Millennials & Home Buying

Millennials are the largest generation in the U.S. and, according to MarketWatch, they’re the largest generation to ever enter the the housing market, currently at 17 percent. A few more facts:

  • They make up more than 30 percent of all homebuyers
  • 90 percent purchased in a major city
  • 80 percent consider home buying a good investment
  • A high percentage have a DIY attitude when it comes to research
  • Many have high student debt
  • On average it takes 12 and a half years to save for a down payment
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Home Inventory Rises

Zillow’s October Real Estate Market Report states that the number of home for sale in the United States increased by 3 percent last month, compared to the same period in 2017. This is the first increase in home inventory in nearly four years.

Many of the country’s hottest markets saw the biggest increase in inventory, led by San Jose where 1,500 were added to the market in Ocotber. San Francisco, San Diego, and Seattle also saw significant increases in homes for sale.

Home value appreciation remained steady in October at 7.7 percent.

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The impact of student loans

Zillow’s latest Housing Aspirations Report finds that the average monthly student debt payment for renters who hope to buy a home int he next year is $388. Figuring on spending no more than 30 percent of their income on combined student debt and housing, the maximum priced home they could afford would be $269,400 which represents 52.3 percent of the homes nationwide that are for sale.

Conversely, if they had no student debt they could afford a hoe worth $361,00 which is 66.4 percent of the homes currently listed for sale.

Of course, in the Bay Area the numbers are much different where buyers with student debt can only afford 11.7 percent of the homes for sale.

Nationwide, 33.9 percent of renters who say they are planning to buy a home have some form of student debt.

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Looking to buy in a metro area? Think Pittsburgh…

A new report from HSH.com combines the National Association of Realtors’s quarterly home price data with local property tax and homeowner’s insurance numbers to come up with the income needed to buy a median-priced home in the market.

The most affordable:

  • Pittsburgh: Salary needed – $38,880
  • Oklahoma City: Salary needed – $40,917
  • Cleveland: Salary needed – $40,997

The east affordable:

  • San Jose: Salary needed – $256,877
  • San Francisco: Salary needed – $200,025
  • San Diego: Salary needed – $132,420
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Real Estate Investing: The Pros

With the craziness of the real estate market, this might be a good time to consider real estate investment, i.e., where the property generates income instead of being a primary residence,

  1. Cash flow from rents: Higher rents these days are generally greater than mortgage payments.
  2. Long-term security: Real estate appreciation (see below) should bring in a guaranteed cash flow for years to come.
  3. Appreciation: Real estate properties are considered one of the most reliable sources of renewable capital as they tend to increase in value over time.
  4. Hedge against inflation: As inflation occurs the property’s value and rental income will also increase. However, the mortgage will remain the same.
  5. Tax benefits: Rental payments are not subjected to self-employment taxes and there may be other benefits such as depreciation and lower tax rates.
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Old Home vs. New Home

Old home pros:

  • Charm
  • Less expensive
  • Larger lots
  • Mature landscaping
  • Lower property tax

Old home cons:

  • Expensive to maintain
  • Old appliances
  • Fewer amenities

New home pros:

  • Modern amenities
  • Warranty from builder

New home cons:

  • More expensive, higher property tax
  • Shoddy workmanship
  • Poor landscaping
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Saving for a down payment? Better start now…

In the last 20 years home values have gown nearly twice as fast as incomes: 98.6 percent for home, 52.6 percent for incomes. Not surprisingly then it is it taking longer and longer to save that 20 percent down payment.

These days it takes an average of 7 years to save for a down payment. This is undoubtedly why only 43 percent of would-be buyers say they using savings exclusively for down payments. The majority of buyers rely on other sources of money such as the sale of a previous home or gifts from family and friends.

To put things in perspective, the median household income is $118, 061 for the median price for a home is now $1,287,600 meaning it would take 22 years to come up with a 20 percent down payment!

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Real Estate Trends for 2019

Sure there are still two months left in 2018 but it’s not too early to look at some general trends that happening now and will likely continue in the new year.

  • Millennials are buying: According to Inc Magazine 66 percent of first-time buyers are millennials and this percentage should only grow as time goes by.
  • Baby Boomers are selling; As the baby boomer generation ages, many of them are retiring, selling their homes, and moving to lifestyle communities or apartment complexes.
  • More prefab homes: Offsite fabrication is both cost effective and efficient and growing in demand as property development focuses on functionality and sustainability.
  • Drones used in selling: At last, sellers can provide potential buyers with a full 360-degree view of their property.
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Housing inventory ready to rise?

While housing inventory continued to decrease – down 0.2 percent in the last year – analysts say a turnaround may be coming with up to 8 percent increase in new listings, which would be the largest jump since 2013.

Larger cities are already seeing an in crease in listings with San Jose, Calif.; Seattle; Jacksonville, Fla.; San Diego; and San Francisco posting increases of 31 percent or more.

With inventory still low, houses are continuing to sell at a rapid pace with the average time on the market in the U.S. at 65 days. In the Bay Area, of course, houses sell at a much more rapid rate.

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At least 670 new home coming to Richmond … eventually

The Richmond city council has voted to allow six qualified developers to submit a request for proposal in the coming months for the desirable Point Molate site. Long a point of controversy, the city of Richmond reached an agreement with a Native American tribe that had wanted to build a casino on the site that calls for 70 percent of the 413 acres to be kept as open space as well as preserving buildings in the Winehaven Historic District.

To add to the complexity, the area currently has no water or electricity so a fair amount of infrastructure work must be completed before actual development can begin.

Needless to say, considerable work remains to be done before these 670 homes will be completed. But it’s a start.

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