First-Time Homebuyer Activity Reaches Three-Decade Low

A combination of factors is keeping many younger Americans out of the real estate market, pushing the level of first-time homebuyer activity to its lowest level in more than 25 years.

The National Association of Realtors’annual Profile of Home Buyers and Sellersfound that first-time buyers accounted for 33 percent of purchases in its most recent survey, down 5 percent from one year earlier. First-time homebuyer activity hasn’t been this low since 1987, when NAR measured it at 30 percent.

Since NAR began conducting the yearly poll in 1981, the average level of first-time buyer activity is 40 percent.

NAR Chief Economist Lawrence Yun attributed the decline to a number of hurdles that younger homebuyers face, including student debt, flat wage growth, and rising rents. Yun also partially blamed a lack of homes for sale on the market – a particular issue here in the Bay Area – along with a handful of other factors.

“Adding more bumps in the road is that those finally in a position to buy have had to overcome low inventory levels in their price range, competition from investors, tight credit conditions, and high mortgage insurance premiums,” Yun said.

And for the first-time buyers across the country who were able to successfully purchase a home, about one-quarter required financial assistance from friends or family members, survey results found. Nearly all younger buyers — 97 percent — financed the purchase, compared with about two-thirds of buyers age 65 and over.

Across the country, the average first-time buyer paid $169,000 for their home, but here in the Bay Area the barrier to entry is much higher. NAR’s most recent monthly housing summary put the median list price for a home in the San Francisco metro area at $949,000 in September, making it the country’s priciest housing market. The San Jose metro area was the third most expensive in the U.S., with a median list price of $718,000.

Younger Bay Area home shoppers also face competition from all-cash buyers and affluent international investors. First-time buyers here must further contend with some of the highest rents in the U.S., which make it more difficult to save money for a down payment.

So what can first-time Bay Area homebuyers do to give themselves a leg up? Two of Pacific Union’s top real estate professionals in Silicon Valley recently gave SFGate a few tips, including getting prequalified for a loan and maintaining a focused attitude.

They also noted that while many first-time buyers initially find homes online, employing the services of a knowledgeable and dedicated real estate professional plays a critical role in a successful transaction.

(Photo: Flickr/Rob Cruickshank)

Buying a Home is 38% Less Expensive than Renting!

In Trulia’s 2014 Rent vs. Buy Report, they explained that homeownership remains cheaper than renting throughout the 100 largest metro areas in the United States; ranging from an average of 5% in Honolulu, all the way to 66% in Detroit, and 38% Nationwide!

The other interesting findings in the report include:
Even though prices increased sharply in many markets over the past year, low mortgage rates have kept homeownership from becoming more expensive than renting.

Some markets might tip in favor of renting later this year as prices continue to rise faster than rents and if – as most economists expect – mortgage rates rise, due both to the strengthening economy and Fed tapering.

Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.

Bottom Line
Buying a home makes sense. Rental costs have historically increased at a higher rate of inflation. Lock in a mortgage payment now before home prices and mortgage rates rise as experts expect they will.


Article and Photo Sourced From:  http://www.keepingcurrentmatters.com/2014/09/10/buying-a-home-is-38-less-expensive-than-renting/?utm_source=feedburner&utm_medium=email&utm_campaign=Blog_Promo 

The Cost of Renting versus Buying

 

Infographic Sourced From:  http://www.keepingcurrentmatters.com/2014/09/05/the-cost-of-renting-vs-buying-infographic/ 

5 Reasons to Sell BEFORE Winter Hits

People across the country are beginning to think about what their life will look like next year. It happens every Fall. We ponder whether we should relocate to a different part of the country to find better year round weather or perhaps move across the state for better job opportunities. Homeowners in this situation must consider whether they should sell their house now or wait. If you are one of these potential sellers, here are five important reasons to do it now versus the dead of winter.




1. Demand is Strong
Foot traffic refers to the number of people out actually physically looking at home right now. The latest foot traffic numbers show that there are more prospective purchasers currently looking at homes than at any other time in the last twelve months which includes the latest spring buyers’ market. These buyers are ready, willing and able to buy…and are in the market right now!

As we get later into the year, many people have other things (weather, holidays, etc.) that distract them from searching for a home. Take advantage of the buyer activity currently in the market.

2. There Is Less Competition Now
Housing supply is still under the historical number of 6 months’ supply. This means that, in many markets, there are not enough homes for sale to satisfy the number of buyers in that market. This is good news for home prices. However, additional inventory is about to come to market.

There is a pent-up desire for many homeowners to move as they were unable to sell over the last few years because of a negative equity situation. Homeowners are now seeing a return to positive equity as real estate values have increased over the last two years. Many of these homes will be coming to the market in the near future.

Also, new construction of single-family homes is again beginning to increase. A recent study by Harris Poll revealed that 41% of buyers would prefer to buy a new home while only 21% prefer an existing home (38% had no preference).

The choices buyers have will continue to increase over the next few months. Don’t wait until all this other inventory of homes comes to market before you sell.

3. The Process Will Be Quicker
One of the biggest challenges of the 2014 housing market has been the length of time it takes from contract to closing. Banks are requiring more and more paperwork before approving a mortgage. Any delay in the process is always prolonged during the winter holiday season. Getting your house sold and closed before those delays begin will lend itself to a smoother transaction.

4. There Will Never Be a Better Time to Move-Up
If you are moving up to a larger, more expensive home, consider doing it now. Prices are projected to appreciate by over 19% from now to 2018. If you are moving to a higher priced home, it will wind-up costing you more in raw dollars (both in down payment and mortgage payment) if you wait. You can also lock-in your 30 year housing expense with an interest rate in the low 4’s right now. Rates are projected to be over 5% by this time next year.

5. It’s Time to Move On with Your Life
Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?

Only you know the answers to the questions above. You have the power to take back control of the situation by putting your home on the market. Perhaps, the time has come for you and your family to move on and start living the life you desire.

That is what is truly important.

http://www.keepingcurrentmatters.com/2014/09/03/5-reasons-to-sell-before-winter-hits/

Survey: Investors Losing Interest in Bay Area, Opening the Door for First-Time Buyers

Good news for Bay Area buyers: A recent survey found that investors today are far less active in the region’s real estate markets than in years past, helping to ease some of the fierce competition for homes.

The news is especially welcome for first-time buyers, who have struggled to compete against well-heeled investors paying all cash for starter homes and then turning them into rental properties or waiting a few months and flipping them at even higher price points.
The California Association of Realtors’ 2014 Investor Survey, conducted in May and released to the public on Wednesday, found that  investors are changing their strategies and moving away from buying homes in more popular, urban areas in favor of rural locations of the state where better deals can be found.
In 2014, nearly half (45 percent) of California investors said they purchased properties in rural counties such as Kern, Fresno, Merced, San Joaquin, and Tulare, up from 27 percent in 2013, according to the survey.
Meanwhile, 15 percent of investors purchased properties in Northern California in 2014, down significantly from 27 percent in 2013.
The organization gave an early look at some of the survey data two weeks ago, and Pacific Union reported at the time that rising home prices have curtailed investment activity in high-dollar Bay Area markets like Silicon Valley.
The survey also found that 67 percent of investors paid cash, and one-third were residents of foreign countries, with China, Mexico, Taiwan, and India being the top countries of origin. Investors owned an average of 8.3 properties in 2014, up from 6.5 properties last year.
Reflecting the recovering housing market, the majority of investment properties purchased in the last year (70 percent) were equity sales, while 18 percent were short sales and 12 percent were foreclosures.
Most investors said they made minor or no repairs to the properties, and 55 percent said they intend to sell them within six years.


(Image: Flickr/Woodleywonderworks)

Homeownership's Impact on Net Worth

Over the last six years, homeownership has lost some of its allure as a financial investment. As homeowners suffered through the housing bust, more and more began to question whether owning a home was truly a good way to build wealth. A study by the Federal Reserve formally answered this question.

Some of the findings revealed in their report:

• The average American family has a net worth of $77,300
• Of that net worth, 61.4% ($47,500) of it is in home equity
• A homeowner’s net worth is over thirty times greater than that of a renter
• The average homeowner has a net worth of $174,500 while the average net worth of a renter is $5,100

Bottom Line

The Fed study found that homeownership is still a great way for a family to build wealth in America. 



Article and Illustrations Sourced from:  http://www.keepingcurrentmatters.com/2014/08/07/homeownerships-impact-on-net-worth-3/?utm_source=feedburner&utm_medium=email&utm_campaign=Blog_Promo 

Survey: Purchasing a Home ‘Overwhelming’

A recent survey of prospective homebuyers found that most believe they are financially prepared for home ownership, yet many admit they aren’t sure what purchasing a property will actually cost them.
Nearly 90 percent of buyers surveyed say they know what type of property they can afford, but only 52 percent have actually determined what their monthly mortgage payment would be, according to the poll by Discover Home Loans.
Forty-one percent say they haven’t yet calculated their down payment, and nearly half — 48 percent — say they don’t know how much their mortgage payment would be if they chose a more or less expensive property.

Most homebuyers say they find the financing process “overwhelming,” including 76 percent of first-time buyers and, surprisingly, 54 percent of previous owners.
“The sheer amount of information can lead to confusion and stress,” Cameron Findlay, chief economist at Discover Home Loans, said  in a statement accompanying the survey results.
For help understanding the financial aspects of home ownership, buyers say they are more likely to turn to real estate professionals than other sources of information such as family, friends, and mortgage bankers.

Fully two-thirds of buyers said they consulted a real estate professional for help and information to assess whether purchasing a home will be a good investment, compared with 56 percent who said they spoke with family or friends and 39 percent who went to a mortgage banker.
For help evaluating mortgage terms and competing offers, 59 percent sought the advice of a mortgage banker, and 49 percent turned to a real estate professional.



(Image: Flickr/401(K) 2012)

Statistics Reveal ‘Typical’ California Homebuyer

The typical California homebuyer is 48 years old and an ethnic minority, with a college degree and a household income of more than $100,000.

Those statistics come from the California Association of Realtors’ latest annual survey of homebuyers, conducted in the first quarter of 2014. The survey found that the average homebuyer today is the oldest in at least 12 years, climbing from 35 in 2012 to 38 in 2013 to 48 in 2014. By ethnicity 36 percent of buyers are white, with Hispanics and Asian/Pacific Islanders each accounting for 26 percent of the total and blacks accounting for 12 percent.

Measured by household income, 17 percent of buyers reported an annual income of more than $200,000, with 27 percent earning $150,000 to $199,999 and 27 percent bringing home $100,000 to $149,999. Twenty-five percent of buyers are paid $75,000 to $99,999 per year, while only 3 percent earn $50,000 to $74,999.

In the Bay Area, only 22 percent of residents could afford to buy a home in the first quarter of 2014, a huge drop from two years ago, when 45 percent of residents could afford a property. The minimum household income needed to join the ranks of Bay Area homeowners was $140,977 in Q1 2014, up 56 percent from Q1 2012.

Other statistics from the CAR report:
Previous homeowners accounted for 59 percent of buyers in 2014, with 40 percent previous renters and 2 percent living most recently with their parents.
All buyers viewed at least 10 homes before buying; 56 percent viewed 20 or more.
The percentage of first-time buyers peaked at 54 percent in 2012. It slipped to 42 percent in 2013 before plunging to just 12 percent in 2014.
Buyers moved a median distance of 15 miles from their previous home.
Nine out of 10 buyers made offers on previous homes.
Fully 54 percent of buyers reported that they bought their home because of a price decease.
Similarly, 54 percent of buyers said they are fully satisfied with their purchase, while 46 percent said they selected the best option given the limited supply of homes. A year earlier, 66 percent said they were fully satisfied.
Buyers said they plan to keep their current homes for an average of 8.8 years, up from 6 years in 2013.

(Image: Flickr/Mark Moz)

A Reminder to Homebuyers: Annoy Sellers at Your Peril

Prospective buyers would do well to remember that they won’t get any closer to their goal of home ownership by annoying sellers.



This may seem an obvious point, but real estate professionals say buyers irritate sellers time and again. Transgressions range from failing to comply with a request to remove shoes while indoors on a rainy day to failing to call well in advance when canceling a scheduled walk-through.

Don’t forget that until the deal actually closes, the seller holds the ultimate trump card: the home itself. And it’s a seller’s market nowadays, particularly in the Bay Area, where single-family-home inventory has been constrained for the past year.

A recent article on Bankrate.com, a website that aggregates financial data, notes that “a little give-and-take is normal, but some buyers push the envelope, as well as the sellers’ buttons.” The article goes on to list eight ways that homebuyers may annoy sellers and jeopardize a purchase:

Skipping appointments: Failing to show up for a scheduled appointment, or canceling at the last minute, is simply rude; the seller may have spent half a day making the house spic-and-span for the visit. Unless there’s a last-minute emergency, buyers must show up on time.

Disregarding house rules: If you (the buyer) are touring a home, remember that it’s not yours (yet). Take your shoes off inside, if requested, don’t let children run amok, and respect the wishes of the seller.

Nitpicking: If you don’t like something in the house, but it’s not a negotiable flaw, be quiet about it while touring the property. Some sellers may secretly install cameras or microphones to listen in on conversations, so save any catty remarks for the car ride home.

Presenting a long list of flaws: Using a laundry list of perceived defects as a negotiating tool could backfire and make a seller wonder whether the buyer is seriously interested. The seller is more concerned with the bottom line than a buyer’s critical observations.

Requesting multiple visits: As a sale approaches closing, sellers are busy making repairs, packing up, and moving. They don’t have time to accommodate a buyer’s repeated requests to come in, look around, and ruminate on future plans.

Renegotiating after reaching a deal: Barring any surprises from a home inspection, the negotiated price should be the final price.

Generating ‘iffy’ commitment letters: You can understand where a seller would get nervous if, after an agreement has been reached, the buyer’s lender steps in with a letter asking the buyer to confirm his or her credit-worthiness. Save everyone a panic attack by securing the loan beforehand.

Speeding up the closing date: It’s understandable that an anxious buyer may want to move up the closing date, but the seller needs time to pack up and move out. An extra ounce of courtesy is always appreciated.





(Image: Flickr/Pall Spera Co.)

Real Estate Roundup: All-Cash Sales Reach All-Time High

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious:

NEARLY HALF OF U.S. HOMEBUYERS PAYING ALL CASH
More buyers than ever before are forgoing financing and paying all cash for homes, according to RealtyTrac’s Q1 2014 U.S. Institutional Investor & Cash Sales Report.

All-cash sales accounted for nearly 43 percent of residential real estate transactions in the first quarter, the highest since the company began recording that statistic in 2011. The number of U.S. buyers paying all cash jumped 24 percent from the first quarter of 2013, and the trend has been particularly prevalent in the Lake Tahoe and Northern Nevada regions, the report notes.

“The cash buyer segment of the Northern Nevada housing market is very strong,” Craig King, COO of Chase International, told RealtyTrac. “More than 50 percent of transactions in our Reno office were cash sales.”

The report also found that while institutional investor activity reached a two-year national low, it increased 92 percent annually in the San Francisco area – the second-largest increase in the country.


CALIFORNIA SEES BIG MORTGAGE-DELINQUENCY DROPS
Mortgage-delinquency rates across the U.S. were at their lowest levels in nearly six years in the first quarter, with large declines in California helping to buoy the national recovery.

TransUnion’s most recent mortgage report shows that U.S. mortgage delinquencies dropped 24 percent year over year in the first quarter, the ninth straight quarter of decreases. Currently, the national mortgage-delinquency rate stands at 3.6 percent.

California posted annual mortgage-delinquency declines of about 37 percent, the second highest in the country. TransUnion says that while California’s delinquency rate was double the national average five years ago, it has fallen to 2.8 percent to outpace the rest of the country.


PACIFIC HEIGHTS HOME SELLS FOR 70 PERCENT MORE THAN LIST PRICE
While multiple offers and overbids are commonplace in San Francisco, one homebuyer in the city’s prestigious Pacific Heights neighborhood has taken things to what some might call illogical extremes.

As Curbed reports, the two-bedroom home at 2514 Gough Street sold for $3.4 million, an astonishing 70 percent above its initial asking price of $2 million. Built in 1941, the home features amenities such as a gated courtyard entry, a Japanese rock garden, and a patio and garden area.

By comparison, the average San Francisco homebuyer paid about 10 percent above asking price for a single-family home in April, according to Pacific Union’s most recent monthly real estate report.


AMERICANS BULLISH ON HOUSING AND JOB MARKETS
More Americans than ever believe now is a good time to sell a home, according to Fannie Mae’s April 2014 National Housing Survey.

Forty-two percent of survey respondents told Fannie Mae that the current market is right for sellers, which the company says is a record high. Only 5 percent of those surveyed felt that housing prices would decline in the next year, the study’s all-time low.

Just 12 percent of Americans reported having a smaller income than they did a year ago, also the lowest level Fannie Mae has recorded. The report notes that fewer people are worried about losing their jobs, which may attract more buyers to the housing market.

“Consistent with Friday’s upbeat jobs report, concern about job loss among employed consumers also has hit a record survey low,” Fannie Mae Senior Vice President and Chief Economist Doug Duncan said in a statement. “These results are in line with our expectations for increased housing activity and gradual strengthening of the housing market going into the spring and summer selling season.”






(Photo: Flickr/401(K) 2012)

Down Payments Declining in Changing Mortgage Scene

Good news for homebuyers: Average down payments are declining, a sign that lenders are serious about easing home-loan requirements.

Many buyers assume they need to put down at least 20 percent of the purchase price in order to qualify for a loan, but the average down payment for a 30-year, fixed-rate mortgage in the first quarter of 2014 was 15.78 percent, according to data compiled by LendingTree. That’s down from 16.01 percent in the fourth quarter of 2013.

Also, average credit scores for LendingTree customers dropped 6 percent year over year, suggesting that lenders are more willing to consider a wider pool of borrowers.

“As the housing market improves and refinance activity declines, lenders are adapting their guidelines to improve credit accessibility for borrowers,” Doug Lebda, LendingTree founder and CEO, said in a statement.

“Relaxed lending guidelines translates to a larger pool of qualified homebuyers that could boost the housing recovery,” Lebda said. “While lenders still need proof that a borrower has the financial ability to repay the loan, lenders have started to accept lower down payments and credit scores from potential borrowers.”

Average down payments by state in the first quarter ranged from 12.31 percent in North Dakota to 19.36 percent in New Jersey. Unsurprisingly, California residents dropped the third largest down payments in the U.S. — 18.21 percent — slightly lower than buyers in New York, who put down an average of 18.54 percent.

The LendingTree data supports another recent study that found lenders have lowered borrowers’ minimum FICO credit scores and debt-to-income ratios over the past year to attract more business.

First-time buyers, who generally face the closest scrutiny from lenders, would do well to talk with a real estate professional for help finding a lender and prequalifying for a home loan before entering negotiations with a seller.

If you plan to buy a home in the Bay Area or the Tahoe/Truckee region, Pacific Union’s mortgage partner, Mortgage Services Professionals, can offer loan advice and consultation to help make your purchase a success. 

(Image: Flickr/Lucas Stanley)

Real Estate Roundup: Bay Area Markets Best in U.S. For Sellers

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious:

SAN JOSE, SAN FRANCISCO NUMERO UNO FOR HOME SELLERS THIS SPRING
This spring is shaping up to be best for sellers in the West, particularly in parts of the Bay Area, according to a recent report from Zillow.

Zillow’s report ranks the San Jose metropolitan area as the No. 1 market for home sellers in the country, followed by San Francisco. The company bases its rankings on shortest time on market, highest sales-price-to-list-price ratio, and lowest frequency of price reductions.

The Bay Area’s healthy job growth, which leads the state, is a key factor driving the trajectory of our region’s housing market.

“Relatively strong job markets in the West are helping spur robust demand, which is being met with limited supply, causing rapid home value appreciation and giving sellers an edge,” Zillow Chief Economist Dr. Stan Humphries said in a statement.

The report also ranked San Jose and San Francisco home values as the highest in the nation, at $748,800 and $648,700, respectively.


OAKLAND AREA INVENTORY CRUNCH EASING
Hopeful buyers in our inventory-constrained East Bay region may get a springtime lift from the latest National Association of Realtors National Housing Trend Report.

According to the association’s data, the number of homes for sale in the Oakland metropolitan region in February spiked 42 percent year over year, the seventh largest gain in the nation. There were 2,715 homes for sale in Oakland in February, a jump of almost 19 percent from the previous month.

While the San Francisco and San Jose regions showed year-over-year declines in the number of homes for sale, both saw a rebound from January, with inventory increasing by double-digit percentage points.


NEW HOUSING DEVELOPMENTS PLANNED IN WALNUT CREEK, OAKLAND
In addition to the aforementioned NAR report, there’s more good news that could eventually help ease the inventory shortage in the East Bay: a pair of housing developments in Walnut Creek and Oakland.

The Contra Costa Times reports that Hall Equities Group has proposed a four-story, 24-unit luxury condominium development in downtown Walnut Creek on the site of a current strip mall. The units would range from one to three bedrooms up to 2,500 square feet in size, and the developer claims they would be the “very nicest” and “most expensive” on the Interstate 680 corridor.

Over the hills on the banks of the Oakland Estuary, Signature Development Group and Zarsion Holdings Group are breaking ground on what the Oakland Tribune has dubbed a “mega-development.” The $1.5 billion project is slated to yield 3,100 new homes, as well as shops, outdoor space, and a marina.

The development, known as Brooklyn Basin, should also help goose Oakland’s economy by creating nearly 10,000 construction jobs.


NEW HOME CONSTRUCTION STALLS ACROSS THE U.S.
Home construction declined slightly in February but far less than in the previous month, according to an article in The Wall Street Journal.

Citing statistics from the U.S. Commerce Department, the publication reports that housing starts fell 0.2 percent in February, compared with 11.2 percent in January. The article blames frigid temperatures in other parts of the country from hindering both builders and prospective buyers.

Building permits were up 7.7 percent from January to February, an optimistic sign that activity could reinvigorate this spring, the Journal said.



(Image: Flickr/Mark Moz)

Homebuyers Are Happy, Led by Millennials

Recent homebuyers are overwhelmingly happy with their purchases, according to a recent survey, but the reasons why depend on the age of the buyer.

Most younger buyers consider their homes strong investments, while older buyers view their new homes as a match to their changing lifestyles — typically choosing a smaller house after their children move out on their own.

These are just a few of the findings in agenerational trends study by the National Association of Realtors, based on a survey of more than 8,700 buyers and sellers.

Eight out of 10 recent buyers considered their home purchase a good financial investment, ranging from 87 percent for buyers age 33 and younger to 74 percent for buyers 68 and older.

The largest group of recent buyers are millennials — those under the age of 34 — who accounted for 31 percent of recent home purchases. Generation X buyers, born between 1965 and 1979, made up 30 percent of recent purchases, and younger baby boomers, born between 1955 and 1964, accounted for 16 percent.

“Given that millennials are the largest generation in history after the baby boomers, it means there is a potential for strong underlying demand,” Lawrence Yun, NAR’s chief economist, said in a statement accompanying the survey results.

“Moreover, their aspiration and the long-term investment aspect to owning a home remain solid among young people. However, the challenges of tight credit, limited inventory, eroding affordability, and high debt loads have limited the capacity of young people to own.”

The median age of millennial homebuyers is 29 and the median income is $73,600, according to the NAR study. They typically purchased an 1,800-square-foot home costing about $180,000.

In comparison, Gen X buyers’ median age is 40 with a median income of $98,200, and they tended to buy a 2,130-square-foot home costing $250,000.

Other findings from the survey:

• Millennials were more likely to buy in an urban or central city area than older boomers.
• Younger buyers tended to place higher importance on commuting costs than older generations. Older buyers were likely to place more emphasis on energy efficiency, landscaping, and community features.
• Millennials planned to stay in the home for 10 years, while those in the baby boom generation planned to stay for 20 years.
• Younger buyers tended to move to larger, higher-priced homes, but “there is a clear trend of downsizing to smaller homes among both younger and older baby boomers and the Silent Generation (those born between 1925 and 1945),” according to the study.
• Overall, 88 percent of recent buyers financed their home purchase. Nearly all (97 percent) millennials financed, compared with just 55 percent of Silent Generation buyers.
• Among the generations, Gen X (29 percent) is the largest group who are recent home sellers, followed by older boomers (22 percent) and younger boomers (21 percent).

(Image: Flickr/Tony Hoffarth)