Given the choice, members of the millennial generation would rather walk than drive. A recent study by NAR and Portland State University finds that Americans ages 1834 are 12 percent more likely to walk as a mode of transportation compared to driving. The 2015 National Community and Transportation Preference Survey finds that this demographic also prefers to live within walking distance of shops and restaurants and have a short commute, and they are the most likely age group to make use of public transportation.
Millennials may be leading the pack, but 48 percent of Americans overall say they would prefer to live in communities containing houses with small yards but within easy walking distance of local amenities, instead of living in communities with houses that have large yards, but require lots of driving. And while 60 percent of adults surveyed currently live in detached, single-family homes, 25 percent of those respondents said they would rather live in an attached home and have greater walkability.
85% of survey participants said that sidewalks are a positive factor when purchasing a home.
The report finds that sidewalks matter: 85 percent of survey participants said that sidewalks are a positive factor when purchasing a home, and 79 percent place importance on being within easy walking distance of amenities and transportation. Women in particular value walkability in their communities, with 61 percent indicating that having sidewalks with stores and restaurants to walk to is very important.
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Crowdfunding- should it be done to buy a house? Should Buyers Crowdfund Their Way Into Homeownership? In recent years, crowdfunding has become a popular way to pay for a remarkably wide range of ventures. Want to back a sliced-ketchup product, a self-serve cocktail machine, or maybe a charity race? Just pull out your smartphone. But more recently the technology has been moving a bit closer to home—right up, in fact, to your doorstep. Crowdfunding is becoming an increasingly popular way for aspiring home buyers to tap into their networks to come up with down payments.
A new wave of crowdfunding platforms, like Kickstarter for real estate, could be a game changer for younger, tech-savvy generations of home buyers saddled with student loan debt. It’s an idea that is gaining traction, with sites such as HomeFundMe and Feather the Nest, which helps folks raise money for down payments and repairs, and online registries such as HoneyFund, which includes the option of gifting a down payment contribution.
“The No. 1 challenge that we hear from millennials in terms of their ability to buy a home is the down payment,” says Jonathan Lawless, vice president of customer solutions for Fannie Mae. “Crowdsourcing is an interesting new way that a person can generate a down payment, one made possible by technology. … We think there is a great future for it.”
Users who are typically pre-qualified for a mortgage can create personal pages on these platforms, on which they can talk about their journey toward homeownership, illustrated with photos and maybe video. These pages can be shared with family and friends. “[Many] people find they can afford [mortgage] payments, but not the down payment to own a home,” says Christopher George, CEO of CMG Financial, a San Ramon, CA–based mortgage banking firm that launched HomeFundMe late last year.
George, a father of four millennial sons, came up with the idea for HomeFundMe in 2016 after seeing the financial struggles of his kids’ generation. The crowdfunding platform is the only one of the bunch designed solely for down payments and is the first to be backed by mortgage industry giants Fannie Mae and Freddie Mac.
“We’re talking to millennials saying their social network is their net worth,” George says. “Why not allow your sphere of influence [to] help as well?”
What you need to know about a crowdfunded down payment Using gifted funds for a down payment can be tricky—mortgage lenders typically require a letter from the giver, specifying that the money is a gift, not a loan, and there are no strings attached. But using an online fundraising platform can allow buyers to bypass some of that red tape.
Using HomeFundMe, anyone can give up to $7,500 to a campaign without documentation. HomeFundMe also doesn’t charge fees to use the platform, or take a cut of what’s raised. The company will even give buyers $2 for every $1 they raise, up to $1,000, or up to 1% of the purchase price if they undergo home buyer counseling beforehand. Buyers who earn less than their area’s median income can earn up to $2,500, or 1% of the home price.
So what’s the catch? Crowdfunders must get their mortgage through HomeFundMe’s parent company, CMG Financial. They have to close on a home within a year of accepting their first gift. And if they don’t use the money to buy a home, funds marked “conditional on the recipient purchasing a home” are returned to the donor. The crowdfunder can keep the rest.
Other crowdfunding platforms have slightly different business models.
The online gift registry Feather the Nest has helped about half of its 3,000 “nesters” raise down payments since it launched in 2014, according to company officials.
Fees include a 5% transaction fee that goes to Feather the Nest, and a fee of 2.9% plus 30 cents that goes to its payment processing system, Stripe.
At HoneyFund, another online registry, about 6% of the 100,000 mostly millennial couples who use the site each year ask for down payments, according to company officials. There are no fees to use the platform, but users are charged 2.8% processing fees plus 30 cents per gift when the money is moved into their PayPal or WePay accounts.
“A lot of couples are not only saving for their home down payments but also home improvements,” HoneyFund CEO Sara Margulis says.
The dangers of crowdfunding your down payment However, there are risks to buyers relying on crowdfunding to come up with money for a home.
“If somebody is not able to save for their own down payment, it might be because they are stretched financially. But it [also] might be that they are bad at saving,” says Fannie Mae’s Lawless. “The ability to generate savings is a critical aspect of being a responsible homeowner.”
Remember, it was homeowners who couldn’t really afford their homes that led to the financial crisis just over a decade ago. So helping more people who haven’t mastered the art of saving, or who may be so financially stretched that they can’t afford to save, is worrisome.
It’s “a very risky proposition,” says Rick Sharga, executive vice president at Carrington Mortgage Holdings, a real estate company in Aliso Viejo, CA. These kinds of buyers may be “one unexpected car payment, one roof repair, one water heater replacement away from missing a mortgage payment and possibly going into a downward cycle they can’t recover from.” Article taken from Realtor.com
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Owning is becoming more popular than renting. Rising wages, loosening credit standards and demographic shifts are all creating momentum for owning rather than renting.
The homeownership rate rose from the prior year for the fifth consecutive quarter in 2018, according to U.S. Census data released Thursday. Owning a home is becoming more common. It held steady at 64.2%, unchanged from the prior quarter and its highest level since 2014. The share of Americans who own a home rose from the prior year, from 63.6% in the first quarter of 2017.
The homeownership rate rose last year for the first time in 13 years. That marked a turning point in the recovery, during which home prices have risen sharply and credit standards were initially very tight, blocking many renters from buying homes.
The U.S. added 1.3 million owner households over the last year and lost 286,000 renter households, the fourth consecutive quarter in which the number of renter households declined from the same quarter a year earlier. That could pose challenges for apartment landlords, who are bracing this year for one of the largest infusions of new rental supply in three decades. “Landlords should start to take caution,” said Ralph McLaughlin, chief economist and founder of Veritas Urbis Economics, a consulting firm. “There’s going to be downward pressure on rents in the near future.” Rising wages and looser credit standards have helped bolster demand for homes in the last year. Fannie Mae made it easier for borrowers to take on more debt in the middle of last year, which coincided with a significant rise in the homeownership rate.
Demographics trends also increasingly favor homeownership, as members of the large millennial generation are entering their early to mid 30s, when people typically marry, have children and purchase their first home.
Nonetheless, challenges remain. Rising interest rates this year and a tax bill that passed late last year that diminished the tax benefits of homeownership were expected to dampen demand for homes this year.
The rate for a 30-year, fixed-rate mortgage hit 4.58% this week—the highest level since August 2013, according to data released by Freddie Mac on Thursday.
Limited inventory and rising prices are also making it difficult for young people to buy their first homes, as they compete in fierce bidding wars and often lose out to downsizing baby boomers or investors able to pay cash or make large down payments.
The homeownership rate for households headed by someone 35 years or younger declined to 35.3% from 36% the prior quarter. Nonetheless, it rose a full percentage point from 34.3% in the first quarter a year ago—the fifth consecutive quarter it has gone up on an annual basis.
A lack of homes for sale is also creating challenges for would-be buyers. The homeowner vacancy rate declined to 1.5% from 1.7% a year earlier, according to the Census data. That is down significantly from the recent peak of 2.8% during the housing bust in 2008 and close to the level seen in the early 1990s, according to Tian Liu, chief economist at Genworth Mortgage Insurance.
That is likely to push home prices up even further, Mr. Liu said.
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Don’t underestimate the power of privacy. Homebuyers say that privacy and having a space that is solely their own is the leading goal of homeownership.
In a recent survey of homebuyer preferences on Realtor.com, privacy even nudged out the much more practical desire of finding a space that addresses family needs. Privacy becomes increasingly important as buyers age up.
Other big reasons to buy a home: stability, financial investment and physical comfort. Many are also looking to buy simply because they are sick of their current home.
As for the architectural details: Ranches are the most popular style of home (and were dubbed the favorite of 42 percent of respondents—by far, the top choice), the kitchen is the most important part of the home (80 percent say so), and most people are looking for that sweet spot of a three-bedroom, two-bathroom configuration.
While most of these preferences held true through multiple age groups, the 35-to-44 range showed slight variations. They were less interested in the ranch style home, and were more prone to requesting four bedrooms, likely because they have growing children.
The most searched attributes at Realtor.com were large backyards, garages and updated kitchens.
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Outdoor Living Trends: Owners and buyers look to increase value, livability with improved outdoor spaces.
When spotlighting trends in home projects for the coming year, the National Association of Home Builders’ Best of American Living awards pointed to intimate outdoor gathering spaces as one of the Outdoor living trends.
With outdoor fireplaces or fire pits and comfortable seating, small gathering spaces are poised to overtake larger backyards as the most sought-after way to spend time outside while staying at home.
But the best way to incorporate outdoor living into everyday life depends on the homeowner, says Brad Allen, CRS, ABR, a managing partner with The Art of Real Estate in South Carolina.
The biggest returns on cost for outdoor upgrades all revolve around improving lawns, with upgrading to seed lawn bringing the highest return at 417%. Source: National Association of REALTORS® Remodeling Impact Survey 2016
Young families, for example, might still want those wide-open spaces for running and other activities, whereas millennials lean toward outdoor fireplaces with sitting areas for lounging.
Making the Outdoors Marketable Because outdoor spaces have to be tailored to the needs of the buyer, it’s important to find out what your client wants before showing the client something that’s trendy, rather than useful, says Sharon Breslau, CRS, an associate broker with Westwood Metes & Bounds Realty, Ltd. in upstate New York. In her area, situated snugly in the Catskill Mountains two hours north of New York City, outdoor areas tend to focus on the view and streams for second-home buyers. But that doesn’t mean every buyer wants the same view.
“It’s a series of questions I ask up front when I have a buyer,” Breslau says.
Many buyers are going for the trendy intimate spaces, Allen says, particularly if they come with any kind of added entertainment area.
That can mean a deck with a great dining setup, or it could mean a pool, depending on the buyer, says Mary Lane Sloan, CRS, a partner/broker who works with Allen.
Bringing the Outdoors Inside The outdoor space itself isn’t the only way to experience the outdoors—how the inside interacts with the outside matters, too, Breslau says.
“Windows and doors are the eyes looking out of the house, so what do you see when you look out? Do you see a bush, or do you cut that bush down and suddenly you can see the yard and a nice hill or meadow?” Breslau says. “When you do an initial listing appointment, you want to talk about how the inside and the outside correspond, because the seller really wants people to like both.”
In general, outdoor spaces have to go way beyond curb appeal, allowing multiple spaces around the outside that interact with the inside.
Breslau encourages buyers to look for open space directly around the house—being able to walk all the way around a house without running into an obstacle is ideal—because this allows more light inside.
Investing Outdoors A 2016 National Association of REALTORS® report on the impact of remodeling outdoors showed the importance the outdoors is playing in the way buyers see the indoors. According to the report, outdoor remodeling projects add value to a home on resale, while also making homeowners who plan to stay in their homes happier.
Allen tells homeowners to make major changes outdoors only if they’re going to love those changes and find the revamped outdoor space useful, since a dollar-for-dollar recovery upon selling isn’t likely.
“However, a nice outdoor living space will most likely make the home more appealing to buyers, which could cause a buyer to purchase the home when compared to a house without an outdoor living space,” Sloan adds.
Year-round Outdoor Living In warm climates, outdoor spaces can be used all year without issue. Allen currently is working with a new-construction buyer who plans to install a 14-foot-wide accordion-style sliding door that will open her basement recreation room straight onto her patio and pool.
And outdoor kitchens or fireplaces on porches are useful in all warmer-weather climates as long as they’re covered to protect from rain, Sloan says.
In places like New York, though, warmth isn’t a guarantee for most of the year, so homeowners have to think outside the box to get more use out of their outdoor spaces, Breslau says. Three-season screened-in porches allow people in colder-weather areas to enjoy the outdoors for at least a little longer in the spring and fall, but to make those spaces year-round, all they need is some insulation and a gas heater to bump up usage in the winter season.
“People love them, especially if they’re right off the kitchen,” Breslau says. “Again, it’s that connection from the indoors to the outdoors. People love having the ability to step outside and feel like they’re still at home—they feel that they’re getting more use out of their house.” ￼
Private World Outdoor areas are great for having fun and relaxing, but if neighbors are too close by, they can also invite unwanted guests into the activities.
Privacy concerns are leading some homeowners to find creative ways to keep their outdoor areas out of the public eye, especially in areas where zoning regulations restrict fencing.
“A lot of people use bushy trees like giant green arbor vitae or Leland cypress,” says Brad Allen, CRS, ABR, a managing partner with The Art of Real Estate in South Carolina. “I have also seen sellers install lattice-style screens on the sides of their decks and porches.”
Sharon Breslau, CRS, an associate broker with Westwood Metes & Bounds Realty, Ltd. in upstate New York, also suggests having landscapers plant anything that grows big, “things that are hedgy and easy to pop in that add a little more privacy,” including rose of Sharon or jasmine, or anything viney on a trellis that can shield the sight of any neighbors.
“Privacy means something different to every person who you ask,” Breslau says. “So, I always ask: If you’re standing on your deck at your new house, can you see the neighbors? Are they off in the distance, or are you totally alone and can’t see anyone at all?”
Breslau also suggests using fountains to mute noises, especially a busy road in the distance. That adds another level of privacy and is helpful for Outdoor Living Trends that buyers love. By Megan Craig
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Economists and real estate professionals ruminate on whether to invoke the dreaded B-word and how to react as a hot market continues. Home prices are accelerating, and some markets are now considered overvalued. As home values surge, affordability is rapidly eroding. Are market bubbles starting to percolate in some regions?
Many housing markets are entering a fifth or sixth year of strong sales conditions, with low inventory and continuing high annual price escalations. Add to the mix an extraordinarily long bull market in stocks, and some buyers, agents and brokers are starting to ask whether the residential real estate business is too good. Is a housing bubble in the making? And if so, what can brokers and agents do to mitigate the risk to their clients and to their own real estate businesses?
“We have certainly experienced economic and real estate market bubbles before, which I define as a disconnect between the pricing for products and the underlying fundamentals that should define their values,” says George Ratiu, the National Association of REALTORS® managing director of housing and commercial research. “What happened in the housing market in 2005–2006 could be characterized in similar terms, with a disconnect between prices that people assumed would continue to go up and the underlying fundamentals in the housing market at that time.”
Odds of a Repeat Bubble Are Low But Ratiu and other economists and real estate analysts are quick to add that the housing market decline that occurred in much of the country between roughly 2005 and 2012, depending on the particular market, was among the severest on record. They view the likelihood of the reoccurrence of an event of similar breadth and magnitude as very small in the foreseeable future.
“As in 2006, today’s home prices are high relative to income and to rent in many markets, but there the similarity ends,” says Frank E. Nothaft, chief economist at Irvine, California-based real estate data and analysis firm CoreLogic. “There are many more differences. For one, interest rates [and capitalization rates] are much lower, so a given income [or rent stream] is consistent with somewhat higher prices. Second, no- and low-doc lending, subprime and no-down-payment lending facilitated by second liens, all of which were common in 2006, have largely vanished from today’s market. Third, the speculative ‘flipping mania’ of 2006 is absent from most metro areas.”
But Local Exceptions Are Possible Still, while another pervasive Great Recession-like bubble event is viewed as unlikely by many, all real estate is local and that generally applies to bubbles, too. Allan Weiss, founder and CEO of Weiss Analytics LLC, a Natick, Massachusetts-based real estate information and analysis firm, and some other real estate market analysts say that while a major national bubble is unlikely, they do have concerns that bubble-like conditions may be emerging in some markets or property types or price range subsets within those markets.
“When we look at our affordability index, we definitely see evidence of bubbles forming in many markets across the country,” says Daren Blomquist, senior vice president of Irvine, California-based real estate information and analysis firm ATTOM Data Solutions (formerly RealtyTrac). “An index of under 100 for a market means that it is less affordable than it has been in the past. Looking at the most recent quarter, the second quarter of 2017, of the more than 400 counties in our most recent quarterly index, 45 percent of them are below 100, which is definitely more markets than normal.”
How to Recognize a Bubble It is not easy, but there are ways to recognize bubble conditions in a given market. Among the key factors that economists, analysts, agents and brokers say would highlight the danger of a bubble are:
• Multi-year large annual price increases • A sudden increase in inventory and/or reduction in sales volume • Extensive market participation of investors, rather than owner-occupants, as buyers. • Extensive market participation of relocation buyers from more expensive locations • Subpar underwriting and appraisal practices • Sudden shocks to the national economy or local economics of the market
How to React Communicating with clients about the risk of a bubble is a sensitive issue. Rather than invoke the word “bubble,” a highly charged word likely to frighten buyers, a better approach may be conducting a more nuanced discussion of price risk and sales conditions, says Michelle Gordon, CRS, a Grand Rapids, Michigan-based agent at Distinctive Homes.
With respect to sellers, it may mean advising clients of the possibility of a bubble and advising them to sell at a good price before a possible bubble pops, rather than holding out too long for a “best” price that significantly delays a sale and risks bubble exposure, says Judie Seitz, CRS, a Cincinnati, Ohio-based agent at Comey & Shepherd REALTORS®.
There are also steps that real estate professionals can take to protect their practices. Taking steps to diversify a practice by selling in a wide range of property types and price ranges can reduce the danger of exposure to a downturn in a submarket, says Jeff Dowler, CRS, an agent at Carlsbad, California-based Solutions Real Estate.
Bubbled Waters Real estate analysts vary in their estimation of which markets might have the greatest risk for bubbles or price corrections. During the first half of 2017, many of the metro areas that bear closest scrutiny tended to be in Florida, especially because of the relatively large price appreciation and elevated levels of investor activity, according to a CoreLogic study, the CoreLogic Market Conditions Indicator.
An ATTOM Data Solutions list of the 20 markets with the lowest affordability indexes in the second quarter of 2017, equating to markets where prices may be overinflated and affordability is out of line with historic norms, has the top spots dominated by Colorado markets, but it also includes Flint, Michigan; Knoxville, Tennessee; and Tarrant County, Texas—which are all among the top 10, says Daren Blomquist, senior vice president of ATTOM Data Solutions (formerly RealtyTrac).
Blomquist notes that markets low on ATTOM Data Solutions’ affordability index list suggest that traditional overvaluation suspects such as New York City and San Francisco are possibly being overtaken by previously more conservative middle-America markets.
By David Tobenkin: a freelance writer in the greater Washington, D.C., area.
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Blockchain technology could revolutionize the real estate business model.
With Bitcoin making headlines, a new word has entered the business lexicon: “blockchain.”
Much like the internet two decades ago, blockchain is a relatively new technology with seemingly endless possible applications. But outside the techie world, people have a limited understanding of how it actually works and whether it should be trusted.
Still, some experts see blockchain’s potential to completely change how real estate transactions are handled.
How blockchain technology works A blockchain is essentially a decentralized database with continuously updating digital records. Instead of using a central depository of information, blockchains use a network of databases that are constantly synchronized and available to those on the network (all via the internet).
Much like the internet itself, blockchain networks can be either private or public, says David Conroy, R&D lab engineer with the National Association of REALTORS®’ Center for REALTOR® Technology. The private version works like a private business’s intranet system, with information available only to those with a login to that specific network. Public blockchains are accessible by anyone, without a login needed.
In at least a couple of instances, agents have made and closed deals from start to finish exclusively using blockchain technology.
In September 2017, Sheryl Lowe of Kuper Sotheby’s International Realty in Austin, Texas, became the first broker to close on a home purchased entirely with cryptocurrency (Bitcoin) when it represented the buyer of a custom home.
Blockchain gets its name from the way the digital transactions are completed, by being added to blocks with other transactions being carried out at the same time, then cryptographically protected. The blocks are “validated” using complex coded problems, and once the coding is finished, the new block is linked to older blocks, creating a chain that shows all the transactions made since the start of that blockchain.
Because the chain is constantly checked and updated across the entire network, everyone sees the same information at the same time, and everyone can follow each piece of the transaction as it occurs.
The downside of Blockchain Blockchain sounds failsafe, right? It is, except for one sticky problem: People still largely control it. That means individuals’ blockchain access codes are only as safe as they’re kept, says Ridaa Murad, founder of Breakform|RE in El Segundo, California—a common problem with current passcoding systems.
Of course, another huge issue facing blockchain technology is similar to that faced by the internet in 1994: People don’t really understand how it works, and therefore don’t trust their transactions to be handled correctly through this new and seemingly complex technology.
“Companies are seeing the potential, but people aren’t really secure about putting all that information out there in this way yet,” Conroy says.
Is blockchain the future of real estate? We’re still far from having all transactions done on the blockchain, Murad says, mostly because so few people understand how the technology works. Also, he says, despite the fact that it’s superior in many regards compared to other similar technologies currently in existence, that doesn’t guarantee that it will become commonly used in businesses. People will need to adapt.
But Conroy sees it as the obvious evolution of the real estate business model.
“It will revolutionize how real estate is transferred. It will be one of the most impactful technologies for sure,” he says. “It will increase the speed of transactions, reduce risk, make customers more informed … It has the biggest opportunity to create positive change.” A little farther from home, in Ukraine, an entire transaction was completed using smart contracts on the Ethereum blockchain, showing how quickly and securely the technology works for this purpose. That home was sold, perhaps unsurprisingly, to Michael Arrington, co-founder of the tech news site Tech Crunch.
“It’s only being done right now by absolute cryptonerds,” says Ridaa Murad, founder of Breakform|RE in El Segundo, California. “The one in Ukraine, this is just a guy trying to show everyone it can be done way faster, way better, way cheaper.”