Cool Tools News Spool

Month: April 2015

  • Will Millennials save spring home buying?

    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.

  • Tapping the Bank of Mom and Dad

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

    by G. Steven Bray

    With studies showing millennials earning less than earlier generations of potential homebuyers, it’s reasonable to worry that they won’t be able to afford the down payment to purchase a home. With lower earnings, higher student debt, and higher rents, it seems unlikely they’ll have much left to save.

    A new study by loanDepot suggests another source may be available: the Bank of Mom and Dad. The study shows that 17% of parents of millennial-aged children expect to help them purchase a home in the next 5 years. Half of those say they’ll contribute towards the down payment. Interestingly, this number is lower than in past years. However, a larger share of parents says they’ll help their kids pay student loans or other expenses.

    Being an empty-nester, it surprised me that 22% said they would let their kids move back home to save money. Amd 20% said they’re likely to co-sign a loan for their children.

    One of the more interesting results of the survey concerned attitudes about parental assistance. While more than two-thirds of parents viewed their financial support as a gift, less than a third of the kids agreed. Does requiring naming rights for the grandchildren really negate the generosity of the gift?

  • Healthiest housing market since 2001

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

    by G. Steven Bray

    I read an interesting report from Nationwide Insurance’s economics group this past week that claimed the housing market is the healthiest it’s been since 2001. Let’s take a look at how they came to this conclusion.

    The report’s authors calculate a value they call the Leading Index of Healthy Housing Markets (LIHHM) using employment, demographic, mortgage, and home price data for the national and individual housing markets. They claim a market’s score, which ranges from 75 to 125, indicates the relative health of that market. A score of 100 is neutral, and scores above 100 indicates a healthy market.

    The current value for the national market is 109.8, which the authors conclude indicates a housing market unlikely to enter another downturn soon. Further, they find that only two of 373 metro areas have negative scores at this time. Positive contributors to the index included employment gains and higher home prices. In addition, they cite a pick-up in household formation.

    Interestingly, these results are a bit at odds with Freddie Mac’s Multi-Indictor Market Index (MIMI). The national MIMI score in Jan was 74.6, a level Freddie says indicates a weak housing market.

    Regardless of which report you believe, what may be more interesting is the trend, and both indices show year-over-year improvement.

    Click here for the Nationwide Insurance report.

    Click here for the Freddie Mac report.

  • Another study says Baby Boomers aren’t moving

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

    by G. Steven Bray

    We talked a couple weeks ago about a study showing Baby Boomers say they plan to stay in their homes and the effects this may have on the housing market. Another study, this one by Merrill Lynch, seems to corroborate those results.

    The survey showed people 65 and older will account for more growth in the housing market over the next decade than any other demographic group. Sixty-four% of respondents said they are likely to move at least once during retirement, and 37% already have done so.

    What’s more, they aren’t necessarily downsizing. Roughly one-third said their last move was to a larger home, and another 19% moved to a similarly-sized home.

    The motivations driving these trends seem to be a desire to house visiting family members and a desire to age in place. Eighty-five% percent of respondents said they want to receive extended healthcare in their homes. This correlates with recent declines in nursing home residents. More than half of respondents said they already had renovated their homes to add features to allow them to age in place.

    As with the previous survey, the results call into question the conventional wisdom that aging homeowners should be freeing up existing housing stock for younger buyers and suggest a continued tight supply of existing homes for sale.