Foreclosures Drop SignificantlyFirst Preston HT

22July

Foreclosures Drop Significantly

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The overall health of the housing sector appears to be improving. The foreclosure rate has been declining over the past few years and hit an 8-year low in June according to a RealtyTrac report citing 107,194 U.S. properties filed for foreclosure. This was a 19% drop from the previous 6 months.

Daren Blomquist of RealtyTrac said, “Nationwide foreclosure activity in June reached an important milestone, dropping to levels not seen since before the housing price bubble burst in August 2006. Over the next six to nine months, nationwide, foreclosure numbers should start to flat line at consistently historically normal levels.”

While this is positive news it’s important to note that there is still an abundant amount of distressed inventory in the market.

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14July

Student Housing is Heating Up

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There is a sector of real estate that has quietly been heating up and investors want in; it’s student housing. Forget the image you have in your head of the dorms you lived in while attending college years ago. This isn’t your stereotypical student housing of nondescript rooms with dirty carpet, linoleum floors, and equipped with only the bare necessities. Today’s student housing is all about the comforts of home.

A large group of today’s college students have grown up living with luxury amenities at home and want the same comforts while attending school. Some private investors and REITs (real estate investment trust) have identified this opportunity to build new housing both on and off campus. Universities are welcoming the on campus private investment since budgets have been tightening.

These new student housing buildings could easily be mistaken for a luxury hotel or apartment building and feature flat screen TVs, state of the art fitness centers, and full kitchens and baths. Bill Bayless, CEO of American Campus Communities, the largest student housing REIT in the U.S. commented, “Student housing isn’t just real estate. It’s really creating physical assets that are conducive to academic achievement.” It is estimated that the student housing sector is a $4-5 billion business and still growing.

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3July

Will Rental Prices Affect Mortgage Rates?

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It’s no secret by now that the rental market across the U.S. is hot as rental prices are growing at their fastest pace in 5 years. The national vacancy rate was 4.1% during the second quarter of this year and the asking rent increased to an average of $1,099 a month (0.8% increase from the first quarter). So with the cost of renting creeping upward, will this affect those that are looking to buy instead of rent?

Some economists believe mortgage rates could increase as rent continues to rise. Lawrence Yun, The National Association of Relator’s chief economist made a statement, “Given that housing is the biggest weight to overall consumer price inflation, if this rent trend continues, and it could easily because vacancy rates are falling and falling, then the overall CPI inflation will be higher than anticipated, which will then force the Federal Reserve to raise interest rates sooner than later.” There are other economists; however that disagree and feel that interest rate policy will not hinge solely on apartment rents.

Mortgage rates have not seen much action over the past year (30-year fixed rate mortgage rate is 4.17%) but if they were to increase this wouldn’t be beneficial to homebuyers. For housing to grow legs it is important to see job growth and income growth become stronger than it has been. An increase in supply could also help push prices down.

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25June

Real Estate Values Driven by Walkability

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Home prices have continued to grow over the past year. The Case-Shiller Index noted an increase of 10.8% in home prices year-over-year ending in April. One of the factors that has been linked to the rise appears to be a city’s walkability.

George Washington University School of Business and Smart Growth America joined together to release a report ranking the walkability of 30 of the largest cities in the US. They concluded there is a distinct correlation between real estate values and walkability for both residential and commercial properties. Chris Leinberger, Research Professor of Urban Real Estate at GWU commented, “Walkable, urban for-sale housing is by far the most expensive housing in the country. The range, depends on the market, between 40% and 200% greater than driveable, suburban housing. Twenty-five years ago that relationship didn’t exist because walkable (cities back then) was not valued.”

The younger generation of Millennials tend to prefer transportation via car ride-shares, walking, bike shares and rapid transit in an effort to be more environmentally conscious. Washington, D.C. was ranked number 1 as the most walkable city. Those cities boasting more walkable neighborhoods have seen home real estate values bounce back quicker and higher than those with less.

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19June

Housing Bubbles Abroad?

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With the run up in home prices in the U.S. some people are concerned about a possible housing bubble again. But several economists have popped a hole in this belief based on market fundamentals. Lending standards having gotten tighter and the size of down payments have increased from the pre-housing bubble burst. However, the story aboard seems to be different. The Deputy Managing Director of the International Monetary Fund (IMF), Martin Zhu, noted in a recent speech that housing prices were climbing in several countries.

Canada is experiencing strong home and apartment construction and has high price-to-rent and price-to-income ratios making affordability tighter. It is also experiencing a lot of foreign investing from China. Real home price appreciation has almost hit 20 percent.

The country of Norway has reported around a 30 percent jump in home prices since the worst of the Global Recession which is partly due to surging population and incomes as a result of immigration. A large portion of the consumer’s wealth is sitting in illiquid real estate and household debt is high, so a housing downturn could hurt the country.

Since the beginning of 2009, Switzerland’s home prices have increased more than 20 percent and mortgage debt has jumped to 140 percent of GDP, which for some analysts is a warning sign. There have been efforts to tighten lending standards, as we have seen here in the U.S. after the housing collapse, and increased bank reserves. For these countries and several others real estate is still booming but are there bubbles looming?

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12June

Student Debt Holding Back Housing

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One thing that could be attributing to the housing market’s lackluster performance is student loan debt. It has been a topic of discussion over the past few years; the amount of student loan debt that today’s college graduates rack up is at all-time highs. On average, college graduates have $35,000 in student debt and as college expenses increase every year, this amount is only projected to grow. Student loan debt is in excess of $1 trillion today.

With such high levels of debt accumulated right out of school, this leaves typical would be first-time homebuyers with less disposable income and makes it harder to qualify for a mortgage. Couple this with still high unemployment rates for young workers (ages 25-34) and it really impacts housing. In April, first-time homebuyers accounted for just 29% of existing homebuyers, which is down from historical rates of around 40%, according to the National Association of Realtors.

This lack of homeownership has recent grads either renting or still living at home with mom and dad. This is good news for the rental market which continues to show signs of strong demand. Jed Kolko, Trulia’s chief economist commented, “For young people, the housing recovery is still in an early stage: More jobs today means they move out of their parents’ homes and become renters, while home buying remains years away for many.”

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3June

Summer Real Estate in the Hamptons

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For years the Hamptons has been a hot summer destination for New York City dwellers to escape to, along with other vacationers from across the country. The recession took its toll on the summer destination spot along with the real estate market, but this summer the Hamptons look to be coming back strong.

The summer of 2007 was the last big boom the Hamptons saw and this summer is shaping up to be even bigger. So far the high-end real estate has seen a remarkable amount of activity as vacationers seek to rent houses during their stay and investors look for investment properties. The colder and longer than normal winter left potential buyers and renters putting off planning for their summer vacations and now they are scrambling to pin down their plans.

Prices have been on the rise and the Corcoran Report cites increased closed sales were up 38% in the first quarter of the year along with sales volume jumping 27%. The lack of available land in some of the hot spots has contributed to higher prices and some recent big home sales in the area have encouraged other homeowners to put their properties on the market while it’s hot.

What is the Hamptons buyer looking for today in a property? Lots of natural light, open floor plans, plenty of square footage and a combination of indoor and outdoor living space.

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29May

Home Prices Rise in March

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Just when you thought home prices couldn’t go any higher they are still pushing limits. The S&P/Case-Shiller composite index recorded a 0.9% rise in March on a seasonally adjusted basis. Economists had expected the index to report a 0.7% increase.

Although the index reported a year-over-year home price increase of 12.4% (well above Wall Street’s appraisal) this was down slightly from February’s year-over-year data of 12.9%. As mortgage rates drop again, the housing market could see more growth and higher prices still.

March’s slight drop in year-over-year data reveals that home prices could be moderating. Markets like Las Vegas, San Francisco, and Los Angeles have reported significant slowdowns. Chairman of the index committee at S&P, David Blitzer, said, “Annual price increases for the two composites have slowed in the last four months and 13 cities saw annual price changes moderate in March. The National Index also showed decelerating gains in the last quarter.” It will be interesting to see over the next few months how much higher prices can go and even if they will or not.

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21May

Housing Starts Driven by Multi-Family Homes

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Apartment Building

The housing market has finally received some good economic data after a few months of less than stellar news; Housing starts for the month of April increased 13% from the previous month. What’s interesting to note about this number is what is driving it.

It appears it is all about multi-family properties (e.g. townhomes, condos and apartment buildings) at the moment. The recent jump in housing starts was spurred by a 43% rise in multi-family properties which is defined as buildings with five or more units. On the other hand, single-family starts rose less than 1% from the month of March. Multi-family building permits increased from 400,000 to the highest it’s been since 2008, to 478,000.

The composition of housing starts isn’t surprising considering home ownership rates are still low and credit for first-time home buyers remains hard to obtain. Peter Boockvar, an analyst with the Lindsey Group, commented, “Bottom line, with the home ownership rate down to 64.8 percent versus the 2004 peak of 69.2 percent, and the 50-year average of 65.4 percent, the trend to renting is obvious for a variety of reasons we all know.”

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13May

Home Prices are Hot

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Home prices continue to rise in what is undoubtedly a seller’s market. According to Zillow, prices have increased so quickly that about 1,000 local housing markets have reached records in new home prices.

Real estate brokerage firm, Redfin, noted that 40% of the sellers it surveyed plan to price their homes above market value when they list during the second quarter this year. This is a 33% increase from the start of the year. Fannie Mae reported in April that 42%, an all-time high, of their 1,000 surveyed homeowners and renters believe that it is a good time to sell.

Home sellers are more likely to receive the asking price from the buyer that pays in all cash. In markets with fewer cash buyers, home sellers have indicated they are willing to hold out if it doesn’t sell quickly. For some homeowners they need to get their full asking list price in order to pay off a current mortgage.

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