To qualify, applicants must meet specific criteria, the Atlanta, Georgia-based firm outlined, including: Closing the loan with Citizens Trust Bank Income not exceeding $150,000 Maximum of $25,000 in assets The property must be owner-occupied Borrower contribution of at least $500 Completion of a homebuyer education course Can be combined with other approved down payment assistance … [Read more…]
When the housing market was searing hot, buyers faced intense competition — bidding wars, cash investors, and buy/sell decisions made on rapid deadlines. Now that real estate has cooled, there are fewer homes for sale, two-decade-high interest rates, and stubbornly elevated house values.
It’s rarely easy to buy a home. And if you can find a house you love, the question becomes: Is now a good time to buy?
The 2023 housing market
Looking for the perfect time to buy? Fewer than one in five consumers surveyed by Fannie Mae in July 2023 thought that it was a good time to buy a home. Yet, timing the housing market is more complicated than timing the stock market. Which is impossible. There are few “just right” Goldilocks real estate markets.
But you’re not buying the market. You’re buying a house in a city, neighborhood, and block where you want to live. Hopefully, for quite a while.
Mortgage rates
We all know this story. Interest rates have risen — and mortgage rates are no exception. The Federal Reserve has been raising short-term interest rates for well over a year in an effort to shrink inflation — the rise in consumer prices. Not only do the Fed’s rate increases immediately lift short-term mortgage rates such as variable-rate loans, but they also tend to influence long-term mortgage rates upwards as well eventually.
And though we don’t live in a 2%-3% world these days, mortgage rates are near their 52-year historical average.
Since April 1971, the 30-year mortgage rate has averaged 7.74%, based on data collected by Freddie Mac.
Of course, that’s little comfort to homebuyers today who remember when rates were under 3% for much of 2021. Conversely, the highest rate on record was a whopping 18.63% in October 1981.
According to Zillow research, the trend of mortgage rates — whether interest rates are generally rising or falling — may influence whether existing homeowners would consider selling their existing house to move into another. With so many existing homeowners paying a much lower mortgage rate, the study found it would take rates to fall somewhere to between 4% and 5% before they would sell the home they’re in and buy another.
This rate gridlock is contributing to the lack of existing homes for sale.
Take action: Consider the interest rate strategies below until (and if) mortgage rates fall significantly lower for an opportunity to refinance.
Home values
There is a little good news, though. Higher mortgage rates have softened the real estate market, and the increase in home prices is moderating.
The rise in existing home values is slowing. Home values are lower year-over-year in almost half (23) of the 50 largest metro areas, according to a Zillow analysis.
Take action: Look for homes with price reductions where you want to live. Then negotiate even harder.
But listings for existing homes are far fewer. For more than 12 months, new listings have been down year-over-year. The number of new listings of homes for sale is down more than 20% from pre-pandemic levels, according to Realtor.com.
Take action: Consider expanding your search to more affordable areas close to your favorite neighborhood if it’s too pricey.
New home inventory is rising. Construction of new homes is showing promise of growth, according to the U.S. Census Bureau. However, builders are still wary of oversupplying the market, concerned that consumer demand could sag as potential buyers shy away from rising mortgage rates.
Take action: If you want to buy a house now, consider new construction. You may be able to choose some finishes or make an even better deal on a spec home that’s been on the market for a while.
When is a good time to buy a house?
Buying a home is more than considering macroeconomic factors. It’s an important life decision based on your personal and financial situation.
Where do you want to be in 5 years?
When you rent, the decision to move is broken down into six months, or a year or two at a time, as your lease renews. But every dollar-related detail makes a home purchase a medium- to long-term investment. Buying a house includes various costs: the down payment, closing costs, and financing fees, moving expenses, property taxes, and perhaps selling your existing place.
Homeownership requires a years-long timeline. How you make a living, your friends, family, and even community amenities all come into play.
Your income
A primary consideration: your job. Will it require a location change anytime soon, or can you live where you please? Is your income steady and all but assured?
Your credit score
One of the significant factors that will qualify you for a home loan is your credit score. It’s important to know it before applying for a mortgage.
For the most common loan, a conventional mortgage not backed by a government agency, you generally need a FICO score of 620 or better.
FHA loans can allow a credit score as low as 580 with 3.5% down. VA loans issued to qualified military service members and veterans don’t officially have a minimum credit score, though some lenders will require a FICO score of 620.
As a benchmark to where you stand, the median credit score on a new mortgage in the second quarter of 2023 was 769, according to the New York Federal Reserve.
Of course, minimum scores are the entry-level to qualifying; the higher your score, the better the loan terms you’ll be offered. Most importantly, that can mean you’ll pay a lower annual percentage rate over the life of the loan. You may also have more room to negotiate on fees.
Your current debt load
A primary financial metric lenders will use to determine your creditworthiness is your debt-to-income ratio.
Fannie Mae, a government-sponsored entity that provides liquidity to the home loan market, looks for a maximum total DTI ratio of 36% of “the borrower’s stable monthly income.” Exceptions can allow for total DTIs up to 50%, but it’s usually best to avoid working on the edges of qualification if you can.
You can calculate your DTI by dividing your total recurring monthly debt by your gross (before taxes and other deductions) monthly income.
Include debt such as monthly mortgage payments (or rent), real estate taxes, and homeowner’s insurance. Also, add any car payments, student loans, and the monthly minimum due on credit cards. Remember any personal loan payments and child support or alimony.
Do not include debt such as monthly utilities — like electricity, water, garbage, or gas bills — or car insurance, television streaming subscriptions, or cell phone bills. You can also exclude health insurance costs and miscellaneous expenses such as groceries or entertainment.
Your savings
Having a cash cushion in the form of emergency savings shows lenders that you are prepared for the unexpected. Of course, that savings account should also include …
Your down payment
A large chunk of your savings account should be dedicated to the down payment. A minimum of 3% down is required in order to qualify for a conventional loan targeted to first-time homebuyers — or ideally, 20% to avoid private mortgage insurance. Yes, zero-down options exist if you are eligible for a VA- or USDA-backed loan.
According to Realtor.com, the average down payment in the first quarter of 2023 was 13%.
4 rate-relief strategies to consider
Buying a house when interest rates are high can require some financial finesse to enhance affordability.
1. Buying discount points
Prepaying interest in order to lower your ongoing mortgage rate is called buying discount points. One point is equal to 1% of the loan amount. However, lenders sometimes add a point or two to a mortgage proposal to make their loan offer appear more enticing. But you’re actually paying for the discount with an upfront fee.
When shopping for a loan, compare loan offers with zero points. Then, you can decide whether to buy points to lower your interest rate. It is important to note that buying one point (paying 1% of the loan amount upfront) will generally reduce your interest rate by only one-quarter of a percentage point.
2. An interest rate buydown
Borrowers can lower their mortgage interest rate for the first few years at the beginning of the loan term with a buydown. Home builders, sellers, and some lenders sometimes offer an interest rate buydown to boost sales.
While you get a short-term break on the interest rate, your payments and total interest may actually be higher. It’s a strategy that requires running the numbers on the long-term benefits.
If you’re paying for the buydown, compare a mortgage both with and without a buydown. By the way, lenders will qualify you based on the permanent interest rate, not the temporary buydown rate.
3.An adjustable-rate mortgage
A mortgage product that increases in popularity whenever rates begin to rise is back: the adjustable-rate mortgage.
ARMs have a fixed interest rate for an introductory period, often five to 10 years, and then the rate changes regularly, usually once or twice a year. Tips when shopping for an ARM:
Look for an introductory rate that is lower than a fixed-rate mortgage.
Choose a term you feel comfortable with, perhaps in line with how long you plan to stay in the home.
Make sure you budget for possible increases in your monthly payment if the interest rate moves higher after the end of the introductory rate period.
4. A shorter-term mortgage
Are you more comfortable with an interest rate that never changes, even if your monthly payment is slightly higher than you’d like? Consider a shorter-term loan. Mortgages with 20- or 15-year fixed terms, as opposed to the traditional 30-year term, typically come with lower interest rates. The lower rate and shorter term combination means you’ll gain equity in your home faster, too.
Your next move
Buy smart and shop a lot. Relentlessly shop mortgage rates and lenders for the best loan offers and justified fees. Get a written preapproval from your lender, then shop for a house you can love and can afford. Your home buying competition is.
According to Zillow, when it comes to first-time buyers versus repeat buyers, first-timers are more likely to reach out to at least three lenders and three real estate agents.
Floods, fires and extreme weather are reshaping how people view climate risk and real estate
A clear majority of people in each region of the United States consider at least one climate risk when shopping for a home.
A majority of today’s buyers are millennial and Gen Z shoppers, and they are more likely than other generations to consider a climate risk when deciding where to buy a home.
SEATTLE, Sept. 5, 2023 /PRNewswire/ — More than 4 out of 5 prospective home buyers consider climate risks as they shop, new Zillow research shows. Most say their major concern is flood risk, followed by wildfires, extreme temperatures, hurricanes and drought.
New Zillow research finds the share of first-time buyers has hit 50%, the highest level in years
SEATTLE, Aug. 23, 2023 /PRNewswire/ — Half of all home buyers are purchasing their first home, the highest share that Zillow has ever recorded. Zillow’s 2023 Consumer Housing Trends Report finds that first-time buyers now make up 50% of all home buyers, up from 45% last year and a meaningful jump from 37% in 2021. The share of first-time buyers likely hasn’t been this high since around 2010, when there was a first-time home buyer tax credit.
First-time buyers are making gains relative to repeat buyers. Zillow research finds a vast majority of homeowners with mortgages have locked in a rate below 5%, and are almost half as likely to consider moving. It’s true that first-time buyers make up a larger piece of a smaller pie, as home sales and inventory shrink. However, this significant rise in the share of first-time buyers helps explain what’s driving demand and keeping upward pressure on prices in a market with mortgage rates surpassing 7%.
“High mortgage rates and a shortage of inventory is keeping would-be repeat buyers in their current homes,” said Zillow senior population scientist Manny Garcia. “A greater relative share of first-time buyers is filling the gap, and they’re competing against each other for the limited number of affordable starter homes on the market.”
Affordability is the greatest hurdle for first-time home buyers. It now takes nearly 12 years for a typical first-time buyer to save up for a down payment, compared to nine years prior to the pandemic. Meanwhile, the typical monthly home payment has more than doubled in that time. Yet the growing share of first-time buyers suggests many are getting creative to make homeownership a reality.
Zillow’s report finds that most first-time buyers are tapping at least two sources to finance their down payment (60%), most commonly their savings and gifts from family or friends. Down payment assistance can help, and available programs are included on every for-sale listing on Zillow.
There are other tools helping first-time buyers anticipate and manage monthly costs. A new app filter on Zillow allows shoppers to search for homes by monthly mortgage cost, instead of by list price. In addition, a growing share of buyers are paying an upfront fee to reduce the interest rate on their mortgage and in turn, lower their monthly payment. Research from Zillow Home Loans finds nearly 45% of conventional primary home borrowers bought points to ease monthly costs, compared to 30% who did the same in 2021.
Nearly half of first-time home buyers are millennials (49%), a massive generation of adults ages 29–43 who are fueling fundamental housing demand as they hit their prime home-buying years. Gen Z adults between 18 and 28 years old are hot on their heels, making up more than one-quarter of all first-time buyers (27%).
These younger buyers are debunking the “lazy millennial” myth by working harder during the home-buying process. Zillow’s report finds that first-time buyers are more likely to contact at least three real estate agents and three mortgage lenders, compared to repeat buyers. They’re also more likely to make at least two offers on homes, and are more likely to report being denied a mortgage at least once before they’re approved for a loan. First-time buyers are seeing their persistence pay off for a piece of the American Dream, and many still believe the opportunity to build equity outweighs today’s higher costs of entry.
About Zillow Group:
Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make home a reality for more and more people. As the most visited real estate website in the United States, Zillow and its affiliates help people find and get the home they want by connecting them with digital solutions, great partners, and easier buying, selling, financing and renting experiences.
Zillow Group’s affiliates, subsidiaries and brands include Zillow®; Zillow Premier Agent®; Zillow Home Loans℠; Trulia®; Out East®; StreetEasy®; HotPads®; and ShowingTime+℠, which includes ShowingTime®, Bridge Interactive®, and dotloop®.
It’s no secret that housing prices have been quickly climbing over the past decade — the median home value in the U.S. is higher than ever before, at almost $220,000, and some markets, like San Jose, Las Vegas and Atlanta, are reporting double-digit annual home value growth in the U.S. Markets .
But understanding what buyers can get for their money, and how homeowners’ investments have grown over time, can be tough — especially when the footprint of homes themselves haven’t changed much. To help with this, Zillow Research created a map, released today, that allows users to see just how much a dollar gets you in each market, and how this has changed over time.
For example, one dollar will buy you 1.07 square inches of the typical U.S. home, but ten years ago, one dollar bought you 1.23 square inches. Back in 1998, one dollar bought you 2.09 square inches. For reference, one square inch is about twice the size of a postage stamp, and a dollar bill itself is a little more than 13.25 square inches.
However, in the city of San Jose, where the typical home is worth almost 84 percent more than it was twenty years ago, one dollar will buy you just 0.20 square inches of a home. In 2008 it bought you 0.37 square inches, and back in 1998, one dollar bought you almost one full square inch.
Your dollar will go the furthest in Memphis, Tenn., buying more than 2.5 square inches of a home. Expect to get the smallest amount of space for your dollar in San Francisco, where one dollar will buy you just 0.14 square inches.
Fresno falls almost exactly in the middle of Memphis and San Francisco for the space you can get for one dollar, where it will buy you 0.97 square inches of a home.
“A dollar today isn’t what it used to be, particularly when it comes to real estate in light of the rapid pace of home-value appreciation that the American economy has witnessed over the past half-decade,” said Zillow senior economist Aaron Terrazas. “A dollar gets you about 20 times more space in an affordable market like Memphis than in a pricey place like San Francisco. Figuring out exactly how much space a dollar does – or doesn’t – buy you can be sobering, but enlightening. The space we live in is a tangible thing, with real value, and this shows how true that is.”
Home values across the country rose 8 percent over the past year, and Zillow is forecasting them to appreciate another 6.8 percent over the next 12 months. Over the past year, home values in the cities of Baltimore, San Jose, Las Vegas and Dallas appreciated the most.
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
Well it’s mid-2015, and even though the housing market appears to be on fire, 63% of properties actually sold for below list price, this according to the May 2015 Realtors Confidence Index Survey.
This may seem rather surprising, given how hot real estate has been over the past few years.
Ask anyone who has purchased a home (or attempted to) and they’ll probably tell you they got into a bidding war, or were forced to include a cover letter with their offer.
Despite that common tale, most properties don’t actually sell above list. In fact, nearly two-thirds do not.
However, this number has trended down lately. A year ago, around 70% of properties sold at a discount. So clearly properties are selling more easily at higher prices.
The Realtors said properties that remain on the market for a longer period of time are more likely to sell at a discount.
Some 84% of properties that sold between 2012 and May 2015 after 12 months were sold at a discount, per the Realtors’ monthly survey.
Meanwhile, less than half of the properties that sold within a month went for below list price. And nearly a quarter (24%) sold for a premium.
Properties that sold after 12 months only sold at a premium a measly six percent of the time.
In other words, price your home right the first time to avoid a price cut and losing money on the sale. Price it really right and you might sell for a premium.
The Longer They Sit, the Harder They Fall
When considering selling a home
Know that time is of the essence, even if you’re in no rush
As homes fester on the market
They’re more likely to experience price cuts and eventually sell for less
As you can see from the chart above, the longer a listing stagnates, the lower the chance of it selling for list price or at a premium.
Surprisingly, 48% of properties listed for less than a month still went for below their asking price. So there’s always room to negotiate, even if the property was just listed.
And don’t worry about offending anyone – if you don’t offend them with your offer you offered too much, that according to a wise man…
Most Properties Sold for 4-11% Below List Price
It was most common to see a property sell 4-11% below list
With properties selling 0-3% below list the next most likely outcome
In other words, expect your home to sell for less than you listed it for
And don’t forget the closing costs and real estate agent commissions that are deducted from the sales price
In May 2015, it was most common for a property to sell for between 4-11% off list price.
A discount between 0-3% was the second most common outcome, followed by no discount or premium.
Very few properties sold at 20% or more off, and even fewer sold for 11% or more than list.
So it’s important to have realistic expectations when it comes time to sell your home.
In short, you should expect a price cut, and thus list it accordingly. Don’t list it at your absolute bottom dollar price if you know you’ll have trouble accepting a lower offer.
And don’t forget the many closing costs associated with a home sale, along with the hefty commissions that must be paid out to real estate agents involved with the transaction.
If you’re looking to sell for more, consider the fact that staging a property could help it sell for one to five percent more, this according to the Realtors.
Zestimates Can Help with Pricing
While it might sound somewhat counterintuitive
Pricing your property below market value
Could help it sell a lot faster and at a higher price
Whereas an overpriced home might sit on the market longer and eventually require a price cut
In a related article, the Zillow Research team threw out some pointers to help home sellers list their properties at the right price.
They said despite an improving housing market, it’s wise not to “overheat your listing price.”
Zillow found that properties priced more than 12% above their Zestimate are nearly half as likely to sell within 60 days.
And apparently the “sweet spot,” where homes sell the fastest, is between the Zestimate and six percent above it.
The company also discovered that smaller homes sell the fastest (those under 1,100 square feet) and that the optimal number of photos per listing is 16 to 21.
Your home may take longer to sell if you don’t provide enough photos. And as we know, that could result in a price cut. So take good photos and plenty of them.
Read more: Should I continue renting or buy a home instead?
Selling a home is one of the most stressful experiences in modern life, second only to a relationship break-up. More than three quarters of Americans who have sold a home in the past three years say it was a stressful experience, and it could easily become more stressful as the market slows and turns in favor of buyers.
According to a new Zillow survey, 36 percent of home sellers say the process left them in tears, with millennials and parents far more likely to cry at some point during the sale. Of those who cried, 20 percent shed tears five times or more.
It’s no wonder. In a world of hyper-connection and on-demand everything, selling a home traditionally is one of the few things that has not gotten easier over time.
“If you’ve ever sold a home before, you know how daunting the process can be,” said Zillow Brand President Jeremy Wacksman. “Anticipating that stress can be a huge obstacle that keeps homeowners from moving on to the next stage of their lives. Our survey found more Americans were stressed over selling their home than planning a wedding, getting fired or becoming a parent.”
Selling a home can be challenging for many reasons. Among those surveyed, 70 percent were stressed by uncertainty over the sale price, 69 percent were stressed their home wouldn’t sell in their desired timeframe, 65 percent were stressed an offer would fall through and 65 percent were stressed about fixing up their home for sale.
According to Zillow’s latest research, 61 percent of sellers are buying a new home at the same time, which adds significant pressure and financial complexity to the process. Zillow’s survey shows that nearly 7 out of 10 people mistimed the process, with more than one-third saying the sale of their home took longer than expected.
Sellers can take steps to help speed up, streamline and de-stress the process:
Prepare your home for sale early and be strategic about when to list. Nationwide, the best time to sell a home is May 1 to May 15. Homes sold in the first half of May sell six days faster and for $1,600 more than the average listing. The Zillow Owner Dashboard is the fastest way to learn which month is the best to list a house in your area.
Pay attention to online curb appeal. The vast majority of buyers begin their home search online so talk to your agent about using high-resolution photography to highlight your home’s unique features on all devices.
Be ready to make concessions. Zillow research finds 83 percent of sellers make trade-offs with buyers, the most common being the inclusion of appliances in the sale.
Homeowners looking for convenience, certainty and control now have an alternative to the traditional sale process. With Zillow Offers, home sellers can request a free, no-obligation cash offer from Zillow to buy their home, and they can pick a close date that works best for them – without having to worry about open houses or fixing up the home for sale.
Since Zillow Offers launched just over a year ago, more than 100,000 sellers have requested an offer from Zillow to buy their home, and Zillow now receives a request for a Zillow Offer every two minutes. To meet this strong demand, Zillow is accelerating Zillow Offers’ expansion, with plans to operate in 20 markets by the end of Q1 2020. Zillow Offers is currently available in Phoenix, Las Vegas, Atlanta, Denver, Charlotte, Raleigh, Houston, Riverside, Dallas, Minneapolis and Orlando.
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected]
Finishing school, joining the workforce and moving out on your own is a rite of passage for many young people. Today’s young adults are taking longer to make this transition, and doing it less often overall than previous generations, according to a new Zillow analysis.
In 1980, 1990 and 2000, the tipping point age at which more people lived independently than not remained steady at 23. But by 2007, it had risen to 25, and then to 26 in 2017. And not only does it take longer for young adults to begin living independently, but fewer people ever do. A smaller share of adults of every age lived independently in 2017 than 1980, including a 10-percentage-point gap for 40-year-olds.
Typically, adults begin living independently later in more expensive
metros, and the gap has widened over the past four decades. Since 1980,
the tipping point age has increased by an average of about four years in
metros in the top quarter of most expensive home values, compared to
about two years for metros in the bottom three quarters. In 2017, the
tipping point age was highest in Riverside, Los Angeles, New York and Miami
at 29. Each of these metros have seen their tipping point ages increase
by at least five years since 1980, while it has only increased one year
in less-expensive Oklahoma City, for example – from 21 to 22.
Young people today more often pursue higher education, which typically delays when they begin working full-time. In previous decades, people with a high school education lived independently at similar rates to those with a college education, likely due to the additional years of earnings they can accrue in their early 20s while their college counterparts are in school. Now, there is a significant gap. Those with a college degree are more likely to live independently than those with a high school education by age 26, and at age 30 the gap widens to 12 percentage points.
Changes in social and cultural norms, as well as affordability challenges, likely explain some of the shift. Young people today are more likely than their predecessors to live in urban cores, where housing is more expensive and rent price growth has hindered the ability of renters to afford a home without roommates or save enough of their salaries each month for a down payment. Increased demand for starter homes as the large Millennial generation reaches typical home-buying age, along with persistently low inventory, has contributed to robust home value appreciation in many large metro areas, making it more difficult for first-time buyers to get into a home.
“It’s true that people are becoming homeowners later and later in life, but even before that today’s adults are taking significantly longer to simply live on their own,” said Skylar Olsen, director of economic research at Zillow. “While some may consider the impact of evolving tastes and cultural norms, as economists we can point to very real changes in household budgets that make the classic tactics of sticking with mom and dad or extending those college roommate years past graduation more appealing. As the costs of life’s basics outpace incomes, parents that offer housing after their children’s schooling has ended can provide breathing space, allowing the next generation to begin paying off substantial college debt. Smaller, more accessible housing markets often tout not just the possibility of homeownership for today’s adults, but simply the opportunity for independence and privacy – features of life that major job markets struggle to offer more and more.”
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected]
More than three quarters of homeowners across 20 large metro areas agree local governments should do more to keep housing affordable, and most agree that allowing more building would help, according to a new Zillow survey.
But while there is meager support for new large multifamily buildings, more than half of homeowners say they and others should be allowed to convert their homes to create additional housing.
That’s according to the latest Zillow Housing Aspirations Report, which asked homeowners for their feelings about how best to help quell affordability issues by allowing more homes into their neighborhoods, and comes as in-law suites and backyard cottages gain attention as possible solutions to sharply rising housing costs. Previous Zillow research has shown that even modest rezoning to allow for more accessory dwelling units – creating two, three or four dwellings where only one sits now – could spur the creation of millions of new homes nationwide.
This kind of mid-density is often referred to as “missing middle” housing, slotted between single detached homes and much larger apartment complexes of several hundred units. “Missing middle” units are the only type of home to have gotten more affordable in the past year, but very few have been built in the past 20 years compared to previous decades: They make up only 4.3% of homes built since 2000 compared with 8.2% in the 1980s.
In
all, 57% of those surveyed agreed that homeowners should be able to
add additional housing on their property, and 30% said they would be
willing to invest money to create housing on their own property if
allowed.
The
strongest support comes from younger and lower-income homeowners and
those in the West, where housing tends to be the most expensive. The
highest support was in the San Diego (70%), Seattle (67%) and San
Francisco (64%) metros, and the lowest was in the Detroit (47%),
Phoenix (50%) and Dallas (51%) areas.
Support
also was strongest among homeowners of color – two-thirds (67%) of
Black homeowners supported this type of density, compared with just
over half (54%) of white homeowners – perhaps because of persistent
homeownership gaps due in large part to historical discriminatory and
exclusionary housing policies.
Advocacy
was more muted for larger multifamily buildings. Only 37% of
homeowners surveyed said they would support a large apartment
building or complex in their neighborhood – and that support was more
starkly divided among generations. Nearly 60% of younger homeowners
(18-34) were open to large buildings, compared with only a quarter of
those 55 and older.
Overall
support for development of these larger apartments is highest in the
Chicago (47%), Miami (45%), Washington, D.C. (44%), and San Francisco
(43%) metro areas, and lowest in the Atlanta metro (29%).
However
housing comes about, more than three-quarters of homeowners surveyed
said single-family neighborhoods should remain that way, with more
older homeowners (81%) agreeing than younger homeowners (69%). And a
little more than half said adding homes was acceptable if they fit in
with the general look and feel of the neighborhood. Homeowners
expressed concern about the impact of more homes on traffic and
parking, with 76% saying that it would have a negative impact. About
half said it would have a positive impact on amenities and transit.
“In
an era of historically low supply and escalating housing prices, the
need for more solutions to create housing opportunities is greater
than ever. Our latest research shows that homeowners in major markets
are generally supportive of providing a range of housing options that
allow for not only more housing units, but also a diversity of
housing types in existing communities,” said Zillow senior
economist Cheryl Young. “Homeowners may continue to shy away
from adding large multifamily buildings nearby, but are open to
adding units in their own backyards. This ‘missing middle’ housing,
they believe, could help alleviate the housing crunch without
sacrificing neighborhood look and feel while improving local
amenities and transit. These findings show that broad-based support,
especially from homeowners, provides the middle ground necessary to
move the needle needed to bring relief to the housing crunch.”
Additional
Zillow research has shown that “missing middle” homes tend
to be more affordable. Renting a home in a 2-, 3-, and 4-unit
building is less expensive than a single-family house in 42 of the
largest 49 metros with available data.
Accessory
dwelling units also seem to be becoming more popular. While “in-law
units” and “cottages” are the most common listing
terms nationally for secondary units on Zillow, the term “ADUs”
rose to 5.7% in 2019 from 1.2% of listings in 2015. The share of
listings mentioning a secondary housing unit in any way rose from
1.7% of all listings to 1.9%. And the shift to using the term “ADU”
indicates that officially sanctioned secondary units are fast
becoming a valuable selling point.
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected]
Growing unemployment across the U.S. has prompted millions of adults to move back in with their parents.
As a new Zillow analysis shows, the potential rent lost from Gen Z alone could total an estimated $726 million, and the ripple effects of their next move could have far-reaching consequences for the housing market.
The number of adults living in a parent’s or grandparent’s home grew by more than 2.7 million in March and April, nearly triple the next-largest two-month increase from the past five years. A large majority of those who moved home – about 2.2 million – are from Generation Z, and between 18 and 25 years old.
Those 2.2 million Gen Zers represent an estimated $726 million in rent payments each month – payments that could be lost if these moves prove to be more than a temporary measure. That represents about 1.4% of the rental market at risk. It is highly unlikely that all leases will be broken and this full amount would go unpaid, but it serves as a gauge of the potential impact on housing.
The next move this population makes could shape the housing market’s near future. If jobs quickly return to pre-pandemic levels, the housing status quo could return just as quickly as these renters return to the market. But if jobs are permanently lost or slower to recover than expected, that could free up many rental units and drive down prices.
“The share of adults living with their parents has been high since the global financial crisis of the aughts,” said Zillow Senior Principal Economist Skylar Olsen. “Then, it was Millennials flocking to the basements and spare bedrooms of their Baby Boomer parents, where many remained as rent burdens grew. Now, it’s Gen Z’s turn to ride out today’s crisis amid massive unemployment. But this time, rents are more likely to slow, easing the path to returning to living on their own even if some under-employment persists. Apartment construction has exceeded historic norms in recent years and some are likely to double up or live more affordably in all kinds of ways, which should soften rent growth, at least for now.”
Previous Zillow research has shown renters in some industries highly affected by coronavirus-related layoffs were struggling to keep their heads above water even before the pandemic began. It’s possible that many will appreciate the breathing room afforded by living with parents if allowed to stay rent-free, and stay even after their jobs return. That could allow some Gen Zers to save enough to move into homeownership more quickly, or perhaps even delay their parents from downsizing into a smaller home while a child is still living under their roof.
Young Americans move more often in general because they tend to have less stable employment and have not had time to accrue the same level of savings as older counterparts. Many also move home during the summer due to college schedules, typically bumping up the share of young adults living with parents by 2-3 percentage points from April to July.
It is likely that some college students made that move earlier this year as campuses closed due to COVID-19, contributing to the jump seen in April, but there were far more young people living with parents in April than even during a typical summer peak, indicating the usual seasonal shift was super-charged by soaring unemployment. Recently unemployed young people moved back home at roughly the same rate as usual – about 60% of them typically live with parents – but the pool is much bigger than ever.
Metros with a higher share of young renters have a greater potential for impact. This includes Austin, Kansas City, Cincinnati and Pittsburgh. On the other end are areas with more millennials and older renters, including Miami, New York and Los Angeles, each with less than 1% of the rental market made up of young people who have moved home.
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected]