Trends For 2017 from Realtor.com

Trend No. 1: Microapartments are the tiny homes of cities

Everyone knows space doesn’t come cheap in the country’s most expensive cities. (We’re looking at you, San Francisco and New York.) Hence the spread of microapartments—fully appointed living spaces encompassing a measly 250 to 365 square feet.

The apartments are tinier than tiny houses—measuring a quarter to a third the size of the median apartment in a newly completed building with five or more units in 2013, according to the U.S. Census Bureau.

More and more of these miniature dwellings are cropping up in big cities like New York, Seattle, and Los Angeles. They’re even spreading to smaller metros like Providence, RI.

What they lack in size, microapartments make up for in lower costs—usually. They typically run renters about 15% less than studio units in the same neighborhoods. But residents may wind up paying a little extra for the luxe amenities that many come with, like convertible furniture, free Wi-Fi, weekly housekeeping service, and sometimes even communal activities (whitewater rafting trips! happy hours!).

Trend No. 2: Co-living is coming to a city near you

The days of finding roommates on Craigslist and then praying for the best may be numbered. Co-living, a movement in which young professionals have their next housemates/BFFs carefully screened and live together in upscale, highly planned (would-be) harmony, is making its impact felt in major metros across the U.S.

The real draw for these “Real World”-esque quarters is the communal environment, where residents pay a little extra to mix and mingle with one another at Sunday artisanal potluck dinners, weekend art workshops, or various common spaces in the building. Other perks include shorter leases (some only three or six months) as well as housekeeping services to minimize disputes.

The spaces have been opening first in hipster-filled urban areas such as Brooklyn, NY; San Francisco; and Washington, DC. But they are also moving to smaller metros like Chattanooga, TN.

“It’s a neat, innovative market response to the higher cost of renting,” Susan Wachter, a real estate and finance professor at the Wharton School at the University of Pennsylvania, told realtor.com.

Trend No. 3: The hottest tiny houses are school buses

School bus loft

It’s a loft on wheels. And just look at that view! Don’t worry about the seat belts.

The tiny-house craze isn’t exactly new. With a half-dozen or so reality TV shows and a devoted following, the trend of downsizing into just a few hundred square feet is familiar to just about everyone. But why move into a tiny house when you could live in a school bus instead?

Trend No. 4: Housing prices are out of control, so why not live in a yurt?

With rents and home prices zooming ever higher, affordable housing seems like a fantasy. That’s where yurts come in.

These circular homes, which have sheltered Mongolian nomads for thousands of years, can cost quite a bit less than more traditional homes. (A roughly 700-square-foot model with a wooden frame and vinyl walls could go for around $20,000. That doesn’t include the foundation and utilities hookups.)

That’s a prime reason why over the past few years, sales of the structures have grown by about 10% annually at the Colorado Yurt Co., Ivy Fife, the company’s marketing manager, told realtor.com.

“We’ve seen quite a few retirees buy a piece of ground and put a yurt on it and get out of debt and have a little bit more freedom,” she said.

Working With Millennials

Tips and Hacks to Working With the New Buyers
Millennials represent the largest population tranche since the Baby Boomers. The Millennial population is entering their early 20s to late 30s.

Technology is not technology to them. They have never experienced life without it.

Social Media is to them what TV was to us. Information is what they have for breakfast.

According to the National Association of REALTORS® 2016 Home Buyer and Seller Generational Trends report, 89% of Millennials are chose to use a real estate professional in their home search last year.

1. Information is a commodity. Agents will need to brand themselves beyond the gatekeeper function.

In order to establish a relationship with Millennials, you will need to be able to help them navigate the marketplace in areas such as credit scores, neighborhoods, ways to help them identify the down payment they will need, and so on. They will need to know the various processes and professionals they will need to interface with: attorneys, mortgage officers, title officers, builders, developers, appraisers, inspectors, and others.

2. Authentic connections beat age.
Today information has really leveled the playing field. Whereas age might have offered an advantage in terms of experience, information and assets, today’s Millennial makes on average over $70,000 a year. And though they may have some student loan debt, they also have access to capital in the form of gifts or loans from parents or grandparents.

Agents should consider their role as one of a collaborator, looking to identify the right fit with the right finances.

3. Experience and trust become a one-two punch.
Buying a home is a big emotional hurdle.

Making an offer is quite intimidating, especially within markets that are very thin on inventory. Providing a ‘checklist’ of do’s and don’ts is critical to their peace of mind and a successful transaction.

Agents need to consider the unfamiliarity with the sales process and uncertainty attached to the part of real estate that makes it somewhat of a card game.

Probably the biggest hurdle is the 20% down requirement.

Here is where your backstory can really help them to see the finish line: you can relate to them a number of situations in which you have helped buyers achieve their objective by exploring the options not typically discussed.

4. Match their preferred form of communication.
It is common knowledge that most Millennials prefer to text; and if that is not the case with your buyers, find out. Ask them.

Some like email. A phone call is usually not the norm.

A Millennial also communicates well in person.

5. Another communication tip: don’t assume they don’t understand.
After you have taken the time to ‘educate them,’ give them the benefit of the doubt when explaining the details. Listen for their response. Then recap what you told them by fleshing out the next steps.

Housing Starts Beat Forecasts

U.S. builders broke ground on more U.S. homes than forecast in December, representing the seventh straight yearly increase, according to a report issued from the Commerce Department.

Fast Stats

■ Housing starts increased by 11.3% to a 1.23 million annualized rate

■ The annualized forecast was for 1.19 million starts, revised up from a 1.10 million pace

■ Permits for single-family homes rose 4.7%

■ Permits for multifamily homes declined 9%

■ Starts rose from prior month in three of four U.S. regions; construction in the South was the only region in which there was a decline

■ For 2016, there were a total of 1.17 million starts, up from 1.11 million from 2015 and the most since 2007

■ Single-family starts declined by 4% to 795,000 rate

■ Multifamily construction jumped 57.3% to 431,000

■ According to the U.S. Commerce Report, builder confidence is close to an 11-year high

■ The housing starts is seen as being held back due to a shortage of skilled workers and available ready-to-build lots

This report focusing on residential construction for the close of 2016 is seen as a sign that the industry will continue to move in a positive direction for 2017.

2016 Average American Finances

A Financial Snapshot of the Average American

American Earnings
The average American household income was $65,751 in 2015 according to the IRS. If this calculation is correct, we can expect to see that the U.S. median wage growth in 2015 and 2016 will come in at about 3% to 4%, respectively, translating into an average household income in 2016 of about $70,400.

American Debt
A recent article by the financial website NerdWallet calculated that the average household owes a total of $132,529, which includes all credit card, mortgage, auto loan, student loan, and other types of debt.

Americans are on track to surpass the amount owed at the beginning of the great recession by the end of 2016.

Other Stats

+ The average household with credit card debt pays nearly $1,300 in interest per year.

+ The average American with a 401(k) has $96,288 saved in their account.

+ The average 65-year-old can expect to withdraw just over $8,000 from their 401(k) each year if they want their money to last throughout their retirement.

+ The average personal savings rate in the United States as of Oct. 2016 is 6%.

+ This is a significant improvement from 2005, when the personal savings rate hit a low of 1.9%.

+ The 6% rate is nowhere near enough.

+ It is recommended that we save between 10% to 15% of your income.

The World of Homeownership

Owning a home is a big responsibility that comes with great rewards. Budgeting is important, so plan for sudden expenses that may arise in addition to your regular monthly expenses.

+ Property taxes and special assessments

+ Home/hazard insurance

+ Property maintenance

But before you can consider the Big “B” (Buy), it will require another Big “B,” which stands for Budget.

So the day you decide that you want to buy a home is a big day in anyone’s life. It is a good decision, but one that will involve a degree of effort, risk, education and endurance in order to bring you to that dream home and then keep it.

Budget

+ What is your current budget?

+ What additional expenses will you be expected to pay on a monthly basis?

+ What about a budget for unexpected expenses?

+ The first step necessary to take after you figure out your present budget is to estimate what your mortgage payment will be. This is where you can take advantage of some of the resources available to you online, especially if you live in New Jersey.

Affordability Calculator

The affordability calculator will help you to determine how much house you can afford. The calculator tests your entries against mortgage industry standards to determine the highest priced house you can qualify for, along with the down and monthly payments you would need to make in order to sustain homeownership. http://www.njrealtor.com/consumers/affordability-calculator/

Know Your Credit History

It’s no secret. Your credit history is an important factor that affects your ability to obtain a mortgage for the purchase of your home. Lenders want to see how you borrowed and repaid money in the past. This is reflected in your FICO score. FICO scores range from 300 to 850, and lenders believe that borrowers with higher scores are more likely to repay their loan. Homebuyers should obtain a copy of their credit report by contacting www.annualcreditreport.com.

Answer these questions:

Am I better off renting?

How much home can I afford?

How much can I save in taxes?

What is my monthly spending plan?

Is it better to rent or buy?

MLK Camden Residence Preserved

According to an article in New Jersey Monthly, Martin Luther King Jr.’s Camden residence has been saved from demolition, thanks in large part to the efforts of local car salesman Patrick Duff, an amateur historian who documented the home’s historic significance.

King lived in the house from the end of 1948 to 1951, while attending Crozer Theological Seminary in Chester, Pennsylvania. His Camden residency had been all but forgotten until Duff, investigating a related matter, happened upon the legal complaint signed by King following a June 12, 1950, incident in nearby Maple Shade.

NJ DE and MD Top 2016 Foreclosure Rates

Foreclosures Fall Nationally

According to ATTOM Data Solutions, foreclosure filings on 933,045 fall 14% for U.S. properties for 2016 from 2015. This is the lowest level since 2006, when there were foreclosure filings on 717,522 U.S. properties.

The report found that that 0.70% of all U.S. housing units had at least one foreclosure filing in 2016, which is the lowest annual foreclosure rate nationwide since 2006, when that figure was 0.58% of housing units.

The new data for December 2016 show that there were 85,919 U.S. properties with foreclosure filings, which was down 1% from November 2016 and down 17% from 2015. December represented the 15th consecutive month with a year-over-year decrease in foreclosure activity.

A total of 379,437 U.S. properties were repossessed by lenders (REO) in 2016, down 16% from 2015 and down 64% from the peak of 1,050,500 in 2010 to the lowest level since 2006.

A total of 478,857 U.S. properties started the foreclosure process in 2016, down 16% from 2015 and down 78% from the peak of 2,139,005 foreclosure starts in 2009 to the lowest level since ATTOM began tracking foreclosure starts in 2006.

New Jersey, Delaware, Maryland post top state foreclosure rates in 2016

21 states and the District of Columbia posted a year-over-year increase in REOs in 2016, including Massachusetts +61%; Alabama +32%; New York 21%; Virginia +9%; and New Jersey +4%.

States with the highest foreclosure rates in 2016 were New Jersey 1.86% of housing units with a foreclosure filing); Delaware 1.51%; Maryland 1.37%; Florida 1.18%; and Illinois 1.10%.

Atlantic City, Trenton, Rockford post top metro foreclosure rates in 2016

Among 216 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rate in 2016 were Atlantic City, New Jersey 3.39% of housing units with a foreclosure filing; Trenton, New Jersey 2.16%; Rockford, Illinois 1.54%; Philadelphia 1.53%; and Lakeland-Winter Haven, Florida 1.46%.

Average time to foreclose jumps to new record high

+ U.S. properties foreclosed in the fourth quarter of 2016 had been in the foreclosure process an average of 803 days, a 29% jump from the previous quarter and a 27% increase from 2015 to the longest since ATTOM began tracking average foreclosure timelines in Q1 2007.

There were eight states where the average time to foreclose in the fourth quarter was more than 1,000 days: Utah (1,403); New Jersey (1,383); New York (1,283); Hawaii (1,220); Florida (1,186); Indiana (1,033); Illinois (1,024); and Pennsylvania (1,010).

Foreclosure activity increases in 12 states, 25 %of metro areas

12 states and the District of Columbia posted an increase in overall foreclosure activity in 2016 compared to 2015, including Delaware + 45%; Rhode Island +29%; Massachusetts +21%; Connecticut +21%; and Hawaii +20%.

Foreclosure starts increase in 15 states

15 states and the District of Columbia posted a year-over-year increase in foreclosure starts in 2016, including Delaware +37%; Connecticut +35%; Maine +30%; Rhode Island +26%; Arizona +15%; and Massachusetts +12%.

Howeowners Add $837 Billion in Total Equity

The real estate market has been gradually demonstrating that owning a home can be a smart way of creating significant wealth. Since 2011, home prices have been erasing many of the homes that have been under water due to the housing crisis of 2008-9.

According to Fanny Mae, during the first three quarters of 2016, howeowners across the nation saw a cumulative gain $837 billion in total equity.

This positive trend cuts two ways: firstly, homes are becoming more expensive, secondly, as interest rates creep higher from their historic lows, salaries and wages have not kept pace.

This is forcing Millennials to wait longer to make their first home purchase.

Certain states such as Nevada, Missouri and New Jersey are still finding it difficult to work-through all the homes that have negative equity or are in some stage of foreclosure.

Still, this is January, and we are three months from the threshold of the 2017 buying season. A lot could happen, but inventory remains very tight.

But there are still signs of optimism:

A survey released by the Associated General Contractors of America showed that 3 out of 4 U.S. construction firms expect to increase head count this year.

This means that new jobs are going to be created, and wages are expected to increase.

New Home Construction Eases

Home builders aren’t exactly closing out the year with more enthusiasm, despite a shortage of homes on the market.

According to the U.S. Commerce Department’s new residential sales report, permits to put up new residences fell in November. Permits issued were down 10.4% from October to November and fell approximately 0.9% from permits issued for November 2015.

In light of the blight of inventory available for sale, builder’s permits are considered an important component of calculating the kind of market the industry can expect in the months ahead. The Commerce Department’s report may forecast that first-time homebuyers especially will not receive a reprieve from the construction industry, at least for the time being. New construction has been at a flat line for some time now, most of which is the trepidation that many builders still remember from the crash of 2008.

The impact remains: not enough homes for sale and not enough homes for rent.

Still, industry professionals are not dour about future prospects, knowing that the health of the market requires the economic tensions such as shortages and higher mortgage rates, to provide fiscal stability.

It also makes sense that the construction industry normally slows down during the colder months, December–March.

New construction fell 28.4% from October 2016 and nearly 7.9% from November 2016. Not all the metrics within the report were negative: permits for single-family homes in November increased by 11.6% from 2015, but were down 9.4% from October 2016. The number of new homes that were completed in November also increased by 4.1% from October 2016 and 24.2% as compared with November 2015.

For some within the industry, this will translate into greater pent-up demand for spring 2017.

Scarcity is always a positive factor when selling into a market. Many within the industry are believing that the arrival of the new administration will also reduce the number of regulations, thus reducing overall costs of doing business.

Real Estate Market Steadies as Rates Increase

This is clearly a trend: higher rates. As rates for home-purchase loans rose for the ninth straight week, the industry continues to believe that the market is still strong enough to weather the increased costs.

According to mortgage finance provider Freddie Mac, the 30-year fixed-rate mortgage averaged 4.32% in the latest reporting week, which is up two basis points from the prior week.

It is only since November that rates have surged 85 basis points. The 15-year fixed-rate mortgage averaged 3.55% in the latest reporting period, which is up from 3.52%. These higher rates are also reflected in the increase of affordability, which is sure to impact first-time buyers.

With the present mortgage rate hikes, buyers will clearly look for ways to make a purchase work for them. Trying to time the purchase of a home based upon rates may not be the best strategy to employ, considering that a 20-basis-point jump in rates on a $200,000 home would add just $18 to the monthly mortgage cost.

More bad news for homebuyers comes in the form of a slowdown in new construction from builders recently. This will be covered in part two of this article.

In some cases, first-time homebuyers may reconsider where they want to buy that first piece of real estate. There are also other scenarios in which the buyers may look to purchase a two-family home in order to help with the mortgage payments.

Still higher trends in mortgages, affordability and home prices give the sense that the real estate market is rising a wave instead of sitting on a bubble, as many experienced back in 2006-08.

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