That’s how much the Federal Reserve dropped interest rates during the 2008 downturn. Quartz points out that there was also a 6% rate cut in 1990 and a 5.25 drop in 2005. The current interest rate is so low that the Fed won’t have the same economy-stimulating power when the next recession hits.
9 out of 10
Also in Quartz: people in Singapore are living in the American dream. 90% of Singapore households own their homes. In Bulgaria, it’s 80%. In Spain, the Czech Republic, Slovenia, Italy, Finland, Ireland, and Mexico, at least 70%. Curiously, the current US home ownership rate of 64% is about the same as it was in 1990. But back then this percentage was above average, whereas we now are close to the bottom compared to high-income nations in Europe and Asia.
Fascinating research by Zillow. Income is not necessarily the best predictor of home ownership. Among older couples, single-earner households are only 1% less likely than their dual-earner peers to own homes. And among unmarried singles, those living with roommates or relatives have much higher household incomes, but are only 1% more likely to own homes.
7.9% and 17.1%
Apartment List’s survey shows how income inequality is transferred from generation to generation. 7.9% of millennials renters receive parental help in paying rent, and 17.1% expect parental assistance with home purchase down payments. Since 2000, house prices have increased 75% and rents have gone up 61 percent, but household income for those under 35 has only risen by 31%. Those unable to count on parental support inevitably fall behind.
Bloomberg sifts through the IRS’ Statistics of Income Bulletin and found that $480,930 is the minimum you have to earn annually to join the 1% club. Back in 2009, the threshold was $350,000. The average adjusted gross income among one-percenters is $1,483,596.
According to Redfin, that’s how often buyers make offers on houses they’ve never set foot in, up from 19% in 2016. This practice is much more common among millennials (45%) than boomers (6%). It happens most often in LA (57%?!), but is still surprisingly uncommon in Seattle (19%).
-7.8% versus 14%
The Census Department reports that sale of new homes during January plunged 7.8% versus a year ago. John Burns Consulting points out the insanely wide error margin (+/- 19%!) and says that their survey of 300+ home builders showed that January new home sales jumped 14% year over year. John Burns Consulting also touted publicly-traded home builders’ strong financial performance, but Seeking Alpha reports on falling stock prices due to earnings misses.
National Association of Realtors (NAR) says that pending home sales have fallen to their lowest level since 2014. NAR’s interpretation is that shoppers are looking but not buying. Redfin, on the other and, says that the number of buyers making offers is up by 1.2%.
28 to 9
The New Jersey State Senate overwhelmingly supported the creation of municipal charitable funds to which homeowners can pay their property taxes. These payments would then qualify for federal tax write-offs, reversing the new tax law’s $10,000 state and local tax deduction limit.
Windermere’s own Rob Graham does the math to show what happens when sellers try to reduce commissions paid to buyers’ agents. In MLS Area 390 (Central District/Capitol Hill), a 3% to 2.5% reduction causes the average house to stay on the market for 24 additional days.
Mortgage rates have risen 7 weeks in a row, reaching their highest point since April, 2014. But Johns Burns Consulting says the housing market has weather 1%+ rate increases 10 times over the last 43 years: “Historically, rising confidence, solid job growth, and higher wages have more than offset reduced demand for housing resulting from higher mortgage rates. When rates rise during a weak economy, home sales and prices get crushed.” John Burns’ survey of 300 home builders showed that only 15% expected sales volume to drop significantly if rates went all the way up to 5%.
Rates do matter, though. In Redfin’s home buyer survey, only 6% of the respondents said a 5% rate would cause them to abandon their plans. But 21% said they would have to scale down their budget. In the Seattle area, hefty property tax increases further reduce buyers’ purchasing power, even as prices continue to rise.
CoreLogic predicts that interest rates will rise by 0.85% between Nov 17 and Nov 18 while median house prices will increase by 2.6%. These two factors, along with inflation, will add 15.5% to the typical mortgage payment.
The National Association of Realtors reports that housing inventory has decreased for 32 months in a row on a year-over-year basis. Existing home sales sank 3.2% in January compared to last December, which doesn’t tell the whole story. It dropped by only 1.3% in the South while plunging 9.5% in the West. The percentage of first time buyers fell from 32% to 29%. This is comparing apples to oranges, but Zillow says Seattle area shoppers have 19.3% fewer options to choose from, versus a year ago.
7,000 to 13,5000 Housing Units
A McGill University Study claims that AirBnB took thousands of housing units out of New York City’s long-term rental market, causing median rent to increase by 1.4% over the past 3 years. The authors say AirBnB hosts earn 55% more than long-term landlords. Nearly 300 unique listings earned $100,000 or more last year.
Seattle Times says that’s the number of 65+ driver’s license holders in Washington State, out of a total of 5.8 million licensed drivers.
Holy cow. Calculated Risk Blog reports that framing lumber prices are up 31% from a year ago.
2 weeks vs 6 months
Crosscut says Seattle City Light is way behind on hookups for new housing. 3 years ago, the process took as little as 2 weeks. Nowadays it’s up to 6 months, adding greatly to home builders’ financing costs and reducing their financing capacity for new projects. City Light also has a backlog of 12,000 move requests.
According to ATTOM Data, that’s Seattle’s average home sale profit. ATTOM says nationwide, home sale ROI is at its highest since 2007. That’s partly because homeowners are staying put longer. The 8.18 year average tenure is at its longest since 2000.
36% vs 29%
Zillow reports that for the first time since 2005, there’s been a 2%+ (1.52 million total) annual increase in new households that own their homes. The gain is led by households headed by someone under 35, 36% of which own their homes. In Seattle, though, the story may be different. Curbed says between 2006 and 2016, renter share increased by 13.6%, while ownership share decreased by 10.1%. Only 29% of young adults are homeowners, which is no wondering considering…
According to IRS data, almost half of Seattle-area tax-payers made less than $50,000 in 2015. Even in Sammamish, which had the smallest proportion of low-income tax-filers, 28% were below the $50,000 mark.
That’s the national home ownership rate, as reported by the Census Bureau. HousingWire points out that 36% of Millennials own homes, versus 79.2% of those 65+. 72.7% of the non-Hispanic white population own homes, versus 46.6% of Hispanics and 42.1% of blacks. Zillow economist Aaron Terrazas is hopeful that having created enough rental housing to meet market demand, builders will now turn their attention to the for-sale market, thereby fueling continued growth in home ownership.
David Blitzer, S&P Dow Jones Indices managing director, points out that there’s been very little for-sale housing construction. Single family home starts averaged 632,000/year between 2010 and now, versus 698,000/year during the last financial crisis and 1.5 million/year between 2001-2006. Bill McBride at Calculated Risk puts home construction in context of the overall economy. The $272 billion Q4 spending was 1.4% of GDP, compared to the $238 billion home improvement spending, which was 1.2% of GDP. Bill also notes that the multi-family housing market has now softened for 9 consecutive quarters.
7.9% vs 20%
The National Association of Home Builders finds this curiosity: all-cash deals accounted for only 7.9% of new home purchases (as reported by the Census Bureau), versus 21% of existing home sales (says the National Association of Realtors). Two reasons: new homes cost a lot more ($321K median, versus 248K median for existing homes), and 15% of existing homes were purchased by investors.
According to Experian‘s fascinating State of Credit report, that’s the average credit score in Washington State. The national average is 675. 22.3% of Americans have 780+ credit scores, versus 19.8% five years ago. 21.2% have sub-600 scores, versus 26.9% in 2012.
Realtor Magazine reports that Home builder Lennar offered real estate start-up Opendoor $100 in debt financing. The two companies are testing a home trade-up program (“as you do with cars!”), whereby Opendoor’s software algorithm buys your old house on the spot, so that you can buy one of Lennar’s brand new houses.
HousingWire reports on Divvy Homes’ new twist on home financing. Pick out any house for sale and Divvy will buy it. You then put 2% down and pay a monthly rent, with the goal of building up 10% in equity over 3 years. At that point, you would have the option to buy out the remainder of the house with a mortgage.
You should read this Seattle Times report on The Firs, a mobile home park in SeaTac. The owner wants to shut down the park and build on the land. Current residents, including 90 children, will be forced to relocate, but there are no nearby housing options. The means lost jobs, interrupted schooling and the dismantling of a close knit community where neighbors help each other make ends meet.
Also in the Seattle Times, the newly released Cost of Living Index says Seattle is the 6th most expensive place in the US. But believe it or not, we’re only #14 when it comes to housing costs. Hamburgers, dry cleaning and haircuts are where we’re #1. We’re also in the top 10 for gas, tire balancing, beer, frozen corn and tennis balls.
RIP, Ingvar Kamprad. Quartz reports that despite his dyslexia, IKEA’s founder did his first business deal at age 5 and had a diversified empire of Christmas ornaments, fish, lingonberries, and garden seeds by middle school. I did not know that there are no IKEAs in South America.
The cost of a detailed Lego replica of your 2,000 SF house. Delivery in 8-10 weeks. Might possibly be more durable than many new construction homes in Seattle.
According to the Brookings Institution, student debt is the only kind of debt that continued to grow after the recession. There are currently $1.4 trillion in outstanding student loans. National Association of Realtors estimates that educational borrowing could delay home ownership by 7 years. The Brookings study included some scary findings on race and wealth. Black college graduates have a median net worth of $23,400, vs $180,500 for their white counterparts. Black holders of graduate degrees have a median net worth of $84,000, versus $293,100 for their white counterparts.
-$1 trillion vs +$671 billion
Slightly old news, but this April 2017 report by the Federal Reserve Bank of New York puts student loans in a bigger picture context. The current level of total household debt ($12.6 trillion) is close to what it was during the previous peak in 2008. By whereas housing related debt has declined by $1 trillion, educational debt has increased by $671 billion. Recent graduates with student loans leave school with an average balance of $34,000, up 70% over the last decade. There goes saving up for home ownership.
$10,370 vs $4,320
Apartment List surveyed 11,000 millennials and found that 80% would like to own a home at some point. College grads with no student debt have a huge advantage, with an average of $10,370 in savings. Student loan borrowers have less than half in their bank accounts.
I’m tired of Seattle’s dark winter days but it could be worse! NPR says Moscow only had 6 minutes of sun light during the whole month of December, 2017.
2.4 cents per mile
KIRO 7 reports that Washington State is starting a pay-per-mile gas tax pilot. Gas tax revenues are projected to drop 45% by 2035 because cars are getting better gas mileage. The 2.4 cents per mile rate is based on what a 20.5 MPG car pays under the current 49.4 center per gallon gas tax.
According to Crosscut, only 44% of Seattle Section 8 voucher recipients were able to find housing in 2017. Section 8 covers the difference between fair market rent and what recipients are able to pay (up to 30% of their income). But Seattle recipients only have 180 days to find a willing landlord.
The Puget Sound Regional Council projects that the number of workers in the Puget Sound area will increase by 40% between now and 2040. The number of residents will hit 5 million. Sooo many people. How will we all fit? How will we get around? The state says $40 billion is needed to meet transportation and infrastructure needs. (Update on 1/30 – new projection from PSRC: 6 million people by 2050!)
According to Seattle Times, that’s the percentage of brand new South Lake Union apartment units that are empty. In the downtown core, two-thirds of new apartments are vacant! Compared to the last quarter, rents in December fell more than 6% in SLU and downtown, as well as other popular areas like Belltown, Ballard and even Redmond and Sammamish/Issaquah. Rents may fall further in 2018 as 24,500 apartments are under construction across King and Snohomish counties. Seattle is getting more apartments this decade than the last 50 years combined, even as construction costs have risen 35% over the past 5 years.
30,000 and 30,000
Wall Street Journal says that’s the number of vacant apartment units in metro Denver, up from 5,500 three years ago. 12,000 apartments have been built since 2015, and 22,000 more are on the way. Almost all are luxury units. Meanwhile, there’s hardly any availability when it comes to affordable units below median rent. So Denver has partnered with local employers and non-profits to create a subsidy program that houses lower income residents in market rate apartments.
(Update on Jan 26) The Guardian reports that more than half of the ultra-luxury apartments built in London last year remain vacant. Local builders say that it would take a least 3 years to sell the glut of high-end flats if sale continue at their current pace and no new construction is started. As in other cities, most of the housing demand in London is at more affordable price points, but such homes are not being built.
54% vs 64%
National Association of Realtors is touting ATTOM Data’s finding that buying is cheaper than renting in 54% of 447 counties it analyzed. While this is true, it doesn’t tell the real story: 64% of the US population live in areas where it is more affordable to rent. In particular, renting is cheaper in 76% of the counties with populations of a million or more.
Seattle Office Space News reports that there are 614,000 immigrant residents in the Seattle area. They paid $6.4 billion in taxes in 2014.
HousingWire reports that 80+% of homeowners nationwide now have tappable equity (the amount they can borrow against while remaining under 80% loan to value). The total available equity is $5.5 trillion, versus $3 trillion back in 2012. But due to rising interest rates, refinancing activity dropped 14% between Q3 2016 and Q3 2014. The math favors home equity lines of credit for those with high balances and don’t plan to capitalize on a large amount of equity.
Pyatt Broadmark‘s real estate lending funds offer short term loans for acquiring, renovating and building properties in the Pacific Northwest. The annualized return for its Fund I is an impressive 11.44% since its 2010 inception. But after its 2013 high of 12.35%, returns have declined year after year, to 10.5% in 2017. I was interested to see that its Fund II for loans in the Mountain West held up much better, with a 11.54% return in 2017.
The National Association of Realtors reports that investors of single family rentals have much better luck finding bargains in cold weather. In Seattle, where the summer to winter temperature spread is 24%, the price savings is 24.7%. In San Francisco, with a 12 degree temperature spread, the cost differential is 19.3%.
30 basis points
According to LendingTree, the best 30-year-fixed loan offers for borrowers with the best profiles had an average APR of 3.80%. But the average for all borrowers? 4.42%. Those with 760+ credit scores were quoted 4.26%, but those with 680-719 credit scores got 4.56%. The 30 basis point spread is the largest it’s been since April, 2016.
Up to $50.2K
Houzz says that’s the cost of renovating a large (200+ SF) kitchen in Seattle. In Miami, the same project would cost as little as $17K! The top priority for 63% of kitchen remodelers is more storage.
That’s the return on investment for owning an AirBnB… in South Bend, Indiana. iPropertyManagement compiled a list of top 100 vacation rental locations and Seattle is not on the list. Their ranking formula was based on median rental prices, historical occupancy rates, median sale prices and local ownership costs, such as property taxes and utilities. Seattle is at a huge disadvantage when it comes to the last 2 criteria.
Seattle is also not on Redfin’s list of top 25 home buying destinations that have it all: good schools, access to public transit, low crime AND affordability. Chicago, according to Redfin, is the place to be, with more than a dozen spots on the list. According to Redfin’s Illinois agents, high local taxes – about 2% of home values – are one reason why their prices are so low. Will Seattle’s house prices fall as our taxes rise?
The Top 5%
Realtor.com reports that nationwide, luxury housing (defined as homes priced in the top 5 percentile) took longer to sell and appreciated less over the past year, compared to the rest of the market (5.1% versus 6.9%). In particular, CoreLogic noted that low-priced homes (75% of median or below) appreciated by 9.7 percent. Javier Vivas, Realtor.com’s director of economic research, pointed out that based on the age of luxury inventory, it seems high-priced housing is being constructed at a pace that exceeds demand. Definitely not the case at the other end of the spectrum.