Market News

More people renting, landlords making more money

More people over 40 years of age are renting.  In fact, the US Census Bureau reports that 51% of households headed by 40+ers now rent.  This number is up from 43% twenty years ago.  I don’t think most of that is by choice.  The financial crisis uprooted about that many homeowners, and with a stumbling economy of part-time and low paying jobs, many people have not found their footing enough to once again become homeowners.

Thanks to the Fed, those homes taken from former lower and middle income homeowners wound up in the hands of Wall Street hedge funds, who made rentals out of them.  That play has not suited the former homeowners very well.  Between 2001 and 2014, while the national average income has fallen by 9%, rents have increased 7%.  Call that a double whammy that makes buying a home look like a great deal.

New Government Issued Regs to Delay Closings

Monday will be the first day the new federal closing guidelines take effect, and there is fear that they will delay most closings by fifteen days on average.  Of course, the same thing was said five years ago when guidelines were last revamped.  However, this version looks like it may actually effect some buyers and sellers.  I suspect there will be some fumbling around as lenders and title companies decipher the government specs in the real world, and that some closings will be delayed.  But after a couple months things should return pretty much to normal.

So, if you’re buying or selling and plan on closing during the next few months, it would be best to plan on a 45-60 day timeframe from offer acceptance to closing.  (If you have questions or concerns, just ask!)

Reasons for the lack of inventory

A few weeks back I posed the question- Why is there a lack of inventory when sales numbers are up and prices are too?  I mean, on the surface that just doesn’t make sense— if prices are up and there are ready, willing and able buyers, then sellers should be pushing and shoving to get in line to get their houses sold.

Here’s a few thoughts on why sellers are sitting on the sideline:

1)  Owners lack sufficient home equity to be able to sell and then buy their next house.  Yes, prices are up, but much more so in certain areas than in others.

2)  Mortgage lending requirements remain tight, forcing some to the sidelines because they won’t now qualify or they fear they won’t.

3)  People that were hurt financially in the Great Recession just aren’t up for the fight that buying a new home would entail.

4)  Unless an expanding family is the reason prompting a move, people want and are demanding HGTV quality in their next home, and those high end amenities just don’t measure up with their budget.  ie. champagne tastes, beer budget syndrome.  People figure that if they’re going to downsize they must have a higher end lifestyle, and those may be unrealistic expectations based on their financial situation.

5)  Wages haven’t kept pace with costs.

6)  Millenials are not jumping into the home buying experience in sufficient number to push the home buying train out of the terminal.  Millenials are lagging far behind previous generations in buying at the same age.  Because of this, Gen Xers have nobody to sell their homes to so they, in turn, can purchase the boomers’ homes.  There are lots of reasons why Millenials are not buying.  These include chronic underemployment (the barista with a degree syndrome), burdensome student loan debt, and an adversity to taking on housing debt due to their earlier observations of their parents losing homes in the Great Recession.

At any rate, inventory per buyer is down 15% from a year ago and almost half from 4 years ago.  What changes the trend?  Basically, one or more of the aforementioned factors must be unwound.  Only time will tell how that plays out.  Stay tuned.  I’ll keep you posted.