Millennials drive homeownership rate increase | North Salem Real Estate

The homeownership rate increased slightly in the third quarter, driven primarily by a jump in first-time homebuyers.

The homeownership rate increased to 64.4% in the third quarter of 2018, according to the latest report from the U.S. Census Bureau. This is up slightly from 64.3% in the second quarter and from 63.9% in the third quarter of 2017.

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Homeownership Rate Q3

(Source: U.S. Census Bureau)

This increase was driven primarily by first-time homebuyers as more Millennials opted out of renting and entered into the homeownership market.

“Led by another surge in owner household formation, homeownership rates are up again, but those gains are not driven by those who experienced the housing crash and lived to tell about it,” said Skylar Olsen, Zillow director of economic research and outreach. “First-time home buyers drove the market this year.”

“The homeownership rate of the 45 to 55 age bracket dropped quarter-over-quarter, while the under 35 age bracket continues to rally,” Olsen said. “Their homeownership rate is up a whopping 1.2% since Q3 2017 to 36.8%.”

Homeownership among those under age 35 increased from 35.6% in the third quarter 2017 and 36.5% in the second quarter this year to 36.8% in the third quarter 2018, the report showed.

Meanwhile, those ages 35 to 44 years dropped from 60% in the second quarter to 59.5% in the third quarter. This is still up slightly from 59.3% in the third quarter 2017. Those ages 45 to 54 years also saw a decrease, falling from 70.6% in the second quarter to 69.7% in the third. This is also still up from 69.1% in the third quarter of 2017.

Older generations also saw an increase in their homeownership rate. The rate for those ages 55 to 64 increased from 75.1% the previous quarter and 75% the previous year to 75.6% in the third quarter. Those ages 65 years and older saw an increase from 78% in the second quarter to 78.6% in the third quarter this year, however this is down slightly from 78.9% in the third quarter of 2017.

“Today’s report shows that more people are choosing homeownership over renting, and a large part of that story is the historically large number of first-time homebuyers,” said Tian Liu, Genworth Mortgage Insurance chief economist. “In the past two years, first-time homebuyers have purchased at least 1.9 million homes each year. That is more than the pace of household formation over the same period, meaning that the transition from renting to own is the more powerful driver of housing demand.”

“That has also been an important and often overlooked reason for the rapid rise in home prices, as more buyers came into the market,” Liu said. “Paradoxically, the rise of first-time homebuyers, which has pushed home prices up, also is slowing home sales today. These events caused the homeownership rate and home sales to diverge this quarter.”

The Hispanic homeownership rate saw a quarterly drop as it fell from 46.6% in the second quarter to 46.3% in the third quarter. This was still up slightly from 46.1% in the third quarter of 2017.

Among whites, the homeownership rate increased from 72.5% in the third quarter of 2017 and 72.9% in the second quarter this year to 73.1% in the third quarter of 2018. Blacks also saw an increase from last quarter, rising from 41.6% to 41.7%, however the rate dropped from last year’s 42%.

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https://www.housingwire.com/articles/47259-millennials-drive-homeownership-rate-increase-in-q3?utm_campaign=Newsletter%20-%20HousingWire%20Daily&utm_source=hs_email&utm_medium=email&utm_content=67103596&_hsenc=p2ANqtz-_pUkX9OvEYkaBpJ1jmUzH1E6CDF1CW5tJ2zdACxjVFaOimvN7qzgg3CY5GZ8vTRjO9elaur9WodJE-ofZoDFiWSfnEPA&_hsmi=67103596

Home builder confidence plummets | South Salem Real Estate

  • Rising mortgage rates and continued home price growth are hurting affordability and fast becoming a toxic cocktail for the nation’s home builders.
  • Sentiment among home builders dropped 8 points in November to 60 in the National Association of Home Builders/Wells Fargo Housing Market Index.
  • The reading was the lowest reading since August of 2016, but anything above 50 is still considered positive.

Homebuilder confidence plummets to the lowest level in more than 2 years

Rising mortgage rates and continued home price growth are hurting affordability and fast becoming a toxic cocktail for the nation’s homebuilders.

Sentiment among homebuilders dropped 8 points in November to 60 in the National Association of Home Builders/Wells Fargo Housing Market Index. That is the lowest reading since August 2016, but anything above 50 is still considered positive. The index stood at 69 in November of last year and hit a cyclical high of 74 last December.

“Builders report that they continue to see signs of consumer demand for new homes but that customers are taking a pause due to concerns over rising interest rates and home prices,” said NAHB Chairman Randy Noel, a builder from LaPlace, Louisiana.

Of the index’s three components, current sales conditions fell 7 points to 67, sales expectations in the next six months dropped 10 points to 65, and buyer traffic registered an 8-point drop to 45. Buyer traffic had broken out of negative territory earlier this year but now appears to be back in it solidly.

Some of the nation’s largest publicly traded homebuilders, like Lennar and KB Home, lowered their expectations for sales in 2019 in recent earnings releases. There is still a shortage of homes for sale, but newly built homes come at a price premium, and as interest rates rise, new home buyers are consequently hit hardest.

The average rate on the popular 30-year fixed mortgage is now more than a full percentage point higher than it was a year ago. The huge home price gains seen over the last two years are now shrinking, but prices were still up a strong 5.6 percent year over year in September, according to CoreLogic.

“For the past several years, shortages of labor and lots along with rising regulatory costs have led to a slow recovery in single-family construction,” said the NAHB’s chief economist, Robert Dietz. “While home price growth accommodated increasing construction costs during this period, rising mortgage interest rates in recent months coupled with the cumulative run-up in pricing has caused housing demand to stall.”

read more…

https://www.cnbc.com/2018/11/19/homebuilder-confidence-plummets-to-the-lowest-level-in-more-than-two-years-as-demand-stalls.html

Home Sales Slow as Mortgage Rates Rise | Waccabuc Real Estate

Rising rates coupled with increasing home prices have discouraged homebuying activity during the third quarter of 2018, according to Freddie Mac’s (OTCQB: FMCC) October Forecast, which now includes estimates for 2020.

Sam Khater, Freddie Mac’s chief economist, says, “The housing market continued to cool off in the Fall with slowdowns in home sales, new construction and price growth. While we expect the weakness in housing activity to extend the next few months as the market absorbs the recent uptick in mortgage rates, the combination of strong economic growth and millennials moving toward homeownership should help home sales regain momentum and rise modestly in 2019.” 

Forecast Highlights 

  • After growing at its fastest pace in nearly four years (4.2 percent), the U.S. economy is expected to slow to around 3 percent in the third quarter of 2018. GDP is expected to grow at a rate of 3.0 percent for 2018, slowing to 2.4 percent in 2019, and dropping to 1.8 percent in 2020 as the effects of expansionary fiscal policy fade.  
  • Mortgage rates remained steady at 4.6 percent for the third quarter until the weekly average rate reached a seven-year high at 4.9 percent in the beginning of October. The 30-year fixed-rate is expected to average 4.5 percent in 2018, rising to 5.1 percent in 2019 and 5.6 percent in 2020.
  • Home prices are expected to increase to 5.4 percent in 2018, with the growth rate slowing slightly to 4.6 percent in 2019 and even further to 2.9 percent in 2020.
  • High home prices and borrowing costs continue to affect housing activity. Total home sales (new and existing) are now forecasted to decline modestly this year to 6.07 million, and then regain momentum, increasing 1.8 percent to 6.18 million in 2019 and rising 1.1 percent to 6.25 million in 2020.

Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we’ve made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders, investors and taxpayers.

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freddiemac.com

Who is buying houses? | Katonah Real Estate

Super-low inventory and quickly rising prices largely framed this year’s housing market. But a closer look at 2018’s buyers and sellers reveals other intriguing real estate trends, captured by a new report from the National Association of Realtors.

Here are five big takeaways:

Marriage not needed: 

The share of married couple buyers hit the lowest point since 2010 at 63 percent. Single females made up the second-largest buyer group at 18 percent, following by single males at 9 percent and unmarried couples at 8 percent.

The decline in married couples reveals that marriage is no longer a prerequisite to buying a home. “You don’t need a ring,” says Jessica Lautz, director of demographics and behavioral insight for the NAR.

Tough for first-timers:

Low inventory for entry-level homes and rapid price increases continue to befuddle first-time homebuyers. This year, the share of first-time buyers fell to 33 percent, down from 34 percent last year and well below the historical norm of 40 percent.

“They didn’t bounce back,” Lautz says.

Almost a quarter of first-time homebuyers (23 percent) moved directly from their parents’ homes before purchasing a house, a new high. Lautz notes that may be how some first-timers can compete in today’s market. “They’re not stuck in a lease and its time frame,” she says. “They can save for a down payment because they’re not paying rent.”

First-time homebuyers contributed a median 7 percent of the sales price to their home purchase, up from 5 percent last year and the highest level since 1997. Overall, buyers put down 13 percent, up from 10 percent in 2017 and the highest since 2005.

Older repeat buyers:

Repeat buyers are getting older. The median age was 55 years, up from 54 last year and an all-time high for the survey.

Lautz says that these younger Boomers are healthier than their counterparts in the past, so they don’t need to move to an assisted-living facility or downsize, which has become less and less common. “Many are purchasing multi-generational homes and taking care of parents, or their children are moving back home,” Lautz says.

Many homeowners who bought their homes eight to 10 years ago at the peak of the previous housing bubble also stalled their home sale as they waited to regain equity. That’s another reason repeat buyers could be older.

Student loan woes:

College debt remains a significant challenge for potential homebuyers. Almost a quarter of all buyers reported having a median of $28,000 in student loan debt, while two in five first-time buyers said they had a median of $30,000 in education debt.

Of the 13 percent of buyers who said saving for a down payment was the hardest part of buying a home, half said their student loan debt had hampered their ability to save for a home purchase or down payment.       

“Even with a thriving economy and an abundance of job opportunities in many markets, monthly student loan payments coupled with sky-high rents and rising home prices make it exceedingly difficult for potential buyers to put aside savings for a down payment,” NAR’s chief economist, Lawrence Yun, said in a statement.

Fewer children:

The share of homebuyers with children under 18 reached the lowest point in the survey’s 37-year history at 34 percent, mirroring recent low birthrates in the country, says Lautz. “This changes the neighborhoods buyers are looking at. Schools are a reduced preference. Some buyers may be willing to move to up-and-coming neighborhoods more than before.

Additionally, buyers without children may be content with houses with less than three bedrooms, no recreation room or even a townhouse or condo if they don’t see children in their future. Many buyers also are interested in how their homes work for their pets. Fifteen percent of buyers this year said it was important that their home is close to green spaces or a veterinarian for their pets. This is the first time the NAR posed this survey questions.

read more…

https://www.usatoday.com/story/money/2018/10/29/housing-market-older-repeat-buyers-fewer-children-trends-2018/1803185002/

U.S. wages rise the most in a decade | Waccabuc Real Estate

  • Wages and salaries rose 3.1 percent in the third quarter, the biggest increase in a decade, according to the Labor Department.
  • Overall compensation costs were up 2.8 percent, ahead of Wall Street expectations.
  • Wages have been the missing piece in the economic recovery, though the Fed has been raising rates to guard against future inflationary pressures.

Higher wages are very good for real estate

Employment costs rose more than expected in the third quarter in a sign that more inflation could be brewing in the U.S. economy.

The Labor Department’s employment cost index rose 0.8 percent for the period, ahead of the estimate of 0.7 percent from economists surveyed by Refinitiv.

Wages and salaries rose 0.9 percent, well ahead of expectations for 0.5 percent. Benefit costs were up 0.4 percent.

On a yearly basis, wages and salaries jumped 3.1 percent, the biggest increase in 10 years.

Wage increases have been the missing link in the economy since the recovery began in mid-2008. Average hourly earnings have been rising steadily but have stayed below the 3 percent level as slack has remained in the labor market.

However the unemployment rate is now at 3.7 percent, the lowest since 1969, and wage pressures have begun to build. The Federal Reserve has been raising interest rates in an effort to stave off future inflationary pressures, though the central bank’s preferred gauge of inflation rose just 2.5 percent in the third quarter, including a 1.9 percent increase for health benefits.

The wage data came the same day that ADP and Moody’s reported private payroll growth of 227,000 in October, easily beating Wall Street expectations. The combination of news sent Treasury yields higher in morning trading.

Overall compensation costs for civilian workers rose 2.8 percent, tamped down in part by the small rise in benefit costs, which rose 1.9 percent for the 12-month period ending in September. Employers have been looking for non-salary measures to retain workers, but may have to start increasing wages to attract and retain talent.

In addition to the tighter job market, various states, communities and private companies have passed minimum wage increases, adding to inflation pressures.

At an occupational level, compensation costs increased 4.8 percent for information technology and 3.5 percent for sales and office and service occupations.

State and local government compensation costs rose just 2.5 percent, just one-tenth of a point more than the increase for the same period a year ago.

read more…

https://www.cnbc.com/2018/10/31/wages-and-salaries-jump-by-3point1percent-highest-level-in-a-decade.html

Home remodeling slowdown expected | Bedford Hills Homes

After several years of solid acceleration, annual growth in national home improvement and repair spending is expected to soften in 2019, according to the Leading Indicator of Remodeling Activity (LIRA) released today by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University. The LIRA projects that year-over-year increases in residential remodeling expenditures will reach a decade high of 7.7 percent this year and then start to drift downward to 6.6 percent through the third quarter of 2019.

“Rising mortgage interest rates and flat home sales activity around much of the country are expected to pinch otherwise very strong growth in homeowner remodeling spending moving forward,” says Chris Herbert, Managing Director of the Joint Center for Housing Studies. “Low for-sale inventories are presenting a headwind because home sales tend to spur investments in remodeling and repair both before a sale and in the years following.” 

“Even so, many other remodeling market indicators including home prices, permit activity, and retail sales of building materials continue to strengthen and will support above-average gains in spending next year,” says Abbe Will, Associate Project Director in the Remodeling Futures Program at the Joint Center. “Through the third quarter of 2019, annual expenditures for residential improvements and repairs by homeowners is still expected to grow to over $350 billion nationally.”

The Leading Indicator of Remodeling Activity (LIRA) provides a short-term outlook of national home improvement and repair spending to owner-occupied homes. The indicator, measured as an annual rate-of-change of its components, is designed to project the annual rate of change in spending for the current quarter and subsequent four quarters, and is intended to help identify future turning points in the business cycle of the home improvement and repair industry. Originally developed in 2007, the LIRA was re-benchmarked in April 2016 to a broader market measure based on the biennial American Housing Survey.

The LIRA is released by the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University in the third week after each quarter’s closing. The next LIRA release date is January 17, 2019.

The Remodeling Futures Program, initiated by the Joint Center for Housing Studies in 1995, is a comprehensive study of the factors influencing the growth and changing characteristics of housing renovation and repair activity in the United States. The Program seeks to produce a better understanding of the home improvement industry and its relationship to the broader residential construction industry.

The Harvard Joint Center for Housing Studies advances understanding of housing issues and informs policy. Through its research, education, and public outreach programs, the center helps leaders in government, business, and the civic sectors make decisions that effectively address the needs of cities and communities. Through graduate and executive courses, as well as fellowships and internship opportunities, the Joint Center also trains and inspires the next generation of housing leaders. 

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http://www.jchs.harvard.edu/press-releases/slower-growth-anticipated-home-remodeling

Lumber prices drop 10.3% | Bedford Corners Real Estate

Softwood lumber prices fell 10.3% in October—the largest drop since May 2011—according to the latest Producer Price Index (PPI) release by the Bureau of Labor Statistics. The producer price index for softwood lumber has fallen 21.2% since setting the cycle and all-time high in June (see below). Even after the decrease, however, the index currently sits just 4.7% lower than the prior-cycle high set in 2004.

The final demand price index for OSB has followed a path similar to that of softwood lumber over the last three months.

Since climbing 38.1% in the first seven months of 2018, OSB prices have fallen 16.6%. The price index for OSB is now 15.2% and 15.7% higher than it was to start 2018 and 2017, respectively.

Residential construction goods input prices increased 0.4% in October and have now risen 7.5% over the last twelve months. The index decreased only twice during that period, by 0.1% and 0.5% in December 2017 and August 2018, respectively. Year-to-date residential construction goods input price increases in 2018 (+5.6) continue to outpace the increase during the same period in 2017 (+2.9%).

Gypsum prices fell 1.6% in October, continuing what has been a relatively volatile year. The price index for gypsum products is 6.3% higher than it was to start 2018, but the year-to-date price increase masks large fluctuations within the year. Consecutive-month increases of 5.4% and 6.1% have been partially offset by two-month decreases of 3.3% and 1.8%.

The last several large increases in the gypsum price index has been foreseeable, as large wallboard producers sent out price increase announcements in the March-May and October-December periods. These announcements informed customers that wallboard prices would increase effective as of January or June/July, depending on the announcement date. Examples of such announcements may be found here and here.

Ready-mix concrete prices declined 0.5% in October. After a large price increase (relative to historical data) in early 2018, prices of ready-mix concrete dropped and have remained essentially unchanged since July.

read more…

Softwood Lumber Price Decline Largest in Seven Years

Zillow Stock Plunges as a Cooling Housing Market Stymies Its Risky Expansion Plans | Pound Ridge Real Estate

Zillow’s stock plunged as much as 20% late Tuesday after the company warnedthat revenue this quarter would fall short of Wall Street expectations, exacerbating investor concerns about the prospects of online real-estate startups like Zillow and Redfin as the U.S. housing market is starting to slow down.

The news caused Zillow’s stock to fall as low as $32.40 a share in after-hours trading, or 20% below its official closing price of $41.04 a share. Redfin, another online real-estate company, fell as much as 6.5% in aftermarket trading.

After nearly a decade of recovery and slow growth, the U.S. housing market has been heading into a slowdown in 2018. Not only are mortgage rates rising, but housing prices have been climbing about twice as fast as average incomes. Sales of new homes as well as previously owned homes have been slowing from a year ago. Tax reform enacted late last year has also reduced tax incentives to buy homes.

Those trends have hurt the stock performance of Zillow and Redfin alike. At its low point late Tuesday, Zillow was down 51% from its 52-week high, while Redfin was down 53% from its high point in the past year.

Zillow started out as an online real-estate listings service that, once successful, began to seek out new business models. Like Redfin, it moved into buying and selling homes. In May, Zillow’s stock plunged on news that it would start buying and quickly flipping homes for resale. In August, its stock plunged on again on news it was buying an online-mortgage lender, Mortgage Lenders of America. Both represent traditionally risky markets that Zillow believed would pay off in the long term.

“Zillow Group is undergoing a period of transformational innovation,” Zillow CEO Spencer Rascoff said in the company’s earnings release. “We believe that these changes will have positive long-term effects for consumers, our industry partners and our business. It will take time for advertisers to adapt to these changes, but we are confident that they set us up for long-term growth.”

During that expansion, however, Zillow and Redfin have had to face dual headwinds in rising interest rates, which can deter home purchases, and in slowing home purchases.

While Zillow’s move into adjacent markets may hold some long-term promise, investors are concerned about their short-term outlook. “Zillow was in fantastic shape just six months ago,” CNBC’s Jim Cramer said last month. “We loved their attempts to corner the real estate advertising market. Then they decided to move into a totally new, totally risky business at what may be the worst possible time, and the stock has since cratered.”

read more…

http://fortune.com/2018/11/06/zillow-stock-plunges-20-warns-disappointing-revenue-risky-expansion/

Facebook cuts thousands of ad targeting options | Bedford Real Estate

After HUD’s housing discrimination allegation

In the wake of being accused of allowing landlords and homeowners to discriminate against prospective renters and buyers, Facebook is making changes to its advertising policies to remove thousands of targeting options that may have been used to engage in discriminatory advertising.

Late last week, the Department of Housing and Urban Development filed a complaint against Facebook, claiming that the social media giant’s advertising platform enabled property owners to discriminate against prospective renters and buyers based on their race, color, religion, sex, familial status, national origin, disability, or other factors.

Facebook, for its part, responded to HUD’s allegations by stating that “there is no place for discrimination” on its platform and said that it planned to both respond in court and continue working with HUD to address its concerns.

But the company is doing more than that.

Facebook announced this week that it is removing more than 5,000 ad target options to “help prevent misuse.” And that’s not all. The company also announced that all U.S. advertisers will be required to comply with the company’s non-discrimination policy in order to advertise on Facebook.

“While these options have been used in legitimate ways to reach people interested in a certain product or service, we think minimizing the risk of abuse is more important,” Facebook said of the removed ad target options.

According to Facebook, the removed options include “limiting the ability for advertisers to exclude audiences that relate to attributes such as ethnicity or religion.”

But Digiday reported that advertisers may still be able to find their way around these new limitations.

From Digiday:

A Facebook spokesperson told Digiday the majority of the targeting options being removed are exclusions, which allow advertisers to select certain audiences they do not want seeing their ads. Advertisers will no longer be able to include terms including “Passover,” “Evangelicalism,” “Native American culture,” “Islamic culture” and “Buddhism,” Facebook said.

Jesse Math, group director of paid social and display at PMX Agency said that if an advertiser was trying to exclude Hispanic audiences using the term “Hispanic” — one of the terms that Facebook likely cut — an advertiser could use common interests instead such as “Telemundo interest” or specific Hispanic artists that are less known by other communities.

If that ends up being the case, Facebook would likely utilize its non-discrimination policy to punish the offending advertiser.

As stated above, the site will soon require all advertisers to comply with its non-discrimination policy. Previously, only advertisers the site identified as offering housing, employment or credit ads were required to certify their compliance with the site’s non-discrimination policy.

“In the coming weeks, this new certification will roll out gradually to all U.S. advertisers via our Ads Manager tool,” Facebook said in its post announcing the changes. “Advertisers will be required to complete this certification in order to continue advertising on Facebook. We’ve designed this education in consultation with outside experts to underscore the difference between acceptable ad targeting and ad discrimination.

read more…

https://www.housingwire.com/articles/46551-facebook-cuts-thousands-of-ad-targeting-options-after-huds-housing-discrimination-allegation

Mortgage rates now 4.94% | South Salem Real Estate

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing that mortgage rates rose significantly across the board.

Highest mortgage rates in seven years

Sam Khater, Freddie Mac’s chief economist, says, “The economy continued to show resilience as strong business activity and growth in employment drove the 30-year fixed mortgage rate to a seven year high of 4.94 percent – up 11 basis points from last week.”

Added Khater, “Higher mortgage rates have led to a slowdown in national home price growth, but the price deceleration has been primarily concentrated in affluent coastal markets such as California and the state of Washington. The more affordable interior markets – which have not yet experienced a slowdown home price growth – may see price growth start to moderate and affordability squeezed if mortgage rates continue to march higher.”

News Facts

  • 30-year fixed-rate mortgage (FRM) averaged 4.94 percent with an average 0.5 point for the week ending November 8, 2018, up from last week when it averaged 4.83 percent. A year ago at this time, the 30-year FRM averaged 3.90 percent. 
  • 15-year FRM this week averaged 4.33 percent with an average 0.5 point, up from last week when it averaged 4.23 percent. A year ago at this time, the 15-year FRM averaged 3.24 percent. 
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.14 percent with an average 0.3 point, up from last week when it averaged 4.04 percent. A year ago at this time, the 5-year ARM averaged 3.22 percent.