Tag Archives: homeownership

Housing markets could benefit from Latinos who want to buy their first homes

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The executive director of the National Association of Hispanic Real Estate Professionals says many Latinos want to purchase homes:

Q: Your report (“The State of Hispanic Homeownership” at NAHREP.org), assembles data from a number of private and governmental sources, and contends that the number of Hispanic homeowners has grown to 6.69 million in 2012 from 4.24 million in 2000 and that they represented 51 percent of the total net increase of 694,000 owner-households in the United States in 2012. Considering the nation’s economic circumstances, that sounds pretty good. Yet, you say they’re facing head winds?

A: Even to our surprise, Hispanic homeowners seem to be very resilient, especially coming off the (housing) crisis. Affordability is at an all-time high and a lot of Hispanics have jumped into the market recently. Some of the biggest factors in this are household formation, income trends and overall consumer confidence. They’re forming households at a faster rate than the general population. If you look at the market of Hispanic households, they’re much more likely to be made up of a husband and wife with children, (an arrangement that’s) much more aligned with the purchase of a home.

But there are a couple of major barriers to this trend continuing, and though difficulty in accessing mortgage credit is an important one, even more important right now is the lack of inventory of houses for sale…

The fulfillment of this scenario of Hispanics being a dominant force in future homebuying will require the industry to be able to adapt to cultural nuances. And basically, NAHREP is saying the industry isn’t there yet. Twelve years ago, when we started this organization, we were selling a vision that few people bought into. It’s not really like that anymore — the major players in housing now understand, or are starting to understand, how important the Latino market is.But there are nuances to working with the Hispanic market — there’s language, of course, and the likelihood of so-called “thin” credit files (that limit access to mortgages) within a culture where having debt is not a desirable thing.

The housing market could benefit from such a reservoir of buyers. For example, those baby boomers who want to unload their homes in the near future may just want to access possible Latino buyers. Plus, the one cited figure above seems to suggest that some of the uptick in housing in the country can be attributed to Latinos. But, assuming different groups in the United States want to or perhaps more importantly can, given the wealth differences in the United States, purchase homes is not a given. There are still big gaps in homeownership rates by race and ethnicity.

It would be interesting to hear how real estate agents and others in the real estate industry are really adjusting their methods for potential Latino customers.

Will Baby Boomers be able to sell their houses?

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We may be nearing the “Great Senior Sell-Off” where Baby Boomers want to sell their homes but there may not be enough younger people to buy them:

In the coming years, baby boomers will be moving on (inching further through the python, if you will). “They will want to sell their homes, and they’re hoping there are people behind them to buy their homes,” says Nelson, director of the Metropolitan Research Center at the University of Utah. He expects that in growing metros like Atlanta and Dallas, those buyers will be waiting. But elsewhere, in shrinking and stagnant cities across the country, the story will be quite different. Nelson calls what’s coming the “great senior sell-off.” It’ll start sometime later this decade (Nelson is defining baby boomers as those people born between 1946 and 1964). And he predicts that it could cause our next real housing crisis.

“Ok, if there’s 1.5 to 2 million homes coming on the market every year at the end of this decade from senior households selling off,” Nelson asks, “who’s behind them to buy? My guess is not enough.”…

A vast majority of today’s households with children still want such houses, Nelson says. But about a quarter of them want something else, like condos and urban townhouses. That demand “used to be almost zero percent, and if it’s now 25 percent,” Nelson says, “that’s a small share of the market but a huge shift in the market.” And this is half of the reason why many baby boomers may not find buyers for their homes. “Even if the numbers matched,” Nelson says, “the preferences don’t.”

Demographics will further complicate this picture. We’re moving toward a future in America when minorities will become the majority. But given entrenched educational achievement gaps, particularly for the fast-growing Hispanic population, Nelson fears that the U.S. is not doing a good job educating the “new majority” to make the kinds of incomes that will be required to buy the homes we’ve already built.

A number of commentators have argued we may be on the verge of this with younger generations have less interest in owning a home. I haven’t seen an argument about the demographic angle before but it is also intriguing.

The article also hints that this phenomenon might not be evenly spread across the United States. What happens to exurban locations as Baby Boomers and others desire more urban locations? What happens to communities with bigger homes that people no longer want? While these sorts of problems in the United States have been localized in places like Detroit, this could become a bigger issue.

This may be a larger problem involving more people than Baby Boomers. What if a county or society makes a rapid switch away from homeownership and toward renting? What happens to that existing housing stock?

You can get a no-money-down mortgage – if you are really wealthy and put your investments up as collateral

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No-money-down mortgages have been blamed for helping bring about the recent economic crisis but they can still be obtained – if you have the assets to obtain one.

It’s 100% financing—the same strategy that pushed many homeowners into foreclosure during the housing bust. Banks say these loans are safer: They’re almost exclusively being offered to clients with sizable assets, and they often require two forms of collateral—the house and a portion of the client’s investment portfolio in lieu of a traditional cash down payment.

In most cases, borrowers end up with one loan and one monthly payment. Depending on the lender and the borrower, roughly 60% to 80% of the loan can be pegged to the home’s value while the remaining 20% to 40% can be secured by investments. On a $2 million primary residence, for instance, the borrower could get a $2 million loan, which would require a pledge of assets in an investment portfolio to cover what could have been, say, a $500,000 down payment. The pledged assets can remain fully invested, earning returns as normal, without disrupting the client’s investment goals.

While these affluent clients may be flush with cash, this strategy allows them to get into a home without tying up funds or making withdrawals from interest-earning accounts. And given the market’s gains combined with low borrowing rates in recent years, some banks say clients are pursuing 100% financing as an arbitrage play—where the return on their investments is bigger than the rate they pay on the loan, which can be as low as 2.5%. Some institutions offer only adjustable rates with these loans, which could become more expensive if rates rise. In most cases, the investment account must be held by the same institution that’s providing the loan.

These loans also provide tax benefits. Since borrowers don’t have to liquidate their investment portfolios to get financing, they can avoid the capital-gains tax. And in some cases, they can still tap into the mortgage-interest deduction. (Borrowers can usually deduct interest payments on up to $1 million of mortgage debt.)

Theoretically, this is how no-money-down mortgages could work since only signing up wealthier clients helps limit the losses a bank might incur if they default on the mortgage. Yet, it also sounds like another financial option that is only available to the wealthy who might even be able to make money by taking out a non-money-down mortgage. In other words, is this something that only helps the rich get richer (and possibly bigger houses)?

When banks say these loans are safer, how much safer? I suspect part of the safety of these mortgages is that there are relatively few new ones being offered to wealthy Americans. It would be interesting to hear about some cases where this has worked out well or not worked out as planned.

PulteGroup says majority of Americans want equal size or bigger homes

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A spokeswoman for PulteGroup says data they collected shows a majority of American homeowners want equal size or bigger homes in the future:

Across all demographics, the millennials (age 28 and younger), Generation Xers (born from the early 1960s through the early ’80s) and baby boomers (born 1946 through the early ’60s) said they want their next house to be the same size or larger. An overwhelming majority, 84 percent of homeowners ages 18 to 59, said they don’t intend to downsize.Larger homes are what people dream of. People told us they yearn for large spaces, for large backyards and big patio spaces. Large closets. A nice master suite. They yearn for large kitchens, oversized mudrooms. No, I don’t think the McMansion is dead. People want that square footage…

They want to maximize the use of every nook and cranny. They expressed a strong desire for homes that are designed in such a way as to make them feel organized. They want smart use of the space. Take those bigger mudrooms, for example. They’ve come to be called the owner’s entry, off the garage, and though they may contain the laundry equipment, they’re also places to stay organized — they’re drop zones for the laptop or the kids’ backpacks and all that other stuff we carry in through the garage…

Only 28 percent of those ages 55 to 59 said they want their next home to be smaller.

One reason for this is that they have a lot of stuff, and they don’t want to let go of all that stuff. And stuff has to have a place to go. In our Del Webb properties (for residents 55 and older), we’ve installed fixed stairways from the garage into the attic, instead of the rope that pulls down stairs to the attic, because it’s safer for the homeowners — they want that unused attic space for their stuff. We call it a storage loft.

Summary: Americans want big yet organized homes, partly to hold all of their stuff. Of course, matching the dream for the big home to economic realities might be more difficult.

I’m also a bit curious about the demographics of this study. Is it a nationally representative sample?

Real estate firm survey: younger Americans still want to own a home

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Even though a number of commentators have suggested younger Americans are not as interested in homeownership, a recent survey conducted by “Better Homes & Garden real estate brand” suggests this may not be the case:

Nearly all of them said they were willing to adjust their lifestyles to save for a home. Sixty-two percent said they’d eat out less. Forty percent said they’d work a second job. And 23 percent said they’d move back home with their parents to save money — they’re being strategic about saving money to own a home.

They also said that all of the media coverage of the housing crisis has taught them the importance of doing their research and planning, and they think they’re more knowledgeable about the process than their parents were at their age. But they want to be ready to own — 69 percent said that someone is ready to buy if they can maintain their lifestyle (while owning), and 61 percent agreed that the “readiness indicator” is if they have a secure job.

And even if these younger adults do want to own a home, the real estate industry has to be ready to appeal to this group:

Well, as an industry and certainly as a brand, we’d have to step up our campaign to show young buyers the importance of real estate as a long-term investment and lifestyle.

On a related note, something else also drove us to do this survey: the big disconnect in the average age of a first-time buyer (36), versus the average age of a real estate agent (56). This younger generation of buyers’ habits are different — they’re comfortable using technology, especially mobile devices, to buy and track everything, and agents need to learn this.

Several things are interesting here. First, it appears a good number of younger Americans do want a home but they are also more aware of what it will take to make it happen. If homeownership is such a big investment, younger Americans want to do their homework to know what they are getting into. This could mean that fewer people in this group will buy a home until they find a more “perfect” situation which might decrease the homeownership rate but it could also mean that those who buy a home are more committed.

Second, it is suggested that the real estate industry needs to stay relevant in the era of the Internet. Traditionally, real estate agents are necessary people in the middle who have expertise that the average homeowner would not have. But, potential homebuyers have much more information at their fingertips and if more people are selling their own homes, the real estate industry needs to continually show what extra value it offers. Also, this article hints at the aging of real estate agents: is this a desirable job for young people to pursue? If you look at a table of occupational prestige in the United States, real estate agent is at the bottom.

I wonder if the story for younger Americans and homeownership will be a bifurcated one based on socioeconomic status. Those with higher education and good jobs will continue to buy homes. Those who don’t have college degrees and/or struggle to find a good job may not have the option to do so.

Response to economic crisis: Irish government cutting support of homeownership

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A conference on housing in Ireland suggests the Irish government is reversing course and will no longer be supporting homeownership:

STATE SUPPORT for the principle of home ownership is at an end after almost 100 years, a national housing conference has heard.

Encouraging people to buy their homes had been seen by the State as a social good, as well as an economic one, but there was now a definite shift in policy, UCD sociology professor Tony Fahey said.

Tenant purchase schemes were dying out and local authorities were no longer offering loans to private buyers. The policy now is households need to be assisted by the State if they can’t afford to rent, not if they can’t afford to buy.

“It had been an article of faith for almost 100 years that home ownership was a social good and should be supported by the State . . . The historic roll the State played in putting up capital for housing won’t be repeated.”

Americans tend to think we are a nation of homeowners but there are several countries that have higher rates of homeownership. Ireland is one such country:

The highest home ownership is in Romania (96pc), followed by Lithuania (91pc), Hungary (89pc), Slovakia (89pc), Estonia (87pc), Latvia (87pc), Bulgaria (87pc), Norway (85pc), Iceland (84pc), Spain (83pc), Slovenia (81pc), Malta (79pc), Czech Republic (77pc) and Greece (76pc).

Ireland comes in at 73.7pc, while 70pc of people in the UK own their own homes.

Irish home ownership levels have dropped from a high of 79pc in the 1990s to just short of 74pc at the start of this century, according to a new book on the economy, ‘Sins Of The Father’ by Conor McCabe.

Ireland is now facing the consequences of a burst housing bubble in the last few years.

While Ireland is facing their own issues, I wonder if the US government might make a similar shift or at least pull back from supporting homeownership through public policy and government rhetoric. Thus far, it doesn’t look like this has happened much. But, if the mortgage interest deduction disappears and/or younger Americans continued to avoid buying homes, perhaps things could change quite a bit here as well.

However, even if the policies changed, this doesn’t necessarily mean the cultural value of homeownership will change quickly.

Painting the lawn has adverse effects on photosynthesis

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Painting the lawn or the playing field could have some adverse effects on the grass itself:

Yep, the September-October issue of Crop Science highlights a study out of North Carolina State University that shows conclusively — brace yourself — that “grasses coated with latex paints show a notable reduction in photosynthesis.” They’re talking about playing fields, of course, and the lines, stripes and logos regularly affixed atop them.

That’s all well and good, but it completely ignores an aspect of turf painting that has nothing to do with lines or logos. Sports, it seems, has a long tradition of painting grass simply to make it look more like grass.

  • When the clear panels in the roof of the Astrodome had to be painted over in 1965 because the resulting glare was blinding fielders, the turf beneath them died, and was subsequently painted green…
  • Groundskeepers at Cleveland’s Municipal Stadium didn’t even bother with grass — for many years they painted the dirt green. (Pat Summerall wrote that when he played for the New York Giants, the Yankee Stadium Grounds crew took to painting the dirt, as well.)…

The practice even carries over to movies, where they painted the stadium grass twice for Bull Durham, yet it still, said writer/director Ron Shelton, “looks yellow on film.”

Painting the grass and using artificial turf has a long history in sports. A number of teams and facilities have gone to the field turf primarily for monetary reasons as it is cheaper to maintain.

This brings me to an idea: how long until homeowners go for artificial turf? I’m not talking about the Astroturf featured in the Brady Bunch yard but field turf that looks and feels more like grass. Perhaps the rubberized turf could even be sold as safer for children. For builders and developers, putting down good turf may be more expensive upfront than laying down sod but perhaps the costs could be passed along to homebuyers, particularly if it were guaranteed for a number of years.

How will American culture change since Millennials want to buy the newest smartphones rather than cars and houses?

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Here is part of a fascinating article about what Millennials want to purchase and how this differs from the consumption of previous generations:

Needless to say, the Great Recession is responsible for some of the decline. But it’s highly possible that a perfect storm of economic and demographic factors—from high gas prices, to re-­urbanization, to stagnating wages, to new technologies enabling a different kind of consumption—has fundamentally changed the game for Millennials. The largest generation in American history might never spend as lavishly as its parents did—nor on the same things. Since the end of World War II, new cars and suburban houses have powered the world’s largest economy and propelled our most impressive recoveries. Millennials may have lost interest in both…Subaru’s publicist Doug O’Reilly told us, “The Millennial wants to tell people not just ‘I’ve made it,’ but also ‘I’m a tech person.’?” Smartphones compete against cars for young people’s big-ticket dollars, since the cost of a good phone and data plan can exceed $1,000 a year. But they also provide some of the same psychic benefits—opening new vistas and carrying us far from the physical space in which we reside. “You no longer need to feel connected to your friends with a car when you have this technology that’s so ubiquitous, it transcends time and space,” Connelly said.

In other words, mobile technology has empowered more than just car-sharing. It has empowered friendships that can be maintained from a distance. The upshot could be a continuing shift from automobiles to mobile technology, and a big reduction in spending…

In some respects, Millennials’ residential aspirations appear to be changing just as significantly as their driving habits—indeed, the two may be related. The old cul-de-sacs of Revolutionary Road and Desperate Housewives have fallen out of favor with Generation Y. Rising instead are both city centers and what some developers call “urban light”—denser suburbs that revolve around a walkable town center. “People are very eager to create a life that blends the best features of the American suburb—schools still being the primary, although not the only, draw—and urbanity,” says Adam Ducker, a managing director at the real-estate consultancy RCLCO. These are places like Culver City, California, and Evanston, Illinois, where residents can stroll among shops and restaurants or hop on public transportation. Such small cities and town centers lend themselves to tighter, smaller housing developments, whether apartments in the middle of town, or small houses a five-minute drive away. An RCLCO survey from 2007 found that 43 percent of Gen?Yers would prefer to live in a close-in suburb, where both the houses and the need for a car are smaller.

This article is primarily about the economic impacts of these shifting patterns but I think there is another important side to this: how does this affect American culture? A few ideas…

1. What makes up the American Dream will likely shift. We have gone almost 100 years with this combination: a house of one’s own and a car (or multiple cars in recent decades). The content of this dream will change and the pace to which people pursue it. Newest additions to the Dream: can I get a smartphone with an unthrottled data plan? How about a living arrangement that is exciting in terms of having nearby cultural and social opportunities but doesn’t tie one down financially?

2. As fewer teenagers see getting a driver’s license as the same sort of initiation into adulthood and freedom as previous generations, perhaps we have a new marker of adulthood: getting the first smartphone (with at least texting capabilities and perhaps also data).

3. As I’ve discussed before, the possible new kinds of suburbia we might see in the coming decades would be a remarkable shift away from completely auto-dependent developments. This will lead to some interesting consequences for housing. New Urbanism may just explode in popularity (as long as such developments are reasonably priced).

4. The car is no longer an important status symbol but rather more like a tool that is used to get from Point A to Point B. Tools may have some fun features but the number one concern is that that they function consistently. In contrast, the phone (and what one can do with it) becomes a status symbol.

5. As we’ve seen in recent years, announcements of new technologies and smartphones will garner increasing levels of attention. Just look at what happens when we get close to an Apple announcement for the newer iPhone (or iPad). Cars and houses will have to fight even harder for your attention. How this changes the ratio and content of commercials will be interesting to watch.

6. When are we going to see television shows and movies that truly reflect plugged in and online worlds? We have plenty of examples where characters use these devices but precious few that show what it is like to consistently operate in the online and offline worlds. The movie Catfish comes to mind. While most online users won’t go to the lengths the characters do in this movie, at least it depicts people living out real relationships in the online sphere.

7. A growing push for cheaper, faster, perhaps even free Internet access everywhere. To be disconnected will be viewed as more and more undesirable.

8. Revamping existing housing stock will require some imagination and creativity in marketing, construction, and financing.

9. Building off Richard Florida’s ideas about the creative class, what happens when this group becomes too big and unwieldy and is no longer “select,” there are not enough places that meet their requirements (not everywhere can be Austin), and not enough jobs for people with their education and interests? Obviously, shifts can take place but these won’t necessarily be easy.

Australia retakes the lead for largest new homes in the world

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In recent years, Australia and the United States have alternated having the largest new homes. New data suggests Australia has retaken the lead:

In any case, that Australian homes should be costly is not so surprising given the peculiarities of the domestic market.

The Australian dream requires you to own a detached house with a large garden, a land-hungry type of accommodation that makes up no less than 76 percent of all homes.

Three-quarters of all homes have three or more bedrooms, and almost a third have four or more. The average newly built home is now the largest of any country at 243 square meters (2,615 square feet), taking the McMansion mantle from the United States.

And, while it is one of the emptiest countries on the planet, it is also one of the most urbanized, with most of the population crowding the coast in just eight sprawling cities.

I wonder how much this has to do with something I suspect is at play in the United States: housing starts may be down but those that are being built are primarily aimed at the upper ends of the market toward people who haven’t been hit as hard by the recession.

It is interesting that this is buried in the final paragraphs of a story about the Australian housing market. The overall piece suggests that a country can have large homes without necessarily having an overextended housing market like we see in the United States. One complaint about McMansions in the United States is that they have ruined the housing market, pushing buyers and lenders to have bloated mortgages and generally corresponding with American habits of overspending and incurring debt. But it doesn’t have to be this way: the article tells of different mortgage patterns in Australia such as homeowners paying them off quicker and having a small amount of subprime loans. In other words, having a large home doesn’t have to be tied to the ideas of profligate spending if the system is set up in a different way.

If your lawn is all brown, just paint it green

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Americans will go to some lengths to keep their lawn green – including painting it.

As the worst drought in decades hits two-thirds of the USA, residents and businesses in normally well-watered areas are catching on to the lawn-painting practice employed for years in the drier West and Southwest…

Perazzo said the dyed lawns will hold their look for a few months…

In the frequently parched Phoenix area, Brian Howland said he started Arizona Lawn Painting after the nationwide foreclosure crisis left scores of homes empty and their lawns neglected.

Some customers have been residents fearful that their homeowners’ associations will penalize them for letting their lawns fade.

This is either an example of American ingenuity, fear of homeowner’s associations, or a strange quest to maintain face/status as a homeowner.

I would love to know if neighbors look down on their neighbors who have to dye their lawn. In other words, how much status can one recover through this method? Another way to think about this would be to look at whether homes on the real estate market with dyed lawns do better or worse in terms of time on the market and sales price. The best thing that can come out of dyeing seems to be that those unfamiliar with the lawn and neighborhood might not know any better.