Record High For American Houshold Net Worth

Recent gains in the stock market and higher home prices helped Americans’ net worth soar to a record high in the second quarter, according to a new report by the Federal Reserve.

Net worth was up 1.7 percent during the quarter, reaching a record high of $81.5 trillion.  net worth

American’s gains in wealth have helped to lift consumer confidence and allowed them to ramp up their borrowing, which could soon prove a boon for the economic growth too. During the second quarter, household debt rose to its fastest pace since 2007, increasing at an annual rate of 3.6 percent, compared to 2.2 percent in the first quarter.

Most of the nation’s largest wealth gains have gone to the affluent, who tend to own stocks, The Wall Street Journal reports. The Standard & Poor’s 500-stock index rose about 5 percent in the second quarter, while Americans also benefited from more modest gains in the real estate market. Home prices ticked up for the 12th consecutive quarter, rising 0.8 percent in the second quarter, according to the Federal Housing Finance Agency’s home price index.

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Source: Reuters 09/18/2014 & Wall Street Journal 09/18/2014

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FHA Fees Are Driving Away First Time Home Buyers

FHA Fees Are Driving Away First Time Buyers:  The Federal Housing Administration’s rise in its mortgage insurance fees in recent years is pricing many “creditworthy Americans out of the market” and causing the number of first-time home buyers to reach new lows, housing analysts argue.

First-time home purchases have fallen to historic lows. They account for about 28 percent of existing-home sales year-to-date – well below the long-term benchmark of 40 percent, according to the National Association of REALTORS®.   home buyers

The 24- to 35-year-old cohort – which usually makes up the largest share of first-time buyers – has been faced with high levels of student debt and stricter underwriting standards that have made it more difficult for them to apply for a mortgage. But in an op-ed piece in American Banker, Richard A. Smith, CEO and president of Realogy Holdings Corp., also notes that the “biggest and most surprising challenge faced by today’s aspiring home owners come from the FHA, the very agency created to help them.”

The agency has more than doubled its mortgage insurance fees since 2010, as it tries to cover a wealth of defaults that the agency faced in the aftermath of the financial crisis.

“This was a necessary step,” notes Smith, who also serves on the housing commission of the Bipartisan Policy Center and the policy advisory board of the Harvard Joint Center for Housing Studies. “However, premiums are still at crisis levels years later. For many would-be home owners, it’s just too much.”

Monthly premiums for FHA-insured mortgage totaled 0.55 percent of the loan amount in 2010. But today, it has bloomed to 1.35 percent – a 145 percent increase, amounting to an additional $120 on a monthly mortgage payment for a $180,000 loan. The up-front fee that borrowers are required to pay the FHA also has risen, increasing from 1 percent of the loan amount to 1.75 percent.

The FHA’s higher mortgage premiums have pushed 1.5 million renters over a sustainable debt-to-income level to qualify for a home loan in 2013, according to National Association of REALTORS®’ research.

As such, the FHA’s lending has fallen sharply too. This year, the FHA will likely assist about 450,000 first-time home buyers, down about 33 percent from its historical averages. From 2009 to 2013, the FHA assisted about 690,000 first-time buyers annually. What’s more, the FHA traditionally supported the purchase of nearly 100,000 condos annually. However, in the past 12 months, the agency has supported only 17,000 condo purchases.

In the op-ed piece, Smith urges the FHA to adjust its policies and reduce its monthly premiums to pre-crisis levels. He also says the FHA should consider enabling borrowers to finance their mortgage insurance over the life of the loan, which would allow the FHA to “improve affordability for consumers without eliminating revenue.” He also notes the alternative that the FHA could eliminate the requirement that buyers pay for mortgage insurance over the entire life of their loan and allow borrowers to drop it when they reach 20 percent equity, as is done in the conforming loan market.

“A new approach to lending policy will be necessary if the U.S. economy is to benefit from a resurgence in first-time home purchases,” Smith says.

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Source: American Banker 09/16/2014

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Americans Squeezed By Rising Rents & Falling Wages

Americans are increasingly becoming cash-strapped, facing rising rents while their paychecks are shrinking or stagnant, RealtyTrac reports. Nationwide, rents have risen by 6 percent over the last decade, according to data compiled from Harvard’s Joint Center for Housing Studies.

Meanwhile, incomes have plunged, falling 13 percent over that same time period. More than half of all renters now are devoting 30 percent or more of their income to paying rent, up from 12 percent a decade ago.                             rents

Among some of the least affordable rental markets (in which the percent of income spent on rent is 42 percent or more) are: Bronx County, New York-Northern New Jersey-Long Island, N.Y.-N.J.-Pa.; Baltimore City, Baltimore-Townson, Md.; Philadelphia County, Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.; Kings County, New York-Northern New Jersey-Long Island, N.Y.-N.J.-Pa.; and San Francisco County, San Francisco-Oakland-Fremont, Calif., according to a RealtyTrac analysis.

Coinciding with the increase in renting, home ownership rates have been falling.

Traditionally, home owners have long outnumbered renters by more than three to one, according to RealtyTrac. But since the recession, the rate of home ownership has steadily been dropping, falling from a 69.2 percent peak in the fourth quarter of 2004 to 65.2 percent in the fourth quarter of 2013, according to Census data.

The number of renter households has risen to 43 million, or 35.4 percent of all U.S. households, which is up from 31 percent in 2004, according to Harvard data.

“The American Dream of owning a home is still alive and well today in the United States, but it is increasingly under assault by a growing number of renters,” RealtyTrac writes in a recent article.

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Source: RealtyTrac 09/12/2014

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What Makes A Smart City?

Everyone wants to live in a smart place. But the magic mix that draws people in is composed of a lot of different dynamics coming together all at once, according to the National Geographic Channel’s Smart Cities program. What Makes A Smart City?

“A city needs a heart and soul—typically the center, where people congregate for work and leisure. Smart cities are well-connected locally and internationally, have a sustainable lifestyle, and are places where people come first,” says Ian MacFarlane, consultant for the program.                     smart city

National Geographic’s Traveler magazine recently compiled a list of the 50 top attributes that make for a smart city, naming cities that exemplify each factor along the way. Of course, the authors were thinking of travel destinations when they put the list together, but many items on their list matched attributes that make for a top place to live, too. Here are a few that resonated with the U.S. real estate industry:

  • Support for local artisans. Example: Paducah, Ky. was recently named a UNESCO City of Crafts and Folk Art for its promotion of its fiber arts assets and its attempts to attract creative types to its LowerTown Arts District.
  • Dreamers who foster innovation. Example: San Francisco is a city that has more than its fair share of tech start-ups and their eager investors.
  • Urban farming. Example: Manhattan was ahead of the curve when Bell Book & Candle started growing greens in aeroponic rooftop gardens many years ago.
  • High-tech data streams. Example: Chattanooga, Tenn. got the nickname of “Gig City” for its lightning-fast Internet.

The magazine included 47 other examples from around the world of how cities are demonstrating the types of intelligence that delight travelers and residents alike in the upcoming issue.

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Source: National Geographic Traveler 10/2014

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Highly Rated School Districts Lift Home Prices

Homes within highly rated school districts tend to have a higher median sales price, sell for a greater percentage over the list price, and sell faster, according to a new study by the real estate brokerage Redfin.

Highly rated public schools were found to have homes with a median sales price of $474,900 compared to $290,000 in an average-rated school zone. Redfin researchers also found that homes in top school districts are more likely to sell for 30 percent above the list price versus 23 percent. They tend to sell faster too: A median of 25 days on the market versus 21 days.                              school districts

Homes in top-level school districts can be more difficult to come by, the study shows. For every 100 homes in a neighborhood, on average, only 5.8 were on the market in the past year compared with 6.5 for the greater metro area.

Redfin analyzed test score data from GreatSchools ratings, provided by Onboard Infomatics, in 22 major metro areas to determine the neighborhoods that have the most highly rated public schools. Redfin also included data on median sales price, and the percentage of homes that sold above the asking price.

The following metros have some of the top rating averages from GreatSchools, and listed below them are the top three neighborhoods containing the most highly rated schools within each metro. (For the full list of 22 metros and the top schools identified, visit Redfin’s research blog.)

  • Orange County, Calif. metro area

Turtle Rock, El Camino Real, Northwood

  • Austin, Texas metro area

Steiner Ranch, Circle C Ranch, East Oak Hill

  • Long Island, N.Y. metro area

South Wantagh, North Syosset, North Baldwin

  • Seattle, Wash. metro area

Queen Anne, Ballard, Factoria

  • Phoenix, Ariz. metro area

Desert Ridge, Hillcrest Ranch, Ahwtukee

  • San Jose, Calif. metro area

Monta Vista, Blossom Hill, North Los Altos

  • Houston, Texas metro area

Shadow Creek Ranch, Kingwood, Sugar Creek

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Source: RedFin

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Green Neighborhoods Make For Healthier Babies

Pregnant women living in “green” neighborhoods are more likely to deliver healthier babies, suggests a new study from researchers at Oregon State University and the University of British Columbia.

What makes a neighborhood green: the presence of trees, leaves, grass, and other greenery. Mothers who live in such greener spaces are more likely to deliver at full-term and have babies born at higher weights compared to mothers who live in urban areas that aren’t as green, according to the study recently published in Environmental Health Perspectives.                                    green neighborhoods

“This was a surprise,” says lead author Petty Hystad, an environmental epidemiologist at the College of Public Health and Human Services at Oregon State. “We expected the association between greenness and birth outcomes to disappear once we accounted for other environmental exposures, such as air pollution and noise. The research really suggests that greenness affects birth outcomes in other ways, such as psychologically or socially.” Researchers controlled for factors such as neighborhood income, exposure to air pollution, noise, and neighborhood walkability.

Between 1999 and 2002, researchers tracked more than 64,000 births in Vancouver, British Columbia. They found that when mothers lived in greener neighborhoods, pre-term births were 20 percent lower, and moderate pre-term births were 13 percent lower for infants. The study also found that infants from greener neighborhoods tended to be of a healthier weight: They weighed 45 grams more at birth than infants from less-green neighborhoods.

Why the link to healthier pregnancies and green neighborhoods? More research needs to be done to determine if green space opens the door to more social opportunities and enhances a woman’s sense of belonging in the community, or if it has a psychological effect in reducing stress and depression, Hystad says. The study also was not clear on what type of green space is most beneficial to pregnant women, but Hystad says that adding a planter to a patio or a tree to a sidewalk wouldn’t make a large difference in birth outcomes.

The study is one of several recently that shows the health benefits of green space, Hystad says.

“We know a lot about the negative influences, such as living closer to major roads, but demonstrating that a design choice can have benefits is really uplifting,” says the study’s senior author Michael Brauer of the University of British Columbia. “With the high cost of health care, modifying urban design features, such as increasing green space, may turn out to be extremely cost-effective strategies to prevent disease, while at the same time also providing ecological benefits.”

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Source: Oregon State University


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Loan Demand Dropped 7.2%

Mortgage rates continue to hover near yearly lows, but the low rates aren’t creating a rush from home buyers or home owners. The Mortgage Bankers Association reports that its seasonally adjusted index of mortgage application activity, which reflects applications for home purchases and refinances, loan demand dropped 7.2 percent for the week ending Sept. 5.                                      loan demand

Broken out, applications for refinancings had the biggest fall at 10.7 percent last week while applications for home purchases, viewed as one of the leading indicators of future home sales, dropped 2.6 percent. (That follows another 1.5 percent loan demand drop the prior week in purchase applications.)

Mortgage rates did tick up slightly last week, but remain low by historical standards. The 30-year fixed-rate mortgage averaged 4.27 percent in the week, up from 4.25 percent the week prior. It was the first time in four weeks that interest rates had risen slightly, the MBA reports.

The MBA’s report covers more than 75 percent of the U.S. retail residential mortgage application market.

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Reuters 09/10/2014

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Why It Pays to Be a Home Owner

Why It Pays to Be a Home Owner. A home owner is building net worth at a pace that is up to quadruple that of a renter.

In the past 15 years, the net worth of the typical home owner has ranged between 31 and 46 times that of the net worth of the typical renter, according to the Federal Reserve’s Survey of Consumer Finances, which is based on 2013 data.             home owner

On average, home owners had nearly $200,000 in net worth compared to the average $5,000 net worth of renters, according to the survey.

“Home owner equity is a substantial component of home owner wealth,” Danielle Hale, research economist at the National Association of REALTORS®, writes on the association’s Economists’ Outlook blog.

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Source: Bolg

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More American Retirees Carry Mortgage Debt

More American retirees are expected to still owe on their mortgage by the time they reach retirement. The share of Americans 65 and older with mortgage debt increased from 22 percent in 2001 to 30 percent in 2011, according to data from the Consumer Financial Protection Bureau.

Loan balances have also nearly doubled: The median amount owed has grown from $43,400 to $79,000 (adjusting for inflation).                               mortgage debt

Some analysts are blaming the refinancing boom in the early 2000s for adding to mortgage debt. During the housing run-up prior to the meltdown, a large number of Americans took advantage of the chance to make smaller down payments as well as purchase vacation homes, which heightened mortgage debt, according to a 2012 analysis by lead researcher John Gist at George Washington University’s Institute of Public Policy.

Indeed, Gist found that older Americans with housing debt have the highest rates of refinancing. Also, more than half of those born between 1946 and 1964 refinanced in 2004 and 2007. They also tended to take home equity loans more than younger generations.

The mortgage debt may force more Americans to stay in the workforce longer. About 65 percent of home owners with mortgages are still working at age 64 compared to 54 percent of those who do not have housing debt, according to an analysis by Urban Institute researchers Barbara Butrica and Nadia Karamcheva.

Having bigger mortgages that stretch later into life is a trend that will likely stay, particularly as Millennials wait longer to purchase a home, Sam Khater, deputy chief economist at CoreLogic, told Bloomberg.

“A lot of today’s Millennials are entering the market quite a bit later than their parents, so just by definition, they’re going to be carrying more debt later in life,” Khater says.

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Source: Bloomberg/Business Week 09/04/2014

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Land Prices On the Rise This Year

Land prices rose a median of 4 percent across the country for the 12 months ending in June, according to the 2014 Land Markets Survey of more than 600 members of the REALTORS® Land Institute.

About half of the most recent land sales were located in the heartland, including Kentucky, Tennessee, North Carolina, South Carolina, Georgia, Alabama, Mississippi, and Florida. About 26 percent of recent sales were also centered in Kansas, Missouri, Arkansas, Louisiana, Oklahoma and Texas.                         land prices

About three-fourths of recent land sales were recreational (21 percent); timber/ranch (25 percent); and for agricultural uses (27 percent), according to the report.

Some additional findings from this year’s report:

  • On average, 31 percent of the land value was financed by purchasers.
  • Fifty-eight percent of buyers in land sales transactions are individuals and families; 17 percent are corporations/partnerships; 17 percent are investors; and 10 percent are expansion farmers. Individuals and families tend to buy land for agricultural or recreational purposes, whereas corporations are more strongly motivated by development and commercial purposes.
  • Pricing for agricultural land is $5,600 per acre but can vary widely among states. For example, irrigated land vs. non-irrigated land shows a big difference in price, with irrigated land highest in California and Iowa.
  • The median time on the market for land sales was 120 days, but that also varied considerably. Agricultural, irrigated land tended to have much lower time on the market, at 60 days, compared to commercial, which averaged 237 days.

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Source: NAR Economits Outlook 09/03/2014

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