2017 SCE HOUSING SURVEY FINDS INCREASED OPTIMISM ABOUT HOME PRICE GROWTH

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The Federal Reserve Bank of New York has released results from its February 2017 SCE Housing Survey, which provides information on consumers’ housing-related experiences and expectations. The survey, which is part of the broader Survey of Consumer Expectations, shows an increase in home price growth expectations, especially for growth during the next year. In addition, the majority of households continue to view housing as a good financial investment; expected changes in mortgage rates have slightly increased since last year’s survey; and renters’ perceived access to mortgage credit has continued to ease.

Here, the key findings from the February 2017 survey:

Home prices/rents

Average home price change expectations at both the one- and five-year horizons increased from 2016. For example, the mean one-year ahead expected change in home prices in 2017 was 5.1 percent, which is 1.8 percentage points higher than last year and the highest level since the inception of the survey in 2014. Five-year growth expectations also increased from last year, but remain at or below the levels in 2014 and 2015.

There was a drop in the perceived downside risk in home prices over both the one- and five-year horizons. At the one-year horizon, the average probability of home prices decreasing declined from 43 percent in 2016 to 37.5 percent.

Rent change expectations increased at both the 1- and 5-year horizons, by 0.8 and 0.5 percentage points, respectively.

Housing outlook

Attitudes toward housing continued to remain positive: 60.4 percent of all respondents think that buying property in their zip code is a very or somewhat good investment, and 12.7 percent think it is a bad investment. Although slightly less optimistic than respondents overall, most renters are also enthusiastic about buying property, with 55.9 percent viewing it as a good investment and 15.6 percent viewing it as a bad investment. Higher-income (annual income of $60,000 or more) and more educated (a bachelor’s degree or more) households continue to have a more optimistic outlook of housing compared to their counterparts.

The average probability of buying a home, conditional on moving within the next three years, was largely unchanged from 2016 at 63.6 percent. The average probability of moving during the next year declined slightly, from 19.2 percent to 17.8 percent.

Mortgage rates

On average, households perceive mortgage rates for themselves and nationally to have increased by about 40-50 basis points from 2016. This change is roughly in line with the increase in actual mortgage rates. Less-educated and lower-income households perceived larger increases.

Average expectations of future mortgage rates similarly increased for both the one- and three-year-ahead horizons. For example, the average year-ahead mortgage rate expectation was 5.6 percent, up from 5.2 percent in 2016. The average probability that mortgage rates will increase over the next year rose from 49.5 percent in 2016 to 52 percent; this is primarily driven by older respondents (ages 50 or older).

Owners

The average probability of mortgage refinancing over the next year declined to 10.2 percent, from 11.3 percent in 2016.

The average probability of investing at least $5,000 in the home over the one- and three-year horizons remained steady. The average probability for the one-year horizon stands at 32.4 percent; the corresponding value for the three-year horizon is at 46 percent.

Renters

Renters continue to perceive obtaining a mortgage (if they want to buy a home) as difficult, with 65 percent stating that it would be somewhat or very difficult to get a mortgage. However, renters are gradually beginning to perceive credit access as becoming easier. For instance, this year 20 percent of renters stated it would be somewhat or very easy for them to obtain a mortgage if they wanted to, compared to fewer than 15 percent in 2014 and 2015. These movements held across demographic groups, although they are less pronounced for older renters.

Renters continue to report a strong preference for owning homes. The share of renters who report preferring or strongly preferring to own instead of rent (if they had the financial resources to do so) stood at 72.3 percent, a slight decrease from 74.1 percent in 2016. Younger and less-educated respondents are particularly likely to express a strong preference for owning.esplanade

CAN A HOMEOWNER ASSOCIATION SHIFT REPAIR COSTS TO OWNERS?

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homeownerassociaton-240x170People who buy condos reap numerous benefits that are not available to traditional homeowners. Condo owners, for example, enjoy professional maintenance and repair services that alleviate much of the upkeep costs that homeowners must tackle on their own.

However, despite many of their maintenance costs being covered by the homeowners’ association or by the property owner, condo owners still may be forced to pay some costs for damages to the property directly outside of their condominiums. These costs can lead to contentious situations between the homeowners’ association and the condo owner.

Thanks to a recent change to the homeowners’ association laws in California, there may be little that condo owners can do to contest these costs in court. It used to be that owners could go to court and challenge the association if the damage could be linked back to common use facilities or fixtures. A court ruled in favor a condo owner by stipulating that there could be no way to distinguish one section of the common use facility or fixture from another and thus no way to prove definitively that the damage was caused by or the responsibility of the condo’s owner.

However, a change to the law now states that homeowners’ associations can in fact pass on these expenses to the owners and escape having to pay for costs like those incurred when fixing a broken gas line or a backed up sewer line. Condominium owners themselves may have to pay for these damages without legal recourse.

 

 

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