Homeownership Help: The Growing Importance of the Bank of Mom and Dad

Homeownership Help: The Growing Importance of the Bank of Mom and Dad
By Aaron Terrazas

The Bank of Mom and Dad is increasingly open for business – and is increasingly necessary for younger homebuyers looking to secure a down payment, particularly for middle-income households, presumed first-time homebuyers, Hispanics and Asians.

We’ve been hearing anecdotally for some time that the combination of rising home values, slow income growth and still-tight credit markets has resulted in a growing reliance on intra-family loans and gifts meant to be used as down payments for younger home buyers. Now, data from the Federal Reserve Board’s 2014 Survey of Household Economics and Decisionmaking (SHED) helps confirm the stories.

The growing importance in the home-buying process of loans and gifts from family and friends underscores both the challenge that securing a suitable down payment represents for younger homebuyers, and their resourcefulness in finding ways to clear the down payment hurdle. The data also raise difficult questions around inequality in the housing market, as the lowest-income buyers likely needing the most help from family and friends to buy a home may not have access to the same kinds of social networks as their wealthier peers.

The SHED asks homeowners to identify the sources of the funds used for their down payment when they purchased their current home. There are five non-exclusive response options (homeowners can identify more than one source of funds):

• Proceeds from the sale of a previous home
• Personal savings
• A loan or gift from family or friends
• A second mortgage
• Financial assistance from a government program or non-profit organization

Respondents are also given the option of indicating that no down payment was made.

The use of loans and gifts from family and friends to help purchase a home increased sharply during the recession – from 8 percent of homes bought in 2007 to 21 percent of homes bought in 2009. The share has since declined, to 13 percent in 2014, but remains slightly above where it was prior to the recession (Figure 1).



The reliance on down payment assistance from family and friends varies across racial and ethnic groups. Those falling into the “Other, non-Hispanic” grouping in the SHED data, presumably mostly Asians, have gotten the most help buying a home from their social networks over the past decade: 23 percent of these home buyers received a loan or gift from family or friends between 2005 and 2014. Hispanics also have a higher incidence of down payment assistance from social networks (17 percent) over the same time. Non-Hispanic blacks were least likely (7 percent) to report receiving down payment assistance from family and friends (Figure 2).



By imputing household incomes using data from the American Community Survey (ACS), we are able to delve more deeply into the relationship between income, inequality, and the intergenerational transfer of economic privilege – with sometimes surprising results.

As expected, the lowest-income households are much less likely to buy homes: Only 2 percent of households in the bottom income quintile at the end of 2014 purchased a home during the previous three years, compared to 9 percent of households in the upper two income quintiles.

But among households that were able to buy a home, those in the middle of the income distribution were most likely to receive a down payment loan or gift from their family or friends: 25 percent of home buyers in the middle income quintile received a loan or gift from their social network to help fund their down payment, compared to 15 percent and 16 percent, respectively, in the lowest and highest income quintiles (Figure 3).



This suggests that middle-income home buyers are the households most likely to both:

• Need help in funding a down payment
• Have social networks in place capable of providing assistance

Homebuyers at the bottom of the income distribution are likely less able to turn to family and friends for financial assistance, while home buyers at the top of the income distribution probably do not need assistance to the same degree as other buyers.

The SHED data cannot tell us if buyers are first-time homebuyers, but we can create two first-time homebuyer groups based on a few logical assumptions:

• A pre-recession cohort composed of young adults who purchased their current home between 2005 and 2007 when they were between the ages of 24 and 34, and who indicated that they did not rely on the proceeds from the sale of a previous home when making the down payment on their current home.
• A post-recession cohort composed of young adults who purchased their current home between 2012 and 2014 when they were between the ages of 24 and 34, and who also indicated that they did not rely on the proceeds from the sale of a previous home when making the down payment on their current home

The results suggest that more first-time buyers are relying on down payment assistance from social networks today than a decade ago. Among the pre-recession cohort of presumed first-time home buyers, 11 percent received down payment assistance from their family or friends, compared to 22 percent for the post-recession group (Figure 4). First-time homebuyers are also increasingly relying on personal savings, and less on second mortgages that were more common prior to the recession. The share relying on assistance from government or non-profit organizations has been essentially flat.



These data suggest that the Bank of Mom and Dad was particularly important for home buyers overall during the worst years of the recession. And gifts from family and friends have likely increased in importance among first-time homebuyers in more recent years, perhaps driven by high rents, still-tight credit availability, student loan debt and/or higher down payments as home values have increased. The reliance on down payment assistance from social networks appears to be particularly important for middle-income households, Hispanics and, very likely, Asians.

Aaron Terrazas is a Senior Economist at Zillow.

For more information, visit www.zillow.com.

For more information, please contact me at Announcements@mycbpp.com or toll free at 800.505.8111 .

For more information, please contact me at Announcements@mycbpp.com or toll free at 800.505.8111. Coldwell Banker Platinum Partners Real Estate Service in Georgia and South Carolina.

Housing Recovery to Pick Up Steam in 2016

Housing Recovery to Pick Up Steam in 2016

Steady employment and economic growth, pent-up demand, affordable home prices and attractive mortgage rates will keep the housing market on a gradual upward trend in 2016. However, persistent headwinds related to shortages and availability of lots and labor, along with rising materials prices are impeding a more robust recovery, according to economists who participated in a recent National Association of Home Builders (NAHB) Fall Construction Forecast Webinar.

“This recovery is all about jobs,” says NAHB Chief Economist David Crowe. “If people can get good jobs that pay decent incomes, the housing market will continue to move forward.”

The good news, Crowe added, is that total U.S. employment of 142 million is now well above the previous peak of 138 million that occurred in 2008.

The one caveat is that job growth has been concentrated heavily in the service sector, which tends to pay lower wages than goods producing jobs.

Meanwhile, home equity has nearly doubled since 2011 and now stands at $12.5 trillion.

“The single biggest asset in most people’s portfolio is the home they own,” says Crowe. “That’s important because the primary purchasers of new homes are the sellers of existing homes. The more equity they have, the more comfortable they feel about purchasing a new home.”

And while mortgage interest rates are expected to rise over the near-term, averaging 4.5 percent in 2016 and 5.5 percent in 2017, Crowe says this is not expected to have an impact on the housing recovery. “As the economy gets better, job and wage growth should keep pace. So even though mortgage rates will rise, they will still be low by historical standards and very affordable.”

Supply Headwinds
Crowe noted several factors that are hindering a more robust recovery. Citing an NAHB survey of its members, 13 percent of builders reported the cost and availability of labor was a significant problem in 2011 and that concern jumped to 61 percent in 2014.

About one-fifth of builders shared the same concerns regarding lots in 2011 and that ratio shot up to 58 percent in 2014.

Concerns over building materials stood at 58 percent among builders in 2014, up from 33 percent in 2011.

Single-Family Continues to Post Gains
Turning to the forecast, NAHB is projecting 719,000 single-family starts in 2015, up 11 percent from the 647,000 units produced last year. Single-family production is projected to increase an additional 27 percent in 2016 to 914,000 units.

On the multifamily side, production ran at 354,000 units last year, slightly above the 331,000 level that is considered a normal level of production. Multifamily starts are expected to rise 9 percent to 387,000 units this year and post a modest 3 percent decline to 378,000 units in 2016.

Residential remodeling activity is forecasted to increase 6.8 percent in 2015 over last year and rise an additional 6.1 percent in 2016.

Suburbs are Still Hot
Looking at home buyer preferences, Trulia Housing Economist Ralph McLaughlin says that contrary to popular belief, millennials prefer to own a home in the suburbs rather than rent in the cities.

“Many believe that home buyers are bucking the trend of previous generations in that they want to live in urban areas and want to rent,” says McLaughlin. “What we are finding from our surveys is just the opposite. Among millennial renters, almost 90 percent say they eventually want to purchase a home. That is significantly higher than Gen Xers, who were hurt by the recession, and quite a bit more than current baby boomer renters, who are at 40 percent.”

However, an overwhelming majority of millennials, who are still starting households and paying off college debt, say it will be at least two years before they are ready to buy.

Roughly half of all Americans prefer to live in suburban areas, about a quarter prefer urban areas and just over 20 percent prefer rural communities, according to a Trulia survey conducted last November.

“As we get into the recovery, suburban areas are growing faster than urban areas,” says McLaughlin. “That is a sign that the urbanization trend we saw start to happen at the beginning of the recovery was more of a blip rather than a new rule.”

Moreover, the percentage of households living in urban neighborhoods in 2013 was lower among nearly all age groups compared to 2000.

“So again, this shows there really isn’t an urbanization trend among households,” says McLaughlin.

Over the past five years, the share of searches on Trulia in suburban-urban zip code areas has held fairly constant, at roughly a four-to-one-ratio for suburban searches.

“Home buyers are saying they prefer modern and modest sized homes in the suburbs with amenities,” he says, adding that 44 percent of Americans say they want to live in a house between 1,400 and 2,600 square feet.
Recovery in All Regions, but Pace Varies

Delving below the national numbers, NAHB Senior Economist Robert Denk says that housing market conditions are improving in all regions, but the pace of recovery continues to vary by state and region.

“We’ve gotten to the point in the recovery where we no longer have problems that came with the housing bust,” says Denk. “It now is really a matter of housing markets reconnecting to the fundamental drivers, and that is employment. Production has been rebounding in all regions, prices have been moving up and new foreclosures are back to more normal levels.”

Using the 2000-2003 period as a healthy benchmark when single-family starts averaged 1.3 million units on an annual basis, NAHB is projecting that single-family production, which bottomed out at an average 27 percent of normal production in early 2009, will rise to 74 percent of normal by the fourth quarter of 2016 and climb to 91 percent of normal by the end of 2017. Single-family production currently stands at 53 percent of normal activity.

The hardest hit areas during the downturn were a combination of the bubble states – California, Arizona, Nevada and Florida – and the industrial Midwest. The bubble states had the most excessive price and production spikes, while the problems in the Midwest were more related to fundamental economic weakness.
The most successful recoveries are happening now in the energy states, including North Dakota, Wyoming, Texas, Montana and Louisiana.

Other states exhibiting strong employment and housing growth include South Carolina, Utah, Tennessee, Idaho, Oregon and North Carolina.

In another way of looking at the long road back to normal, by the end of 2017, the top 40 percent of states will be back to 99 percent or more of normal production levels, compared to the bottom 20 percent, which will still be below 73 percent.

“Keep in mind that with all of these buckets, the numbers keep getting higher,” says Denk. “There is broad-based improvement across the country.”

For more information, visit www.nahb.org.  

For more information, please contact me at Announcements@mycbpp.com or toll free at 800.505.8111 .

Reprinted with permission from RISMedia. ©2015. All rights reserved.

For more information, please contact me at Announcements@mycbpp.com or toll free at 800.505.8111. Coldwell Banker Platinum Partners Real Estate Service in Georgia and South Carolina.

6 Designer Tips to Make Your Home Look Expensive

6 Designer Tips to Make Your Home Look Expensive
By Barbara Pronin


Creating a stylish interior for your home is rarely a problem when money is no object. But when funds are in short supply, says interior designer Cheryl Eisen, there are plenty of tricks for achieving the luxe look you want.

Eisen, a long-time New York-based home stager who works for high-end clients, shared six practical if inexpensive tips with readers of Harper’s Bazaar:

• Use larger area rugs – The bigger the area rug, the larger the room will appear. You can save some money by fastening together two smaller, less expensive area rugs instead of purchasing one large one.
• Less is more – When it comes to shelving, opt for a minimalist look rather than cramming them with books. Stand several books upright, interspersed with vases and other décor items of various heights and colors.  
• Go bold or go home – Every room needs a focal point, and often it is eye-catching wall art. Use a large canvas you love on one wall or create a triptych with three separate pieces that form one visual image.
• Go for flair in the bedroom – Create a little dramatic flair in the bedroom by painting the wall behind the bed darker than the others – or by covering it with grass cloth or another textured wall covering.
• Love a room with a view – If you’re lucky enough to have a great view from your living room or office, frame it with neutral curtains so the eye is drawn to the windows and the view behind.
• Be eclectic – Decorate rooms with natural palettes, adding pops of color and texture with accessories. (A popular color scheme today is white, gray and beige.) Then search Craigslist or an upscale second hand store for eclectic pieces like a vintage chair and/or pillows in bright hues and varied shapes.

For more information, please contact me at Announcements@mycbpp.com or toll free at 800.505.8111 . For more information, please contact me at Announcements@mycbpp.com or toll free at 800.505.8111. Coldwell Banker Platinum Partners Real Estate Service in Georgia and South Carolina.

Coldwell Banker Platinum Partners Receives Award at Navy Federal/RealtyPlus Partnership Celebration

Realtors (R) Angie Schroeder & John DuBose
proudly exhibit the Spirit Award.

Navy Federal Credit Union, in partnership with Cartus Corporation, held its annual Navy Federal RealtyPlus Broker Network Summit in Pensacola, Fla. RealtyPlus is a free nationwide service that gives one-on-one service and, in most states, pays cash back to Navy Federal members who buy and sell homes. The second annual conference gave realtors an overview of Navy Federal mortgage products, as well as broker best practices.

“We were very pleased to celebrate the 26th year of partnership with Navy Federal Credit Union,” said Cartus Senior Vice President, Affinity Services, Steve Slabaugh. “Buying or selling a home is a substantial life event, and we at Cartus are honored that Navy Federal entrusts us with the delivery of the RealtyPlus program to their almost 6 million members. The Cartus Broker Network is dedicated to providing an exceptional experience for every member, and our cash-back bonus program continues to be a valuable benefit to Navy Federal members. We congratulate the award winners, all of whom are outstanding representatives of the Cartus Broker Network.”

Coldwell Banker Platinum Partners was honored for their exceptional services.  They received the Navy Federal Credit Union SPIRIT Award.  Connie Farmer Ray, President & CEO of Coldwell Banker Platinum Partners gratefully receives the award and says, “it’s the efforts of our entire Company which is dedicated to providing excellent service and ongoing professionalism.”  

Christy Woiwode, VP of Relocation for Coldwell Banker Platinum Partners spoke of the value gained at the conference. “I appreciate the depth and breadth of information that was made available during the event,” Woiwode said.

About Navy Federal Credit Union

Navy Federal Credit Union is the world’s largest credit union with more than $71 billion in assets, 5.9 million members, 274 branches, and a workforce of over 12,000 employees worldwide. The credit union serves all Department of Defense and Coast Guard active duty, civilian and contractor personnel and their families. For additional information about Navy Federal, visit www.navyfederal.org.

About the Cartus Broker Network
Cartus Broker Network is the nation's leading network of more than 800 market-leading real estate firms representing approximately 2,900 offices and nearly 108,000 agents. Cartus provides trusted guidance to organizations of all types and sizes that require global relocation solutions.

About Cartus
Cartus, who Celebrates 60 years in corporate relocation, provides trusted guidance to organizations of all types and sizes that require global relocation solutions. Cartus serves half of the Fortune 50. We provide service in more than 167 countries, applying our more than half century of experience to help our clients with their mobility, outsourcing, consulting, and language and intercultural training needs. Cartus is a subsidiary of Realogy Holdings Corp. (NYSE: RLGY), a global leader in real estate franchising and provider of real estate brokerage, relocation and settlement services. To find out how our greater experience, reach, and hands-on guidance can help your company, visit www.cartus.com; read our blog at www.cartusblog.com; or click www.realogy.com for more information.

 


For more information, please contact me at Announcements@mycbpp.com or toll free at 800.505.8111. Coldwell Banker Platinum Partners Real Estate Service in Georgia and South Carolina.

Stephanie F Hogan joins Coldwell Banker Platinum Partners Savannah Office

Stephanie F Hogan joins Coldwell Banker Platinum Partners Savannah Office located at 6349 Abercorn Street.  Stephanie has honorably served in the United States Army for 12 years as a signal operator and logistics

Stephanie F Hogan
Realtor
Office Phone: (912) 352-1222
Cell Phone: (912) 346-9034
Fax: (912) 356-3622

officer.  She began investing in real estate in 2011 and wanted to pursue her real estate passions by becoming a REALTOR.  She focuses on residential properties in the Savannah and Richmond Hill areas and especially enjoys working with first-time home buyers, veterans and investors.

Stephanie has her BS in Social Work from FSU (Tallahassee FL).  She is originally from Tallahassee and was stationed at Fort Stewart in 2009.  “After living in Savannah, I knew this area is where my family and I would call home.”  “I am fully committed to serving all of my clients’ real estate needs, whatever they are.  From finding a home for a growing family or an addition to an investment portfolio; I guarantee superior service with a smile,” says Stephanie.  She continues, “I have joined Coldwell Banker Platinum Partners because of the unmatched level of support and professionalism offered to me and also to my clients.”

For more information, please contact me at Announcements@mycbpp.com or toll free at 800.505.8111. Coldwell Banker Platinum Partners Real Estate Service in Georgia and South Carolina.