The Department of Housing and Urban Development (HUD) announced the 2016 maximum loan limits for the Federal Housing Administration (FHA) yesterday. While the maximum loan limit will not change, limits will rise in 188 counties around the country.
Every year, HUD establishes the maximum mortgage amounts which the FHA can insure. HUD sets limits based on the median home price at the local level. However, the local limit is restricted to a maximum and minimum level. The maximum FHA limit is 115 percent of the local median price up to 150 percent of the national conforming loan limit of $417,000. No county can has a limit less than 65 percent of the conforming limit or $271,050. A limit is not reduced if the local median price declines.
For calendar year 2016, 188 counties will see an increase in their FHA loan limit. While many of these areas are the same that received increases in their conforming loan limits, many are new. Areas concentrated in Colorado, California, Seattle, and North Dakota will see some of the largest increases, but Catron County, NM will jump $115,350 while Tuscaloosa, AL will rise $60,150 (see table at the end for a full list). No county will experience a decline in its limit.
The number of counties with limits at the floor will fall by 21 from 2015 to 2016 to 2,597, while the number of markets at the $625,500 maximum will increase by one to 77. The number of markets in between the minimum and maximum limits will rise by 20 to 560.
The limits for many counties will not change in 2016 either because their median price has not eclipsed a previous high mark and has been “frozen” or 115 percent of the 2015 local median price was below $271,050. However, based on the FHA’s methodology a 2.5 percent increase in the local median price for 2016 would move 115 of these markets above their current limits. Of these counties, one is below the $271,050 threshold and has not seen an increase in its median price while an additional seven had their medians rise in 2015, but were still below the $271,050 mark. A 5.0 percent increase would draw an additional 39 counties over their current limits. Atlanta, Baltimore, Columbus, Philadelphia, Albany, Kansas City, and Reno would all benefit from such an increase. This table does not include the 188 markets where limits rose in 2016 and may rise as well with price gains. NAR Research is currently forecasting 4.6 percent growth in the national median home price in 2016.
With mortgage rates set to rise in the coming quarters, access to credit still limited in the private sector, and FHA terms and pricing more favorable to many first-time and marginal borrowers, changes to these local limits are gaining importance. However, limited supply remains a stout headwind to entry level homebuyers.
Rising Poverty in the American Suburbs: A Presentation by Dr. Katrin Anacker in the REALTOR® University Speaker Series
In a presentation at a REALTOR® University Speaker Series held recently, Dr. Katrin Anacker, Associate Professor of Public Policy at George Mason University’s School of Policy, Government, and International Affairs, presented the major findings of her recently published edited book, “The New American Suburb: Poverty, Race, and the Economic Crisis.” The book looks at the economic transformation of American suburbs, which have increasingly seen rising poverty in the wake of slow recovery after the housing downturn and the Great Recession.
According to Kneebone and Nadeau, suburban poverty increased from 2000 to 2005-2009 (Chart 1). In the 100 largest metropolitan areas, the total population in suburban extreme poverty tracts, where 40 percent or more of the population is poor, increased by 36 percent (from about 907,000 in 2000 to about 1.24 million in 2005-2009). The poor population living in these suburban extreme poverty tracts rose 40.6 percent (from about 400,000 to about 570,000). The fastest growth in poverty occurred in exurban extreme poverty tracts, where the total population and the number of poor people more than doubled from 2000 to 2005-2009.
Chart 1.Lee, Green Leigh, and McMillan analyzed longitudinal data and also found rising poverty in the inner-ring suburbs from 1970 to 2007 (Chart 2). Here, the poverty rate increased from less than 10 percent in 1970 to about 15 percent in 2007. Rising poverty in the inner-ring suburbs is correlated with although not necessarily caused by the decline in college-educated population (Chart 3).
As these studies show, suburban poverty has increased sharply after the housing market collapse in 2006 and the slow economic recovery after the recession, which technically ended in June 2009. One of the reasons for the slow recovery in the suburbs is that many of them are less able to draw from public resources to deal with the aftermath of the crises in subprime lending, foreclosure, and possible long-term economic decline. According to the Keating, who conducted three case studies of foreclosures in the Cleveland metropolitan area, suburban stakeholders have faced a more severe lack of municipal resources to address the current economic situation. At the same time, many suburban municipalities have found themselves in dire straits during a time of increasing needs yet decreasing revenues, for example through the local property tax. Roth and Allard show that the suburban infrastructure lags behind the somewhat well-established infrastructure in central cities, indicating the need for improvements by the public and private sectors, and possibly philanthropy.
For more information on the book “The New American Suburb: Poverty, Race, and the Economic Crisis”, please contact email@example.com.
REALTOR® University provides on-line education on real estate and other topics at the MBA and undergraduate levels. The REALTOR® University Speaker Series provides a venue to learn about and stimulate discussion of economic and real estate issues in support of NAR’s mission as the Voice of Real Estate. The Speaker Series presentations can be accessed on this webpage.
 The REALTOR® University Speaker Series on “The New American Suburb: Poverty, Race, and the Economic Crisis” was held on December 7, 2015 at the NAR Washington Office.
- Existing-home sales decreased 3.4 percent in October from one month prior while new home sales increased 10.7 percent. These headline figures are seasonally adjusted figures and are reported in the news. However, for everyday practitioners, simple raw counts of home sales are often more meaningful than the seasonally adjusted figures. The raw count determines income and helps better assess how busy the market has been.
- Specifically, 447,000 existing-homes were sold in October while new home sales totaled 41,000. These raw counts represent a 5 percent loss for existing-home sales from one month prior while new home sales increased 21 percent. What was the trend in the recent years? Sales from September to October increased by 3 percent on average in the prior three years for existing-homes and 5 percent for new homes. So this year, existing-homes underperformed compared to their recent norm while new home sales outperformed.
- Why are seasonally adjusted figures reported in the news? To assess the overall trending direction of the economy, nearly all economic data – from GDP and employment to consumer price inflation and industrial production – are seasonally adjusted to account for regular events we can anticipate have an effect on data around the same time each year. For example, if December raw retail sales rise by, say, 20 percent, we should not celebrate this higher figure if it is generally the case that December retail sales rise by 35 percent because of holiday gift buying activity. Similarly, we should not say that the labor market is crashing when the raw count on employment declines in September just as the summer vacation season ends. That is why economic figures are seasonally adjusted with special algorithms to account for the normal seasonal swings in figures and whether there were more business days (Monday to Friday) during the month. When seasonally adjusted data say an increase, then this is implying a truly strengthening condition.
- What to expect about home sales in the upcoming months in terms of raw counts? Independent of headline seasonally adjusted figures, expect less activity in November for existing-home sales. For example, in the past 3 years, November sales slipped by 4 to 21 percent from October. In contrast, existing-home sales typically rose in December by 7 to 18 percent. For the new home sales market, the raw sales activity in November tends to be less than that occurring in October, and activity gets better in December. For example, in the past 3 years, November sales dropped by 3 to 18 percent from October while December sales rose 13 percent last year.
- There are plenty of new jobs in the states in the Mountain and Pacific Time Zones and in a few southern states. Idaho, Utah, and Nevada are leaders. The Pacific states of California, Oregon, and Washington as well as the southern states of Florida, Georgia, and South Carolina are among the top ten job creating states.
- Indiana is the best performer from the Midwest, while Massachusetts is the only state from the Northeast doing better than average. Energy producing states are suffering. Low oil prices have led to job cuts in Louisiana and North Dakota. West Virginia coal mining jobs are vanishing.
- In terms of “momentum,” there are 36 states with stronger job conditions in the latest data compared to the prior month. This is good news regarding strengthening support for real estate in more states.
- As would be expected the states with consistent and fast job gains will be the ones experiencing stronger housing market conditions. The national forecast of existing home sales is expected to rise by about 2 percent in 2016. Idaho and Utah can easily expect to surpass that national growth figure.
- As for metros, the Silicon Valley in San Jose is still on fire with a 5.1 percent job growth rate. Cape Coral-Ft. Myers and Orlando are creating a bunch of jobs, possibly implying more retirees moving into Florida. Hard to explain, but Grand Rapids, Michigan has been a consistent outperformer with the latest growth rate of 3.8 percent.
- As an aside, with Idaho now at the top position, the state is not only about potatoes. Though job creation is in the cities and towns, a visitor will absorb the vast empty land with many cows roaming the open range. At times, one can spot a cowboy herding cattle. One cowboy recalled his days moving the herd from Texas to Colorado and further beyond, involving steady circling to squeeze the herd into a tight space for the night, traveling through steady rain for days, cooking over an open fire, etc. He said these were the happiest days of his life. Somehow, we know this statement to be true yet most of us cannot get ourselves out of the city to live that life.
In the monthly REALTORS® Confidence Index Survey, NAR asks REALTORS® “In the neighborhood or area where you make most of your sales, what are your expectations for residential property prices over the next year?” The map below shows the median expected price change in the next 12 months for each state, reported in the October 2015 REALTORS® Confidence Index Survey Report (http://www.realtor.org/reports/realtors-confidence-index) .10
REALTOR® respondents from Florida were the most upbeat, with a median expected price growth in the range of five to six percent. In Washington, Nevada, and Colorado, the median expected price growth among respondents was four to five percent.
Nationally, REALTORS® who responded to the October 2015 survey expected prices to increase by 3.2 percent over the next 12 months (3.2 percent in September 2015; 3.0 percent in October 2014). REALTORS® expect the recent strong price growth to moderate as rising prices have made homes “unaffordable” for many, with home prices almost at par with their levels prior to the housing downturn.
10 In generating the median price expectation at the state level, we use data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have less than 30 observations.
In the monthly REALTORS® Confidence Index Survey, NAR asks REALTORS® “What are your expectations for the housing market over the next six months compared to the current state of the market in the neighborhood or area where you make most of your sales?” The map below shows the REALTORS® Confidence Index – Six-Month Outlook across property types by state based on responses from August-October 2015, reported in the October 2015 REALTORS® Confidence Index Survey Report. 
In the single-family homes market, all states, except for Vermont and Connecticut, had broadly “strong” to “very strong” markets. States with large oil-related sectors such as Texas, North Dakota, and Louisiana still had a broadly “strong” housing market despite the continuing slump in oil prices. Sustained job creation, the low interest rate environment, the offering of three percent downpayment conventional mortgages, and lower mortgage insurance premiums for FHA loans are likely sustaining the positive outlook for single-family homes.
In the townhomes market, 13 states had broadly “strong” markets, which included California, Oregon, Washington, Colorado, Texas, Florida, Maryland, and the District of Columbia.
The condominium market remains broadly “weak” except in nine states such as California, Washington, North Dakota, Colorado, Wyoming, Michigan, and Florida. REALTORS® have reported difficulty in accessing condominium unit purchase financing for both FHA-insured and GSE-backed loans. Only 20 percent of condominiums are eligible for FHA condominium unit financing because of strict eligibility criteria such as those pertaining to occupancy requirements and delinquency dues.
 The market outlook for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have less than 30 observations. Respondents rated conditions or expectations as “Strong (100)”, “Moderate (50)”, and “Weak (0).” The responses are compiled into a diffusion index. Values 25 and lower are considered “very weak”, values greater than 25 to 49 are considered “weak”, a value of 50 is considered “moderate”, values greater than 50 to 75 are considered “strong”, and values greater than 76 are considered “very strong”.
Macroeconomic conditions downshifted in the third quarter of this year. Real gross domestic product (GDP) advanced at an annual rate of 2.1 percent, according to the Bureau of Economic Analysis’s second estimate. The gain remained below the long-run historical average of 3.0 percent.
On the upside, employment gains—especially in the professional and business services sector—boosted demand for office space. Commercial lease space continued advancing in the third quarter of 2015. While construction has been ramping up across all property types, the gap between demand and supply continued to add downward pressure on availability.
Office net absorption totaled 14.6 million square feet in the third quarter of 2015, gaining strength with each consecutive quarter this year, based on data from JLL. New completions totaled 26.6 million square feet over the first nine months of this year, with the development pipeline gaining 8.5 million square feet in the third quarter. Overall office vacancies declined 20 basis points from the second quarter, to 15.1 percent in the third quarter. Rents for office properties rose 1.6 percent during the third quarter, bringing the 2015 cumulative gain to 4.3 percent.
Commercial fundamentals in REALTORS® markets continued improving during the third quarter 2015. Leasing volume during the third quarter rose 3.8 percent compared with the second quarter 2015. Leasing rates advanced at a steady pace, rising 2.5 percent in the third quarter, compared with the 2.7 percent advance in the previous quarter. Office vacancies increased 30 basis points to 16.0 percent compared with a year ago.
Tenant demand remained strongest in the 5,000 square feet and below, accounting for 72 percent of leased properties. However, demand for space in the 5,000 – 7,499 square feet more than doubled during the third quarter, comprising 13 percent of total. Lease terms remained steady, with 36-month and 60-month leases capturing 64 percent of the market.
To access the Commercial Real Estate Outlook: 2015.Q4 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.
In the monthly REALTORS® Confidence Index Survey, NAR asks REALTORS® “How would you describe the past month’s housing market in the neighborhood or area where you make most of your sales?” The map below shows the traffic indices based on responses from August-October 2015, reported in the October 2015 REALTORS® Confidence Index Survey Report.
Buyer traffic, measured by the REALTORS® Buyer Traffic Index, was “moderate” to “very strong” across most states. Sustained job creation, the low interest rate environment, the offering of three percent downpayment conventional mortgages, and lower mortgage insurance premiums for FHA loans are likely sustaining the strong demand for existing homes.
Meanwhile, seller traffic, measured by the REALTORS® Seller Traffic Index, was broadly “weak” across most states, except in Montana, Wyoming, North Dakota, Texas, Maine, and Alaska. REALTORS® reported low inventory of properties in the lower price range and for those that are move-in ready.
 The index for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have less than 30 observations. Respondents were asked “How do you rate the past month’s buyer traffic in the neighborhood(s) or area(s) where you make most of your sales?” The responses were “Strong (100)”, “Moderate (50),” and “Weak (0).” Respondents rated conditions or expectations as “Strong (100)”, “Moderate (50)”, and “Weak (0).” The responses are compiled into a diffusion index. Values 25 and lower are considered “very weak”, values greater than 25 to 49 are considered “weak”, a value of 50 is considered “moderate”, values greater than 50 to 75 are considered “strong”, and values greater than 76 are considered “very strong”.
Commercial sales transactions span the price spectrum, but tend to be measured and reported based on size. CRE deals at the higher end—$2.5 million and above—comprise a large share of investment sales, and generally receive most of the press coverage. Smaller commercial transactions tend to be obscured given their size. However, these smaller properties provide the types of commercial space that the average American encounters on a daily basis—e.g. strip shopping centers, warehouses, small offices, supermarkets, etc. These are the types of buildings that are important in local communities, and REALTORS® are active in serving these markets.
The National Association of REALTORS® Commercial Real Estate Outlook: 2015.Q4 report focuses on market performance in both large (LCRE) and small commercial (SCRE) sectors. The report provides an overview of economic indicators, investment sales and leasing fundamentals.
Macroeconomic activity throttled back during the third quarter of 2015. Based on the second estimate from the Bureau of Economic Analysis, real gross domestic product (GDP) rose at an annual rate of 2.1 percent. In comparison, second quarter growth measured 3.9 percent, while the third quarter 2014 rate of growth was 4.3 percent.
Payroll employment rose by 501,000 positions in the third quarter, bringing total new jobs to 1.8 million from January through September of 2015. Professional and business services accounted for the bulk of new hires, followed by education and health, as well as leisure and hospitality. The retail trade, construction and manufacturing sectors also provided solid figures over the period. The unemployment rate declined from 5.4 percent in the second quarter to 5.1 percent in the third quarter.
Even with economic fundamentals softening, demand for commercial space continued improving across all property types. Vacancy rates in LCRE and SCRE markets converged, as the rebound has been broadening in secondary and tertiary markets.
Commercial investment sales have been riding a wave of global capital searching for yield, coupled with continuing low interest rates. The volume of commercial sales in LCRE markets during the third quarter of this year slowed noticeable, rising only three percent on a yearly basis, according to Real Capital Analytics. The main driver in the slowdown was the decline in portfolio transactions. Prices increased by 14.2 percent in the third quarter, driven by strong appreciation of apartment and CBD office properties.
In comparison, sales in SCRE markets rose seven percent year-over-year during the third quarter, based on REALTORS® market data. With inventory shortage continuing as a main concern, price appreciation moved four percent higher compared with the third quarter of 2014.
Cap rates in SCRE markets were, on average, higher by 103 basis points compared with cap rates in LCRE markets. With the interest rate on 10-year Treasury Notes averaging 2.2 percent during the third quarter of 2015, the spread between cap rates and 10-year Treasury Notes ranged from 470 basis points in LCRE markets to 573 basis points in SCRE markets. The large spread indicates that CRE investors continue to enjoy healthy returns in rebounding markets.
The outlook for the last quarter of 2015 remains positive. With economic growth expected to remain moderately positive, demand for commercial properties will continue to provide downward pressure on vacancy rates. As funding sources increase, commercial real estate investments are projected to close over $500 billion by the end of the year.
To access the Commercial Real Estate Outlook: 2015.Q4 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.
Active military and veterans comprised 21 percent of all home buyers in 2015 ̶ a sizable subset worth exploring their purchasing preferences, according to NAR’s 2015 Profile of Home Buyers and Sellers report released in November 2015.
Let’s take a quick look at the demographics for these two groups combined. The median age for this subgroup was 48, whereas active military was typically 34 years old and veterans were 61 years. The median price of a home they purchased was $223,000, which is consistent with all buyers. Twenty-eight percent were first-time home buyers and 81 percent bought previously owned homes. Active military and veterans were most likely to buy single-family homes at 86 percent. However, only 85 percent worked directly with an agent or broker, slightly down from 88 percent compared to all buyers.
Unique Facts about Active Military and Veterans:
- 18 percent bought multigenerational homes compared to 13 percent for all buyers
- 21 percent were relocated due to a job compared to only eight percent for all buyers
- Median income for active military and veterans is $79,500, which is lower than $86,100 for all buyers
- Median home size purchased was 2,100 square feet whereas the median for all buyers was 1,900
- 41 percent of this group used virtual tours to help them purchase their home, more than any other demographic group
Veterans relocated to three areas of the country more often than any other region, including the West North Central, East South Central, and the Mountain region. These three regions combined encompass the central part of the United States where the states are less densely populated and away from large metropolitan cities on either the east or west coast.
By all credible measures, access to credit has been constrained in recent years. The market appears to have loosened in the spring of 2015 though, followed by another modest improvement in the late summer. However, credit remains tight by historical standards and there are storm clouds on the horizon.
Starting in 2012, there was a steady decline in the average FICO on accepted FHA applications as the FHA increased its mortgage insurance fees, private mortgage insurers recapitalized and recovered, and borrowers migrated into the cheaper conventional space. However, the average FICO score for rejected applications in both the conventional and FHA spaces, 725 and 668 respectively, were relatively unchanged and significantly above levels on accepted applications from 2001 suggesting that overlays were limiting downward movement in these measures.
The average FICO score on rejected FHA applications began to fluctuate in the summer of 2014, but in the 4th quarter of 2015 the average FICO scores on a rejected application fell in both the conventional and FHA space. This pattern accelerated in the spring of 2015, following overhaul of the representation and warranties framework for the GSEs, changes in FHA pricing, renewed confidence among consumers with lower credit scores, and clarification of the FHA’s defect taxonomy. Conversely, the average accepted FICO in the FHA space rose reflecting the migration of some borrowers from the GSEs to the FHA as a result of the FHA’s 50 basis point reduction in its mortgage insurance premium in January of 2015.
The reduction in the average FICO score on a rejected application is a signal of an important change. Some lenders including Wells Fargo indicated that they would reduce overlays on FHA mortgages in early 2014. The eventual decline in the average rejected FICO suggests that this did in fact occur, but it was not widely signaled to consumers, consumers were constrained in other ways, or that there were only a limited number of lenders willing to make these loans until later in 2014. More recently, though, lenders have indicated concern about the FHA’s proposed changes to its certification policy and Wells Fargo along with a number of other lenders indicated that they would reinstitute overlays on FHA loans. The average FICO on a rejected application rose from 627 to 630 from September to October. This measure can be volatile and the FHA’s policy would not explain why the average FICO on rejected conventional applications rose as well, so time will tell whether the reemergence of overlays will have a persistent impact. Regardless of recent trends, the average FICO on an accepted application remains nearly 40 points higher on conventional loans and 20 points higher on FHA mortgages.
Credit scores are not the only dimension for overlays though. Loan-to-value ratios or down payments can also be used to limited access to credit, but as evidenced by the chart above low down payment loans were available at the FHA. The steady rise in the average LTV on accepted conventional loans from 2011 to 2013 reflects the renewed health and return of private mortgage insurers as well as excessive pricing by the FHA.
The average front-end debt to income ratio (DTI) climbed through the middle of 2013 for both conventional and FHA accepted applications as mortgage rates jumped following the taper tantrum. International instability drove rates lower in early 2015 and caused the average front end DTI in both channels to moderate, but this pattern was reversed by mid-summer. Meanwhile, the average for rejected FHA applications fell sharply and remains below its average from 2011 to 2014, a sign that the FHA’s 50 basis point reduction improved affordability for the marginal borrower.
The average back-end DTI ratio on an accepted FHA or conventional loan has changed little in the last four years at roughly 41 percent and 36 percent, respectively. This pattern suggests that despite the GSEs having an exemption on the back-end DTI requirements of the Ability to Repay (ATR) rule while in conservatorship, the bulk of originations are observing the 43 percent back-end DTI restriction. The same is true in the FHA space. However, the average back-end ratio on a rejected application has climbed to 50 percent in October of 2015 from 47 percent in the summer of 2014.
The recent trend of overlay relief suggests that mortgage originators and investors have become more comfortable with regulatory and legal risks in the post-Great Recession paradigm. However, overlays on credit scores remain historically high, while the current environment does not resemble the extreme risk taking behavior from 2001 to 2005. Lenders and insurers regularly impose compensating factors on borrowers who have risky elements in their credit profile. Furthermore, regulators have imposed significant increases in capital requirements and lenders price risk appropriately. While not complete, signs point to significant strides in healing the mortgage market.
REALTORS® generally reported improved housing market conditions in October 2015 compared to a year ago, according to the October 2015 REALTORS® Confidence Index Survey Report.
The confidence and traffic indices all increased compared to a year ago. Compared to September 2015, market activity eased, in part due to the seasonal slowdown across many local markets at this time of the year. Sustained job creation, the low interest rate environment, the availability of three percent downpayment conventional mortgages, and the reduction of mortgage insurance premiums for FHA-insured loans are likely sustaining the housing market recovery.
First-time home buyers accounted for 31 percent of sales, essentially unchanged from the previous months’ figures. Cash sales made up 24 percent of sales, purchases for investment purposes accounted for 13 percent of sales, and distressed properties dropped to six percent of sales. Properties typically sold within 57 days nationally compared to 63 days a year ago.
Based on the American Community Survey 2014, the typical homeowner is 45-54 years old, married, and lives in a single-family detached unit. In contrast, the typical renter is 25-34 years old living alone in multi-unit structures (mostly with 5-9 units).
Identifying specific characteristics of homeowners and renters can help us understand an individual’s tenure choice: whether they decide to rent or to own. Households locate across the country based on individual’s preferences for certain neighborhoods, walkability, access to public transport, social characteristics and many other factors. This means that the homeownership rate vary from metro area to metro area. Indeed, the homeownership rate is less than 50% in the following four metro areas: College Station-Bryan, TX (47.7%), Los Angeles-Long Beach-Anaheim, CA (48.3%), Hinesville, GA (48.5%), Merced, CA (49.8%). Demographics may give an answer to why those metro areas had more renters than owners.
Let’s examine the demographics for both owners and renters at the metropolitan level.
Homeowners: The largest share of homeowners falls within the age bracket between 45-54 years old in 2014. However, there are metro areas where the largest share of homeowners is in a younger age bracket. In our recent study “Best Purchase Markets for Aspiring Millennial Homebuyers”, we identified the top metro areas where millennials move to and we concluded that these markets are well-positioned to experience a rise in first-time home buyers. Indeed, we see that in most of those metro areas the largest share of homeowners is in the 35-44 year age-group instead of the 45-54 year age-group. This seems to occur because of the influx of millennials who increase the share of younger owners. Here is the list of metro areas with largest shares of homeowners in the age-range 35-44 years:
On the other hand, baby boomers seem to move to sunnier metro areas to retire. Here is the list of some metro areas where the largest share of homeowners is 65-74 years old (above the typical age):
Renters: A typical renter is 25-34 years old. However, the largest share of renters rises to the 35-44 year age range in the following areas. Those metro areas seem to experience an increase in homeownership as renters get closer to the typical age of owners.
Homeowners: There are metro areas which are more diverse than other areas. Diversity is higher in California, Hawaii and the metro areas in the South. The smaller the share of the largest group, the more diverse metro area is. For instance, in San Jose, CA that is 58% White (the largest group), 34% Asian, 1% Black owners is more diverse than Atlanta, GA that is 68% White, 25% Black owners and 5% Asian.
Based on the second axiom of urban economics, change is self-reinforcing, thus it is expected that the diversity of the following areas will continue to increase. Here is a list of the most diverse metro areas in homeowners:
Washington, DC is also one of the most diverse metro areas with 66% White, 21% Black, 9% Asian owners.
Let’s see which metro areas had the highest concentration of home owners of each race in 2014:
White (including Hispanic or Latino origin)Metro Area Share of Owners Dubuque, IA
98.4%Fond du Lac, WI
98.3%La Crosse-Onalaska, WI-MN
Black (including Hispanic or Latino origin)Metro Area Share of Owners Pine Bluff, AR
Asian (including Hispanic or Latino origin)Metro Area Share of Owners Urban Honolulu, HI
56.4%San Jose-Sunnyvale-Santa Clara, CA
33.8%San Francisco-Oakland-Hayward, CA
24.6%Los Angeles-Long Beach-Anaheim, CA
Renters: While the national homeownership rate decreased for every race group from 2013 to 2014, the gap between the ownership rates for Blacks and Whites slightly increased from a year ago. Specifically in 2014, at national level, 41% of Black householders own a house versus 59% who rent. In contrast, 69% of White householders own a house while 31% who rent.
Here are the metro areas with the highest concentration of renters of each race in 2014:
White (including Hispanic or Latino origin)Metro Area Share of Renters Brownsville-Harlingen, TX
93.8%Coeur d’Alene, ID
93.8%Eau Claire, WI
Black (including Hispanic or Latino origin)Metro Area Share of Renters Albany, GA
68.1%Pine Bluff, AR
Asian (including Hispanic or Latino origin)Metro Area Share of Renters Urban Honolulu, HI
31.0%San Jose-Sunnyvale-Santa Clara, CA
25.8%San Francisco-Oakland-Hayward, CA
Homeowners: Homeowners are most commonly married couples. However, there are many people living alone who own a place as well. The metro areas below attract the most single owners:
Renters: In contrast, renters are more likely to be single. Here are the metro areas that buck the trend with the highest share of married couples who rent a house:
Units of structure:
Homeowners: While the vast majority of owners buy single family homes, housing units in multi-unit structures or essentially condominiums are their second choice. In some metro areas, the share of multi-unit owners is significantly high (28% of the total owners). Geographically, people tend to buy housing units in multi-unit structures in coastal and urban areas where density is high, affordability is low, and the gap between the price of a single family home and a condo is big. Here is the list of the metro areas with the highest share of owners of a housing unit in a multi-unit structure:Metro Area Share of Ownersliving in multi-unit structure Naples-Immokalee-Marco Island, FL
27.8%Urban Honolulu, HI
26.6%New York-Newark-Jersey City, NY-NJ-PA
24.1%Miami-Fort Lauderdale-West Palm Beach, FL
Renters: On the other hand, the typical renter lives in a housing unit in multi-unit structure. However, in the following metro areas there are more individuals that rent a single family home than a housing unit in multi-unit structure.Metro Area Share of Renters living in single family home Madera, CA
Note: If the estimates do not sum to 100% this indicates that data for this geographic area for certain racial groups cannot be displayed because the number of sample cases is too small.
- NAR released a summary of existing-home sales data showing that the housing market sales pace slowed down from last month, as October’s existing-home sales reach the 5.36 million seasonally adjusted annual rate. October existing-home sales marks 13 consecutive months of year over year gains, and sales are up 3.9 percent from a year ago.
- The national median existing-home price for all housing types was $219,600 in October, up 5.8 percent from a year ago, October 2014.
- Regionally, all four regions showed growth in prices from a year ago. The West had the largest gain at 8.0 percent while the Northeast had the smallest gain at 1.3 percent from last October.
- From September, no region saw gains in sales. The West had the biggest decrease at 8.7 percent while the Northeast was flat. All regions showed gains in sales from a year ago. The Northeast had the biggest increase of 8.6 percent while the South had the smallest gain of 0.5 percent. The South leads all regions in percentage of national sales at 38.6 percent while the Northeast has the smallest share at 13.7 percent.
- October’s inventory figure decreased 2.3 percent from last month and is also down 4.5 percent from a year ago. It will take 4.8 months to move the current level of inventory at the current sales pace. It takes approximately 57 days for a home to go from listing to a contract in the current housing market compared to 63 days a year ago.
- Single family sales decreased 3.7 percent while condos also fell 1.6 percent compared to last month. Single family home sales increased 4.6 percent and condo sales are down 1.6 percent from a year ago. Both single family and condos had an increase in price with single family up 6.3 percent and condos up modestly at 1.6 percent from a year ago, October 2014.
The Federal Housing Finance Agency (FHFA) announced the conforming loan limits for 2016 today. Limits will rise in a 39 counties around the country. The national conforming limit remains unchanged, but could rise in the near future.
Every year, the FHFA evaluates home price growth at the national level in order to adjust the national conforming loan limit. That limit currently stands at $417,000 and will not change in 2016 despite several years of strong price growth. However, the loan limit in certain high-cost areas will rise. The high cost limit is defined as the lesser of 1.15 times the local median home price or 1.5 times the national conforming limit or $625,500. Thus, for an area with a median price of $400,000, the conforming limit in that county would be $460,000 as its median times 115 percent is greater than the national conforming limit and below the high-cost limit.
For fiscal year 2016, the FHFA announced an increase in limits for 39 counties, most of which are concentrated in Denver, Boston, Seattle, and Nashville, and four markets in California that include San Diego (see bottom table). No counties will see a decline in their limit.
In 2007, the national conforming loan limit was frozen at $417,000 as the economy entered the great recession. As home prices fell, the limit was held constant until subsequent price growth could justify raising it above the 2007 level. Earlier this year the FHFA requested public comment on which measure of home price growth to use to adjust the national conforming loan limit. A new price index was chosen to adjust the conforming limit, but of significance was the implication that the FHFA was anticipating an imminent increase in the loan limit. Based on the new methodology chosen, the current price level remains roughly 3.7 percent below the seasonally adjusted level from the third quarter of 2007 when the limit was frozen. NAR is currently forecasting quarterly annualized price growth of nearly 4.7 percent for the four-quarter period ending in the 3rd quarter of 2016 suggesting that the conforming limit may rise in 2017 based on the new methodology. As depicted below, the FHFA’s seasonally adjusted purchase index, an alternative measure of price growth comprised only of data from mortgages backed by the GSEs, is 0.3% higher than the 3rd quarter of 2007.
FHFA’s Decision Impacts FHA Borrowers
The conforming loan limit is doubly important as it also defines the maximum loan amount that can be financed through the Federal Housing Administration (FHA). The FHA’s national limit is 65 percent of the conforming limit of $417,000 or $271,050, but it too rises to as much as $625,500 in high cost areas based on the local median price. Given the FHA’s sharp 50 basis point reduction in its annual mortgage insurance premium last January, a higher local limit allows more consumers to access lower cost home financing or to get access at all.
With mortgage rates set to rise in the coming quarters and access to credit for some home buyers limited in the private sector, a change to the conforming and local limits is gaining importance. However, limited supply remains a heavy headwind to entry level home buyers.
- There was a big rebound in new home sales in October after a very poor showing in September. Even with the gain, the sales pace of newly constructed homes is only about half of what it should be. Home builders need to get busier.
- Specifically, the annualized sales pace in October was 495,000, a gain of 11 percent from one month ago and 5 percent from one year ago. The Northeast region made the biggest gain, matching the region’s best performance in 5 years.
- One reason for the increase is that builders are evidently constructing more affordable smaller-sized homes. The median price of newly constructed homes in October was $281,500, the lowest price in over a year. The price is still considerably higher than the existing home price of $219,600. Because the gap between new and existing home prices has been larger than normal, either builders need to focus on less expensive homes or there will be plenty of room for existing home prices to rise and catch up.
- Whatever builders build, sell quickly. In the past month it took an average of only 2.8 months to find a buyer, the lowest in at least 25 years. Given the general shortage of inventory, home builders need to greatly ramp up production.
- For those small home builders who are still facing difficulty obtaining construction loans from community and local lenders, they should check out the Small Business Administration. There is a SBA program that permits loans to build up to 5 new homes.
This Thanksgiving we look at how recent buyers are choosing their homes, and how their friends and family can influence their decision. While we don’t all get to see our families every day, for many home buyers having the option to do so can impact the home they purchase. Based on data from the recently released 2015 Profile of Home Buyers and Sellers, we can see how multi-generation homes are becoming more common and the importance of living close to friends and family.
- This year 13 percent of all buyers purchased a multi-generational home, buyers of multi-generational homes were typically 49 years old. Eight-two percent of the multi-generational homes purchased were detached single-family homes.
- Homes were typically 2,200 square feet and were purchased for $231,000. Multi-generational homes typically had four bedrooms and two bathrooms. Eleven percent of buyers purchased because they desired a larger home.
- Among all multi-generational buyers, the desire to own a home of their own was the primary reason for purchasing (29 percent). The majority of multi-generational buyers were married couples (69 percent), and single females (13 percent).
- The main reasons for purchasing a multi-generational home was for the health and caretaking of aging parents (22 percent), cost savings (14 percent), children or relatives over 18 moving back into the house (12 percent), to spend more time with aging parents (eight percent), and children or relatives over 18 that never left home (eight percent).
- Seven percent of all buyers purchased their home to stay close to friends and family. Single females (nine percent) and married couples (seven percent) recently purchased their homes to be closer to friends and family.
- The convenience to friends and family for single females (43 percent) and unmarried couples (41 percent) was an influencing factor of their neighborhood choice.
Lawrence Yun for Forbes
What is going on with home builders? Housing starts refuse to rise in any meaningful way, despite the ongoing shortage in the number of homes on the market and falling rental vacancy rates. What is being built is getting quickly sold. Housing starts totaled 1.06 million on a seasonally adjusted annualized rate in October, the Commerce Department reported Wednesday, and the average time to find a buyer was 3.3 months — near record lows. The housing starts figure is the lowest in seven months and is even below the level we saw a year ago. A big negative consequence of the continuing lackluster homebuilding activity is that renters are suffering and are having a hard time converting into ownership.
According to the latest annual survey of home buyers, in the past year the first-time buyer share fell to the lowest point since 1987, nearly 30 years ago. Only 32% of recent homebuyers self-identified as being first-time homeowners compared to the historic average of around 40%. Because there are other measurements of first-time buyers, it is worth briefly noting that this stated first-time figure is out of all buyers purchasing only a primary home and therefore excludes investors and vacation home buyers. Also the government sometimes has a technical definition that does not pass the smell test for everyday common folks, such as classifying an individual as a first-time buyer even though this person was a homeowner in the past (though technically not in the past 3 years) or because someone is buying as a newly single person even though the person had been a homeowner prior to a divorce. It’s no wonder that Americans are ever more wary of Washington, when the city gets stuck in debates over technical definitions rather than applying common sense.
- Applications for purchase mortgages surged 11.9 percent for the week ending November 13th after a tepid 0.1 percent gain in the prior week, but the 4-week moving average remains strong.
- The volume of applications surged in the lead up to the implementation of the new Know Before You Owe (KBYO or TRID) rules on October 3rd, pulling forward many applications that would have registered later in October. A boom and bust pattern developed in subsequent weeks, which appears to have stabilized and gained traction with a new crop of buyers.
- The 4-week moving average, a means of smoothing this weekly volatility, sat at 19.7 percent stronger than a year earlier and up from 15.2 percent two weeks earlier, reversing slippage in the weeks following implementation of TRID.
- The gains were concentrated in the government sector which jumped 15.5% compared to a 10.4% gain in the conventional space.
- The average contract rate on a 30-year fixed inched 6 basis points higher to 4.18 percent. Though slightly up from last week, it is roughly in line with the 4.17 percent average rate at the same time in 2014. Rising rates tend to have a stronger impact on refinances than on purchase applications, but refinance gained only 2.0 percent lagging the outsized gains in the purchase market.
- This week’s pattern of stabilization is likely to continue in the weeks ahead, but could remain choppy as originators wrestle with the new regulatory environment. Applications will remain far stronger than the fall of 2014.
- In the long term, the rule should help to make the process a more transparent process for consumers. Luckily the change was timed for the fall, a slower period, the Consumer financial Protection Bureau has signaled its intention to hold lenders harmless so long as they perform a “best effort” to comply in the near term.
- Anecdotes suggest a modest degree of confusion with the new rules among lenders and lawyers. Some lenders may be better prepared for the changes than others. Consumers and Realtors should shop a variety of lenders, while consumers can ask their Realtor for her experiences with various lenders in the TRID environment.
Commercial space is heavily concentrated in large buildings, but large buildings are a relatively small number of the overall stock of commercial buildings. Based on Energy Information Administration data approximately 72 percent of commercial buildings are less than 10,000 square feet in size. An additional 8 percent of commercial buildings are less than 17,000 square feet in size. In short, the commercial real estate market is bifurcated, with the majority of buildings (81 percent) relatively small (SCRE), but with the bulk of commercial space (71 percent) in the larger buildings (LCRE).
While large buildings in top-tier markets generally receive most of the press coverage, smaller commercial properties tend to be obscured given their relatively smaller size. However, these smaller properties provide the types of commercial space that the average American encounters on a daily basis—e.g., strip shopping centers, warehouses, small offices, supermarkets, etc. These are the types of buildings that are important in local communities and REALTORS® are active in serving these markets.
NAR’s Commercial Real Estate Market Trends gathers market information for SCRE properties and transactions, and summarizes sales and rental activity based on a quarterly survey of commercial REALTOR® practitioners. Based on the latest report, fundamentals improved during the third quarter 2015. Leasing volume during the second quarter rose 3.8 percent compared with the second quarter 2015. Leasing rates advanced at a steady pace, rising 2.5 percent in the third quarter, compared with the 2.7 percent advance in the previous quarter.
NAR members’ average gross lease volume for the quarter was $567,257, 9.8 percent lower than the previous period. New construction accelerated, posting a 6.6 percent gain from the second quarter of this year, and a marked increase from the 2.7 percent rise recorded in the first quarter 2015.
Tenant demand remained strongest in the 5,000 square feet and below, accounting for 72 percent of leased properties. However, demand for space in the 5,000 – 7,499 square feet more than doubled during the third quarter, comprising 13 percent of total. Lease terms remained steady, with 36-month and 60-month leases capturing 64 percent of the market.
To access the latest Commercial Real Estate Market Trends report, visit: http://www.realtor.org/research-and-statistics/commercial-real-estate-market-survey.