Housing outlook brightens despite higher rates – USA TODAY

The housing market is expected to pick up moderately next year on steady job and income growth and an easing supply crunch, but rising mortgage rates are likely to temper the gains, economists say.

The “X” factor is President-elect Donald Trump. Some of his proposed policies could juice home sales and starts more than anticipated while others may constrain the market.

“We think 2017 is going to be another solid year” for housing, says Ralph McLaughlin, chief economist of real estate research firm Trulia. “But homebuyers will continue to face headwinds.”

Among the chief stumbling blocks is the rise in mortgage rates. Since late October, the average 30-year rate has climbed from 3.47% to 4.32%, boosting the monthly payment on a $200,000 mortgage by $97. Yun estimates the rate will increase to about 4.6% by the end of 2017, adding an another $34 to that monthly mortgage check.

Rates are rising in anticipation of higher inflation under Trump’s fiscal stimulus plan and faster interest rate hikes by the Federal Reserve.

McLaughlin notes that with rents soaring in recent years, owning a home is still a far better deal than renting in most of the country. But as mortgage rates edge higher, Yun says some low- and moderate-income buyers will no longer qualify for a loan.

“People at the margins (will be) priced out,” he says. He estimates the increase in rates over the next year will mean 400,000 fewer home sales than if borrowing costs were flat.

Kendall Walker, a real estate agent at Redfin in Northern Virginia, says she hasn’t yet seen customers ditch their house hunts because of higher rates. But she adds, “We’ve had some buyers come down in price” to offset the bigger mortgage burden, reducing the size of their dream homes by as much as 30%.

Fortunately, Yun says, steady job and pay gains will result in an overall pickup in home sales in 2017. Many economists expect current average annual earnings growth of 2.5% to approach 3% by the end of next year as the low, 4.6% unemployment rate forces employers to bid up for workers.

Another positive development is the prospect of somewhat more ample supplies. There was a four-month inventory of homes nationally in November, according to the Realtors group, well below a healthy six-month stockpile. That has crimped sales and pushed up prices, which have risen 5% to 6% the past couple of years.

One reason for the meager inventory: the housing crash left many homeowners owing more on their mortgages than their homes were worth. Some have hesitated to unload their units until they realize bigger equity gains, McLaughlin says. Also, many investors snapped up cheap homes during the crisis and rented them out, leaving fewer on the market.

But as a result of rising prices, the share of homeowners who are “seriously underwater” fell to 10.8% in the third quarter from 29% in 2012, according to ATTOM Data Solutions and RealtyTrac. Higher home values also have prodded more investors to sell their units, a trend McLaughlin expects to continue.

Meanwhile, home builders are expected to respond to the tight supplies by putting up more houses. Housing starts are estimated to increase 10% from 1.18 million this year to about 1.3 million in 2017, according to a survey of 53 economists by Blue Chip economic Indicators. That’s not too far from the 1.5 million deemed normal and well above the roughly 400,000 bottom in 2010. Yun says single-family home construction will drive the gains.

As the fresh supplies hit the market, he predicts the current four-month inventory of existing homes will increase to five months by midyear, helping moderate annual home price gains from 5.5% this year to about 4% in 2017.

That would still outpace wage growth for many Millennial first-time homebuyers, a group that also will be particularly squeezed by higher mortgage rates. Yet Yun says many Millennials are likely itching to move out of their parents’ homes and settle down after postponing marriage and families for several years. He predicts the share of homes bought by first-time buyers will rise from 32% in November to 35% next year – still below a normal 40%.

Trump’s policies are a wild card. His tax cuts could put more money in buyers’ pockets and goose demand, Goldman Sachs says. And his proposal to lift some financial regulations could make it easier for some consumers to obtain mortgages, McLaughlin says.

But his proposed restrictions on immigration may curtail population growth and dampen housing demand while exacerbating a construction worker shortage that’s already constraining housing starts, Goldman and McLaughlin say.


Realtor.com® 2017 National Housing Forecast

  • Realtor.com® Forecasts Post-Election Economy to Result in Higher Mortgage Rates
    While Housing Delivers Slower Gains in 2017
  • Phoenix housing market predicted to be No. 1 out of 100 local metro forecasts

The 2017 housing market will be a year of slowing, yet moderate growth, set against the backdrop of a changing composition of home buyers and a post-election interest rate jump that could potentially price some first-timers out of the market, according to the realtor.com® 2017 housing forecast released today.

The report also predicts the top five housing trends of 2017, as well as home prices and sales for the 100 largest metros in the U.S.

2017 National Housing Forecast
The 2017 national real estate market is predicted to slow compared to the last two years, across the majority of economic indicators. Home prices are anticipated to increase 3.9 percent and existing home sales are forecasted to increase 1.9 percent to 5.46 million homes. Interest rates are expected to reach 4.5 percent due to higher expectations for inflationary pressure in the year ahead.

Realtor.com® is forecasting the homeownership rate will stabilize at 63.5 percent after bottoming at 62.9 percent in 2016. New home sales are expected to grow 10 percent, while new home starts are expected to increase 3 percent. The forecast is based on GDP growth of 2.1 percent, a 2.5 percent increase in the consumer price index and unemployment declining to 4.7 percent by the end of the year.

Prior to this month’s election, demographics and an improving economy were laying the foundation for a substantial increase in first-time buyers in 2017, but due to mortgage rate increases over the last few weeks realtor.com® predicts first timers will face new hurdles as they navigate the qualification and buying process. These higher rates are associated with anticipation of stronger economic and wage growth next year, both of which favor buyers. However, higher rates will make qualifying for a mortgage and finding affordable inventory more challenging.

“We don’t expect the outcome of the election to have a direct impact on the health of the housing market or economy as we close out 2016. However, the 40 basis points increase in rates in the days following the election has caused us to increase our interest rate prediction for next year,” said Jonathan Smoke, chief economist for realtor.com®. “With more than 95 percent of first-time home buyers dependent on financing their home purchase, and a majority of first-time buyers reporting one or more financial challenges, the uptick we’ve already seen may price some first-timers out of the market.”

Top Housing Trends for 2017
Next year’s predicted slowing price and sales growth, increasing interest rates and changing buyer demographics are setting the stage for five key housing trends:

1. Millennials and boomers will dominate the market –– Next year, the housing market will be in the middle of two massive demographic waves, millennials and baby boomers – that will power demand for at least the next 10 years. Although increasing interest rates have prompted realtor.com® to lower its prediction of millennial market share to 33 percent of the buyer pool; millennials and baby boomers will still comprise the majority of the market. Baby boomers are expected to make up 30 percent of buyers in 2017 and given they’re less dependent on financing, they are anticipated to be more successful when it comes to closing.

2. Midwestern cities will continue to be hotbeds for millennials – Midwestern cities are anticipated to continue to beat the national average in millennial purchase market share in 2017 with Madison, Wis.; Columbus, Ohio; Omaha, Neb.; Des Moines, Iowa; and Minneapolis, leading the pack. This year, average millennial market share in these markets is 42 percent, far higher than the U.S. average of 38 percent. With strong affordability in 15 of the 19 largest Midwestern markets, realtor.com® expects this trend to continue in 2017 even as interest rates increase.

3. Slowing price appreciation – Nationally, home prices are forecast to slow to 3.9 percent growth year over year, from an estimated 4.9 percent in 2016. Of the top 100 largest metros in the country, 26 markets are expected to see price acceleration of 1 percent point or more with Greensboro-High Point, N.C.; Akron, Ohio; and Baltimore-Columbia-Towson, Md., experiencing the largest gains. Likewise, 46 markets are expected to see a slowdown in price growth of 1 percent or more with Lakeland-Winter Haven, Fla., Durham-Chapel Hill, N.C.; and Jackson, Miss., undergoing the biggest shift to slower price appreciation.

4. Fewer homes on the market and fast moving markets – Inventory is currently down an average of 11 percent in the top 100 metros in the U.S. The conditions that are limiting home supply are not expected to change in 2017. Median age of inventory is currently 68 days in the top 100 metros, which is 14 percent – or 11 days – faster than U.S. overall.

5. Western cities will continue to lead the nation in prices and sales – Western metros in the U.S. are forecast to see a price increase of 5.8 percent and sales increase of 4.7 percent, much higher than the U.S. overall. These markets also dominate the ranking of the realtor.com® 2017 top housing markets, making up five of the top 10 markets on the list (Los Angeles, Sacramento and Riverside, Calif., Tucson, Ariz., and Portland, Ore.) and 11 of the top 25 (Colorado Springs, Colo.; San Diego; Salt Lake City; Provo-Orem, Utah; Seattle. and Oxnard-Thousand Oaks-Ventura, Calif.)

Top 2017 Housing Markets
Despite a more moderate housing market overall in 2017, strong local economies and population growth will continue to fuel the nation’s hottest markets. The realtor.com® 2017 top 10 housing markets based on price and sales gains are: 1. Phoenix-Mesa-Scottsdale, Ariz.; 2. Los Angeles-Long Beach-Anaheim, Calif.; 3. Boston-Cambridge-Newton, Mass.-N.H.; 4. Sacramento–Roseville–Arden-Arcade, Calif.; 5. Riverside-San Bernardino-Ontario, Calif.; 6. Jacksonville, Fla.; 7. Orlando-Kissimmee-Sanford, Fla.; 8. Raleigh, N.C.; 9. Tucson, Ariz.; and 10. Portland-Vancouver-Hillsboro, Ore.-Wash.


These top 10 markets are forecast to see average price gains of 5.8 percent and sales growth of 6.3 percent, exceeding next year’s anticipated national growth of 3.9 percent and 1.9 percent, respectively. But when compared to last year, prices in eight of the top 10 markets are expected to decelerate with only Los Angeles and Tucson, Ariz. showing stronger growth than last year. Other commonalities among the top 10 housing markets include: relatively affordable rental prices, low unemployment, large populations of millennials and baby boomers, as well as a high number of listing views on realtor.com®.

See Table 1 for the ranking of the top 100 largest metros in the U.S., as well as their price and sales forecasts.

6 of the Nation’s Friendliest Towns

Daily Real Estate News | Friday, December 21, 2012

Forbes partnered with Nextdoor.com, a social network for neighborhoods, to determine the friendliest towns in America. A total of 500 towns with populations between 5,500 and 150,000 were included in the study and ranked on the percentage of owner-occupied homes, crime rate, charitable giving, and percentage of college graduates. Studies have shown home ownership can increase neighborhood stability and college-educated people have been found to display more civic engagement.

The following towns emerged as the top 6 friendliest towns in the nation, according to the study:

  1. Sammamish, Wash.: a Seattle suburb where nearly 90 percent of households own their own homes.
  2. Orinda, Calif.: Just outside of Oakland, this suburb boasts a 92 percent of owner-occupied units.
  3. Fishers, Ind.: This town has a very low crime rate and year-round community activities.
  4. Seal Beach, Calif.: An “Orange County seaside enclave” in which about 75 percent of residents own their homes.
  5. Westerville, Ohio: A Columbus suburb boasts about 40 parks, and a very low crime rate.
  6. Frisco, Texas: Fast-growing suburb in which the population has grown from 40,000 to 120,000 since 2000 and 80 percent of its risdents own their homes.

Find out what other towns made the friendliest list at Forbes. 

Fannie: Housing Market Staying Resilient

Daily Real Estate News | Friday, December 21, 2012

Economic activity turned sluggish in the fourth quarter as uncertainties loom over the fiscal cliff, restraining consumer and business confidence, according to Fannie Mae’s Economic & Strategic Research Group. Still, the housing market is staying resilient, researchers note.

“With data pointing to soft economic conditions and the fiscal policy debate hanging in the balance, we expect growth in the current quarter to moderate from the pace seen last quarter,” says Doug Duncan, Fannie Mae’s chief economist. “On the bright side, the housing market has stayed resilient and continues to show signs of a strong, sustained recovery. Mortgage rates remain close to historic lows and home sales and home prices are trending positively. For the first time since 2005, residential investment is poised to contribute to annual economic growth this year, albeit on a small scale.”

Housing and mortgage activity is expected to gain momentum in the new year, Duncan says. Fannie Mae forecasts that home sales will increase by 8 percent in 2013, after a projected 10 percent increase this year.

“Although home prices have dipped during the seasonally weak fall and winter seasons, year-over-year gains have strengthened significantly above 2011 levels, and we expect that trend to continue in coming years,” Duncan says.

Source: “Fannie Mae: Fiscal Cliff Remains Key Risk Factor to Near-Term Growth,” RISMedia (Dec. 20, 2012)

The Future of TV Is the Internet: Roku CEO

Anthony Wood, CEO of Roku, explains how his set top player allows viewers to stream their choice of media, and weighs in on the future of streaming television.

Most television will be streamed over the Internet in the coming years, said Anthony Wood, CEO of Roku, maker of the streaming TV device of the same name.

The question is how Internet-delivered content will get to your TV and who will deliver it, Wood told CNBC’s Squawk on the Street. Right now, set-top devices like Roku and Apple TV and Internet-enabled Smart TVs are best positioned to take advantage of the sea change, said Wood.

“Those are the two ways that most people are going to be watching television that’s distributed over the Internet,” said Wood.

In the set-top battle, Roku and Apple are neck and neck right now. The two devices account for roughly 90 percent of the stream-to-television market. As of April, Roku had sold about 3 million Roku players since the company was founded in 2002. The rest of 2012 has been positive, said Wood.

“We were selling a Roku every second on Black Friday. We’re having our best quarter ever this year, and the platform is doing really well,” he said.

Stream-to-television devices currently have an advantage over Smart TVs, said Wood. Whereas most Smart TVs deliver a few marquee services, such as Netflix and Hulu, Roku gives customers access to nearly 700 streaming channels, according to the company.

However, the lines between Roku and its Smart TV competition could begin to blur. A number of Roku-ready televisions will debut at CES, the preeminent technology trade show, this January.

“We think there’s a huge opportunity to expand our platform from streaming players, where we’re a leader today, into TVs,” said Wood.

While Wood believes that the future of television is on the Internet, he said it will be some time before consumers give up the bundled services offered by cable and satellite providers. But as these the incumbents face competition from streaming services, he said they may begin to offer more options and cheaper services.

The next generation, he says, is a virtual MSO, or multiple system operator. Such a system would combine on-demand services such as Netflix and Hulu with traditional subscription fee service for programmed TV — all via the Internet, rather than cable or satellite.

“That’s the big question. I think that’s coming, but whether it’s next year or not we’ll have to see,” said Wood.source cnbc

Cost of Raising a Child Up to $235K—Before College

With a husband working strictly on sales commission in a down economy, money has been tight for several years now for Laura Sowa. The Nashville woman works hard to keep things as normal as possible for her two daughters, but these days “normal” is being redefined. This hit home for Sowa recently as she listened to the girls playing “shopping trip” in the next room.

“It’s so funny,” Sowa says. “Samantha will tell Emily, ‘No, you can’t buy that today. It’s not on sale.’ Then Samantha will make coupons for Emily to use and say, ‘Now you can buy it.’ They both know you never pay full price for anything.”

Child’s play mimicking real life—mom is an inveterate coupon-cutter, bargain hunter and all-around economizer. Times are tough for millions of families like the Sowas, and the cost of raising kids just keeps going up.

According to the latest statistics released by the U.S. Department of Agriculture, parents will spend an average of $235,000 to raise a child born in 2011 to the age of 17. (And that’s not taking into account any savings for college).

Housing, food, clothing, health care, child care, schooling … the list of compulsory expenses goes on and on. Discretionary spending such as family vacations, birthday gifts, music lessons and the like are mostly extra.

Couple this whopping $235,000 with the recent, sudden downturn in the American economy, and families are facing challenges unseen in generations.

“It does give some people pause,” says Dr. Joyce Cavanagh, a family economics specialist and associate professor with the Texas A&M AgriLife Extension in College Station. “Every year when this study comes out, there are people who think, ‘Whoa, that’s a lot of money. What are we getting ourselves into?'”

The numbers in the USDA’s report are eye-opening.

The $235,000 figure is an average. For the lowest income groups, raising a child will cost about $212,000. For the highest earners, the number shoots up to $490,000.

The greatest share of these expenses is housing, which is 30 percent of the total. It’s followed closely by child care and education at 18 percent and food at 16 percent.

“Because of the economic insecurity of life today, there are some tough trade-offs that families are having to make,” says Ellen Galinsky, president of the Families and Work Institute in New York City. “These aren’t luxury trade-offs, like not getting the fanciest strollers. These are food and ‘who’s going to stay with my child’ issues for so many families.”

Indeed, who is going to stay with the kids is one of the biggest financial hurdles parents face. In 1961, when the USDA’s Expenditures on Children by Families report was first issued, child care and education costs amounted to only 2 percent of the overall cost. Today, that number stands at 18 percent.

Rebecca Sutton of Belvidere, N.J., has two sons—Landon, 4, and Brody, 4 months—with her partner, Jared Coffin. When the couple found out they were having a second child, they started doing the math and the result shocked them.

“Our day care expense for just our older son was over $1,000 a month,” Sutton says. “If we had put our younger son in day care as well, it would have been about $2,200 a month. That was more than our mortgage payment.”

The couple knew they couldn’t afford it and made a tough choice. Sutton returned to her job as an online marketing manager while Coffin, an electrician by trade, quit his full-time job in order to stay home with the kids. He picks up side work here and there, but being a dad is his primary focus.

“He’s really getting into his groove now,” says Sutton. “He’s enjoying spending time with both kids.”

For much of the past decade, Josh Bevington was living the high life. A successful real estate agent in one of the hottest markets in the nation, he whipped around town from open houses to closing transactions. He had a thick portfolio of clients and was helping buy and sell dream homes in southwest Florida.

But in 2008, the American economy began to struggle; the bottom dropped out of the housing market and few places were harder hit than the Gulf Coast of Florida.

“We would joke around the office that we were working twice as hard for half as much,” Bevington recalls. “The membership at the local board of realtors decreased by half as a lot of agents got out of the business.”

As the market constricted, so did Bevington’s family finances. With three young children at home, Josh’s wife, Caroline, tried to return to full-time work as a pediatric physical therapist. But money woes had hit local hospitals and the hours weren’t there.

So Josh and Caroline sat down with their household budget and began making tough decisions. Gym memberships? Canceled. A treadmill? Sold online for extra cash. Running outside was free. Old cars were kept longer than planned. Friends and family helped out with baby-sitting.

Financial experts say the Bevingtons took the right steps when money issues appeared.

“That’s one of the bright spots of these hard economic times,” Cavanagh says. “We have seen more families developing a budget or a spending plan. That’s a first step—to become more aware of how they are spending money.”


From there, it’s a simple next step to identify the areas where money is being wasted or the areas where one can cut back without too much sacrifice.

Finally, if circumstances require it, families can move on to making more serious cuts, reducing food and clothing budgets, moving to a less expensive home, even selling a car and taking public transportation. Painful, but often necessary.

“After we found out we were having a second son, we knew we couldn’t stay where we were living,” Sutton recalls. “The cost of living was way too high. Our house was too small and we wouldn’t have been able to upgrade, the housing market was too expensive.”

So Sutton and her family packed up their home in Maple Shade, N.J., and moved two hours away—closer to family and to a home owned by Sutton’s parents.

Every family needs to find their own balance—the amount of belt-tightening they can live with while still giving the kids everything they need.

“I operate on a zero weekly budget,” Laura Sowa says. “The only money I spend during the week is for gas or groceries.”

And she means it.

Sowa never dashes into a restaurant to grab a quick lunch or dinner. Rather, she keeps a picnic blanket in her car along with packed lunches so she and the girls can stop at a park or the library to eat. She pores over local magazines looking for free things to do with the kids at area attractions, museums and bookstores.

When it comes to shopping, Sowa is a coupon queen. Each week, she goes through the supermarket flyers to see what’s on sale. Then she plans the family’s meals based on what bargains she can get. She estimates she cuts at least 30 percent off her grocery bill each week, sometimes more.

“When I get it up to 40 or 45 percent, I’m pretty proud. I make a call to my husband and tell him how much we saved,” Sowa says with a laugh.

“We have seen an incredible rise in the number of people using coupons,” says Cavanagh. “A dollar here and 50 cents there really does add up over the course of a year.”

There are other keys to Sowa’s frugalness.

Special activities such as camps or lessons for the girls often go on Christmas and birthday lists and are given as gifts by grandparents. Sowa never buys any clothing new. All of the girls’ clothes are either hand-me-downs from older cousins or items purchased at consignment shops. Sowa keeps tubs in the attic of their home, labeled by size and season. Shirts, pants, dresses, jackets—they all sit there waiting to be called into action. When they are being worn, Sowa takes fastidious care of them until the girls outgrow them.

“I do a lot of soaking,” she says. “I soak them in detergent to get any stains out and then they go back to consignment. I press them and hang them and price them and off they go.”

The money made selling items on consignment goes toward new things the family needs. It’s a never-ending loop.

While times have been tight for many families with children like the Bevingtons and Sowas, valuable lessons have been learned. Lessons about budgeting. Lessons about making do with less. Lessons about what one really needs in life to be happy.

For Josh Bevington, the downturn in his real estate business brought some hardship, but also something of immeasurable value.

“It was a blessing in disguise. I had been working way too much, working 80 hours a week,” Bevington says. “I was able to step back and realize that my priorities were out of whack. I started going to church. I started spending time with the kids. I’m coaching. I’m taking an active part in their lives.”

Despite what the statistics say, it turns out that the high cost of raising kids isn’t always as expensive as many believe.

“What we think our children need and what children actually need can be quite different sometimes,” says Galinsky. “Don’t think it’s always something you have to purchase for your child or something you have to schedule for them. The time spent with you—taking a walk, looking at leaves falling—will be something they will remember forever.”

Cutting the cost

Sometimes circumstances dictate that we cut back to the bare minimum. Here are nine things to consider when you have to stretch your budget.

1.Don’t buy a top-of-the-line stroller.

2.Cut your child’s hair.

3.Find free entertainment at parks, libraries, restaurants.

4.Keep birthday parties simple — at home, games, cake, presents, done.

5.Handle pre-school at home.

6.Shift hours instead of opting for expensive childcare.

7.Look (but don’t buy) in stores, then purchase online.

8.Shop bargain racks, consignment stores and garage sales.

9.Pack lunches, buy in bulk, and consider making food from scratch. source: usa today