Home Search

Tuesday, November 29, 2011

Who says Homes aren't selling?

Home Sales Increase Across the Country
The National Association of Realtors recently released their 2011 3rd Quarter Housing Report. In the report, they showed that combined sales of single family homes, condos and co-ops increased in EVERY state as compared to the 3rd quarter of last year. Here are the state-by-state numbers.
The next time someone says houses aren’t selling, ask them which state they live in and show them the chart.

Wednesday, November 9, 2011

Homeownership, As American as Baseball and Apple Pie and Baseball!

Americans Still Believe in the Value of Homeownership



Last week, Fannie Mae released their National Housing Survey for the third quarter of 2011. They survey the American public on a multitude of questions concerning today’s housing market. Each quarter, we like to pull out some of the findings we deem most interesting. Here they are for the most recent report:

Most Important Reasons to Buy a Home

The study shows that the four major reasons a person buys a home have nothing to do with money. The top four reasons, in order, are:
  • It means having a good place to raise children and provide them with a good education
  • You have a physical structure where you and your family feel safe
  • It allows you to have more space for your family
  • It gives you control of what you do with your living space (renovations and updates)
When we talk about homeownership today, it seems that the financial aspects always jump to the front of the discussion. There is no doubt that families must justify a home purchase from a financial point of view today. However, the reasons they actually buy are the same reasons our parents and grandparents purchased their home – to create a better lifestyle for their families.

The Home as an Investment

Though most people purchase a home for non-financial reasons, everyone realizes there is a money component to homeownership. Here is what they said on this issue:
  • 64% of the general population (and 69% of homeowners) believe that homeownership is a ‘safe’ investment.
  • 55% believe that homeownership has more potential as an investment than any other traditional asset class.
  • 68% think that now is a good time to buy a home

Rent vs. Buy

We are always interested in the difference people see in renting vs. owning.
  • 63% of renters have aspirations to someday own their own home
  • 70% of renters think that owning is superior to renting
  • 96% of homeowners see homeownership as a positive experience (4% see it as a negative experience) while 83% of renters see renting as a positive experience (15% see it as a negative experience)
  • 97% of homeowners live in a single family residence while 53% of renters live in a multi-unit building

Bottom Line

Even in these difficult times, Americans still realize the value of homeownership both from a financial and social standpoint.

Tuesday, November 8, 2011

The Ship Appears to be Turning

The Ship Appears to be Turning

Today, we are again honored to have Ken H. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research as our guest blogger. To view other research from FIU, visit http://realestate.fiu.edu/. Dr. Johnson will also be speaking at NAR’s Conference and Expo in Anaheim later this week. For more information click here. - The KCM Crew

On October 31, CNN Money reported: “Home prices headed for triple dip”.  Reporting on information provided by Fiserv (a financial analytics company), a 3.6% fall in prices on a national basis is expected by next summer.  This will result in the Case-Shiller Home Price Index falling to 35% below its peak in 2006 and marking a triple dip in U.S. housing markets.[1]

Say it ain’t so!  Is housing set for a third dip in five years?  This depend on factors being in place to lessen the impact from market anxiety brought on by worries over a pending wave of foreclosures and the U.S. debt crisis, which we will start to hear more about shortly.

So, what are these factors and what do they tell us?  These factors are really fundamental drivers that encourage individuals to buy versus rent their personal residences.  They are sometimes referred to as housing affordability measures.  The price to income, mortgage payment to income, and a buy versus rent analysis for various markets provide strong evidence that factors are in place to encourage home ownership or favor renting depending on the resulting measurements.  In ongoing research being performed by Beracha and Johnson, these measures are at record levels in favor of buying.[2]  In fact, the price to income ratios in 23 of the 50 states are at 30-year record lows.  The payment to income ratios are at 30-year record low in all 50 states.  A buy versus rent analysis performed in 23 of the nation’s largest metropolitan areas also indicates that hurdle rates (the rates at which potential buyers are indifferent between buying and renting) in all 23 cities are below 25-year average appreciation rates.  All of these results strongly favor purchasing.

What about per capita income and present day prices (relative to past prices)?  Presently, U.S. per capita income is on the rise again and has regained to the level of 2007 (roughly $40,000 per person), while prices of homes on the other hand rest at 2002 levels according to the Case-Shiller Home Price Index.  What about mortgages rates?  Presently, 30-year fixed rates are at near record low levels.

So, let’s put this all together.  Housing is presently more affordable than at any time in the last 30 years.  While income is only at 2007 levels, home prices are even lower coming in at 2002 levels.  All of these factors set the stage for many individuals to favor purchasing over renting.  Thus, while there are grave concerns over the overall health of the economy, fundamental drivers now appear in place to staunch any further significant plunges in home prices. 

The ship appears to be turning.[3]

Endnote

[1] See http://money.cnn.com/2011/10/31/real_estate/home_prices/

[2] Beracha and Johnson (2011) on going research.

[3] This conclusion obviously assumes nothing unprecedented and catastrophic occurs such as the removal of the home interest deduction to combat the national debt or the often predicted foreclosure tsunami actually finally occurs.

Monday, November 7, 2011

Homeownership: Still The American Dream!

Homeownership: Reports of Its Death are Exaggerated



There have been a growing number of reports announcing the death of American homeownership over the last two years. Some have said we are evolving into a rental society and even challenge the long standing belief that homeownership should be a part of the American Dream. They look at the falling rate of homeownership as proof of their point. Others say that the younger generations no longer see the value in owning over renting.

However, this past week, two news items might refute these points. First, DSNews reported the homeownership rate actually increased in the last quarter; the first quarterly increase in two years.
“After falling to a 13-year low during the second quarter, the homeownership rate posted a highly unexpected rise in the third quarter, according to a Census Bureau report.”
Then, Fannie Mae released their 2011 3rd Quarter National Housing Survey. We will cover this report in more detail on Wednesday. But we do want to mention a few findings the report highlighted. Both Generation Y (birth date mid-1970s to mid 1990s) and Generation X (birth date mid 1960s to mid 1970s) have stronger beliefs in the importance of homeownership than those of the general population.

Here are the numbers for the three major reasons to buy (as per the survey) with the percentage who believe in each reason:

1. It is a good place to raise children and provide them with a good education:
  • Generation Y: 84%
  • Generation X: 81%
  • General Population: 80%
2. You have a physical structure where you and your family feel safe:
  • Generation Y: 77%
  • Generation X: 79%
  • General Population: 76%
It allows you to have more space for your family:
  • Generation Y: 76%
  • Generation X: 77%
  • General Population: 73%
Both generations also believe in homeownership as an investment. 70% of Generation Y and 66% of Generation X see homeownership as a safe investment while 64% of the general population believes so.

Bottom Line

This country’s belief in homeownership is anything but dead. The younger generations have the same if not a higher level of belief than earlier generations. As the economy improves, more people will make the move into a home of their own.