DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.
Issue link: http://digital.dsnews.com/i/844224
10 YOUNGER GENERATION SHIFTS TO BUYING INSTEAD OF RENTING Independent title agents and real estate professionals are confident that transaction volume, purchase transactions, and refinance transactions will grow during the next 12 months, according to the second quarter Real Estate Sentiment Index (RESI) released in June by the First American Financial Corporation. On a national scale, the number of those surveyed who expect a rise in residential purchase volume increased from nearly 9 percent Q1 to Q2. Comparatively, that number is 6.25 percent lower than it was last year. Residential refinances also have higher sentiment than they did during Q1, rising 17.33 percent. Year over year, that number is down 24 percent. ere are states, however, in which industry professionals' confidence in residential purchase volume increased over the year. ese states include: Louisiana (24.1 percent), Texas (15.6 percent), New York (12.9 percent), Missouri (11.4 percent), and Tennessee (9.7 percent). Independent title agents and real estate professionals did not have quite as much confidence in forecasted price growth. In Q1, 3.89 percent of those surveyed believed prices would increase in the coming year; and, in Q2, that number only rose to 4.19 percent. e five states in which professionals predicted the highest residential price increases were: Kentucky (8.6 percent), Washington (8.0 percent), Michigan (6.1 percent), Maryland (6.0 percent), and New York (5.8 percent). e RESI also asked industry professionals about their experience working with first-time homebuyers. According to those surveyed, 55.3 percent of first-time homebuyers were between the ages of 26 and 30, while 31.5 percent were between 31 and 35. Ages 36 and older only accounted for a combined 3.7 percent of first- time buyers, compared to 8.8 percent aged 21 to 25, indicating a staggering majority of first- timers are millennials. Of those first-time homebuyers, 41.4 percent say they bought a home as a financial investment. 25.2 percent cited having kids/ starting a family as their reason for buying, and 23.3 percent indicated their reason was due to a new job and/or increased income. Only 10 percent said they wanted to buy a home because they got married. According to Mark Fleming, First American Financial Corporation's Chief Economist, the obstacles to buying a home haven't changed much. "In contrast to the perception that millennials are eschewing homeownership for the ease and flexibility of renting, this quarter's survey provided more evidence that millennials are increasingly participating in the housing market," Fleming said. "Like generations before them, saving for the down payment is the biggest obstacle. When millennials buy a home may be different, but why millennials buy homes is arguably the same as it's always been." According to 37.9 percent of respondents, saving for the down payment was the largest obstacle, with overall affordability being the second largest obstacle (30.8 percent), followed by a limited inventory of likable homes (19 percent), and limited access to credit (12.3 percent). DETROIT TOPS SINGLE- FAMILY INVESTMENT LIST In terms of single-family homes, investors see the most yield from properties in older metro areas—particularly those in the Midwest and Northeast, according to recent data from RentRange Data Services. Detroit, Cleveland, and Milwaukee boast the best single-family markets in the nation. RentRange recently released its rankings of the nation's top 25 metro areas in order of highest gross average yield on single-family homes. Detroit came in at No. 1, with a 17 percent average gross yield for the first quarter of 2017. Rents jumped nearly a full percent in the Michigan city over Q1. According to RentRange, cities in the Midwest and Northeast dominated the list, largely because of ever-increasing home prices in the South. "Data shows that the highest-yielding markets are dominated by older metro areas in the Midwest and Northeast," RentRange reported. "Sales price increases in these markets have lagged behind faster-growing markets in the South and Southwest." e only Southern cities to make the top 10 were McAllen-Edinburg-Mission, Texas; Birmingham-Hoover, Alabama; and Memphis, Tennessee/Mississippi/Arkansas. RentRange also analyzed vacancy rates and investor purchase volume in the top 25 metros. "Analyzing the average vacancy rates, which is the percentage of rental properties that are vacant or unoccupied at a particular time, the lowest rates from the list are in Pittsburgh, Indianapolis, St. Louis, Oklahoma City, and Canton," RentRange reported. "Lower vacancy rates generally mean properties stay vacant for less time, limiting the loss of rent." Investor purchase volume was high in Detroit; Rochester, New York; St. Louis; Oklahoma City; and Canton, Ohio, indicating "a large number of investors find the market appealing from a single-family rental investment standpoint." According to Dennis Cisterna, CRO at RentRange, investors should consider all historical data points when deciding where to buy single-family properties—something previous generations of investors were unable to do. "e first step every investor should take when looking to invest in single-family rentals is to conduct due diligence by researching historical housing and rental data, the local economy, and property specific financial information like insurance, taxes, gross yield, net yield, and cash flow," Cisterna said. "Today's investor has a leg up on their predecessors because this type of information is now readily available in a way it was never before. While many markets may have high yields, they may have quite different rent growth percentages and vacancy rates. A strong market would generally have a combination of high yields, low vacancies, and high rent growth." "In contrast to the perception that millennials are eschewing homeownership for the ease and flexibility of renting, this quarter's survey provided more evidence that millennials are increasingly participating in the housing market."