More Renters May Be Stuck

More Renters May Be Stuck. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Millions of Americans may be unwillingly stuck in rental housing. The nation’s home ownership rate has plunged for eight years, currently down to 63.7 percent in the first quarter of this year from a peak of over 69 percent in 2004.

As the home ownership rate has fallen, the amount of rentals has soared, and so has the costs of renting. Last year, rents climbed at a 3.2 percent rate – double the pace of overall inflation.

Many renters may struggle to save in buying a home as rental costs continue to soar. The share of renters paying more than 30 percent of their income on rent – what is considered “cost burdened” – remains near record highs. Nearly half of all renters were in this category in 2013, according to a newly released report by Harvard University’s Joint Center for Housing Studies.

The number of new rental households has climbed by 770,000 annually since 2004, according to the report. Many of the people living in rentals were once home owners, who lost their homes to foreclosure and cannot yet qualify for credit to buy again yet.

The home ownership rate has dropped by the fastest rates among people in their late 30s to early 50s, according to the Joint Center’s report. Prior to the Great Recession, these age segments were in their prime home-buying years. But when the housing market dropped, many were left with little or no equity.

“People in their 40s and 50s were very hard hit by the housing crisis,” says Chris Herbert, managing director of Harvard’s housing center. “They’ve been a bit of a forgotten generation.”

Source: “More Americans Are Renting, and Paying More, as Homeownership Falls,” The New York Times (June 24, 2015)

Housing Outlook Remains Healthy

Housing Outlook Remains Healthy. Image courtesy of watcharakun / FreeDigitalPhotos.net

Cincinnati, Cleveland, and Chicago were singled out as the major housing markets with the healthiest outlooks in the nation, according to the latest reading of the Leading Index of Healthy Housing Markets (LIHHM), a report released by Nationwide that evaluates the healthy housing outlook of the U.S. and 400 metro areas.

Overall, the national index remains near its peak at a level over the break-even of 100, which suggests the housing market is healthy with little chance of a national housing downturn over the next year. The latest report showed that markets in the upper Midwest and Southeast were performing the best.

“The employment, household, mortgage market, and house price components of the national LIHHM remained positive with the latest available data,” according to the report. “Housing affordability at a national level is neither undervalued nor overvalued with little sign of a national house price bubble.”

The majority of metro areas are healthy, indicating that few regional housing markets are vulnerable to a housing downturn in the near term. However, Texas and Louisiana had the most negative outlook, with 75 percent of the negatively ranked metro areas in the country being in either of the two states. The report notes that Texas metro areas were down primarily because of overheated markets while Louisiana metros were down because of the impact of the sharp drop in oil prices on jobs and income growth.

Source: “Nationwide’s Health of Housing Market Report,” Nationwide.com (June 2015)

New-Home Sales Climb to 7-Year High

New-Home Sales Climb to 7-Year High. Image courtesy of Danilo Rizzuti / FreeDigitalPhotos.net

New-home sales surged to the highest rate since February 2008, as the new-construction market continues to gain ground this year. Sales of newly built single-family homes increased 2.2 percent, reaching a seasonally adjusted annual rate of 546,000 units in May, according to a report from the Commerce Department.

“Our builders are seeing motivated buyers and the release of pent-up housing demand,” says Tom Woods, chairman of the National Association of Home Builders. “However, builders are facing supply-chain challenges, which is affecting the inventory of new homes.”

Sales are nearly 20 percent higher than the pace in May 2014. New-home inventories remain tight at 206,000, a 4.5-month supply at the current sales pace. That’s pushed the average sales price of a new home sold in May to $337,000.

“This month’s new-home sales report is consistent with other government data and rising builder confidence that indicate a continual recovery of the housing market,” says David Crowe, NAHB’s chief economist.

Regionally, new-home sales were mixed in May. They rose 87.5 percent month-over-month in the Northeast and had a 13.1 percent boost in the West. However, new-home sales dropped 5.7 percent in the Midwest and 4.3 percent in the South.

Source: National Association of Home Builders and “New Home Sales Up 2.2% in May,” Forbes.com (June 23, 2015)

Metros with Fastest-Growing Economies

Metros with Fastest-Growing Economies. Image courtesy of noppasinw / FreeDigitalPhotos.net

Florida is emerging as the new leader for economic growth, fueled by baby boomers and retirement communities. Oil towns had dominated in recent years but as the energy boom fades, growth has been tapering off.

Instead, Naples, Fla., emerged as the leader on a list of metro areas that are expected to see the most economic growth next year, according to a new report from the U.S. Conference of Mayors, prepared by IHS Global Insight. Naples is expected to see its economy grow 4.9 percent in 2016. Metro areas in Florida made up half of the top 19 economic performers. For example, The Villages, a senior community, ranked third and has been the fastest-growing city by population for two consecutive years.

Here’s a list of the metros expected to see the most economic growth in 2016:

• Naples-Immokalee-Marco Island, Fla.: 4.9%
• Sebring, Fla.: 4.8%
• The Villages: 4.7%
• Cape Coral-Fort Myers, Fla.: 4.5%
• Austin-Round Rock, Texas: 4.4%
• Raleigh, N.C.: 4.3%
• Ocala, Fla.: 4.2%
• Fayetteville-Springdale-Rogers: 4.2%
• Dallas-Fort Worth-Arlington: 4.1%
• San Jose-Sunnyvale-Santa Clara, Calif.: 4.1%
• Laredo, Texas: 4.1%
• Orlando-Kissimmee-Sanford, Fla.: 4.1%

Source: “These 18 Cities Will See the Most Economic Growth Next Year,” Bloomberg (June 18, 2015)

First-Time Buyers Fuel Latest Sales Boost

First-Time Buyers Fuel Latest Sales Boost. Image courtesy of digitalart / FreeDigitalPhotos.net

Existing-home sales rose in May to their highest pace in nearly six years, largely attributed to a big rise in the number of first-time home buyers, according to the National Association of REALTORS®’ latest housing report, released Monday. All major regions saw sales increases in May, with the Northeast seeing the most notable rise.

Existing-home sales – measured as completed transactions of single-family homes, townhomes, condos, and co-ops – climbed 5.1 percent to a seasonally adjusted annual rate of 5.35 million in May. Sales are 9.2 percent above last year at this time.

The market share of first-time home buyers rose to 32 percent of transactions in May, matching the highest share since September 2012. A year ago, first-time buyers represented 27 percent of all buyers, NAR reports.

“The return of first-time buyers in May is an encouraging sign and is the result of multiple factors, including strong job gains among young adults, less expensive mortgage insurance and lenders offering low downpayment programs,” says Lawrence Yun, NAR’s chief economist. “More first-time buyers are expected to enter the market in coming months, but the overall share climbing higher will depend on how fast rates and prices rise.”

As the supply of homes remain tight, homes are selling fast and price growth in many markets continues to teeter at or near double-digit appreciation, Yun notes. “Without solid gains in new home construction, prices will likely stay elevated – even with higher mortgage rates above 4 percent,” Yun says.

5 Stats to Gauge the Market

Here’s an overview on key market conditions from NAR’s latest existing-home sales report:

1. Inventory: Total housing inventory rose 3.2 percent to 2.29 million existing homes available for sale by the end of May. That is 1.8 percent higher than a year ago. Unsold inventory currently is at a 5.1-month supply at the current sales pace, down from 5.2 months in April.

2. Home prices: The median existing-home price for all housing types was $228,700 in May – nearly 8 percent above May 2014 home prices.

3. Days on the market: Properties typically stayed on the market for 40 days in May, up from 39 days in April. Still, that marks the third shortest time since NAR began tracking days on the market in May 2011. Forty-five percent of homes sold in May were on the market for less than a month.

4. All-cash sales: All-cash sales comprised 24 percent of transactions in May, down considerably from a year ago when they made up 32 percent of transactions. Individual investors, who account for the  bulk of cash sales, purchased 14 percent of homes last month, down from 16 percent a year ago. Sixty-seven percent of investors paid cash in May.

5. Distressed sales: Foreclosures and short sales remained at 10 percent for the third consecutive month in May. Distressed sales are below the 11 percent share a year ago. Seven percent of May sales were foreclosures and 3 percent were short sales. Foreclosures sold for an average discount of 15 percent below market value in May while short sales were also discounted 16 percent.

Regional Breakdown

The following is a snapshot of how existing-home sales fared across the country in May:

• Northeast: existing-home sales rose 11.3 percent to an annual rate of 690,000. Sales are now 11.3 percent above a year ago. Median price: $269,000, up 4.8 percent above May 2014 levels.
• Midwest: existing-home sales rose 4.1 percent to an annual rate of 1.27 million in May. Sales are 12.4 percent above May 2014. Median price: $181,900, up 9.4 percent from a year ago.
• South: existing-home sales increased 4.3 percent to an annual rate of 2.18 million in May, and are 6.9 percent above year ago levels. Median price: $198,300, up 8.2 percent from a year ago.
• West: existing-home sales increased 4.3 percent to an annual rate of 1.21 million in May, and are 9 percent above a year ago. Median price: $324,000, up 10.2 percent above May 2014.

Source: National Association of REALTORS®

Apartment Occupancies Soar to Record High

Apartment Occupancies Soar to Record High. Image courtesy of artur84 / FreeDigitalPhotos.net

Apartments are filling up nationwide. The national occupancy rate in May reached 95.3 percent, the highest ever, reports Axiometrics, a real estate analytics firm.

“The May rate historically is the start of each year’s occupancy peak, meaning occupancy should remain at the current level or higher,” says Stephanie McCleskey, Axiometrics’ vice president of research.

Higher occupancy rates have come with higher rents. In May, rents rose 5 percent nationally, making it the fourth consecutive month at or above that mark.

“Owners and investors are having a profitable start to the year,” McCleskey says.

Apartment demand has been high from millennials who are forming their own households as well as baby boomers looking to downsize, CNBC reports.

Laurie Goodman, director of the housing finance policy center at the Urban Institute, recently published a paper claiming that the rental surge will only get bigger. Goodman predicts that out of the 22 million households formed in the next 20 years, 13 million will be renters.

“We are nowhere near building enough to meet demand,”  Goodman says.

Source: “Apartment Occupancy at All-Time High: Here’s Why,” CNBC (June 18, 2015)