Housing Risk #3. Rising Homeownership Tenure
Everyone is taking more and more risk. The core has done extremely well, but it’s the core.… People are starting to move out.”
U.S. homeowners who sold in the second quarter of 2017 had owned an average of 8.05 years, a record high going back as far as data is available, Q1 2000, according to ATTOM Data Solutions. Longer homeownership tenure translates into fewer move-up sales and less inventory for first-time homebuyers. “Existing homeowners,” said Mark Fleming, Chief Economist with First American, a provider of title and settlement services, “are increasingly financially imprisoned in their own home by their historically low mortgage rate. It makes choosing a kitchen renovation seem more appealing than moving.” The Bubble Danger: If owners are less inclined to sell that means fewer units will be available for purchase, there will be less supply, and a good reason for prices to rise. As mortgage rates go up the importance of preserving legacy financing at 4 percent or less will become more significant, thus keeping additional homes off the market.
CHRIS RICHTER CEO, AUDANTIC REAL ESTATE ANALYTICS
quarter and down from a 7.1 percent annual increase in Q2 2016.
We’re not buying any big properties, anything close to a million and trying to flip those … we couldn’t cash flow that,” Southern California investor Brett Chotkevys told Housing News Report in March. Chotkevys is co-owner of Helpful Home Solution, which he said flips about 75 properties a year all across Southern California. “If I was doing a couple flips a year I wouldn’t worry about it. But when you are doing 20 at a time … it’s more of a risk management. …I don’t think it’s going
to drop, but nonetheless I want to have a backup plan on all my properties.”
Less Optimism on the Frontlines But some real estate investors on the frontlines of the Los Angeles housing market are hedging against a market correction they believe is almost inevitable given the cyclical nature of real estate in the region.
A somewhat similar sentiment was expressed by veteran Seattle real estate investor Chris Richter, who also runs real estate data and analytics firm Audantic, about what is arguably the nation’s hottest housing market — far and away the metro with the highest year-over-year increase in the June Case-Shiller index.
“With us being where we are in the cycle, and us being very near the top.
JULY 2017 | ATTOM DATA SOLUTIONS
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