Home Ownership Rate Falls to 20-Year Low

Home Ownership Rate Falls to 20-Year Low. Image courtesy of renjith krishnan / FreeDigitalPhotos.net

The U.S. home ownership rate posted declines across all four regions of the U.S. in the fourth quarter, plunging to its lowest level since the third quarter of 1994. But a sharp rebound in household formation during the quarter has more economists optimistic that a turnaround in the home ownership rate is on the horizon.

The home ownership rate fell from 64.3 percent in the third quarter to 63.9 percent in the fourth quarter, reaching a 20-month low, the Commerce Department reported Thursday. In 2004, the home ownership rate peaked at 69.4 percent.

While the home ownership rate fell, however, household formation more than quadrupled during the fourth quarter to 1.7 million from 356,000 a year ago. The gains were mostly driven by renter households, the Commerce Department reported.

Still, housing analysts are optimistic from signs that household formation is picking up, particularly as the labor market strengthens too and credit requirements for qualifying for a mortgage are loosened up. Economists are expecting a rise in first-time buyers and a regain of momentum in housing this year.

“The combination of a high share of young adults living in the parental home, falling mortgage rates, and loosening credit means that the outlook for household formation is strengthening,” says Paul Diggle, a property economist at Capital Economics in London. “That’s one of the reasons why we are optimistic about the prospects for homebuilding over the next few years.”

Many economists are predicting that the home ownership rate will stabilize in the coming quarters.

“The decade-long decline in the share of the population who own their home may now be drawing to an end,” Diggle told Reuters News. “Wage growth may soon accelerate, helping young households to make the leap into home ownership. The survey evidence certainly suggests that owning a home remains part of most people’s perception of the American dream.”

Source: “U.S. Home Ownership Hits 20-Year Low, But New Households Growing,” Reuters (Jan. 29, 2015)

Inventory Problems Stall Home Sales

Inventory Problems Stall Home Sales. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Pending home sales dropped in December, despite interest rates being at the lowest levels in more than a year, the National Association of REALTOR® reports. All regions across the country posted declines in December.

In December, pending home sales nationally fell 3.7 percent month-over-month. Still, NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, remained about 6 percent above year-over-year levels for the fourth consecutive month.

Lawrence Yun, NAR’s chief economist, says that inventory problems mixed with slightly higher home prices attributed to December’s decline in contract signings.

Total inventory dropped in December for the first time in 16 months, which left homebuyers with fewer choices of homes for-sale.

“With interest rates at lows not seen since early 2013, the strength in existing-sales in upcoming months will largely depend on the willingness of current home owners to realize their equity gains from the past couple years and trade up,” Yun says. “More jobs, increasing consumer confidence, less expensive mortgage insurance, and new low down payment programs coming into the marketplace will likely lead to more demand from first-time buyers.”

Regional Look

Across the country, here’s how pending-home sales fared in December:

• Northeast: posted the largest decline of any other region, dropping 7.5 percent in December month-over-month. Pending home sales, however, remain 6.3 percent above year ago levels.
• Midwest: decreased 2.8 percent in December, but remains 1.9 percent above December 2013.
• South: decreased 2.6 percent in December, but pending-home sales are 8.6 percent above the prior December’s levels.
• West: declined 4.6 percent in December, but pending-home sales are 6.3 percent above a year ago.

Source: National Association of REALTORS®

2015: The Breakout Year for Sellers?

2015: The Breakout Year for Sellers? Image courtesy of noppasinw / FreeDigitalPhotos.net

Home owners are living in their homes longer. Typically, home owners stay in their homes six or seven years before making a move. But in 2014, that number grew to a 10-year average, according to research by the National Association of REALTORS®.

NAR researchers are predicting that “pent-up sellers” will likely be unleashed in 2015, after regaining equity and feeling more confident from the economic recovery.

Many home owners have been staying put longer due to the after-effects of the housing crisis, which placed a large number of home owners in underwater status, owing more on their mortgage than their home is currently worth, researchers note. Many home owners may have been waiting to move until home values edged higher.

But for many home owners, that has finally happened: Home values are up 25 percent over the past three years, on average, according to NAR. (Read: The ‘Equity Rich’ Home Owner Is Back)

The “lock-in” effect with interest rates has also been keeping some home owners in place too. Mortgage rates have been near historical lows, and for home owners who snagged a low rate their monthly payments may have been reduced drastically. They may be unwilling to part with the low rate.

That said, mortgage rates continue to remain low in recent weeks, which could finally help motivate home owners to part with their former low rates. The 30-year fixed-rate mortgage remains below a 4 percent average (averaging 3.36 percent last week), and the 15-year fixed-rate mortgage below 3 percent (averaging 2.93 percent last week), according to Freddie Mac.

Source: “Pent-Up Sellers?” National Association of REALTORS® Economists’ Outlook Blog (Jan. 28, 2015)

How does Home Staging Really Win Over Buyers?

How does Home Staging Really Win Over Buyers? Image courtesy of stockimages / FreeDigitalPhotos.net

Home staging can influence buyers’ perceptions of a home and even motivate them to pay more, according to the National Association of REALTORS®’ 2015 Profile of Home Staging, a survey of more than 2,300 REALTORS® representing buyers and sellers.

Eighty-one percent of REALTORS® who represent buyers say that staged homes make it easier for their home buyers to visualize a property as their future home. Forty-six percent of buyer agents also reported that staging makes their buyers more willing to tour a home they viewed online, and 45 percent say that buyers tend to view the value of the home more positively if it is decorated to buyers’ tastes.

Twenty-eight percent of agents said their buyers are even more willing to overlook other property faults if a home is staged, according to NAR’s survey.

Buyer agents also say that staging can potentially influence how much their buyers are willing to offer for a home. According to the survey, thirty-two percent of buyer agents surveyed say that staged homes increase the dollar value buyers are willing to offer for a home by 1 percent to 5 percent; 16 percent said it could increase offers by 6 percent to 10 percent.

However, not everyone chooses to stage a home in prepping it for sale. Forty-four percent of seller agents say they only suggest that sellers declutter and fix property faults, and they do not recommend that their clients should professionally stage the home.

Indeed, about 34 percent of seller agents surveyed say they stage all the homes they list; 13 percent stage only “difficult” homes to sell; and 4 percent only stage high-priced homes they list, according to the NAR survey.

Here are additional findings from the NAR survey:

• The median dollar value to stage a home: $675 per home
• Among homes that are staged, here’s how it is often paid for: 62 percent of sellers’ agents offer the home staging servicing to sellers; 39 percent say that the sellers pay for staging prior to the home being listed; 10 percent of sellers pay for staging after the home is sold; and 3 percent of agents’ firms pay for the home staging service.
• The three most important rooms to be staged for buyers: living room, kitchen, and master bedroom.

Source REALTOR® Magazine Daily News

A Hot Trend to Watch: Tiny Homes

A Hot Trend to Watch: Tiny Homes. Image courtesy of phanlop88 / FreeDigitalPhotos.net

Could you imagine living in 97 square feet? Tiny houses – some might even call them teeny-tiny – are growing in popularity among buyers in the second home market. Some are even making them their primary residence.

Leaf House, a tiny home builder based out of Whitehorse, Yukon, Canada, has downsized from its 215-square-foot house that can sleep a family of four, to it’s most recent 97-square-foot model. The smaller version is constructed with vacuum insulation panels and is designed to withstand the extreme cold.

“Being so well insulated, the tiny house doesn’t need a lot of heating; In fact, all it has are two radiant electric panels totaling only 800 watts. We’re talking a hair dryer here, turned to low,” writes Lloyd Alter, managing editor of TreeHugger, in his recent review. Leaf House also builds custom tiny homes and can deliver the house or build it onsite.

But not all tiny homes are about extreme living – some are also designed to give the home owner a little luxury.

For example, Portland, Ore.-based home builder Tiny Heirloom specializes in luxury homes on wheels with 100 percent customizable floor plans, design, and insulation. Their base model packages start at $65,000, and comes with granite countertops, real-wood or bamboo flooring, stainless steel appliances, a washer/dryer combo unit, a wind or solar package, and more. They also throw in one flight from anywhere in the lower 48 states, to meet the team and see the home under construction.

The small home movement isn’t just for those who want to live off the grid, either. Country Living magazine has an entire section of their website dedicated to little homes, and recently published, “44 of the Most Impressive Tiny Houses You’ve Ever Seen,” highlighting small homes from all over the country.

Real estate pros should check their local ordinances on the minimum square footage requirement for a building permit – some tiny homes may not even need a building permit. Tiny homes are also an option for buyers seeking land for recreational purposes, such as hunting, fishing, or weekend getaways.

Source: “Leaf 3 is a tiny house designed for seriously cold climates,” Treehugger (Jan. 14, 2015) and “Tiny houses are welcoming retreats,” The Courier-Journal (Jan. 14, 2015)