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of 94 found.
Western Drought to Hurt or Help Housing?
by John Burns of John Burns Real Estate,
While the drought throughout the Western US has created a lot of concern, it turns out that a number of companies and water districts were prepared, having invested in all sorts of technologies and water recycling programs. In fact, new homes and new home communities are far more water efficient than existing communities.
Land Is the Riskiest of Asset Classes
Investing in land carries significantly more volatility than nearly all other real estate asset classes. As a general rule, a 1% change in home values results in a 3% change in finished lot values because almost all of the change is attributable to a change in the value of the land rather than the structure. Investing in raw land carries an even greater level of volatility and price swings.
Housing Booming, Busting and Muddling Along
by John Burns of John Burns Real Estate,
Housing is local again! Our consultants and clients see vastly different housing markets all across the country. I categorize them into three groups (booming, busting, and muddling) in this article and provide anecdotes from our team members---- but it is really more complicated than that.
Chicago Housing Outlook an A Plus after Falling 91%
by John Burns of John Burns Real Estate,
Watch out for a housing renaissance in the Chicago metro area. The region massively overcorrected in this last downturn and just recently joined the recovery. New home revenue fell 91% from 2005 to 2010, and most private builders went out of business.
A Picture: More Misleading than a Thousand Words
by John Burns of John Burns Real Estate,
If you believe mortgage rates will return to 8.3%, backend debt to income ratios will fall to 38%, and that significant down payments and savings will be required going forward, then you should be concluding that housing appears overvalued today. I am not ready to make those assumptions.
Housing Bargains Harder to Find
by John Burns of John Burns Real Estate,
While mortgage rates remain near historical lows, home prices have come back strong.Thanks to strong price appreciation, the ratio of Median Home Price / Median Household Income now exceeds historical averages (since 1981) in 20 of the top 21 housing markets.
Front Running the Fed
by John Burns of John Burns Real Estate,
We are very bullish on housing, and already thinking through the impact that 3.5% mortgage rates can have if prices rise substantially due to the interest rate stimulus. The Fed has put 34% more purchasing power into the pockets of homeowners, and investors are taking advantage.
Where Will Home Prices Rise the Most? Check the Law.
Inventories have plummeted in Western markets over the last year, helping to spur robust price growth. Our home price index (below) shows just how much price appreciation has occurred (the index is 5+/- months more current than Case Shiller and removes the mix-shift bias).
A Strategy to Navigate the Housing Cycle
by John Burns of John Burns Real Estate,
The memories of 2007 through 2011 are clouding too many people's vision. There are plenty of legacy problems from the housing boom that have yet to clear, and plenty of risk to the downside, but the demand, supply and affordability measures are in place to help us put the housing downturn behind us and move forward. We are leaving stage one of the recovery and moving into stage two. Don't miss the ride.
Government Mortgage Policies Will Determine the Speed of the Recovery
Our current view on housing is that the market has bottomed and the slow recovery is underway. But now the question we are often asked is, "What does that recovery look like?" Even in a down market, the mortgage industry remains a multi-trillion dollar business and our takeaway is that a full-fledged housing recovery won't completely take hold until housing finance begins to rebuild itself.
Booming Rental Markets
The apartment market is strong. All of the large metropolitan areas in the US are seeing rent growth and declining vacancies, but location still matters. We recently completed our forecasts for 78 apartment markets across the country and we expect the following categories of markets to experience the strongest rental growth over the next five years.
Rental Housing Boom Set to Explode
by John Burns of John Burns Real Estate,
Rental households comprise 34% of the housing stock, and are growing at the incredible rate of 1.6 million per year, while owned households are actually declining in number. This is an incredible surge in demand. In our summary of the U.S. housing market only 20% of renters live in large buildings and the remaining 80% of renters live in alternative types of housing. Approximately 55% of new renters are renting single-family homes, while 45% are renting apartments. The single-family rental business, which is already larger than the institutional quality apartment business, is booming.
Housing in One Graphic
by John Burns of John Burns Real Estate,
The following graphic summarizes the U.S. housing market. The red boxes are a small percentage of the total, yet are receiving all the media and political attention. Americans make astute financial decisions, at least in the short-term (debt will hurt us in the long-term). We will bailout very few homeowners. We will increase construction by building in the ever-increasing number of areas that need homes and builders can make a profit. We will figure out how to make portfolio investments in the massive single-family rental market. We will buy homes if it makes financial sense for us to do so.
Home Prices Have Been Rising for 3 Months, but Nobody has Been Telling You
Over the last 3 months, prices are up in 90 of the 97 markets we analyzed. The average price increase over the last 3 months is 1.1%, or a 4.5% annual rate. This is big news, so why isn't anyone else reporting it? It is because most price indexes are at least 3 months behind what's happening with home prices right now. The Burns Home Value Index (BHVI) gives you a 3-month competitive advantage. We developed the BHVI to answer the question, "What is happening to home prices today?" The answer is, "Home prices are rising!"
Defending Our Optimism
by John Burns of John Burns Real Estate,
Since our client webinar last January, we have been defending our realism, which was viewed as optimism by most of our clients, whether they are builders, developers, product manufacturers, private equity investors or public markets investors. We called for home prices to fall slightly, a tough three years selling homes, and a construction recovery that is exactly the time for patient money (5-10 year money) to invest wisely. Most money is not that patient, so the challenge for each of our clients continues to be when to increase their investments.
Reasons for Moving Have Shifted Dramatically
People buy homes for many different reasons, and the mix of reasons has shifted lately. Family-related reasons, such as marriage or divorce, is an increasing percentage, while the desire for homeownership is a decreasing percentage of home buyers. This supports our forecast for 62% homeownership. With the general view that prices and mortgage rates are more likely to get better than worse, many buyers are staying on the sidelines. When they can say, "We should have bought 6 months ago," we expect the pent-up demand to begin to unleash.
Skyrocketing Student Loan Debt Will Delay Homeownership
Student loan debt now totals $865 bn, which is greater than all credit card debt and other types of household debt except for mortgages! College graduates have debt averaging $25,000. Even more troubling is the rise in debts associated with for-profit college and trade schools, whose revenues come primarily from debt available through Federal government programs. The debt load is so high, and the job outlook so bleak, that student loan default rates have almost doubled. With the economy little improved since 2009 (two-year lag on data), default rates are bound to rise further.
Homeownership To Fall 8%
We have done a lot of quantitative and qualitative research on the future of homeownership, and concluded that homeownership is likely to fall eight percentage points, from 70%* in 2005 to 62% in 2015. The American Dream of Homeownership is still alive and well, as confirmed by several surveys, including ours. However, we are going to return to requiring future homeowners to save and to take on debt that they can afford to repay. This will be a shock to some, but we all know it is the right thing to do.
Debt is Addictive, and Requires a Painful Rehab
The charts below tell the story. The typical U.S. consumer has become addicted to debt, and the banker/dealer continues to supply more debt drugs in the form of credit cards as well as low interest rate loans for homes, cars, televisions, and even cell phones (cheap phones in exchange for multiyear contracts). Business owners and governments are just as addicted. Why wait for what you want when you can get your fix right away by signing on the dotted line?
Renting REO to Stabilize Housing
by John Burns of John Burns Real Estate,
After extensive research, we believe that selling REO homes (homes that are owned by the lender after foreclosure) to investors makes the most economic sense for the banks, Fannie Mae, Freddie Mac, HUD, and the American taxpayers. Current regulatory and political pressures that prohibit or discourage these institutions from adopting this sound economic decision should be relaxed. Selling REO to investment groups who will professionally manage the homes, can help stabilize home prices, improve REO asset recoveries and prevent rents from rising too quickly.
Back to the Future: Median Home Prices Mirror Years Past
Prepare to take a trip back in time as you use the interactive map below to view the last time median home prices matched current median prices. Youll find some markets and regions are mirroring 2006 - when MySpace was the top website in the social networking realm. In other markets, you may have a flashback to 1997, standing in line to see the movie Titanic.
It's About Payment, Not Price!
For those consumers who are waiting to buy a home, are you aware that you could be "priced out" of the market by rising mortgage rates and tighter underwriting, even if home prices fall? Potential home buyers are focused on the wrong metric. They are overly focused on home price because of the tremendous correction that has occurred and the focus on home prices in the media. What consumers and the media are ignoring is the monthly payment, which is absolutely fantastic right now and highly unlikely to get much better. Everyone is just assuming that they will stay low forever.
Tremendous Demographic Shift
The growth in non-family households is staggering! The number of non-family household-people living alone or do not have any members related to the householder-has increased nearly five times in the last 50 years. At the same time, the number of family households has increased by just 1.7 times. The absolute growth in both has been about equal. Additionally, married couples now comprise less than half of all U.S. households. The percentage has been declining at a rate of approximately 0.5% per year for the last 50 years, from 75% of all households in 1960 to only 48% last year.
U.S. Building Market Intelligence
by John Burns of John Burns Real Estate,
With elected and appointed officials debating the future of housing, those who make real estate decisions today have to have a view (or at least a risk/reward tradeoff) on the key issues being debated in DC these days. Officials are seriously considering substantial changes to the mortgage industry, from changing the deductibility of mortgage interest to the rules and leadership on government-supported mortgages, which account for more than 90% of all mortgages underwritten today. Will they make and implement changes? What will those changes do to the market in the short-term and long-term?
Apartments to Benefit the Most from 3.4 million Units of Pent-Up Housing Demand
We believe the apartment business is set to explode, with steadily rising rents and occupancy that will justify new construction. Here are the three primary reasons for the optimistic outlook: 1. Pent-Up Demand, 2. Modest Job Recovery and 3 Government Policy: 19 years of continually more aggressive government intervention toward homeownership is about to reverse itself.
The Math Behind the Mortgage Interest Deduction
by John Burns of John Burns Real Estate,
In February, we handicapped a 75% chance that Congress would reduce the mortgage interest deduction, when consensus among our clients was only a 32% likelihood. Since Congress is getting closer to acting, we are publishing a free copy of our February 2011 report and circulating it around D.C. so we can help officials make an informed decision. The most likely scenario, a reduction in the principal balance of deductible mortgage debt to $500,000, raises only $5 billion per year for the IRS, with most of the pain being felt in a few high-priced markets.
Why Isn't Housing Recovering?
For nearly two years, corporate profits have been surging, GDP has been growing, and the majority of the key indicators we track have been moving in the right direction. Yet, home sales have remained in the dumps. The indicators that hit closest to home (pun intended) are the ones that housing needs the most. These are the day-to-day realities that keep us feeling glum: job growth is slow, we're in a "Wage-Less" recovery and home values are declining... again.
Apartments to Get a Double Dose of Demand: Jobs and Demographics
Apartment conditions are improving around the country. Vacancies are falling, rents are rising. REIS reported that 77 of the 82 metro markets for which they collect data had positive first quarter absorption, 79 experienced an improved occupancy rate, and 79 experienced increasing effective rents. Job growth is driving the improvement but, as we mentioned in our last report, 'Apartment Market Has Room To Run', apartment market demand is also set to benefit from a major demographic shift. Additionally, the aftermath of the for-sale housing crisis will also create tremendous rental demand.
Local Building Market Intelligence
by Jody Kahn of John Burns Real Estate,
Generally, the 2011 spring selling season has been a disappointment, but look closely and you'll find year-over-year sales comparisons at the metro level are revealing some surprising patterns. Each month, we survey 250 to 350 public and private builder executives about conditions at over 1,800 communities they manage nationwide. This is not a statistically valid sample at the metro level (3 to 13 sample size), and remember that going from 1.0 sales per community to 1.5 sales is a 50% increase, but this is the most timely data out there. Here is one of our March findings:
Federal Debt Explosion = Inflation
There's been a lot of talk about Americans living beyond their means, but it looks like we're just taking cues from our own government. In fact, you are $127,000 more in debt than you thought, thanks to the massive federal debt load. The federal debt has grown every single year since 1957, and the debt has doubled in the last seven years alone. On top of that, we have unfunded Social Security obligations, which has a present value of $16.1 trillion as of January 2010. If we counted that, it would add another $144K to the $127K in federal debt we owe, bringing us to a total of $271K.
February New Home Sales Improving, Still -9% Year-Over-Year
by John Burns of John Burns Real Estate,
Net new home sales remain 9% lower than Feb 2010, despite improvement from Jan, according to results of the John Burns monthly survey of public and private homebuilding executives across the country. Net sales jumped by 26% in Feb 2011 compared to a normal rise of 12% from Jan. "We told our clients that a 9% decline is actually better than it seems, because we are comparing year-over-year to sales which were boosted by the federal tax credit," says CEO John Burns. "If we can get through the spring coming that close to last year, I would say we are seeing stability in the housing market."
The Apartment Market Has Room to Run
The stars are aligning for an apartment boom. Other than housing affordability, all signs are pointing to a surge in rentals. Tighter lending standards, a shortage of consumers with a down payment, and strong demographics all point to rentals as the economy recovers. Look at the coming surge in demographics: The number of 20-24 year olds will grow 1.2% per year through 2013. The number of 25-34 year olds will grow 1.4% per year through 2015. This translates to an additional 1.3 million renter households. And finally, more than 1.2 million young adults moved home from 2005 to 2010.
10K Home Buyers Sitting On the Fence!
88% of almost 10,000 consumers we surveyed think it?s a good time to buy a home. They told us what it will take to get them off the fence to buy a home, but they aren?t finding it! Our sample size was huge (almost 10,000 responses) and biased toward today?s home shoppers (respondents were among 1 million survey recipients who have recently registered their email with a home builder or land developer).
Capital Allocation and Its Ramifications
by John Burns of John Burns Real Estate,
?Which markets are going to stabilize first?? I want to talk about the ramifications of the answer to that question. The answer to this question is very important to home builders and land developers, both big and small, for reasons that are far more than just the answer to ?where can I make the most money?? When a consensus view develops, such as the current consensus that Washington D.C. will stabilize first, there are a number of ramifications. Here are a few: oversupply of capital, blindsided local builders, stock price envy.
Nuances Begin to Distinguish the Markets
by John Burns of John Burns Real Estate,
We are seeing nuances emerge that will separate the economic health and recovery of the individual markets. Washington DC, the big Texas metros, Phoenix and Orlando lead the way in job growth. Chicago, Las Vegas and Riverside-San Bernardino continue to shed jobs. More than one-third of all sales are going to investors in former bubble markets. The number of homes on the market generally improves the further West you go.
U.S. Building Market Intelligence
by John Burns of John Burns Real Estate,
Those of you who have been following this e-mail for a while are noticing that many of the grades below have shifted from D?s and F?s to B?s and C?s. That is because the economy is starting to reach its long-term average outlook. Housing, however, is clearly going to lag the recovery rather than lead it. In the meantime, how do you make money in housing?
Results 1–50
of 94 found.
