31 replies to this topic

[cw68]

Interesting article in the Bee this morning regarding Millennials and home buying.
 
http://www.sacbee.co...cle5389560.html
 
Thoughts?

Very good article. The current economy, combined with student loan expenses, doesn't support the past dreams of home ownership. Additionally, the suburban dream is the millennials' dream.

Chad and I were both discussing this during the election. So50 is being on a model from 20 years ago. Folsom isn't going to be drawing the numbers younger people like it used to. I think So50 is going to be detrimental to Folsom as a whole.

[Steve Heard]

 

I'd be curious to know what percentage of recent sales are old school conventional loans with 20% (or more) down payments?  My guess (and it's only a guess) is most people shopping in that $240k range are likely using FHA loans with far lower down payments, making the mortgage vs rent calculation less favorable.  As I've said before, you can always get to rental parity if you make the down payment large enough.

 

I was trying to make sense of it the info on the HUD site, but some of it is confusing. I found a chart here: http://www.huduser.o...HAShareVol.html

 

And a statement "Forward-loan endorsements fell 23 percent over the same period in FY 2013 on both a loan count and dollar weighted basis. The HECM endorsement volume, at $2.9 billion for the fourth quarter of FY 2014, represents a decrease of 27 percent from the same period in FY 2013."

 

That doesn't tell us how many people in this region are using FHA, though.

 

I'll see if I can find that out.

[rip]

Steve, have you checked out Ryan Lundquist's appraisal blog? It's http://sacramentoappraisalblog.com.

 

He is a total data geek (like me) and has a ton of great charts.  According to his post from a couple of weeks ago, in November 25% of mortgages were FHA in the Sacramento area.  For perspective, in the past FHA accounted for more than 30%.  Cash sales made up 17% of the market compared to 36% 2 years ago.  Of course the FHA numbers don't account for other low down payment (VA, Freddie Mac, Fannie Mae, etc) programs.  But even taking a conservative guess, it would seem that at least half of the market is using some kind of conventional (20%+ down) mortgage.  It would be very interesting to see how loan types correlated with purchase price. 

[Steve Heard]

Interesting article in the Bee this morning regarding Millennials and home buying.

 

http://www.sacbee.co...cle5389560.html

 

Thoughts?

Interesting indeed.

 

Many of those quotes could have come out of my mouth 20 years ago. I've always valued freedom, travel and life experiences over material things. I was 41 before I finally 'gave in' and bought a home. I love my home now, but wasn't ready for it then. I am fully aware that had I bought sooner, I'd be way ahead of the game, but I just wasn't ready. I understand where these folks are coming from. 

 

I think that eventually, many folks get tired of having to pay someone else's mortgage and property taxes, not being able to make any alterations to the property (even hanging pictures), not getting any of the tax benefits or property value appreciation, and they will want some sense of security and protection against rising costs.

 

Home ownership isn't for everyone, though, and some people are very happy to rent. That just means more opportunity for investors.

 

 

Steve, have you checked out Ryan Lundquist's appraisal blog? It's http://sacramentoappraisalblog.com.

 

He is a total data geek (like me) and has a ton of great charts.  According to his post from a couple of weeks ago, in November 25% of mortgages were FHA in the Sacramento area.  For perspective, in the past FHA accounted for more than 30%.  Cash sales made up 17% of the market compared to 36% 2 years ago.  Of course the FHA numbers don't account for other low down payment (VA, Freddie Mac, Fannie Mae, etc) programs.  But even taking a conservative guess, it would seem that at least half of the market is using some kind of conventional (20%+ down) mortgage.  It would be very interesting to see how loan types correlated with purchase price. 

 

Rip, yes, we've had Ryan speak at our broker tour meetings. I think he's coming back in a month or so. Always interesting stuff.

[SacKen]

Yes, lots of folks were expecting prices to drop after the investors pulled out, but instead, it just pushed us toward a more stable market.

 

I am wondering if the next step will be a Bay Area migration, as their prices go nuts.

 

...

 

The Bay Migration of the late 90s is what caused me to buy a home a little sooner than I was planning. I had been watching the markets closely and started to notice a trend of people and companies moving here. I bought in '98, just before prices started double-digit growth.  I'm seeing some of the same situations I saw back then that started with the Bay area becoming impossible for someone to live unless they were one of the few getting valuable stock options. There seemed to be a 3-5 year delay for the effect to really be seen in this area, so I wouldn't expect a mass migration just yet, but I'd be on the lookout for tech companies expanding up here instead of in the Bay in the next couple of years.

 

As for investors... have they pulled out?  My concern was not about flippers, but large rental investors.  It seemed like the last downturn resulted in a lot of those guys buying up properties.  There still seems to be a lot of rentals owned not by someone like me with a couple rentals, but investors with dozens or more rentals.  I don't have real numbers, though. It's just based on the horror stories I heard from potential renters when I recently listed my rental.  Those large rental companies will start dumping the minute it looks like values might plunge, snowballing the price plunge even more.

 

As a side-note... those guys make it real easy for me to find good renters! It sounds like they are a PITA to deal with and I get people practically fighting over the chance to rent my place.  I end up with great renters that treat it like their home, not a house they rent.

[rip]

I'm with you Ken on the concern over big investors.  All by itself, Blackstone purchased more than a thousand homes in the Sacramento area. What's even sketchier, is they have packaged up all these house as rental backed securities that they are then selling to other investors.  The rates of return they are promising are going to require pretty aggressive year over year rent increases to make them fly.  Historically rents are even more correlated to incomes than mortgages.  With flat wage growth, I wonder if the market will bear the increases they require to meet their promised returns?  If not, then what? 

[Steve Heard]

 

As for investors... have they pulled out?  My concern was not about flippers, but large rental investors.  It seemed like the last downturn resulted in a lot of those guys buying up properties.  There still seems to be a lot of rentals owned not by someone like me with a couple rentals, but investors with dozens or more rentals.  I don't have real numbers, though. It's just based on the horror stories I heard from potential renters when I recently listed my rental.  Those large rental companies will start dumping the minute it looks like values might plunge, snowballing the price plunge even more.

 

Yes, the large, institutional investors are gone. I knew a couple of buyers for them.

 

When they came to town about the end of 2011, we used to get calls that went like this, "Hi, I'm representing ________ and we're interested in purchasing your listing at 123 Main St. We'll pay $10,000 over asking, in cash, as-is and close in 10 days."

 

Most sellers would jump at such an offer, but  some turned them down. Some were concerned about what they'd leave behind for their neighbors, or wanted to make sure that the home went to people who would love the place. 

 

Some lenders also restricted investors from buying their foreclosed properties by making the homes available for owner-occupant buyers for the first week or two.

 

Still, the big guys were snapping them up like crazy.

 

There were some 1300 to 1500 sq ft homes in Broadstone had dropped down to the low to mid-$200,000's. They were selling like mad. Today those go for $100,000+ more. Still, they are selling below the peak values of 2005.

 

It's funny how things change with investors over time. 10 years ago, investors large and small were buying property to hold for the long term. If they couldn't get positive cash-flow, they didn't mind. They had write-offs, and the properties were appreciating. 

 

They got out of the market when the crash came, and when they came back, it was because prices had fallen to the point that they could get that positive cash-flow, and then when prices got too high, they pulled out because they don't want the write-offs and hope for appreciation any more.

[Robert Giacometti]

I realize people have different tastes and what's important to them in selecting where they live. Just because I find certain characteristics and qualities to be important, that doesn't mean everyone else should have the same beliefs.

 

However, when I moved to Folsom 25 years ago., I did so because I thought this area was far more beautiful than the Bay area, the culture here was far more appealing to me and felt the restaurants were better and the music was more to my liking. Most of the people I know who moved up from the BA, back then, shared these similar beliefs.  I was attracted to the small community that had plenty of water and was safe. I also realized I could be part of shaping the future of the community before it became an extension of where I moved from.

 

IMO, Id pay more to live here in Folsom than I would to live in the B.A. I try to avoid going there as much as possible, its dirty, unsafe, congested, crowded and expensive for the quality of life that one gets there. I get it,  in that others may want all that and more power to them!

 

What gets me boiling, is those who have moved up here and then want to drag all that garbage here with them as if this those who were here before them, don't know what's good for them. They are attracted to certain values and culture of a community and when they get here want to change the very things that made the community attractive in the first place! I probably started seeing this in the early/mid 2000's and surely not with everyone as there have been many who were attracted to the culture here and have worked to preserve it.

 

IMO, the quality of life has declined significantly over the last 25 years, traffic is worse, its dirty than ever, emergency response times have almost doubled, our budget surpluses were wasted on the planning of S50, its congested, crime is way up and most people I know agree, that they don't feel as safe as they once did, we set back to back records for having drivers killed in accidents involving impaired drivers,  our abundance of water was given away and local city policies are bought n paid for with outside money ( as evidenced in our last election). The current plans to develop South of 50 will be a TEMENDOUS drag on the city's finances and snuff out what remaining traces of what Folsom once was!

 

So much of this could have been different! We could have been so much better off than where we are!

[fouroheight68]

Interesting article in the Bee this morning regarding Millennials and home buying.

 

http://www.sacbee.co...cle5389560.html

 

Thoughts?

 

This was my response on FB to the article

 I'm 29, my wife and I are on our 3rd house, and live in folsom. I had no idea less than 7% of homeowners were under 35 here. I would have liked to have seen the bee interview some people like myself and my wife. We were fortunate to have graduated with no debt and well paying jobs, but I can't imagine renting and throwing away money each month. I enjoy home ownership, even cleaning the gutters and the yard. Homeownership has benefited us very well financially, which I encourage to most our generation. We also value experiences like the people quoted in the article - we just got back from almost a month in Europe. And guess what - our real estate investments were what afforded us that opportunity.

 

 

I'm really tired of hearing about "millenneals" and the general stereotypes going around - they don't want kids, they dont want to settle down, they dont want to work, etc. My wife and I are expecting a baby, we bought/sold $1,003,000 in real estate in the past year, we enjoy traveling, but we also work hard. We graduated college with ZERO debt because we worked 40 hour weeks at the same time as getting our degrees (well, my parents helped alot too). We aren't exceptions - our friends and colleagues are the same way. I'm sick of news media interviewing "millenneals" who took huge college loans out to get degrees in liberal arts, and then wondering why they cant get jobs and afford a home. 

[ducky]

 

This was my response on FB to the article

 I'm 29, my wife and I are on our 3rd house, and live in folsom. I had no idea less than 7% of homeowners were under 35 here. I would have liked to have seen the bee interview some people like myself and my wife. We were fortunate to have graduated with no debt and well paying jobs, but I can't imagine renting and throwing away money each month. I enjoy home ownership, even cleaning the gutters and the yard. Homeownership has benefited us very well financially, which I encourage to most our generation. We also value experiences like the people quoted in the article - we just got back from almost a month in Europe. And guess what - our real estate investments were what afforded us that opportunity.

 

 

I'm really tired of hearing about "millenneals" and the general stereotypes going around - they don't want kids, they dont want to settle down, they dont want to work, etc. My wife and I are expecting a baby, we've owned over a million dollars in real estate in the past 3 years, we enjoy traveling, but we also work hard. We graduated college with ZERO debt because we worked 40 hour weeks at the same time as getting our degrees (well, my parents helped alot too). We aren't exceptions - our friends and colleagues are the same way. I'm sick of news media interviewing "millenneals" who took huge college loans out to get degrees in liberal arts, and then wondering why they cant get jobs and afford a home. 

 

I was thinking maybe my children were an exception.  They haven't owned quite as much real estate as you, but are very much in the same position concerning raising a family and owning real estate and working through school to keep their debt down.

[Steve Heard]

 

This was my response on FB to the article

 I'm 29, my wife and I are on our 3rd house, and live in folsom. I had no idea less than 7% of homeowners were under 35 here. I would have liked to have seen the bee interview some people like myself and my wife. We were fortunate to have graduated with no debt and well paying jobs, but I can't imagine renting and throwing away money each month. I enjoy home ownership, even cleaning the gutters and the yard. Homeownership has benefited us very well financially, which I encourage to most our generation. We also value experiences like the people quoted in the article - we just got back from almost a month in Europe. And guess what - our real estate investments were what afforded us that opportunity.

 

 

I'm really tired of hearing about "millenneals" and the general stereotypes going around - they don't want kids, they dont want to settle down, they dont want to work, etc. My wife and I are expecting a baby, we bought/sold $1,003,000 in real estate in the past year, we enjoy traveling, but we also work hard. We graduated college with ZERO debt because we worked 40 hour weeks at the same time as getting our degrees (well, my parents helped alot too). We aren't exceptions - our friends and colleagues are the same way. I'm sick of news media interviewing "millenneals" who took huge college loans out to get degrees in liberal arts, and then wondering why they cant get jobs and afford a home. 

 

I'm glad you replied to that. I wasn't surprised at the description of the millennials' attitudes, but was at the numbers. I seem to sell to a lot of millennials, and if you were to ask me before that article came out, I'd have said that they were a much larger part of the market. 

 

I looked back at my last 25 sales. With 2 parties per sale, there were 50 'sides'. 18 of them were millennials.

[fouroheight68]

 

I'm glad you replied to that. I wasn't surprised at the description of the millennials' attitudes, but was at the numbers. I seem to sell to a lot of millennials, and if you were to ask me before that article came out, I'd have said that they were a much larger part of the market. 

 

I looked back at my last 25 sales. With 2 parties per sale, there were 50 'sides'. 18 of them were millennials.

 

I think there is a misconception of the attitude of millennials, that they dont WANT to own a house, which in my experience is wrong. Many of my friends own houses, but only because they are financially able to do so. The others who don't own houses DO WANT to purchase, but aren't able to financially (loans and low paying jobs are the issue). 

[cw68]

 
I'm glad you replied to that. I wasn't surprised at the description of the millennials' attitudes, but was at the numbers. I seem to sell to a lot of millennials, and if you were to ask me before that article came out, I'd have said that they were a much larger part of the market. 
 
I looked back at my last 25 sales. With 2 parties per sale, there were 50 'sides'. 18 of them were millennials.

I think that there will still always be younger people wanting to move to Folsom and Folsom-esque communities, but I think that the overall percentage of millennials who want to, and will want to in the future, will be lower.

It used to be that lots of people got married right out of high school and settled down. Then it was when they graduate from college and then they'd settle down. Now every year the average age of getting married gets older and older.

Those single people in their twenties won't care as much about the good schools and kid's sports or some of the similar big draws of Folsom. These numbers are just going to increase in percentage as the years go by.

The number of millenials who don't drive, don't buy cars, don't get married or have kids as early, have debt out of school and/or change jobs often (whether by choice or not) is just going to increase. There will always be exceptions to the rules and people of all kinds, but the number of people who want to be married, settled down, and with kids by the age of 25 are few when 25 years ago it was more the norm. That's just the way it is.

[fouroheight68]

I think that there will still always be younger people wanting to move to Folsom and Folsom-esque communities, but I think that the overall percentage of millennials who want to, and will want to in the future, will be lower.

It used to be that lots of people got married right out of high school and settled down. Then it was when they graduate from college and then they'd settle down. Now every year the average age of getting married gets older and old.

Those single people in their twenties won't care as much about the good schools and kid's sports or some of the similar big draws of Folsom. These numbers are just going to increase in percentage as the years go by.

The number of millenials who don't drive, don't buy cars, don't get married or have kids as early, have sent out of school and/or change jobs often (whether by choice or not) is just going to increase. There will always be exceptions to the rules and people of all kinds, but the number of people who want to be married, settled down, and with kids by the age of 25 are few when 25 years ago it was more the norm. That's just the way it is.

 

Yeah, I guess I agree!

[cw68]

 

Yeah, I guess I agree!

 

I apologize for all the typos. Dang smart phone. I went back and fixed them in my original post. Embarrassing!