New NAHB research shows that millennials tend to buy homes that are smaller, older, and less expensive than homes bought by older generations. Being the youngest home buyers with little or no accumulated wealth also affects how millennials shop and buy their homes.
The majority of millennials are buying homes for the first time in their lives. Three out of four millennials who purchased a home were first time buyers, but a quarter traded their existing homes.
The Bureau of Economic Analysis BEA released its estimate of real GDP growth for the third quarter. Economic output expanded at a seasonally adjusted annual rate of 3.5%, down from the 4.6% rate in the second quarter, but still respectable. The slowdown is no surprise given the rapid pace in the second quarter, driven in part by a bounce back from the decline in the first quarter. The real question is whether the momentum of the third quarter can be sustained. Key drivers of growth, personal consumption expenditures PCE and business fixed investment, slowed while more volatile sectors, net exports and national defense spending, made outsized contributions to growth.
PCE slowed to an annual pace of 1.8% from 2.5% in the second quarter and business fixed investment grew only 1.0% after a 19.1% surge last quarter. Strong exports and weak imports (which subtract from growth) combined with a whopping 16.0% increase in defense spending contributed 2 percentage points to the overall 3.5% growth rate. The trade imbalance is likely to correct and defense spending has declined consistently for the last three years.
These sectors will not be the major engines of growth in the fourth quarter. A slowdown in inventory investment reduced growth by more than 0.5 percentage points and is as likely to restrain as contribute to growth in the fourth quarter. Continued strong growth in the fourth quarter will require a reacceleration in PCE and business fixed investment.
A record number of millennials, individuals aged 18 to 34 years, are delaying household formation. This Great Delay, instead of the forbearance of impending doom, may actually be a sign of prudent economic decision making from a generation coming of age during turbulent economic times. Instead of forming a household, many have enrolled in college or stayed in school to pursue a college degree. This personal investment has short-run and long-run implications of great interest to the housing market.
When young Americans delay household formation, they often delay renting or buying a home. The relationship between the Great Delay and the housing market is most clearly seen in the record number living with their parents and the decline in homeownership rates among Milennials. For example, the U.S. Census Bureau quarterly survey of housing vacancy and homeownership shows that for adults under the age of 35 the homeownership rate dropped from a record high 43.6 percent in the second quarter of 2004 to its current record low of 36.2 percent in the first quarter of 2014.
The decline in the homeownership rate can be partly attributed to long-run demographic trends. Researchers point out that Americans, on average, are waiting 5 years longer to get married when compared to 1970. Additionally, Americans are waiting longer to have children. The average age at first birth in 2006 was 25 compared to the average age at first birth age of 21 in 1970.
A recent Zacks report finds new data combined with higher homebuyer and homebuilder confidence will lead to a pickup in the housing market this fall.
Data released in August raises the hope that that the housing market recovery might finally be back on track, according to Zacks. Housing starts surged 15.7% from the prior month, to an eight-month high in July, beating expectations. After declining in June, building permits also beat expectations, increasing 8.1% in July.
The inventory of new homes for sale rose 4.1%, to 205,000 units in July, suggesting the supply is also improving. In July, month-over-month sales of existing homes rose 2.4%, up for the fourth consecutive month, while sales of new single-family homes fell 2.4%, below expectations, marking the only deviation from other housing indicators.
Recently, mortgage giant Fannie Mae revised its forecast for the U.S. housing market, and the news is not too good. Basically, thanks to a weak first half of 2014, Fannie now thinks total home sales will actually be lower in 2014 than they were in 2013, and that 2015 won’t be much better.
While this makes sense, because a lot of catalysts that drove sales last year are no longer there, what could this mean for the U.S. real estate market going forward? And what if the negative trends become even worse?
A weak 2014 so far Home sales have been lagging in 2014 for a few reasons. First of all, the year got off to a rough start because of the brutally cold winter weather during the first few months. And even as the weather thawed, the market didn’t pick up quite as much as experts thought it would.
According to recent data from Zillow, buying a typical home in the U.S. is much more affordable than renting, especially compared to historical standards. In fact, the data shows that the average renter who signs a lease today can expect to contribute nearly twice the percentage of his or her income to paying the rent than the average homebuyer must pay toward a mortgage.
Still, despite the high cost of renting, more people (especially the younger generation) are choosing to rent their homes. Why aren’t they buying, like their parents and grandparents did?
The data tells an expensive story
According to Zillow’s July Real Estate Market Report, U.S. homebuyers can expect to pay just 15.3% of their income toward their mortgage payment on a typical home. This is down significantly from the 22.1% of a homeowner’s income that was needed to pay the mortgage just five years ago.
Developers Look to Expand as China Struggles With Cooling Market
By Kris Hudson and
A rendering of a Landsea townhouse. Chinese builders want to expand abroad as China’s market slows. Dahlin Group
Small Chinese builders are following their larger brethren into the U.S., betting that the recovering American housing sector will help them expand as China struggles with its cooling market.
Landsea Green Properties Co. , a Chinese home builder listed on the Hong Kong Stock Exchange, has started residential projects spanning hundreds of planned homes in San Francisco, New Jersey and in Ventura County, Calif., near Los Angeles.
Also on the West Coast, Starryland USA, a subsidiary of Chinese developer Fuxing Huiyu Real Estate Co., intends to build upscale homes in development projects in San Francisco’s Bay Area; in Orange County, Calif.; and near Seattle. Starryland’s parent is listed on the Shenzhen Stock Exchange.
U.S. construction spending rebounded strongly to hit its highest level in more than 5-1/2 years in July as private construction increased and state and local government outlays surged, in a further sign of vigor in the economy.
Construction spending increased 1.8 percent to an annual rate of $981.31 billion, the highest level since December 2008, the Commerce Department said on Tuesday.
July’s percentage increase was the largest since May 2012 and reflected gains across all categories, with the exception of federal government.
After the financial crisis and mortgage meltdown, it’s natural that many people are skeptical about the housing market.
When you build economic growth on liar loans and the idea that housing prices will always rise, bad things are bound to happen.
Still, the housing market is recovering.
There is a host of data out there that shows, while the biggest part of the snap-back in prices is behind us, there may be significant upside in the years ahead. Just today, the National Association of Home Builders/Wells Fargo said a gauge of confidence among home builders rose to a seven-month high in August, helped by job growth and low mortgage rates.
When Chuck and Lynda Cohen decided this year to downsize from their four-bedroom Pacific Palisades home, they never imagined they’d end up in a trailer park. They also never imagined they would pay more than a million dollars for the privilege.
Multimillion-dollar properties are no rarity at Paradise Cove, the Malibu, Calif., mobile-home community where the couple, both retired from the film industry, this spring purchased a two-bedroom, 1,800-square-foot trailer for $1.25 million. Earlier this year, a trailer in the park—which in the past has included residents like actor Matthew McConaughey —sold for $2.55 million. And in July, a four-bedroom, 2,200-square-foot trailer with a hot tub and two-car garage went on the market for $3.75 million.
Such prices are partly attributable to Paradise Cove’s location. On a bluff overlooking the Pacific Ocean, the park is surrounded by conventional homes that can run in the $20 million to $40 million range, said Michael Gardner, an agent with Prudential Malibu Realty. And with amenities like hardwood floors, high-end appliances and granite countertops, these trailers look little different from upscale conventional homes—though all of them have a trailer axle hidden somewhere underneath and can be moved, at least technically.