Finding ways to help young adults make their first home purchases
Source: LA Times
Stricter mortgage underwriting standards, higher unemployment, and heavy student debt are among the key factors that stand in the way of many potential buyers in their 20s and 30s. But first-time home buyers in this age group may be able to turn to effective techniques that family members, friends, and even employers can use to bridge the generational gap by offering a helping hand.
Making sense of the story:
• Americans who were 30 to 34 in 2012 had the lowest homeownership rate of any similarly aged group in recent decades at 47.9 percent.
• In comparison, Americans born between 1948 and 1957 had a 57.1 percent ownership rate by the time they hit the 30-to-34 bracket. This is despite record low mortgage rates and bargain-priced foreclosures and short sales.
• A new federal rule imposing a 43 percent maximum debt-to-income ratio for “qualified mortgages” is particularly difficult for younger buyers with high student debt. Student debts average $21,402 but can balloon as high as six figures.
• According to one industry estimate, 27 percent of first-time buyers last year received gift money from relatives to help defray the down payment and closing costs.
• With professional help, some family members are providing either second mortgages or first mortgages, and properly structured, these loans provide annual returns to family members well in excess of money-market funds or bank deposits.
• Money provided as a loan cannot be disguised as a loan. If the money is a gift, there needs to be a formal letter making the purpose of the gift explicit and the specific transaction for which it is to be used. Documentation is also needed to attribute the source of the funds and the capacity of the gift giver to provide the money.
In other news …
U.S. Home Sellers Return for Spring as Buyers Get Relief
As the housing market’s busiest season approaches, escalating values are spurring more listings as homeowners regain equity lost in the worst crash since the 1930s. With more sellers looking to cash in on rising prices, would-be buyers likely will have more choice and therefore, relief from the bidding wars of last year.
If investors bail on housing, what then?
After the housing crash, investors bought thousands of distressed properties with billions of dollars in cash. It is estimated that institutional investors have purchased well over 100,000 homes, but some experts are concerned that if investors pull out of the housing market this year, there could be a “significant” or “somewhat significant” impact on the markets.
Student debt may hurt housing recovery by hampering first-time buyers
Source: Washington Post
Millions of Americans are carrying heavy student debt, which could prevent a generation of potential buyers from purchasing their first homes. Purchases from first-time buyers are well below the historical norm, thereby undermining the housing recovery’s momentum.
Cold weather saps homebuilder confidence in February
Source: The Hill
In February, homebuilder confidence fell to its lowest level since May due to unusually cold weather. In light of the decline in buyer traffic as rampant snowstorms blanketed the country, there was a 10-point drop on the National Association of Home Builders(NAHB)/Wells Fargo Housing Market Index (HMI).
Dirty Mortgage Words
Forbes outlines some of the dreaded terms used in the mortgage industry, whether they’re consumer-centric or industry words. “Adverse” is described as the dirtiest word in the consumer-centric mortgage world since it is mortgage-speak for decline.
Gap Between Most, Least Expensive Housing Markets Still Wide
Source: Wall Street Journal
Evidence of a widening price gap was made clear in the annual affordability survey from the NATIONAL ASSOCIATION OF REALTORS®. While homes in much of the nation are affordable, on the coasts, especially California, a familiar pattern is reemerging: Too many people, not enough homes, and price growth that outstrips income growth.
The best and worst housing markets for taxes
According to analysis of data from the Office of Revenue Analysis, homeowners in the housing market with the heaviest overall tax burden paid a percentage of their income seven times greater than the burden borne by the housing market with the lowest overall tax burden.
Talking Points …
• Between the years 2007 and 2011, 42,000 new residents moved from Los Angeles County to San Bernardino County, which represents the largest migration into a region in the United States, according to the U.S. Census Bureau’s migration report. Affordability of housing is attributed as the number one reason for the migration.
• The median home price in the San Bernardino County is hundreds of thousands of dollars cheaper in comparison to Los Angeles County and Orange County. The huge savings have led to the greater inland migration, and the Inland Empire has a greater share of undeveloped property.
• According to the report, the second largest area of migration was from Los Angeles County to Orange County, with 40,000 people. The third largest is from Asia, with 35,000 people from Asia moving into Los Angeles County.
Thanks for reading! Feel free to call with questions, (714) 963-8000!
David S. Wilfert
RE/MAX R.E.O. – The Wilfert Group
12341 Newport Avenue, Suite A-100, North Tustin, CA 92705
Real Estate Broker – BRE# 01861699
Notary Public – Commission# 1987439
Direct: (714) 963-8000 or Email: David@WilfertGroup.com