Increasing the Homeownership Rate as a Boost to the Economy

REALTORS® across Southwest Florida and throughout the United States are dedicated to promoting homeownership opportunities and the elimination of hurdles to achieving the American dream of owning a home.

“As REALTORS®, we work every day to help people realize the American Dream of owning their own home,” says 2017 Florida REALTORS® President Maria Wells.  “Opening the door to homeownership helps families find security and stability.  While buying a home is usually the biggest financial investment someone may make in their lifetime, it also offers a sense of place and community.  Our homes hold our hopes, our memories and our dreams for the future.”

Extending a long-standing tradition, President Donald Trump has declared June as National Homeownership Month and has announced his support to the goal of increasing the U.S. homeownership rate.  According to the declaration:  “For generations of Americans, owning a home has been an essential element in achieving the American Dream.  Homeownership is often the foundation of security and prosperity for families and communities and an enduring symbol of American freedom.  This month, we recommit to ensuring that hard-working Americans enjoy a fair chance at becoming homeowners.”

The continued recognition of June as National Homeownership Month inspires everyone within the real estate and housing industries to continue to promote homeownership as an important contributor to economic strength and to increase the number of homeowners, especially amongst minority groups.  According to the most recent United States Census data reported, the homeownership rate in the state of Florida for the first quarter of 2017 was 64.6 percent, while the homeownership rate for the entire nation was 63.6 percent for the same period of time. 

Wells impressed the fact that homeownership serves as a foundation for communities, instilling pride and a sense of belonging among individuals within the communities.  Research indicates that homeownership provides both tangible and intangible benefits to the economy, community and the individual homeowners. 

Recognition of homeownership first began as a week-long celebration in 1995, and was later extended to the entire month of June by President George W. Bush in 2002. 

Enabling Entry to Housing Market Through Downpayment Assistance and Tips

Out of the 902 closed sales for homes in the Naples area during April 2017, 65.3 percent were cash sales and 34.7 percent were conventional mortgage sales, according to the latest report released by the Naples Area Board of REALTORS® (NABOR®).  The March Market Report pointed out the history of cash sales in the area has dropped over the last several years and more buyers are using conventional mortgages for the purchase of their homes: 73 percent cash sales in March 2015, 67 percent for March 2016, and 64 percent for March 2015.  With a growing number of homebuyers turning to financing in order to purchase a home and a recent survey by real estate data provider Zillow reporting that more than two-thirds of renters consider setting aside money for a downpayment as the number one obstacle to entering the housing market, it is important for potential buyers to be aware of the options available to assist them in getting over the downpayment hurdle.

Here are some tips for potential homebuyers to consider in overcoming the downpayment hurdle include:

·      Consider beginning to save early on.

·      Carefully weigh loan options.

·      Look into lenders offering loans through government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, which only require a 3 percent downpayment or loans offered through the Federal Housing Administration (FHA), which require a 3.5 percent downpayment.

·      Buyers who are U.S. Military Veterans, service members or residents of specific rural areas may not have a downpayment requirement at all, as the Department of Veterans Affairs and the U.S. Department of Agriculture have zero-downpayment loan programs available for qualified borrowers. 

·      Consider using gift money from relative or friends toward the downpayment amounts or retirement savings. 

·      A large number of downpayment assistance programs exist across the nation as well, for borrowers with low to moderate income, teachers, firefighters, and other public service positions.

With industry leaders indicating a vast and growing number of potential homebuyers are currently interested in entering the housing market, as well as a decreasing number of cash sales in the Naples area, an increasing number of buyers looking to finance the purchase of a home, and clearly expressed concerns about challenges in saving enough money for a downpayment, a clear analysis of all of the options available to potential homebuyers is timely and essential.   As the summer residential real estate season begins, potential homebuyers are encouraged to explore the many options available and carefully consider those options as far as requirements for qualification and what will best fit the individual current and future needs of each homebuyer.

Sellers Adjusting Pricing to Market Value in Southwest Florida Real Estate Market

The single-family housing market in Southwest Florida has continued to see sellers modifying their pricing to match current market value. These modifications to pricing to current market value have resulted in a decrease of the average median home prices in Southwest Florida and have helped to increase pending sales activity. This practice amongst home sellers in Southwest Florida is projected to continue and is expected to continue to boost sales activity in the area as we move forward through the remainder of 2017.

In contrast, the condominium market in Southwest Florida is still showing many units priced high and in need of price adjustments. This has had an impact on the average days on the market for condominium homes. As summer approaches and seasonal buyers are expected to return to the area for the summer selling season, condominium homeowners are anticipated to make the price adjustments necessary to attract buyers who are looking for properties listed at fair market value versus overpriced units.

Housing market reports indicate the number of overall closed sales in the Bonita Springs-Estero area within Southwest Florida, including single-family homes and condos, increased to 2,989 units for the 12-month period ending in April 2017. This is compared to 2,965 units for the 12-month period ending in April 2016. Pending sales for April 2017 were at a 7 percent increase with 3,098 units when compared to 2,902 units in April 2016. Activity narrowed slightly for the Naples area, when compared to the strong end to the first quarter of 2017, as pending sales for the 12-months ending in April 2017 showed a 3 percent decrease. Closed sales showed a 4 percent decrease and inventory, in contrast, showed an 8 percent increase. Again, continued price adjustments and the beginning of the summer selling season are expected to boost the housing market in Southwest Florida in the coming months, offering a positive outlook for the area’s residential real estate market.

Home Sales Forecasted to Top Last Year’s Totals

Lawrence Yun, Chief Economist of the National Association of REALTORS® (NAR) provided his 2017 midyear forecast and was joined by Jonathan Spader, Senior Research Associate at the Joint Center for Housing Studies at Harvard University, and Mark Calabria, Chief Economist and Assistant to Vice President Mike Pence, in presenting at the 2017 REALTORS® Legislative Meetings & Trade Expo. Discussions included the ongoing strength of the United States job market combined with an upward trend in consumer confidence, and how these factors are expected to contribute to a forecasted 3.5% increase in existing home sales for 2017. 

Yun discussed the challenges presented by low inventory and high prices in some metro areas, while Spader discussed the homeownership rate and Calabria discussed the importance of productivity and the labor force participation rate in encouraging the growth of the economy.

The first quarter of this year represents the best quarterly existing sales pace in ten years with 5.62 million sales.  Yun states that he expects activity to remain on this path and finish the year at approximately 5.64 million.  Yun’s projected 5.64 million in sales would represent the best since 2006 (6.47 million) and 3.5 percent above the total number of existing sales for 2016.  “The housing market has exceeded expectations ever since the election, despite depressed inventory and higher mortgage rates,” says Yun.  “The combination of the stock market being at record highs, 16 million new jobs created since 2010, pent-up household formation and rising consumer confidence are giving more households the assurance and ability to purchase a home,” adds Yun.

Despite the fact that the number of home sales for the U.S. is at a decade high, Yun expresses his belief that the strong labor market should be encouraging an even higher number of sales.  Yun says, “There’s little doubt first-time buyer participation would improve and the homeownership rate would rise if there was simply more inventory.” 

Yun foresees new housing construction to increase by 8.4 percent to 1.27 million for this year, but this is still not quite sufficient to make up for the low number of new homes build in the last few years.  New single-family home sales are estimated to total approximately 620,000 for 2017, an increase of 8.4 percent from 2016. 

“There was a lot of uncertainty at the start of the year, but a very strong first quarter sets the stage for a modest sales increase compared to last year,” said Yun.