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Real Estate News

Latest Realty News from NAR

The Silent Generation: Downsizing Homes & Joining Senior-Related Housing

The Silent Generation, buyers aged 73 to 93 years, made up the smallest share of buyers by age at only seven percent of all home buyers in 2018. The median age for this group was 76 years old and they were born between 1925 and 1945. They tended to have the smallest families; 96 percent of these buyers had no children living at home under the age of 18 years and they made up the same share of single female buyers as Younger Boomers at 25 percent. Of the generations, buyers 73 to 93 years bought fewer multi-generational home at 13 percent. For those that purchased a multi-generational home, the reason was for the health and caretaking of aging relatives at 13 percent.

The Silent Generation had the smallest share of first-time home buyers at only four percent, which was expected for their age group. Correspondingly, they made up the largest share to move directly from a home that they owned at 82 percent. They also had the lowest median household income at $69,600, likely living off retirement funds. They managed their finances accordingly and bought homes with the second lowest median home price at $243,000. They also purchased some of the newest homes last year with a median year of 1996.

Buyers aged 73 to 93 years also bought new homes at 14 percent and wanted the amenities of new home construction communities (23 percent). These buyers were the most likely to purchase a duplex, apartment, or condominium at nine percent, or a townhouse at 10 percent. They were also the most likely to buy a home in senior-related housing at 29 percent. These buyers wanted a home convenient to friends and family (47 percent) and for the convenience to shopping (34 percent). They were the least likely to buy homes in an area for the quality of the school district, convenience to schools, or for the convenience to a job. They were also the least likely to compromise on the condition of the home (16 percent). The Silent Generation also bought frequently in a rural area at 23 percent.

The age group of buyers 73 to 93 years were the highest share among the generations to purchase for the desire to be closer to friends and family (27 percent) and for a smaller home (17 percent). They had an expected tenure in the home at a median of 10 years. They were the most likely to move due to a household member’s health and least likely to want a larger home.

Foreign Buyers Purchased $4.8 Billion in U.S. Commercial Real Estate in 2018

International clients are an important niche market for residential and commercial REALTORS® alike. In the latest 2019 Commercial Real Estate International Business Trends, NAR reported that foreign buyers purchased $4.8 billion of U.S. commercial real estate in 2018.[1] The median value for a buyer-side transaction was $600,000, while the median value for a seller-side transaction was $1 million. The dollar volume of foreign buyer purchases of U.S. commercial property declined in 2018 compared to the $6.7 billion in 2017 and $7.9 billion in 2016 as the economic expansion slowed in Asia (e.g., China, Japan), Canada, Europe (e.g. United Kingdom, Germany, France, Italy, and Spain), and Latin America.

Major Buyers of Commercial Property

Asia was the largest source of U.S. commercial property buyers, accounting for about a third (34 percent; 28 percent in 2017) followed by the Canada and Latin America (29 percent; 25 percent in 2017), Europe (20 percent; 29 percent in 2017), Middle East (10 percent; 12 percent in 2017), Oceania (2 percent; 1 percent in 2017), and from other countries that were not identified by respondents (3 percent; 6 percent in 2017).

The top foreign buyers of commercial property were China (21 percent), Canada (7 percent), Mexico (6 percent), Germany (5 percent), India (5 percent), Israel (5 percent), United Kingdom (5 percent), Venezuela (5 percent), Vietnam (5 percent), and Italy (4 percent).

Major Destinations of Buyers of Commercial Property

Florida was top choice among foreign buyers of U.S. commercial property (20 percent) followed by Illinois (13 percent), Texas (11 percent), and California (9 percent). Other top destinations were Georgia, New York, Virginia, Hawaii, Maryland, Massachusetts, Nevada, New Jersey, and Oklahoma.

Financing and Types of Property Purchased

About half of commercial foreign buyers, 52 percent, made an all-cash purchase (70 percent in 2017), and 25 percent obtained financing from a U.S. source.

International commercial buyers purchased across a variety of property types, but apartment was the most preferred, at apartment (19 percent), followed by retail (16 percent), land (12 percent), industrial (11 percent), office (9 percent), hotel (9 percent), and other types.

The bulk of foreign buyers of commercial property purchased the property as an investment to be rented out (39 percent in 2017), and 33 percent purchased the property for a business they participate in (34 percent in 2017). The Other category, which accounted for 22 percent (16 percent in 2017), includes a purchase of the property for residential and business-related uses.

Reasons Foreign Client Decided Not to Purchase U.S. Commercial Real Estate

One in five international clients decided not to purchase U.S. commercial properties in 2018 (17 percent in 2017). Understandably, the primary reason deterring a purchase is cost and exchange rate changes (36 percent of clients who decided not to purchase; 30 percent in 2017).Other major reasons are the buyer “could not find a property” (31 percent of clients who decided not to purchase), difficulty moving money out of the country (22 percent; 17 percent in 2017), tax-related issues (22 percent; 17 percent in 2017), immigration/visa (9 percent), and difficulty obtaining financing (9 percent).


[1] NAR also estimates foreign buyer purchases of U.S. residential property. According to the 2018 National Association of REALTORS® Profile of International Activity in U.S. Residential Real Estate, foreign buyers purchased $121 billion of residential property during April 2017—March 2018, or eight percent of the $1.6 trillion of total existing home sales during the same period.

 

Older Boomers: Most Satisfied Buyers Purchasing Forever Homes

Older Boomers, buyers aged 64 to 72 years, made up 14 percent of all home buyers in 2018 again this year. The median age for this group was 68 years old and they were born between 1946 and 1954. Within this group, they had the third largest share of single female buyers at 20 percent. Their primary reasons for purchasing a home were the desire to live closer to friends and family (22 percent), followed by retirement (19 percent).

Combined, Older Boomers owned the highest share of investment (10 percent) and vacation (seven percent) properties. Older Boomers were the most likely to purchase homes in a rural area (25 percent) and in a small town (14 percent).

Compared to other buyers, they moved the greatest distances at a median of 30 miles, same as the Silent Generation. Older Boomers were the less likely to purchase homes for the quality of school districts or convenience to schools. Rather, they purchased homes for the quality of the neighborhood and for convenience to friends and family. This age group found commuting costs the least important. Overall, Older Boomers were very likely not to make compromises on the home when they purchased (49 percent), citing that they were never moving and it was their forever home (33 percent).

In their home search process, Older Boomers were very likely to contact a real estate agent first and they were the least likely to find the paperwork a difficult step. Older Boomers were the most satisfied with the home buying process at 94 percent.

Older Boomers’ income was below the median income of all buyers ($91,600) at just $83,200 and they purchased homes at a median price of $250,000. Older Boomers were very likely to use the proceeds from the sale of a primary residence as the source of their downpayment (54 percent) and from an IRA account (five percent). They were the largest group of home buyers to have credit card debt at 67 percent.

Older Boomers were the second largest share of home sellers at 22 percent in 2018. The median age for an Older Boomer seller was 68 years. They had the second lowest median income at $81,700. They were the most likely to sell to be closer to friends and family (26 percent) and for retirement (16 percent), and at a median distance of 50 miles from the home they recently purchased. They were also very likely to sell when they wanted to (96 percent). They receive the second highest equity at 43 percent and second highest dollar value at $74,000.

February 2019 Housing Affordability Index

At the national level, housing affordability is up from last month but down from a year ago. Mortgage rates were down from last month at 4.60 percent this February, and up 4.1 percent compared to 4.42 percent a year ago.

  • Housing affordability declined from a year ago in February moving the index down 2.8 percent from 161.5 to 156.9. The median sales price for a single family home sold in February in the US was $251,400 up 3.6 percent from a year ago.
  • Nationally, mortgage rates were up 18 basis point from one year ago (one percentage point equals 100 basis points).
  • The payment as a percentage of income was down from last month at 15.9 percent this February and up from 15.5 percent from a year ago. Regionally, the West has the highest payment at 22.3 percent of income. The South had the second highest payment at 15.7 percent followed by the Northeast at 15.3 percent. The Midwest had the lowest payment as a percentage of income at 12.4 percent.

  • Regionally, the Midwest recorded the biggest increase in home prices at 5.5 percent. The Northeast had an increase of 3.9 percent while the West had a gain of 3.5 percent. The South had the smallest gain in price of 2.2 percent.
  • Regionally, all four regions saw a decline in affordability from a year ago. The Northeast had the biggest drop in affordability of 5.3 percent. The Midwest had a decline of 5.1 percent followed by the South that fell 1.8 percent. The West had the smallest drop of 0.9 percent.
  • On a monthly basis, affordability is up from last month in three of the four regions while the South was flat. The Northeast region had the biggest increase of 3.7 percent. The Midwest had an incline of 2.8 percent. The West had the smallest increase in affordability of 0.4 percent.
  • Despite month-to-month changes, the most affordable region was the Midwest, with an index value of 202.2. The least affordable region remained the West where the index was 112.2. For comparison, the index was 159.6 in the South, and 163.4 in the Northeast.

  • Mortgage applications are currently down while credit availability and new home purchase applications increased. There has been an increase in inventory of modestly prices homes. Median family incomes are growing 2.8 percent while home prices increased 3.6 percent. Despite being down from last year, affordability is up from last month in the US and in three of the four regions with the South being flat. Interest rates have dropped two months in a row, which will lower mortgage payments for future homebuyers.

  • What does housing affordability look like in your market? View the full data release here.
  • The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principal and interest payment to income). See further details on the methodology and assumptions behind the calculation here.

Which States Have Affordable Housing?

Finding affordable housing can be a challenge. Rents are often compared to the price of housing and many of those who rent desire to own a home. The typical renter has to factor in what portion of their income will they have to commit to housing.

Based on NAR’s home affordability index[1], the Midwest has been the most affordable region to own a home, which is comprised of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Ohio, North Dakota, Nebraska, South Dakota and Wisconsin. The West has been the least affordable region to own a home, which is comprised of Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.

Now, let us examine if there is any correlation with affordable rents and housing within the states and regions. Let us look at some of the states that have highest or lowest rent growth. I also want to examine the gross rent to income to find which states have favorable or less encouraging affordability conditions.  It is also necessary to look at which states are showing the highest and lowest renter income growth. For my analysis, I used rent data from ApartmentList.com and I estimated the 2018 median household income by adjusting the 2017 American Community Survey income data using wage growth data from the Bureau of Labor Statistics.

The Midwest is also the most affordable region to rent, with North Dakota having the lowest gross rent to income ratio at 24.9 percent while Ohio had the highest, at 27.5 percent. In all these states, the rent to income ratio is no higher than 30 percent; a threshold that indicates rent is burdensome for households.

The West and the Northeast are the least affordable regions to rent, having seven out of the top ten -states with the highest gross rent-to-income ratio. Out of the states with the highest gross to rent-to- income, Florida representing the South had the highest at 33.3 percent followed by Hawaii, Louisiana and California.

North Dakota led four of the other states in the Midwest region with a decline of 6.3 percent in rent growth.

Arizona and Nevada lead all states with the highest rent growth with an increase of 3.0 percent. Virginia had the smallest rent growth of the top ten at 1.7 percent.

Wyoming lead all states with the highest income growth at 9 percent. The remaining nine states from West Virginia to Wisconsin experienced income growth between 6 and 4 percent. Hawaii had a gain of 5 percent in income growth while being the only state on this list to having a decline in rent growth of 0.8 percent. The South and the West lead all regions in income growth.

New Hampshire and Mississippi were the only states to experience a decline of 1 percent in income growth. Utah, Arizona, Minnesota, Indiana, Alaska, and Nebraska were six of the ten lowest income growth at a 2 percent. Arizona showed rent growth of 3 percent and Delaware had rent growth of 2.4 percent. The South and the West have the highest gross rent-to-income ratios and they are the regions with the fastest rent growth. Renters will find it increasingly challenging to find affordable housing in these states.

Affordable housing is key for all income levels and finding the right state and region to live is key to allowing your income to work for you and provide stability. Finding affordable housing is affected by both income and the cost of housing (rent or mortgage). Consider how housing expenses and your income will look over time. Income growth varies per state and depends on the job growth and job quality, which refers not only to pay raises but other job attributes such as opportunity for personal development.


[1] To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. For example, a composite HAI of 120.0 means a family earning the median family income has 120% of the income necessary to qualify for a conventional loan covering 80 percent of a median-priced existing single-family home. An increase in the HAI, then, shows that this family is more able to afford the median priced home. NAR HAI index as of January 2019.

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