Named the Nation’s Best Newsletter by NAREE
February 2017 Vol 11 Issue 2
MY TAKE By John Burns John Burns Real Estate Consulting P10
CLIENT CORNER By Rick Sharga Chief Marketing Officer, Ten-X P18
BETTER TO BUY OR RENT IN 2017 P20
P1 OUT WITH THE OLD DISTRESS, IN WITH THE NEW FORECLOSURE NORMAL
A handful of states including notably New York, New Jersey and Florida continue to struggle through a logjam of deferred distress still lingering from the last housing downturn even as the distressed market in most of the rest of the country is returning to pre-recession norms. This first of a two-part series on the distressed market outlook for 2017 focuses on how real estate brokers and foreclosure attorneys are dealing with the long tail of legacy distress in New York, New Jersey and Florida.
P10 FINALLY: DEMOGRAPHIC CLARITY
The five greatest demographic opportunities for real estate executives in the next 10 years explained succinctly by John Burns, founder of John Burns Real Estate Consulting. These five opportunities are rooted in thousands of hours of research on demographic trends for Burns’ most recent book, Big Shifts Ahead: Demographic Clarity for Businesses , and incorporate a fundamental reframing of how to define generations that no longer rely on the unwieldy 20-year generational definitions typically employed in the industry. An analysis of more than 50 million single family home and condo sales over the past 16 years reveals which month is best for realizing home-buying bargains. This analysis looks at the number of home sales occurring each month over the past 16 years, the median price per square foot for homes sold during that month in the past 16 years, and the discount or premium of that median price per square foot relative to the overall median price per square foot over the entire year. P17 BIG DATA SANDBOX: BEST MONTH TO BUY A HOME Chief Marketing Officer Rick Sharga explains how Ten-X is empowering consumers who transact online with one of the company’s three transformational real estate marketplaces – Auction.com, Ten-X Commercial, and Ten-X Homes – with transparent real estate data that helps those consumers make the most informed decisions possible. That transparent data is not only empowering Ten-X consumers, it’s also arming Ten-X executives with insights to inform the company’s strategic planning and business initiatives going forward. P18 CLIENT CORNER: DATA TRANSPARENCY EMPOWERING ONLINE REAL ESTATE TRANSACTIONS
Buy or Rent in 2017?
More Affordable to Buy or Rent?
P20 DATA IN ACTION
Despite rapidly rising home prices, it’s still better to buy than rent in 58 percent of 540 county-level housing markets – although that equation could be changing quickly as interest rates rise. Detailed rent, home price and wage data used to determine the buy-or- rent calculation are provided in a table for the top 20 counties where it’s still better to buy than to rent, and an interactive heat map provides similar data for the remainder of the counties analyzed.
Out With the Old Distress, In With the New Foreclosure Normal
BY DAREN BLOMQUIST, EXECUTIVE EDITOR
EDITOR’S NOTE: This is part one of a two-part series investigating the distressed market for 2017.
Luana Malavolta laments the vicious cycle of deferred distress weighing down the Bronx housing market where she works as a real estate broker.
“I have 20 buyers sending me the same frigging house that really isn’t for sale,” she said, referring to pre-foreclosures that have been lingering in distress for years without finishing foreclosure or listed for sale. “It begins with the banks,
and it begins with the pre-foreclosures. … No one’s evicting the person who is squatting in their own house.” New York properties foreclosed in the fourth quarter of 2016 had been in the foreclosure process an average of 1,283 days — 3.5 years — the third longest of any state behind Utah and New Jersey, according to the ATTOM Data Solutions 2016 Year-End Foreclosure Market Report. Biggest Backlogs of Distress The report also shows that as of the end of the year, 31,838 loans actively in foreclosure in New York were originated between 2004 and 2008, the second biggest backlog of bad loans tied to the last housing bubble of any state and representing 56 percent of all loans actively in foreclosure in New York.
Biggest Backlogs of Legacy Foreclosures Click on map to view interactive nationwide heat map
2004 to 2008 Share of Total Loans in Foreclosure 25% 76%
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an associate broker with EXIT Realty Search in the Bronx. “I feel it is because the financial institutions do not move fast enough on foreclosures and short sales, letting the properties stay in distress much longer. The longer the property is in distress, the less marketable it is for first time homebuyers utilizing mortgage products.” Predators More Aggressive That leaves the local distressed market largely to cash buyers who are willing to purchase in cash at the foreclosure auction or directly from the distressed homeowner — in some cases taking advantage of that owner while making a hefty profit, according to Malavolta, a buyer’s agent with the Neighborhood Assistance Corporation of America (NACA). “The predators are getting more and more aggressive,” said Malavolta, describing the predators as those who target homeowners in default and offer them in the ballpark of $10,000 to $20,000 to sign over the deed, enough to “go to Florida. … They give them cash and they have them sign the deed over. A shady lawyer is involved as well. Now they have access to the house … the bank doesn’t even know. “The cash buyer purchases (the property) and barely cleans it and puts it back on the market at a tremendous markup,” Malavolta continued. “Because inventory is so low you have fewer people buying, but at higher prices.”
Nassau County, New York, in Long Island posted the biggest total among counties nationwide with 8,632 bubble-era loans in foreclosure, representing 74 percent of all loans actively in foreclosure. Five other counties in the New York metro area were in the top 20 for biggest backlogs of bad bubble-era loans: Kings (Brooklyn) at No. 3; Suffolk (Long Island) at No. 6; Westchester at No. 10; Richmond (Staten Island) at No. 17; and Bronx, where Malavolta works,
at No. 18 with 3,492 bubble-era loans in foreclosure, representing 65 percent of all loans actively in foreclosure. Malavolta believes the lengthy foreclosure timeline in New York results in more highly distressed foreclosure properties that become more difficult to sell when they do finally hit the market for sale. “There is less and less inventory coming on the market that is purchasable for mortgage products,” said Malavolta,
No one’s evicting the person who is squatting in their own house. … The longer the property is in distress, the less marketable it is for first time homebuyers utilizing mortgage products.”
Luana Malavolta | Associate broker, EXIT Realty Search, Bronx, New York
The Thousand-Day Foreclosure Club Avg Days to Complete Foreclosure in Q4 2016
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All-cash buyers represented 41 percent of all residential property purchases in New York in 2016, the third highest share of any state behind Hawaii (49 percent) and Florida (44 percent), according to the ATTOM Data Solutions Year-End 2016 Home Sales Report. That was well above the national average of 28 percent and an increase from 39 percent of all sales in 2015 — counter to the national downward trend in share of cash sales. The share of cash buyers in the Bronx in 2016 was 39 percent, down slightly from 40 percent in 2015 but still well above the national average. New York’s share of distressed sales also increased in 2016, counter to the national trend — 15.9 percent of all residential property sales in the state during the year were sales of bank- owned homes, sales at the public
foreclosure auction or short sales — up from 13.2 percent in 2015 and up from 11.4 percent in 2014. In the Bronx, distressed sales accounted for 23 percent of all residential property sales in 2016, down slightly from the previous year but still well above the state and national averages. National Foreclosures at 10-Year Low While New York and a handful of other states continue to struggle through a logjam of deferred distress still lingering from the last housing downturn, the distressed market is returning to normal in most parts of the country. Nationwide a total of 933,045 U.S. properties received a foreclosure filing in 2016, down 14 percent from 2015 to the lowest level since 2006, when
there were 717,522 U.S. properties with foreclosure filings.
While bank repossessions are still elevated above pre-recession levels, foreclosure starts – a leading indicator in the distressed market – were down to the lowest level since ATTOM Data Solutions (formerly RealtyTrac) began tracking in 2006. A total of 478,857 U.S. properties started the foreclosure process in 2016, down 16 percent from 2015 and down 78 percent from the peak of 2,139,005 foreclosure starts in 2009. Light at End of Tunnel Even in states still struggling through a foreclosure backlog, there is evidence of light at the end of the tunnel. In New Jersey, which posted the nation’s highest state foreclosure rate in 2016, foreclosure
States with Highest Share of Cash Sales 2016 2015
39.0% 37.1% 37.0% 36.3% 36.2%
0% Hawaii Florida New York New Jersey Alabama Tennessee Michigan North Carolina Oklahoma Pennsylvania
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starts have turned a corner and have decreased on a year-over-year basis in 11 of the last 12 months, according to ATTOM Data. For all of 2016, foreclosure starts in New Jersey decreased 20 percent. “I would tell you that the volumes are starting to get back to 2006, 2007 levels on the front end,” said Ed Kirn, partner with the Powers Kirn law firm, which specializes in foreclosure in New Jersey and Pennsylvania. “We are seeing the light at the end of the tunnel. The backlog is in the back-end of the house. The sheriff’s sales particularly.” ATTOM data shows the number of properties scheduled for sheriff’s sales in New Jersey increased 14 percent in 2016 compared to 2015, while completed foreclosures that were repossessed by the foreclosing lender (REO) increased 4 percent. “(Our) REO department is really busy now moving a lot of these assets for the lenders,” said Kirn, noting that the lag between when his firm has filed a writ to foreclose and when the property actually goes to sheriff’s sale is starting to compress. “We’re starting to see those times decrease and get somewhat back to normal timeframes. That tells me that the glut has eased up a bit … things are starting to normalize.” Still, Kirn continues to see evidence that the backlog is still being worked through by the banks.
now, some of them have been in as long as five years,” he said. “I have 2010, 2011, 2012 referrals that are finally hitting the sheriff’s sale. So they truly are the backlog cases.” High Property Taxes Hobbling Recovery Kirn noted that despite a general trend upward in home values and prices over the past few years, banks are still often taking a haircut on the legacy foreclosures finally being completed.
… but on some of these REOs the banks are taking a hit. That’s just because these loans have been in default for so long,” said Kirn, noting that unpaid property taxes are a big part of the losses typically realized by banks. “When the property has been in default for five years, that number really explodes.” The average property tax owed on single family homes and condos in New Jersey in 2016 was $8,477, the highest of any state, followed by New York ($6,127), Connecticut ($5,839), New Hampshire
“We’re seeing home prices in general rebound pretty healthily in New Jersey
The ones that are going to REO right now, some of them have been in as long as five years. I have 2010, 2011, 2012 referrals that are finally hitting the sheriff’s sale. So they truly are the backlog cases.”
Ed Kirn | Partner at Powers Kirm law firm Moorestwon, New Jersey
New Jersey Foreclosure Starts Down, Completions Up Foreclosure Starts Scheduled Foreclosure Auctions Bank Repossessions (REO)
“The ones that are going to REO right
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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States with Highest Property Taxes Avg Annual Residential Property Taxes
Property Tax Rate
($5,478) and the District of Columbia ($5,124), according to ATTOM Data Solutions tax assessor data. New Jersey also ranks top among the states in terms of property tax rate — average property taxes as a percent of average property values. The property tax rate in New Jersey in 2016 was 2.31 percent, more than twice the national average of 0.94 percent. High property taxes in New Jersey are not only making it more difficult to liquidate distressed properties, they are hobbling the state’s home price recovery, according to Rob Lyszczarz, president of RE/MAX Properties Unlimited, which has offices in Union, Morris and Bergen counties. “With the higher property tax piece, it really creates a lid on where the property values can go,” said Lyszczarz, who said
he recently analyzed year-end home sales numbers and was somewhat surprised to find that four of the five multiple listing services (MLSs) that cover markets where his brokerage does business posted year-over-year declines in home prices in 2016. “I would have guessed that we would have seen 2 to 3 percent increases as opposed to decreases. … If you don’t step back and analyze the data, your instinct can be incorrect.” Strong Sales, Sluggish Appreciation Statewide in New Jersey, single family homes and condos sold for a median price of $270,000 in 2016, exactly the same median price as in 2015, according to ATTOM sales deed data. Median home prices statewide have increased 5.1 percent over the past five years, but are still 16.9 percent below the pre-recession
peak of $325,000 in 2007. Meanwhile, median home prices nationwide in 2016 increased 6.8 percent from a year ago, are up 45.0 percent from five years ago and are just 0.4 percent below the pre- recession peak in 2006. ATTOM data shows 11 of 15 (73 percent) New Jersey counties analyzed in its 2016 year-end home sales report posted year- over-year declines in median home prices for the year, including Essex (down 12.7 percent); Atlantic (down 7.4 percent); Camden (down 5.0 percent); Morris (down 4.6 percent); and Middlesex (down 3.0 percent). While Lyszczarz chalks some of the price decline up to a higher share of lower- value distressed sales, he said some
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by demand from real estate investors, according to Lyszczarz as well as ATTOM owner-occupancy data, which shows that 35 percent of all single family homes purchased in New Jersey in 2016 were sold to non-owner occupants (investors) — the highest share in the last 20 years for which the data is available. This trend in rising real estate investor demand also shows up at the foreclosure auction, where 17.7 percent of homes sold at auction in New Jersey went to third party investors rather than back to the foreclosing lender — the highest share going to investors since 2006, according to ATTOM foreclosure deed data. Lyszczarz said his brokerage has worked with several large institutional investors purchasing investment properties over the past few years, but those investors are starting to divest their portfolios — a cause for some concern. “These are national, billion dollar hedge funds,” he said, explaining that the companies are approaching his brokerage to sell these properties on the regular retail market, not through portfolio sales to other investors. “I have no insight into the motivation behind it, but I do know that the trend was acquisition a few years ago; now the (trend) is divesting. … I’m not sure what they’re seeing in the market that’s causing them to do that.” Waiting for the Music to Stop More than 1,200 miles south in Cape Coral, Florida, real estate broker Marc Joseph,
Median Home Prices Now Versus Then 2015 2011 2006 2016
These are national, billion dollar hedge funds. I have no insight into the motivation behind it, but I do know that the trend was acquisition a few years ago; now the (trend) is divesting. … I’m not sure what they’re seeing in the market that’s causing them to do that.”
Rob Lyszczarz | President, RE/MAX Properties Unlimited Westfield, New Jersey
is also due to affordability constraints holding back home prices.
Still, home sales volume is on the increase in New Jersey, according to ATTOM data. Home sales through September (the latest month with complete data statewide) show the state is on track to hit a 10-year high in home sales volume for 2016, up 9 percent from 2015 following a 12 percent year-over- year increase in sales volume in 2015. Institutional Investors Divesting That rising sales volume combined with the doubling of agents in his brokerage over the past two years has been driven largely
“New Jersey is a state that is dealing with some significant challenges for homebuyers,” said Lyszczarz, whose brokerage has nearly doubled in size to 200 agents over the last two years despite the sluggish growth in home prices. “It all comes down to affordability. My lenders are telling me that the biggest issue they are having is first time homebuyers having too much student loan debt.”
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owner of Marc Joseph Realty, has similar concerns about the institutional investors who purchased single family rentals by the thousands in his market over the last seven years since the housing market hit bottom in 2007. “Those hedge funds, they haven’t dumped them yet,” he said, noting that he anticipates those big investors will sell off their inventory at some point before the market returns to its pre- recession high of $317,000 as tracked by the local MLS. “They’re not going to go past 317. Why? They’ve already tripled their money.” Joseph said other buyers who bought during the downturn are starting to cash out, a trend that concerns him. “I’m watching someone triple their money … when I hear tripling their money and cashing out, at some point you run out of
chairs,” said Joseph, who gave an example of a recent client who had purchased two homes side by side at a bargain price during the downturn but was now selling. “The guy is 70 years old and just wants to take money off the table.” Joseph is concerned that another housing market correction could be coming given the rapidly rising home prices and renewed frenzy from out-of-town investors buying in Cape Coral, but he doesn’t anticipate it correcting as severely as it did during the Great Recession. “Honestly I don’t think I’m ever going to see that again. Now because things are so transparent, I don’t think we’ll see that amount of people displaced from their homes again,” said Joseph, who at one point during the last downturn was giving foreclosure bus and boat tours in Cape Coral, one of the epicenters of the foreclosure crisis. “(But) am I going to go
out and buy a house right now after being in business 25 years? Hell, I’m scared.”
Starving Foreclosure Market New risks emerging in the Cape Coral market such as rampant new construction, looser lending and lease options are what concern Joseph more than legacy distress. He said the backlog of bad loans from the last housing boom have mostly been cleared out in his market, dropping from as high as 22,000 foreclosure cases in the Lee County court system down to 827 at the beginning of 2017. “That’s a lot of inventory to smoke through,” he said. “If you’re still trying to sell foreclosures now, you’re probably going to starve. It’s changed that much.” Statewide in Florida a total of 131,889 properties had foreclosure filings in 2016, down 37 percent from 2015 to the lowest
Florida Foreclosure Starts & Completions Down Foreclosure Starts Scheduled Foreclosure Auctions
If you’re still trying to sell foreclosures now, you’re probably going to starve. It’s changed that much.”
Bank Repossessions (REO)
Marc Joseph Broker/owner, Marc Joseph Realty, Cape Coral, Florida
0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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Share of Distressed Sales Falling ... And Rising 2015 2016 2014
Every time we turned around there was another opinion that came out that changed the way we did things. Nobody wanted to get sued for filing a case in violation of statute of limitations.”
Andrea Tromberg Managing partner, Gladstone Law Group, Boca Raton, Florida
level since 2006, according to ATTOM foreclosure activity data.
2016, the Florida Supreme Court issued a similar decision in the “Bartram v. U.S. Bank National Association” case. Those rulings together have given foreclosing lenders the clarity needed to move forward with cases in limbo as a result of uncertainty around how to apply the statute of limitations, according to Andrea Tromberg, managing partner at Gladstone Law Group, which represents lenders in foreclosure cases in Florida. “We almost saw a grinding halt because of some of the issues with statute of limitations,” said Tromberg, referring to the foreclosure case referrals her firm was receiving. “Now the banks have had some time to update their system, calculate the amounts due and (determine) how to breach these loans correctly based on the court rulings.
“Every time we turned around there was another opinion that came out that changed the way we did things,” she added. “Nobody wanted to get sued for filing a case in violation of statute of limitations … I think a lot clients wanted to hear from the Supreme Court to make sure.” The two court rulings provide banks with the “roadmap” they need to move forward with delayed cases, according to Tromberg, who predicted an increase in Florida foreclosure filings early in 2017 as a result. “Where we’re seeing the uptick is mostly in these files … maybe they got dismissed in the past for improper documents … then they go to re-file and they have a statute of limitation issue,” Tromberg
But two court cases decided in favor of foreclosing lenders in 2016 could result in at least a short-term resurgence in foreclosure activity in 2017, according to experts. Both decisions revolved around how to apply the five-year statute of limitations on foreclosure cases in Florida. Florida Foreclosure Uptick Expected In April 2016, Florida’s Third District Court of Appeal reversed a previous decision it had made in the “Deutsche Bank Trust Co. Americas v. Beauvais” case, finding that a foreclosing lender could re-file a previously dismissed foreclosure case against a borrower even more than five years after the previously dismissed case was originally filed. Then in November
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explained. “So we had to wait all of 2016. Now we have the answers, and it took a little time after the opinions came through because it took a little while to adjust (foreclosure filing procedures).” End of Road for Foreclosure Holdouts Tromberg also noted that another court ruling late last year is helping banks push through foreclosures delayed by bankruptcy proceedings. In “Failla v. CitiBank, N.A. “, the Eleventh Circuit Court of Appeals in Florida ruled in October 2016 that “chapter 7 debtors who file a statement of intention to surrender
real property in bankruptcy cannot later contest a foreclosure action,” according to the Burr Foreman legal blog. “That has really helped us in cases that were highly contested to get all of the defenses stricken,” Tromberg said. Kirn, the foreclosure attorney in New Jersey, said he’s also seeing more foreclosure cases previously stalled by bankruptcy now progressing to the foreclosure sale, which provides closure to a protracted process.
“People will stay in them until the sheriff’s sale, but when the sheriff’s sale happens they realize that it’s the end of the road and they will vacate,” Kirn said, adding that he believes the loosening logjam of legacy foreclosures will ultimately be good for the overall housing market in New Jersey. “As we get through the sheriff’s sales and the backlog, it will be the beginning of a recovery period for our housing market. …Urban blight is going to decrease. Zombie properties are going to decrease … it’s better for everybody.”
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Finally: Demographic Clarity
Busy real estate executives need people to get to the conclusions, so here you go. We spent more than 9,000 hours researching demographic shifts, and believe the greatest demographic opportunities over the next 10 years will be: 1. 38 percent more people over the age of 65. Most of growth in the population 65 or older – which will reach 66 million people by 2025 – will be young Baby Boomers born in the 1950s. They are 7 percent more likely to work than their predecessors, which means 25 percent will be working full-time. Demand for higher-density, lower-maintenance living has already surged, and we coined a term called
“surban” to describe urban living in suburban environments. These active retirees will keep their cars, but don’t want to spend much time in them, and they want to be near their kids. More than ever, we expect they will be providing down payments to the kids too, in order to keep the kids living nearby. 2. 8 million more working women. Women now earn 58 percent of all college degrees, and now earn more than their spouse or partner 38 percent of the time – a stat that has been rising 0.4 percent per year. Men and women, particularly those born
John founded John Burns Real Estate Consulting, a firm with 17 U.S. offices that helps executives make informed housing industry investment decisions through their research membership and consulting services. John also co-authored Big Shifts Ahead: Demographic Clarity for Businesses , a book written to help make demographic trends easier to understand, quantify, and anticipate. 490,000+ people follow John’s LinkedIn Influencer column, 30,000+ subscribe to his emails, and the media cited the firm 400+ times in 2015.
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EVERY DECADE SINCE THE 1940s HAS 40–44 MILLION PEOPLE LIVING IN AMERICA FIGURE 1.1 2015 Population by Year Born EVERY DECADE SINCE THE 1940S HAS 40-44 MILLION PEOPLE LIVING IN AMERICA 2015 Population by Year Born
US Born Foreign Born
40 MILLION (56–65)
27 MILLION (66–75)
44 MILLION (26–35)
44 MILLION (16–25)
14 MILLION (76–85)
41 MILLION (36–45)
43 MILLION (46–55)
41 MILLION (6–15)
Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau 2014 National Projections
Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau 2014 National Projections
in the 1970s, are willing to trade a large house for a home closer to work so they can be near their kids. While the percentage of 20- to 64-year-old women choosing to work has fallen 3 percent since 2001, the percentage of men has fallen 5 percent. The real estate needs of these 78 million women will vary. The one common thread will be how busy they are. 3. 8 million increasingly affluent immigrants. Clearly, elected officials can affect this dramatically. For example, three immigration laws in the 1980s gave rise to more immigration over the subsequent 20 years than
the prior 60 years. However, today’s immigrant tends to arrive on an airplane from China, Brazil and other countries where the economies have been booming. While most expect some slowing in those economies, the pent-up demand to move to the U.S. remains large. 4. 25.8 million newly formed households , 13.3 million of which will move to a household abandoned by someone who passes away or moves into an assisted living facility. The net gain will be 12.5 million households, which is an 86 percent increase over the paltry growth from 2005 to 2010.
The record number of people passing away has been one big reason that net household formation has been slow. Nonetheless, these 25.8 million want to live differently than prior generations, and will fill their homes up with all sorts of technology. While more people than usual have been living urban too, three times as many live suburban. 5. 62 percent of the growth heading south , where 42 percent of America currently lives. Plenty of jobs, affordable housing and warm weather will make Texas, Arizona, Nevada, Florida, Georgia, North
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HOUSEHOLD GROWTH BY DECADE FIGURE 7.2 Household Growth by Decade (Millions) HOUSEHOLD GROWTH BY DECADE (MILLIONS)
Carolina and surrounding states the growth engine.
6. Renting, which will take market share. Eighty percent of the tremendous number of people passing away own their home, making it very difficult to prevent homeownership from falling. With mortgage interest and property taxes on most homes already less than the standard deduction, the tax benefits of homeownership have been greatly reduced. The foreclosure scars of the last recession haven’t faded either. People want to own their own home but, more than ever, are going to proceed more cautiously, waiting until they are confident in their job and savings before taking on a mortgage. Our best estimate is that homeownership will fall to 60.8 percent in 2025. These are just some of the highlights from a book Chris Porter and I just published called Big Shifts Ahead: Demographic Clarity for Businesses . It comes with 100 color charts and 2 tools for making demographic analysis much easier: 1. Define each generation by decade born . Every generation will be 10 years long. The math will be easy – those born in 1980 turn 37 this year. The generations will have far more in common than current generational definitions that can be up to 20 years long. It will make it easier for you to
YEAR Source: John Burns Real Estate Consulting, LLC based on US Census Bureau data. Note: colors based on generation in their 20s. Source: John Burns Real Estate Consulting, LLC based on US Census Bureau data. Note: colors based on generation in their 20s.
FORECASTING 5.2 MILLION MORE HOMEOWNERS BY 2025 FIGURE 8.4 Homeowner Growth by Generation (Millions), 2016–2025 FORECASTING 5.2 MILLION MORE HOMEOWNERS BY 2025 Homeowner Growth by Generation (Millions), 2016-2025
1950s Innovators 1940s Achievers 1930s Savers Pre- 1930s
1990s Connectors 1980s Sharers 1970s Balancers 1960s Equalers
HOMEOWNER GROWTH (MILLIONS)
Source: John Burns Real Estate Consulting, LLC
Source: John Burns Real Estate Consulting,
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understand their backgrounds and attitudes, something we summarized in the book. We gave each generation a name based on the shift they led in society:
• government policies, • economic cycles, • new technologies, and • societal shifts.
We live in an exciting time when American businesses can capitalize on rapidly changing demographics. These changes will impact the type of homes, offices, retail and storage spaces America needs, and where America needs them. Group the generations by decade born, and use the 4-5-6 framework to make decisions more easily.
We noted how each policy, cycle, technology or societal shift affected groups differently, depending on where they were in five life stages we describe. This framework will also help you adjust your strategy when one of the big four influencers (government policy, economic cycles, technologies, and societal shifts) changes unexpectedly. By doing this, you will better be able to answer the six who, what, when, where, why and how questions you are asking about your business.
• 1930s Savers • 1940 Achievers • 1950s Innovators • 1960s Equalers • 1970s Balancers • 1980s Sharers • 1990s Connectors • 2000s Globals
2. Apply the 4-5-6 Rule. We grouped all of the external factors that influence demographic behavior into four main categories:
FIGURE 2.1 Generational Clarity
GENERATIONAL CLARITY GENERATIONAL CLARITY
BABY BOOMERS GENERATION X MILLENNIALS
LATE Still working
No Internet in grade school EARLY
LATE Always had Internet
Traditional Definitions Traditional Definitions 19+/- years in length
Have no/ little home equity
Have plenty of home equity
New Definitions by decade born
ACHIEVERS INNOVATORS EQUALERS BALANCERS SHARERS CONNECTORS 1940s 1950s 1960s 1970s 1980s 1990s
L IFE STAGES
9% 21% 39% 9% 22% 38% 13% 35% 14%
8% 25% 67%
Young Singles (≤ 45) Young Childless Couples (≤ 45) Young Families (Oldest Kid ≤ 9) Mature Families (Oldest Kid 10-18) Mature Couples and Singles * Retirement Age
4% 25% 71%
1% 13% 86%
100% 100% 100% 100% 100% 100% 100%
*Household head is either 46–65 or has an adult child living with them. 2014 data rolled forward to 2015. Note: percentages less than 1% have been left out, and rounding adjustments were made to total to 100%
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Existing Home Sales in January Jump to Fastest Pace in a Decade
Existing homes sold at an annualized pace of 5.69 million in January, up from 5.51 million in December and up from 3.8 percent from a year ago to the fastest pace since February 2007, according to the National Association of Realtors. The increase occurred despite a recent rise in interest rates. According to the Freddie Mac Primary Market Mortgage Survey, the average interest rate for a 30-year fixed rate mortgage stood at 4.16 percent for the week ending Feb. 23, 2017, up from 3.62 percent a year ago in the week ending Feb. 25, 2016. “Much of the country saw robust sales activity last month as strong hiring and improved consumer confidence at the end of last year appear to have sparked considerable interest in buying a home,” said Lawrence Yun, NAR chief economist, in a statement released with the numbers. “Market challenges remain, but the housing market is off to a prosperous start as homebuyers staved off inventory levels that are far from adequate and deteriorating affordability conditions.” The report also shows median existing home prices continuing to increase at a strong pace, up 7.1 percent from a year ago to $228,900. January 2017 marked the 59th consecutive month where median home prices have increased on a year-over-year basis, according to NAR. The strong pace of sales cut into already low inventory levels of homes for sale, which dropped to 1.69 million, down 7.1 percent from a year ago and represents a 3.6-month supply.
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CFPB Given Another Day in Court to Defend Its Constitutionality The Consumer Financial Protection Bureau (CFPB) has a second chance to defend its constitutionality thanks to a recent federal court ruling. According to HousingWire, the U.S. Court of Appeals for the District of Columbia Circuit ruled Feb. 16 that the bureau could re-present its defense of its constitutionality to the full court in May. A panel of three judges from the court had ruled the structure of the bureau was unconstitutional by a vote of 2-1 in October last year. That ruling came from a case in which mortgage lender PHH fought against a $103 million fine the CFPB levied against it back in June 2015 for “illegally referring consumers to mortgage insurers in exchange for kickbacks,” according a HousingWire article. In the process of reviewing the case disputing the fine, the U.S. Court of Appeals for the District of Columbia Circuit found that the leadership structure of the CFPB was unconstitutional. But that decision was not made by the entire court, but instead by just a three-judge panel. The decision Feb. 16 to review the case again was made by the entire court, and the review itself will also be heard by the entire 10-judge court. The core issue regarding the constitutionality of the CFPB revolves around the constitutionality of whether the single- director structure at the CFPB is consistent with the U.S. constitution, and that is one of the issues the court has asked both the CFPB and PHH to address when it re-hears the case in May, according to an American Banker article. That single-director structure played prominently in the PHH decision as CFPB Director Richard Cordray in that case overruled a $6.4 million fine initially levied against PHH by an administrative law judge working for the Securities and Exchange Commission with the $109 million fine in his decision on the case.
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BIG DATA SANDBOX
ATTOM Data Solutions analyzed more than 50 million single family and condos sales over the past 16 years and found that February is the best month for home-buying bargains. Homes purchased in February sold at a price per square foot that was 6.1 percent less than the rest of the year on average — the biggest discount of any month of the year. And the top five days that offer the biggest discount all fall in February.
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Data Transparency Empowering Online Real Estate Transactions
Rick Sharga , Chief Marketing Officer, Ten-X
What is your elevator pitch for Ten-X? “Ten-X owns and operates three online real estate marketplaces: Auction.com, the largest, most trusted marketplace for REO and foreclosure properties; Ten-X Commercial, a national platform where brokers and investors buy and sell commercial properties; and Ten-X Homes, the first online transaction platform for consumers and agents. “The company has sold over $46 billion of residential and commercial properties since 2007 – over 250,000 properties. “
How do you and your customers utilize ATTOM Data? “Ten-X uses ATTOM data two ways — for internal analytics, and to improve the experience of customers looking to buy properties. “On the analytics side, the data is used to help determine market trends, estimated property values, sales forecasting and foreclosure activity and inventory. “On the customer side, we’re about to release a new version of our Auction. com site which integrates a large amount
of ATTOM data into our property details pages, providing buyers with the kind of information they need to make an informed decision. “As we build out our Ten-X Homes website, we’ll be incorporating ATTOM data into property pages, and other areas of the site where consumers and their real estate agents will be doing research on homes, neighborhoods and cities prior to buying or selling a home.” Why did you decide to use ATTOM Data? “We were buying residential real estatedata from a number of providers, and wanted to centralize our purchasing with one partner who could provide us with a wide variety of housing related data — sales, pricing, property characteristics, foreclosure activity, neighborhood information, etc. — in an integrated manner.
Having access to the full suite of data products available from ATTOM has helped us develop a more comprehensive approach to our business development efforts; helped us provide insights and guidance for our clients who are institutional sellers, and provided rich market information that’s helped us do strategic planning around markets and future business initiatives.”
“ATTOM (then known as RealtyTrac) stood out amongst its competitors as
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What has been your experience with data delivery, quality and customer service? “We’ve had a great relationship with ATTOM, and feel like we’re treated as a preferred client. This started early on in our partnership, when ATTOM responded to our initial inquiries about data delivery and quality. “When we first started working with the data, we had a number of questions and issues, and couldn’t determine if the data was of a high enough quality to meet our needs. In fact, we believed it wasn’t and told this to CEO Rob Barber and his team. “In response, ATTOM assembled a team of engineers, including their Chief Data Officer, and visited our site for an all-day summit. They walked us through the data and identified several instances where we hadn’t properly configured the data on our end, which is what had caused poor quality results. After implementing some of ATTOM’s recommendations, we saw significant improvements in our processes and in the quality of the data itself. “ATTOM also hosts a weekly call for us to ensure that any questions about the data are addressed promptly. If there is ever a delay in our data delivery, we hear about it quickly. Any time that we have a need to do so, we can reach out to ATTOM and expect a quick response to our inquiry. They are a valued partner.”
... in order to keep pace with customer demands, we recognized that we needed to improve the buyer experience, and believe that incorporating ATTOM data into the consumer journey on our sites will make an enormous difference. So far, consumer testing has had very positive results.”
having the breadth and depth of data we wanted, the flexibility to allow us to use the data in ways that met our specific business needs, and a pricing model that enabled us to reduce our overall spending compared to the piecemeal approach we’d previously been using.” How is the marketplace responding to Ten-X products and services? “2016 was a record year for Ten-X, and we’re forecasting a bigger year in 2017. Having access to the full suite of data products available from ATTOM has helped us develop a more comprehensive approach to our business development efforts; helped us provide
insights and guidance for our clients who are institutional sellers, and provided rich market information that’s helped us do strategic planning around markets and future business initiatives. “We had record sales this year, and are visited by almost 2 million prospective buyers every month. But in order to keep pace with customer demands, we recognized that we needed to improve the buyer experience, and believe that incorporating ATTOM data into the consumer journey on our sites will make an enormous difference. So far, consumer testing has had very positive results.”
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BETTER TO BUY OR RENT IN 2017 Top 20 Markets that are Better to Buy
2017 3-Bed Fair Market Rent
Annual Pct Change in Rent
Pct of Avg Wages to Rent
2016 YTD Median Home Price
Annual Pct Change in Home Price
Monthly House Payment
Pct of Avg Wages to Buy
More Afford- able to Buy or Rent?
Miami-Fort Lauderdale-West Palm Beach, FL
California San Bernardino Riverside-San Bernardino-Ontario, CA $1,682
Las Vegas-Henderson-Paradise, NV
Dallas-Fort Worth-Arlington, TX
Miami-Fort Lauderdale-West Palm Beach, FL
San Antonio-New Braunfels, TX
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD New York-Newark-Jersey City, NY- NJ-PA Miami-Fort Lauderdale-West Palm Beach, FL
Hillsborough Tampa-St. Petersburg-Clearwater, FL
Minneapolis-St. Paul-Bloomington, MN-WI
Contra Costa San Francisco-Oakland-Hayward, CA $3,251
St. Louis, MO-IL
BUY OR RENT IN 2017? More Affordable to Buy or Rent? BUY
Click on map to view interactive nationwide heat map
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