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Strategies for Aging in Place: Preparing for Tomorrow’s Housing Needs Today A REALTOR® University Speaker Series Presentation

Mon, 08/22/2016 - 15:39

America’s population is aging: in 2015, the 65 and over population accounted for about one in seven of the population; by 2030, this ratio will rise to one in five, and by 2060, the ratio will be nearly at one in four.[1] With aging as an inevitable process, what are the strategies and home features to plan for that makes the home safe and functional while remaining visually pleasant through the process?

At a REALTOR® University Speaker Series held recently[2], Marianne Cusato shared her insights on strategies that REALTORS® can use to help buyers or sellers choose or remodel homes that will enable their clients to age in place independently, safely, and comfortably. Ms. Cusato is Associate Professor at University of Notre Dame’s School of Architecture, Housing Expert for HomeAdvisor, a designer, author and lecturer in the fields of real estate trends and housing.

To listen to the webinar, click here.

Using data from her study for HomeAdvisor’s on Aging-in-Place Survey, Ms. Cusato noted that baby boomers entering or approaching retirement are preparing their homes or planning ahead when making a move to accommodate their later years. In fact, 56 percent of homeowners who hired a professional to do age-related remodeling work were under 65 years old.

The most common projects are as simple as lowering electrical switches, adding grab bars, and installing lever-handled doorknobs, to installing ramps to the entrance, widening doorways, and putting a bathroom and master bedrooms on the main floor.

With insights from HomeAdvisor’s Aging-in-Place Survey as backdrop, Ms. Cusato shared useful and beautiful home design tips for how REALTOR® can work with clients to meet their needs for both today and tomorrow.

  1. Look for designs for all ages (doors with lever handles, use of pull-out drawers, comfort height toilets)
  2. Discuss the timeline: plan for long-term needs while working on immediate retrofitting needs
  3. Understand the cost and set aside a budget. Home Advisor’s website provides a tool to estimate remodeling costs and to match clients with professionals
  4. Strategies for steps: plan for future placements of ramps and lifts and bathroom additions on the main floor
  5. Strategies for avoiding falls: use natural light, remove rugs and floor coverings that can cause tripping, install grab bars and plan ahead with blocking
  6. Kitchen strategies and food preparation: consider pull-out cabinets and retrofit for sit-down counters
  7. Strategies for ease of living: use sensor faucets, lever handles on doors, and remote control blinds
  8. Bridge the digital divide: consider home automation, energy monitoring and security systems
  9. Consider multi-generational housing: consider home designs like mother-in-law cottages, separate entries, and adaptable suites. Ms. Cusato’s website has home designs that are adaptable to a variety of lifestyles and for aging-in-place.[3]
  10. Plan for transportation needs and for working at home.


About the Speaker

Marianne Cusato is a designer, author and lecturer in the fields of real estate trends and housing. Ms. Cusato is the co-author of two books: The Just Right Home: Buying, Renting, Moving…or Just Dreaming–Find Your Perfect Match! and Get Your House Right, Architectural Elements to Use and Avoid. Ms. Cusato is renowned for her work on innovative housing solutions for disaster recovery: her 308 s.f. Katrina Cottage design won the Smithsonian Institute’s Cooper-Hewitt Design Museum’s 2006 “People’s Design Award.” She is a graduate of the University of Notre Dame School of Architecture.


About REALTOR® University Speaker Series

REALTOR® University provides on-line education on real estate and other topics at the MBA and undergraduate levels. The REALTOR® University Speaker Series provides a venue to learn about and stimulate discussion of economic and real estate issues in support of NAR’s mission as the Voice of Real Estate. The Speaker Series presentations can be accessed on this webpage.

[1] Source: U.. Census Bureau Table NP2014-T-3

[2] Held on August 10, 2016 at the NAR Washington D.C. Office

[3] See Marianne Cusato’s designs at!design/c83s

TRID: The Cost of a Better Experience

Thu, 08/18/2016 - 15:57

The implementation of the new Know Before You Owe or TRID rules were market my initial delays that have given way to relative calm. However, half of lenders surveyed in the 2nd quarter Survey of Mortgage Originators indicated that they increased fees to consumers to cover TRID related costs. Weighted by production volume those costs amounted to $258 on average.

What drove the costs? 71.4 percent of respondents cited investor demand or TRID policy and 57.1 percent cited a lack of regulatory clarity as cost drivers. Some reports suggest that lenders have had difficulty selling the loans they originate to investors, which has caused them to hold onto loans longer, resulting in higher costs. Despite frequent anecdotes, increased manual underwriting was only cited by 14.3 percent of respondents.

Looking to remediation, 42.9 percent indicated that neither clarity, investor changes, nor software changes would reduce costs over time. 28.6 of respondents felt that these changes would reduce costs, while an equal share was unsure.

While the TRID rules may result in higher fees from some lenders, the rules were intended to protect consumers and to streamline the old disclosure process. This benefit is not easy to quantify and costs are not insignificant, but they are not likely to impact sales as fees are often added to the mortgage balance, spreading the charge over the life of the loan.

Sales to First-Time Buyers: 33 Percent of Sales in June 2016

Mon, 08/15/2016 - 15:50

First-time homebuyers appear to be getting back into the market more strongly with interest rates moving down to new lows. First-time buyers accounted for 33 percent of residential sales in June 2016, up from the 30 percent share in May 2016 and one year ago (Chart 1), according to the June 2016 REALTORS® Confidence Index Survey Report ().1

The average contract rate on 30-year conventional mortgages has stayed below four percent since 2015 (except in July 2015), down to an average of 3.57 percent in June 2016 (Chart 2). The last time 30-year rates fell below four percent was in 2012 through the middle of 2013. Mortgage rates are an important consideration in deciding when to purchase a home, especially among first-time homebuyers. In 2015, 95 percent of first-time homebuyers obtained  mortgage financing and typically financed  94 percent of the purchase price.[2]

Despite the favorable interest rate environment, potential buyers are facing a challenge, with home prices rising faster than income growth, mainly because supply has not kept pace with demand (Chart 3). The low interest rate environment is lowering the monthly mortgage payment, but rising prices are also making it more difficult to save for a downpayment. As of May 2016, the median family income is up by 11 percent compared to the level in January 2012, while the median price of an existing-home is up by 56 percent over this same period.[3]

The approval of H.R. 3700, the “Housing Opportunity Through Modernization Act of 2016” by both the House of Representatives and the Senate is expected to help first-time buyers by increasing the access to FHA condominium financing. The new law addresses a number of restrictive conditions that have restricted access to condominium financing related to owner-occupancy requirements, the condominium re-certification process, mixed-use buildings, and private transfer fees.[4] Under the new regulation, condominiums that are 35 percent owner occupied are eligible for FHA-insured financing, a lower barrier than the current requirement of 50 percent.

[1] First-time buyers accounted for about 32 percent of all home buyers based on data from NAR’s 2015 Profile of Home Buyers and Sellers (HBS). The HBS is a survey of primary residence home buyers and does not capture investor purchases but does cover both existing and new home sales. The RCI Survey is a survey of REALTORS® about their transactions and captures purchases for investment purposes and second homes for existing homes.

[2] National Association of REALTORS® 2015 Profile of Homebuyers and Sellers

[3] NAR data used in calculating the Home Affordability Index.

[4]The bill, which was championed by NAR, passed  the House of Representatives 427-0 and the Senate under unanimous consent on July 14, 2016. The bill is on the way for the President’s signing. See

TRID, Brexit, or Something Else?: Delays Level Off

Fri, 08/12/2016 - 13:08

The average time-to-close, as measured by closed listings reported from MLSs, rose modestly in July relative to a year earlier. July’s 3-day delay was roughly in line with the 3.1 day delay averaged over the prior 3 months. The July reading tied April for the second lowest since October of 2015.

After falling sharply in March, delays have hovered in a relatively tight 3-day range. The July increase may reflect non-TRID related delays, though, as lenders noted an increase of non-TRID delays in the second quarter Survey of Mortgage Originators from 1.5 percent to 3.7 percent as well as rate extensions as a result of Brexit. Brexit related delays are likely to ease as the number of potential refinances burns out and seasonal volumes decline.

TRID or Know Before You Owe is a new set of rules governing the closing process. These rules are intended to help make consumers more aware of their financial liability, while streamlining the process.  The CFPB recently released a set of proposed changes to help clarify lenders’ and mortgage investors’ concerns. These changes may ease TRID related delays in the future as could clarity from the first wave of regulatory reviews under the new regime, greater concentration of production among TRID-proficient producers, vendor software improvements, and as demand from mortgage investors recovers.

Brexit: Lower Rates with Little Delays

Fri, 08/12/2016 - 11:39

Brexit, the vote by British citizens to leave the European Union, could have far reaching implications for international trade, but it could take several years to realize the full impact. In the near term, it means lower mortgage rates, stronger refinances, and improved affordability for home buyers.

For the 2nd quarter Survey of Mortgage Originators, lenders were asked whether Brexit had impacted their business. 14.3 percent noted more rate lock extensions, while twice that figure noted a shortage of appraisers to handle added volume. A majority 64.3 percent noted no issues and no respondents indicated delays.

The need for rate lock extensions is not clear. Higher settlement volumes relative to appraisers could create delays and the need for rate lock extensions. Likewise, a late rate lock extension could trigger re-disclosure of a loan estimate (LE) under TRID and a longer timeline just as decline in the APR of 0.125 percent or more would trigger re-disclosure of the closing disclosure (CD). Regardless, these limiters should ease with time as refinance volumes burnout and as the purchase market moderates through the fall.

Cap Rates Compress in REALTORS® CRE Markets In Q2.2016

Fri, 08/12/2016 - 11:18

Commercial real estate transactions span the price spectrum, but tend to be measured and reported based on size. While the majority of buildings (81 percent) are relatively small (small cap CRE), with the bulk of commercial space (71 percent) concentrated in larger buildings (large cap CRE), larger buildings account for the majority of sales. CRE deals at the higher end—$2.5 million and above—comprise a large share of investment sales, with transaction data readily available from several sources, including Real Capital Analytics (RCA).

Data for smaller transactions—$2.5 million and below—many of which are handled by REALTORS®, are less widely available. NAR’s Commercial Real Estate Market Trends gathers market information for small cap CRE properties and transactions.

In light of the global low-rate environment, investors have been searching for higher returns. U.S. commercial real estate continues to offer stronger yields, especially in rising smaller markets. Based on the latest NAR report on REALTORS® CRE markets, capitalization rates averaged 7.0 percent across all property types, a 50 basis point decline on a yearly basis. Apartments posted the lowest cap rate, at 6.5 percent, with Class A apartment transactions recording average cap rates of 6.2 percent. Office transactions witnessed average cap rates of 6.8 percent, with Class A properties posting yields of 6.5 percent. Hotel transactions registered caps of 7.0 percent, followed by retail properties, with cap rates averaging 7.1 percent. Industrial spaces posted average cap rates of 7.4 percent, with Class A properties commanding yields of 6.9 percent.

Capitalization rates for transactions in large cap CRE markets averaged 6.6 percent in the second quarter, a 30 basis point compression, based on RCA reports. Transactions of office properties in CBD markets tied with apartments for the lowest average cap rates, at 5.6 percent. Retail properties recorded cap rates of 6.4 percent, followed by industrial properties, at 6.8 percent. Hotel transactions averaged cap rates of 8.5 percent in the second quarter.

The interest rate on 10-year Treasury Notes—a standard measure of risk-free investments—averaged 1.6 percent during the second quarter of 2016, 80 basis points lower than the second quarter of 2015. Based on the prevailing rates, the spread between cap rates and 10-year Treasury Notes ranged from 500 basis points in large cap CRE markets to 540 basis points in small cap CRE markets. The spread denotes the continued attractiveness of commercial assets for both domestic and global CRE investors.

To access the latest Commercial Real Estate Market Trends report, visit:

In What States Did Properties Sell Quickly in April–June 2016?

Thu, 08/11/2016 - 14:54

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?”

At least half of the properties that sold in April–June 2016 were on the market for 30 days or less in the District of Columbia and in 16 states, mostly in the West and Midwest regions, according to the June 2016 REALTORS® Confidence Index Survey Report. Local conditions vary, and the data is provided for REALTORS® who may want to compare local markets against other states and the national summary.


Nationally, properties sold in June 2016 were typically on the market 34 days (32 days in May 2016; 34 days in June 2015).11 Short sales were on the market for the longest time at 156 days, while foreclosed properties typically stayed on the market for only 49 days. Non-distressed properties were typically on the market for 30 days.

Nationally, 48 percent of properties were on the market for less than a month. Eleven percent of properties were on the market for longer than six months.

11 Respondents were asked “For the last house that you closed in the past month, how long was it on the market from listing time to the time the seller accepted the buyer’s offer?” The median is the number of days at which half of the properties stayed on the market. In generating the median days on market at the state level, we use data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations.

June 2016 Housing Affordability Index

Thu, 08/11/2016 - 11:17

At the national level, housing affordability is down from a year ago as home price growth distresses affordability. Inventory levels are low and are putting pressure on home prices despite another month of declining mortgage rates.

  • Housing affordability declined from a year ago in June pushing the index from 154.8 to 153.3. The median sales price for a single family home sold in June in the US was $249,800 up 5.0 percent from a year ago.
  • Nationally, mortgage rates were down 15 basis points from one year ago (one percentage point equals 100 basis points) while incomes modestly rose approximately 2.1 percent.
  • Regionally, all regions saw declines in affordability from a year ago except the Northeast. The Northeast had an increase of 2.4 percent benefiting from only a slight gain in home prices. The Midwest had the largest decline in affordability of 3.4 percent. The South had a decline in the affordability index of 1.4 percent followed by the West with 1.1 percent.
  • The West had the biggest increase in price at 6.9 percent. The Midwest had an increase of 5.8 percent while the South had a 5.6 percent gain in price. The Northeast had the smallest increase of 1.5 percent.
  • By region, affordability is down in all regions from last month. The Northeast (5.7 percent) had the biggest decline. The Midwest and South had a decline of 5.5 percent and 3.3 percent. The West had the smallest decline in affordability of 1.7 percent.
  • Despite month to month changes, the most affordable region is the Midwest where the index is 186.8. The least affordable region remains the West where the index is 114.8.  For comparison, the index is 157.9 in the South, 154.9 in the Northeast.
  • Mortgage applications picked up this week while rates remain low. Median family incomes are still not keeping pace of increasing home prices. Rents are up more than 3 percent which matches the highs of 2008. Lending standards are easing which can help encourage first time buyers to get involved in the housing market. Purchase mortgage applications remain notably higher than one year ago (see chart).
  • 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.

Closing Documents Remain Elusive, but Change Coming

Wed, 08/10/2016 - 15:16

Lenders’ reluctance to share closing disclosures (CDs) with REALTORS® rose in the 2nd quarter of 2016 according to responses to NAR’s Survey of Mortgage Originators. Under the new Know Before You Owe or TRID rules, the HUD-1 closing form was replaced with the CD. In the past, REALTORS® frequently reviewed the HUD-1 for their clients or answered clients’ questions. However, many lenders have refused to share the new closing documents citing legal liability concerns.

This pattern worsened in the 2nd quarter as 64.3 percent of lenders indicated that they do not share the CD, up from 54.5 percent. No respondents indicated that they share the documents outright.

Sharing of the CDs may become easier, though. On July 28th, after this survey was closed, the Consumer Financial Protection Bureau clarified that lenders can in fact share the documents. The CFPB noted that certain exceptions within lending laws allow lenders to share the documents when it is a usual, appropriate, or acceptable method, “to provide the customer or the customer’s agent or broker with a confirmation, statement, or other record of the transaction, or information on the status or value of the financial service or financial product.”[1] Lenders can comment on the CFPB’s clarification through October 28th.

With this clarification lenders may feel enabled to share the CDs more freely. NAR will continue to monitor.

[1] pp 148

Commercial Sales in REALTORS® Markets Rise 8.4 Percent in Q2.2016

Tue, 08/09/2016 - 15:26

Commercial real estate space is heavily concentrated in large buildings, but large buildings are a relatively small number of the overall stock of commercial buildings. In terms of inventory, commercial real estate markets are bifurcated, with the majority of buildings (81 percent) being relatively small (small cap CRE), while the bulk of commercial space (71 percent) is concentrated in larger buildings (large cap CRE). The bifurcation continues along transaction volumes as well, with deals at the higher end—$2.5 million and above—comprising a large share of investment sales, while transactions at the lower end make up a smaller piece of the pie.

Data are readily available for transactions in excess of $2.5 million from several sources, including Real Capital Analytics (RCA). However, in general, data for smaller transactions—many of which are handled by REALTORS®—are less widely available. NAR’s Commercial Real Estate Market Trends gathers market information for small cap CRE properties and transactions, mostly valued below $2.5 million.

Sales volume in large cap CRE markets posted a 14.0 percent year-over-year drop, totaling $105 billion during the second quarter of 2016, based on RCA data. Following a strong growth trend, sales at the upper end have declined for the past two quarters, as investors took a step back, buffeted by the global economic slowdown, capital markets’ volatility and diverging monetary policies across developed economies.

In REALTORS® markets, commercial sales maintained positive momentum, with rising investment volume.  Sales of commercial properties during the second quarter rose 8.4 percent on a year-over-year basis, in the wake of an 8.5 percent increase during the first quarter.

Prices in large cap CRE markets rose by 2.9 percent during the second quarter of this year, based on partial data from RCA’s Commercial Property Price Index. The advance was driven by continued appreciation in prices of apartment and CBD office properties, both of which have exceeded their prior 2007 peaks.

In comparison to top-tier markets, price growth accelerated in small cap CRE markets during the second quarter of 2016, based on REALTORS®’ information. Commercial properties traded at 5.3 percent higher prices compared with the same period in 2015, following a 5.1 percent increase during the first quarter of this year. The average reported transaction price was $1.4 million during the period.

To access the latest Commercial Real Estate Market Trends report, visit:

Raw Count of Home Sales (June 2016)

Tue, 08/09/2016 - 11:20
  • Existing-home sales increased 1.1 percent in June from one month prior while new home sales rose 3.5 percent.  These headline figures are seasonally adjusted figures and are reported in the news.  However, for everyday practitioners, simple raw counts of home sales are often more meaningful than the seasonally adjusted figures.  The raw count determines income and helps better assess how busy the market has been.
  • Specifically, 583,000 existing-homes were sold in June while new home sales totaled 54,000.  These raw counts represent an 11 percent gain for existing-home sales from one month prior while new home sales were unchanged.  What was the trend in recent years?  Sales from May to June increased by 7 percent on average in the prior three years for existing-homes and decreased by 4 percent for new homes.  So this year, both existing and new homes sales outperformed.
  • Why are seasonally adjusted figures reported in the news?  To assess the overall trending direction of the economy, nearly all economic data – from GDP and employment to consumer price inflation and industrial production – are seasonally adjusted to account for regular events we can anticipate that have an effect on data around the same time each year.  For example, if December raw retail sales rise by, say, 20 percent, we should not celebrate this higher figure if it is generally the case that December retail sales rise by 35 percent because of holiday gift buying activity.  Similarly, we should not say that the labor market is crashing when the raw count on employment declines in September just as the summer vacation season ends.  That is why economic figures are seasonally adjusted with special algorithms to account for the normal seasonal swings in figures and whether there were more business days (Monday to Friday) during the month.  When seasonally adjusted data say an increase, then this is implying a truly strengthening condition.
  • What to expect about home sales in the upcoming months in terms of raw counts?  Independent of headline seasonally adjusted figures, expect less activity in July and even slower activity in August for existing-home sales. For example, in the past 3 years, July sales typically decreased by 2 to 4 percent from June while in August sales were unchanged or decreased by 3 to 9 percent from July. For the new home sales market, the raw sales activity also tends to decrease in both July and August. For example, in the past 3 years, July sales dropped by 2 to 23 percent and August sales typically decreased by 5 to 6 percent from July.

TRID Costs and Lender Optomism in the 2nd Quarter

Mon, 08/08/2016 - 13:34

Lenders continue to deal with the effects of TRID and wavering investor demand but are more optimistic about investor demand for mortgage in the second half of 2016.  Those are some of the sentiments expressed in the Survey of Mortgage Originators for the 2nd quarter of 2016.  NAR surveyed a panel of lenders from credit unions, retail banks, and mortgage banks on current production trends as well as their outlook on regulations and policy issues such as TRID, Brexit, and front-end risk sharing.

Highlights from the 2nd quarter include:

  • Non-QM lending remained in a slump in the 2nd quarter despite a modest improvement in investor demand for these loans.
  • Credit access in general was expected to rise over the coming six months driven by gains in non-QM and rebuttable presumption
  • The share of transactions delayed due to TRID eased further to 1.7 percent with a slight uptick in TRID-related cancellations.
  • Half of lenders passed increased costs to consumer with a weighted average increase of $258. Lenders were more reluctant to originate smaller loans in the TRID environment.
  • The share of lenders unwilling to share closing documents (CD) with REALTORS® rose to 64.3 percent in the 2nd quarter
  • Lenders grew more optimistic about normalized operations in the next six months, but less so for investors’ ability to adjust, which could prolong the impact in jumbo markets on the coasts
  • More than half of respondents indicated they would participate in front-end risk sharing or were considering it, but 42.9 were concerned about having no clear path for small lender participation.
  •  14.3 percent of respondents cited more rate extensions due to Brexit, while 28.6 percent noted a shortage of appraised but a majority 64.3 percent noted not changes.

House Price Growth When Children are Teenagers—A Path to Higher Earnings? A REALTOR® University Speaker Series Presentation

Mon, 08/08/2016 - 11:22

Does house price appreciation prior to children attending college impact their future earnings as adults? This was the subject of a presentation at a recent REALTOR® University Speaker Series by Dr. Daniel Cooper, Senior Economist and Policy Advisor at the Federal Reserve Bank of Boston, who co-authored a study on this question with Maria J. Luengo-Prado.[1]

To listen to the webinar, please click here.[2]

In analyzing the impact of house price growth on children’s future incomes as adults (25 years old or over in 2007), Dr. Cooper and Dr. Luengo-Prado matched child and parent data from families in the Panel Study of Income Dynamics (PSID). The authors identified household heads who were at least 25 years old in 2007, and they matched these household heads with their parents and where they lived when they were 17 years-old (assumed to be the age before they enter college). The sample consists of 892 child respondents who turned 17 between 1979 and 1999 and lived in 126 different metropolitan areas.

The Cooper and Luengo-Prado study found that:

1)      House price appreciation increases the income of homeowners’ children as adults and decreases the income of renters’ children as adults. For every 10 percent increase in home prices that occurred when children were 17 years-old, the income of homeowners’ children as adults was 9 percent higher on average, while the income of renters’ children as adults was 15 percent lower.

2)      The children of homeowners who experience positive house price growth when their children are 17 are more likely to attend a school ranked in the top quartile of colleges and universities than are the children of homeowners that do not experience favorable house price growth. This is one of the channels that links house price growth to income.

3)      While house price growth does not appear to have a consistent influence on the economic mobility of renters’ children, it seems to affect owners’ children. The probability of children ending up in the highest income quartile is lower for all parent income quartiles when house price growth is below the national average than when growth is above the national average. Also, the probability of children ending up in the lowest income quartile is greater when house price growth is below average, particularly for those children with parents whose income is above the lowest income quartile.

Dr. Cooper noted that the results of the study are based on data prior to both the housing boom and the Great Recession and thus may not fully capture the impact of the housing boom and bust on children’s future incomes.

About the Speaker

Dr. Cooper is a senior economist and policy advisor in the macroeconomics/ international economics section of the research department at the Federal Reserve Bank of Boston. His main research interests are related to household consumption and wealth and using microeconomic data to investigate macroeconomic policy questions. Dr. Cooper holds a B.A. in economics from Amherst College and earned M.A. and Ph.D. degrees in economics from the University of Michigan. His CV and full list of publications and studies can be accessed here.

About REALTOR® University Speaker Series

REALTOR® University provides on-line education on real estate and other topics at the MBA and undergraduate levels. The REALTOR® University Speaker Series provides a venue to learn about and stimulate discussion of economic and real estate issues in support of NAR’s mission as the Voice of Real Estate. The Speaker Series presentations can be accessed on this webpage.

[1] Daniel Cooper, María José Luengo-Prado, House price growth when children are teenagers: A path to higher earnings?, Journal of Urban Economics, Volume 86, March 2015, Pages 54-72, ISSN 0094-1190, The views expressed in the study are those of the authors and do not necessarily reflect the views the Federal Reserve Bank of Boston or the Federal Reserve System.

[2] The presentation was held on July 29, 2016 at the NAR Washington Office. Thanks to Meredith Dunn, Communications Manager, for recording and editing the webinar video.

Mortgage Applications: Perception vs. Reality

Fri, 08/05/2016 - 13:32

Every four months the New York Federal Reserve Board (FRBNY)[1] conducts a survey of consumers to measure their perceptions and tastes about credit. The Survey of Consumer Expectations (SCE) covers a broad set of topics about mortgages including:

  • Whether the respondent had applied for a mortgage,
  • Whether their application had been rejected,
  • Whether they planned to apply in the future, and
  • If they were to apply, whether they expect their application to be rejected

In recent quarters, the results have cut an odd path. While the share of respondents who indicated that a mortgage application had been rejected fell from a peak of 24.5 percent in February of 2015 to 10.3 percent in June of 2016, the share that felt their application would be rejected rose to its highest level since the survey began at 39.9 percent. The share reporting a rejected application did rise modestly from the February to June of this year, but reached a level less than half of the peak from the February of 2015.

Could consumers’ perception be that far off? Or could consumers be self-selecting where higher quality borrowers applied and received mortgages, while non-pristine consumers perceived tightening and applied at lower rates?

Applications for credit by borrowers with credit scores below 680 and between 680 and 760 fell from October of 2015 through June of 2016, while applications from the highest quality borrowers climbed (above).

At the same time, borrowers with the highest credit scores indicated a greater likelihood of applying for a mortgage in June of 2016 compared to 12 months earlier (9.3 percent increase), while respondents with credit below 680 and between 680 and 760 were 14.8 percent and 26.5 percent less likely to apply over this period, respectively. Each sector rose from February of 2016 to June, but the increase was most pronounced in the over 760 sector, which grew roughly 23 percent compared to gains of just 2.6 percent and 2.7 percent for the other two sectors, respectively.

The SCE survey does not report rejection rates by credit score, so the driver of this pattern is not clear. However, respondents as a whole indicated a drop in plans to apply for a mortgage in June at 7.8 percent relative to 8.6 percent 12 months earlier. The June reading was up from February, but still off 8.8 percent from a year earlier when consumers rode a wave of enthusiasm garnered by the FHA’s 50 basis point premium.

The Brexit-led decline in mortgage rates in June may have fueled renewed demand for mortgages, but it is not clear if this upward trajectory will hold in the face of non-pristine consumers’ perceptions about access to credit.

[1] Source: Survey of Consumer Expectations, © 2013-2015 Federal Reserve Bank of New York (FRBNY).

The SCE data are available without charge at and may be used subject to license terms posted there. FRBNY disclaims any responsibility or legal liability for this analysis and interpretation of Survey of Consumer Expectations data.

NAR Commercial Members’ Pulse on Economic Development

Fri, 08/05/2016 - 11:28

NAR commercial members work with small businesses in their local communities all over the country. Often REALTORS® can provide an ear to the ground for what’s happening in local economic development as they are one of the first sources to help companies buy, sell, lease, and manage property that enable businesses to operate and grow. In the 2016 Commercial Member Profile, we asked commercial members to give us a pulse on their cities and towns.

A majority of commercial members were optimistic and saw economic growth in their areas. We asked members if they have seen an increase in new businesses opening in their communities. Seventy-five percent said they had seen new businesses opening around them, while only 20 percent they had not seen new companies open, and five percent did not know.

Failure is a part of economic development, identified by companies shutting their doors. It is normal to have some businesses close in the face of competition. The important thing to measure if there is a steady increase in closures, then market conditions may be unfavorable to economic growth. Next we asked if commercial members had seen an increase in businesses closing in their areas. Roughly half (56 percent) said they had not seen an increase of companies closing, compared to a third (36 percent) that said there was an increase in businesses closing.

As for the market conditions of local companies in the last year, more commercial members were optimistic of growing local economic development. When asked their view on the net ratio for the number of businesses opening closing, 63 percent of members said that more businesses were opening in their areas than closing, 18 percent said the ratio had remained the same in the last year, and 13 percent said more businesses were closing than opening.


The data found above was the same across all firm sizes, roughly three-fourths of commercial members across all firm sizes said there was an increase in businesses opening in the past year and roughly two-thirds said there were more businesses opening than closing in their communities.


Last, we cut the data by population size in which the commercial member operates. We see an upward trend in the data where more businesses are opening in larger cities. When asked if there was an increase in businesses opening, 63 percent of commercial members in regions with less than 49,999 people said yes compared to 84 percent of commercial members in areas with 2,000,000 to 3,999,999 million people. Similarly, 46 percent of commercial members in regions with less than 49,999 people said more businesses were opening than closing compared to 70 percent of commercial members in areas with 2,000,000 to 3,999,999 million people. The trend illustrates that business is growing faster in more densely populated areas.


NAR will continue to take a pulse on economic development from its commercial members throughout the year. Stay tuned for more info!


REALTORS® Median Expected Price Change in Next 12 Months, By State, Based on April–June 2016 Surveys

Thu, 08/04/2016 - 15:35

In the monthly REALTORS® Confidence Index Survey (RCI), the National Association of REALTORS® asks members “In the neighborhood or area where you make most of your sales, what are your expectations for residential property prices over the next year?”

The map shows the median expected price change in the next 12 months for each state based on the April–June 2016 RCI surveys, according to the June 2016 REALTORS® Confidence Index Survey Report.

The District of Columbia and the states of Washington, Oregon, and Colorado are the areas that are expected to have the highest price growth, with the median expected price growth at more than five to seven percent in each of these states. REALTOR® respondents from California, Idaho, Kentucky, Tennessee, South Carolina, Florida, and Hawaii also expected strong price growth, with the median expected price growth at more than four to five percent in each of these states.

Prices have been rising because supply has not kept pace with demand:

  • As of June 2016, the inventory of existing homes for sale was equivalent to 4.7 months of the current monthly sales pace, which is below the six months’ supply which most analysts consider to be the level that reflects a healthy balance of demand and supply (Chart 1).

  • New single-family housing construction stood at 1.15 million, 70 percent of its level in January 2000. Housing construction is in short supply across all regions (Chart 2).

  • With new construction at a low level and the supply of existing homes for sale at low levels, the turnover rate of existing homes relative to the housing stock is quite low. As of the first quarter of 2016, approximately four percent of existing homes were recently sold, down from six percent in 2006 and five percent in 1999 (Chart 3). The turnover rate has improved since the rate dipped to three percent during the housing downturn in 2008 through 2011, but it still remains below the 4.5 percent rate in 1999.


Share of renters who qualify to buy a home in the largest metro areas.

Thu, 08/04/2016 - 09:35

Top Markets Where Renters Can Afford to Buy

Thu, 08/04/2016 - 09:28

The U.S. homeownership rate has slowly fallen in recent years to currently its lowest level since 1965[1]. After the recent housing downturn, it has been suggested that some are more hesitant to buy a home, and while data show that 74% of consumers think that it is a good time to buy a home, renters are less likely to think this than homeowners[2]. A majority of those who do not own a home also believe it will be very or somewhat difficult to qualify for a mortgage, given their current financial situation[3].

However, based on our study, there are affordable metro areas right now where renters earn enough income to qualify to buy a home even with a down payment lower than the traditional 20 percent[4]. While nationwide, 28 percent of renters have income to qualify for a home purchase, the top metro areas each had higher than 40 percent of renters who are qualified to buy. Comparing household income with qualifying income levels for renters in nearly 100 of the largest metro areas across the country, here are the top ten metro areas with the highest share of qualified renters for a home purchase and above-national hiring conditions[5]:


Many of the top ten markets are located in the Midwest and South – including three areas in Ohio. The median existing-home sales price in these two regions continue to be lower than the Northeast and West[6], and while many of these areas were slower to recover from the recession, improvements in their local labor markets in the past year have pushed their hiring levels to at or above the recent national growth rate.

Going one step further, the following visualization shows the top ten markets sorted by:

  1. Median household income[7],
  2. Qualifying income,
  3. Share of qualified renters,
  4. Extra income—the gap between the typical qualified-renter household income and qualifying income

Use the filters to see the top ten metro areas for each of the studied variables.


  1. a.       Sorting by Median household income (high to low) and above-national hiring conditions: The top ten markets are mostly located in the West (such as San Jose, San Francisco and Honolulu) where the share of qualified renters is low. With the exception of Washington, DC, nine of the top 10 markets have a share of qualified renters which is lower than the national level (22%). However, these small groups of qualified renters earn much more than the income needed to buy a home. For instance, in San Jose the median household income for qualified renters was $325,545 in 2015 while they need $246,784 for a home purchase. Thus, they earn $78,761 more than the qualifying income.
  2. b.       Sorting by Qualifying Income and above-national hiring conditions (high to low): It is no surprise that the list mostly includes markets with high median household incomes of qualified renters and a small share of qualified renters.
  3. c.        Sorting by Share of qualified renters and above-national hiring conditions (high to low): see analysis above.
  4. d.       Sorting by Extra Income and above-national hiring conditions (high to low): With the exception of Washington and Baltimore, the share of qualified renters is below the national level in these metro areas. Median household income of qualified renters in most of those market is above $100,000 while the qualifying income is $75,000 and higher.


Charts for all of the metro areas >

Charts for the top ten metro areas >

Methodology >



[1]According to the U.S. Census Bureau, the homeownership rate fell to 62.9 percent, which is the lowest since 1965.

[2] 2016 Q2 Homeownership Opportunities and Market Experience (HOME) Survey.

[3] Ibid.

[4]Qualifying income in this study is based on a 3 percent down payment in each metro area’s median home price in 2015. Both Fannie Mae and Freddie Mac have 3 percent down payment programs, and Federal Housing Administration (FHA) loans require a minimum 3.5 percent down payment. The rankings of these metro areas would all hold under a 3.5 percent down payment assumption. Additionally, because this study considers income qualification, a lower down payment assumption leads to a smaller share of qualified renters, because income requirements are higher for lower down payments.

[5] National job growth rate for the period May 2015-May 2016 of 1.6% was compared to metro area job growth in the same time period.

[6] The median existing-home price in June 2016 was the lowest in the Midwest ($199,900) and South ($217,400) regions.

[7] In this study context, median household income refers to the median among qualified renters, only.


Buyer Traffic Continued to Outpace Supply in Many States in April–June 2016

Wed, 08/03/2016 - 15:33

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® (NAR) asks members How do you rate the past month’s traffic in the neighborhood(s) or area(s) where you make most of your sales?” NAR compiles the responses on buyer traffic into a REALTORS® Buyer Traffic Index and the responses on seller traffic into a REALTORS® Seller Traffic Index. The maps below show the condition of buyer and seller traffic using data collected from April‒June 2016, according to the June 2016 REALTORS® Confidence Index Survey Report.

Local conditions vary in each state, but the REALTORS® Buyer Traffic Index indicates that markets were “strong” to “very strong” in all states except in Delaware and Connecticut where buyer traffic was “weak” and Alaska and Oklahoma where buyer traffic was “moderate.”[1]

Amid strong demand, seller traffic was “weak” in many states, measured by the REALTORS® Sellers Traffic Index.[2] However, seller traffic was “moderate” to “strong” in several states, including those that had benefited from the oil boom but who are now facing slower job growth due to lingering lower oil and natural resources prices—North Dakota, Wyoming, New Mexico, and Texas. With the collapse of oil prices, the slower job growth and job cutbacks in oil-producing states are likely leading to more home selling and a shift to a buyer’s market.[3]

Job creation is strongly associated with the demand and supply of homes: strong job growth improves the prospect for homeownership, while job contraction in an area may lead to more homes being sold as people move out of the area. The chart below shows the change in non-farm employment in May 2016 from the levels in May 2015 by state. Non-farm employment increased strongly in Washington, Oregon, Idaho, Utah, and Florida where homebuying demand has been robust as well. On the other hand, employment contracted in the oil-producing states of Alaska, North Dakota, Wyoming, Kansas, Oklahoma, and Louisiana (also in Maine, although it is not an oil-producing state). In states with negative or low employment growth such as North Dakota, Wyoming, New Mexico, Texas, and Louisiana, there are more REALTOR® respondents who reported “strong” than “weak’ seller traffic.

[1] The index for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have fewer than 30 observations. Respondents were asked “How do you rate the past month’s buyer traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. For graphical purposes, index values 25 and lower are labeled “Very weak,” values greater than 25 to 49 are labeled “Weak,” a value of 50 is labeled “Moderate,” values greater than 50 to 75 are labeled “Strong,” and values greater than 76 are labeled “Very strong.”

[2] Respondents were asked “How do you rate the past month’s seller traffic in the neighborhood(s) or area(s) where you make most of your sales?” Respondents rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. A value of 50 indicates a balance of respondents who reported “Strong “and “Weak” markets. For graphical purposes, index values 25 and lower are labeled “Very weak,” values greater than 25 to 49 are labeled “Weak,” a value of 50 is labeled “Moderate,” values greater than 50 to 75 are labeled “Strong,” and values greater than 76 are labeled “Very strong.”