First-time home-buyers are shifting housing industry standards when it comes to home design preferences—and, according to the latest Home Design Trends Survey by the American Institute of Architects (AIA), one of the most significant changes is the end of the era of expansive property and square footage.
Small, simply, is the new big.
Smaller homes are generally more affordable, which is key for many first-time home-buyers squeezed by high home prices and student debt. Small homes, however, are scarce in most housing markets.
Aside from less living space, the architecture professionals surveyed see the following trends taking shape:
- In-Home Accessibility
- Single-Floor Plans
- Open-Concept Layout
- Informal Spaces
Source: American Institute of Architects (AIA)
NEW STUDY: U.S. Homeownership Rate Off
Despite steadily improving local job markets and historically low mortgage rates, the U.S. homeownership rate is stuck near a 50-year low because of a perverse mix of affordability challenges, student loan debt, tight credit conditions and housing supply shortages according to new findings released at the Realtors® Sustainable Homeownership Conference.
Led by a group of prominent experts including Realtor’s Chief Economist Lawrence Yun, they reported a dip and idleness in the homeownership rate, its drag on the economy and what can be done to ensure more creditworthy households have the opportunity to buy a home.
“The decline and stagnation in the homeownership rate is a trend that’s pointing in the wrong direction, and must be reversed given the many benefits of homeownership to individuals, communities and the nation’s economy,” said Realtor President Brown, a Realtor® from Alamo, California, “Those who are financially capable and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream.” One of Brown’s main objectives as president of NAR is identifying ways to boost the homeownership rate in a safe and responsible way.
Credit standards have not normalized following the Great Recession. Borrowers with good-to-excellent credit scores are not getting approved at the rate they were in 2003, prior to the period of excessively lax lending standards. Safely restoring lending requirements to accessible standards is key to helping creditworthy households purchase homes.
U.S. real estate markets are increasingly becoming international, and changing demographics brought forth by immigration and growing interest from foreigners are positioned to bolster home sales activity and prices. That’s according to speakers at the recent international real estate forum organized by the REALTOR® University Center for Real Estate Studies in Washington DC.
Alex Nowrasteh, immigration policy analyst at the Cato Institute, shared insight on the current and future impact of foreign buyers and immigration on the U.S. housing market. He said the rising U.S. population is being bolstered by a growing number of immigrant households, and their presence will continue to transform the housing market. Of the roughly 321.4 million residents in the U.S., 278.1 million are born here (natives) and the remaining 43.3 million – made up of 20.7 million naturalized citizens and 22.6 million non-citizens, foreign-born.
Danielle Hale, Managing Director of Housing Research, said foreigners view the U.S. as a great place to buy and invest in real estate. She noted the upward trend in sales activity from resident and non-resident foreign buyers1 in the past seven years, with total foreign buyer transactions increasing from $65.9 billion in 2010 to $102.6 billion in the latest survey.
A majority of foreign buyers in recent years are from China, which surpasses Canada as the top country by dollar volume and total sales, according to Hale.
If you’re entering the real estate market for the first time, you may find the array of titles used by real estate professionals a little confusing. There are real estate agents, associate brokers, brokers and Realtors.
A real estate agent is anyone who earns a real estate license and is the first step for someone entering the real estate profession. This is a temporary license and the agent must attain a real estate associate broker’s license as a permanent real estate license by taking additional courses.
The Real Estate broker is a person who has taken education beyond the agent level as required laws and has passed a broker’s license exam. Brokers can work alone or they can hire agents to work for them.
If you have hired a real estate agent to help you buy or sell a home, that agent typically reports to a broker. The broker is usually the manager and often owner of the real estate company and is recognized by the State as the “designated broker” of that real estate firm responsible for the overall operation and supervision of several real estate agents.
You can choose to work with a salesperson or a broker, but in any case you should take the time to interview your agent and ask for references. If you want to work with someone new to the profession, you may want to ask to meet the broker as well so you can feel comfortable that someone with experience will be representing your best interests.
The term Realtor refers to a real estate agent who is a member of the National Association of REALTORS®, which means that they are bound to uphold the strict standards of the association and its code of ethics.
Potential homebuyers have a lot to contend with from tight credit and low inventory to rising prices. But for buyers who are able to muscle past these hurdles, Realtors® know that deals can still fall apart when needlessly high regulatory burdens get in the way. That point was made clear by Ben Carson, secretary of Housing and Urban Development, who told REALTORS at a recent meeting that HUD is working to make improvements with the goal of ushering in a new era of homeownership. NAR for years has pushed for reforms at the Federal Housing Administration – a program office under HUD’s jurisdiction – that would make it easier for homebuyers to utilize FHA’s low-down payment financing options to purchase condos. One example is NAR’s call for FHA to address current restrictions on the treatment of condominiums. The new rules would make it easier to buy a condo with FHA financing. NAR President William E. Brown, said, “Condominiums are an affordable option that many young and first-time buyers look to when they start their home search, but using an FHA loan to buy a condo is still a real challenge,” said Brown. “Finishing work on the condo rules would offer some much-needed clarity and relief.” In addition to condo rules and life of loan mortgage insurance, Brown raised another Realtor® priority: reinstating a cut to the mortgage interest premium FHA charges for its loans. FHA announced that it was cutting annual premiums consumers pay for mortgage insurance from 0.85 percent to 0.60 percent, but the cut was rescinded under the new administration just a few weeks later. FHA has said that the decision to reinstate the cut is still under review.
Sixty-one percent of U.S. adults believe home prices in their local area will rise over the next 12 months, the highest percentage since Gallup began collecting such data in 2005. That also marks a big difference between 2008 and 2012, when no more than one-third of Americans believed home prices would increase.
Residents in the western region of the U.S. are the most optimistic, with nearly three-quarters of residents saying they expect price increases compared to slightly more than half of Midwestern and Eastern residents, according to the Gallup poll. With mortgage rates sitting below 4 percent, consumers may have more incentive to act now before home prices rise even more.
Sixty-seven percent of U.S. adults say now is a good time to purchase a home, which is down slightly from the 2012-to-2014 period when at least 70 percent said so. Unsurprisingly, homeowners (74 percent) are more likely than renters (56 percent) to say it’s a good time to purchase a home, according to the poll. Higher home prices and declining views of home ownership may be behind the dip in those who say it’s a good time to buy, Gallup researchers note.
DAILY REAL ESTATE NEWS
The National Association of Realtor’s recent research shows a strong connection between rising student loan debt and the inability to purchase a home, which has negatively impacted our nation’s economy. In fact, student loan borrowers who are current on their loan payments expect to delay their home purchase by a median of 5 years due to their high monthly payments and overall debt load.
First-time homebuyers typically make up 40 percent of the primary residence buyers, which is currently at 32 percent, the lowest percentage of the housing market since 1987. This is especially concerning since homeownership is often the only way for hardworking Americans to build wealth and financial security.
NAR supports legislation that would streamline the myriad of confusing student loan programs into a simple fixed repayment plan. It would also create an income based repayment option that would guarantee all student borrowers the option to keep their loan payments as a small percentage of their income providing them confidence that they will be able to afford the cost of repaying their loans and be able to help grow our nation’s economy.