Baby Boomers Aren’t Downsizing Yet

Baby Boomers Aren’t Downsizing Yet. Image courtesy of artur84 / FreeDigitalPhotos.net

Baby boomers aren’t showing any signs of leaving the single-family home market that has defined their generation’s real estate habits, despite many predictions that they would by now. As boomers hit age 65 and become empty nesters, many housing analysts forecasted that a huge wave of them would downsize and move into an apartment, condo, or townhouse.

But Fannie Mae researcher Patrick Simmons says that isn’t happening yet.

“There’s a perception, particularly in many media reports, that this massive generation born between 1946 and 1964 is altering its housing consumption,” Simmons, the director of strategic planning for Fannie Mae’s economic group, told the Chicago Tribune. “It’s true that they’re becoming empty nesters in droves. But by one measure, the proportion of boomers who live in single-family homes actually increased between 2006 and 2012.”

Baby boomers’ mobility has gone down. Nine out of 10 boomers surveyed by AARP reported that they wanted to stay in their current home as long as possible. Some may be motivated to stay put because of the housing crisis. For boomers, the value of single-family homes they owned fell by an average of 13 percent. Some boomers could still be underwater and are waiting to recoup more on their house before they sell. Others may be holding on to their home because they snagged a record low mortgage rate in recent years, and they know borrowing won’t be any cheaper if they do decide to sell.

Some baby boomers are downsizing but choosing to stay in smaller single-family homes rather than move to a condo or town home.

But “eventually, boomers will slow down with age and have the same physical frailties that their predecessors had,” Simmons told the Tribune. “My sense is that it’s not going to be a major shift — something we see in the numbers in a year. It will likely unfold over a decade or more.”

Source: “Time to Downsize? Not for Baby Boomers,” Chicago Tribune (July 6, 2014)

LeBron James’ Return: A Win for Cleveland’s Housing Market?

LeBron James’ Return: A Win for Cleveland’s Housing Market?

NBA star LeBron James announced last Friday that he is heading home to Cleveland to rejoin the Cavaliers next year, after playing for the Miami Heat for the past four years. But he says his return to his hometown is about much more than just basketball.

James, a native to Akron, Ohio, says he cares deeply about the area and wrote in Sports Illustrated that “my relationship with Northeast Ohio is bigger than basketball. I didn’t realize that four years ago. I do now.”

James says he wants to promote the area through his charitable works.

“I want kids in Northeast Ohio, like the hundreds of Akron third-graders I sponsor through my foundation, to realize that there’s no better place to grow up,” James wrote in Sports Illustrated. “Maybe some of them will come home after college and start a family or open a business. That would make me smile. Our community, which has struggled so much, needs all the talent it can get.”

But could James’ return really boost Cleveland’s economy or housing market? Cleveland and Akron are among the 10 lowest metro areas for home price growth. Akron recently ranked the lowest, with prices dropping by 0.2 percent, according to a housing report from Black Knight Financial Services. Cleveland and Akron also are fourth and fifth on the list for metro areas with the highest percentage of homes underwater (in Cleveland, 35 percent of homes are underwater; Akron is at 34 percent).

While property values are unlikely to rise just because James is returning to Cleveland, an article in HousingWire notes “the good vibes may just spur growth in an area that sorely needs it.”

“I feel my calling here goes above basketball,” James writes. “I have a responsibility to lead, in more ways than one, and I take that very seriously. My presence can make a difference in Miami, but I think it can mean more where I’m from.”

Source: “Why LeBron James’ Return to Cleveland Is Huge Real Estate Win,” HousingWire (July 11, 2014) and “LeBron: I’m Coming Back to Cleveland,” Sports Illustrated (July 11, 2014)

Return of the First-Time Home Buyer?

Return of the First-Time Home Buyer? Image courtesy of marin / FreeDigitalPhotos.net

Young people are starting to leave their parent’s home and move out on their own. The Current Population Survey for 2013 showed a drop in the percentage of 20-somethings living with parents, marking the first decline since 2005.

As of now, the percentage drop appears minimal: Those aged 18 to 24 living with parents or a related subgroup dropped from 56 percent to 55 percent in one year. However, Brad Hunter, chief economist at Metrostudy, notes in a Builder online article that the one-percentage-point decline represents 300,000 people who are now looking for a household of their own that who were previously living with their parents.

Indeed, a recent report by Harvard University’s Joint Center for Housing Studies predicts that 2.7 million more households will form among people in their 30s over the next decade.

First-time buyers usually make up about 40 percent of home buyers. However, lately, the share has been in the 35 percent to 38 percent range, Hunter says. For existing-home sales, first-time buyers’ share is less than one-third of all buyers, at 27 percent in May, according to the National Association of REALTORS®.

The delay in millennials branching out on their own has greatly reduced household formation in recent years. Household formation rates usually average 1.4 million per year. Lately, the rate has been a fraction of that, about 500,000 to 700,000 a year.

“We are seeing some evidence that young people who had moved in with their parents or relatives are now finding the means and the motivation to move out and get their own place,” Hunter notes. “While most of these newly-emerging twenty-somethings will be going into rentals, the movement out of the parental home is nonetheless expected to support a series of positive steps from rentals to entry-level re-sales to entry-level new homes, and on up the ladder.”

Source: “First-Time Buyers and New-Home Demand: Reverting to Normal,” Builder (July 10, 2014)

Amenities Buyers Will Make Sacrifices For

Amenities Buyers Will Make Sacrifices For. Image courtesy of photostock / FreeDigitalPhotos.net

Home buyers are showing some willingness to pay more for certain amenities in a home, according to the latest PulteGroup Home Index Survey of more than 1,000 adults ages 25 to 65.

What’s surprising is that buyers say they’d give up some pretty alluring draws about a property for certain amenities: Forty-four percent surveyed say they’re willing to give up a location near public transportation in exchange for certain amenities, and 35 percent say they’d give up better schools and proximity to entertainment and shopping.

So what are these amenities that home buyers want so badly? Fifty-one percent surveyed say they want their next home to be larger than their current residence, and 64 percent say they prefer a move-in ready home.

Among the most important features home buyers identified:

• “His and her closets” in the master bedroom (31%) and spa-like master bathrooms (23%)
• A large eat-in kitchen area (23%) and a kitchen island (22%)
• At least one bathtub in a home (54%)

“In addition to the more common home options, we’re starting to see regional trends emerging among home buyer preferences,” says Ryan Marshall , PulteGroup Inc.’s executive vice president of home building operations, marketing and sales. “From outdoor kitchens in Florida, to spice kitchens in California, shoppers are increasingly discerning when it comes to home features that could be the deciding factor in their next move.”

Folding, accordion-style glass doors are popular in the Southwest, while multi-generation floor plans and screened-in porches are popular in the Southeast, according to the survey. In the Northeast, balconies off the kitchen and rooftop terraces are sought-after, while “Jack ‘n’ Jill” bedrooms are in high demand in the Midwest.

The most important areas to home buyers when choosing a new home: kitchen (29%), bedroom (22%), and living room (18%).

“Consumers today aren’t just looking for the biggest house on the block. They’re looking for more efficient use of space and a greater area allocated to ‘workhorse’ spaces, like the kitchen,” says Marshall.  “Home buyers want unique features and amenities and will do what it takes to find the home they truly want, even if they have to pay more for a move-in ready home.”

Source: PulteGroup Home Index

Student Housing ‘Ripe With Opportunity’ in Real Estate

Student Housing ‘Ripe With Opportunity’ in Real Estate. Image courtesy of imagerymajestic / FreeDigitalPhotos.net

Student housing is getting more attention from the real estate industry as more developers take their projects upscale and bring them on campus.

“This is an industry that is ripe with opportunity,” Bill Bayless, CEO of American Campus Communities, the largest student-housing REIT in the country, told CNBC. “If you look at the student housing sector, it was ignored by the mainstream real estate industry for more than 40 years.”

Budget constraints have forced major universities to allow private investors onto campus for real estate developments, investors that once mostly had to center their student housing development off-campus.

The millennial generation is reshaping student housing too, with a demand for dorms that offer private suites with full kitchens and baths opposed to the traditional double rooms and communal spaces. The buildings also include extras like large physical fitness centers, movie theaters, and virtual driving ranges.

Housing experts say more attention needs to be devoted to the student housing sector. Aging dormitories built for the baby boom generation need to be replaced, and the student population in colleges is growing. Student housing’s growth is also being driven by international interest. Foreign student enrollment is estimated to jump to 12 percent by 2021, compared to about 5 percent in 2006. Also, more baby boomers are retiring in college towns that are drying up vacancies in nearby apartments and are limiting off-campus options for students, CNBC reports.

Source: “Investors Get Schooled in Housing,” CNBC (July 8, 2014)

The Biggest Hurdles to Home Ownership

The Biggest Hurdles to Home Ownership. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

With mortgage rates still near historical lows, why aren’t more home owners making a move? Housing analysts blame student loan debt, overly strict lending standards, and lost equity as the leading culprits behind a sluggish housing recovery. But what do home owners say?

Mortgage information site HSH.com surveyed 786 home owners at the end of 2013 about their experiences when it came to finding and financing their home. The top six biggest hurdles to home ownership were identified as:

1. Home prices (flagged by 23.5% respondents): Rising home prices are not just difficult for young home buyers. Home owners aged 50 to 59 reported the highest incidence of struggling with higher home prices.
2. Down payment (22.9%): Those aged 18 to 29 reported the least trouble with down payments, while home owners aged 30 to 39 and 50 to 59 reported the highest incidence of down-payment struggles.
3. No issues (20.9%): A significant portion of respondents said they don’t face any hurdles to home ownership, with older home owners reporting fewer hurdles than their younger counterparts.
4. Credit score: 12.8%
5. Interest rates: 12.6%
6. Property taxes: 7.3%

Source: “Survey: What’s the Hardest Part of Affording a Home?” FOX Business (July 2, 2014)