Do rising rents make homebuying more attractive?

 Real Estate Market  Comments Off on Do rising rents make homebuying more attractive?
Sep 152015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

Zillow reports that American renters are now paying 30.2% of their income for rent, the highest percentage in recorded data, which dates back to 1979. This is up almost 1% from last year and much higher than the long-term average of 24.4%. The 30% share is important because above this level economists say housing costs are unaffordable.

On the flip side, the Zillow report says that the average homeowner only spends 15.1% of their income on a housing payment. While that huge gap makes for wonderful marketing fodder, I think the number is questionable. The median home price is about $231,000, and the median income is about $53,000. Even if I grant Zillow that the average homebuyer is able to afford a 20% down payment, I still get a $900 principal and interest payment, which is more than 20% of the homebuyer’s income. And I haven’t even considered property taxes and insurance.

But all real estate is local. In Austin, for example, the median home price is $255k, and the median income is a bit over $52k. Assuming a homebuyer has a 20% down payment, she’s looking at a total housing payment that is more than 35% of her income. The average rent payment in Austin is $1445, which is 33% of her income.

So, while rising rents are a strong incentive for renters to consider buying a home, you may not be able to use a lower housing payment as a deal clincher.

Fannie housing survey results say “buy now”

 Real Estate Market, Residential Mortgage  Comments Off on Fannie housing survey results say “buy now”
Aug 252015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

The latest Fannie Mae housing survey holds some cautionary results for those in the real estate industry. Both the share of respondents who believe now is a good time to sell and now is a good time to buy fell last month, with the latter hitting an all-time survey low at 61%.

Fannie economists suspect the results are shaded by global economic headlines, particularly the Greek default and Chinese stock market plunge. Year-over-year, the indicators measured in the survey are as strong as or stronger than a year ago.

If you chalk up these disconcerting results to headline weariness, it’s easy to find some positive news in the numbers.

– Consumers still expect home prices and rents to rise, and they expect rents to rise 50% faster than home prices. Thus, potential homebuyers have an incentive to act sooner rather than later, especially if they’re currently renting.

– An increasing percentage, now 51%, also thinks mortgage rates are going to rise in the next year, providing more incentive to buy now.

– The share of respondents who say their next move will be a home purchase ticked up to 65%.

– Finally, the survey hasn’t shown an appreciable change in consumers’ attitudes about their own finances in the last 12 months. This lends further credence to the analysis suggesting the results may be skewed by world headlines.

Fannie’s housing survey reflects the attitudes of 1000 consumers about the housing market and the economy. Fannie has conducted the survey each month since June 2010. Click here to see the full survey results.

Freddie Mac housing index shows recovery continues

 Real Estate Market  Comments Off on Freddie Mac housing index shows recovery continues
Aug 052015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

Freddie Mac’s MiMi index, or Multi Indicator Market Index, continues to point to a recovering housing market. The latest index covers the spring buying season, and shows the nationwide index increased to 79.2. While this value still indicates a borderline weak housing market, it is a sizable improvement from last year and from the previous month. By comparison, the index high was 121.16 in 2006.

More than half the states have MiMi values in the stable range of 80 to 120. Texas ranks 7th nationwide with a MiMi value of 87.6. This represents a 5% improvement over last year.

Of Texas metros, Austin leads the pack and remains in the top 5 nationally with a value of 92.8. Values for other TX metros include DFW at 83.9, El Paso at 84.9, Houston at 86.7, The Valley at 89.1, and San Antonio at 86.5.

The biggest drag on MiMi values for TX metros is the number of purchase applications. This probably is more indicative of tight supply than market weakness. Thus, I think it’s safe to say the housing markets may be stronger than indicated by their MiMi scores.

Latest Fannie housing survey points to improving market

 Real Estate Market  Comments Off on Latest Fannie housing survey points to improving market
Jul 292015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

The latest Fannie Mae housing survey contains a few nuggets for the housing market. Perhaps the most exciting is consumers’ attitudes about the selling climate. The percentage who thinks now is a good time to sell a home climbed to a survey high of 52%, the first time this statistic has exceeded 50% in the survey. Given the lean inventory numbers of late, this is a welcome result.

The other nuggets are the percentage of respondents who think rents will rise in the next year increased 4 points to 59% while a decreasing percentage, 47%, think home prices will rise. Further, the average expected rent increase is 4.2%, while the average home price increase is 2.6%. Moreover, an increasing percentage believes that mortgage rates will rise in the next year. Thus, more renters may be motivated to consider buying a home and buying soon.

On the negative side, a declining percentage think now is a good time to buy. This correlates with consumers’ overall view of the economy. A majority say the economy is on the wrong track even though they view their personal situation more positively. This may represent a headwind for the market, but for those consumers who are less concerned or less cautious, it sounds like there’s plenty to motivate them to act.

Fannie’s housing survey reflects the attitudes of 1000 consumers about the housing market and the economy. Fannie has conducted the survey each month since June 2010. Click here for the full survey results.

More reasons for renters to become homebuyers

 Real Estate Market, Residential Mortgage  Comments Off on More reasons for renters to become homebuyers
Jul 092015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

A recent Harvard study gives you more reasons to target renters as potential homebuyers. The study reported that rents are rising at twice the rate of overall inflation and, more importantly, rising faster than paychecks, especially for the middle class.

The homeownership rate has fallen to a 25-year low as more folks choose to or are forced to rent. Apartment vacancies are disappearing, and that is keeping upward pressure on rents.

In 2013, nearly half of renter households were “cost burdened”, meaning their rent ate up more than 30% of their income. Given that rents continue to rise and wages remain stagnant, it’s likely the percentage has grown in the last two years.

Homeownership still seems to be a better financial choice in many US cities. Despite rising home prices, NAR’s first quarter home affordability index shows that Texas homes remain very affordable for median-income folks. The obvious marketing angle is to encourage renters to buy now before rising home prices and interest rates degrade affordability.

A more creative marketing angle might be to focus on rent prices rather than home prices. Rents change, and right now they’re rising more than 5% annually. The Labor Dept reports that incomes are rising at less than 2% annually, so rent is going to eat up an ever-larger share of a family’s income. Buying a home now allows a family to control their housing cost more effectively with a fixed mortgage payment at a low interest rate.

Cash sales down; Will 1st-time homebuyers return?

 Real Estate Market  Comments Off on Cash sales down; Will 1st-time homebuyers return?
Jun 242015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

Although the information is a little dated, I found it interesting that Apr Realtor data confirmed what many of us felt this spring. The economy and housing market in particular seem to have shaken off the winter chill and point to a strengthening housing recovery. For the 3rd month in a row, more Realtors viewed the market as strong as opposed to weak across all property types.

Two other interesting results were:

– Homes continue to sell quickly, typically within 39 days; and

– Investor sales are declining, mirrored by a decline in cash sales, which accounted for 24% of sales.

Moving forward, this could be good news for first-time homebuyers as they tend to lose out to cash offers.

Finally, Realtors identified several areas of concern, including:

– Limited inventories of move-in ready, affordable homes – I think move-in ready is a key point here;

– Financing issues, including a difficult, slow qualifying process, continued problems with appraisals, and concern about upcoming regulatory changes;

– Slowing demand from international buyers because of a strong US dollar;

– The adverse impact of lower oil prices and the effects of higher flood insurance rates; and

– The potential impact of rising interest rates.

If you want to see the full report, click on the link at the end of my blog.

Click here to see the full report.

Fannie survey provides reason for optimism

 Real Estate Market  Comments Off on Fannie survey provides reason for optimism
Jun 102015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

I think the most positive news from the May Fannie Mae Housing Survey is the percentage of respondents reporting a significant increase in their household income in the last year. This statistic climbed to a near survey-high of 28%. Those expecting improvement in their personal finances also rose. These results are consistent with the recent jobs and personal income reports showing on average consumers are earning more. While this hasn’t translated yet into increased consumer spending, if the trend continues, it should be positive for homebuying.

Unfortunately, respondents are increasingly negative about the overall economy. Only 38% of respondents think the economy is on the right track, the lowest percentage in almost a year. So while consumers may be earning more, it may be challenging to get them to step up to a big financial commitment, like buying a new home.

But the resistance may be softening. An increasing percentage believes now is both a good time to buy and to sell a home. The latter reached an all-time survey high of 49% and is particularly important given the current dearth of housing inventory. Further, an increasing share says if they were going to move, they would buy rather than rent.

Fannie Mae chief economist Doug Duncan says the “good time to sell” and “income growth” questions are key indicators for the housing market, and their increases suggest moderate improvement in the market this year.

Note that Fannie completed this survey prior to the recent mortgage rate increases. Assuming rates don’t reverse, it will be interesting to see if the Jun survey continues to show optimism or if the higher rates sap momentum as they did last year.

Click here for a link to the survey results.

Fannie housing survey reveals cautious homebuyers

 Real Estate Market  Comments Off on Fannie housing survey reveals cautious homebuyers
May 182015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

Fannie Mae’s Apr National Housing Survey revealed good news and bad news about the housing market. The good news was that the recent slide in consumer sentiment towards housing reversed. The bad news was consumers are becoming more wary of their ability to afford a home.

Sixty-three percent of respondents said they would prefer to buy a home next time they move. This reverses the recent slide in this index and is up from a survey low of 60% in Mar. An increasing majority expects rental rates to increase in the next year, and the average expected rate of increase is 4.1%, much higher than the survey’s average expected home price increase. This presents a continuing opportunity to convince would-be renters to become homebuyers instead.

Unfortunately, a declining share believes now is a good time to buy a home. Fannie cites renewed concerns about rising home prices and recent economic weakness as causing the decline. The average expected home price increase ticked up again this month, and an increasing majority believed the economy is on the wrong track. Interestingly, this result is at odds with respondents’ views of their own financial situation, which generally improved. Thus, should the economy improve this summer, this nervousness could pass quickly.

Click here for a link to the survey results.

RealtyTrac says more investors and less cash

 Investment, Owner-occupied, Real Estate Market  Comments Off on RealtyTrac says more investors and less cash
May 052015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

RealtyTrac released an interesting report recently that showed the share of homes purchased by owner occupants dropped to 63.2% in the first quarter, the lowest level since 2011 when they started tracking the data. This is down from 65.8% last quarter and 68.6% a year ago.

RealtyTrac considers anyone who has the property tax bill mailed somewhere other than the property address to be a non-owner occupant, so it could include vacation home buyers in addition to investors.

Among non-owner occupants, a much smaller 44.7% were cash buyers, down from 61% a year ago. Institutional investors represented 3.4% of all buyers, down from 6.1% last year and the lowest share in 4 years.

This suggests that smaller, more traditional real estate investors are becoming more active in the market. It also suggests that buyers are taking advantage of relatively easier credit requirements to use mortgage money to complete their purchases.

Three of the top 5 metro areas for investor activity were in FL, and no TX cities made that list, which makes sense given that FL cities led the nation in REO sales. More interesting, I think, is the shifting focus of institutional investors. Memphis and Charlotte topped the list of markets having the most institutional investor activity.

Click here for the full report.

Will Millennials save spring home buying?

 Real Estate Market, Residential Mortgage  Comments Off on Will Millennials save spring home buying?
Apr 222015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

As we enter the spring home buying season, could the millennial generation finally move out of their parents’ basements and become the home buying generation? Recent data are conflicting, but there is reason for hope.

Millennial homebuyers have several factors working against them. Wages have stagnated since the financial crisis while home prices have recovered in many markets favored by young adults. The result is reduced affordability. Student debt also is a problem for many Millennials. Recent surveys corroborate the anecdotes – Millennials are worried about their debt loads. Even if they could afford a home, they’re more interested in reducing debt than taking on a mortgage. Finally, those debt payments make it harder for Millennials to save for a down payment. As a result, homeownership among young adults has dropped more than 6 points to 36.8% as more Millennials are doubling up with friends or just living with parents to save on expenses.

But they’re also choosing to rent, and that may be an impetus for some to consider home buying. Home ownership is at a 20+ year low, whereas rental occupancy is at a 20+ year high. The result: Rents are rising quickly in many of the same areas Millennials prefer. So, while rising home prices make a buying home less affordable, in most areas, home buying is still a better financial decision than renting.

Two other recent trends suggest we could see home buying pick up. First, wages finally may be growing. While the data trend is only a few months old, recent announcements by several major employers that they’re raising their minimum wage suggest the trend may continue. Second, recent census data shows that household formation finally is gaining steam. While most of those new households are renters, those rising rent payments could encourage more to consider a home purchase.

Encourage fence sitters to try our Rent vs. Buy calculator on our Web site. It’s eye-opening how much more expensive renting can be.

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