Forecasts on their massive influence aside, is the housing industry ready for this next generation of homebuyers? Just as Millennials are different moviegoers than their parents, they will be different homebuyers. One of the starkest differences: Millennials shop for their homes differently. According to the National Association of Realtors, 99% of Millennials search online when shopping for a home. They are twice as likely as their parents’ generation to use a mobile device to look for a home. In fact, nearly 6 in 10 Millennials (58%) reported to have first found the home they eventually bought on a mobile device.
Millennials also live and plan to own their homes differently than their parents. The average Millennial job tenure is 2.8 years. They make up 43% of all movers. But, many young people have moved throughout history. Do Millennials plan to settle down once they buy a home? One can expect they should, but they aren’t likely to own the same home for 30+ years as many in their previous generations do. According to the ValueInsured Survey, while “owning my own home” remains – just like for their parents – the top personal definition of the American Dream for Millennials, two other popular answers are “having the freedom to pursue opportunities wherever they are” and “being able to move and live wherever I want”.
Other latest findings that indicate Millennials may be a generation on the move include..
This may be what the gold rush felt like, except it is now a rush to buy homes. We keep hearing housing demand is high, inventory is tight. Some headlines even describe homebuyers as "panicking" to rush to buy homes, or rushing to lock in low rates. Yes, if you have been paying attention to recent reports, you may have seen the word “rush” used frequently when describing today’s home buying activities.
However, while many first-time home buying hopefuls wonder how they can save enough to buy at today’s sky-high prices, some may at the same time notice their own parents are selling. Baby Boomers are downsizing, and many are making bank. And they can help...
What has been somewhat over-shadowed by the red-hot housing headlines are reports of unsustainable home prices, often by the same industry experts and forecasting models. According to the latest report by Fitch Ratings, home prices in Dallas are 10% –14% higher than what the market can sustain based on its economic fundamentals including population growth and inflation-adjusted income growth. Many of the largest and hottest real estate markets in the country are also over-heated by estimated 5% to double-digit percentage levels.
In ValueInsured’s latest quarterly Modern Homebuyer Survey, 3 out of 4 interested homebuyers– prospective homebuyers who plan to buy within the next 24 months – said they would buy a home sooner if they could have more confidence they would not lose their down payment after they buy, in the event home prices go down and they need to sell their recently purchased home resulting in a loss.
Homebuyer sentiment has always been a very interesting, dynamic and often unpredictable factor in the housing market. Take home prices, for example. According to the recently released S&P/Case-Shiller U.S National Home Price Index, home prices in December 2016 continued a record-breaking streak, having risen to a 30-month high. Previous all-time highs were smashed in seven major cities, including Boston, Charlotte, Dallas, Denver, Portland, San Francisco and Seattle. By all account, inventory has been tight, and there is the looming threat of imminent interest rate hikes. You would think homebuyers would be deterred; some might even throw in their towels and decide to stay life-long renters.
However, homebuyer psychology is a funny thing....
Is mortgage lending too tight, or too loose? That seems to be a question the FHFA has been trying to answer since the housing crisis in 2008. Many factors led to the housing collapse, but no doubt the overly lenient mortgage lending practices were the biggest culprits. To make sure history does not repeat itself, mortgage-lending rules are now noticeably more restrictive compared to those in 2006, at the height of the housing bubble. On the other hand, there are indications lending standards might now be too strict, preventing further recovery of the housing market.
In January 2017, ValueInsured asked American homebuyers in its quarterly Modern Homebuyer Survey what benefits they valued in a home mortgage lender. The results may challenge conventional assumptions but are consistent with housing industry and consumer trends in that homebuyers are moving away from big-brand names, and demanding more innovative solutions
In January 2017, ValueInsured released its latest Housing Confidence Index that reported a slight decline in Americans’ overall housing confidence. The drop was driven by existing homeowners, who are not as confident now as they were in Fall 2016 that their home would be worth as much as what they paid for. This makes sense, since ValueInsured’s fall index was reported in early September, some of the country’s most overheated markets have stabilized and there were steady reports of cooling home prices throughout the remainder of 2016. This was partly driven by the fall 2016 interest rates hike, election uncertainty, and by buyers’ pricing fatigue.
Dissecting the January Modern Homebuyer Survey data further, what’s particularly interesting is that more affluent American households – typically more confident in housing given their stronger purchasing power – are not reporting the highest housing confidence
In the past two years, as the economy improved and home mortgage interest rates stayed in record lows, one key factor that had kept housing growth from kicking up to the next gear was the stagnation of entrance by Millennial first-time homebuyers. American homeownership rate in 2016 was lowest in five decades. The primary cause was attributed to Millennials – an age group that traditionally supplied a steady stream of first-time homebuyers – whose homeownership rate dropped to the lowest recorded at 34.1%. Well-documented explanations for this historically low rate include heavy student-loan debts, growing trend to boomerang back to parents’ homes, delay of marriage, increased career mobility and other factors that delay homeownership.
However, Millennials have not lost their desire to own a home...
Optimism Driven by First-Time Homebuyers Reports ValueInsured’s Quarterly Index
DALLAS, January 25, 2017 – Americans are starting off 2017 cautiously optimistic about the housing market, reports ValueInsured Modern Homebuyer Survey. The first consumer confidence survey conducted in January and released post-inauguration reveals nearly seven-in-10 Americans (69 percent) believe 2017 will be a better year for the housing market than 2016, despite rising interest rates and a new administration.
In our latest ValueInsured Modern Homebuyer Survey, we learned that most prospective first-time and upgrade homebuyers will buy sooner, if they could be given more confidence about the housing market, and about their odds of preserving their down payment savings. We interviewed 1,013 Americans who were interested in buying a home, and this is what they told us
In a recent interview with CNBC regarding the current housing market and homeownership rate, a self-made millionaire and published financial author made the claim that an average homeowner in American today is 38 times wealthier than the average renter. This has what many often call the American Dream – if you have made it in this greatest country in the world, you get to own a piece of its land.
But in recent years, since the housing crisis, this notion has been challenged, and some of the people who have fared most poorly and had the toughest time surviving the financial crisis were Americans who owned homes in 2007-2008. We wanted to know how today’s Americans feel about their wellbeing and how it relates to homeownership, and designed part of our latest ValueInsured Modern Homebuyer Survey to explore exactly that.
At this time last year, I predicted 2016 would be a good year to buy a home. It appears millions of Americans agreed with me. Total home sales were up 5% in the first half of 2016, and the total annual growth is expected to cap off at 4.7%. Most encouraging is the record 34% first-time homebuyers in Q3 2016, up from 29% in 2015.
For 2017, I predict a softening led by the imminent rates hikes – Fed supported or not. But there still could be opportunities for buyers and sellers alike.
DALLAS, Nov. 21, 2016 – ValueInsured, the only provider of down payment protection, submits a response to the Federal Housing Finance Agency’s (FHFA) Single-Family Credit Risk Transfer Request for Input (RFI). The RFI was issued to “assist FHFA and the Enterprises in their ongoing analysis of font-end credit risk transfer transaction structures in which a portion of the credit risk is transferred prior to Enterprise acquisition of the underlying mortgage.”
In its submission, ValueInsured outlined why down payment protection could be one of the most effective and far-reaching credit risk transfer (CRT) solutions, citing:
Down payment protection (DPP) represents an additional up-front risk transfer mechanism not currently in use;
DPP is the only upfront risk transfer mechanism designed to modify borrower behavior so as to avoid defaults;
In contrast with other CRT mechanisms that only deal with default scenarios, DDP-related loans would be de-risked before getting onto the GSE’s balance sheets;
For the period just prior to and during the housing crisis (1999 through 2008), DPP covered transactions would have provided approx. $2.2 billion of coverage toward borrower down payments on loans that ultimately went into foreclosures, and an additional $37.24 billion to cover borrowers’ home equity losses;
DPP-related loans backed by major reinsurers represent an efficient use of capital that positively impacts the cost structure of residential mortgage loans.
In each of our recent quarterly ValueInsured Modern Homebuyer Survey, Millennial homeowners have consistently proven to be the most confident consumer segment in the health of our housing market. Compared to the national housing confidence index of 68.9 recorded in September 2016, Millennial homeowners reported an 83.0 point housing confidence in the same index, higher even than the 78.1 recorded for all American homeowners. Millennial homeowners also show remarkable confidence in their own long-term well-being as homeowners, with 90% agreeing “the housing market is headed to a good direction long-term for people like me”, compared to just 38% of their non home-owning peers who say the same.
However, upon further digging into our latest fall survey data, Millennial homeowners do show some cracks in their robust housing confidence.
There has been a lot of good news in the housing industry lately that Millennials are finally ready to settle down and buy homes. Dubbed the “Millennial Housing Movement”, many analysts expect Millennials will be the ultimate high gear that propels the next housing boom. Here's some recent coverage: Business Insider, Forbes, and Market Watch.
Millennials have always been the media and business darling not only because our nation has always been youth-obsessed. They are the largest population group at 75.4 million according to the latest Census Bureau, and one quarter of our country’s population. But here’s a well-document problem for Millennials: they tend to be saddled with college debt and are expected to earn less than their parents. This is a key reason – not their rumored fear of commitment – that Millennials have been late to get married, start a family, and to buy their first home.
From our latest ValueInsured Modern Homebuyer Survey, we learned again, as we did in all our previous quarterly surveys, that Millennials want to own homes.