tiny housing,” “green living,” a rise in urban migration and even the introduction of the 15-year fixed mortgage are all indicators that selling a home to a Millennial homebuyer will quickly dispel the assumption that he or she will be interested in buying as much (or more) as he can afford. Many other factors will be involved.

2. The marketing process must be authentic, tell real stories and indicate, above all else, patience. The Millennial will not be rushed…

It appears this is a relationship-focused generation; a group that derives satisfaction from networks and collaboration. It seems likely that the lender or broker able to most successfully engage Millennials as homebuyers will be the one that builds an authentic relationship with him or her, rather than the one with the best Super Bowl advertisement.

3. …unless he/she has committed. Millennials do not understand, nor will they tolerate, an unnecessarily slow purchase process. That includes mortgages.

Once the sale is made, however, lenders and brokers alike will quickly realize (if they didn’t already) that the Millennial generation is comprised of fairly savvy purchasers. This is a group that was born as home computing emerged, grew into adolescence with the Internet, and which completed student loan applications (as well as virtually every other major purchase or loan) on mobile devices. It seems fair to say that pushing a stack of archaic origination or closing documents in front of a potential homebuyer of Millennial age will become a thing of the past quickly.

Downward trend Of Home

New home construction decreased yet again in September after a drop in August, according to a new report from the U.S. Census Bureau.

Privately-owned housing starts dropped in September to 1.04 million. This is down 9% from the revised August estimate of 1.15 million and down 11.9% from last year’s 1.18 million.

Of those, single-family housing starts increased 8.1% from August to 783,000.

“The headline number in this month’s report doesn’t tell the full story,” Quicken Loans Vice President Bill Banfield said. “Single-family starts made significant gains in September, which is welcome news to a housing market that has continued to lack inventory, especially in the entry-level sector.”

Not everyone, however, shares this optimism.

“The 12-month rolling total of housing starts was up year-over-year, but the rate of increase is slowing,” Trulia Chief Economist Ralph McLaughlin said. “Five of the past six months have shown slowing growth in starts, which means homebuyers will see fewer new homes come on to the market in the next six to 12 months.”

“While housing starts continue to inch up to their pre-recession average, they’re only about 75% back to normal,” McLaughlin said. “Housing completions, which represent tangible new supply for homebuyers, is even lower at 67%.”

Privately owned housing completions decreased 8.4% monthly and 5.8% annually to 951,000. Single-family completions decreased even more at 8.8%.

In fact, one expert points out that while housing continues to underperform, it isn’t getting the attention that it needs.

“Housing continues to be the biggest underperformer in the economy, but the subjecthasn’t really come up in this election, for either side,” said Brent Nyitray, iServe Residential Lending director of capital markets.

Privately-owned housing units authorized by building permits increased 6.3% from August to 1.22 million. This is also 8.5% above September 2015.

Of those, single family building permits increased only slightly at 0.4% from August.

“The sharp drop in housing starts in September was concentrated in the volatile multifamily sector, so shouldn’t ring too many alarm bells,” Capital EconomicsProperty Economist Matthew Pointon said. “And with building permits seeing a strong pick-up, much of that weakness should be reversed next month.”

Other experts point out that housing isn’t running out of steam, despite low inventory. Click here to see why.