The New Hot Housing Market: Vacation Homes

The New Hot Housing Market: Vacation Homes. Image courtesy of Simon Howden / FreeDigitalPhotos.net

It’s a good time to have a vacation real estate niche. Vacation home sales jumped to a record high in 2014, according to the National Association of REALTORS®’ 2015 Investment and Vacation Home Buyers Survey. Vacation home sales climbed to an estimated 1.13 million last year, the highest since NAR began its survey in 2003.

Sales of vacation homes rose 57 percent compared to the 717,000 tally in 2013. Vacation sales in 2014 nearly doubled the combined total of the previous two years.

“Affluent households have greatly benefited from strong growth in the stock market in recent years, and the steady rise in home prices has likely given them reassurance that real estate remains an attractive long-term investments,” says Lawrence Yun, NAR’s chief economist. “Furthermore, last year’s impressive increase also reflects long-term growth in the numbers of baby boomers moving closer to retirement and buying second homes to convert into their primary home in a few years.”

Vacation home sales comprised 21 percent of all transactions in 2014 – the highest market share since NAR began conducting its survey.

As vacation home sales soared, investment purchases dropped for the fourth consecutive year, the report showed. Investment home sales in 2014 fell 7.4 percent to an estimated 10.2 million in 2014 compared to 1.10 million in 2013. The market share of investment sales dropped to 19 percent in 2014 from 20 percent in 2013.

“Despite strong rental demand in many markets, investment property sales have declined four consecutive years to their lowest share since 2010 as rising home prices and fewer distressed properties coming onto the market have further reduced the number of bargains available to turn into profitable rentals,” Yun says.

Here are some additional findings from the report:

Sales prices: The median sales price of vacation and investment homes dropped last year. The median vacation home price was $150,000, an 11 percent drop from $168,700 in 2013. The median sales price of an investment home was $125,000, down 3.8 percent from a year ago when it was $130,000.

All-cash transactions: The share of vacation buyers who paid in all-cash dropped to 30 percent in 2014 compared to 38 percent in 2013. Investment buyers who paid all-cash in their transactions dropped to 41 percent in 2014 compared to 46 percent in 2013. For those buyers who did finance their purchase with a mortgage, 48 percent of vacation buyers and 41 percent of investment buyers financed less than 70 percent of the purchase price.

Distressed properties: Forty-five percent of vacation homes and 44 percent of investment homes purchased last year were distressed properties – either a foreclosure or short sale.

Vacation buyer profile: The average vacation home buyer last year had a median household income of $94,380 – higher than in 2013 when the median income was $85,600. Vacation home buyers also tended to buy a property that was a median distance of 200 miles away, and plan to own their property for a median of six years. Forty percent of vacation buyers bought a home in a beach area, 19 percent purchased in the country, and 17 percent purchased a vacation home in the mountains.

Investment buyer profile: The average investment home buyer in 2014 had a median household income of $87,680 – less than $111,400 in 2013. The median distance of the investment property was 24 miles from their primary residence. Investment buyers purchased property for a variety of reasons, including for rental income (37 percent), because of low prices and the buyer found a good deal (17 percent) and for potential price appreciation (15 percent). Investment buyers plan to hold onto the property for a median of five years. The South was the the most popular choice for investment properties. The majority of investment buyers (37 percent) purchased a property in the South last year, followed by 26 percent in the West, 20 percent in the Midwest, and 17 percent in the Northeast.

Source: National Association of REALTORS®

Why Home Owners Need to Get Moving

Why Home Owners Need to Get Moving. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

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:

• 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.”

Source: “4 Reasons to Sell Your Home Now,” CNNMoney (March 25, 2015)

Book Brings Home the Idea of Home

Book Brings Home the Idea of Home Image courtesy of iosphere / FreeDigitalPhotos.net

As agents keep their eye out for closing gifts that will be relevant and memorable, a new book that kids can enjoy with their parents may help plant some long-growing seeds about the value of home.

Carson Ellis’s new Home, according to a review on literary site BrainPickings.org, “presents an imaginative taxonomy of houses and a celebration of the wildly different kinds of people who call them home.”

The homes Ellis depicts in lavish, colorful illustrations range from the realistic — she shows herself illustrating her half-finished book in her own home — through the fictional but familiar, including the shoe lived in by the fairytale “old lady,” and finally to fanciful abodes, including a home on the moon and the home of a Norse god.

Other characters who appear with their unique homes include a Slovakian duchess, a Kenyan blacksmith, and a babushka. Ellis even illustrates animals’ homes to show how universal the idea is: Even bees and field mice have homes.

However different and unusual the home may be, concludes reviewer Maria Popova, “only from that place of safety can we reach out to connect, to understand one another, and to begin belonging together.”

Source: “An Illustrated Celebration of the Many Things Home Can Mean,” BrainPickings.org (March 9, 2015)

Mortgage Amounts Reach Record Highs

Mortgage Amounts Reach Record Highs. Image courtesy of hywards / FreeDigitalPhotos.net

A close look at the average size of purchase loans may be an indication of where most of the housing market is being fueled by these days. And if that’s the case – the upper-end of the housing market is the clear winner.

The average loan size for a home purchase was $294,900 during the week ending March 6 – a record high, according to the Mortgage Bankers Association. Average purchase loan amounts are exceeding levels reached prior to the recession, at a time when home prices had been surging to unsustainable heights, MBA reports. From 2011 to December 2014, the average purchase loan amount has risen nearly 32 percent.

Lynn M. Fisher, the Mortgage Banker Association’s vice president for research and economics, told The New York Times that home prices may be rising more quickly for larger homes, which could be skewing the loan average upward. However, she said what’s more likely is that the majority of properties being sold may be at the high-end of the price range.

“The mix of people buying is changing,” Fisher told The New York Times. “More of the bigger stuff is transacting.”

Buyers of low-end properties or those looking for homes priced below $250,000 are “generally of moderate credit and are having trouble or being intimidated from applying for mortgages,” Lawrence Yun, the chief economist of the National Association of REALTORS®, told The New York Times. “While on the upper end, given the stock market bull run of the past six years, they have done very well financially. The stock market expansion has given a comfort level at the top tier of families to go ahead and apply.”

Also hurting the lower end of the market is the limited number of homes for sale. The lower end of the market has seen some of the biggest inventory problems, Yun says. Investors, paying in all-cash, have snatched up bargain properties and shut out some traditional or first-time buyers. The lower-priced transactions paid in all cash are not included in the mortgage application data, which could also explain the disparity between loan size and home prices, Yun points out.

But homebuilders appear to mostly be targeting the upper-end of the market too.

“We are seeing a major price boost on the newly constructed home,” Yun says. “And there will be an ongoing shortage of inventory on the lower end.”

Source: “Mortgage Amounts Rising More Quickly Than Home Prices,” The New York Times (March 20, 2015)

Solar Panels Can be a Deal Killer

Solar Panels Can be a Deal Killer. Image courtesy of xedos4 / FreeDigitalPhotos.net

Studies have suggested that the addition of solar panels on a home can boost a home’s value. But sometimes those solar panels can sabotage a deal when it comes time to sell.

More companies are offering home owners a contract to lease solar panels where they pay no upfront costs for the installation and could start saving on their electricity bills right away. But home owners who sign onto these deals are finding some snags when they go to sell.

Potential buyers are leery of taking on the leasing payment contracts for the next 15 to 17 years because they often have to qualify on credit from the solar companies themselves. Also, some buyers are hesitant to sign a contract because they’re concerned the solar equipment will become obsolete or won’t amount in a big savings in the end after paying the leasing fee.

Some home buyers are refusing to buy the house unless the seller buys out of the remaining lease payment stream — which could be $15,000 or more.

For example, a Fresno, Calif., couple trying to sell their house told The Los Angeles Times that it attracted multiple offers but two sets of buyers backed out of the contracts due to the leased solar panels on their roof. The buyers felt the long-term cost of the lease agreement was too high or they were concerned about the credit qualifications they had to meet in order to take over the lease. Ultimately, the couple had to pay $22,000 to break the lease with the solar company so that they could sell the house.

With the rising popularity of solar, Lynn Farris, a real estate professional in Windermere Hulsey & Associates in Vacaville, Calif., says she’s already seen several disputes arise over solar panel leases, and she expects the problem to get worse.

After all, residential solar installations are rising dramatically — up by 50 percent per year since 2012, according to the Solar Energy Industries Association.

Source: “Leased Solar Panels Can Complicate – or Kill – a Home Sale,” The Los Angeles Times (March 22, 2015)

Foreclosure Rates Near a ‘Significant Milestone’

Foreclosure Rates Near a ‘Significant Milestone’. Image courtesy of digitalart / FreeDigitalPhotos.net

Foreclosures continue to fall across the country and the return to normal levels may be on the horizon for many places, according to a new report.

Foreclosure filings fell 4 percent in February, reaching the lowest level since July 2006, according to RealtyTrac’s U.S. Foreclosure Market Report. Foreclosure filings reflect the number of default notices, scheduled auctions, and bank repossessions. The U.S. foreclosure rate now stands at one in every 1,295 homes that received a foreclosure filing in February.

“Given that August 2006 was the peak of the housing bubble, this eight-and-a-half year low in foreclosure activity is a significant milestone and a sign that nationwide foreclosure activity is on track to return to historic norms this year — and is possibly even headed below historic norms given the skinny-jeans-tight lending standards over the past five years,” says Daren Blomquist, vice president at RealtyTrac. “In markets where foreclosures were processed more efficiently we are seeing foreclosure numbers now below pre-crisis levels in some cases. Conversely, the cleanup of deferred distress is continuing in markets where a logjam of in-limbo foreclosures is still lingering from the housing crisis — as evidenced by rebounding foreclosure activity in those markets.”

24 states posted year-over-year increases in foreclosure activity. Activity was most elevated in Massachusetts (up 53% year-over-year) and New York, up 19 percent.

States With the Highest Foreclosure Rates

The following states posted the nation’s highest foreclosure rates:

1. Maryland: 1 in every 564 housing units received a foreclosure filing in February (foreclosure activity has fallen 1 percent compared to a year ago there, however)

2. Nevada: 1 in every 569 homes received a foreclosure filing (a 12 percent rise from a year ago mostly from a rise in foreclosure starts)

3. Florida: 1 in every 570 housing units (despite a 35 percent decrease in foreclosure activity compared to a year ago)

4. Indiana: 1 in every 871 housing units

5. Idaho: 1 in every 877 housing units

6. New Jersey: 1 in every 895 housing units

7. Illinois: 1 in every 906 housing units

8. Delaware: 1 in every 957 housing units

9. Ohio: 1 in every 1,000 housing units

10. North Carolina: 1 in every 1,088 housing units

Source: RealtyTrac