Monday, July 14, 2014

Farmland Boom Shows Signs of Cooling

DAILY REAL ESTATE NEWS | MONDAY, JULY 14, 2014
Following double-digit rates of appreciation, agricultural land prices may soften in the coming months, says Lawrence Yun, National Association of REALTORS®’ chief economist.
What's happening to the boom? Well, Yun says you can blame it on corn prices. They've been on the decline, which means a lower dividend from the land, translating to lower prices for properties.
More on the Farmland Boom:
For example, in Central Illinois the price of corn has been cut in half from $8 per bushel to $4, and could fall even further. In the early 1980s, agricultural land prices fell when the price of corn dramatically dropped and interest rates rose sharply, leaving many farmers unable to generate enough revenue to pay off the interest on the money they owed.
However, Yun notes on NAR’s Economists’ Outlook blog that though corn prices will likely have a negative impact, this time around farmers are at a much more moderate borrowing level than in the past. Also, interest rates remain near historic lows.
“Any decline in land prices will be modest and not like the 1980s,” Yun says. “Most farmers will be able to absorb some decline in land prices without facing financial problems.”
Source: “Agricultural Land Price Trend,” National Association of REALTORS® Economists’ Outlook Blog (July 11, 2014)


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The Return of the First-Time Home Buyer?

DAILY REAL ESTATE NEWS | FRIDAY, JULY 11, 2014
Young people are starting to leave their parent’s home and move out on their own. The Current Population Survey for 2013 showed a drop in the percentage of 20-somethings living with parents, marking the first decline since 2005.
As of now, the percentage drop appears minimal: Those aged 18 to 24 living with parents or a related subgroup dropped from 56 percent to 55 percent in one year. However, Brad Hunter, chief economist at Metrostudy, notes in a Builder online article that the one-percentage-point decline represents 300,000 people who are now looking for a household of their own that who were previously living with their parents.
More on first-time buyers:
Indeed, a recent report by Harvard University’s Joint Center for Housing Studies predicts that 2.7 million more households will form among people in their 30s over the next decade.
First-time buyers usually make up about 40 percent of home buyers. However, lately, the share has been in the 35 percent to 38 percent range, Hunter says. For existing-home sales, first-time buyers’ share is less than one-third of all buyers, at 27 percent in May, according to the National Association of REALTORS®.
The delay in millennials branching out on their own has greatly reduced household formation in recent years. Household formation rates usually average 1.4 million per year. Lately, the rate has been a fraction of that, about 500,000 to 700,000 a year.
“We are seeing some evidence that young people who had moved in with their parents or relatives are now finding the means and the motivation to move out and get their own place,” Hunter notes. “While most of these newly-emerging twenty-somethings will be going into rentals, the movement out of the parental home is nonetheless expected to support a series of positive steps from rentals to entry-level re-sales to entry-level new homes, and on up the ladder.”


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Friday, July 11, 2014

Report: Hurricanes Could Put 6.5 Million U.S. Homes at Risk

DAILY REAL ESTATE NEWS | FRIDAY, JULY 11, 2014
More than 6.5 million homes along the U.S. Atlantic and Gulf coasts could be at risk of a storm surge from a hurricane, which could amount to nearly $1.5 trillion in potential reconstruction costs, according to the 2014 storm surge analysis conducted by CoreLogic. The analysis estimates the number and reconstruction value of single-family homes that could be exposed to a potential hurricane-driven storm surge.
When natural disaster strikes:
“This exposure could constitute significant risk for home owners and financial services companies, as many at-risk homes lack protection from insurance coverage,” CoreLogic’s report notes.
Florida has the highest number of homes at risk of storm surge damage, with nearly 2.5 million homes potentially in harms way, representing $490 billion in potential damages, according to the report. At the metro level, the New York metro area, which includes northern New Jersey and Long Island, contained the highest number of homes at risk for potential storm surge damage – 687,412 – as well as the highest reconstruction value at more than $251 billion.
The reconstruction value of homes exposed to storm surge damage was found to be much greater in the Atlantic region than the Gulf. The total reconstruction cost value of homes along the Atlantic coast is nearly $951 billion – nearly double the value of properties at-risk in the Gulf Region, at slightly over $545 billion, according to the report.
The CoreLogic analysis includes single-family homes, mobile homes, duplexes, manufactured homes and cabins. View the full report at CoreLogic. 
Source: CoreLogic




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The 10 Priciest Places to Live in the World

AILY REAL ESTATE NEWS | FRIDAY, JULY 11, 2014
In Hong Kong, you might pay $6.64 in U.S. dollars for a cup of coffee, or $6,960 to rent an unfurnished, two-bedroom apartment. Hong Kong landed No. 3 on Mercer’s latest annual Cost of Living Survey. The survey is geared to give those who are working abroad insight into the cost of living and is often used by employers to develop compensation packages for people with international assignments.
To arrive at its list, Mercer researchers analyzed cities in five continents, measuring the comparative cost of more than 200 items in each location, such as housing, food, clothing, transportation, household goods, and entertainment. They used New York as a baseline city to compare against the other cities.
“Despite moderate price increases in most of the European cities, European currencies for the most part slightly strengthened against the U.S. dollar, which pushed most Western European cities up in the ranking,” Nathalie Constantin-Métral, who compiled the survey, told Forbes. A rise in the cost of rentals has also pushed some European cities up in the rankings, particularly Copenhagen, Amsterdam, and Frankfurt, according to the study.
The following are the most expensive cities in the world in 2014, according to Mercer’s survey:
Exchange rates are benefiting foreign buyers:
1.     Luanda, Angola
2.     N’Djamena, Chad
3.     Hong Kong, Hong Kong
4.     Singapore, Singapore
5.     Zurich, Switzerland
6.     Geneva, Switzerland
7.     Tokyo, Japan
8.     Bern, Switzerland
9.     Moscow, Russia
10.   Shanghai, China
Source: “The Most Expensive Cities in the World,” Forbes.com (July 10, 2014)






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Top Amenities Buyers Will Make Sacrifices For

DAILY REAL ESTATE NEWS | THURSDAY, JULY 10, 2014
Home buyers are showing some willingness to pay more for certain amenities in a home, according to the latest PulteGroup Home Index Survey of more than 1,000 adults ages 25 to 65.
Take the Pulse of Buyers' Desires
What's surprising is that buyers say they'd give up some pretty alluring draws about a property for certain amenities: Forty-four percent surveyed say they're willing to give up a location near public transportation in exchange for certain amenities, and 35 percent say they'd give up better schools and proximity to entertainment and shopping.
So what are these amenities that home buyers want so badly? Fifty-one percent surveyed say they want their next home to be larger than their current residence, and 64 percent say they prefer a move-in ready home.
Among the most important features home buyers identified:
  • "His and her closets" in the master bedroom (31%) and spa-like master bathrooms (23%)
  • A large eat-in kitchen area (23%) and a kitchen island (22%)
  • At least one bathtub in a home (54%)
"In addition to the more common home options, we're starting to see regional trends emerging among home buyer preferences," says Ryan Marshall , PulteGroup Inc.'s executive vice president of homebuilding operations, marketing and sales. "From outdoor kitchens in Florida, to spice kitchens in California, shoppers are increasingly discerning when it comes to home features that could be the deciding factor in their next move."
Folding, accordion-style glass doors are popular in the Southwest, while multi-generation floor plans and screened-in porches are popular in the Southeast, according to the survey. In the Northeast, balconies off the kitchen and rooftop terraces are sought-after, while "Jack 'n' Jill" bedrooms are in high demand in the Midwest.
The most important areas to home buyers when choosing a new home: kitchen (29%), bedroom (22%), and living room (18%).
"Consumers today aren't just looking for the biggest house on the block. They're looking for more efficient use of space and a greater area allocated to 'workhorse' spaces, like the kitchen," says Marshall.  "Home buyers want unique features and amenities and will do what it takes to find the home they truly want, even if they have to pay more for a move-in ready home."


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Tiny Homes Spark Big Movement

DAILY REAL ESTATE NEWS | THURSDAY, JULY 10, 2014
A 164-square-foot home may sound like a squeeze to most Americans, but to some home buyers, it may very well be the perfect fit.
“Dramatic downsizing is gaining interest among Americans, gauging by increased sales of plans and ready-made homes and growing audiences for websites related to the [tiny home] niche,” Bloomberg reports. National interest in the search term “tiny house” has been soaring since May, according to Google trends. A+E Networks Corp. started airing “Tiny House Nation” this week, a series that highlights the growing small-home movement.
Tiny homes, defined as 500 square feet or less, allow people to cut their housing expenses, live simply, and go mortgage-free.
Why Bigger Isn't Always Better
Such homes weren’t considered so tiny by historical standards. In 1950, single-family homes averaged 983 square feet, according to the National Association of Home Builders.
But the tiny home movement has grown at a time when new homes have bloomed to the biggest on record. The median size of new single-family houses was at a record 2,384 square feet in 2013. Only 1 percent of home buyers are purchasing a home that is 1,000 square feet or less, according to housing data from the National Association of REALTORS®.
“Since I got into the small-house game 15 years ago, every year seems like it’s the biggest ever,” says Cotati,Calif.-based architect Jay Shafer, who founded Tumbleweed Tiny House Company in 1999 and later Four Lights, both micro-building and design companies. “It shows people how little some need to be happy, and how simply they can live if they choose.” Shafer, his wife, and two young children share a 500-square-foot home.
“Tiny houses are no longer strange,” Debby Richman, the company’s chief marketing officer, told Bloomberg. “They are now ‘cute.’ The cultural mores have changed.”
Who’s occupying these “tiny” homes? The largest share — 23 percent — of “tiny home” inhabitants are between ages 31 and 40, according to The Tiny Life blog, which conducted a nationwide survey of more than 2,600 people. Sixty-one percent of respondents said they had zero credit-card debt.
“Wherever you find expensive housing on the East Coast or the West Coast, you find a higher concentration of tiny houses because people understand the need,” Shafer says.
Source: “Tiny Houses Big with U.S. Owners Seeking Economic Freedom,” Bloomberg (July 9, 2014) and “Tiny Houses Offer Big Potential in Some Areas,” The Associated Press (July 8, 2014)




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Thursday, July 10, 2014

Survey: Lenders Fear Another Housing Bubble Is Brewing

DAILY REAL ESTATE NEWS | WEDNESDAY, JULY 09, 2014
Mortgage bankers are fearful that another real estate bubble is on the horizon, according to a quarterly survey of 203 bank risk managers from the United States and Canada conducted by FICO. Fifty-six percent of respondents said that an “unsustainable real estate bubble is inflating.”
The Bubble Debate Continues
"The home loan environment has bifurcated," says Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. "Six million home owners in the U.S. are still underwater on their mortgages, with the average negative equity a whopping 33 percent. Yet with home prices soaring in many cities, total home owner equity in the U.S. is at its highest level since late 2007. That doesn't feel like a healthy, sustainable growth situation. No wonder many lenders in both Canada and the U.S. are concerned about the risk in residential mortgages."
But real estate experts mostly have downplayed housing bubble fears in recent months. In fact, a new report finds that home prices are still undervalued by 3 percent nationally. Trulia’s most recent Bubble Watch report found that at the current pace, home prices are expected to fall in line with long-term fundamentals – neither over- or undervalued – by the last quarter of 2014 or the first quarter of 2015.
“Much of the recent house-price appreciation is a result of market correction for the significant undervaluation caused by the price declines in the late aughts,” Mark Fleming, chief economist at housing data provider CoreLogic noted in recent months. “There is no need to fear a bubble for at least a few years to come, if at all.”
FICO’s survey also asked bankers about the most common concerns they have in the underwriting process on consumer loans. The most common concerns cited by bankers: “high debt-to-income ratio” in approving loans (59 percent); “multiple recent applications for credit” (13 percent); and “low FICO score” (10 percent).
"As consumer confidence picks up and people increase their borrowing, lenders are understandably concerned about growing indebtedness," says Mike Gordon, FICO's executive vice president of sales, services and marketing. "For the last two quarters, around 65 percent of our respondents said they think credit card balances are headed higher. Those are the two highest figures we've ever seen in this survey. When I talk with bankers, they tell me they're happy to see growing consumer optimism, but they're wary of a return to reckless borrowing."
Source: FICO and “Study: Home Prices Undervalued by 3%,” REALTOR® Magazine Daily News (June 30, 2014)



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