Generation X Not Buying Boston Area Homes

The market for Boston area homes as well as the nationwide real estate home buying market has often placed the blame on recent drops in the number of homebuyers on the Millennials. A new study now shows that Generation X should shoulder part of the responsibility as well.

Fewer Gen Xers and millennials are buying Boston area homes

The rate of homeownership in the U.S. has consistently fallen each year since 2005. New evidence shows that Gen Xers are part of the decline. Owning a home among the age group 35-54 has declined more than any other age group for the past 22 years.

Fewer Gen Xers and Millennials Buying Boston Area Homes

Harvard University’s State of the Nation’s Housing 2015 report reveals homeownership among those aged 35-54 has dropped the most of any other age group since 1993, especially those under age 44.

Daniel McCue, senior research associate at The Joint Center for Housing Study of Harvard University said, “The market peaked right when they were at peak first-time buying age.”

The generation’s older members were particularly unlucky because when they were at the age where most people tend to trade up to larger homes, the housing crisis occurred. “They were subject to the decline in home prices, which made [some homes] subject to distress, underwater and delinquency,” McCue said.

The current homeownership rate of 63.7% has been buoyed in large measure by Baby Boomers. This trend seems unlikely to continue for the Gen Xers due to their smaller population. When we look at Millennials, their homeownership rates are low … they have a much higher chance of building careers and catching up, but for those aged 35-44 it’s more of a question.

Generation X, which the Harvard study defined as people born from 1965-1984, occupy an important place in today’s housing market. As they trade up to larger, more affluent homes, inventory becomes available for new first-time purchasers of Boston area  homes.

However, the study finds, such is not the case. The number of homeowners aged 35-39 has dropped 23% from 10 years ago.

Gen Xers seem to be staying put in the rental market longer than before. The normal cycle of renting and moving onto homeownership and making room for younger renters to follow isn’t happening as quickly.

Furthermore, it appears they may not become buyers of Boston area homes any time soon since greater rental demand has pushed rent to new highs, making it harder for them to save money for a sufficient down payment.

In addition, the lack of job and wage growth continues to make ownership of Boston area homes a challenge to most and a fiscal hardship to many. In households aged 35-44 incomes are at mid-1980s levels and for people aged 45-54 incomes are at the lowest levels since the late 1960s.

Experts say repercussions and scars from the recent housing crisis have made prospective buyers hesitant to buy. However, Gen Xers could participate in owning Boston area homes as those who lost their homes through foreclosures or short sales return to the home buying market.

Of the 11 million homeowners who lost homes to foreclosures during the housing crisis, only about 2 million have returned to the home buying market. It is expected that the market will see a gradual return of the remaining 8-9 million as they convert from paying rent to owning again, but industry experts warn it may take some time to fully realize the gain.

Find more articles pertaining to Boston area homes under our Boston Real Estate section of articles to your right just below our Boston Real Estate Categories.

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Boston Area Real Estate News – July 2015

Boston Area Real Estate News - July 2015

In our Boston Area Real Estate News for July 2015:

American Dream: Not What It Used to Be

Owning a home is no longer the American Dream it once was.

Owning a home is no longer the American dream it once was. The lingering effects of the Great Recession and housing bust have altered Boston Area homeownership – a change likely to ripple through the Boston Area housing market for years to come, according to a recent study conducted by the Joint Center for Housing Studies of Harvard University.

Because of a lack of jobs, slow income growth and other financial factors – including the weight of student and other debt, homeownership continues to lose steam, sales of existing homes are lagging and single-family construction is at near historic lows.

The homeownership rate stands at 64.5 percent, where it stood in 1993. The rate fell for eight consecutive years after peaking in 2004 at nearly 70 percent.

While homeownership has dropped off, those living in apartments continues to increase along with rental rates.

Rents on a national basis have nudged up by 3.2 percent, meaning affordable housing is becoming out of reach for a segment of the population.

The flip side of falling Boston Area homeownership rates has been exceptionally strong demand for rental housing, with the 2010s on pace to be the strongest decade for renter growth in history. With no signs of a slowdown in renter household growth, rental markets are likely to remain tight in the near term.

Meanwhile, if you are renting and plan to continue doing so, or if you're an up and coming first time renter, the next article is for you…

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5 Tips for Renters This Summer

Roughly 45 million people will choose to rent a home instead of buy this year– many for the first time.

When they move into their new place, they will quickly discover a number of things they didn’t realize they needed – whether it’s something aesthetic like wall art or essential like a recycling bin. Here are five rental reminders before the next big move:

1. Make Sure You Can Afford It

Popular advice insists that renters should not spend more than one third of their annual salary on rent – but that doesn’t necessarily mean that’s how much you actually end up spending. Rent is only one of your monthly expenses; so don’t forget to budget for things like utilities, cable, Internet or even weekly groceries.

2. Know Your Landlord

Surprisingly, not a lot of new renters research their landlord or rental company before signing a lease. People research restaurants before dining, so why not do the same with someone you’ll be paying rent to for a year?

3. Get Renters Insurance

Studies show that 66% of burglaries happen in the home, and renters are just as likely to be victimized as homeowners, yet fewer than 45 percent of them actually purchase insurance. The average price of renters insurance is only $15 a month, and saves you from financial disaster in the event of theft, accidents or property damage.

4. Pay Your Rent On Time Every Month

It’s important to build a good credit score in case you want to buy a Boston Area home someday. The easiest way to do that is to pay rent on time each and every month, and if you do miss a payment or have to pay late, include a formal letter of apology to your landlord with your rent for his or her records.

5. Think Safety

A neighborhood can seem safe and active during the day, but nighttime can tell a whole different story. Familiarize yourself with your new neighborhood by looking up local crime maps and signing up for sites like EveryBlock, which aggregates crime news from local outlet sources, public police reports and comments from local residents. Do your research and find a safe and fun neighborhood that suits you.

Why is the rental market so hot everywhere? Partly because being able to afford a home is shrinking…

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Boston Area Home Affordability is Shrinking

Home sales could be off to their best year since the housing and economic downturn, with May marking the fifth straight month that contract signings have climbed, according to the National Association of Realtors.

The Realtor’s Pending Home Sales Index, which is based on contract signings, climbed 0.9 percent to 112.6 in May from a slight downward revision of 111.6 in April and is now 10.4 percent above May 2014 (101.9).

The index has now increased year-over-year for nine consecutive months and is at its highest level since April 2006

This year’s stronger sales — coming with similarly tight housing supplies from a year ago — have caused Boston Area home prices to rise to an unhealthy and unsustainable pace.

Housing affordability remains a pressing issue with home-price growth increasing around four times the pace of wages. Without meaningful gains in new and existing supply, there’s no question the goal post will move further away for many renters wanting to become Boston Area homeowners.

More Than One Third Cannot Buy Boston Area Homes

Rising prices of Boston area homes have helped restore home equity to many, but more than a third of potential homebuyers — 38 percent — earning the national median household income of $63,900 cannot afford to buy Boston area homes that sold over the last quarter.

Rising Prices of Boston area homes are contributing to many potential home buyers not being able to afford to purchase.

Rising Prices of Boston Area Homes Partly to Blame

The rising prices of Boston area homes are partly to blame, along with stagnant incomes, mounting student loan debt and tougher credit standards requiring unattainable down payments.

The national median home price increased from $214,000 in the second quarter to $221,000 in the third quarter. Meanwhile, average mortgage interest rates slid from 4.44 percent to 4.35 percent in the same period, according to home builders.

“Even with nationwide home prices reaching their highest level since the end of 2007, affordability still remains fairly high by historical standards,” according to NAHB Chief Economist David Crowe. “Rising employment and incomes, interest rates that remain near historically low levels, and pent-up demand should contribute to positive momentum heading into next year.”

Overall, 61.8 percent of new and existing Boston area homes sold between the beginning of July and the end of September were affordable to families earning the U.S. median income. That’s down from the 62.6 percent of homes sold that were affordable to median-income earners in the second quarter.

We have more articles about the rising prices of Boston area homes and the affordability factor of Boston area homes in the Boston Real Estate section of articles under our Boston Real Estate Categories to your right.

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Baby Boomers Staying Put With Their Boston Area Homes

A majority of Baby Boomers surveyed recently by the non-profit Demand Institute say they plan to stay put in their Boston area homes.

Many Baby Boomers plan to stay in their Boston area homes when they retire

Many of the decisions to stay in their Boston area homes has to do with the recession. The financial crisis put an end to years of rapid wealth accumulation, causing the typical Boomer household’s net worth to fall to $143,000 in 2013 from just over $200,000 in 2007, according to Federal Reserve data.

The Boomer generation is also carrying a lot more mortgage debt. The survey found that the median outstanding mortgage balance for 50- to 69-year-olds was $118,000 in 2013, up from $48,743 in 1992. Financially, the Boomer generation is not necessarily ready for retirement, and half of their assets are tied up in their homes.

37% of the Boomers surveyed said they were planning to make a move, however. Nearly half of the movers said they wanted to get a bigger place — and that they intended to spend more money on it. But with a median net worth of just $40,000, this group was among some of the least wealthy surveyed. In fact, the report found that many of those who were looking to “up-size” were also looking to switch from renting to owning.

Many Baby Boomers Plan to Remodel Their Boston Area Homes

Boomers seemed generally unconcerned about whether or not it would be “aging-friendly” — even though a whopping three-quarters of them reported having significant health issues, such as cardiovascular conditions, arthritis, obesity and high blood pressure. Only one-in-five of the movers said they intend to live in senior housing.

Instead, many of those surveyed said they plan to use their money to remodel things like kitchens and bathrooms in order to increase the value of their existing Boston area homes.

More than 17% of the 76 million Boomers are already retired and about 10,000 will reach the traditional retirement age of 65 every day for the next 15 years. And even though many Boomers plan to stay in their current Boston area homes, the Demand Institute estimates that nationwide, this generation will purchase about $1.9 trillion in homes over the next five years.

For more articles on Boston area area homes and the news that affects those homes and the prospects considering buying them, check out our Boston Real Estate News section under Boston Real Estate Categories to your right.

Keep up with our daily real estate and mortgage related news tips as we post them on Twitter, and find us on Facebook as well.

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Boston Area Real Estate News – September 2014

Boston Area Real Estate News - Septermber 2014

In our Boston Area Real Estate News for September 2014:

Boston Area Home Sales Outlook Stronger

Economists are more optimistic about the outlook for Boston Area home sales over the next two years due to stronger job creation.

The annual pace of existing home sales nationwide will likely rise to 5.25 million units in the first three months of 2015 from 5.09 million in the current quarter, according to the Reuter's poll median forecast.

In May, economists expected much slower gains, with 5.1 million resales expected in the first quarter of next year.

Boston Area home sales outlook is looking stronger due to stronger job creation

Americans signed more contracts in July to buy previously-owned homes than in any month in almost a year, suggesting the housing market was pulling out of its slump more quickly than expected.

The National Association of Realtors (NAR) said last week that its Pending Home Sales Index, based on contracts signed last month, rose 3.3 percent to 105.9, the highest level since August 2013.

Low mortgage rates and improving labor market dynamics should remain conducive to gradual growth in the Boston Area home sales sector.

A sharp increase in mortgage rates pushed sales of existing homes lower in the second half of 2013 but borrowing costs have been more stable in recent months and Boston Area home sales have recovered some of the lost ground.

Investors and economists polled by Reuters generally expect the Federal Reserve will begin to slowly increase its benchmark interest rate around the middle of next year after holding it near zero since 2008.

The median forecast put the 30-year mortgage rate at 5.25 percent in 2016, down from 5.68 percent in the May poll. Last week, the 30-year rate averaged 4.28 percent, according to the Mortgage Bankers Association.

Economists don't believe a slow rise in mortgage rates will hurt Boston Area home sales, as slow increases in rates are generally considered a symptom of an improving economy. At the same time, slowly rising rates may also help to bring home price appreciation back down to more sustainable levels.

Speaking of mortgage rates and how they may affect Boston Area home sales…

 

Boston Area Mortgage Rates Remain Low

Boston Area mortgage rates remain much lower than anyone expected they would be by this time when the Fed announced it would start cutting back on its purchases of mortgage bonds.

Mortgage News Daily reports that average 30-year fixed mortgage rates are down to around 4.11 percent. One year ago those same rates were 4.61 percent, down about 50 basis points year-over-year.

Mortgage refinancing tends to pick up anytime mortgage rates drop by 50 bps from recent levels, however most homeowners who were looking to refinance did so when rates were below 4 percent in 2012 and 2013.

We would not be surprised to see rates drift even lower in the coming few days or weeks as they pull lower due to global events, European debt, etc. These are the largest rate indicators right now that are affecting Boston Area mortgage rates.

Boston Area mortgage rates were well above 6 percent during the housing market's 2006-2007 peak. Freddie Mac data going back more than four decades shows 30-year rates hit an all-time low of just 3.31 percent in November 2012.

Trying to decide whether to lock in current Boston Area mortgage rates or let them float a while longer? Seems odd to say floating is an option when we're near the best pricing of the year, but it might be a consideration for aggressive borrowers. If you're close to closing, or have tight debt ratios/cash to close, lock 'em up, and don't look back!

 

Ideal Time to Buy a Boston Area Home?

If you've been waiting to buy a Boston Area home when the time was just right, that time may be now.

Potential homebuyers who have been willing to wait for better deals are starting to be rewarded for their patience, as sellers drop listing prices to meet buyers' more value-focused expectations.

Redfin Chief Economist Nela Richardson says, "Two market developments in July are spurring this change in housing activity as the market transitions from the summer to the fall buying season.”

1 – Boston Area Home Price Slowdown

Home price growth was mostly flat in July for the first time in five months.

As Senior Financial Reporter Trey Garrison said last week, home price growth has slowed across the board, and Capital Economics says the slowdown will likely meet the company's forecast for inflation to slow to 4% in 2015.

Just about everyone was a little surprised by the consecutive month-on-month declines in house prices during April, May and June on the new monthly Case-Shiller national measure. Echoing that message, the Case-Shiller 20-City measure of house prices fell during the latest two months.

2 – End of Seller's Market?

The second market development is a shift in pricing power from sellers to a more balanced market. That shift has been nearly nine months in the making from when sales began to first decline last November.  

Back in October, sellers were starting to lose their dominance in the market, with 72% of surveyed agents describing now as a good time to sell compared to 86% in the second quarter of 2013.

Look for these two trends to drive an unusual surge in home sales this fall. We also look for prices to continue to flatten, and to potentially decline month over month in September or October. If that happens, it will be the first three-month price decline since the fall 2012. Stay plugged in right here and we'll keep you posted on trends as we move through the fall Boston Area home buying season and into the holidays.