Fed’s Impact on Boston Area Housing

Boston area housing is obviously affected by interest rates, and recently, the much anticipated rate hike by the Federal Reserve was once again put on hold because Fed Chairwoman Janet Yellen said she thinks the housing market is still not where it needs to be.

Jeff Taylor of Digital Risk appeared on Fox Business News after Yellen’s comments about the housing market being depressed or distressed, countering her assertion that the housing sector is depressed, citing that housing indicators are at all-time highs.

Many in the Boston area housing market have actually been hoping the Fed WOULD raise interest rates. Taylor points out some of the reasons why this thinking actually makes some sense…

Stay abreast on what the Fed does in the future with interest rates by continuing to follow us on Twitter and Facebook. We post daily there. Also stay abreast of the Boston area housing market by checking here frequently for more up to date news as it affects Boston area housing.

The Boston Area Housing Outlook

The Boston area housing outlook continues to remain positive. The Commerce Department released information confirming that the sales of newly built homes rose more than 5% in July. In addition, prices for new homes were up. Homebuilders cite two reasons for the recent higher traffic and sales activity:

1.) The much anticipated rate increase by the Federal Reserve

2) Lower new construction home prices to more closely match mortgage demand

Metro Boston Area Housing Market Could Cool Down

Despite this summer’s success, some analysts warn that recent market volatility may be creating a slowdown in the Boston area housing market. Some homebuilders aren’t quite as bullish on the remaining months of 2015.

The recent instability in the global economy — specifically China’s stock market woes — has made the expected rise in the Federal Reserve’s federal funds rate less likely. While on the surface that’s a good thing, Boston area housing experts fear the lack of movement in rates will result in a reduced sense of urgency in prospective homebuyers.

Home prices have remained relatively high, too, buoyed in part by the regained consumer confidence in the stock market after a shaky week following China’s record market plummet. Despite expected rates remaining unchanged, homebuilders say consumer caution will trump interest rates.

Ironically, a rise in interest rates would potentially have given the Boston area housing market a boost. Historically, such an event signals an end to the “good old days” as homebuyers move to finally purchase before rates increase further.

Find more articles pertaining to Boston area housing under our Boston Real Estate section of articles to your right under Boston Real Estate Categories. We also post tips on Facebook and Twitter. Follow us there for more tips on Boston area housing as well.

Boston Area Housing Market on the Upswing

The Boston area housing market is doing better than expected. According to recently-released Commerce Department statistics, new home sales across the country enjoyed a 25% percent increase in July, 2015 compared to the same month a year ago.

Boston Area Housing: A Seller’s Market

It’s a seller’s market, evidenced by these characteristics:

  • Higher sales prices across the board for all single-family homes. In the classic definition of a seller’s market, home sellers have the upper hand in that there are more buyers in the market than sellers. Higher prices result result from the excess of housing demand versus housing supply.
  • Sellers are receiving multiple bids for their properties. Home sellers and real estate agents report some homes are receiving “dozens” of offers as prospective buyers jockey for position to buy before somebody else does.
  • Sellers are being offered added incentives by buyers to take their offer. Potential purchasers are offering enticements to home sellers in the hope they will accept their offer over others competing for the same home in the Boston area housing market. Reports of buyers offering round-trip vacations, timeshare weeks and other incentives aren’t uncommon.

Another strong sign of the recovery is that roughly 1 in 5 homebuyers are paying in cash, down from a high of 40% in 2013. What this means to the Boston area housing market is that fewer investors are buying, leaving room in the market for serious homebuyers looking for primary residences.

Finally, industry experts say that the current uptick in the market seems to be fueled by buyers that can afford to buy homes, an indication that the Boston area housing market is enjoying a recovery that is real and tangible, not an artificial inflated boon as seen in other times.

For more articles pertaining to Boston area housing, check out the Boston Real Estate section of our site to your right below Boston Real Estate Categories.

Remember, we also post tips daily on Twitter and Facebook. Check us out there too.

Boston Area Real Estate News – August 2015

In our Boston Area Real Estate News for August 2015 We're Taking an In-Depth Look at Millennials and Why They Can't be Blamed for Low Home Ownership Rates:

Millennials Are Not Why Boston Area Home Ownership Rates Are Down

Lower Boston Area home ownership should not be blamed on Millennials

Boston Area home ownership rates are the lowest they’ve been in 48 years, and there are several factors involved, including a strong rental market and a lack of traditional household formation.  But let's look at why millennials are NOT to blame for the lower rate in Boston Area home ownership.

Some stats about Millennial homebuyers — those aged 34 and younger — that show that they are not only buying homes, but also what trends they're following as they do.

According to a study of generational trends (namely, Millennial home buyers) by the National Association of Realtors, 65% are married couples, 14% are unmarried couples, 12% are single females, 8% are single males and other combinations create the last 1%. So, being unmarried isn’t keeping Millennials from joining the ranks of Boston Area home ownership.

Millennials are also working more now than they were even compared to last year, with unemployment down to 5.3% as of June 2015, as opposed to last year’s 6.1% in June, according to the US Department of Labor.

Stats and trends show that Millennials are moving out of the rental market and buying the homes they once rented. Forty-nine percent are buying in the suburbs, 21% in urban areas, 17% in small towns, 13% in rural districts, and 1% are buying in resort towns. This is a more diverse buying pattern then those from 35-49, who are buying 60% of their homes in the suburbs.

Not only are Millennials buying homes, but they’re relying on real estate agents to make the deal happen. The study shows 90% of Millennials used an agent to close their deals, with only 5% going through a builder and 4% buying directly from the previous owner.

Technically, if you wanted to blame a generalized age group for the dip in use of real estate agents, Gen X, those in the 35-49 age range, could qualify, since only 88% of those homebuyers used an agent.

Millennials are definitely joining the ranks of Boston Area home ownership, but let's look deeper into the trends of this age group to see why more are not buying a home.


Why the Boston Area Housing Market is Changing for Millennials

The Boston Area housing market may be changing due to more Millennials preferring to walk rather than commute by driving

According to the same recent study by the NAR, Millennials prefer walking over driving by 12 percentage points. Millennials want to live within walking distance to shops and restaurants, and have a short commute to work. They also favor expanding public transportation and alternatives such as biking. This is the largest margin in favor of walking for any generation, ever.

The Boston Area housing market may be seeing a drop in overall numbers of those owning homes now versus past years because of the disinterest in traditional single-family homes by these Millennials prefering to walk rather than commute to and from work and recreation.

Nearly half of Americans participating the recent survey by the NAR said they would prefer to live in neighborhoods that have small yards but are in easy walking distance to stores and restaurants, vs neighborhods with large yards but where driving is required to get to amenities.

Around 60 percent of Americans live in detached, single-family houses, but one in four of these individuals would rather live in an attached home in a more walkable neighborhood.

Even though the job market is improving, it seems that more and more Millennials are living with their parents today than they were at the height of the Great Recession. We'll look deeper into this in a moment.

It's no secret that Millennials have had a tough time getting started with careers, families and saving for retirement. And this struggle has carried over into home ownership as well. 

Everything from the recession, to the rising cost of higher education, to the increasing scarcity of better-paying jobs has taken its toll on people born in the last two decades of the 20th century.

Many Millennials feel there is no hurry to own their own Boston Area home, because of how the economy has changed. Our current economy has shifted to a knowledge-based or connection-based economy, and we are seeing people now work well into their 70s, 80s and beyond. So many Millennials feel they have plenty of time to become home owners.


More Millennials Live With Parents

More Millennials seem to be content living with their parents than ever before

According to a new Pew Research Center analysis of U.S. Census Bureau, which found that the share of young adults living in their parents' homes has increased from 24 percent in 2010 to 26 percent in the first quarter of 2015. During the same period, the unemployment rate for adults ages 18 to 34 dropped from 12.4 percent in 2010 to 7.7 percent this year.

Despite the fact that there are 3 million more Americans in the 18-34 range now than there were in 2007, the number who are living independently has fallen from 42.7 million in 2007 to 42.2 million today.

This trend could be one reason why the economy, and namely, the Boston Area housing industry, isn't growing stronger than it is.

The growing young adult population has not fueled demand for Boston Area housing units and the furnishings, telecom and cable installations, and other ancillary purchases that accompany newly formed households according to the Pew Research Center.

Millennial women, by the way, are more likely to leave the nest than millennial men, and fewer women tend to buy a home on their own than do men.

So what do we glean from all this Millennial data?

Trends have changed. Potential Boston Area homebuyer desires have changed. Has the real estate market failed to change with the demand? Something to think about!

Boston Area Housing for the Rest of 2015

Boston area housing industry experts say the future of housing for the remaining five months of the year revolves around one word — affordability. Affordable home prices and affordable rents will determine the Boston area housing market’s direction.

Boston area housing is expected to be lukewarm, at best, for the rest of 2015

Although home prices are still on the upswing, the pace is slower that it was during the first six months of 2014. However, mortgage interest rates are rising and the lack of Boston area housing inventory is likely to keep prices at a higher level than anticipated.

Boston Area Housing Market to Remain Lukewarm

Despite renewed optimism in the Boston area housing market, the production of new homes has not grown substantially this year. In addition, there is little expectation that that will change between now and the end of the year. Homebuilders are being affected by tighter lending and credit requirements and a shortage of skilled construction and subcontractor labor. These and other factors are reasons that homebuilders aren’t building many spec houses anymore, concentrating on permanent construction projects for contract purchasers.

For the rest of the year, Boston area housing market analysts expect a slight rise in new construction, but it will likely be “too little, too late” to cure the inventory shortage.

On the rental side of the Boston area housing market, tenants probably won’t experience much relief either. Demand for rental units are rising, as more people have entered the rental market as a result of the mortgage crisis of a few years ago. While multifamily housing starts has increased this year, supply has not met demand.

Rental occupancy levels are at record highs, putting landlords and rental management companies in the “catbird seat.” And despite some migration from the rental market to the Boston area housing home buying arena, those crossing over represent the exception not the rule. It’s expected the remaining five months of 2015 will not see much of a change.

Occupancy is at a record high, and that gives landlords strong pricing power. Renters do not appear to be turning into buyers, at least not in sizable numbers, and the second half of this year will see no change in that. Higher than normal rent has made it more difficult for prospective homebuyers to save money for a down payment, pushing the length of time tenants will stay in the rental market longer.

One area to watch closely over the next few months is mortgage lending activity. As mortgage lenders grapple with new regulatory challenges it will likely cause them to be more cautious. Yet, as interest rates continue to rise, lenders will want and need more mortgage business. Experts look for independent mortgage lenders to gain a larger share of available business by being slightly more lenient, flexible and competitive in their credit policies and practices. Such activity will almost definitely impact the Boston area housing market… the question, of course, is how much.

Stay abreast of the latest in Boston area housing news, and all the news and events that affect the Boston area housing market by visiting our site often, and remember, we post tips daily to Twitter, and also on our Facebook Page. We’d love you to check us out there too.