After Baby Boomers, What’s Next for Housing?

After Baby Boomers, What’s Next for Housing? Image courtesy of Ambro / FreeDigitalPhotos.net

As baby boomers age, the decline of this mammoth generation will have a “dampening effect on household growth,” according to a new report by Harvard’s Joint Center for Housing Studies. However, this decline in growth will occur over several decades and may be offset by the millennial generation starting households of their own.

But the big question is whether the housing left by baby boomers will be desirable to younger generations?

“Many homes vacated by aging seniors will not be in demand by tomorrow’s young adults, being in the wrong part of the country or otherwise unsuitable,” according to JCHS researchers. “Some will be simply too expensive. Some ‘affordable’ vacated homes in desirable locations will be torn down and replaced by larger and more energy efficient/amenity rich houses targeted to older buyers. Many houses will sit on the market for long periods of time before sellers are willing to recognize that they are overpriced. Some homes in declining communities will become abandoned.”

As such between now and 2030, new construction will be needed to meet the housing demand from the large number of those under the age of 30 that are currently in the pipeline – which will be even further escalated due to future immigration trends, researchers note.

Later this decade, the adult population growth is expect to turn sharply, according to recent Census Bureau population projections. Growth in the population age 20 and older is expected to see a 40 percent decline, gradually falling to about 1.5 million per year by 2050.

“Despite their improving life expectancies, the oldest baby boomers will soon turn 70, and begin to die off in ever-greater numbers,” notes JCHS’ report. “Today, there are about 2.6 million deaths every year, but this number will rise to over 4 million a year by 2050.”

Baby boomers have long had a thirst for real estate. As they aged, the share heading an independent household rose from 53.4 percent in 1990; 56.1 percent in 2000; and 58.5 percent in 2010.

On the other hand, younger age groups have been slower to enter the housing market. “Higher minority shares and delayed marriage have had a negative effect on headship rates, as has the Great Recession’s impact on employment and income,” JCHS researchers note.

So what does this mean for the future of housing?

“Projected declining adult population growth because of increasing deaths will have several effects on housing markets,” JCHS researchers predict. “But it will not have an immediate and proportional impact on household growth for a variety of reasons. First, many initial baby boomer deaths will occur to married couples, leaving the surviving spouse to continue to head a household. Many deaths will also occur to people who do not head a household, but rather live in a household headed by children or other relatives, or in institutional settings (assisted living or nursing facilities).”

The decline in household growth due to the aging baby boomers will occur over many decades. By then, aging millennials could cause “the changing age structure effect to be more positive, similar to what baby boomers exerted as they passed into middle age, offsetting the effects of declining adult population growth.”

Source: “What Will Happen to Housing When Baby Boomers Are Gone?” Harvard Joint Center for Housing Studies’ Housing Perspectives Blog (Feb. 17, 2015)

Home Owners, Appraisers Align on Price

Home Owners, Appraisers Align on Price. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Appraisers’ opinions of home values are mostly falling in line with home owners’ estimates, according to the latest reading of Quicken Loans’ Home Price Perception Index. Indeed, appraisers’ opinions of home values were only 0.18 percent higher than home owners – the closest the two opinions have been since September 2013. The previous month, the difference between appraiser and home owners’ price opinions was 1.43 percent.

While the value perception is closing, home values have also been on the rise. The national median single-family home price at $208,700 in the fourth quarter, up 6 percent year-over-year, according to the National Association of REALTORS®.

Quicken Loans, the nation’s second largest retail mortgage lender, uses its index to evaluate perceptions of the housing market. Appraisers in more than 74 percent of the metro areas the company examined continued to have higher opinions of home values than the home owners – which means that many may have more equity in their home than they realize.

“Interest rates have dropped and we have seen more and more Americans refinance their mortgage,” says Bob Walters, chief economist for Quicken Loans. “These consumers have been watching their local housing market and realizing their home’s true value more accurately than any time in the last year and a half. This is encouraging, but I urge home owners to continue to watch the ebbs and flows of the market, especially in their neighborhood, so they understand the direction of home values in their community when it comes time to sell.”

Source: “Quicken Loans Study Shows Appraiser and Homeowner  Opinions in January Nearly Equal,” Quicken Loans Press Room (Feb. 10, 2015)

Millennials Delay Weddings for Home Ownership

Millennials Delay Weddings for Home Ownership. Image courtesy of Danilo Rizzuti / FreeDigitalPhotos.net

Home ownership may be worth putting off love, at least for millennials. Thirty-eight percent of American millennials (those aged 18-34) say they would – or have – delayed a wedding or honeymoon so they could afford to buy a home, according to a survey of more than 2,000 adults conducted by Harris Poll, on behalf of the real estate brokerage Redfin.

Saving for a down payment may take precedence over saving for a wedding. Saving for a wedding has gotten pricier – recently hitting an all-time high of $29,858 last year, according to TheKnot.com.

Many millennials say they’ll delay a marriage to lessen the financial burden of paying for a wedding and a home within the same year, says Clayton Jirak, a Redfin real estate professional in Chicago.

“This is becoming a popular option for couples who are prioritizing home ownership over marriage,” he says.

They may choose to commit to a mortgage and home together before the walk down the aisle. And such a commitment into home ownership together can be a big first step too – and better yet, if it’s a lasting one.

“Breaking up is hard to do, but splitting financial assets makes it even harder especially considering the fees and closing costs that are associated with buying and selling a home, which if done too soon can wipe out all the equity accumulated,” said Redfin chief economist Nela Richardson. “A house for most people is a long-term asset, which it should be if you are looking for a return on your investment.”

Source: “First Comes Love, Then Comes Mortgage,” Redfin Blog (Feb. 13, 2015)

7 Ways Your Closing Gifts Backfire

7 Ways Your Closing Gifts Backfire. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Showing thanks to your clients with a closing gift is a traditional way many real estate professionals seal up a transaction. A closing gift not only serves as a special treat to your home buyers and sellers, but it can also help make you more memorable long after a transaction ends. After all, expressing gratitude can be a powerful motivator in getting clients to use your services again down the road, studies have shown.

But even with the best of intentions, your gift-giving gesture can backfire if you’re not careful. For starters, making the gift all about you — making your logo the central feature of the gift — will likely ensure that it gets relegated to your client’s attic. “Make your gift client-centered, not agent-centered,” says sales coach Liz Wendling, who works with real estate companies on maximizing their business potential. “If you give them a gift that is egotistical or something they won’t enjoy, it isn’t going to be used to remember you by.” Don’t worry about displaying your information too prominently; just give your clients a thoughtful gift, and they’ll remember you, Wendling says.

1. Making it all about you: That engraved wall clock with your company’s logo etched in the middle really is the perfect gift — for you. Your intention is that your client will remember you every time they glance at the time. But in all honesty, what’s the likelihood that a clock with your name plastered all over the front will end up tucked away in their attic? “It’s not about you,” says sales coach Liz Wendling, who works with real estate companies on maximizing their business potential. “Make your gift client-centered, not agent-centered. If you give them a gift that is egotistical or something they won’t enjoy, it isn’t going to be used to remember you by.” You needn’t have your name and logo in all caps all over your gift for them to remember your kind gesture. As long as it’s a thoughtful gift, they’ll remember you, Wendling says.
2. Not listening: You’ll miss the opportunity to give your clients a truly heartfelt gift if you don’t tune in to their likes and dislikes. “When you’re driving around with them showing properties, they may mention a favorite restaurant — which you could give them a gift card to — or maybe how they’ll be taking a cruise soon, and you could give them money to spend for that,” Wendling says. “Clients are dropping hints all the time. This is one way you can make yourself more memorable, by giving them a gift from listening closely to their likes and dislikes. They’ll feel even more touched by your gesture.”
3. Choosing the wrong time to give: Traditionally, the closing gift is something agents present to clients right after closing. But you may find they’ll appreciate your gift even more if you wait. “A gift can lose its impact if it’s not delivered in the right place or the right time,” Wendling says. If your clients just purchased or sold a house, they undoubtedly have a lot on their minds after closing. Your gift could wind up in a stack or pile that gets overlooked later on. Instead, consider giving them a gift 30 days or even 90 days after closing. It provides a perfect way to follow up and get face-to-face with them again.
4. Not giving the gift in person: Sending your gift in the mail or leaving it at your clients’ doorstep means you’ll miss a perfect excuse to deepen your relationship by checking on how they’re doing. You’ll also be passing up an opportunity to ask for referrals, Wendling says. Contact your clients and say: “I bought a gift to thank you for your business, and I’d like to drop it off in person.” This is where you can weave in asking for a referral in a nurturing, kind way. You’re not just asking for five friends they can connect you with. Instead, you’re using the gift as a subtle way to meet with them again and throw in a “by the way, if you happen to know of anyone else I can help, please send them my name.”
5. Deducting too much — or not enough — on your taxes: The IRS allows you to deduct some of your business gift-giving, but make sure you stay within the legal limits for your deductions. Check out IRS Publication 463 for the guidelines. In general, you are allowed to deduct no more than $25 for business gifts to each person during a tax year.
6. Accidentally offending your client: A gift of wine would be the wrong choice for a recovering alcoholic or someone who doesn’t drink due to religious reasons. Your gourmet sweets also may be a bad choice for someone with an allergy to nuts or dairy. To play it safe, Wendling recommends giving your customers a choice of three gifts. At the end of closing, say: “I usually like to give my clients a little gift after they do business with me. I often do one of three things; which one would you like?” By allowing them to select the gift from your three options, they may be more appreciative of it, and you don’t have to fear you gave the wrong gift.
7. Not giving anything: “You don’t have to spend a fortune,” Wendling says. “You give based on what you can afford and what you think it’s worth.” Yet some real estate professionals are adamant that they shouldn’t be expected to give a gift in return for their service. Like it or not, closing gifts have almost become an expectation among many buyers and sellers. Giving nothing could backfire and may make some clients feel snubbed, Wendling says.

Source REALTOR® Magazine

Successful Cities Invest in Technology, Energy

Successful Cities Invest in Technology, Energy. Image courtesy of FrameAngel / FreeDigitalPhotos.net

Smart investments in energy and innovation earn San Francisco, CA and Austin, TX the distinction of being named the Best-Performing Cities in America by the Milken Institute.

The Milken Institute ranked 379 metro areas to help businesses, investors, government officials, and public-policy groups track and evaluate the performance of metros where they do business relative to the rest of the country. In the 2014 index, the they weighed nine factors, including  job, wage, and technology trends, with a heavy emphasis on growth in jobs creation and retention and the overall quality of new jobs.

What made these cities better equipped to weather the recent economic downturn was their ability to “offset high costs, an unfavorable tax structure, and a burdensome regulatory environment thanks to the clustering of talent and technology in an entrepreneurial ecosystem. The two main factors driving the success of these metros is technology and shale energy production.

“Technological advances in horizontal drilling and hydraulic fracturing are altering the energy landscape of the United States,” according to the study. “Few experts had anticipated the magnitude of the boom in shale oil and gas exploration and production occurring since 2007. Energy investment has claimed the largest share of GDP since the early 1980s.”

Study Highlights

• San Franciso, CA, earned the top spot among large metros, accounting for 45 percent of all jobs created over the five years ending in 2013.
• Five Texas metro areas were ranked in the top 10 list of best-performing cites, due to a combination of tech, energy strength, and a favorable business climate.
• California and Colorado each had four metro areas in the Top 25.
• Technology centers, made up of creative and scientific-based industries represented 13 of the Top 25.
• Seven metros made the Top 25 due to large gains in shale oil and gas exploration, associated infrastructure investment, and related activities.
• Fargo, ND, was No. 1 among small metros, benefiting from the shale oil boom and a diverse makeup of industries.
• West Palm Beach, FL, increased 93 spots and was the city with the overall biggest increase.

Sources: “America’s Best Performing Cities Are Invested In Technology And Energy,”  Fast Company (Jan 15, 2015), and “Best Performing Cities,” Milken Institute, (January, 2015)

Income Increases Boosting Housing Optimism

Income Increases Boosting Housing Optimism. Image courtesy of pakorn / FreeDigitalPhotos.net

The number of households saying their income is significantly higher than it was a year ago is on the rise, as is the number expecting their financial situation to continue to move significantly higher over the next year — both reaching all-time survey highs in Fannie Mae’s January 2015 National Housing Survey, a poll of 1,000 Americans’ attitudes toward owning and renting a home.

Twenty-nine percent of households say their income is “significantly higher” now than it was 12 months ago. Also, 48 percent say they expect their personal financial situation to improve over the next year.

The increases in income are translating into higher optimism about the housing market. The number of households who said it was a good time to buy a home rose 3 percentage points in January to 67 percent, according to the survey. Also, the share of households who say they’d rather buy than rent if they were to move rose 5 percentage points to 66 percent, marking the first increase since September 2014, the survey shows. What’s more, 44 percent of households now say it’s a good time to sell, tying an all-time survey high.

“Consumers are as positive about their personal finances at the start of 2015 as they have been since we launched the National Housing Survey in 2010, and this optimism seems to be spilling over into housing market attitudes,” says Doug Duncan, senior vice president and chief economist at Fannie Mae. “Consumers are more optimistic about the environment both for buying and for selling a home today, and the share who plan to own on their next move has jumped back up, reversing a three-month trend toward renting. … Overall, these are good signs to start off 2015 and are consistent with our expectation that strengthening employment and economic activity will boost the speed of the housing recovery.”

Additional findings from Fannie Mae’s January survey include:

• The majority of households believe home prices will rise over the next year, an average of 2.5 percent over the next 12 months.
• 45 percent of respondents say they believe mortgage rates will also rise over the next year, falling by 3 percentage points compared to one month earlier.
• 52 percent of respondents believe home rental prices will rise over the next year — a slight decrease month over month. The average 12-month rental price expectation fell to 3.6 percent.

Source: “Consumers’ Positive Financial Attitudes a Good Sign for Housing,” Fannie Mae (Feb. 9, 2015)