Nationwide 72 percent of homeowners in a recent survey by HomeGain indicated that they were satisfied with owning a home and 28 percent said they were dissatisfied. An analysis of results from a representative selection of states found that more homeowners in wealthier markets evidenced greater support for homeownership while those in more affordable markets were generally less supportive.

In New York State, the second most expensive state in the nation to buy a home, support was strongest, 77 percent. In California, fifth most expensive, support was 75 percent. Florida, twelfth most expensive state, support was 67 percent, and in Illinois, twenty-ninth most expensive, support was only 55 percent. Only Texas countered the trend. Though it ranks thirtieth in median home price, Texas homeowners supported homeownership by a 75 to 25 percent margin.

Among homeowners dissatisfied with homeownership, 64 percent said that price depreciation was the primary reason. However, depreciation seemed to have no effect on support for homeownership on a state by state basis. Some states like California in the Pacific region, where prices have fallen 10.7 percent since 2009, and homeownership support in has remained high. In Texas’ region, where support for homeownership is high at 75 percent, prices actually appreciated 2.1 percent last year. Illinois, where support for homeownership at 55 percent was lowest among all the states analyzed, its home prices have actually fared better than most regions, with only a 5 percent decline in prices over the three year period compared to the 6.1 percent national average.

“The HomeGain 2012 National Home Ownership Satisfaction survey shows in spite of declines in the values of homes nationwide, satisfaction among homeowners remains high at 72 percent, with nearly 3 of 4 home owners satisfied with home ownership.” said Louis Cammarosano, General Manager of HomeGain. “Of the 28 percent of surveyed homeowners who indicated they were unsatisfied, 63 percent cited price depreciation as the primary reason,” said Louis Cammarosano, General Manager of HomeGain.

]]> http://www.realestateeconomywatch.com/2012/01/homeownership-stronger-in-higher-priced-states/feed/ http://www.realestateeconomywatch.com/2012/01/first-time-buyers-ended-2011-on-new-low/ http://www.realestateeconomywatch.com/2012/01/first-time-buyers-ended-2011-on-new-low/#comments Thu, 26 Jan 2012 17:06:36 +0000 editor http://www.realestateeconomywatch.com/?p=4584 First-time home buyers are an ever-shrinking segment of the real estate market. In December, The percentage of first-time buyers tied the lowest level ever recorded in the National Assocition of Realtors’ Realtors Confidence Index this year at 31 percent of the market.

In June, first-timers also accounted for 31 percent. The lowest level ever recorded in the three and a half year old survey of Realtoers was below 30 percent in March 2010.

Realtors participating in the survey blamed stringent credit requirements by lenders who have still not recovered from the Great Recession.

Nearlhy half of December sales went to repeat buyers, 21 percent went to investors, 13 percent to second home buyers, 24 percent were relocation sales and 2 percent went to foreign buyers.

NAR also released projections of 2012 existing home sales at 4.62 million, a 6.3 percent increase over 2011 and median prices at $167,300, a .7 percent rise over 2011.

Homeownership rates for the nation as a whole fell from a high of 69 percent in 2007 to 66 percent today. (Each percentage point represents 1.4 million households). Among Americans under 25, homeownership actually increased slightly, from 21.9 in 2000 to 23.5 percent in 2011, and homeownership among those over 65 also increased, from 80.3 percent to 81.1 percent over the 11 year period, according to a recent analysis by economists at the National Association of Realtors.

Forty-somethings and those in their late twenties lost about four percentage points in their homeownership rates.

However, those in their thirties have lost about seven percentage points from the peak in 2005 to 2011. Those ages 35 to 39 saw their homeownership rate fall from a peak of 66.6 percent in 2005 to 59.4 percent in 2011; for those 30 to 35, homeownership declined from a peak of 56.8 percent to 49.9 percent last year.

“It is also this group where there is potential for re-entering into the homeownership market in the near future,” said NAR Chief Economist Lawrence Yun.

Fannie Mae’s December National Housing Survey found that Americans expect home prices to turn the corner and rise by an average of 0.8 percent this year, up from an expected 0.2 percent increase last month.   Such an increase, though modest, would be the first positive annual price increase since 2006.

However, Fannie’s in-house experts disagree.  They forecast that the Federal Home Finance Administration Index will fall an additional .08 percent in 2012 after falling 4.1 percent this year.

The new survey was only incrementally more positive than in the past.  Americans who say the economy is on the right track in the December survey rose by 6 percentage points over November, while the percentage who say the economy is on the wrong track dropped by 6 percentage points. On the personal finance side, for the first time since February 2011 more respondents say their financial situation will get better over the next year than say it will stay the same. In turn, the share of consumers who say their income is significantly higher than it was a year ago rose 5 percentage points since last month.

“December attitudes have rebounded from the lows seen during the debt ceiling debate and economic deterioration of Europe this past summer. There is marked improvement in consumer sentiment regarding the direction of the economy, personal finances, and future home price expectations,” said Doug Duncan, vice president and chief economist of Fannie Mae. “This improvement is in line with the modest fourth-quarter pickup in the U.S. economy. However, while December results show that more Americans think the economy is on the right track, consumer attitudes are still at depressed levels, with more than two-thirds saying that the economy is on the wrong track.”

Other key findings:

• Twenty-six percent of respondents expect home prices to increase over the next 12 months (up 4 percentage points since last month), while 18% say they expect home prices to decline (down 4 percentage points since last month). 52% say prices will stay the same.
• •Thirty-six percent of Americans say that mortgage rates will go up over the next 12 months, up 3 percentage points from November and even with October.
• Seventy-one percent of respondents say it is a good time to buy a home (up 3 percentage points since last month), and 11% percent say it is a good time to sell.
• •On average, Americans expect home rental prices to increase by 3.5 percent over the next 12 months, up from 3.2 percent in November.
• •Five percent expect a decline in home rental prices over the next 12 months (tying May 2011 as the lowest point in the past 12 months), while 43 percent of respondents believe that home rental prices will increase.
• Thirty-one percent of Americans say they would rent their next home, while 64 percent say they would buy, up 1 percentage point from last month.

That’s the bottom line from a new study of housing markets from the Research Institute for Housing America (RIHA) and the Mortgage Bankers Association by Professor Gary V. Engelhardt of Syracuse University.

Engelhardt’s thesis may explain the dramatic decline in inventories across housing markets this summer and fall as sellers have kept their homes off the market. According to the latest data from Realtor.com, listings on the nation’s largest homes for sale site were down 21.3 percent in November from a year ago.

Over the next five quarters, positive home-buying sentiment is forecast to remain around current and long-run average levels. But buyers aren’t the problem, according to Engelhardt, it’s sellers. Home-selling sentiment is forecast to remain around current and historic-low levels.

Sellers want to price their homes based on key past market values, such as the purchase price of the property, the market value at the time or the most recent refinance or second mortgage or what a comparable property sold for in the recent past.

Underwater homeowners cannot adjust their reservation prices downward much below that of the outstanding mortgage amount. Currently, about 23 percent of all homeowners with mortgages nationally are underwater. In some particularly hard-hit markets, as many as half of all homeowners with mortgages are underwater. Those are the same places with the highest incidence of past due mortgages and foreclosures.

With large declines in market values, sellers see increased value in waiting, either to initially list, or to keep, the property on the market. This may help to hold reservation prices high enough to drive a substantial wedge between buyer and seller sentiment. A poor job market with limited job mobility - a key driver of housing-market transactions - may exacerbate this.

Over time, buyer and seller sentiment will come more in line and there will be more transactions but prices will not rise as fast as volume for two reasons. First, time on the market for existing listings will fall. Second, any upward price pressure will bring forth new listings, as observed prices will begin to cross the reservation prices of sellers who have kept homes off the market. Overall, there is little reason to believe there will be substantive increases in home prices in the near term, at least until reservation and observed prices become better aligned, Englehardt said.

Things won’t get better until the negative equity picture improves. “Over the past two decades, purchase originations have tracked more selling sentiment more strongly than home-buying sentiment. This is especially the case in the current downturn. This suggests that favorable sentiment and real activity in the market will be weighed down significantly until the overhang of troubled mortgages is cleared out. Although there has been some recent progress on this, there is still a long way to go,” concluded the Syracuse economist.

However, on one front there is consensus: rents will rise significantly.

On average, Americans expect home rental prices to increase by 3.2 percent over the next year,. Some 41 percent said rents will increase next year, 48 percent expect rents to stay the same and only 6 percent expect them to fall. The November numbers showed a slight retreat from October, when 43 expected rents to rise and 47 expected them to stay the same.

Consumer expectations for next year exceed the current level of rent increases. The average monthly rent for all categories, including apartments and single-family homes, was $846 nationwide in the third quarter, up 2.5 percent from the same period a year earlier, according to Local Market Monitor. Reis puts the third quarter increases at 2.3 percent year-over-year in the 80 plus markets it tracks. The National Association of Realtors forecasts multifamily rents to rise 3.5 percent next year, virtually what consumers expect.

Rising rents impact the homeownership markets in two ways. Monthly mortgage payments on the median priced home-including taxes and insurance-are increasingly falling below average rent levels. In 15 cities today it is less expensive to rent than to buy, according to the Wall Street Journal. Higher rents also make investment purchases of residential properties more attractive. Increasingly, investors are buying to rent out properties for extended periods of time rather than selling.

Consumer home price expectations changed slightly in November, moving from negative to positive territory for the first time in six months, with respondents expecting home prices to increase by 0.2 percent over the next year.

“Though their home price expectations have become slightly positive, consumers remain concerned about the direction of the economy and continue to view their household finances as being relatively flat,” said Doug Duncan, vice president and chief economist of Fannie Mae. “Most Americans expect no improvement in their personal financial situation in the next 12 months and will likely remain wary about undertaking the significant financial obligation associated with homeownership until their view of their income, expenses, and job security heads in a more positive direction.”

Highlights:

•Twenty-two percent of respondents expect home prices to increase over the next year (up 3 percentage points since last month), while 22 percent say they expect home prices to decline, down 1 percentage point since last month. 53 percent say prices will stay the same, a 2 percentage point drop from October.

-Thirty-three percent of Americans say that mortgage rates will go up over the next 12 months, down 3 percentage points from October and a return to the level seen in September.

•Sixty-eight percent of respondents say it is a good time to buy a home (down by 1 percentage point since last month), and just 10 percent say it is a good time to sell, which is unchanged from the previous two months.

•On average, Americans expect home rental prices to increase by 3.2 percent over the next year, a 0.1 percent decrease from October.

•Just 6 percent expect a decline in home rental prices (unchanged since last month), while 41 percent of respondents believe that home rental prices will increase in the next 12 months.

•Thirty-two percent of Americans say they would rent their next home, while 63 percent say they would buy, down 3 percentage points since last month and a return to the level seen

A Coldwell Banker Real Estate Survey also found that most used during the holidays  the kitchen and living room are split almost evenly as the most popular spaces (41 percent and 43 percent, respectively), while 12 percent said the dining room is the most frequented area.

Approximately four in 10 respondents say their holiday get-togethers include 15 or more family members and friends, and more than half (54 percent) say they stay overnight with their families so they can all be in one household during the holidays.

Additionally, the survey of nearly 1,000 people found:

More than three-quarters (78 percent) of Americans “deck the halls” by decorating their home for the holidays. The vast majority (67 percent) say they decorate some, without going overboard, while 11 percent say they “go all out.” Only 21 percent don’t decorate at all.

Most people claim they’ve never snooped for presents. 77 percent of respondents said they have never looked for stashed-away presents before it’s time to open them. (Only 23 percent freely admit to peeking around)!

“Almost everyone has a memory of the holidays that involves being home with friends and family,” said Michael Fischer, chief marketing officer, Coldwell Banker Real Estate. “Americans cook and share food, host parties and bring everyone together in our homes. At Coldwell Banker, we recognize that a home is more than just a place to live. This is true more than ever around the holidays.”

For nearly a decade, 39 has been the median age for home buyers.  This year, the median age jumped to 45 years.

The sudden aging may be a one-year anomaly, the result of the rapid decline of first-time buyers who sank from 50 to 37 percent of all home buyers as the as a result of the expiration of the first time buyer tax credit last year.  First-time buyers are considerably younger-31 years old on average-while repeat buyers average 53 years according to the 2011 National Association of Realtors’ Profile of Home Buyers and Sellers.

If the older age sticks, however, the ramifications for the housing market could be serious.  As buyers delay their first purchase, they diminish demand for starter homes, which makes it more difficult for growing families in need of more space to sell and move into larger quarters.

Last year, for example, the typical first-time buyer purchased a 1,570 square foot home costing $155,000; the estimated median monthly mortgage principal and interest payment was $794. The typical repeat buyer was 53 years old and earned $96,600, notably higher than the $87,000 median reported in the 2010 profile. Repeat buyers purchased a median 2,100 square foot home costing $219,500, with an estimated median payment of $1,006.

A number of signs suggests that the home buying population has been aging.

Between the ages of 25 and 34 is prime time when many people form households with a spouse, partner, roommate, or by themselves, then start families and buy their first home. During and after the recession, household formation dropped for this age group, and more of them than ever are living with parents or other adults rather than renting or owning their own place. In the past three years, the rate has dropped from 1.7 million units per year to below 500,000 currently. These folks will wait to form their own households and consider homeownership only when their job prospects improve.

A key measure for housing demand and homeownership is the unemployment rate for this group and the share of this age group that is employed.  As unemployment remains historically high - particularly youth unemployment, which in the United States is above 18 percent among 15- to 24- year-olds - a growing segment of the population is delaying its earliest ventures into the housing market. As more twenty-somethings remain in their parents’ homes or stay with roommates longer before heading out on their own, the bottoming household formation rate begins to anticipate pent-up demand for housing.

Last month, the unemployment rate for 25-34 year-olds rose to 9.8 percent from 9.7 percent in September and is at its highest level since December 2010. The unemployment rate for all adults, in contrast, fell from 9.1 percent to 9.0 percent. In October, 73.5 percent of 25-34 year-olds were employed, down from 73.7 percent in September and 73.9 percent in August. Before and during the boom, almost 80 percent of this age group was employed. The job market remains tough for this key age group: before the recession, unemployment for 25-34 year-olds followed the overall rate pretty much exactly, but has remained stubbornly above the all-adults rate even as the unemployment rate has drifted down slowly, according to Trulia Insights.

For the seven months of this year, the first-time buyer market share has been remarkably steady, ranging from 32 to 36 percent of existing home sales through the spring and summer buying season, according to the National Association of Realtors monthly survey of 1300 members.

The Campbell/Inside Mortgage Finance survey, also a survey of real estate brokers, found that the first-timer market share has fluctuated 35 percent in January to 37.7 percent in August.  In the Campbell survey, the first-time homebuyer share of short sales hit a peak of 54.1 percent of all short sale transactions in November 2009, just before the originally-scheduled expiration of the federal homebuyer tax credit.

Today’s 32 to 38 percent range is not far below the 40 percent market share first-time buyers enjoyed in 2003 and 2004, before the boom drove prices out of reach of man or the tax credit created an artificial, temporary demand.

Even though first-timers are saddled with higher down payments, tougher credit requirements, mortgage approval delays (see Mortgage Bottlenecks Hold up Closings), those are not the deal killers that they might be .

Today’s first-timers have found several ways to deal with higher down payment requirements.  FHA’s 3.5 percent down market share has risen from 3 to 30 percent since 2006, and even with tighter credit standards and higher fees that took effect a year ago, FHA remains the financing of choice for most first time buyers.  Many have also discovered the no down payment USGA guaranteed loan program, which also recently raised fees (see New Fees Drive Up Cost of USDA Home Loans)  but has $12 billion a year to guarantee loans.  Today’s credit requirements and documentation are not much tougher than they were 20 years ago.

In fact, today’s all-time low rates, once-in-a-generation prices 30 percent below levels of four years ago and inventories of distress sales discounted below market values in every market should herald a First-time Buyer Golden Age.  Moreover, rents are rising and rental choices are dwindling as vacancy rates rise.

So why aren’t first-timers buying more than they are?

Fannie May’s recent National Housing Survey has some clues.  Future expectations rather than current realities are keeping buyers at home.

“The September survey showed a marked deterioration in consumer expectations of home prices over the next year-their weakest outlook since monthly tracking began in June 2010,” said Doug Duncan, vice president and chief economist of Fannie Mae. “Despite a decline in negative economic headlines during September - in contrast to their ubiquity during the debt ceiling debate in August - consumers continue to demonstrate very negative attitudes. At the same time, the share of consumers expecting mortgage rates to go up dropped sharply to the lowest level we have recorded, likely influenced by the news that the Federal Reserve will attempt to keep interest rates low for years to come.”

“The lack of a sense of urgency to buy homes, given expectations for further declines in home prices and continued low mortgage rates, coupled with general pessimism regarding their own personal finances and the economy, bodes poorly for the recovery of the housing market,” Duncan stated.

Since 2005, homeowners’ expenditures for housing have risen from 31.9 percent of their household budget to 33.2 percent, but renters’ costs have risen even more from 35.6 percent to 38.4 percent, according to the October CoreLogic U.S. Housing and Mortgage Trends.

Since 1985, homeowners have increased their housing expenditure allocation by 12 percent, while renters increased by 22 percent.

As consumers allocate more of their expenditures toward housing, they have less money to spend on non-housing consumption. The largest decline in a household’s budget occurred in transportation expenditures which fell by 17 percent and 22 percent since 1985 for homeowners and renters, respectively, CoreLogic said.

The increased spending allocation for housing, which is largely due to the stagnation of incomes among Americans of home buying age beginning in the 1990s, has actually contributed to the decrease in homeownership by making buying a home more difficult.

Demographics have also contributed to the decline in homeownership.  For the 25 to 34 age group, the homeownership rate fell from 51.6 percent in 1980 to 42.0 percent in 2010. For 35 to 44 year olds, homeownership rates fell from 71.2 percent to 62.3 percent over the same time period.

The CoreLogic report also found that a significant number of foreclosures are remaining on the market for as long as four years or more.  One out of five REO foreclosures (21 percent) are taking more than a year to sell.  Nearly 10 percent, or 23,200 properties that were auctioned in 2006, remained in REO as of Q2 2010. In other words, these properties have been in REO continuously since 2006.

To download a copy of the CoreLogic report, click on this link corelogic10.19.11.pdf