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Black, Hispanic homeownership rates fall in second quarter

The homeownership rate inched up slightly in the second quarter, but not for all racial and ethnic groups.

The homeownership rate increased to 64.3% in the second quarter, up just slightly from 64.2% in the first quarter and from 63.7% in the second quarter of 2017, according to the latest report from the U.S. Census Bureau.

While this may not seem like much statistically, Chief Economist Danielle Hale pointed out that this represents an additional 1.8 million owner-occupied households over the past year.

The homeownership rate has been steadily increasing, but the chart below shows it has a long way to go in order to catch up with its pre-crisis or even historical levels.

Click to Enlarge

homeownership rate

(Source: U.S. Census Bureau)

“The rise in homeownership in the spring was consistent with the last few quarters, so while there appears to be a slowdown in the growth rate of home sales and prices, it has not slowed rising homeownership,” Freddie Mac Chief Economist Sam Khater said.

“However, homeownership today is a full percentage point below the 50-year average, and this lag reflects the long-lasting scars from the Great Recession and the lopsided nature of this recovery,” Khater said. “Despite years of continuous job growth and a slowly improving economy, it was only last year where we started to see an uptick in homeownership.” 

The white American homeownership rate increased to 72.9% in the second quarter, up from 72.4% in the first quarter and 72.2% in the first quarter last year, other groups did not see that same increase.

The black homeownership rate fell from 42.2% in the first quarter and from 42.3% in the second quarter of 2017 to 41.6% in the second quarter this year. The Hispanic homeownership rate also fell from 48.4% in the first quarter to 46.6% in the second quarter. However, this is still up from 45.5% in the second quarter of 2017.

The homeownership rate for Asian, Native Hawaiian and Pacific Islanders increased to 58%, up from 57.3% in the first quarter and 56.5% in the second quarter last year.

Millennials also continue to increase their share in homeownership as those under 35 saw an increase from 35.3% in the first quarter this year and the second quarter last year to 36.5% in the second quarter of 2018, the highest rate among Millennials in five years.

“Over the past two years, Millennials have been on a home shopping spree, driving a bump in the overall homeownership rate in Q2,” Zillow Senior Economist Aaron Terrazas said. “Homeownership among younger households still remains well below pre-crisis and pre-bubble norms, but those same groups are currently experiencing some of the biggest gains.”

Likewise, the homeownership rate for those ages 35 to 44 years increased to 60%, up from 59.8% in the first quarter and 58.8% in the second quarter of 2017. The homeownership rate for those ages 45 to 54 years increased to 70.6% in the second quarter, up from 70% in the first quarter and 69.3% last year.

The older generations, however, saw slight declines in their homeownership rate. The homeownership rate for those ages 55 to 64 years decreased from 75.4% last quarter and last year to 75.1% in the second quarter. The rate for those 65 years and older also decreased slightly to 78%, falling from 78.5% last quarter and 78.2% last year.

The national homeowner vacancy rate remained steady at 1.5% in the second quarter this year.

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FHFA: Home prices see slight increase in May

Home prices moderately increased in May, rising only 0.2% from April, according to the latest monthly House Price Index from the Federal Housing Finance Agency.

The FHFA monthly HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. Because of this, the selection excludes high-end homes bought with jumbo loans or cash sales.

Monthly, across the nine census divisions, home price changes from April to May 2018 ranged from 1.5% increase in the East South Central division to a decrease of 0.6% in the East North Central division. Changes were all positive year-over-year, ranging from 4.9% in the West South Central division to 9.1% in the Mountain division.

The chart below compares 12-month price changes to the prior year:

FHFA July 24th
(Click image to enlarge)

Here are the states in each division:

West South Central: Oklahoma, Arkansas, Texas, Louisiana

East North Central: Michigan, Wisconsin, Illinois, Indiana, Ohio

Mountain: Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, New Mexico

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Monday Morning Cup of Coffee: Are cities finally fed up with Airbnb wiping out local housing?

Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on larger issues.

Are cities finally fed up with Airbnb’s decimation of local housing? It’s starting to appear that way, as two major cities have voted to limit or restrict short-term rentals, becoming the latest metros to do so.

Last Wednesday, the New York City Council voted unanimously to significantly restrict Airbnb and other online home rental services. The council passed a bill that seeks to prevent landlords and tenants from illegally renting out apartments for a few days at a time to tourists, a trend that the city says has aggravated the housing crisis by making short-term rentals more profitable than long-term leases.

According to a New York Times article, Airbnb and other home rental services, like HomeAway, would be required to provide the addresses and names of hosts to the city’s Office of Special Enforcement each month, and to specify whether rentals are for a whole apartment or just a room.

From the article:

New York City is Airbnb’s largest domestic market, but under state law, it is illegal in most buildings for an apartment to be rented out for less than 30 days unless the permanent tenant is residing in the apartment at the same time. The new disclosure requirements would make it much easier for the city to enforce the state law and could lead to many of the 50,000 units rented through Airbnb in the city coming off the market. After similar rules went into effect in San Francisco, listings fell by half.

“The vacancy rate in New York City is very low,” the Council speaker, Corey Johnson, said before the vote. “We’re in an affordable housing crisis. We’re in a homelessness crisis. And Airbnb will not give us this data.”

According to the NYT’s reporting, home rental companies will face fines of up to $1,500 for each listing they fail to disclose, down from the $25,000 originally proposed.

A New York City Hall spokeswoman told the paper that the new restrictions have the support of Mayor Bill de Blasio, who has prioritized affordable housing in the city, and he is expected to sign the bill into law.

On the other side of the country, in San Diego, the city council recently voted to outlaw vacation rentals in secondary homes, restricting Airbnb and other short-term rentals to primary residences only.

An article from the San Diego Union-Tribune explains that the action will curtail investor activity in the short-term rental market while also barring residents and out-of-towners from hosting short-term stays in multiple properties other than their residences.

From the article:

One exception was made for San Diegans who have additional units on the same property as their residence, as in a duplex. In those instances only, a resident would be able to get a license for a second vacation rental. While not part of Monday’s action, council members said they would like to revisit the issue of granny flats, which under current rules, could not be used for vacation rentals.

The crackdown on Airbnb-style rentals has the potential to affect as many as 80 percent of the city’s more than 11,000 vacation rentals, estimated Elyse Lowe, the mayor’s director of land use and economic development policy.

Airbnb responded to the vote, releasing a statement to the paper:

“Today’s vote by the San Diego City Council is an affront to thousands of responsible, hard-working San Diegans and will result in millions of dollars in lost tax revenue for the City. San Diego has been a vacation rental destination for nearly 100 years and today’s vote all but ensures activity will be forced underground and guests will choose alternative destinations.” 

Last week, Acting Director Mick Mulvaney announced that the Consumer Financial Protection Bureau has opened a “regulatory sandbox” for fintech companies developing new products and services.  

The bureau’s newly created Office of Innovation, which was created after a dramatic reorganization of the agency, will be led by Paul Watkins, a former lawyer with the Arizona attorney general’s office who set up the FinTech Regulatory Sandbox, a program meant to encourage companies to bounce ideas off state officials.

According to the bureau’s press release, the new Office of Innovation will “focus on encouraging consumer-friendly innovation, which is now a key priority for the Bureau.” The CFPB also announced the work that was previously done under Project Catalyst will be transitioned to this new office.

“The Bureau intends to fulfill its statutory mandate to promote competition, innovation, and consumer access within financial services. To achieve this goal, the new office will focus on creating policies to facilitate innovation, engaging with entrepreneurs and regulators, and reviewing outdated or unnecessary regulations,” a statement from the CFPB said.

In an interview with the Wall Street Journal, Mulvaney said the new office will be looking at different financial tech based on blockchain, private and cryptocurrencies, and microlending.

From the article:

Mr. Mulvaney in an interview said he expects the bureau’s new innovation office to look closely at cryptocurrencies, other financial technologies based on blockchain, private currencies and microlending, or lending by individuals rather than institutions. The office also could help companies explore alternatives to traditional credit-scoring methods, such as considering rent and mobile-phone payments, consumer shopping behavior and social-media activity in credit decisions.

“You can make a strong argument…that new technology actually offers new and innovative ways to protect consumers,” said Mr. Mulvaney, a former Republican lawmaker and longtime critic of the CFPB. “You are moving light years beyond the complaint hotline to where you can really see things happening in real time,” he added, referring to the bureau’s public consumer complaint portal. The database is popular with consumers but not with financial companies, which say it spreads unverified negative information about them.

On Friday, S&P Global Ratings Structured Finance sector released its Residential Mortgage Snapshot for July 2018.

The ratings agency reported that while many mortgage loans continue to be modified, the modification rate has dropped considerably during the past six years. The modifications for Prime, Subprime, Alt-A, and Neg Am loan types can be seen in the graphs below:

mortgage modification chart from S&P global

(Click to enlarge; Source: S&P Global Ratings)

S&P’s report also increased its growth rate forecast for the second quarter to 3.9%, citing healthy economic data for the U.S. economy in May. This is an increase of 50 basis points above its March forecast.

“We see this economic strength continuing for the near term, with a forecasted GDP growth of 3.0% in 2018 and 2.5% in 2019,” the report said.

S&P’s economists also said that the economic statistics have increased its confidence in its Fed forecast, the rating agency says it is continuing to expect four Fed rate hikes for 2018 and three in 2019.

But what about housing inventory? S&P said that housing starts are up from last year and the U.S. housing market is continuing its recovery.

“At the current sales rate, the supply of new homes for sale was at 5.2 months,” the report said. “The median sales price of new houses sold in May 2018 was $313,000. We expect the inventory of new homes for sale to continue to increase and to account for a growing share of housing activity in the coming years.”

Have a good week everyone! 

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HUD dedicates $144 million to revitalize 5 neighborhoods

The U.S. Department of Housing and Urban Development announced it is awarding $144 million to be divided into five communities for revitalization efforts.

The money will be awarded to redevelop severely distressed public or assisted housing, as well as the surrounding neighborhoods. It will be funded through HUD’s Choice Neighborhoods Initiative.

HUD expressed its hope that these grants will transform struggling neighborhoods and distressed HUD-assisted housing.

“Choice Neighborhoods Grants are significant investments to transform struggling neighborhoods and improve living conditions for thousands of families,” HUD Secretary Ben Carson said. “The public dollars we award today will generate major investment to revitalize entire neighborhoods and create more opportunities for those who live there.”

The chart below shows which programs were chosen to receive the funds, how much each community will receive, and the targeted neighborhood.

Click to Enlarge

HUD Neighborhood

(Source: HUD)

The Choice Neighborhoods Initiative uses public and private funds in order to support local community strategies that address struggling neighborhoods with distressed public or HUD-assisted housing.

Under the program, local leaders, residents and stakeholders come together to create and implement a plan that revitalizes distressed HUD housing and addresses the challenges in the surrounding neighborhood. The program helps communities transform neighborhoods by revitalizing severely distressed public and assisted housing and catalyzing critical improvements in the neighborhood, including vacant property, housing, businesses, services and schools.

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Bellwether Enterprise Real Estate Capital hires Ilya Weinstein as vice president

Bellwether Enterprise Real Estate Capital, the commercial and multifamily mortgage banking subsidiary of Enterprise Community Investment, hired Ilya Weinstein as vice president of its New York office.

Weinstein will focus on affordable housing as part of the Bellwether’s Affordable Group, working to increase loan production for affordable housing properties in the northeastern U.S. region.

“We are thrilled to welcome Ilya to Bellwether Enterprise’s New York City office, which serves as a hub for some of our company’s most impactful work,” Bellwether Enterprise President Ned Huffman said in a statement.

“Ilya’s established industry experience in the mortgage lending space and his passion for affordable housing aligns strongly with our mission. We are confident that he will help us further build upon our Affordable Group’s impressive portfolio of work.”

Ilya Weinstein, vice president, Bellwether Enterprise Real Estate Capital

Prior to joining Bellwether, Weinstein was an associate at Wells Fargo Multifamily Capital where he helped originate over $10 billion in Fannie Mae and Freddie Mac loans nationwide. Weinstein also worked as an associate at Red Stone Tax Exempt Funding, and before that held positions in asset management and affordable housing lending at Centerline Capital Group.

“Working with Bellwether Enterprise is an exciting opportunity to find ways to increase affordability in a region with some of the highest costs of living in the country,” Weinstein said in a statement.

“By providing flexible financing solutions to service diverse needs in the affordable housing space, Bellwether Enterprise is consistently able to positively impact communities nationwide. It is an honor to join the Affordable Group…and I look forward to continuing and growing this important work alongside the Bellwether Enterprise team.”

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Redefy names Chris Rediger CEO and moves Jordan Connett to chairman of the board

Flat-fee listing company Redefy Holdings named Chris Rediger its new CEO. Previously president and chief technology officer, co-founder Rediger will be stepping up into Jordan Connett’s former position as Connett becomes the chairman of the board of directors.

Redefy is one of the handful of companies cropping up to take advantage of home sellers’ frustration with the old Realtor model of selling their homes. Through Redefy’s online platform, home sellers can list a property for a flat rate of $3,000. This flat rate comes with consultation, professional property photography and a plethora of the other services agents typically handle.

Chris Rediger, CEO of Redefy

“We understand the frustration many home sellers feel in paying high-cost real estate commissions to agents. Our proprietary platform enables sellers to keep more of their home equity, while ensuring their home receives the maximum exposure during the sales process,” Rediger said in a statement.

Redefy is on the growth path, looking to enhance its technology offering and increase its market share in the emerging online residential real estate market in the U.S. The number of people who found the home they bought online without an agent rose to over 50% in 2016 and shows no sign of reversing course.

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TRELORA elects Monty Moran as chairman of its board of directors

Flat-fee real estate brokerage TRELORA made former Chipotle Co-CEO Monty Moran chairman of its board of directors to push forward its growth initiatives.

“I have been a huge fan of Chipotle for years. Much of what we have built at TRELORA around process and culture was formed from my respect and admiration of the extraordinary culture Monty built at Chipotle,” TRELORA founder and CEO Joshua Hunt said in a statement.

Moran served as co-CEO at Chipotle from 2007-2017 and grew the company from eight restaurants to more than 2,100 restaurants during that time.

“I knew the very first time I met Monty that he needed to be involved with TRELORA. Monty’s love for and commitment to people, his curiosity and his commitment to excellence is at the very core of TRELORA and he is a leader who everyone here deeply respects, trusts and is ready to learn and grow from. Together with our board and entire team, Monty and I are committed to building a company that has long lasting impact in the hearts and minds of everyone we come in contact with,” Hunt added.

Monty Moran Chairman of the Board of Directors at TRELORA

So far, TRELORA has saved consumers $41 million in real estate commissions and has recently opened offices in Seattle with plans to open more offices in growing markets across the U.S.

“I am humbled and proud to accept the role of chairman of the board of TRELORA,” Moran said in a statement.

“Joshua’s incredible vision of caring for people by streamlining, demystifying and simplifying the process of buying and selling homes inspires me, and has attracted a world class management team, top notch employees, and a strong board of directors. TRELORA already has the top-producing agents and has earned the best customer service scores in the entire industry, and I will work alongside this superb team to build on our early success, grow our national presence, and allow more people around the country to benefit from TRELORA’s service,” he added.

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ERA adds Diana Wall as senior vice president of sales

ERA Real Estate announced Tuesday it has named Diana Wall senior vice president of sales.

“Diana is a business builder with a reputation for integrity, smarts and delivering on her promises,” ERA Real Estate President and CEO Simon Chen said in a statement.

“She understands the power of collaboration and communication in driving success across a large real estate network,” he added.

In her new role, Wall will be responsible for strategy regarding the growth of the ERA broker network. She will work with the ERA senior management team help expand the ERA broker footprint.

Diana Wall, senior vice president of sales at ERA Real EstateThis is Wall’s second time to be an ERA employee. Earlier in her career, she was a district sales manager at ERA. Before rejoining ERA, Wall served as the vice president of business development at RE/MAX and vice president of field operations for Project C.U.R.E.

“ERA is all about acceptance and supporting those who want to create a trusted legacy in their community. I want to ensure that we are onboarding brokers who value the ERA vision, see the full potential of our tools and resources and are fiercely determined to grow,” Wall said in a statement.

“What we’re doing at ERA is bigger than all of us. ERA Real Estate understands how interactions with brokers and agents create meaningful paths to home ownership–and change lives–in the neighborhoods they serve. I want to reinforce that.”

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First American economist: Millennial mortgage market is “far from dead”

Although homeownership rates remain close to half-century lows, a large percentage of Millennials are still determined to actualize the American dream, according to a data blog written by Mark Fleming for First American.

First American’s Homeownership Progress Index measures factors influencing the desire for homeownership. The latest results indicate that potential homeownership demand grew by 1% in 2017 from the prior year, while the actual homeownership rate underperformed potential demand by nearly 9%.

However, Millennials are creating the vast demand for potential homeownership.

The blog points to the results of First American’s most recent Real Estate Sentiment Index survey of title agents and real estate professionals that showed nearly 87% of first-time home buyers were in the prime home-buying age of 26 to 35 — the ages of Millennials.

Here is a graph demonstrating the overall change:

Homeownership Demands

First American attributes underperformance to Millennials, but states that nearly 80% of Millennial respondents to Harvard University’s Joint Center for Housing Studies agreed that homeownership was a part of achieving the American Dream, according to Fleming.

“Millennials are often referred to as a “renter generation,” because they have prioritized furthering their education and thus delayed getting married and having children, which are critical lifestyle triggers to buying a first home,” Fleming writes. “However, the dream of homeownership is far from dead for this age group.”

The First American Homeownership Progress Index determined that the homeownership rate is 30% higher among married Millennial couples, 5.4% higher for households with one or two children and an additional percentage point higher for households with three or more children.

However, Millennial lifestyle needs are changing, and many are forsaking family expansion to pursue higher education. That being said, First American’s HPR shows a strong correlation between homeownership and education, as the relation has nearly double in 10 years.

First American also discovered the median age for a first marriage in 2016 was 27.4 for women and 29.5 for men, which was roughly seven years more than the median ages in 1960, according to Fleming.

Although more Millennials are delaying family expansion, First American anticipates they will eventually mirror the idyllic lifestyle of Baby Boomers, therefore increasing homeownership rates overall.

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Rent just jumped to an all-time high

We’ve known that the rent may be too damn high for quite a while now, but a new report shows that rent has never been this high before.

Newly released data from RentCafé and Yardi Matrix shows that nationwide rents just hit an all-time high in June, crossing the $1,400 threshold for the first time ever.

According to the apartment market report, the national average rent for apartments was $1,405 in June, an increase of 2.9% from the same time period last year and an increase of 0.9% from the month of May.

In terms of dollar amount, apartment renters now must fork over $40 more per month than they did one year ago.

Nationwide average rent June 2018

(Click to enlarge. Image courtesy of RentCafé and Yardi Matrix.)

According to the report, rent increases occurred in nearly all of the nation’s largest cities. Per the report, rents rose in 88% of the nation’s largest 250 cities in June when compared to last year. Rents remained the same in 10% of the top 250 cities and dropped in just 2% of them.

From the report:

None of the rental mega-markets of the country escaped steep rent increases this month. Orlando took 1st place by proportional increase as well as dollar-value, where renters now pay 8.4% or $107 more compared to last June. Tampa, Phoenix and Las Vegas apartments also cost 6-7% more than a year ago. Las Vegas has also reached the $1,000 milestone since last year, same as Jacksonville and San Antonio.

One area hit hard by a June rent increase was Manhattan, which has long been the most expensive rental market in the country.

According to the report, apartment rents in Manhattan have actually been dropping, stagnating, or very sluggishly growing over the last few months.

But that all changed in June, when rent rose to an average of $4,116, an increase of 1.5% or $60 per month, representing the largest increase in a year.

Additionally, the report showed that the rent increase hit all unit types relatively equally.

Again from the report:

With renting gaining popularity among families, two- and three-bedroom units were the main drivers of rent growth so far in 2018. June’s increases, however, were almost perfectly balanced among unit types as the demand for studio and one-bedroom units caught up and even outpaced the two-bedroom segment. Three-bedroom homes cost 0.8% more compared to a month prior, $1,714. Two-bed units have seen a somewhat bigger month-over-month increase (although they lagged behind the other categories in yearly comparison), 0.9% to $1,489. Meanwhile, one-bedroom apartments and studios have seen their rents rise by a full percent, to $1,271 and $1,239, respectively.

Doug Ressler, director of business intelligence at Yardi Matrix, believes that the increases are driven by increasing demand for rental housing for a myriad number of reasons.

“Generational and demographic changes, shifting employment opportunities, policy and economic influences are impacting the housing market and turning homebuyers into renters nationally,” Ressler said. “Student loan debt, smaller household sizes, larger down payments requirements, rising interest rates, are also contributing to this change.”