Young Home Buyers Will Lead Housing Market Recovery, Says NAHB

Generation X –young families and adults ages 31 to 45 – are likely to lead the home buying recovery as it gets underway, according to real estate experts who spoke at an educational webinar produced by the National Association of Home Builders (NAHB) in partnership with Builder magazine

These potential home buyers are most likely to think it's a good time to get off the fence – and have strong opinions about the design features their new homes will include.

At 32 percent of the population of home-buying age – generally defined as those who are at least 30 years old, the Gen X population cohort isn't the largest, but it's the most mobile, said presenter Mollie Carmichael, principal of John Burns Real Estate Consulting in Irvine, Calif. "They are in full force with their careers and they need to accommodate growing families," she said.

In sharp contrast, even though they constitute 41 percent of prospective home buyers, Baby Boomers continue to wait for the market to improve, and their decisions to delay retirement also delay their decisions to downsize into a smaller home, Carmichael said.

Most of the 10,000 buyers and potential buyers in 27 metro areas that the consulting company surveyed were optimistic about a new home purchase, with between 85 percent and 89 percent saying that it was a good time to buy a home. Only 13 percent said they thought home prices would continue to fall, further evidence that it's "not all about price," she said. "They want something compelling, from a design or personalization standpoint," said Carmichael.

In addition, though the average home size is shrinking, a majority of prospective buyers said they would like a bigger home than the one they have. "These are first-time buyers or younger families looking for more room to grow," she said.

Seventy percent said that they were willing to pay $5,000 more for a green home, but those responding to the survey said that they expected new homes to already have many green technology features. They also said they would pay a premium for dark wood cabinets, a separate tub and shower and a fireplace in the living room, and more preferred a great room over formal spaces.

And while community amenities are important to Gen X buyers, 46 percent said they prefer a home in a large-lot, suburban development, versus the 21 percent looking for a traditional or "walkable" neighborhood.

Webinar panelist Heather McCune, director of marketing at Bassenian/Lagoni Architects in Newport Beach, Calif., also emphasized that design will be important in generating sales in the emerging marketplace. "The notion of 'build it and they will come' no longer works. Design matters," she said.

McCune said buyers are looking for homes with a connection between indoor and outdoor spaces, even in colder climates, to create the perception of greater home size, even if the space is only usable for part of the year. They also want more storage, an open floor plan and flexibility in the garage.

"While Gen X numbers are smaller than the birth cohorts before and after them, their numbers have been enlarged by steady immigration," said NAHB Chief Economist David Crowe. "Gen X may wait longer than their predecessors to establish their own household or buy a home because of the recent recession impacts, but the trends are still likely to occur as they have for past generations."

Clemson University Introduces Tool for Tracking Abandoned Developments

Clemson University has developed a website and interactive online tool to identify and track abandoned residential construction sites. The researchers developed the website to identify potential sources of sediment pollution. To view the website, click here.

Federal Housing Finance Agency Reports Mortgage Interest Rates Up Slightly

The Federal Housing Finance Agency this week reported that the National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders, used as an index in some ARM contracts, was 4.79 percent based on loans closed in February. This is an increase of 0.08 percent from the previous month.

The full report on the Contract Rate series can be viewed by clicking here.

The average interest rate on conventional, 30-year fixed-rate mortgage loans of $417,000 or less increased 12 basis points to 4.97 percent in February. These rates are calculated from the FHFA’s Monthly Interest Rate Survey of purchase-money mortgages. These results reflect loans closed during the Feb. 22-28 period. Typically, the interest rate is determined 30 to 45 days before the loan is closed. Thus, the reported rates depict market conditions prevailing in mid- to late-January.

The contract rate on the composite of all mortgage loans (fixed- and adjustable-rate) was 4.80 percent in February, up 10 basis points from 4.70 percent in January. The effective interest rate, which reflects the amortization of initial fees and charges, was 4.92 percent in February, up 11 basis points from 4.81 percent in January.

This report contains no data on adjustable-rate mortgages due to insufficient sample size.

Initial fees and charges were 0.80 percent of the loan balance in February, unchanged from January. Thirty percent of the purchase-money mortgage loans originated in February were "no-point" mortgages, down from 34 percent in January. The average term was 27.2 years in February, down 0.1 years from 27.3 years in January. The average loan-to-price ratio in February was 74.7 percent, up 1.3 percent from 73.4 percent in January. The average loan amount was $216,900 in February, up $14,500 from $202,400 in January.

U.S. Monthly House Price Index Declined 0.3 Percent from December to January

U.S. house prices declined 0.3 percent on a seasonally adjusted basis from December to January, according to the Federal Housing Finance Agency’s monthly House Price Index. The previously reported 0.3 percent decrease in December was revised downward to a 1.0 percent decrease. For the 12 months ending in January, U.S. prices fell 3.9 percent. The U.S. index is 16.5 percent below its April 2007 peak and roughly the same as the May 2004 index level.

The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine Census Divisions, seasonally adjusted monthly price changes from December to January ranged from -1.3 percent in the Mountain and South Atlantic Divisions to +1.6 percent in the West South Central Division.

Monthly index values and appreciation rate estimates for recent periods are provided in
the table and graphs on the following pages.

Click here for complete historical data.

NAHB Chief Economist Delivers Positive News for Upstate Housing Market

More than 100 members and guests of the Home Builders Associations in the Upstate assembled this week to hear the housing market forecast for the Upstate, the state, and the nation.

Dr. David Crowe, Chief Economist of the National Association of Home Builders, delivered a cautious outlook for the nation, but a more optimistic outlook for the Upstate. Members of the Home Builders Association of Spartanburg, Home Builders Association of Oconee, Mortgage Bankers of the Upstate, and the Home Builders Association of Greenville learned about the factors that have influenced the housing market and the contrast between the Upstate and the nation.

Dr. Crowe reported that housing starts in the Greenville MSA have already begun recovering, and will rise to 3,000 in 2012 and 4,000 in 2013, a historically normal level of activity. South Carolina as a whole also is rebounding, albeit more slowly, and will exceed 20,000 starts by 2013, also near a normal level of activity.

The country also is rebounding, but will take much longer to return to a normal level of activity and will not reach 1 million starts before 2014, still well below 1.6 million, the level considered necessary to meet demand. Factors contributing to the slow recovering include tight credit restrictions for home builders and high levels of inventory and foreclosures in the nation's largest housing markets. Dr. Crowe reported that 70 percent of all foreclosures were concentrated in 12 states. Florida leads the way with 23 percent of all foreclosures in the nation.

Factors contributing to the recovery include historically low interest rates, which are expected to remain near historic lows for the rest of the year, high levels of affordability, strong job creation, particularly in the Upstate. Dr. Crowe also reported that pent-up demand, caused by a slowing of household formation, will heavily influence housing market recovery as the rest of the economy recovers and household formation returns to normal.

Positive factors influencing the Upstate include fundamentals like home price to income, which did not fall out of balance in the Upstate like it did nationally, and unemployment, about which Dr. Crowe reported that the Upstate is now below the state and the nation.

To view Dr. Crowe's presentation, click here and open the document at the bottom of the page.

EPA names Ryan Homes Energy Star Partner of the Year

NVR Homes, which builds under Ryan Homes in the Upstate, hass been named the Environmental Protection Agency's Energy Star Partner of the Year.

"At the beginning of 2010, NVR began qualifying every home to the ENERGY STAR standards established by the EPA. NVR built more ENERGY STAR qualified homes than any other home builder in 2010 and has, to date, built more than 10,000 ENERGY STAR homes. ENERGY STAR qualified homes are 20-30% more energy efficient than standard homes."

To read the entire press statement, please click here.

Host of Uncertanties Drives Down Housing Starts and Permits in February

"The decline in new construction and permits in February is the culmination of a great deal of nervousness that both builders and consumers are feeling right now," said NAHB Chairman Bob Nielsen.

"In an already fragile market where credit for building and buying homes remains extremely tight, additional concerns about energy costs, interest rates and other factors are contributing to an atmosphere in which many have adopted a very cautious stance," Nielsen said.

Read the entire article at Nations Building News by clicking here.