MILLENNIALS EXPECTED TO BE BIGGEST HOMEBUYING GROUP IN 2015

| Patrick Carmichael

Due to an expected increase in rent prices next year, Zillow predicts more millennials will enter the housing market and be the biggest homebuying group. Zillow predicts the following for 2015: • U.S. rents will outpace home values by the end of the year • Builders will begin constructing more less expensive homes • Millennials […]

Due to an expected increase in rent prices next year, Zillow predicts more millennials will enter the housing market and be the biggest homebuying group.

Zillow predicts the following for 2015:
• U.S. rents will outpace home values by the end of the year
• Builders will begin constructing more less expensive homes
• Millennials will overtake Generation X as the largest group of home buyers
• Home buyers will have more negotiating power in 2015
First-time home buyers will be a critical part of the housing market next year, and certain markets will have more favorable conditions than others for buyers looking for that perfect entry-level home, according to Zillow. Markets most favorable to first-time buyers are those with strong income growth among 23-34 year olds, significant growth in the number of entry-level homes on the market and home prices that won’t take a big chunk out of buyers’ paychecks.

Zillow predicts the best markets for first-time buyers in 2015 will be: Pittsburgh; Hartford, Conn.; Chicago; Las Vegas; and Atlanta.

Nationwide, home values will increase by 2.5 percent, while rents will grow around 3.5 percent.

HOUSING MARKET ACTIVITY AFTER LABOR DAY LIKELY TO BE THE STRONGEST IN 5 YEARS

| Patrick Carmichael

Home buyers who have been willing to wait for better deals will be rewarded for their patience, as sellers drop listing prices to meet buyers’ more value-focused expectations, according to the latest Housing Market Tracker from Redfin. In the report, Redfin Chief Economist Nela Richardson explains that a slowdown in home price growth and a […]

Home buyers who have been willing to wait for better deals will be rewarded for their patience, as sellers drop listing prices to meet buyers’ more value-focused expectations, according to the latest Housing Market Tracker from Redfin. In the report, Redfin Chief Economist Nela Richardson explains that a slowdown in home price growth and a shift in pricing power from sellers to a more balanced market combined to cause this change in housing activity as the market transitions from summer to the fall buying season.

For the first time in five months, price growth was flat in July across all 35 markets included in the report. That shift has been nearly nine months in the making from when sales began to first decline last November. As a result of this shift, the number of homes that sold above list price in July is down nearly 7 percent to 20.1 percent from 26.8 percent a year ago, the biggest drop of the year.

Redfin expects an unusual surge in home sales this fall and that prices will continue to flatten and potentially decline month over month in September or October. If that happens, it will be the first three-month price decline since fall 2012.

AFFORDABILITY APPROACHES PRE-2004 NORM AS PRICES FIRM

| Patrick Carmichael

Housing affordability dipped slightly in the second quarter of 2014 as several markets saw a firming of home prices, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI). Nationwide, the second quarter HOI was 62.6—i.e., 62.6 percent of new and existing homes sold during the quarter were affordable to a family earning the U.S. median […]

Housing affordability dipped slightly in the second quarter of 2014 as several markets saw a firming of home prices, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI). Nationwide, the second quarter HOI was 62.6—i.e., 62.6 percent of new and existing homes sold during the quarter were affordable to a family earning the U.S. median income of $63,900—down about three percentage points from the first quarter reading of 65.5.

For a seventh consecutive quarter, San Francisco-San Mateo-Redwood City, Calif. was the nation’s least affordable major market, with only 11.1 percent of homes sold in the second quarter affordable to a family earning the area’s median income of $100,400. Other major metros at the bottom of the affordability chart were Santa Ana-Anaheim-Irvine, Calif.; Los Angeles-Long Beach-Glendale, Calif.; San Jose-Sunnyvale-Santa Clara, Calif.; and New York-White Plains-Wayne, N.Y.-N.J.

All five of the nation’s least affordable small housing markets were located in California: Santa Cruz-Watsonville, Napa, Salinas, Santa Rosa-Petaluma, and San Luis Obispo-Paso Robles.

NEW HOUSING FINANCE REFORM PROPOSAL TO BE INTRODUCED

| Patrick Carmichael

Reps. John K. Delaney (D-MD), John Carney (D-DE), and Jim Himes (D-CT) last week outlined a housing finance reform proposal that uses private sector market forces to appropriately price risk while putting the scale and security of a government guarantee behind the program. They plan to introduce legislation this spring to create a housing finance […]

Reps. John K. Delaney (D-MD), John Carney (D-DE), and Jim Himes (D-CT) last week outlined a housing finance reform proposal that uses private sector market forces to appropriately price risk while putting the scale and security of a government guarantee behind the program. They plan to introduce legislation this spring to create a housing finance system that the authors say is fair for borrowers, lenders, and taxpayers.

Key elements of the proposal, known as “Partnership to Strengthen Homeownership Act of 2014”:

• Housing reform legislation allows the government to expand the capacity of housing finance while allowing the private sector to price all of the risk
• Creates incentives for private capital’s market share in housing to grow over time;
• Creates a path for Fannie Mae and Freddie Mac to be sold as independent companies without any government support or monopoly status
• Creates additional funds for low-income housing

CONSUMER OPTIMISM TOWARD HOUSING CONTINUES IN APRIL

| Patrick Carmichael

Americans’ outlook toward the housing market continued to improve in April, perhaps foreshadowing an increase in housing activity in the coming months, according to results from Fannie Mae’s April 2014 National Housing Survey. The share of respondents who believe now is a good time to sell a home increased for the third consecutive month to […]

Americans’ outlook toward the housing market continued to improve in April, perhaps foreshadowing an increase in housing activity in the coming months, according to results from Fannie Mae’s April 2014 National Housing Survey. The share of respondents who believe now is a good time to sell a home increased for the third consecutive month to an all-time high of 42 percent, an encouraging sign since many potential home buyers will need to sell a home before entering the purchase market. In addition, the share of respondents who say now is a good time to buy a home remained steady at 69 percent following a gradual climb since the beginning of the year. Notably, although consumers remain generally split regarding their ability to get a mortgage, fewer respondents are concerned about losing their job – which may encourage potential home buyers to enter the market.

Highlights from the survey include:
• The average 12-month home price change expectation increased from last month, to 2.9 percent.
• The share of respondents who say home prices will go up in the next 12 months increased slightly to 50 percent, and the share who say home prices will go down held steady at 5 percent, the all-time survey low.
• The share of respondents who say mortgage rates will go up in the next 12 months decreased to 52 percent, and those who said they will go down increased to 7 percent.
• Forty-five percent of respondents thought it would be easy for them to get a home mortgage today, falling 7 percentage points from last month.
• The share who say they would buy if they were going to move decreased 3 percentage points to 65 percent.