Headlines – Week of July 31, 2011
August 11, 2011
Homeownership Rate Falls to 13-Year Low
According to the U.S. Census Bureau, the homeownership rate stood at 65.9 percent in June, its lowest in 13 years. According to analysts, tighter lending standards by banks are disqualifying potential homebuyers and preventing them from securing homes.
The three biggest factors causing the decline are: tight underwriting standards, the lack of a downpayment and homeowners being displaced by foreclosures.
Some experts predict that the homeownership rate may fall to about 62 percent by 2015.
The homeownership rate reached a record high of 69.2 percent in the second and fourth quarters of 2004.
According to William Wheaton, economist and co-founder of the Center for Real Estate at the Massachusetts Institute of Technology, a homeownership rate of 69 percent is not sustainable, as a generation of first-time buyers went overboard into the market in 2000-2007.
Wheaton believes the country will have to wait for the next generation to buy up all the unsold houses, leaving a dearth of first-time buyers for the next five to 10 years. Many economists agree are banking that the younger generation, particularly Generation Y, will drive the housing market in the next decade.
Vacation Homes: Why It May Be Time to Buy
According to a recent article in the Wall Street Journal, the upscale vacation-home market is starting to accelerate. While prices are still falling in most regions, the luxury segment is picking up, and brokers are reporting more inquiries than they have had in years.
According to the National Association of Realtors, the median second-home price was $150,000 in 2010, down 11% from 2009 and roughly 25% from 2006. This was only slightly worse than the 22% drop for the overall housing market. The higher end of the market (homes in the $5 million-plus range) has held up better and has sprung upward more quickly.
Properties situated in prime locations, such as on the water or near a ski slope are selling well, but homes in less desirable spots are languishing on the market.
Some locations, such as Hilton Head, have benefitted from tough restrictions on building, which kept inventories manageable during the bust. Prices there have risen by 4% during the past year.
The other market is still very much in crash mode. In places like Miami, Fla. and even Martha’s Vineyard, Mass., prices have continued to drop as foreclosed properties flood the market. But bargains abound as sellers cut their asking prices or accept less to unload properties. In March, for example, a three-bedroom home on Palm Beach Island, Fla., listed for $4.6 million sold for just $2.5 million.
While over time vacation-home markets don’t appreciate better than primary-home markets, most vacation-home buyers aren’t looking to make big investment profits. According to a survey by the National Association of Realtors, more than 80% of second-home buyers reported that they bought for consumption reasons (i.e. to live in the house and enjoy it).
And many second-home buyers are wealthy enough to pay in cash. Last year, 36% of vacation-home transactions were all-cash deals, up from 29% in 2009, according to the National Association of Realtors.
These markets are stabilizing and, in some, prices already have started to rise.
- Santa Barbara, CA
- Aspen, CO
- The Hamptons, NY
- Hilton Head, SC
These areas are still suffering.
- Martha’s Vineyard, MA
- Vail, CO
- Miami, FL
- Palm Beach, FL
Offshore investors snapping up Fla. real estate
According to an article in the Miami Herald, offshore investors are flocking to Florida’s distressed real estate prices as major companies with ties to Hong Kong, Spain, Argentina and Malaysia are snapping up properties sensing the local market has bottomed.
Many of these investors are buying at half the price of the bubble and see potential appreciation of 60 to 70 percent in the next five years.
International investors still perceive the U.S. as the most reliable country in the world and see the country where you can place your money for investment and know it’s safe.
South Florida’s has seen the most deals with ties to investors with connections to major international companies such as Swire Properties (part of Hong Kong-based real estate and airline owner Swire Pacific), Malaysia-based Genting Group (who owns 50 percent of Norwegian Cruise Lines), Agave Holdings (with ties to the owner of Jose Cuervo tequila), and Espacio USA (the American arm of Spanish real estate company Inmobiliaria Espacio).
According to the Miami Association of Realtors, Brazilians have led the Miami condo market resurgence, accounting for 9 percent of unit purchases among international buyers of Miami single-family homes and condos.
Brazilians believe U.S. real property a relative bargain while in other countries like Venezuela, political instability is a factor; they want a safe haven for their money.
Posted by Scott R. Lodde