NEW YORK – May 16, 2012 – Home values will start to climb again and related consumer industries will grow in 2012 and beyond as the U.S. housing market finally turns the corner, according to a new study released today by The Demand Institute, a new nonprofit, non-advocacy group formed in February by The Conference Board and Nielsen.

According to the Institute, the housing market recovery will have “far-reaching impacts in the coming years across the United States and international markets as U.S. consumers increase their spending on buying, renovating, furnishing and maintaining their homes.”

It also won’t be like earlier recoveries, the Institute suggests, with homestead owners leading the way. Instead, real estate investors buying rentals will supply the homebuying demand.

The Institute’s report, The Shifting Nature of U.S. Housing Demand, predicts that average home prices will increase by up to 1 percent in the second half of 2012. By 2014, home prices will increase by as much as 2.5 percent.

From 2015 to 2017, the study projects annual increases between 3 and 4 percent, though unevenly nationwide. The strongest markets “could capture average gains of 5 percent or more in the coming years.”

“In these initial years, the prime driver of recovery won’t be new home construction, but rather demand for rental properties,” says Louise Keely, chief research officer at The Demand Institute and a co-author of the report. “This is a remarkable change from previous recoveries. It is a measure of just how severe the Great Recession has been that such a wide swath of Americans had to delay, scale back, or put off entirely their dreams of homeownership.”

Bart van Ark, chief economist at The Conference Board and co-author of the report, says he doesn’t expect to see the homeownership rate to change.

“Over 80 percent of Americans in recent surveys still agree that buying a home is the best long-term investment they can make,” van Ark says. “What will be intriguing to watch is how their aspirations around homeownership are affected by this period of extended austerity.”

Between 2006 and 2011, some $7 trillion in American wealth was wiped out when home prices dropped 30 percent after dramatic climb in valuations during the housing bubble. Looking forward, the moderate growth expectations for coming years suggest a return to normalcy. As home prices continue to drop and interest rates fall further, first-time buyers and others who remained relatively cautious will be drawn back into the housing market. And, as the market recovers, so too will consumer spending.

“As the U.S. housing market strengthens, almost every consumer-facing industry will be impacted in the coming years,” said Mark Leiter, chairman of The Demand Institute. “Business and government leaders will benefit by fully understanding the nature of this recovery. In doing so they will be better able to anticipate how consumer demand will evolve, and to formulate critical business and policy decisions to lead their organizations.”

Key findings

In addition to the projected gains in home prices, the report discusses in detail the dynamics at work in the U.S. housing market and the impacts across industries. What follows are highlights from the report:

• The recovery will be led by demand from buyers for rental properties, rather than, as in previous cycles, demand from buyers acquiring new or existing properties for themselves. More than 50 percent of those planning to move in the next two years say they intend to rent.

• Young people and immigrants will lead the demand for rental properties. Developers and investors will fulfill it: developers by building multifamily homes for rent, and investors by buying foreclosed single-family properties for the same purpose.

• Rental demand will help clear the huge oversupply of existing homes for sale. In 2011, some 14 percent of all housing units were vacant, while almost 13 percent of mortgages were in foreclosure or delinquent – increases of 12 and 129 percent respectively over 2005 levels. It will take two to three years for this oversupply to be cleared, and at that point homeownership rates will rise and return to historical levels.

• The housing market recovery will not be uniform. Some states will see annual price gains of 5 percent or more. Others will not recover for many years. The deciding factors will include the level of foreclosed inventory and rates of unemployment.

• There will also be vast differences within states. Here, additional factors count, such as whether local amenities, including access to public transport, are within walking distance of homes. The report looks at seven factors and then sorts cities and towns into four categories, with each category predicting the speed of a local home price recovery.

• The average size of the American home will shrink. Many baby boomers who delayed retirement for financial reasons during the recession will downsize. They will not be alone. Most Americans will scale back their housing aspirations. The size of an average new home is expected to continue to fall, reaching mid-1990s levels by 2015.

• Consumer industries including financial services, home furnishings and home remodeling will experience shifts in demand and new growth opportunities. Part of this spending is linked to increases in wealth from improving home valuations, while an even bigger part is tied to the “transaction” of buying or selling the home which sets in motion increased demand for a wide range of products and services.

• Despite the number of Americans who have been hurt financially by the housing crash, the desire to own a home remains strong. The Institute doesn’t expect to see a long-term drop in ownership rates.

© 2012 Florida Realtors®

PARIS – May 14, 2012 – France’s national election will mean a change of residence for many more French than simply outgoing President Nicolas Sarkozy, a real estate firm says.

Winkworth, a real estate firm in South Kensington, Britain, said there has been a 50 percent jump in customer traffic from France since last weekend’s election, which analysts attribute to Socialist President-elect Francois Hollande’s plans to raise taxes on the wealthy, The Daily Telegraph reported Sunday.

Hollande, who defeated the center-right Sarkozy last weekend, has said his tax policy would include raising the tax rate to 75 percent for those earning $1.2 million per year or more. He also expects to raise the tax rate to 45 percent for those earning $193,000 per year or more.

On the other side of the English Channel, British Prime Minister David Cameron is planning to cut the 50 percent tax rate for those earning $241,000 per year or more to 45 percent. This explains the sudden interest in relocating, said one banker.

Hollande has also said, flat out, “I don’t like the rich.”

One French financier remarked that the new French president has triggered “the third-biggest exodus from France – the first being the Revolution and the second when (Socialist President Francois) Mitterrand got into power.”

Copyright © United Press International 2012

WASHINGTON – May 8, 2012 – Despite slow job growth, Americans’ attitudes about homeownership, the economy and personal finances continue to improve, according to Fannie Mae’s April 2012 National Housing Survey.

The continued stabilization of consumer attitudes coupled with other positive trends should, according to Fannie Mae analysts, positively influence Americans’ decisions making about buying a home.

“This month’s survey shows a continued gradual improvement in consumer sentiment and outlook for home prices,” says Doug Duncan, vice president and chief economist of Fannie Mae. “After flatlining at depressed levels for over a year, a growing share of consumers indicates that it is a good time to sell, suggesting rising optimism for the housing market.” Duncan adds, however, that an improving real estate market is dependent on growth in jobs, and recent reports have been a bit erratic, suggesting “that the housing recovery will remain uneven this year.”

On average, Americans expect home prices to increase 1.3 percent over the next twelve months, the highest value yet recorded, while the percentage of Americans who say it is a good time to sell their home rose to 15 percent in April.

Confidence in the economy’s direction rose to a survey all-time high in April hitting 37 percent, an increase of 2 percentage points from March. Another positive trend is an increased share of respondents who reported their income as “significantly higher” from twelve months ago, taking it to the highest level recorded over the past year and 7 percentage points higher than those who reported income as “significantly lower.”

Survey highlights

The economy and household finances
• Confidence in the economy’s direction rose to the highest point in the survey’s two-year history to 37 percent, an increase of 2 percentage points from last month.

• Only 12 percent think that their personal financial situation will worsen in the next 12 months, consistent with February and March as the lowest value in more than a year.

• Twenty-three percent of respondents saw an increase in their personal income from 12 months ago, a 2-percentage point increase from March and the highest level recorded during the past year.

• Thirty-six percent say their expenses have increased significantly over the past 12 months, a 2-percentage point increase from last month and a return to the level recorded in January.

Homeownership and renting
• On average, Americans expect home prices to increase by 1.3 percent over the next 12 months, up 0.4 percentage points since last month and the highest value yet recorded.

• Thirty-two percent of respondents expect home prices to increase over the next 12 months, a slight decline from the sharp spike last month.

• Thirty-nine percent of Americans say that mortgage rates will go up in the next 12 months, consistent with last month’s value.

• The percentage of Americans who say it is a good time to buy decreased by 2 percentage points to 71 percent, while the percentage of respondents who say it is a good time to sell continued to increase this month to 15 percent.

• On average, respondents expect home rental prices to increase by 3.6 percent over the next 12 months, a 0.5 percentage point decrease versus last month.

• Forty-nine percent of respondents think that home rental prices will go up, a 1 percentage point increase from last month and the highest number recorded to date.

• Thirty-two percent of respondents say they would rent if they were going to move, a 2-percentage point increase from last month and the highest level since November 2011.

© 2012 Florida Realtors®

WASHINGTON – April 30, 2012 – What can homebuyers expect to face this selling season? An improving housing market has made it a different picture in many areas compared to recent years, housing experts say. Bankrate.com notes the following trends:

1. Fierce competition.
Housing affordability is at a record high due to falling home values and mortgage rates near record lows. More buyers are jumping off the sidelines. At the same time, investors are snapping up bargain prices, often in all-cash deals, and competing with traditional homebuyers.  Add in a sinking inventory of homes for sale, and the competition is getting fiercer.

“Rents are going up, and as long as there are properties at the level where investors can get positive cash flow, they will continue to invest,” says Jed Smith, managing director of quantitative research for the National Association of Realtors®. Smith adds that first-time homebuyers, in particular, may find increased competition from investors in trying to snag some of the best deals on the market.

2. More renters show desire to become homeowners.
Recent surveys show that buying a home now is more affordable than renting. As such, more renters are finding homeownership more enticing.

The signs are already starting to show: About 59.5 percent of tenants recently surveyed by Kingsley Associates say they intend to renew their leases this year, which is the lowest rate since early 2009.

3. Mortgages may be a little pricier.
Fannie Mae, Freddie Mac and the Federal Housing Administration recently raised their loan fees, which means homebuyers can expect to pay a little more for their mortgage this spring.

“Those who don’t have credit scores in the high 600s to low 700s may be forced to go the FHA route,” says Ed Conarchy, a mortgage planner at Cherry Creek Mortgage in Gurnee, Ill. “And they will be stuck with the higher fees.”

Buyers with smaller downpayments can expect to pay more for FHA mortgage insurance premiums, which have risen to 1.75 percent of the loan total. Bankrate.com cites an example illustrating the higher fees: A borrower who takes out a $200,000 FHA loan will likely have to pay about $3,500 for mortgage insurance upfront. Prior to the increase taking effect, borrowers would pay about $2,000 for that same loan amount.

Borrowers with higher mortgages can expect higher fees too. The FHA announced that in June it would increase its annual insurance for mortgages more than $625,500. “A borrower who lives in a high-cost area and takes out the maximum $729,750 (which is the FHA limit for high-cost areas) will pay $912 each month in mortgage insurance alone,” Bankrate.com reports.

Source: “5 Mortgage and Housing Trends in Spring 2012,” Bankrate.com (April 21, 2012)

© Copyright 2012 INFORMATION, INC. Bethesda, MD (301) 215-4688

WASHINGTON (April 26, 2012) – Pending home sales increased in March and are well above a year ago, another signal the housing market is recovering, according to the National Association of Realtors® (NAR).

The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, rose 4.1 percent to 101.4 in March from an upwardly revised 97.4 in February, and it’s 12.8 percent above March 2011 when it was 89.9. The data reflects contracts but not closings.

The index is now at the highest level since April 2010 when it reached 111.3.

“First quarter sales closings were the highest first quarter sales in five years,” says Lawrence Yun, NAR chief economist. “The latest contract signing activity suggests the second quarter will be equally good. The housing market has clearly turned the corner. Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices will be rising in more areas as the year progresses.”

The PHSI in the Northeast slipped 0.8 percent to 78.2 in March but is 21.1 percent above March 2011. In the Midwest, the index declined 0.9 percent to 93.3 but is 16.9 percent higher than a year ago.

Pending home sales in the South rose 5.9 percent to an index of 114.1 in March and are 10.6 percent above March 2011. In the West, the index increased 8.7 percent in March to 108.0 and is 9.0 percent above a year ago.

© 2012 Florida Realtors®