Real Estate Again Seen as Best Investment

We are almost back to ‘pre-housing crash’ home values. The inventories of distressed properties (foreclosures & short sales) are shrinking dramatically. The economy is improving. The job numbers are headed in the right direction.

The big question that still remains: Have Americans regained their confidence in real estate as a worthy investment?

According to a survey conducted by Princeton Survey Research Associates, Americans have put real estate back into first place as the best of all investments.

Here are the results of the survey:

Bottom Line

Homeownership never lost its place as a key component of the American Dream for a host of financial and non-financial reasons. It is good to see that it has regained the top spot as best overall investment.

Posted by The KCM Crew on Keeping Current Matters

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Top 10 Markets Powered by Serious Job-Creation Mojo

The best spring housing market we have seen since 2006 is underway, with above-average price appreciation. But unlike the 2003–2006 housing bubble, these gains are real and sustainable. How real? Let’s take a look at the 10 best large markets where job growth is powering home price increases.

Top 10 Markets Powered by Serious Job-Creation Mojo

The main factor driving home price acceleration across the nation is strengthening demand. Nearly 3 million jobs have been created in the past 12 months, and (not coincidentally) consumer confidence is higher.

These 10 markets have major job-creation mojo. They stand out among the 100 largest housing markets in the country, because they have the highest level of job creation in the past three years, as well as above-average price appreciation. Furthermore, they are also forecast to see more of such growth in the year ahead.

Here’s a closer look at them, in alphabetical order, with their key distinguishing statistics. Figures for multiyear growth are given as compound annual growth rates.

Atlanta–Sandy Springs–Roswell, GA

Employment growth, 2011–2014: 1.7%

Median home price growth, 2011–2014: 20.3%

Median list price in May: $238,000

Median list price growth, May 2015 vs. May 2014: $13.3%

Market size rank:  9

Atlanta took the most time to recover from the housing downturn, but it has seen an eye-popping 20.3% compound annual growth rate in median home price over the past three years as the market bounced back from the bottom in 2011. Now the diversified local economy is seeing strong gains driven by professional and business services, and construction activity should start to provide even more economic growth going forward. The market’s affordability is a draw for new households and employers alike.

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Austin–Round Rock, TX

Employment growth, 2011–2014: 3.7%

Median home price growth, 2011–2014: 8.5%

Median list price in May: $374,000

Median list price growth, May 2015 vs. May 2014: 20.7%

Market size rank: 34

Austin has been no stranger to top market lists throughout the past decade, as Texas has been one of the few reliable states for economic growth. Austin’s biggest employment sector is government, but professional and business services has been powering the more recent growth. Austin also has the highest household formation rate as a result of the employment growth.

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Charlotte–Concord–Gastonia, NC–SC

Employment growth, 2011–2014: 2.7%

Median home price growth, 2011–2014: 8.4%

Median list price in May: $232,000

Median list price growth, May 2015 vs. May 2014: 14.9%

Market size rank: 24

Charlotte is one of the most affordable markets in the nation, even with its strong price appreciation. The median list price was up 15% over last year in May, while the median age of inventory dropped six days to 48. The diversified local economy should be seeing even stronger growth in employment in the year ahead.

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Dallas–Fort Worth–Arlington, TX

Employment growth, 2011–2014: 2.9%

Median home price growth, 2011–2014: 8.2%

Median list price in May: $278,000

Median list price growth, May 2015 vs. May 2014: 19.3%

Market size rank: 4

Dallas–Fort Worth is the largest market with major mojo. Dallas has been one of the healthiest housing markets in the country over the past decade and did not experience as severe declines in home values as other markets did. The job market is relatively diversified, and growth in jobs is expected at an even higher pace in the year ahead.

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Denver–Aurora–Lakewood, CO

Employment growth, 2011–2014: 2.9%

Median home price growth, 2011–2014: 10.8%

Median list price in May: $445,000

Median list price growth, May 2015 vs. May 2014: 11.8%

Market size rank: 20

Denver reigns as the hottest housing market in the country so far this spring. While the market did see growth from the energy sector in recent years, it remains relatively diversified with professional and business services as the primary driver of job growth. Jobs and prices should continue to grow in the next year at better than the national rate.

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Grand Rapids–Wyoming, MI

Employment growth, 2011–2014: 4%

Median home price growth, 2011–2014: 9.8%

Median list price in May: $184,000

Median list price growth, May 2015 vs. May 2014: 14.3%

Market size rank: 53

Grand Rapids is the smallest market on our mojo list. Its largest employment sector is educational and health services, but professional and business services has been powering the growth rate of 4% over the past three years. In addition, its strong affordability is a draw.

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Orlando–Kissimmee–Sanford, FL

Employment growth, 2011–2014: 3.6%

Median home price growth, 2011–2014: 12.5%

Median list price in May: $234,000

Median list price growth, May 2015 vs. May 2014: 13%

Market size rank: 25

Orlando has seen substantial economic recovery in recent years, but it remains relatively affordable. The local job market is dependent on leisure and hospitality. Affordability and strong growth ahead should drive substantial population and household growth in the year ahead.

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Salt Lake City, UT

Employment growth, 2011–2014: 2.8%

Median home price growth, 2011–2014: 10.3%

Median list price in May: $298,000

Median list price growth, May 2015 vs. May 2014: 14.2%

Market size rank: 52

Salt Lake City is the second smallest market on our list, ranked just ahead of Grand Rapids at No. 53. Despite its size, the local job market is very diversified, and nearly 3% annual growth in jobs over the past three years has powered over 10% annual gains in home prices. This year’s market is showing no signs of slowing down those gains.

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San Francisco–Oakland–Hayward, CA

Employment growth, 2011–2014: 3.2%

Median home price growth, 2011–2014: 16.8%

Median list price in May: $749,000

Median list price growth, May 2015 vs. May 2014: 8.7%

Market size rank: 11

San Francisco is the second-hottest housing market this spring. The type of employment that the Bay Area creates has driven a substantial increase in high-income households: Those with an annual income of $250,000 or more have almost tripled since 2000. This year’s employment growth should end up very similar to the recent three-year trend.

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San Jose–Sunnyvale–Santa Clara, CA

Employment growth, 2011–2014: 4.1%

Median home price growth, 2011–2014: 15.6%

Median list price in May: $898,000

Median list price growth, May 2015 vs. May 2014: 27.9%

Market size rank: 36

San Jose  represents the heart of Silicon Valley, and ranks as the third-hottest housing market this spring. The market is highly concentrated in the tech sector, but that sector’s growth has had a substantial impact in increasing the number of high-income households. In 2000, 4% of the households in the market had an annual income of $250,000 or more. Today it’s 12%.

These 10 markets show just how important job growth is to strong demand for housing. And with housing and new construction producing significant gains, a virtuous economic cycle will be reinforced.

Published by Jonathan Smoke on realtor.com.

The 20 Hottest U.S. Real Estate Markets in May 2015

The housing market is chugging ahead, with even higher home prices and more buyer activity—and in May, we’re seeing more than the ordinary seasonal uptick.

The 20 Hottest U.S. Real Estate Markets in May 2015

“On the demand side, we are seeing traffic and searches on realtor.com® continue to set new highs,” said our chief economist, Jonathan Smoke, who did a preliminary analysis of our site’s data in May. Visits and searches are expected to be up more than 50% and 35%, respectively, year over year.

Helping create more opportunities for buyers, the listings inventory is now growing faster, at 4% over April—but it’s still down compared with last year, so buyers will need to keep on their toes. In part because of the limited inventory, the median list price increased nationally to $228,000, up 7% over the previous year and 1% over April. At the same time, homes are moving more quickly: Median days on market, now at 66, continued a sharp decline, down 11% year over year and 10% month over month.

Smoke’s team also ranked the nation’s 20 hottest real estate markets for buyers and sellers. Looking at the nation’s 300 largest markets, the team used the number of views per listing on realtor.com to gauge demand, and the median age of inventory to assess supply.

California dominated the list, with half of the country’s 20 hottest real estate markets, because of its tight supply of homes and economic-powered growth in demand. San Francisco and San Jose maintain the second and third spots from the April rankings, while the state capital, Sacramento, leaped from No. 21 in April to No. 12 in May.

“Sacramento typically follows strong growth in Silicon Valley and the San Francisco Bay Area, as it is a relatively more affordable alternative,” Smoke said. “But this market has had strong employment growth above the national average and is seeing strong household growth as a result.”

Three states pulled off a two-fer on the list: Texas, with No. 4 Dallas–Fort Worth and No. 16 Austin; Colorado, with No. 1 Denver and No. 13 Boulder; and Michigan, with No. 9 Ann Arbor and No. 10 Detroit. These markets’ success also reflects economic-powered gains, but the Texas and Colorado story is more of a continuing saga that shows the resilience and diversified nature of the states’ economies despite the declines in oil. Michigan’s performance is related to economic recovery and very strong affordability.

Denver resoundingly maintained the top ranking as inventory there shaved six days off the median age while listing views grew 7% over April. Like Dallas, Denver is experiencing substantial economic growth, and the tight supply of housing is resulting in the fastest-moving inventory in the country.

The 20 Hottest Real Estate Markets in May 2015

Market May Rank April Rank
Denver-Aurora-Lakewood, CO 1 1
San Francisco-Oakland-Hayward, CA 2 2
San Jose-Sunnyvale-Santa Clara, CA 3 3
Dallas-Fort Worth-Arlington, TX 4 4
Vallejo-Fairfield, CA 5 5
Boston-Cambridge-Newton, MA-NH 6 6
Santa Cruz-Watsonville, CA 7 8
Santa Rosa, CA 8 7
Ann Arbor, MI 9 9
Detroit-Warren-Dearborn, MI 10 11
San Diego-Carlsbad, CA 11 10
Sacramento-Roseville-Arden-Arcade, CA 12 21
Boulder, CO 13 17
Fargo, ND-MN 14 12
Los Angeles-Long Beach-Anaheim, CA 15 15
Austin-Round Rock, TX 16 14
Oxnard-Thousand Oaks-Ventura, CA 17 13
Manchester-Nashua, NH 18 31
Columbus, OH 19 22
Stockton-Lodi, CA 20 38

Published by Cicely Wedgeworth on realtor.com.

$217,726: That’s What You’ll Save (Give or Take) If You Buy a Home Now

Buying a home costs money. Lots of money. There’s the down payment and the monthly mortgage payment and the maintenance and taxes and the insurance and… Are you overwhelmed yet?

What You’ll Save (Give or Take) If You Buy a Home Now

Published by Rachel Stults on realtor.com.

It might seem like so much that you just want to put off the house hunt and sign that yearlong lease with your landlord (even though he upped your rent 25% and will likely do the same next year).

But this is going to blow your mind: Even with all of those costs, you still stand to save more than $200,000 over the next 30 years if you buy right now.

“But that’s over the course of 30 years!” you say. “I’m thinking about my money right now!” you say.

Well, get this: Wait just one year, and you throw nearly $19,000 in savings down the drain. The penalties are so high because mortgage rates are forecast to increase and because home prices are rising quickly, according to our chief economist, Jonathan Smoke.

Yep, that’s right. There’s a financial benefit—and, similarly, a financial penalty—forevery single day you pay your landlord instead of your mortgage company. At a national level, the 30-year financial benefit of owning today is $217,726, according to our economic data analysts, who crunched the numbers to determine the relative merits of buying vs. renting. (Their work doesn’t capture qualitative advantages such as more control over your living situation, flexibility with pets, and, generally, more options—all things many potential home buyers would argue are equally, if not more, important when deciding whether to take the plunge.)

Postpone for one year, and you’re losing out on an estimated $18,672 in savings. Delay for three years, and that figure jumps to $54,879.

“We’re at a critical juncture: Rents, home prices, and mortgage rates are all expected to rise significantly over the next several years,” Smoke says. “That means the cost of delaying homeownership will go up even more sharply, if you wait three years or even one. It’s much like the decision to start contributing to a 401(k). Delay contributing, and you lose out on the compounding returns.”

‘Financial calculus’ confirms it’s wise to buy ASAP

Smoke and his team used a lot of factors to come up with these estimates, and they made quite a few assumptions as well.* For instance, they assumed that any money saved by renters would be invested, and that the investment would enjoy a compound annual growth rate of 5% (that’s consistent with conservative long-term expected market returns).

We know—these are some pretty big assumptions. How many renters are actually saving and investing? But we’re telling you about these assumptions, because the bottom line is this: Our data team stacked the deck against owning and still came out with eye-popping figures in favor of buying.

“The financial calculus confirms it’s wise to buy—and buy as soon as possible,” Smoke says.

That’s because no matter how you slice it, you can’t deny a few key facts that make the case for buying: Nationally, it’s cheaper right now to buy than to rent, home prices are expected to appreciate, and, while renting is subject to inflation, homeownership costs are locked.

In some markets, financial ‘penalty’ is over $1M

But, as always, it depends on where you go.

For example, in Bismarck, ND, the financial benefit of buying is actually negative. That means you’d spend $12,350 more over the next 30 years to buy instead of rent. That’s because in places such as Bismarck, rents are low, and while home prices have risen dramatically over the past few years, they aren’t expected to rise much in the future. That seems like an incentive to buy, right? Not necessarily. Think about this in terms of home appreciation. Because home prices may have peaked for the foreseeable future, you don’t stand to gain much from owning a house here.

The following markets have the least financial benefit over the next 30 years:

1. Bismarck, ND: –$12,350
2. Dallas–Fort Worth, TX: $830
3. Grand Forks, ND–MN: $4,999
4. Kahului–Wailuku–Lahaina, HI: $7,965
5. Houston, TX: $8,951

But travel west to California and you’ll see an entirely different picture. In Santa Cruz, for instance, you stand to save more than $1 million over the next 30 years if you buy today. That’s because both rent and home prices are skyrocketing, thanks to strong economic drivers such as job growth, population growth, and household growth.

But it’s still hard to get a foot in the door: A median-income household in Santa Cruz could afford less than 10% of the homes available for sale there.

In order to realize a positive financial benefit from buying a house, owners have to wait for “break-even time periods”—when the transaction costs of buying and selling cancel out. Nationally, that wait time is just over three years. In markets that have higher home price to rent ratios, such as San Jose, CA, and New York City, owners normally need to wait longer—as long as six to seven years.

“From a pure financial perspective, you have to be committed to staying longer term,” Smoke says about those high-cost markets. “That’s one of the reasons why rents are also high and getting higher.”

The 30-year financial benefit of owning in the following markets exceeds $500,000:

1. Santa Cruz–Watsonville, CA: $1,006,413
2. Santa Rosa, CA: $883,068
3. San Jose–Sunnyvale–Santa Clara, CA: $782,144
4. Urban Honolulu, HI: $714,748
5. Napa, CA: $712,192

So, in some places you win, in other places you lose. That kind of means it all balances out, right?

Nope, Smoke says: Nearly 90% of the markets (335 of ‘em) produce a financial benefit of at least $100,000 from owning over 30 years. In addition, almost a quarter of the nation’s markets reap a financial return greater than the national average.

We’re not exactly math majors, but we’re picking up what Smoke is putting down. It might feel challenging to come up with a down payment, but we never saw the savings spelled out in such plain language. So BRB—gotta go buy a house.

*Our data analysts used the following assumptions to calculate the relative merit of buying vs. renting:

They factored in a 20% down payment with a closing cost of 3%. Maintenance and annual improvement costs are 1%, and the opportunity cost of capital is 5% (average U.S. investors required return on equity investments).

They assumed a marginal tax of 25% and the cost of selling a house is 8% of the sale price. Capital gains tax is 15% beyond $500,000 (for married couples). Rent brokerage is 1% of first year’s rent and rent insurance is 1% of monthly rent.

Rents Rising Faster Than Home Values

The last time this happened, home values were finally heating up after the housing bust. This time, they’re cooling off.

Rents Rising Faster Than Home Values

Buying a home is already far more affordable than renting one, and that imbalance could worsen as rents outpace home values for the first time in years.

In April, rents nationally rose an average of 4 percent compared to home values increasing by just 3 percent year-over-year, according to new data from Zillow.

One result: Renters who were considering buying are now taking that first step.

“We finally have more buyers who are serious now,” said Cyndi Mino, an agent with First Team Real Estate Agents in Huntington Beach, CA. “Landlords are raising rents ridiculously high, and people are saying, ‘That’s it — it’s time to buy.’”

In Mino’s area, first-time home buyers are finding 2-bedroom condos for $350,000 and 2-bedroom town homes for about $450,000.

Although millennials are expected to be the largest home-buying group in 2015, many first-time buyers are older, Mino said. “They never thought they would or could buy, but with rents going up, if they can save enough money to buy, they’ll pay less for a mortgage [than for rent].”

The last time this happened, it went on for a while — but the situation was considerably different.

In the wake of the housing bust, home values declined before rebounding. Rents, maintaining steady growth, easily stayed ahead.

That changed in April 2013, when home values finally heated up enough to pass rents. By April 2014, home values were sprinting at 8.8 percent year-over-year, while rent gains remained steady between 2 percent and 3 percent on an annual basis.

Now home values are cooling off, while rents pick up a little — and that’s enough for the tortoise to pass the hare.

For more information about rents and home values, visit Zillow Research or follow and ask questions of Zillow Chief Economist @StanHumphries on Twitter.

Rents Outrunning Home Values

Published by Melissa Allison on Zillow Blog.

Spring Has Sprung: Existing-Home Sales Are Up—and Prices, Too

The spring season is clearly a busy one: Existing-home sales climbed in March to their highest level in 18 months, sending the price of a home up 9% over a year earlier, according to a report today from the National Association of Realtors®.

Spring Has Sprung- Existing-Home Sales Are Up—and Prices, Too

Existing-home sales rose from 4.89 million in February to 5.19 million in March, a 6% increase across the country, driving prices higher. In the Midwest, prices rose nearly 10% from a year ago. In the South, prices climbed more than 9%; in the West they rose 8%. That may be good news for homeowners, but less so for buyers.

“There’s no question that affordability is declining in tandem with prices rising,” said Jonathan Smoke, chief economist for realtor.com®. “That said, we see more than half of inventory nationally affordable for median-income households, so there is affordable inventory.”

According to the NAR, inventory climbed about 5% to 2 million existing homes available for sale. While that’s up 2% from last year, it’s still just a 4.6-month supply of houses at the current sales pace. A six-month supply is considered a healthy market.

About 40% of the homes sold in March were on the market for less than a month, according to NAR.

All-cash sales were down, according to the report, while the share of first-time buyers was up slightly. Condo sales showed the biggest improvement, with an 11% increase in sales, while single-family home sales rose 5.5%.

The Midwest led the nation with a 10% monthly sales increase. Monthly sales rose just under 4% in the South and 6% in the West.

Smoke expects sales activity to continue rising, because in most parts of the country it’s still cheaper to buy a house than it is to rent an apartment. With mortgage interest rates still hovering around 4%, affordability is not a factor; however, the market is expecting interest rates to rise this summer. “When that happens, it will be a double-whammy,” said Smoke as home prices and interest rate hikes will combine to make homes less affordable.

To buyers searching for and not finding a home in this tight inventory environment, Smoke says, be patient but also be prepared to act. “Tight supply situation often leads to multiple offers on high-demand homes, so get pre-approved for a mortgage and be ready to put an offer as soon as you find that dream home.”

Published by Chrystal Caruthers on realtor.com.

We Need You(r House)!!

Though the real estate market has improved, we still have one item holding it back from a full recovery – a robust supply of homes for sale.

We need your house

Demand has increased dramatically. At the same time, housing inventory is decreasing especially at the lower price points.

The National Association of Realtors (NAR) recently revealed that there is a pent-up seller demand caused by the uncertainty created by the housing crisis of the last decade.

What does that mean to you?

Houses listed today sell quickly. With prices still below peak values of 2007 in many parts of the country and mortgage interest rates at historic lows, this may be the perfect time for your family to make the move to the dream house you always wanted – whether that’s a larger home or that vacation/retirement home you have been looking at.

What does that mean to the economy?

Housing has always been an essential part of the U.S. economy. As we have reportedbefore, real estate not only provides housing for families. It is often the greatest source of wealth and savings for many. The recent increase in real estate sales has led to an increase in real estate prices. This has increased the value of everyone’s’ home, whether they are selling or not. This leads to an increase in consumer confidence which in turn leads to an increase in consumer spending. Plus, each home sale automatically puts money into the economy.

NAR compiled data from research conducted by the Bureau of Economic Analysis & Macroeconomic Advisors on the economic impact of a home purchase.

After reviewing the data, they concluded that the total economic impact of a typical home sale in the United States is an astonishing $52,205.

The more homes that sell, the better the economy.

Bottom Line

In order for the U.S. economy to get better, we need to sell more homes. Perhaps, it makes sense for one of those homes to be yours.

If you have considered selling but are still a little nervous, now might be the time to sit down with a real estate professional familiar with your market and see what your options truly are.

Published on Keeping Current Matters.