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On Wednesday, the National Association of Realtors released its report on existing home sales for the month of June, which increased to the highest level of sales activity since February of 2007. This article from NAHB’s Eye On Housing highlights some of the details from the report.
Total existing home sales increased by 3.2% in June to a seasonally adjusted rate of 5.49 million units combined for single-family homes, townhomes, condominiums and co-ops, up from a downwardly revised 5.32 million units in May. June existing sales were up 9.6% from the same period a year ago, and have increased year-over-year for nine consecutive months. Although the June percent share of first-time buyers declined from May to 30%, that share remained at or above 30% for the fourth consecutive month.
Existing sales increased in all regions, ranging from 4.7% in the Midwest to 2.3% in the South. Year-over-year, all four regions also increased, ranging from 12.7% in the Midwest to 7.3% in the South.
The distressed sales share decreased to 8% from 10% in May, and are well below the 11% share during the same month a year ago. June all cash sales fell to 22%, matching the lowest share since December 2009. The accelerating withdrawal of cash investors will create more opportunity for first-time buyers.
For the first time in three years of Bankrate’s survey on financial investments, Americans named real estate as the most popular investment option. In this article, Bankrate highlights the results of its national telephone survey that was conducted earlier this month.
The crash in housing prices that walloped the economy over the past decade no longer seems to haunt Americans as it did during the recession. For the first time in three years, real estate was the most popular investment option in a survey that accompanied Bankrate’s Financial Security Index.
When asked what kind of investments made the most sense, 27% said they’d invest in property if they had a pool of spare cash. CDs and other cash investments, the top answer in Bankrate’s 2013 and 2014 surveys, came in second at 23%.
Americans are likely encouraged by recent indicators showing the housing market’s strength. In May, sales of new homes grew 2.2% to the highest level in seven years, and April’s figures increased 8.1% from March, according to the U.S. Census. Buoyed by demand for single-family homes, existing-home sales also rose 5.1% in May, recording a 9.2% year-over-year gain, according to the National Association of Realtors.
Home values are also rising. S&P/Case-Shiller’s latest measurement of national home prices shows a 4.2% year-over-year gain from March to April. Since February 2012, when the index bottomed, prices have increased 26.8%.
It’s a big week for housing data, with two reports set for release. On Wednesday, the National Association of Realtors will release data on June’s existing home sales, and on Friday, the U.S. Census Bureau will highlight new home sales data. In this article from Zillow, economic analyst Alex Hubbard provides a forecast for both reports.
Sales of existing and newly built homes are expected to move in the same direction in June, with new home sales volume rising more from May than existing home sales, according to a Zillow forecast.
Zillow expects Wednesday’s June existing home sales data from the National Association of Realtors to show a monthly increase of about 1 percent, to a seasonally adjusted annual rate of 5.40 million units, up from 5.35 million units in May. Friday’s June new home sales data from the U.S. Census Bureau is expected to show a monthly increase of about 2.5%, to a seasonally adjusted annual rate of 560,000 units, up from 546,000 units in May. The combined increase would bring total new and existing home sales to their highest level since November 2009, when federal homebuyer tax credits helped boost home sales.
Zillow expects the median price of a new home to rise to $282,800 in June, up 1% from May, and the median existing home price to rise to $223,400, up 1.3% from May.
Both new and existing home sales made positive strides through the first five months of 2015, and Zillow expects they will end the second quarter on a high note. Sales of newly constructed homes have increased in four of the past five months, accumulating 232,000 sales, a 22.8% spike from the same period last year. But unlike existing homes, the price of a typical new home has been declining as builders construct less expensive homes aimed at a more modest segment of the market. The median price of a typical new home is currently $280,400, down about 1% from $283,000 a year ago.
Housing demand should pick up through the summer home shopping season, given recent improvements in the job market and rapidly improving income growth. After six long years of persistently high unemployment, the unemployment rate has finally reached (and is actually slightly below) the estimated natural rate of unemployment. Monthly personal income grew by 3.7% year-over-year during the first half of 2014, on average. That growth has accelerated in 2015, growing 4.4% year-over-year, on average. Accelerating income growth has been accompanied by persistently low mortgage rates, making a mortgage itself more affordable relative to historic norms.
As the housing market rebound has remained on track for the first half of 2015, this article from MarketWatch predicts a continuation of that trend throughout the second half of the year – and highlights how housing’s strength will affect the overall U.S. economy.
The U.S. economy has reached halftime in 2015 and it’s been a low-scoring affair. But the second half of the year could show more razzle-dazzle.
After contracting 0.2% in the first three months of 2015, the economy is on track to grow a solid 2.5% or a bit higher in the second quarter stretching from April to June. And economists polled by MarketWatch predict comfortable 3% growth in the remaining two quarters of the year.
If that’s going to happen, the U.S. housing market probably has to keep setting postrecession highs. Construction of new homes in June was almost 27% higher compared with a year earlier and permits to build additional properties hit an eight-year peak.
The current mini-boomlet, if you can call it that, has been driven by a combination of rising urban demand for rental units such as townhouses and apartments and as well as a drop in national vacancy rates to a two-decade low.
Younger millennials have gravitated toward cities and many prefer to rent instead of owning their own homes, a trend hastened in part by tighter mortgage-lending standards. They are also forming more families to create additional demand for housing.
At the same time, strong job creation over the past few years that has shrunk the unemployment rate has allowed more people to set out on their own. Many young people, for example, were forced by financial circumstances to move back in with their parents after the Great Recession. Only recently has the so-called boomerang trend started to reverse.
For anyone who’s thinking about taking out a mortgage, and may be wondering whether the time is right based on fluctuating mortgage rates, this article from The New York Times offers some helpful advice.
It’s understandable why a person might think that the way to understand where mortgage rates are going – and thus whether to lock in a home loan now, or refinance, or whatever major borrowing decision he or she is facing – is to know what is going on inside the brain of Janet Yellen, the Fed chairwoman, and her colleagues. It’s also … wrong.
For most people, trying to parse the intentions of the Fed should play nearly no role in a decision of when to take out a mortgage or other loan. You should make your borrowing decisions based on current market rates and whether they make a given home purchase or refinancing decision affordable or not. Assume that neither you, nor your mortgage broker, nor your Uncle Ned, who watches a lot of Wall Street sharpies on CNBC, has any predictive capacity to know whether rates will be higher or lower a month from now.
Why would this be? Doesn’t the Fed set interest rates? Well, yes. But there are a lot of complexities that stand between that basic fact and the reality of what it will cost you to take out a home loan.
The Fed indeed sets a target for overnight bank lending rates, and buys and sells securities in order to keep market rates at that level. It has kept that rate near zero since the end of 2008, and is now making noises about raising it later this year, perhaps as soon as September.
That’s all well and good, but there are two things to remember. 1) Mortgages are usually based on long-term interest rates, not short-term interest rates, and 2) The Fed is not on some preordained path; rather, its policy will adjust depending on how the economy evolves.
So how should people make the decision on whether to take out or refinance a mortgage? By taking a deep breath, and running the calculations to decide whether they are better off taking action at current prices or not.
Depending on where you live, household recycling might seem like a recent trend. But the history of recycling actually stretches back to the early days of World War II. This fascinating article from CityLab takes a worldwide look at the history of recycling, from 1939 to today and beyond.
Recycling programs might seem ordinary today, but it wasn’t long ago that the vast majority of households sent 100 percent of their waste to landfills. These days, the most ambitious cities are adding “zero-waste” goals to a growing list of “green” policies. Will any of them truly arrive at a future without trash? If the past is any guide, the best ideas for how to get there will be the result of years of testing and tinkering.
Will millennials choose to live in the city, or will they follow previous generations into the suburbs? The answer, according to this article from Gizmodo, is neither… and also a little of both.
Over the last few years, across the country – around the world, too – people of all ages, including millennials, have been moving into cities at an astonishing rate. Now more than half of the world’s population is urban. So here’s the big question: Are today’s 20- and 30-somethings really going to live more urban lifestyles than Gen Xers or Boomers? Or are they going to eventually vacate cities for the ‘burbs, just like every generation before them?
Then came some interesting data, pegged to the release of 2014 Census information this spring: Millennials have indeed started moving out of big city downtowns – but not necessarily in favor of a quiet rural or suburban life.
Instead, we’re seeing a brand new trend: Thanks to the generation’s size and influence, millennials are moving to new places made just for them, by them – revitalizing smaller cities or opting for hybridized urban-burb enclaves where quality of life is the driving force.
As the first wave of millennials started to take jobs, it seemed that this generation was dedicated to living and working downtown. According to different studies, millennials were prioritizing dense neighborhoods, helping to fuel the biking boom, even refusing to get their driver’s licenses. Companies luring millennials promoted their downtown locations with transit proximity, bike-commuting amenities, and other perks which aligned with these lifestyles.
But it turns out that many millennials weren’t ever planning on settling in cities for good – they were just putting off the move to the suburbs for a few more years.
Millennials are coming up with innovative ideas for how to live well wherever they are – which sometimes means bringing the urban experience with them.
According to a recent study by the Urban Land Institute, “Gen Y and Housing: What They Want and Where They Want It,” a nationwide survey of millennials aged 19 to 36 showed that most of them were never living the glamorous downtown life that most stories like to describe. Only 13 percent of millennials in the survey lived in or near downtowns – the rest lived in other city neighborhoods – or in the suburbs.
The kinds of places that millennials want to live share a lot of the same characteristics with urban centers – they’re looking for amenities like walkability and public transit. But according to the study, it’s more about relationships and having the time to enjoy those relationships, which doesn’t necessarily mean working long hours to pay the rent in a big city.
These kinds of compact, livable communities that crop up in less-dense areas have all sorts of names, like New Urbanism and “walkable urban places,” but the one that’s stuck recently is “urban burbs” – and the urban burbs are a new kind of hybridized place made just for millennials.
Millennials might not be staying in the urban cores, but rather, they’re helping to remake the urban-like enclaves that allow easy access to the city when they want it. These places where millennials are choosing to live still have the qualities of downtowns – dense housing, transit connections, walkability, good food, great bars – without the high prices of downtowns.
This article from Forbes highlights some of the latest trends in homeownership among the Millennial generation, and offers some suggestions on how the Baby Boom generation can help Millennials save for and purchase a home.
In March 2015, Bloomberg reported that the rising rental prices might be causing Millennials to experience a “nudge toward homeownership… First-time buyers made up 29 percent of existing-home sales in February, up from 28 percent in January and the first increase since November…” The Zillow Housing Confidence Index said that about 5.2 million renters say they expect to purchase a house in 2015, up from 4.2 million a year ago. Where job growth is strong, the Millennials who were once renting now want to buy.
Baby Boomers, it’s time to help your offspring with this decision. It’s also a good time to help financially.
Affordability – Work with your Millennials to figure out if they can afford a home now, and that they are not counting on increased salaries or bonuses to do so. They’ll need to base the decision on current income and expenses.
Credit scores – Help your offspring pull their scores and make sure that all of the information is accurate. The higher their score, the lower their monthly payments. A score of 700 to 720 should get them a good rate, and 750 and above will garner the best rates on the market.
Percentage of home expenses – If you are looking at a conventional mortgage loan for your Millennial, a good rule of thumb is that their home expenses not exceed 28 percent of their gross monthly income.
Hidden upfront costs – When you are figuring out the upfront money your Millennial needs to procure the mortgage, make sure that you include all costs, not just the 20 percent for the down payment.
Down payment – Many Millennials have not saved much for a home. This is a perfect time for you Baby Boomers to help out. You can loan or gift (IRS annual exclusion for 2015 is $14,000) your kids the money for the down payment. If it is a loan, structure it with a real promissory note (which you can get online), and you can use a current floating or fixed interest rate. You may want to give the kids a little break for a few months while they figure out their new expenses.
Buying a home can be scary; it is a big responsibility. Try to reassure your Millennial children that, even though this is a big step, many of us have taken it and enjoyed the comfort and security a house or condo has provided for our loved ones and ourselves.
The newest housing starts report for June from the U.S. Department of Commerce, released today, shows that new home construction rose to the second-highest level since November of 2007. In this article, Bloomberg highlights the full results of the report.
Housing starts rose 9.8% to a 1.17 million annualized rate from a revised 1.07 million in May that was stronger than previously estimated, figures from the Commerce Department showed. The median estimate of economists surveyed by Bloomberg was a 1.11 million rate. Ground-breaking on multifamily dwellings jumped 29.4%.
Building permits for single and multifamily properties, a gauge of future construction, climbed to an almost eight-year high, the report showed. Steady job gains, low mortgage rates and a gradual easing of lending standards are propelling sales, indicating housing will become a bigger source of strength for the economy.
“They’re pretty positive numbers,” said Lewis Alexander, chief economist at Nomura Securities International Inc. in New York. “You’ve got decent employment growth that’s been particularly good for young people, you’ve got relatively low interest rates, somewhat easing of credit standard – all of those things are helping.”
Building permits increased 7.4 % in June to a 1.34 million annualized rate, the highest since July 2007. They were projected to fall to 1.15 million.
Applications to begin work on single-family projects rose to 687,000 in June, the most since January 2008. Permits for construction of apartments and other multifamily dwellings rose 15.3% after a 20% jump the previous month.
