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.

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. 

UF Survey Results Show Sharp Increase in Florida Consumer Sentiment

 

Consumer sentiment among Florida residents increased in March to the highest level in 15 years, according to the most recent University of Florida (UF) consumer survey. 

University of Florida’s most recent consumer survey results indicate a consumer sentiment reading of 99, the highest rate since March 2002 and the second-highest rate since November 2000.  The lowest index possible is a 2, while the highest possible is 150.  All components that the index is based on showed an increase.

The current outlook that Floridians have regarding their financial situation increased from 88.1 to 88.5.  The perception of Floridians regarding whether it is a good time to buy a major household item such as an appliance increased from 99.7 to 103.5.  Hector H. Sandoval, Director of the Economic Analysis Program at University of Florida’s Bureau of Economic and Business Research says, “The increase in these two components shows that current economic conditions improved among Floridians in March.”  “In particular, women and those under age 60 displayed more optimistic perceptions.” 

The rating measuring what Floridians expect regarding the standing of their personal finances a year from now increased from 99.5 to 107.3 and participants’ viewpoints regarding the economic conditions of the United States over the next year increased from 92.0 to 99.2.  Participant viewpoints of the United States economic conditions over the next five years also increased from 89.5 to 96.7.

“Overall, Floridians are far more optimistic in March than the previous month.  The gain in March’s index came mainly from consumers’ future expectations about the economy.  Importantly, these views are shared by all Floridians, independent of their demographic characteristics and socioeconomic status,” says Sandoval.  “These expectations are particularly strong among women and those with an income under $50,000.”

Encouraging economic news has likely boosted consumer sentiment in Florida.  The labor market statewide continues to expand, with more jobs added on a monthly basis for over six years.  The unemployment rate in Florida remained at five percent in February.  According to the U.S. Bureau of Economic Analysis, Florida ranked third out of all states in the nation as far as personal income growth, with a rate of growth of 4.9 percent in personal income from 2015 to 2016. 

Majority of Millennials Plan to Buy a Home in the Next Few Years

Over 80 percent of millennials in the United States who do not already own a home, plan to buy a home within the next five years, according to a recent HSBC Group research.

HSBC Group’s Beyond the Bricks, which is an independent consumer research survey of 9,000 in nine countries across the world, including 1,009 respondents within the United States, found that the dream of owning a home is very much still front and center for millennials around the world.

Millennials, who have credited slow wage growth and housing price inflation as obstacles in purchasing a home in the past, still see the goal of owning a home as an important personal aim.

The HSBC report also revealed that millennials have a need for better financial planning.  Among non-owners intending to buy a home in the next two years, 32 percent have no overall budget and 54 percent have only set an approximate budget.  More than half of millennials who bought a home within the last two years said they wound up spending beyond their initial budget. 

David Gates, U.S. Head of Mortgage Origination and Sales for HSBC, says, “This study highlights that young people strongly value homeownership, yet there are significant challenges to making the dream a reality for millennials around the world.  The perfect storm of stagnating salaries and rising house prices, paired with the need for improved financial planning can make buying a home a deferred reality.”

Close to three-quarters (71 percent) of millennials are saving more money for a deposit and waiting to earn a higher salary before purchasing a property, the report finds.

Millennials face some challenges when it comes to housing affordability, with a projected 1.9 percent increase in salary growth expected for 2017 and average property prices rising by 4.8 percent last year.

HSBC research pointed out four actions that millennials can take to help them in accomplishing their goal of owning a home:

·      Please early and consider the importance of having a deposit

·      Include extra costs beyond the purchase price within your budget

·      Consider sacrifices, such as spending less on leisure and going out, to help save more money and at a faster pace

·      Look at the big picture of your finances and shop for a home loan that best serves your needs.

Survey Points to Significant Increase in Florida Consumer Sentiment

Consumer sentiment among Florida residents increased in March to the highest level in 15 years, according to the most recent University of Florida (UF) consumer survey. 

University of Florida’s most recent consumer survey results indicate a consumer sentiment reading of 99, the highest rate since March 2002 and the second-highest rate since November 2000.  The lowest index possible is a 2, while the highest possible is 150.  All components that the index is based on showed an increase.

The current outlook that Floridians have regarding their financial situation increased from 88.1 to 88.5.  The perception of Floridians regarding whether it is a good time to buy a major household item such as an appliance increased from 99.7 to 103.5.  Hector H. Sandoval, Director of the Economic Analysis Program at University of Florida’s Bureau of Economic and Business Research says, “The increase in these two components shows that current economic conditions improved among Floridians in March.”  “In particular, women and those under age 60 displayed more optimistic perceptions.” 

The rating measuring what Floridians expect regarding the standing of their personal finances a year from now increased from 99.5 to 107.3 and participants’ viewpoints regarding the economic conditions of the United States over the next year increased from 92.0 to 99.2.  Participant viewpoints of the United States economic conditions over the next five years also increased from 89.5 to 96.7.

“Overall, Floridians are far more optimistic in March than the previous month.  The gain in March’s index came mainly from consumers’ future expectations about the economy.  Importantly, these views are shared by all Floridians, independent of their demographic characteristics and socioeconomic status,” says Sandoval.  “These expectations are particularly strong among women and those with an income under $50,000.”

Encouraging economic news has likely boosted consumer sentiment in Florida.  The labor market statewide continues to expand, with more jobs added on a monthly basis for over six years.  The unemployment rate in Florida remained at five percent in February.  According to the U.S. Bureau of Economic Analysis, Florida ranked third out of all states in the nation as far as personal income growth, with a rate of growth of 4.9 percent in personal income from 2015 to 2016. 

Increasing Fed Funds Rates Could Have a Positive Impact

Two weeks ago, the Federal Reserve announced a decision to raise the Fed funds rate by 25 basis points. Many housing analysts have expressed fear that this decision will increase mortgage rates, have a negative impact on home affordability, and possibly take the United States housing market recovery off its track. Rick Sharga, Executive Vice President of Ten-X and former Senior Vice President at RealtyTrac, disagrees. He thinks the rise in mortgage rates could in fact prove to be a good thing for the housing market.

Sharga and other industry analysts argue that this decision will cause buyers to move faster and get into the housing market sooner – before rates go any higher. Sharga says he expects this decision will help increase home sales in 2017 or, at the very minimum, encourage buyers who would have normally waited until later in the year to buy a home in the spring and summer months instead.

Sharga also expressed his belief that higher rates will encourage lenders to loosen some of the tight underwriting standards that have plagued the housing market the last few years and prevented many would-be borrowers from moving forward with a purchase.
"This will happen partly just due to higher mortgage interest rates, which will provide a bit of a cushion for lenders to take on a little more risk," Sharga writes in a recent column for housingwire.com. "And higher rates will also drastically reduce the number of refinance loans being issued, which lenders will try to offset by doing more purchase loans."

Sharga thinks the Fed's recent 25-basis-point hike may not actually have a big an impact on mortgage rates.

"The 25-basis-point hike was well within the range that most industry analysts had expected, which means it's possible that this hike won't cause mortgage rates to rise significantly from current levels, which are already the highest they've been in years," Sharga notes.

If Sharga expectations come to fruition, this could equal a scenario with motivated buyers, more relaxed lending standards, minimal mortgage rate increases, and strong wage and job growth, which could result in the strongest spring selling season in several years.

Welcome Readers

I am a 4th generation native Floridian and has lived in Naples since 1977. Growing up in the area has afforded me a deep, intimate knowledge of Southwest Florida and everything it has to offer to residents and visitors – especially in the residential real estate market.

I have been a licensed REALTOR® since 1993. I've bought and sold residential real estate all over Southwest Florida from Marco Island to Cape Coral, and everywhere in between. My focus is concentrated on vacation and second homes, investment homes for the golf enthusiast, and those desiring the waterfront lifestyle. I specializes in resales, renovations, pre-construction and new construction homes.

I attended the University of South Florida with studies in Business and hold a Bachelor of Science Degree in Business Administration from Hodges University.

When I'm not serving clients, I take advantage of Southwest Florida’s world-class dining and shopping, and is an avid boater as well. Additionally, I am very active in the community, attending and organizing social activities for many local causes.

I've been married to my husband, Rich, for over 23 years and have two sons who attend local schools.