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Updated: 1 hour 12 min ago

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.”

[3] https://communityimpact.com/houston/the-woodlands/economic-development/2015/12/09/falling-oil-prices-starting-to-affect-woodlands-economy/http://www.theatlantic.com/business/archive/2015/06/north-dakota-oil-boom-bust/396620/

June Pending Home Sales

Wed, 08/03/2016 - 11:28
  • NAR released a summary of pending home sales data showing that June’s pending home sales are up modestly 0.2 percent from last month and also slightly improved 1.0 percent from a year ago.
  • Pending sales are homes that have a signed contract to purchase on them but have yet to close. They tend to lead Existing Home Sales data by 1 to 2 months.
  • All regions showed increases from a year ago except the West, which had a decline of 1.8 percent. The South saw the biggest gain from a year ago at 1.8 percent while the Midwest had the smallest gain at 1.6 percent.
  • From last month, the West had the largest decline at 1.3 percent while the South followed with a decline of 0.6. The Northeast had the biggest gain in pending sales at 3.2 percent.
  • The pending home sales index level was 111.0 for the US, making it the second-highest level in 2016, behind April’s record 115.0.
  • The 100 level is based on a 2001 benchmark and is consistent with a healthy market and existing home sales above the 5 million mark.

 

Most REALTORS® Expect Strong Market Conditions in the Next Six Months Based on April–June 2016 Surveys

Tue, 08/02/2016 - 15:55

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® (NAR) asks members “What are your expectations for the housing market over the next six months compared to the current state of the market in the neighborhood(s) or area(s) where you make most of your sales?” NAR compiles the responses into a REALTORS® Confidence Index—Six-Month Outlook. An index above 50 indicates that more respondents view markets as “strong” rather than “weak.”

The following maps show the REALTORS® Confidence Index—Six-Month Outlook across property types by state, according to the June 2016 REALTORS® Confidence Index Survey Report.[1]

Compared to current conditions in the single-family homes market, the market outlooks in the next six months are “strong” to “very strong” in the District of Columbia and in all states except Alaska. Sustained job creation and the low cost of obtaining a mortgage appear to be sustaining housing demand even as homes have become increasingly unaffordable.

In the townhomes market, the outlook varies from “very weak” in Alaska and Mississippi, “moderate” and “strong” in many states, and to “very strong” in Colorado, Nebraska, and the District of Columbia.

In the condominium market, the outlook in the next six months is expected to “very weak” to “weak” in 27 states. The June survey was conducted before the approval of H.R. 3700, the “Housing Opportunity Through Modernization Act of 2016” by both the House of Representatives and the Senate, so the survey results do not yet reflect the expected positive impact of this law on the condominium market. Compared to the detached single-family home and townhome markets, the condominium market has recovered more slowly because many condominium projects did not meet the eligibility requirements of the Federal Housing Authority so interested buyers of condominium units have been unable to obtain financing.[2] The approval of H.R. 3700 is expected to increase access to FHA condominium financing by addressing a number of restrictive conditions regarding owner-occupancy requirements, the condominium re-certification process, mixed-use buildings, and private transfer fees.[3] 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] The market outlook 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 rated conditions or expectations as “Strong (100),” “Moderate (50),” and “Weak (0).” The responses are compiled into a diffusion index. A diffusion index greater than 50 means more respondents rated conditions as “Strong” than “Weak.” For graphical purposes, states with 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] Only 20 percent of condominiums are eligible for FHA condominium unit financing because of strict eligibility criteria such as those pertaining to occupancy requirements, commercial space  requirements, and delinquent dues. FHA and the GSEs have financing eligibility criteria relating to ownership occupancy requirements, delinquent dues, project approval process, and use for commercial space, among others. See NAR’s position at http://www.realtor.org/news-releases/2015/10/nar-president-testifies-before-house-subcommittee-in-support-of-fha-reforms

[3]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 http://www.realtor.org/articles/hr-3700-heading-to-president

June 2016 Existing-Home Sales

Tue, 08/02/2016 - 10:57
  • NAR released a summary of existing-home sales data showing that housing market activity increased for the fourth consecutive month, as June’s existing-home sales reached the 5.57 million seasonally adjusted annual rate. June’s existing-home sales are up 3.0 percent from a year ago.
  •  The national median existing-home price for all housing types was $247,700 in June, up 4.8 percent from a year ago.
  • Regionally, all four regions showed growth in prices from a year ago, with the West leading at 7.2 percent. The Midwest had an increase of 5.7 percent, and the South followed with a 5.5 percent increase. The Northeast had the smallest gain of 1.4 percent from June 2015.
  • From May, only two of the four regions experienced increases in sales. The Midwest dominated regional sales with an increase of 3.8 percent. The West had an increase of 1.7 percent while the sales in the South didn’t change. The Northeast had the only decline of 1.3 percent.
  • All regions showed gains in sales from a year ago except the West where sales declined 0.8 percent. The Northeast had the biggest increase of 5.6 percent followed by the Midwest with a gain of 4.7. The South had the smallest gain of 3.2 percent. The South leads all regions in percentage of national sales at 40.6 percent while the Northeast has the smallest share at 13.6 percent.
  • June’s inventory figures are down 0.9 percent from last month to 2.12 million homes for sale and the level is below historical averages. Inventories are down 5.8 percent from a year ago. It will take 4.6 months to move the current level of inventory at the current sales pace. It takes approximately 34 days for a home to go from listing to a contract in the current housing market, which is the same as a year ago.
  • Single family sales increased 0.8 percent while condos also increased 3.2 percent compared to last month. Single family home sales increased 3.1 percent and condo sales are also up 1.6 percent from a year ago. Both single family and condos had an increase in price with single family up 5.0 percent and condos up 3.2 percent from June 2015.

 

A Healthy Commercial Market With New Commercial Members

Thu, 07/28/2016 - 15:54

In the line with the influx of new NAR members working in residential real estate from the 2016 Member Profile, NAR also saw a surge of members into its commercial ranks. While commercial members are a smaller subset of professionals in the industry, new entrants affected some of the demographics while other aspects of the industry remained unchanged from last year. We released the 2016 Commercial Member Profile highlighting the trends—let’s take a look at what’s new in field.

An increase in members into commercial real estate is evident with a jump in new NAR members that reported having less than two years of experience, which nearly doubled to nine percent in 2016 from five percent in 2015. In 2016, the median age of commercial members stayed the same at 60 years old. Primary and secondary specialties of members, hours worked per week, household composition, and education were also unchanged from last year.

On the other hand, new entrants affected the percent distribution of license types. Sales agents gained the most new members at 31 percent (up from 24 percent in 2015). Brokers dropped to 47 percent in 2016 (down from 59 percent), as did broker associates falling to 17 percent (down from 20 percent).

Income and years of experience was naturally brought down by the new entrants. The median gross annual income of commercial members was $108,800 in 2015. This is down from a six year high in 2014 at $126,900, yet is still higher than 2013 at $96,200. Commercial members typically have been in real estate 20 years, down from 25 years in 2015, and in commercial real estate for 15 years, down from 20 years in 2015.

Nevertheless, sales volumes continue to rise indicating a healthy commercial market. The median number of sales transactions fell slightly to nine in 2015 from 11 reported in 2014. Despite fewer transactions, the median annual sales transaction volume increased in 2015 to $2,931,000 from $2,916,700 in 2014. The annual median dollar value of sales also increased to $541,700 in 2015 up from $521,700 in 2014. The median lease transaction also increased in 2015 to $600,000 up from $500,000 in 2014, as did the median leasing dollar value gained in 2015 at $221,200 up from $203,800 in 2014.

State of Housing in Swing States

Thu, 07/28/2016 - 12:55

Popular votes and their importance are debatable. The winners-take-all electoral votes in the swing states will determine who will be the next President of the United States. Many have already decided for whom to vote, but for some still deliberating, they may cast their ballot on how they feel about their overall financial situation.

View Lawrence Yun’s full Forbes article here.

Your Vacation Home is Just a Dream Away

Wed, 07/27/2016 - 15:27

Have you ever dreamt about buying a vacation home? The NAR 2016 Investment and Vacation Home Buyers Survey reveals some surprising, and reassuring to the dreamers in all of us, statistics about vacation home buyers.

While buyers of primary residences typically purchase homes because of the desire to be a home owner or due to a job relocation, buyers of vacation homes are motivated by other factors. Thirty-seven percent of vacation home buyers plan to use their property for vacations and family retreats, 16 percent plan to convert their vacation home into their primary residence in the future, and 13 percent purchased because of low real estate prices and the buyer found a good deal.

The median vacation home purchase price was higher in 2015 than in 2014. The typical price was $192,000 for vacation buyers, up from $150,000.

Thirty-nine percent of vacation buyers paid all cash for their property purchase. When financing their purchase, 52 percent of vacation buyers financed less than 70 percent of their purchase.

Among vacation buyers, 27 percent purchased in a resort area, 19 percent purchased in a small town, and 16 percent in a rural area—higher than other buyer types. Forty percent of vacation buyers purchased in a beach area, 19 percent purchased in the mountains, and 19 percent purchased a vacation home on a lake front.

While a detached single-family home is the most common type of home for all buyers, higher shares of vacation buyers purchased condos and townhomes in 2015. The median square feet of a vacation home was 1,500. The typical vacation property was 200 miles from the buyers’ primary residence.

More than 80 percent of vacation buyers reported that now is a good time to purchase real estate. Among primary residence buyers, 15 percent are very likely to buy a vacation property in the next two years.

 

Potential Buyers Want to Own, but Many Can’t Afford to

Wed, 07/27/2016 - 11:14

Positivity about owning a home is still high. In the latest HOME Survey, released earlier this month, 87 percent of people surveyed want to own a home in the future and 88 percent believe homeownership is a good financial decision. However, becoming a homeowner is still presently out of reach for some. Affordability continues to be a speed bump on the road to homeownership, and this is particularly acute in certain areas of the country.

Forty-eight percent of non-homeowner respondents reported that the main reason they currently don’t own a home is because they can’t afford to buy one. This is close to respondents in the Northeast, where 47 percent feel they can’t afford to buy a home. It is slightly less in the Midwest at 44 percent and in the South at 45 percent, but the number jumps to 59 percent in the West.

 

What might change these potential home buyers’ minds about owning in the future? Interestingly, while an improvement in their financial situation is one of the top answers both nationally and regionally, it is lifestyle considerations such as getting married, finding a new job or retiring that would entice most into becoming a homeowner (38 percent). This holds true across the regions: forty percent in the Midwest and South report that this is the case, while slightly lower numbers were reported in the Northeast at 36 percent and in the West at 34 percent.

The Latest on Home Prices

Tue, 07/26/2016 - 09:15
  • Recent housing price data at the national level suggests that home prices continue to increase at a strong pace—faster than what would be considered typical. Strong buyer demand and low inventories coupled with still relatively low levels of new construction are continuing to push prices up and keep housing market tipped in favor of sellers in most local markets. However, prices in some areas are creating affordability concerns that may dampen demand and slow the pace of increase in the months to come.
  • The pace of home price growth still has a substantial way to go before it moves back to a rate that is sustainable. New construction is needed to help meet the continued strong demand from buyers in an economy where jobs are being created and there is a low supply of homes for sale. Without an increase in new construction, affordability could cause a new housing crisis where would-be owners are held back by ever-rising rents, debt obligations such as student loans, and a lack of affordable housing supply.
  •  Various data sources are flashing the same rising price signals:
    • Today, Case Shiller data showed that house prices rose roughly 5 percent in all three indices since May 2015. The national index gained 5.0 percent, while the 10-city composite rose 4.4 percent and the 20-city composite rose 5.2 percent year over year. Each area’s measured gain the same or lower than the gain reported in April.
    • Last week, the Federal Housing Finance Agency (FHFA) and the National Association of Realtors® (NAR) reported price data for April and May.
    •  NAR data showed that prices grew at a 4.3 percent pace from May 2015 to May 2016. NAR also reported on new June 2016 data which showed a slight acceleration to 5.0 percent growth from one year ago.
    • FHFA data showed that prices were up 5.6 percent in May from one year ago, slightly slower than the 5.9 percent pace seen in April, but within the 5 to 6 percent pace seen in the last 16 months.
  • Potential buyers and sellers should be sure to put the national numbers in the context of what is going on in their local markets. The fastest overall growth rates in the NAR data are in the West where prices rose 7.1 and 7.2 percent from one year ago in May and June. By contrast, NAR’s median price showed a slight decline in the Northeast in May and only 1.4 percent growth in June.
  • FHFA data show similar trends. The top two divisions in May were the Pacific (7.9 percent) and Mountain (8.5 percent) divisions which together make up the West Census region. [1]
  • According to FHFA, New England (3.9 percent) and the Middle Atlantic (3.4 percent) divisions, which make up the Northeast region, lagged behind.[2]
  • Case Shiller data show similar results. The strongest price growth was seen out West in Portland (12.5%), Seattle (10.7%), and Denver (9.5%) in the year ending May 2016. By contrast, Washington DC (2.4%), New York (2.0%), and Cleveland (2.5%) were the slowest growing markets. Data shows that sellers in these somewhat weaker areas may not have as much power to demand higher prices for their homes given the local market. How does your market compare to the national price trends?
  • NAR reports the median price of all homes that have sold while Case Shiller and the Federal Housing Finance Agency report the results of a weighted repeat-sales index. Case Shiller uses public records data which has a reporting lag. To deal with the lag, Case Shiller data is based on a 3 month moving average, so reported May prices include information from repeat transactions closed in March, April, and May. For this reason, changes in the NAR median price tend to lead other indexes and suggest that continued strength in home price growth is ahead.

1)       The Pacific division includes Hawaii, Alaska, Washington, Oregon, and California, and the Mountain division includes Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, and New Mexico.

2)        The New England division includes Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, and the Middle Atlantic division includes New York, New Jersey, Pennsylvania.

Profile of U.S. Residents Seeking to Purchase a Property Abroad in April 2015—March 2016

Fri, 07/22/2016 - 09:53

International real estate is multi-faceted. Not only do international clients choose to purchase U.S. real estate, U.S. clients are also interested in purchasing property abroad. Approximately 14 percent of responding REALTORS® reported that they had a client who was seeking to purchase property in another country compared to six percent in the previous 12-month period, according to NAR’s recently released 2016 Profile of International Activity in U.S. Residential Real Estate.

Among REALTORS® who had clients interested in purchasing property abroad, the countries that generated the most inquiries were Mexico, Costa Rica, Philippines, Colombia, and Canada. Spain, Brazil, Thailand, and Italy were also countries of interest to domestic clients searching for property abroad.

The vast majority of U.S. clients seeking property abroad were interested in residential property (79 percent), and a slim majority of those seeking residential property were interested in purchasing a detached single-family home (53 percent) while nearly a third (30 percent) were interested in a condominium. Most clients (87 percent) were looking to use the property as a vacation home and/or residential rental unit. Only nine percent of U.S. clients were seeking a primary residence abroad.

Among all respondents, four percent reported that they referred an interested buyer to a business contact outside the United States, three percent helped the client directly, and one percent referred the client to a business contact in the United States who works with international clients. About six percent of respondents reported that they had a client interested in purchasing property abroad but could not refer the client to anyone to assist in the purchase process.[1]

[1] NAR has a rich source of information to assist REALTORS® working with international clients. For more information, see http://www.realtor.org/global/global-resources.

 

Profile of International Clients Who Sold U.S. Residential Property in April 2015—March 2016

Fri, 07/22/2016 - 09:46

NAR’s recently released 2016 Profile of International Activity in U.S. Residential Real Estate gathered information from residential seller’s agents about international clients who sold residential property.

International clients who sold their U.S. residential property mostly came from Canada, China, United Kingdom, Mexico, Germany, and India–a list that is notably similar to the list of top foreign buyers of residential property. Other major sellers of U.S. residential property are from Brazil, Australia, Japan, Venezuela, and Colombia. Respondents reported several cases of Canadians selling their U.S. property because of the stronger U.S. dollar.[1] Just less than ten percent of respondents could not identify the seller’s country of origin.

The properties sold by international clients were mostly located in Florida, California, Arizona, Texas, Nevada, New Jersey, New York, Illinois, and Ohio. Not surprisingly, the list of states where foreign buyers sold their U.S. property is similar to the list of states where foreign buyers typically purchase U.S. residential property.

Properties owned by international clients sold for $446,191 on average and for a median of $245,331. International clients from China and the United Kingdom sold more expensive properties. This is consistent with the data that Chinese and U.K. clients tend to purchase properties that are more expensive than properties purchased by other foreign buyers.

[1] A stronger U.S. dollar means that a Canadian who sells U.S. property gets more Canadian dollars for every U.S. dollar of investment on the purchase of a U.S. residential property.

Personal Contacts and Referrals: Major Source of Foreign Buyer Leads and Referrals

Thu, 07/21/2016 - 15:17

Personal contacts and referrals were the most important sources of leads among agents who worked with foreign clients who purchased residential property accounting for about 47 percent of responses, according to NAR’s recently released 2016 Profile of International Activity in U.S. Residential Real Estate. Website/online listings accounted for 17 percent.

Among those who found their client through online sources (17 percent), the firm’s and agent’s websites accounted for 35 percent of leads.

Working with international clients requires an understanding of client needs and cultures. NAR’s Commercial and Global Services Group can assist REALTORS® in building their skills to successfully address the needs of their international clients.

 

 

31 Percent of REALTORS® Worked with an International Client in April 2015—March 2016

Wed, 07/20/2016 - 11:32

Approximately 31 percent of REALTOR® respondents reported working with international clients, according to NAR’s recently released 2016 Profile of International Activity in U.S. Residential Real Estate. This is a decrease from the 34 percent share in the previous 12-month period. The slowdown in economic growth in many countries, the strengthening of the U.S. dollar against many foreign currencies, and the sustained increase in U.S. home prices made U.S. residential real estate less affordable to foreign buyers.

Seventeen percent of respondents had one to two foreign clients and five percent of respondents had six or more foreign clients.

 

As is the case with potential domestic buyers, not all international clients will end up purchasing a property. “Could not find property” accounted for 18 percent of all reasons cited by the respondents why the client ended up not purchasing a property. “Cost of property” and “exchange rate” accounted for 22 percent. Finance-related reasons such as “could not obtain financing” and “cannot move money” accounted for 21 percent of the reasons cited by the respondents. Other reasons are related to immigration laws (mainly that the buyer cannot stay in the U.S. for more than six months), exposure to U.S. tax laws (if and when the buyer decides to sell the property), and costs and maintenance fees. “Other” reasons include personal reasons such as the buyer deciding to rent instead of purchasing, or purchasing in another area.

Nearly Half of Foreign Buyers Prefer a Property in a Suburban Area

Tue, 07/19/2016 - 08:37

Nearly half of foreign buyers purchased a U.S. residential property located in a suburban area, according to NAR’s recently released 2016 Profile of International Activity in U.S. Residential Real Estate. Close to a third purchased a property in a central city/urban area, 14 percent in a small town/rural area, and eight percent in a resort area.

Non-resident foreign buyers more likely to purchase property in a resort area: 16 percent of non-resident foreign buyers purchased a resort property, while only three percent of resident foreign buyers purchased in a resort area.[1]

Chinese and Indian foreign buyers (mostly resident foreign buyers) tended to purchase property in a suburban area. Foreign buyers from Canada and the United Kingdom (mostly non-resident foreign buyers) primarily purchased in a resort area. Foreign buyers from Mexico (mostly resident foreign buyers) often purchased in central city/urban and suburban areas.

[1] Non-resident foreigners are non-U.S. citizens with permanent residences outside the United States. These clients typically purchase property as an investment, for vacations, or other visits of less than six months to the United States. Resident foreigners are non-U.S. citizens who are recent immigrants (in the country less than two years at the time of the transaction) or temporary visa holders residing for more than six months in the United States for professional, educational, or other reasons.

 

Reasons Foreign Buyers Purchased U.S. Residential Property in April 2015—March 2016

Mon, 07/18/2016 - 11:29

International clients purchase properties in the United States for residential, investment, and vacation purposes, according to NAR’s recently released 2016 Profile of International Activity in U.S. Residential Real Estate. Forty-six percent of foreign buyers purchased U.S. residential properties for use as primary residences, and forty-two percent purchased property for use as a residential rental unit and/or vacation property.

Resident foreign buyers were more likely to purchase the property as a primary residence while non-resident foreign buyers were more likely to purchase the property as a vacation home, a residential rental unit or both.[1] Seventy-two percent of non-resident foreign buyers purchased the property as a vacation and/or residential rental property for investment while only 21 percent of resident foreign buyers purchased for this purpose.

Canadian and U.K. buyers, who are often non-resident buyers, were more likely to purchase the property for use as a vacation home and/or residential rental property for investment. On the other hand, buyers from China, India, and Mexico, who are predominantly resident buyers, were more likely to purchase residential property for use as a primary residence. The use of the property as a residence of a child studying at a U.S. university was more evident among Chinese buyers, accounting for 13 percent of Chinese purchases.

[1] Non-resident foreigners are non-U.S. citizens with permanent residences outside the United States. These clients typically purchase property as an investment, for vacations, or other visits of less than six months to the United States. Resident foreigners are non-U.S. citizens who are recent immigrants (in the country less than two years at the time of the transaction) or temporary visa holders residing for more than six months in the United States for professional, educational, or other reasons.

Foreign Buyers: Typically Upscale than Domestic Buyers

Fri, 07/15/2016 - 11:15

Foreign buyers purchased residential properties for a variety of reasons and across geographic areas, with the prices of properties purchased typically above those of domestic buyers, according to NAR’s recently released 2016 Profile of International Activity in U.S. Residential Real Estate.

On average, foreign buyers paid $477,462 which is higher than the average price of all existing homes sold in the U.S. at $266,683.[1]  In terms of the typical residential property purchased by foreign buyers, the median price of these properties was $277,380 compared to $223,058 for all existing homes sold in the U.S. in the same time period.[2]

Among the major foreign buyers, Chinese buyers purchased residential properties that were more expensive than properties purchased by other buyers. This can be attributed to the tendency of Chinese buyers to purchase residential properties in central cities and suburban areas with relatively higher property prices such as California, Washington, and New York. In contrast, Canadians mostly purchased residential properties in Florida and Arizona where properties may be cheaper.

Approximately 36 percent of residential clients viewed U.S. property prices to be less expensive than prices in their home country, while 24 percent viewed U.S. prices as more expensive than prices in their home country, and 10 percent viewed U.S. prices to be about the same as in the home country. Roughly three in 10 respondents were not sure how their residential clients viewed U.S. home prices comparatively.

[1] The mean or the average price is used to calculate the dollar volume of purchases and can be used as a measure of central tendency. It is found by summing the responses and dividing by the number of responses.

[2] The median is the middle value of the distribution. Half of all purchases fall below this value and half are above this value. Because home values tend to skew to the higher end, the median is often a better reflection of typical market activity.

 

May 2016 Housing Affordability Index

Thu, 07/14/2016 - 11:26

At the national level, housing affordability is down from a year ago as higher home prices cause a slip in affordability. Median family incomes are not rising at the pace of home prices however, historically lower rates provide opportunities for potential home owners.

  • Housing affordability declined from a year ago in May pushing the index from 161.2 to 158.8. The median sales price for a single family home sold in May in the US was $241,000 up 4.6 percent from a year ago.
  • Nationally, mortgage rates were down 7 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 3.5 percent because it saw a slight decline in home prices. The South had the largest decline in affordability of 3.0 percent. The West had a decline in the affordability index of 2.6 percent followed by the Midwest with 2.4 percent.
  • The West had the biggest increase in price at 6.8 percent. The South had an increase of 5.9 percent while the Midwest had a 4.7 percent gain in price. The Northeast had a decline of 0.5 percent.
  • By region, affordability is down in all regions from last month. The Midwest (4.3 percent) had the biggest decline. The South and West had a decline of 3.8 percent and 2.5 percent. The Northeast had the smallest decline in affordability of 0.5 percent.
  • Despite month to month changes, the most affordable region is the Midwest where the index is 197.6. The least affordable region remains the West where the index is 116.7.  For comparison, the index is 162.7 in the South, 164.2 in the Northeast.
  • Currently mortgage applications are up and rates have remained low. Inventory has not picked up and is having an impact on escalated home prices across many metro markets. Home owners are benefiting from equity gains, but renters hoping to get into the housing market are challenged by rising house prices and rising rents. Job gains have been stronger lately, but incomes are not keeping pace with rising home prices. Lending standards are easing helping some first time buyers to enter the housing market.
  • 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 (principle and interest payment to income). See further details on the methodology and assumptions behind the calculation here.

 

Half of Foreign Buyers Paid in Cash in April 2015—March 2016

Tue, 07/12/2016 - 15:21

Fifty percent of reported foreign buyers of U.S. residential property transactions were all-cash sales, according to NAR’s recently released 2016 Profile of International Activity in U.S. Residential Real Estate.

 

Non-resident foreign buyers tend to purchase in cash while resident foreign buyers obtain mortgage financing from U.S. sources because they are likely to have a U.S. based credit history and able to provide the mortgage documentation required by U.S. creditors.[1] Seventy-three percent of non-resident foreign buyers made an all-cash purchase compared to 33 percent of resident foreign buyers.

Foreign buyers from Canada, China, and the United Kingdom were more likely to pay cash. Meanwhile, foreign buyers from India and Mexico, most of whom are resident foreigners buying primary residences, were more likely to obtain mortgage financing from U.S. sources.

Transferring funds from the home country to the United States can be difficult and/or lengthy. Among cases in which a respondent had a foreign client who did not purchase property, 21 percent were associated with cases where the client “cannot move money” and “could not obtain financing”.

[1] Non-resident foreigners are non-U.S. citizens with permanent residences outside the United States. These clients typically purchase property as an investment, for vacations, or other visits of less than six months to the United States. Resident foreigners are non-U.S. citizens who are recent immigrants (in the country less than two years at the time of the transaction) or temporary visa holders residing for more than six months in the United States for professional, educational, or other reasons.

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