Why Did Home Sales Drop So Dramatically Last Month?

Yesterday, the National Association of Realtors (NAR) released their latest Existing Home Sales Report which covered sales in November. The report revealed that sales:

“…fell 10.5 percent to a seasonally adjusted annual rate of 4.76 million in November (lowest since April 2014 at 4.75 million)…”

That revelation gave birth to a series of industry articles, some of which quoted pundits questioning whether the housing market was slowing. In actuality, there is one rather simple explanation to much of the falloff in sales last month. It is likely the implementation of the “Know Before You Owe” mortgage rule, commonly known as the TILA-RESPA Integrated Disclosure (TRID) rule, which went into effect on October 3. These regulations caused house closings to be delayed by an extra three days in November as shown in the graph below.

 

Days-to-Close-KCM.jpg

Three days might sound like a minimal difference. However, since there are only approximately 20 days in a month that a closing would normally take place (Mondays through Fridays), losing three days constitutes well over 10% of all closings. These sales are not lost. They are just moved into the next month’s numbers. In a DS News article on the subject yesterday, Auction.com EVP Rick Sharga explained:

“The most likely cause for the weak sales numbers is a delay in processing loans due to the new TRID mortgage requirements imposed by the CFPB. This is the biggest change in mortgage document processing in many years, and there have been numerous reports within the industry of problems implementing the process and the new documentation that comes with it.”

So how is the housing market actually doing?

A better way to look at how well the housing market is doing is to look at the Foot Traffic Report from NAR which quantifies the number of prospective buyers that are actively looking for a home at the current time:

A better way to look at how well the housing market is doing is to look at the Foot Traffic Report from NAR which quantifies the number of prospective buyers that are actively looking for a home at the current time:

We can see immediately that demand to buy single family homes is increasing over the last few months - not decreasing.

Bottom Line

No matter what last month’s sales numbers show, the housing market is still doing well as demand remains strong.

Baby Boomers Finding Freedom In Retirement

by The KCM Crew on November 3, 2015

source: KCM

source: KCM

Within the next five years, Baby Boomers are projected to have the largest household growth of any other generation during that same time period, according to the Joint Center for Housing Studies of Harvard. Let’s take a look at why…

In a recent Merrill Lynch study, “Home in Retirement: More Freedom, New Choices” they surveyed nearly 6,000 adults ages 21 and older about housing.

Crossing the “Freedom Threshold”

Throughout our lives, there are often responsibilities that dictate where we live. Whether being in the best school district for our children, being close to our jobs, or some other factor is preventing a move, the study found that there is a substantial shift that takes place at age 61.

The study refers to this change as “Crossing the Freedom Threshold”. When where you live is no longer determined by responsibilities, but rather a freedom to live wherever you like. (see the chart below)

source: KCM and Merrill Lynch

source: KCM and Merrill Lynch

In retirement, you have the chance to live anywhere you want. Or you can just stay where you are. There hasn’t been another time in life when we’ve had that kind of freedom.
— As one participant in the study stated

On the Move

According to the study, “an estimated 4.2 million retirees moved into a new home last year alone.” Two-thirds of retirees say that they are likely to move at least once during retirement.

The top reason to relocate cited was “wanting to be closer to family” at 29%, a close second was “wanting to reduce home expenses”. See the chart below for the top 6 reasons broken down.

source: KCM and Merrill Lynch

source: KCM and Merrill Lynch

Not Every Baby Boomer Downsizes

There is a common misconception that as retirees find themselves with fewer children at home, they will instantly desire a smaller home to maintain. While that may be the case for half of those surveyed, the study found that three in ten decide to actually upsize to a larger home.

Some choose to buy a home in a desirable destination with extra space for large family vacations, reunions, extended visits, or to allow other family members to move in with them.

Retirees often find their homes become places for family to come together and reconnect, particularly during holidays or summer vacations.

Bottom Line

If your housing needs have changed or are about to change, meet with a local real estate professional in your area (like me if you're in Vermont!) who can help with deciding your next step.

source: KCM Blog - keepingcurrentmatters.com

Attaining the American Dream: 5 Financial Reasons to Buy

American Piggy Bank.jpg

Heading into 2015 many people have their sights set on buying a home. The personal reasons differ for each buyer, with many basic similarities. Eric Belsky, the Managing Director of the Joint Center of Housing Studies at Harvard University expanded on the top 5 financial benefits of homeownership his paper - The Dream Lives On: the Future of Homeownership in America. Here are the five reasons, each followed by an excerpt from the study:

1.) Housing is typically the one leveraged investment available.

Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.

2.) You're paying for housing whether you own or rent.

Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.

3.) Owning is usually a form of “forced savings”.

Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.

4.) There are substantial tax benefits to owning.

Homeowners are able to deduct mortgage interest and property taxes from income...On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.

5.) Owning is a hedge against inflation.

Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.

Bottom Line

We realize that homeownership makes sense for many Americans for an assortment of social and family reasons. It also makes sense financially.


Credit: The KCM Blog

Top 10 Reasons to Hire a Real Estate Agent

Top 10 Reasons to Hire a Real Estate Agent
  1. Education & Experience

You don't need to know everything about buying and selling real estate if you hire a real estate professional who does. Henry Ford once said that when you hire people who are smarter than you are, it proves you are smarter then they are.

Selling? See the other 9 reasons here
Buying? See the other 9 reasons here

Read More

10 Things Today's Buyers Look For in a Home

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While David Letterman’s Top 10 lists generally culminate in a No. 1 ranking, this the list includes in no particular order 10 things that are important to buyers today, especially Millennials who represent a significant buyer niche in today’s market. See the list here.

10 Ways to Prepare for Homeownership

If you're ready to buy your 1st home, or you're in the market for a 2nd home, or you're looking to move, you might enjoy this article from Realtor® Mag as a first-time read or as a refresher. I just posted it in the BUYERS section. Read it here.