November 17th, 2014
By: Victor Normand
Published: November 2014
112 Ocean Avenue, Amityville, New York
In all states, home sellers and their real estate agents are obligated to disclose known material defects like a leaking roof or an inoperable heating system in a property for sale. Material defects are defined as those conditions that could affect the value of a home. In Massachusetts, the Consumer Protection Act, Chapter 93A, requires such disclosure even if a potential buyer does not ask. Failure to disclose material defects could subject the agent to treble damages, plus legal fees. But the question is, can matters of an intangible nature be considered material?
Can the fact that crimes, like murder or the presence of a ghost or other paranormal event, psychologically stigmatize a property as to materially affect its value? The fact is that one in four Americans is superstitious and there are several examples of severely depressed values on stigmatized properties. The former home of Nicole Brown Simpson where she and a friend, Ronald Goldman were murdered, sat on the market for two years and eventually sold for $200,000 less than the asking price. State laws on disclosure vary widely.
In Tennessee there is no duty to disclose, and a real estate agent who does disclose such stigmatizing information without permission can be held liable for breaking the fiduciary relationship between the seller and the agent. In California the law does require disclosure for deaths at the property, but only if the death occurred within the last three years, and was not AIDS related. In Massachusetts, there is clarity on the subject.
While Chapter 93A would seem to require full disclosure, the legislature created an exception by passing the “Stigmatized Property Law.” The law states that whether a property is “psychologically impacted” is not a material fact that requires disclosure. However, if asked by a potential buyer about a crime or death of an occupant, the real estate agent must respond accurately as to what is known. There is no duty to volunteer any information, but if asked, the agent must disclose. There is no obligation on the part of the agent to investigate and the potential buyer’s questions should be referred to the local police department.
By extension, paranormal events that may stigmatize a property; think The Amityville Horror, need not be disclosed voluntarily, but should be addressed if asked. In New England where homes are much older than other parts of the country, there may be no knowledge on the part of the current owners of what may have happened in the house 50, or 100 or more years ago. And then there is the issue of what situation might exist in the neighborhood.
Courts have suggested in certain cases that there may be no need to disclose non-physical “transient social conditions” in a neighborhood. The matter of sex offenders living nearby presents both a legal and ethical/moral challenge for real estate agents. While sex offenders are not of themselves a protected class like minorities, children, or the handicapped, the best advice for a real estate agent is to disclose.
Real estate agents representing Buyers and Sellers need to know the laws and act accordingly in all matters relating to disclosure. Private sellers on the other hand are not required to disclose anything, other than the presence of lead paint. They have no duty to disclose things like the condition of the roof or the presence of ghosts, which makes using the services of a Resident Expertsm always the right thing to do.
October 16th, 2014
By: Victor Normand
Published: October 2014
Last month I encouraged home sellers to think outside of the box and list their properties in the fall instead of waiting until the spring. I charted statistics that showed higher final sale prices and fewer days on market in certain towns for homes sold last year in the fall in contrast to home that sold in the spring. Some of you took my advice; some did not or could not because their homes were not prepared for listing which is a common condition.
If your home doesn’t look like new inside and out, which is probably the case since the median age of a home sold in New England is 40 years, there are things to be done that will help you sell at the best price in the shortest amount of time. The typical list includes kitchens with granite counter tops, stainless appliances, updated baths, re-finished hardwood floors and a fresh coat of paint inside and out. You might want to do more, but not every “improvement” will add value to your home.
Even if it will be years before you will be selling your house, be aware that not all home improvements are created equal in the eyes of the buyer. If you have always wanted a swimming pool, have one built for your own enjoyment knowing that today’s homebuyers in this part of the country don’t always want the care and maintenance of one particularly with such a short season. Some neighborhood developments have a pool membership included or perhaps you get to know your neighbor who welcomes people over on hot days.
Wallpaper is another improvement with almost universal negative appeal because of its very personal nature. Another mostly problematic improvement are solar panels. While good for the earth and generally viewed positively, their appeal to home buyers is limited, particularly so for solar panels that are leased and not owned outright. According to the National Association of Realtors® (NAR) 2013 Profile of Home Buyers and Sellers, 90% of those surveyed said that solar panels installed on a home were not important enough to encourage a sale.
National Association of Realtors® 2013 Profile of Home Buyers and Sellers
Home buyers identified exhaust fans in bathrooms and exterior lighting as either essential, must have or desirable by 90% of respondents in a report prepared by the National Association of Home Builders in May of last year. Another low cost improvement that home buyers now have in their homes and expect in the next home purchase are programmable thermostats.
Outdoor living is big so money spent on improving or adding decks and patios tends to payoff well. On the other hand, unconventional features like wine cellars, hot tubs, and media centers can actually take away value from a home because they may not be wanted and removing will be at a cost. Even adding land to your parcel may not be desirable but rather seen as just more property to be taxed and more land to care for. The middle of the road is where you want to be when contemplating upgrades and enhancements to your property.
So, if home improvements with the intent to appeal to home buyers in the near future are under consideration, moderation is good advice. Upgrading a kitchen with high end appliances and finishes may make the rest of your house look not so nice. Keeping home improvements consistent with the character of the home is advised. It is possible to over upgrade a property. You do not want to be the owner of a $350,000 home in a $250,000 neighborhood.
It is good to plan ahead and take the advice of a Resident Expertsm in this changing housing market.
September 17th, 2014
By: Victor Normand
Published: September 2014
It is said that the best time of the year to sell a house is in the spring and that’s when the buyers are out. So says conventional wisdom and conventional wisdom is both wise and self-fulfilling, usually. But, is going along with what everyone else seems to be doing always what one should do?
There is an investment school of thought called contrary investing which challenges conventional wisdom. It’s a version of “buy low, sell high” where they actually try to do just that. Contrarians begin every day by questioning conventional wisdom.They live in a world that believes that there is always a point in time when conventional wisdom reverses itself and they want to anticipate that moment and make money because they got there first.
This sound like a good investment strategy but like most things that sound too good to be true, contrary investing really involves staring into a crystal ball and understanding what you are looking at. You have to know the signs and have confidence in them before you polish up the ball for gazing.
Timing a real estate move can also benefit from a little contrarianism. We took a look at the real estate market in the Acton area for the year 2013 to see how well conventional wisdom holds up when it comes to the best time of the year to act. We used as our measure, days on market and the ratio between the original list price and the actual sale price. And we looked at sales that would have gone to contract (P&S) in either June or September and closed two months later. What we found was that for three of the towns, Acton, Harvard and Boxborough, sales originating in the spring had spent fewer days on market and had a higher sale price to original list price ratio. But for Concord, Littleton, Maynard and Stow the reverse was true (see the chart below).
The point here is that while it is important to be aware of what everyone else is doing, having the discipline of a contrary thinker makes sense as well. A true contrarian starts out questioning everything and trying out an opposing view. You might want to keep your contrary views to yourself until you have done some homework. After all, conventional wisdom is not to be ignored but if you think you are on to something, you might want to make your move. Often those who have done very well with a real estate deal acted ahead of the crowd, whether they meant to do that or not.
The more information you have and the more critical tools you have to process that information, the better your chances of making the right real estate decision. An open mind is required, as is the willingness to consider opposing points of view. As always, having a Resident Expertsm to help you think things through is a great idea.
August 19th, 2014
By: Victor Normand
Published: August 2013
Not much has changed in the past year. Today 2,549 single family homes are on the market in Middlesex County, 154 have less than three bedrooms and only 37 were built after 1980.
What do McMansions, boomerang kids, and the Great Recession have in common? Think multigenerational housing and the days before WWII when it was common for several generations to live together under one roof. Today over 50 million Americans, or 16.3% of the population live in households with more than two generations according to the U.S. Census Bureau, and the trend is increasing every year, though far below the 25% of the population living as extended families in 1940.
The housing boom after WWII saw large tracts of land developed for housing in all parts of the country, and little of it was built for the extended family, just housing for parents and their 2.3 kids. By 1980, the number of extended family households had shrunk to half of what is was, just 40 years previous.
Since 1950 the size of the average home has grown by 240% while the average family size has decreased by 30%. According to the National Association of Home Builders, the average size of an American home has increased from 983 square feet in 1950 to 2,349 SF in 2002 with the Northeast leading the way with an average of 2601 SF.
The housing plan envisioned by many Baby Boomers who bought all those big houses, involved selling that big house when the kids left the nest and downsizing to smaller quarters. The flaw in that scenario is twofold. Though the kids did leave the nest, often, very often, they came back, and flaw number two: where to find the smaller house to down size to?
Presently, there are 2,748 single family homes on the market in Middlesex County; of those only 203 have fewer than three bedrooms, and of those, only 37 were built after 1980. The alternative is newer, age restricted developments that often do not provide all of the economic relief hoped for by retiring Boomers.
As for the Great Recession, it seems to have imposed a reexamination of the social benefits of the extended family. Single and married children living with parents clearly has powerful economic benefits, as does providing housing for elderly parents who can free themselves of their larger homes. So, the problem of what to do with the big house may have its solution in accommodating some major social and economic changes.
Indeed a niche has developed among home builders who are designing homes to provide for the extended family. Also, home owners are re-designing existing McMansions to provide interior living spaces for the comfort of the extended family members. Now the challenge is zoning which often makes it difficult for homeowners and builders to create in-law apartments or accessory buildings. Only California has a law which allows such housing by right. But there are options in the marketplace and then, of course, there is a Resident Expertsm who can help with your multigenerational needs.
July 16th, 2014
By Victor Normand
Published: July 2014
It would literally take an act of Congress before Americans could legally buy property in Cuba, but Cubans are now able to buy and sell their homes on the open market, for market value. For more than 50 years that was not allowed, but now, it’s legal and happening every day. If you think it is a challenge to sell your home or buy a new one here, the process is that much more complicated for the average Cuban.
Jackie and I visited Cuba recently (yes there are proper ways to get a visa to the largest of the Caribbean islands and the only fully communist country in the western hemisphere) and among the many things we experienced, we could not help being curious about Cuban real estate.
You might be surprised to know that between 80% and 90% of Cubans own their own homes. That wasn’t always true, in fact only a small percentage of Cubans owned their own homes before the revolution in 1959, but within days of the communist takeover, all private ownership of housing was abolished, rents were cut in half and evictions outlawed. From that time on, rents were paid to the government and the tenants were given title to their homes in exchange for rent payments that never lasted longer than ten years. Still, until 2011, there was only one place where Cubans could actually buy a piece of real estate, in cemeteries:
Colon Cemetery, Havana, Cuba
Among the many social problems that exposed the former Cuban government to overthrow, the cost of housing was right up there along with organized crime and government corruption. The change brought about by the revolution was successful in making almost all Cubans “owners” of where they lived. However, government policy dictated that homes were for “living in” not “living off of”. The problem was that while Cubans owned their homes, they could not sell them. Passing the home to your heirs was allowed and swapping or permutas was tolerated until 2003 when even permutas was outlawed.
If you travel to Cuba, as we did in April, you will be struck by the deplorable condition of most residential properties. It seems that while the government gave apartments to their occupants, no one owned or was responsible for the buildings within which those apartments were located. Every day in Havana, where one in five Cubans live, whole buildings or parts thereof collapse into the streets.
Residential Neighborhood, Havana, Cuba
In addition to what happens with 50 years of neglect, no private mechanism exists to deal with a severe housing shortage. Recognizing the seriousness of the problem, the Cuban Government under Raul Castro instituted reform in 2011 which allowed homeowners to sell their property at market prices. The real estate brokers, called corredores, or runners, who had previously arranged the permutas, were back in business.
Because there is no organized system for marketing real estate in Cuba with little help from the tightly controlled, censored, and expensive internet, the buying and selling of homes mostly happens at places like the Paseo del Prado in downtown Havana on Saturdays. Buyers and sellers stand around the square holding signs with the particulars of property for sale or sought after.
Paseo del Prado, Havana, Cuba
Since there are no mortgages in Cuba, all real estate transactions are in cash. Cuba has a dual currency system; the Peso, used for local purchases is worth about 4 cents, and the Cuban Convertible Peso (CUC) which can be purchased for one dollar less a 10% tax to the government. Rent and transaction taxes are paid in pesos, the purchase price in CUC’s.
The average monthly wage for a Cuban worker is about $20. So how does the average worker buy an apartment for 40,000 CUC’s in Havana, or a free standing house for 120,000 CUC’s? Two ways: either sell a larger, higher priced home and buy a less costly property, keeping the difference as a nest egg; or use cash earned by exiled Cubans who have repatriated or have provided remittances to relatives on the island . The bad news is both buyer and seller pay a 4% tax on the sale, the good news is, the sale price is determined by an assessed value mostly based on the original, post revolution value determined by the government and paid in pesos not CUC’s.
Cubans are only allowed to own one primary residence and one vacation home. So, while real estate activity has increased every year since the reform on 2011, the lack of private capital has meant that the housing shortage has not been helped by all this new housing market activity. Younger Cubans often live with their parents or other relatives, waiting for a housing opportunity to open up.
Other economic reforms have taken place recently allowing certain businesses to operate privately with government permission. The corredores joined the list of occupations allowed to work on a private basis in September of 2013. Because nearly every Cuban has a stake in real estate, expect more changes to come. There are no licensing laws or continuing education requirements, but you can be sure there will be a Cuban version of Resident Experts (SM) just the same.
June 17th, 2014
By Victor Normand
Published: June 2014
Everyone knows the economy runs in cycles. No one knows exactly when those cycles begin or end until they do, but one thing is for sure, these cycles will continue. Despite having a basic knowledge of economics, most of us continue to buy high and sell low. And that is probably what turns normal economic adjustments in the economy into panics…….. and panics into recessions.
Although reliable economic data does not exist for periods before the mid 1800’s, it is likely that since 1790 there may have been as many as 40 periods of economic contraction. Lower and middle class individuals and families tend to suffer the greatest economic hardship when the economy turns bad, with the value of housing declining as a direct or indirect consequence of the economic downturn.
The first major American depression is recognized as the panic of 1819. During the rest of the nineteenth century it was follow by the Panics of 1837, 1857, 1873, and 1883. They were all triggered by combinations of crop failures, or big drops in commodity prices, reckless railroad and land speculation, bank failures, and major declines in stock prices. The “Panics” were followed by periods of tight credit, the decline of property values and the rise in unemployment. Despite the similarities in these economic calamities, they kept happening. The economic crises of the next century occurred with similar regularity and a bit more variety.
Here’s a summary of what the twentieth century gave us for bad times in the economy:
The Knickerbocker Trust Panic of 1907
The president of the Knickerbocker Trust decided to try to corner the market in copper. His plan came undone when millions of dollars of copper was dumped on the market in a bid to prevent a hostile takeover of an unrelated business. As the extent of the copper market manipulation became known, other banks refused to accept checks from Knickerbocker which led to a run on the Knickerbocker bank and fueled big losses in the stock market.
The Great Depression of 1929
This one is familiar. The bull market that lasted for more than six years began to come undone when talk of a tariff war with Europe began a rout in stocks that eventually brought stock prices down 90% from their pre-crash highs. Other economic excesses and the onset of the “Dustbowl” added to the misery. The hard times lasted off and on for most of the next ten years until the war time economy got everybody back to work.
The OPEC Oil Crisis 1973
The quadrupling of oil prices and an embargo on oil shipments to the US by Arab oil producers sent the economy into a recession. Consumer prices rose sharply but wages did not, creating “stagflation”. Rising interest rates along with the high price of gasoline badly shook the economy which took a decade to recover lost value.
The Savings and Loan Crisis 1986
Lax regulation in the Savings and Loan (S&L) banking sector led to many S&Ls into making long-term loans at fixed interest using short-term money. When the interest rates increased, the S&Ls could not attract sufficient capital and became insolvent. Nearly one third of the 3,200 S&L’s failed.
The Dotcom Bubble 2000
The failure of many internet technology based companies precipitated the end of the longest period of economic growth in US history during the 1990’s and might not have turned into recession except for the September 11th 2001 attack on the World Trade Center.
The Great Recession 2007-2009
The Sub-Prime mortgage crisis led to the collapse in the US housing bubble causing the decline in housing backed assets, helping to set off a global economic crisis. Many of the largest financial institutions in the country including Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, Citi Bank and AIG, failed.
Housing is more than a commodity. During the years when we remain in residence, the market value of a home may vary, but it always remains where we anchor our lives. This intrinsic value of a home has never been in decline despite the condition of the economy. We always try to make the best economic decisions when we are in the market for housing, but even if we do happen to buy high and sell low, our homes are our castles.
May 16th, 2014
By: Victor Normand
Published: May 2014
Real estate professionals agree that presently, there is a shortage of homes for sale in most areas. Consumers who are actively looking for a home to buy would most likely agree. In the larger economy, whenever there are more buyers than sellers of anything, the market will correct the imbalance, and so will the housing market….. eventually. It takes considerable time to produce new housing and it apparently takes considerable time to convince existing home owners to offer their property for sale.
Sometimes there is urgency on the part of sellers and buyers to make a move in the instance of a job change perhaps, but often there is a rather big window of opportunity within which to make a move. For the most part, buyers are living somewhere now and can continue that way, and sellers often seem to be waiting for inspiration. Unfortunately for sellers, when a clear sign comes, it is often too late and the most favorable conditions have passed. For some potential home sellers, waiting for a home to return to its peak value is an indicator of when to sell.
In some Massachusetts communities, home values have reached or surpassed the peak values of 2005. Those communities tend to be the towns in the inner suburbs of Boston, mostly east of route 128. Other cities and towns located south of Boston and in the north central towns are far from recovering their peak values. In our market, most towns are still off the peak by around 10% (see the chart below). Still other potential home sellers are held back by the fear that once they sell, they will have trouble finding something to buy in this tight market.
The perfect situation is a balanced market where all sellers and all buyers are equally matched in number. Unfortunately, while balanced markets do happen, they rarely happen for very long. There are clearly times when it is a buyer’s market, like during the years immediately after the Great Recession, and there are times when it is a seller’s market, like now. More often we are in a state of transition where buyers think it is a buyer’s market and sellers think it is a seller’s market. So, knowing the inventory of homes on the market relative to recent sales activity is a good measure of the overall condition.
The chart below shows the current supply of listed single family homes by town, the number of home sold in the previous 12 months, the actual monthly absorption rate and the number of months it will take to sell off the current inventory. Nationally, in 2010, the worst real estate year after the Great Recession, the absorption rate stood at 9.4 months. According to the National Association of Realtors, a balanced housing market should have between 6 and 6 ½ month of inventory. The rate for the entire state of Massachusetts in presently 4.4 months, and in our market the average is 2.6 months.
Like politics, all housing markets are local. In our market, housing values are increasing in most towns, though not as fast as others and not yet fully recovered to their pre-recession levels, and the inventory level of houses for sale are so low as to keep the market in favor of sellers. That is the condition today, and tomorrow you can be sure changes are likely.
May 16th, 2014
By: Dug North (Acton Real Estate client)
Like all machines, grandfather clocks become dirty and worn through years of use. This is often when they developed odd behavior or simply refuse to run.
So what is to be done? Let’s take a look at the process for having a grandfather clock serviced.
Step 1: Talk to a professional about your grandfather clock
First, you’ll want to speak with a qualified clock repairer. Here are the kinds of things the repairer will probably want to know:
- What brand of clock is it?
- How old is it?
- Is it driven by falling weights? How many?
- Does it play a song on the quarter hours (chime) or does it just count out the hours (strike)?
- What is the clock doing or not doing? When did it start? Have you detected any patterns?
- Has it been serviced before?
- Can you send a photograph or two of the clock?
Before going further, be sure you feel comfortable working with the repair person. Ask for repair estimates and if the work will be warrantied.
Step 2: A first house call to evaluate the clock
House calls may be a thing of the past in many fields, but not so when it comes to large floor-standing clocks. The clock repairer will want to take a look your clock in person. If the clock hasn’t been serviced in a years, chances are very good that it will need to be overhauled. How can your know for sure? Ask to see the clock movement and have the repairer point out the pivot holes in the clock plate. Is there evidence of old, black (or green), dirt-filled oil around the pivots? Ask to see the cut pinions and see if they are dirty too. This dirt and — the associated wear that invariably comes with it — is more than enough to stop a clock. If you are resolved to have it fixed, and the repair estimate sounds fair, it’s on to the next step.
Step 3: Overhaul the movement or (sometimes) replace it
The repairer will take the mechanical parts out of the clock case for service in his or her workshop. These parts include the movement, pendulum, weights, and dial. They will overhaul the movement, taking the mechanism apart completely to clean all of the parts and restore the ones that need it. The repairer will then run the clock for a week or more to be sure that everything is working properly. Certain modern grandfather clocks have movements which are still being manufactured. It can be wiser and more economical to replace this type of movement rather than to overhaul the old one. Ask if this option is available to you.
Step 4: Second house call to Install the movement and configure the clock
Finally, the repairer will bring the serviced parts back and reinstall them into the clock case. The repairer will then make adjustments that can only be made when the movement is in the case such as positioning the hammers that hit the chime rods, making sure the clock is level, and that it is ticking evenly (this is known as being “in beat”). This is a good time to ask any questions you might have about the care and operation of your clock.
After a couple of house calls and a bit of waiting, your grandfather clock can be up and running again.
About the Author:
Dug North buys, sells, and repairs antique mechanical clocks at 307 Market Street, Studio 411, in historic downtown Lowell, Massachusetts. Learn more on his web site ClockFix.com.
April 17th, 2014
By Victor Normand
Published: April 2014
Last week I got my credit card statement from American Express. The statement showed current balances of $2,540 which will be paid by the due date as I usually do. In the event that I would like to stretch out payment, Amex provides a schedule showing that if I only made the minimum payment of $35, and assuming I did not charge anything else on the card, it would take over 9 years to pay it off and I would have paid them $4,400.
All credit card companies are required to make this disclosure, perhaps student loans should come with similar disclosures. I do remember my daughters having to participate in an online tutorial before getting their student loans approved. My recollection is that the purpose of the tutorial was to stress the student borrower’s obligation to pay back the loan and what would happen if they did not. No student or parent of a student looks forward to borrowing money, but I am not sure the impact of those loans is fully comprehended on all levels.
Paying off a student loan every month is a great way for graduates to build a good credit score; unfortunately all student debt is included when establishing the debt to income ratio for obtaining a home mortgage. Many first time home buyers, those typically between the ages of 25 and 34, are finding it difficult to buy homes because of their student debt. According to Lawrence Yun, chief economist for the National Association of Realtors, nationally, fewer than 30 percent of all home sales are to these first time buyers. Historically, it should be between 40 and 45 percent.
Currently, student loan debt at over 1 trillion dollars exceeds all credit card debt. Over 70 percent of recent college graduates carry debt averaging $29,400. The simplified example below shows the impact of this debt burden on a young couple each carrying such debt.
The disturbing aspect of this trend is its direction. Over the past 20 years, student debt has doubled, increasing every year while real wages adjusted for inflation for college graduates has been flat for the past ten years.
All this is not to say that getting a college degree may not be worth the cost. Lifetime earnings for an individual with a college degree are 70% greater than an individual with only a high school diploma, and the unemployment rate for young college graduates is half that of their contemporaries with only a high school education. Still some full disclosure and a bit of cost-benefit analysis wouldn’t hurt.
As for the effects on the housing market, it is too early to tell. For the time being, in our market, buyers of all ages outnumber sellers so while some first time buyers are missing in action, their absence has not been felt. But in the long run, the inability of these first time buyers to get a stake in the housing market or their delayed entry will have a dramatic effect on their wealth accumulation through home ownership. And that goes to the heart of the American Dream.
March 17th, 2014
By Victor Normand
Published: March 2014
Before Tom Brokaw wrote about the “Greatest Generation,” that generation was also known as the “Silent Generation,” a description popularized by Time magazine for those born after 1925 who lived through the Great Depression and came of age during World War II. They were preceded by the “Veterans” who were born after 1900 and followed by the most famous generation of them all- the “Baby Boomers.” After coming up with that title, we got lazy as a society and began naming generations with just letters, X and Y, though the Y’s are now becoming known as “Millennials.”
There are specific benchmarks for the start and end of some of these generations, like world wars or sudden spikes in births. Although exact dates sometimes float around, they still tend to be in roughly twenty year increments. As for their usefulness, they often seem to have more significance after those within a given generation have had a chance to demonstrate behaviors. Predicting how a demographic segment of the population will act is an inexact science. That’s why it is wise to call them trends, which are easy to alter to conform to real time events.
(For other towns or Census facts visit the US Census website.)
So, here are some recent trends:
- Not surprisingly, Generation X is the largest group of home buyers as you would expect that age group to be, though they too were affected by the Great Recession.
- The age of the home purchased increases as the age of the home buyer decreases. The dominant preference for newer homes spans all age groups, but younger buyers are more likely to have to make more sacrifices to get that first home.
- There is a trend among younger buyers toward more urban properties and away from the suburban locations popular with their parents. While some of the reasons relate to life style choices, two others factors may be in play as well:
- Generation X and older Millennials are having children later so choices involving open space and schools can be postponed
- In many communities near urban centers, suburban home sites are less readily available and more costly to build on, making urban locations with favorable zoning and in-place utility infrastructure more attractive.
- Among Millennials, 65 percent are renters and 22 percent live with parents. Although their numbers rival that of the Baby Boomers, their activity in the housing market has yet to be felt for several reasons:
- The economy has yet to produce sufficient job growth which affects this group more than any other
- Student debt is a significant drag of finances for this age bracket
- Condominiums, often the first purchase for first time home buyers, have become difficult to finance
- Many older Baby Boomers are still stuck in homes with mortgages that exceed the value of the property and are unable to downsize as they had once planned.
Despite the challenges still facing many in the housing market, the economy is clearly moving in the right direction and the value of home ownership has not lost its appeal. The trend toward renting instead of buying that was strongest during the years immediately after the Great Recession has abated. So, while events shape history and the generations seem to behave in new ways, most of the underlying fundamentals of the housing market don’t really change.