BABY BOOMERS POISED TO INFLUENCE THE HOUSING MARKET

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Baby-Boomers-Poised-to-Influence-the-Housing-Market-240x170Whether they decide to move from their current homes or age in place, the decisions baby boomers and other older homeowners make during the next few years could significantly impact the single-family housing market. Today, baby boomers and other homeowners age 55 and older control almost two-third (or about $8 trillion) of the nation’s home equity. There also are more than 67 million 55-plus homeowners.

The new “Freddie Mac 55+ Survey”—which polled 4,900 homeowners born before 1961 regarding their current housing situations, plans and willingness to help their grown children become homeowners —found that this generation has the potential to generate significant new demand for mortgage credit and to tighten home-buying competition, especially for millennials and other first-time home buyers.

Here are some of the survey’s key findings:

• Consistent majorities said they are “very satisfied” with their current homes (64 percent), their communities (59 percent) and quality of life (54 percent). Nearly 90 percent of the respondents said people their age should own a home.

• Seventy-six percent of homeowners were confident they would have a comfortable retirement. These feelings were echoed across racial lines and shared by 55-plus homeowners who are still working, as well as retirees, and the 44 percent of homeowners surveyed had a mortgage.

• Consistent majorities said homeownership makes financial sense for married people with children (96 percent) and without children (85 percent), as well as single people with children (79 percent) and without children (53 percent). Almost 25 percent of the respondents also said they have offered down payment assistance to someone.

• This works out to an estimated 42 million homeowners who don’t plan to move. About a quarter (23 percent) indicated they would need major renovations to keep their homes accessible and a third (34 percent) would pay for improvements by refinancing their mortgage or taking out a second loan or home equity line of credit.

• Although movers were in the minority, it was a big minority. According to the survey, almost 40 percent of all 55-plus homeowners said they would like to move at least once more if they had complete control over it. This isn’t just about downsizing to a rental or nursing home; 19 million planned to buy a home and nearly 8 million expected to move within the next four years. Half of the 19 million likely movers also expected to buy less expensive homes.

SPRING USHERS IN ROBUST HOME MARKET

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Spring-Ushers-in-Robust-Home-Market-240x170This spring’s real estate market is coming in strong. New data released by realtor.com shows that homes in May are moving off the market at the fastest pace seen since the housing recovery began, despite record-high asking prices.

Based on realtor.com’s preliminary findings, homes spent a median of 65 days on the market in May—the same length of time as a year ago and three days quicker than April. The median home was listed at $250,000—9 percent higher than a year ago and 2 percent higher than the past month. For-sale housing inventory also has continued to increase on a monthly basis, but remains lower than a year ago.

Meanwhile, more than 550,000 listings have been added to the market to date in May (a 4 percent increase), but the level of inventory remains 4 percent lower than a year ago. Site traffic data on realtor.com shows a 30 percent growth in searches for homes for sale, compared with May 2015.

“Pent-up demand and low mortgage rates are driving consumers into the market with urgency,” says realtor.com Chief Economist Jonathan Smoke in a statement. “However, the recurring issue of limited supply is leading to higher prices.”

Thankfully, Smoke adds, gains in new single-family construction and new home sales are providing a pressure release. “Potential buyers are finding they can avoid a competitive bid situation if they elect to sign a contract on a home to be built,” he says. “As the share of new homes sold goes up, we should eventually see signs of more balance in the existing home market, like lower price appreciation. However, we clearly aren’t there yet.”

Here is a snapshot of the realtor.com’s May data:

• Median age of inventory is estimated to end at 65 days, the same as May 2015 and down 4 percent from April.

• Median listing price for May should reach a record high of $250,000—a 9 percent increase year over year and a 2 percent increase month over month.

• Listing inventory in May is showing a 4 percent increase over April. However, inventory decreased 4 percent year over year.

SINGLE-FAMILY SECTOR IMPROVES IN 2016

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singlefamilyimproves-240x170This could finally be the year that production of single-family homes outpaces apartments in the U.S., according to the National Association of Home Builders’ 2016 Spring Construction Forecast.

On the downside, factors that stand to hinder a full rebound include a shortage of build-able lots and labor, along with limited access to acquisition, construction and development loans.

“Builders remain cautiously optimistic about market conditions,” says Robert Dietz, NAHB’s chief economist. “2016 should be the first year since the Great Recession in which the growth rate for single-family production exceeds that of multifamily. And we see single-family growth accelerating in 2017 as the supply side chain mends and we can expand production.”

Steady job growth mixed with affordable home prices, low mortgage rates and pent-up demand have bolstered consumer confidence, with the single-family housing market expected to make a recovery during the next year and into 2017.

NAHB forecasters predict that single-family production will see an increase of 14 percent this year (to 812,000 units), and then rise another 19 percent in 2017 (to 964,000 units).

Referring to the 2000-2003 period as a healthy benchmark when single-family starts averaged 1.3 million units annually, NAHB estimates that single-family production — which bottomed out at an average of 27 percent of normal production in early 2009 — will reach 64 percent of historically normal levels by the fourth quarter of this year and rise to 77 percent of normal by the end of 2017. Single-family production now stands at 58 percent of normal activity.

“Consumer surveys suggest the ultimate goal of millennials is to purchase a single-family home in the suburbs,” says Dietz. “We see growth for single-family looking ahead. The recovery continues and is dictated by demand-side conditions and supply-side headwinds.”

On the multifamily front, production was recorded at 395,000 units in 2015, above the rate of 331,000 that is considered a normal level of production. Multifamily starts are expected to decline by 4 percent (to 379,000 units) in 2016 and increase 6 percent (to 402,000 units) in 2017.

Residential remodeling activity also is expected to increase 3.3 percent in 2016 compared with 2015 and rise an additional 1.3 percent in 2017.

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