Ultimate Open House

From NAHB

The housing market is about to see a major youth infusion from members of Generation Y moving into households of their own, but what kind of homes they will want or be able to afford are among the open questions that will be especially challenging for established builders who may be ill-equipped to respond to the magnitude of the changes likely to characterize the recovery period that lies ahead.

Turning the tables on young men, young women will be the demographic group to watch, as they come to the housing market better educated and with higher paying jobs than their male counterparts.

In an NAHB webinar on June 30, James Chung, president of Reach Advisors, cited some demographic statistics about the U.S. population that ought to have an especially upbeat ring in the ears of the developers of multifamily rental properties. However, he cautioned that the dynamics of the marketplace will be dramatically different.

“The demographic winds have clearly changed for residential real estate,” Chung said, “from massive tail winds to massive head winds ahead. The good news is that multifamily still has some tail winds ahead after the storm subsides, much more so than other sorts of real estate, but the wind in the sails will be different from the past.”

Less Money to Spend on Housing

Nobody quite knows for sure how the emerging economy will color the behavior of consumers, but as the U.S. population begins to get back on its feet financially it is unlikely that typical housing consumers will have the wherewithal they once had to spend on housing.

In terms of household income, statistics from the Census Bureau depict a decade in which the top 10% captured 50% of all U.S. earnings and the top 1% landed 25%, he said. In inflation-adjusted dollars, from 2000 to 2008 incomes were down for every age group up through the younger half of the baby boom, those aged 45 to 54, who saw their median income plunge almost 12%.

The younger baby boomers, the large majority of whom are well-established home owners, will be able to soften that blow by falling back on healthy amounts of home equity, according to Chung. But that won’t be the case for Generation Y members, who have feet planted in both the 15-to-24-year and 25-to-34 age groups, both of which experienced a decline in median household income in the 7% to 8% range through 2008.

Born roughly in the 1980s through 1990s, members of Gen Y had actually been spending more than prior generations at their age even though they had less income than those who had preceded them, Chung said. But their high-spending ways began fizzling out with the onset of the recession, he said, as the subsidies they had been receiving from their parents started “shrinking fast.”

The nation’s current job situation remains at detrimental levels for housing, Chung reminded his audience, with roughly 20% of the workforce out of work, underemployed or so discouraged that it has dropped out. Returning to full-employment will need some time, maybe not as long as the decade or more the Japanese took to recover following the collapse of their financial institutions in the 1990s, he said, but that scenario is a more likely outcome for today’s precarious U.S. economy than the rapid job creation that used to occur in the aftermath of recessions.

What young women are able to earn in the period ahead and how well they fare on their career paths will have implications for housing, he indicated, perhaps enabling them to pass more quickly than expected through the upper end of multifamily rentals into the first-time buyer market.

The amount of support that prospective renters and buyers receive from the economy remains a major unknown, but Chung laid out some demographic numbers and market research on Gen Y that builders should be digesting now.

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From Wall Street Journal

Walt Disney Co. plans to unveil Wednesday its first foray into residential real estate in more than a decade with a pricey vacation-home development in Florida’s Walt Disney World.

It’s a risky move. Disney will offer homes priced between $1.5 million and $8 million in a state where the foreclosure rate remains among the nation’s highest. In Orlando, where brokers say home values have dropped between 50% and 60% from the peak, Disney’s pricing would put its homes near the top of the market. According to Realtor.com, the average price of new listings in greater Orlando this year is just over $243,000.

But Disney believes the market for luxury homes is rebounding. Despite adding wine-tasting events and VIP park tours in recent years, “The affluent market is an area where we haven’t offered a lot of product,” says Matt Kelly, vice president of Disney resort real-estate development.

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From MarketWatch.com

Home buyers are close to gaining more time to obtain a federal home-buyer tax credit of up to $8,000.

President Barack Obama is expected to sign off on legislation as early as Thursday following approval in both congressional chambers earlier this week. It would extend the deadline for the home-buyer tax credit, giving buyers with purchase contracts in place three more months to close on the sale.

Specifically, buyers would have to close before Oct. 1 to be eligible for the extended credit. The closing deadline was originally June 30. To be eligible, buyers need a contract that was in place by April 30.

The National Association of Realtors has estimated that about 180,000 otherwise eligible buyers were likely to miss out on the credit if the original deadline was upheld. It’s been difficult for some buyers to get their mortgages approved on time, as lenders work through a clogged pipeline of applications

From Housingwire.net

More than twice as many women purchased a home for the first time in 2009 than men, according to a survey by the National Association of Realtors (NAR).

The first-time homebuyer share of the market increased to 47% in 2009 from 41% in 2008. Single women made up 25% of all first-time homebuyers, while single males made up 12%. Married couples were 49% of all first-time buyers, with unmarried couples taking up 12%.

More single women, 17%, became repeat homebuyers in 2009 than men, 8%. Married couples made up 69% of all repeat homebuyers. Unmarried couples made up 5% of repeat buyers.

“Several developments during 2009, including record affordability and the availability of the first-time home buyer tax credit, drew first-time buyers to the market,” according to NAR.

The West region of the US saw the greatest increase in first-time homebuyers, from 41% to 51%. The South and Midwest saw 6% and 7% increases respectively, and the Northeast had a 2% increase.

The median age for the first-time homebuyer was 30, and among repeat buyers, it was 48.

Despite the recession, incomes among first-time and repeat homebuyers did not change much from 2007 and 2008. The median income for first-time homebuyers increased $1,000 to $62,600. The median income for repeat buyers dropped $100 from 2008 to $88,000.

From housingzone.com

Nearly two-thirds of Americans think the time is right to buy a house, with a majority believing prices will be the same or higher over the next year, according to a Fannie Mae survey just released.

The 64 percent that said it is a good time to buy is just shy of the 66 percent that said the same thing in 2003 as the U.S. housing market was racing higher, said the survey. However, most of the 3,451 polled said that it would be tougher for them to get a loan than it was for their parents.

The survey comes amid signs that the U.S. housing market is recovering after suffering the worst downturn since the 1930s. But, while home prices in some regions are rising, soaring delinquency rates across the nation mean foreclosures will keep persistent pressure on the market, according to analysts.

Fannie Mae, the largest U.S. mortgage finance company, said that the public still “strongly believes” in upholding their financial commitments, though that weakens once people know someone who is defaulting.

Those who know someone in default are more than twice as likely to have seriously considered stopping payments on their own mortgage, Fannie Mae said.

Nearly nine in ten Americans, including seven in ten who are delinquent on their own mortgages, do not believe it is acceptable for people to stop making payments on an underwater mortgage, while eight percent believe it is acceptable.

Concerning the home as an investment, seven out of ten respondents (70 percent) said they believe buying a home continues to be one of the safest investments available. This compares to 74 percent who think putting money into a bank account (money market or savings account) is safe. In contrast, only 17 percent believe buying stocks is a safe investment.