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Please click here to see the edition of BuilderBytes for 10/31/14 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • 3Q 2014 GDP rose by 3.5 percent in advance estimate
  • Federal Reserve ends QEIII, will now focus on interest rates
  • Initial unemployment claims rise by 3,000 in latest report
  • Mortgage applications dip 6.6 percent in latest survey, interest rates up slightly 
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

During the month of September, while both new and existing home sales rose slightly, there was one group which continues to remain somewhat on the sidelines:  the first-time buyer.  According to the National Association of Realtors®, in September the share of first-time buyers was 29 percent for the third straight month. 

Since historically the share of first-time buyers has been closer to 40 percent, given that these buyers have represented less than 30 percent of the market in 17 of the last 18 months, it’s almost certain that this change will have an impact on the housing market in the future.  So just where have these first-time buyers gone, and what are their plans for their housing needs?

For now, most are choosing to rent:  according to the Census Bureau, the share of households age 25 to 29 who owned their own homes fell from nearly 41 percent in 2007 to 34 percent by 2013, which is great for landlords but not for the neighborhood stability which accompanies higher percentages of homeownership.

Not surprisingly, the primary reason they’re choosing to rent for now is economic:  according to the non-profit group Generation Opportunity, unemployment rates for millennials (those born between 1980 and 1995) remain higher than for other age groups.  Even when they do find employment, many jobs are either part-time or offer low, entry-level wages which wouldn’t help them qualify for mortgages.

Considering that the average worker today doesn’t earn the national median salary until age 30 – versus age 26 in 1980 – a four- or five-year delay in reaching traditional milestones such as getting married, starting families and buying homes seems to mirror the temporary disappearance of many first-time homebuyers.  Consequently, if the median age for a first-time homebuyer has been about 31 -- and 47 for a move-up buyer -- any delays in grabbing the first rung of that homeownership ladder are likely to have an impact on future purchases.

In addition, other factors have also been at play here, including tougher mortgage loan standards, a lack of entry-level home inventory, and student loan debt that often must be paid down before buyers can qualify for a mortgage.  Meanwhile, young adults trying to save for down payments must also contend with rising housing costs, with many households paying 30 percent – and much higher in high-cost cities – of their incomes on rent.

Fortunately, despite these considerable headwinds facing young adults, the ongoing speculation that millennials won’t embrace homeownership as much as previous generations simply isn’t true:  It’s simply being delayed.   In fact, according to recent research from Zillow, the dip in first-time home buyers has been much more about long-term changes in family structures that it is about current economic conditions.

If anything, young adults are simply trying to navigate a mortgage system that simply hasn’t kept up with the times.  Given that 90 percent of today’s mortgages are supported by various government programs (up from 40 percent a decade ago), another reason for fewer first-time buyers could simply be a lack of mortgage options which would open up the lending spigot.

Indeed, for married, dual-income couples, the homeownership rate is actually above pre-recession historical levels, whereas it has dropped for the increasingly rare, traditional family structure of two parents who live on a single full-time income.  For young singles, although the rate of homeownership has been mostly flat over the last decade, this rate still seriously lags those of married couples.  Consequently, if the rate of marriage for young adults today stands at about 26 percent – compared with 36 percent of Gen Xers, 48 percent of baby boomers and 65 percent of the Silent Generation at the same age – we certainly shouldn’t be surprised at their delay in settling down and buying homes.

For builders, the challenge is to offer homes today that millennials want, and that means more urban-oriented projects close to transit centers that can effectively compete with upscale rental projects which continue to offer more compelling amenities.

As for the millennials themselves, the future job market is already pivoting towards them, as many of them sat out the poor labor market of the recession by improving their education.  Last year, 34 percent of those aged 25 to 29 held some type of college degree, making them the best-educated cohort since 1968.  With their comfort of the latest technologies and awareness of current cultural tastes, for many employers the combination of these factors at a lower salary than older, more seasoned candidates will prove hard to resist.

Please click here to see the edition of BuilderBytes for 10/30/14 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • Case-Shiller Indices show continued deceleration in home gains through August
  • Consumer confidence rebounds in October
  • Durable goods orders slumped in September after busy summer
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

Please click here to see the edition of BuilderBytes for 10/28/14 on the Web.

In this issue of the MetroIntelligence Economic Update, I covered the following indicators:
  • September new home sales rose to six-year high
  • Pending home sales rose in September to second-highest level over last year
Want to advertise in the newsletter and reach over 130,000 readers? Contact National Sales Manager Nick Cosan at nkosan@penpubinc.com.

My column for the October 2014 issue of Green Home Builder magazine is now posted online.

For this issue, entitled "The Driverless Car's Impact on Land Use," I did some (quite fascinating) research on just what kind of changes in land use patterns we can expect in the future from the driverless (or self-driving) car. An excerpt:
So just what does this mean for land use and real estate development?  Firstly, the very act of decoupling parking requirements from obtaining project approvals will have an enormous impact on how we design office buildings, retail centers, high-density multi-family projects and even the traditional single-family home...

Secondly, driverless cars could make long commutes more bearable due to both the improved efficiencies of an interactive fleet which constantly coordinate with real-time traffic information, as well as the ability to free up riders to be more productive during hours which are otherwise wasted...

Thirdly, the mixed-use, pre-WWII walkable community that is returning to favor nationally could become even more prevalent if cities are willing to relax their parking requirements -- if and when the driverless car gains critical mass...
To read the entire column, click here.

To read the entire October 2014 issue in digital format, click here.

      
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