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Updated: 7 hours 29 min ago

Latest Construction Spending

Fri, 01/02/2015 - 11:31
  • The overall construction spending modestly edged down in the latest month due to a combination of government spending cuts and modestly less commercial real estate construction.  The broad trend, nonetheless, is on the rise.  That’s good news for workers in construction and for general contractors.
  • Specifically, total dollar value of recently completed construction fell 0.3 percent in November from the month earlier. The construction of government-funded health care facilities, new schools, and power plants declined while the private sector construction of residential units increased.  Commercial real estate construction was essentially unchanged.
  • Despite the volatile monthly data, the trend is clearly on the upswing.  From the cyclical low point of several years ago, the total construction dollar spending is up by roughly 20 percent.   Construction of new hotels and lodging facilities are coming back strongly with a 100 percent jump from 2010.  On the other end, the construction of buildings for religious worship has been on a long-term decline.  (See graphs below).
  • Because of more dollars on construction, the employment in this sector looks positive.  Construction related jobs of specialty trade and general contractors took a big hit during the recession, falling from 5 million to 3.4 million.  Now, the jobs are coming back with 3.8 million workers in this sector.
  • Apartment vacancy rates are very low.  In addition vacancy rates of office, retail, and warehouse buildings have been falling.  It would appear therefore that more construction workers are needed.  With oil prices low and oil drilling jobs to be cut soon, there could be more workers switching out of the oil industry and into construction in 2015.  The financial inducement is there as well with construction workers’ earnings rising 2.7 percent in the most recent data, which is faster than the general wage growth of 2.1 percent.

Which Buyers Live with Friends or Family Prior to Purchasing?

Fri, 01/02/2015 - 10:03
  • Looking at the data from NAR’s 2005-2014 Profile of Home Buyers and Sellers, first-time home buyers were more likely to live with parents, relatives or friends prior to purchasing a home than repeat buyers.
  • For recent home buyers the percentage living with parents, relatives or friends prior to purchasing a home has remained consistent over the last 10 years, with an average of 11% of all buyers.
  • The typical age of first-time homebuyers in 2014 was 31-years-old. First-time buyers made up a larger share of those who lived with relatives or friends prior to purchasing a home in comparison to repeat buyers who in 2014 were typically 53-years-old.
  • Over the last decade an average of 19% of first-time buyers and 5% of repeat buyers lived with relatives or friends.



  • The U.S. Census recently published an interactive infographic exploring how young adults, aged 18-34, have changed over the last 40 years.
  • Over the last 13 years the percent of young adults living with a parent has increased from 23.2% to 30.3%.
  • While the percentage of recent homebuyers who have previously lived at home has not increased to the same degree as the percentage of young adults living with a parent, the increase does show why the percentage of first-time buyers living with family or friends may not have decreased over recent years.


2015 Resolution: Save for a House?

Wed, 12/31/2014 - 11:48

Many people make New Year’s Resolutions as the calendar flips from December 31st to January 1st. Often times, at the top of the list (along with trimming the waist line) is saving money and paying down debt. Many people do so with a goal in mind – a nice vacation, a new car, or even a new home. Maybe this year you are saving for your downpayment for a new home, or know someone who is.

The majority of home buyers use savings as a downpayment source—65 percent of all buyers (81 percent of first-time buyers, 57 percent of repeat buyers). Using savings as a downpayment source has increased in prominence over the last 14 years as buyers are relying less frequently on the proceeds from the sale of their primary residence.

Saving for a home can take time for home buyers. Among recent home buyers, 37 percent saved for six months or less, 15 percent saved for six to 12 months, and 10 percent saved for 12 to 18 months. Home buyers often make sacrifices on their path to homeownership. 72 percent cut spending on luxury or non-essential items, 56 percent cut spending on entertainment, and 45 percent cut spending on clothes.

There is a light at the end of the tunnel for those saving. Eighty-eight percent of recent home buyers financed their home purchase. The typical downpayment was 10 percent for all buyers, but six percent for first-time home buyers and 13 percent for repeat home buyers.

The payoff for home buyers is worth it. Seventy-nine percent of recent buyers believe their home is a good financial investment, and many believe it is a better financial investment then stocks. Aside from the financial investment, buyers were able to successfully complete their goal which was just to own a home of their own.

For more information on the 2014 Profile of Home Buyers and Sellers, visit: http://www.realtor.org/reports/highlights-from-the-2014-profile-of-home-buyers-and-sellers.

Home Price Comparison: New versus Existing

Tue, 12/30/2014 - 10:30
  • Newly constructed homes are carrying a hefty premium over existing homes.  The gap, which historically had been 15 to 20 percent, has in recent years widened to 30 to 40 percent.  That suggests either existing home prices are much cheaper in relation to the newly built homes and/or that there is just not enough new homes being produced.
  • In the most recent monthly data, in November, the median home price of a newly constructed home was $280,900 while the median price of an existing home was $206,200.  This gap is 36 percent.
  • Indeed, too few new homes are being constructed.  Even though single-family housing starts are projected to have risen for the fourth time in the past five years, the level is essentially at a deep recession level.  This year’s single-family housing starts look to hit 650,000.  But the normal should be at least a million.  Persistent underproduction of new homes is one key reason for pushing up prices.  From 2004 to 2014, a typical newly constructed home price will have risen by 27 percent.
  • Meanwhile, a typical existing home price has risen by 25 percent in the past three years.  Even so, the decade growth in home price, due to the downward correction that occurred during the housing bust, is only 8 percent.  Over the same decade, from 2004 to 2014, a typical apartment rent grew by 31 percent.  In other words, home prices are not rising too fast or to a new bubble.  Rather, the shortage of new construction is leading to the premium on the new homes to expand.
  • If housing starts do not revive quickly and robustly then new home price premium could rise even further.  NAR projects single-family housing starts to rise to 820,000 in 2015.  That would be a nice growth and good news for homebuilders.  Still it would be under the historical average.

REALTORS®’ Outlook Upbeat for Next 6 Months

Tue, 12/30/2014 - 05:18

Confidence about the residential real estate sales outlook for the next six months broadly improved in November 2014:   REALTORS® Confidence Index Survey, http://www.realtor.org/reports/realtors-confidence-index.  An improving jobs market, the 30-year mortgage rate at approximately 4 percent, and higher inventories of available homes for sale may have accounted for the rebound in positive market expectations for sales of single family homes.

Expectations about the market for townhomes and condominiums also improved but were still somewhat weak (index below 50).  REALTORS® continued to report about the difficulty of obtaining FHA financing for condominiums, typically the entry point for homeownership.

REALTORS® Confidence Index Survey: November 2014 Survey Highlights

Mon, 12/29/2014 - 07:38

REALTORS® reported that their confidence in local real estate market conditions in November 2014 was broadly steady compared to October, although slightly down from a year ago. The REALTOR® Confidence Index-Current Conditions for the current single family home outlook was near 50:  (http://www.realtor.org/reports/realtors-confidence-index).    In addition, REALTORS® were increasingly optimistic about the market outlook for the next six months. An improving jobs market, the decline in the 30-year mortgage rate to about 4 percent, and higher levels of available home inventory may have accounted for the uptick in market expectations.

First-time home buyers appeared to be slowly re-entering the market, with the share of first-time homebuyers at 31 percent, up from 28 percent a year ago. Investors and distressed sales continued to account for a smaller share of the market.

Unemployment Insurance Claims Continue To Decline (Dec 13 Report)

Thu, 12/18/2014 - 13:26
  • Insurance claims by the jobless continue to decline, a sign of the continuing good health of the labor market. Claims for unemployment insurance filed in the week of December 13 totaled 298,000, a decrease of 6,000 from the previous week. This puts the 4-week moving average to 298,750, which is below the 300,000 benchmark that signals a healthy economy. A healthy job market is important to keep the housing market recovery going.

  • The latest data at the state level is of the week ending December 6. The largest decreases were in Nebraska (-429), Vermont (-353), Arkansas (-216), Kentucky (-134), and North Dakota (-13).The largest increases in initial claims for the week ending December 6 were in Pennsylvania (+12,302), Texas (+9,107), Georgia (+8,214), California (+6,051), and New York (+5,972). States reported increases/decreases in a variety of sectors that included manufacturing, construction, and services.
  • In a related report, the Federal Operations Market Committee which sets monetary policy decided yesterday to keep steady the federal funds rate which underpins the movement of mortgage rates. Interest rates have fallen sharply, with the conventional 30-year mortgage rate averaging 3.8 percent for the week ending Dec 18. There is less pressure for inflation to increase given the steep drop in oil prices.
  • Given the favorable economic environment of low interest rates and solid job growth (240,000 jobs created per month in 2014), NAR forecasts 4.9 million of existing home sales in 2014, increasing to 5.2 million in 2015.


Building the Buyer and Seller Relationship

Thu, 12/18/2014 - 12:16

Buyer and seller use of a real estate agent in the process of buying or selling a home remains at a historical high. On the buying side, 88 percent of buyers purchased a home while using a real estate agent or broker—up from 69 percent in 2001. On the selling side, 88 percent of sellers used an agent in their selling process—up from 77 percent in 1991.

The housing market can be difficult to navigate for home buyers who have not been in the market for several years, but can be especially difficult for first-time home buyers who have never purchased a home. Not surprisingly, the number one benefit that buyers had from using a real estate agent during the home purchase process was helping them to understand the process.  Buyers and sellers both place a high importance on choosing an agent who is honest and has integrity. They want someone who has a good reputation, knows the purchase process, and knows the neighborhood.

Personal referrals drive the real estate business and are the leading way both buyers and sellers find their real estate agent to work with. Fifty-two percent of buyers and 60 percent of sellers used an agent that was referred to them or they had worked with before. Seventy percent of sellers and 67 percent of buyers only interviewed one agent before finding the agent to work with. More than half of buyers reached out to a potential agent via phone, and most only needed to call once before the real estate agent returned the call and the professional relationship started.

For agents out there, the take away is: continue building your knowledge of the purchase process and becoming your neighborhood specialist, but also work to build trust with your current clients—they will send future clients your way. And if someone calls you to begin the search process, call them back—you are likely their only contact.

For more information on this research, check out the 2014 Profile of Home Buyers and Sellers: http://www.realtor.org/reports/highlights-from-the-2014-profile-of-home-buyers-and-sellers


Latest Consumer Price Inflation

Wed, 12/17/2014 - 10:00
  • It has become easier to breathe with consumer prices falling by the most amounts in six years.  Lower gasoline prices are everywhere. But wait, renters are getting squeezed hard with fast rising rents.
  • Specifically, the overall Consumer Price Index (CPI) fell 0.3 percent in November from the month prior. This largest monthly decline in a long time has pushed down the annual inflation rate to only 1.3 percent.  With the Cost-of-Living-Adjustment on government issued checks, like social payments, set to rise by 1.7 percent in 2015, some people will experience a modestly improved living standard.
  • Apartment rents increased at the highest pace since November 2008, rising 3.5 percent from one year before.  Homeowner equivalency rents – a hypothetical figure of what the homeowners would pay in rent if they were renting out their home – increased by 2.7 percent.
  • Very good that the overall CPI is decelerating.  Not only is it good for consumers, but it also implies that the Federal Reserve can be patient and delay raising interest rates.  The Fed considers the ideal inflation rate to be at or near 2 percent.  Given low inflation, the Fed can keep its short-term fed funds rate at zero at least through the spring of next year.
  • Gasoline prices as everyone knows have been tumbling.  A typical American family spends $3,000 a year at the pump.  It will be $2,000 if gasoline prices stay at this level, a cool $1000 savings.  The cause is an oil production boom in North Dakota. This one small U.S. state looks to flip at least one bad acting oil-dependent country – Russia, Venezuela, or Iran.
  • With low gasoline prices, there could be record driving miles over this holiday break, including possibly extending vacations to go to new places.  Be aware, however, of more domestic arguments.  Possibilities of more new activities mean more decisions need to be made.  Not all will agree with that decision. That is why there are more domestic arguments during vacations than on normal days where fewer decisions are made.  

Latest Housing Starts

Tue, 12/16/2014 - 02:30
  • New home construction activity declined slightly in the latest month.  However, the overall annual figure is likely to show an 8 percent gain for 2014.
  • Specifically, housing starts fell 1.6 percent in November from the prior month.  Though a decline in housing starts has been above 1 million annualized production rate for the 3rd consecutive month, something that has not happened since 2008.
  • The gains in housing starts in recent years have been predominantly on the apartment side.  The multi-family housing starts have returned to their historical normal.  Homebuilders are responding to increased occupancy rates and rising rents.
  • The construction of new single-family homes, however, continues to languish.  That is a bit of a puzzle since the builders are having an easy time selling newly constructed homes, with an average of only 3 months to move a property after a completion.
  • Rising construction costs, shortage of construction workers, and the difficulty of obtaining construction loans from local banks have been the key reasons as to why homebuilders have been unable to quickly build.
  • Overall, the homebuilding activity is too low in relation to job creations and population growth.  Do not be shocked if there is shortage of inventory when spring home buying season returns.  As a result home prices may rise too fast.  Only a sharp ramp-up in new supply from new home construction will keep the lid on home prices.  If housing starts can reach 1.25 million in 2015 then home prices will rise by 3 to 5 percent.  If not, then much faster home price appreciation should be expected.
  • Meanwhile, homebuilders’ assessment of market conditions has been surging and is at a historically high level.  But that sentiment appears to be a self-deception as it does not match up with reality.  Is this a case of too much idle time on their hands leading to unrealistic wild thoughts, like a lovesick teenager?  Or could it be that many homebuilders have gone under during the downturn and the only ones providing the assessment are the big builders with Wall Street money now facing less competition?   Something indeed to smile about.   

Latest Industrial Production

Mon, 12/15/2014 - 12:27
  • Factory production in America grew solidly in the past month.  This implies that the U.S. economy is brushing aside the weakening European economy and is in no danger of a recession.  Job gains will continue.  Commercial REALTORS® specializing in industrial spaces will likely experience increased business opportunity.
  • Specifically, industrial production in November was 5.2 percent higher from one year ago.  That is the best gain since January 2011.
  • The construction industry has been one of the lagging sectors in the current economic cycle.  Therefore, there has been lower production for construction supplies, like cranes.  Meanwhile, the manufacturing sector is reviving very nicely.
  • Because of rising industrial production, the capacity utilization rate finally rose above 80 percent for the first time since early 2008.  High utilization will require constructing new factories.  Commercial real estate practitioners involved in factory site locations need to keep their eyes sharp.
  • It is very good news that U.S. companies are producing more.  However, it will still be the case that many developing countries will take up a larger share of global manufacturing in the future, particularly related to unskilled repetitive factory assembly work.  With wages rising in China, new factory centers could arise in Vietnam, the Philippines, and Mexico.  Americans working in menial repetitive tasks that do not require much education will therefore face low-wage competition from these countries.  However, Americans in the knowledge-based work like software development, medical instruments, and professional business service will experience rising global demand for their services and will experience higher salaries over time.  Income inequality in America will therefore likely become even more unequal in the future between those with and without an education.   

Retail Sales and Leasing

Fri, 12/12/2014 - 11:19
  • Retail sales are strengthening, likely helped by lower gasoline prices.  This implies continued economic expansion and job creations.  Commercial REALTORS® should anticipate increased leasing activity and higher retail rents next year.
  • Specifically, sales at retail and restaurants rose by 5.1 percent in November, its best showing in over a year.  The boost is coming as spending at gasoline stations fell for the 6th straight month.  As such, falling oil prices are a net positive for the U.S. economy as it helps consumers spend money in other sectors.
  • Retail sales that are generally tied to the housing sector are climbing as well.  Spending at furniture and home furnishing shops increased by 2 percent while spending on building materials and garden equipment rose by 8 percent.  They are likely to improve further because home sales have become positive on a year-over-year basis in recent months after a brief slump in the earlier part of the year.
  • Real estate investors of retail shops have been doing well.  Rents are rising and property prices have been zooming.  The total investor returns, according NACREIF, provided 7 percent gain in the past year on top of double-digit gains in recent prior years.  The average national retail vacancy rate is likely to dip to 9.6 percent next year from 9.8 percent this year.  Retail rents are projected to rise by 2.5 percent.
  • Warning: if interest rates rise too fast next year then the cap rates (rent income-to-price ratio) will also have to rise.  That could mean property price declines in the retail sector unless rents pick up even faster.
  • People associate retail sales with buying clothes.  City people buy more of them than country folks since more eyeballs will get a glimpse of it.  That says we buy clothes not for ourselves but for others.  Looking sharp in the city at times appears strange.  One famous European painting of “Betrothal” is not of a shotgun marriage but of the fashion of the time of having the right “pregnant look.”   Future generations will be laughing at our current fashion.

Home Prices Rebound, but Still Down from Peak

Thu, 12/11/2014 - 13:41

Back in the 3rd quarter of 2005, the national median home price peaked at $227,633. Nine years later, the national median was $216,367 in the 3rd quarter of 2014, a decline of 4.9%. While the national median sale price remains below the boom-period peak, a majority of local markets have outpaced the national average over this period.

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As depicted above, markets in North Dakota, largely due to a boom in oil production surged with the median price in Bismarck up 87.2% over this period. Markets in Texas have done well and six registered in the top 10. Metro areas in the Midwest, the Mid South, and the Northwest gained over this period. In total, 87 of the metro areas tracked saw an increase of the median home price in the nine years since the national market peak.

At the other end of the spectrum were markets concentrated in the boom and bust states like Southern California, Arizona, Nevada, and Florida. Markets in New England have sputtered in their recovery, partially due to the judicial process for handing foreclosures used in these states. The clearing process for foreclosures takes longer and the overhang of distressed properties weighs on the median price, though it may not be representative of submarkets in these areas.

Curious how your market has performed? To find out more about your market or others, see the Local Market Reports for the 3rd quarter.

Regional Income Growth Gains Importance

Thu, 12/11/2014 - 13:40

Mortgage rates eased in the second half of 2014 based on unrest in Eastern Europe and fear of an economic slowdown in Europe. This decline in rates has helped to improve affordability, but rates are expected to rise over the next 12 to 16 months. As rates rise, local income growth will become more important. For more information on local conditions, see NAR’s 3rd quarter Local Market Reports.

Home prices, mortgage rates, and mortgage insurance can all affect affordability. But income growth is also a critical driver of affordability. Mortgage rates eased over the last three decades, ameliorating sluggish income growth over the most recent decade, but that is likely to change over the coming decade putting additional emphasis on the need for solid income growth.

Nationally, the median nominal per capita income grew 1.9% from 2012 to 2013 and at an annualized rate of 1.8% from 2005 to 2013. The average nominal per capita income growth from 2012 to 2013 of the 169 metro areas tracked by NAR Research was 1.1%. Over the longer horizon, the average was 2.7%.

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However, real income growth was relatively weak over this period. Inflation, as measured by the personal consumption expenditures (PCE) series, was 1.9% over this period, suggesting that real income growth, nominal income growth adjusted for inflation, did not maintain pace with inflation over this time period. In fact, real per capita income growth[1] fell 0.4% from 2005 to 2013. Adjusting the nominal per capita income growth of the MSAs tracked by the 2.2% [2] national correction, 126 of these metro areas experienced positive real per capita income growth over this period. The average real per capita income growth was 0.5%, higher than the national average. As depicted above, the strongest annualized real per capita income growth was grouped in North Dakota, Texas, and parts of the Northeast. Bismarck and Fargo were first and third in terms of median income growth, but New Orleans which rebounded from the post-Katrina devastation over this period, was second. Texas and New York each had five markets in the top twenty.

Stagnant real income growth could become an issue. As depicted above, forecasting out the debt-service ratio (annual PITI/annual household income) under a stylized scenario where mortgage rates rise from 4.0% in 2014 to 6.0% by 2018 with different income growth paths depicts the impact on affordability and access to credit. As rates rise without adequate income growth, debt service ratios will rise and in a worst case scenario above even FHA eligibility levels.

Home buyers tend to have higher incomes than non-buyers and borrowers may currently under report their incomes when qualifying, both of which could ameliorate the impact. However, Analysis by Federal Reserve Economists[3] suggests that a 2% increase in mortgage rates would result in a 5% to 7% decline in home purchases, or 250,000 to 350,000 fewer home purchases. Furthermore, these figures do not account for mortgage insurance and loan level pricing adjustments (LLPAs) that are currently impacting affordability. This stylized analysis emphasizes the importance of income growth but it should be noted that proper pricing of mortgage insurance and reasonable capital relief could play a role in boosting affordability as mortgage rates rise.

A restoration of traditional, sound underwriting will allow in many borrowers who may not have had access to lower rates in recent years.

Curious about housing and economic conditions in your area? See the 3rd quarter Local Market Reports for more information on conditions in your areas.

[1] Per capita adjusted for inflation (CPI-U-RS)
[2] 2.2% was the national adjustment for median family, household and per capita income. A local adjustment would be ideal, but is not available.
[3] http://www.newyorkfed.org/research/staff_reports/sr702.html

Identifying Top Metro Areas Attractive to Baby Boomer Buyers

Thu, 12/11/2014 - 11:02

Metro areas with a lower cost of living and sunnier weather are poised to see an increased number of Baby Boomers moving in and buying a home as some delay retirement and remain participants on the labor market.

NAR analyzed current population trends, housing affordability, cost of living, housing inventory and job market conditions in the 100 largest metropolitan statistical areas across the U.S. (hyperlink to list of 100)  to determine housing markets most likely to see a boost in sales from Baby Boomers. State taxes and the share of expenditures for Public Welfare, Hospitals, Health, Police Protection, Parks and Recreation at the state level for those areas were also considered (tax expenditures hyperlink).

The top markets positioned to see an influx of baby boomer homebuyers are (hyperlink for list of 10):

- Albuquerque, New Mexico

- Boise, Idaho

- Denver

- Fort Myers, Florida

- Greenville, South Carolina

- Orlando, Florida

- Phoenix

- Raleigh, North Carolina

- Sarasota, Florida

- Tucson, Arizona

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Click on the tabs to follow the story below. Hover over the map for a snapshot of each metro area’s share. The following charts show the housing and job market conditions for the 10 most attractive metro areas for Baby Boomers compared to the average for the 100 largest metro areas.

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REALTOR® University Presentation: Cities & Suburbs Now and in the Future

Wed, 12/10/2014 - 12:42
Dr. Anthony Downs, Brookings Institution
Summary by Jed Smith
Managing Director, Quantitative Research

Most Americans agree that traffic congestion is a major problem in their communities, and congestion seems to be getting worse.  In a REALTOR® University presentation Dr. Anthony Downs, an Economist and Senior Fellow at the Brookings Institution, discussed how traffic congestion appears to be a long-term problem.  (Watch the highlights video.  Dr. Downs has written many books, including An Economic Theory of Democracy, Stuck in Traffic, and Still Stuck in Traffic).

Congested roads waste commuters’ time, cost them money, and degrade the environment. Dr. Downs focused on three major issues—why congestion occurs, where future population growth is likely to develop, and whether walkable communities will dominate future housing choices.

Why traffic congestion arises, and is it possible to get rid of it?

Having everyone present at the same time is the most efficient way for businesses to operate.  In addition, businesses are more efficient when located near other businesses, whether competitors, suppliers, or customers.  There are substantial externalities associated with the gathering of stakeholders in one location.  This means that the participants  will all need to travel at the same time, thereby causing congestion.

Building more roads as a solution to congestion doesn’t work.  It is too costly to build enough roads.   In addition, railroads and other public transportation options tend to be very expensive and don’t pay their way.  In addition, mass transit does not provide door-to-door service, as does the automobile, so congestion is probably with us.  Congestion is the economic byproduct of efficiency.

Does the future favor population growth in large areas or in small areas?

Urban planners advocate high density, high rise population concentrations in analyses of urban planning.  Carried to the ultimate conclusion, everybody ought to live a New York lifestyle.  However, analyses of urban areas with population growth in recent years has shown that the majority of the growth has occurred and is likely to continue to occur in the suburbs.

Will walkable communities dominate future growth? 

The Millennial generation is reported as adverse to purchasing a car, preferring to walk, bike, or use public transportation. The example most frequently cited is San Francisco, with high tech firms and Millenials clustered in technology jobs, living in the central city.  It is appropriate to note that Sa Francisco is an “outlier”—it is the second most densely inhabited city in the country, right behind New York City.  There is an acute lack of space in San Francisco.  In addition, the Millenials have not yet reached two important facts or stages in life:  marriage and children.  These two events do not in general appear to be conducive to the walkable communities envisioned by urban planners, even though that is their story and they are sticking to it.  Small children need open space, monitored gathering places, playgrounds, and specialized facilities and services—not walkable open-air bars and great shopping experiences.


As noted, while there may be some measurable gains from increasing housing densities, most other land-use strategies have little effect. Indeed, the most powerful solutions, including higher gasoline taxes, increased public funding for transit, and highway tolls, are also the least palatable politically.  Large cities exist because of the substantial externalities they create.  As a result, congestion is a major by-product, which in general cannot be avoided.

New Baby Boomer Release from NAR Research

Wed, 12/10/2014 - 08:50

WASHINGTON (December 10, 2014) – Metro areas with a lower cost of living and sunnier weather are poised to see an increased number of baby boomers moving in and buying a home as some delay retirement and remain participants in the labor market, according to new research by the National Association of Realtors®.

NAR analyzed current population trends, housing affordability and local economic conditions in metropolitan statistical areas1 across the U.S. to determine housing markets most likely to see a boost in sales from leading-edge baby boomers2. Boise, Idaho and Raleigh, North Carolina were identified as top standouts for baby boomers for their solid job growth, share of self-employed workers and affordable home prices.

Lawrence Yun, NAR chief economist, says Florida and Arizona cities attract many baby boomers. In addition, the share of men and women working after their 65th birthday has increased3, setting the stage for elevated baby boomer buying activity in metro areas with a dynamic local economy, adequate housing supply and a lower cost of living.

“A broadly improving economy and rebounding home prices are giving baby boomers the opportunity to sell and move to support their retirement lifestyle. Furthermore, our research identified cities movers are gravitating to while still remaining in the workforce as a business owner,” Yun said.

NAR’s research reviewed 100 metro areas that have lower state taxes, solid job market conditions, and strong migration patterns (on a percentage basis) of baby boomers moving to that particular area to determine which housing markets are likely to see a boost from this generation. Cost of living, housing affordability and inventory availability were also considered.

The top markets positioned to see an influx of baby boomer homebuyers are (listed alphabetically):

  • Albuquerque, New Mexico
  • Boise, Idaho
  • Denver
  • Fort Myers, Florida
  • Greenville, South Carolina
  • Orlando, Florida
  • Phoenix
  • Raleigh, North Carolina
  • Sarasota, Florida
  • Tucson, Arizona

Other markets with strong potential for attracting baby boomer homebuyers include:

  • Chattanooga, Tennessee
  • Dallas
  • McAllen, Texas
  • Riverside, California
  • Tampa, Florida

“These metro areas are attractive to baby boomers because of their housing affordability, lower tax rates and welcoming business environment,” says Yun. “With baby boomers working later in life, these factors will likely play as much of a deciding role of where boomers eventually retire as will areas with a warm climate or variety of outdoor activities.”

According to a NAR generational study of homebuyers and sellers released earlier this year, baby boomers represented 30 percent of all buyers, had a median household income of $92,400 and bought a home that cost $210,0004.

NAR also recently analyzed current housing conditions, job creation and population trends to determine the best markets for aspiring, leading edge millennial homebuyers. Visit www.realtor.org/millennials to find out more about millennials and homebuying.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

# # #

1Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. NAR adheres to the OMB definitions, although in some areas an exact match is not possible from the available data. A list of counties included in MSA definitions is available at:  http://www.census.gov/population/estimates/metro-city/List4.txt.

Regional median home prices are from a separate sampling that includes rural areas and portions of some smaller metros that are not included in this report; the regional percentage changes do not necessarily parallel changes in the larger metro areas. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Quarter-to-quarter comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.

Median price measurement reflects the types of homes that are selling during the quarter and can be skewed at times by changes in the sales mix. For example, changes in the level of distressed sales, which are heavily discounted, can vary notably in given markets and may affect percentage comparisons. Annual price measures generally smooth out any quarterly swings.

NAR began tracking of metropolitan area median single-family home prices in 1979; the metro area condo price series dates back to 1989.

Because there is a concentration of condos in high-cost metro areas, the national median condo price often is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional areas will be included in the condo price report.

2Baby boomers are generally categorized as those born in the U.S. between 1946 and 1964. NAR’s research analyzed leading-edge baby boomers (ages 60-69).  

3 According to the U.S. Department of Labor’s civilian labor force participation rates by age, sex, race, and ethnicity, 1992, 2002, 2012, and projected 2022 (Table 3.3)

4 According to NAR’s Home Buyer and Seller Generational Trends study. The study breaks baby boomers into two generations: Younger (ages 49-58) and Older Boomers (ages 59-67). All information is characteristic of the 12-month period ending in June 2013 with the exception of income data, which are for 2012.

Information about NAR is available at www.realtor.org. This and other news releases are posted in the “News, Blogs and Videos” tab on the website.  


Final-100 Metro

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NAR Baby Boomers Infographic

Metro and State Employment Conditions

Tue, 12/09/2014 - 12:01
  • The U.S. economy has added 2.7 million net new jobs or by 2.0 percent over the past 12 months to November.  At the state level, North Dakota continues to be the top standout.  Texas and Utah are also red hot.
  •  At the other end, Alaska struggles.  Virginia and Maryland, the two states with large exposure to government spending, are near the bottom as they deal with federal budget sequestration.
  • As would be expected the real estate market is healthiest in states with better employment conditions.  Moreover, job gains should be viewed as a leading indicator of home sales and commercial leasing activity.  So REALTORS® in North Dakota, Texas, and Utah should prepare for much better times ahead.
  • Among the large metro markets, the fast moving cities are Houston (+4.3%), Grand Rapids (+4.0%), Dallas (+3.6%), Jacksonville (+3.6%), San Jose (+3.6%), Orlando (+3.5%), Austin (+3.4%), Miami (+3.2%), Nashville (+3.2%), Raleigh (+3.2%), and Seattle (+3.2%).
  • Among the smaller metro markets, Midland (+7.2%), Elkhart (+4.9%), Lubbock (+4.4%), Odessa (+4.2%), Naples (+3.9%), Sarasota (+3.7%), and St. George (+3.8%) are far ahead of the rest.
  • North Dakota’s massive oil production is the reason for the fast job gains.  The low gasoline prices are the result, which help U.S. consumers.  This small U.S. state may also tip Venezuela, Iran and Russia into revolutions, as these countries rely on oil revenue to fund government social spending.


REALTORS® Continue to Report Difficulty in Obtaining Mortgages

Tue, 12/09/2014 - 06:16

Credit continued to flow to those with high credit scores, based on information provided by REALTORS® in the October 2014 REALTORS® Confidence Index Survey:  http://www.realtor.org/reports/realtors-confidence-index.   Almost half of  REALTORS® providing transaction credit score information reported FICO credit scores of  740 and above; with normal credit conditions, approximately 40 percent of buyers would have credit scores of 740 and above.  About 2 percent of REALTORS reported a purchase by a buyer with credit score of less than 620; in a normal market the credit scores would be closer to 5 percent.  As of July 2014, the median borrower FICO score for purchase-only loans was 749, up from about 700—in 2000[1].

Senior government officials have indicated that mortgage credit should become more available in the foreseeable future.  In addition to large financial institutions potential home buyers may find regional and community banks and credit unions as credit sources.

[1] http://www.urban.org/UploadedPDF/413271-Housing-Finance-Chartbook.pdf

The Job Mobility Rate

Mon, 12/08/2014 - 13:14
  • One of the better indicators about the strength of the job market is the quit rate.  How many workers are quitting their jobs?  A rational person would only quit if they had a new job lined up or if there is a good prospect of finding a new one.  Recent trends show increased quit rates and increased job opening rates.
  • Two out of 100 employed people quit their jobs in the latest month, the highest quitting rate since mid-2008.  The rising incidences of quits, which reached 2.75 million in October, are congruent with more job creations in the economy.
  • People working in lodging and food service have the highest quit rate at 4.2 percent.
  • Government workers are least likely to quit.  Only 0.8 percent did so in the latest month.  Rarely do we hear of a government worker getting excited about the latest work project.  The low quit rate is therefore probably related to good pension and easy work load and not about the interesting aspects of their job.
  • The quit rate is the highest in the South (2.2 percent) and the lowest in the Northeast (1.5 percent).
  • REALTOR® membership experiences about a 15 to 20 percent turnover rate over the course of a year, translating into around 1.5 percent monthly quit rate.
  • More dynamism in the labor market generally spills over into the real estate market as well.  Some of the quits will necessitate a selling and buying of a house.  Dynamism is also good for the economy.  It implies mobility.  Andrew Carnegie delivered newspapers and Warren Buffet threw peanuts at baseball games before quitting and moving on.
  •  “Take this job and shove it, I ain’t working here no more.” It’s fine to say that as one leaves.  But please consider using a better grammar structure before interviewing with the next employer.  Only in few instances is it fine to blurt out incorrect grammar.  For example, James Brown’s “I Feel Good” carries a punch far better than the lame “I feel well.”