Citadel NYC Archives

Remodeling Index Finds Home Repairs On The Rise

Maintenance is a big part of being a homeowner. Put simply, owning a home means having a never-ending to-do list and, depending on your level of know-how, some of it will require the help of a professional. These jobs can range from major renovations such as putting an addition on your house to basic upkeep and repairs like having ducts cleaned and fixing leaks. Essentially, you are your home’s temporary caretaker and how well you take care of it will affect not only how comfortable and enjoyable your home is to live in but also how much you can ask for it when you sell. These days, it seems Americans are increasingly interested in fixing up their homes. In fact, newly released data from the National Association of Home Builders shows home remodeling contractors are busy right now. So what kind of jobs are most in demand? Well, results show demand is highest for basic maintenance and repairs, while additions and alterations – both major and minor – saw slight declines during the second quarter. In short, Americans are tackling their to-do lists and fixing up their homes. This could be due to improved economic conditions and a stronger job market, though it may also be that current homeowners are tending to their homes in hopes of listing them someday soon. More here.

Builder Confidence Still High In July

This summer, home buyer demand has been high while the supply of homes for sale has remained lower than normal. But, if you’re a builder, those are perfect conditions. After all, when there are more buyers than homes, building more homes is the quickest way to balance the market. Because of that, the National Association of Home Builders’ Housing Market Index – which measures builder confidence on a scale where any score above 50 indicates more builders view conditions as good than poor – has seen an uptick in optimism this year. Builders have been generally positive about the new home market and their prospects for the year. In July, for example, the index scored a 68, with components measuring sales conditions and expectations for the next six months in the mid 70s. In other words, builders are feeling good. And that’s encouraging news for prospective home buyers, as more new homes can help alleviate upward pressure on prices. But Robert Dietz, NAHB’s chief economist, says it’s not all good news. “Builders are encouraged by growing housing demand, but they continue to be burdened by rising construction material costs,” Dietz said. “Builders need to manage these cost increases as they strive to provide competitively priced homes, especially as more first-time home buyers enter the housing market.”

How Long Does It Take Renters To Save For A House?

With rental costs and home prices both increasing, it’s become more challenging for renters to save for a down payment. How much so? Well, according to one recent analysis, the typical renter will have to save for nearly six and a half years to come up with a 20 percent down payment on a median-priced home. And, since the median home value is currently $216,000, depending on your prospective neighborhood, it could take even longer to save up for a house. Renters who aspire to homeownership shouldn’t get discouraged, though. Despite the fact that a 20 percent down payment is the standard amount recommended by financial experts, it is not a requirement in order to buy a house. In fact, depending on the particular terms of your mortgage, you can put down as little as 3 percent. In 2017, for example, 29 percent of first-time buyers had a down payment between 3 and 9 percent. That’s why it’s important to explore your options before deciding homeownership is out of reach. More here.

Home Buyer Demand Shows No Signs Of Slowing

If you’ve been paying attention to this year’s housing market, you already know that there’s been a high level of demand and a lower-than-normal number of homes for sale. That lack of balance has led to rising prices and more competition. But, despite the challenging conditions in many markets across the country, home buyer demand has not let up. Mostly, that’s due to an improved economy and job market. Mike Fratantoni, the Mortgage Bankers Association’s chief economist, recently told CNBC the job market is the primary factor driving demand. “The strong job market continues to bolster demand for homes,” Fratantoni said. In short, prospective buyers feel more secure in their jobs and financial situation, which makes them less hesitant to enter the market. That’s proven by new numbers showing a 7 percent surge in applications for loans to buy homes last week. But there’s also evidence that more homes are being listed for sale and, though inventory hasn’t yet rebounded, the trend may be starting to turn, which would be good news for buyers and the market overall. More here.

Are Waterfront Homes Selling For Less?

There are two reasons home buyers typically have to pay more for a house on the water. The first is that people want to live on the water. It’s a desirable location. Secondly, there are a limited number of houses with water access. And when you combine high demand and low supply, you usually have a recipe for higher prices. But new research shows that waterfront property isn’t selling at as high a premium this year. In fact, waterfront homes in the first quarter sold for a 36 percent premium, which is the lowest level since 2002. By comparison, the average premium since 1996 is 41 percent and in 2012 the premium was as high as 54 percent. In other words, the difference in price between homes on the water and those further inland is lower than normal. But since having an ocean or lake view hasn’t become any less desirable, what might be behind this trend? Well one explanation is that a lower overall number of homes for sale has helped raise prices for homes all over, which has narrowed the price gap between waterfront and inland homes. More here.

Americans Are Feeling More Confident Financially

When it comes to deciding whether or not it’s a good time for you to buy a house, your personal finances are a big factor. After all, feeling secure in your job, income, and debts can make taking on a large financial transaction far less stressful. For that reason, Fannie Mae’s most recent Home Purchase Sentiment Index may be encouraging news for the housing market. That’s because, though confidence in most of the components – including whether this is a good time to buy or sell a home – was flat or down, those dealing with the direction of the economy and financial expectations for the next year were up. “Tight supply and lackluster income growth continue to weigh on housing activity, and consumer expectations for home price growth over the next 12 months have moderated,” Doug Duncan, Fannie Mae’s senior vice president and chief economist, said. “However, consumers expressed increased optimism about the direction of the economy and their personal financial situations over the next 12 months, with both measures matching previous survey highs this month” More here.

Mortgage Rates Fall But Demand Stays Flat

According to the Mortgage Bankers Association’s Weekly Applications Survey, average mortgage rates were down last week for 30-year fixed-rate mortgages with conforming loan balances, loans backed by the Federal Housing Administration, and 15-year fixed rate loans. But despite falling rates, demand for mortgage applications remained flat, with refinance activity dropping 2 percent and purchase activity up just 1 percent from the week before. Michael Fratantoni, MBA’s chief economist, told CNBC that, though a lower-than-normal number of homes for sale may be holding demand back, first-time buyers are still active. “A shortage of inventory remains a significant constraint, but it is interesting to note that applications for government purchase loans fared better on the week, indicating that first-time buyers remain in the market.” Government-insured FHA loans offer lower down payment requirements and are, therefore, more popular with younger buyers who may not have saved enough for a 20 percent down payment. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications. More here.

Affordability Perceptions May Be Holding Buyers Back

Perception doesn’t always match reality but, when it comes to financial markets, that doesn’t necessarily matter. For example, if you’ve ever invested in the stock market, you know that a company’s stock can rise or fall based on the day’s news, even if the company’s fundamentals and outlook remain the same as the day before. In short, perception matters. And, in today’s housing market, there’s a perception that there are few affordable homes available to prospective buyers. In fact, according to a recent analysis from Fannie Mae, though only 8 percent of homeowners consider their current mortgage unaffordable, 45 percent said that affordable housing is difficult to find in their area. Which provides a snapshot of what is going on in many markets across the country. Homeowners that want to sell may be waiting because they don’t feel they’ll find an affordable house to move into. The flip side of this, however, is that as long as current homeowners aren’t selling their homes, inventory shortages will continue, which is the primary factor behind recent price increases. More here.

Are Cities Becoming More Popular Than Suburbs?

Suburbs sprouted out of a desire to have the conveniences of urban life but also the space and privacy of living outside the city. In other words, the best of both worlds. And for decades, suburban areas, based on that promise, grew at a faster rate than the nation’s cities. Americans spread out from city centers and moved further and further away. But, according to a new report from the Urban Land Institute, we may now be starting to move back. In fact, between 2010 and 2015, dense urban locations saw their populations grow faster than the residential neighborhoods of their surrounding suburbs. There are a few reasons for this. One is that rental apartment inventory grew at about twice the rate of inventory in the suburbs. Also, there were more jobs created in city centers than in suburbia during this period. However, though there are many factors driving Americans back into the city, the report also notes that urban living costs more, which means younger Americans – who are most likely to desire an urban lifestyle – may be increasingly unable to afford it. More here.

Why Are Younger Americans Buying Fewer Homes?

In recent years, there’s been a lot of discussion about millennial home buying preferences. Mostly, this is due to the fact that first-time home buyers have historically made up about 40 percent of the home sales in any given year. And, because they account for a large number of the homes sold each year, any fluctuation in those numbers is notable. That’s why Freddie Mac recently took a look at why the homeownership rate among young adults has dropped 8 percent since hitting its peak in 2004. As you might imagine, there are a variety of reasons for this. Among them, affordability, not surprisingly, ranks highest. Concern about being able to afford homeownership is always an issue for younger buyers. But there are many other factors that have played a role in suppressing buyer demand among first-time buyers. Some of the other common reasons named included lower marriage and fertility rates, student-loan debt, borrowing constraints, and a preference for urban living, which tends to be more expensive. In short, young Americans – in addition to affordability challenges – have more debt and are starting families later in life. But, though lifestyle and demographic changes have influenced buying activity, Freddie Mac predicts homeownership rates will rebound, if the economy and wages continue to improve. More here.