Is a Recession Imminent? Industry Economists Share Predictions

December 27, 2019
 Market Reports

There’s been widespread news that the market is healthy. Job growth is up, unemployment is down and the real estate market is thriving, for now. An undercurrent of concern, however, may be keeping consumer confidence low, and that’s related to fears that another recession is imminent. Is that apprehension warranted?

The National Association of REALTORS® (NAR) answered that question and others in its first-ever Real Estate Forecast Summit on Dec. 11, featuring the insights and market forecasts of 16 economists.

“We’re excited to bring you unique perspectives of the real estate market; where it’s been and where it’s going,” said John Smaby, immediate past president of NAR, kicking off the summit. “There’s a lot of brainpower in this room. You’ll hear educated forecasts of tomorrow’s real estate market and hear from top economists on the top challenges and opportunities.”

While they all had varying opinions about the state of the market, and where we are headed, the biggest takeaway is that chances of another recession in the short-term are low, tallied at an average 29 percent chance by the economists.

“This time of year, I get the same question from our 1.4 million members: ‘What’s going to happen next year?’” said Lawrence Yun, PhD, NAR’s chief economist and senior vice president of Research. “I thought it would be good to assemble a group of economists to give their perspectives.”

Here’s what they had to say about today’s economy and real estate market:

“We are in a great economy,” said Yun, “and the job market data certainly reflects that. There is consistent job creation, leading to a super low unemployment rate of 3.6 percent in the U.S. The stock market is touching an all-time high, and homeowners have been accumulating wealth thanks to price appreciation.”

But there are segments of the population that are not participating in this wealth gain, said Yun.

“The younger buyer and African American homeownership rates are still struggling to gain traction,” said Yun. “We want to look into what could be the barriers or perhaps the housing conditions. We have more people, affordability conditions are better, yet home sales are actually lower, so something is not matching up with the current environment.”

Home values are increasing, but the growth is leveling out in certain price points, while others are a little livelier, reported multiple economists.

“We see a much higher increase at the low-end and it is far outstripping the wage increases at the entry-level,” said Edward Pinto, resident fellow, and director at the AEI Housing Center of the American Enterprise Institute.

For many places across the country, the home affordability gap is increasing because of this.

“The bad news is that house prices have been increasing much faster than household incomes,” said Kermit Baker, PhD, senior research fellow at the Joint Center for Housing Studies at Harvard University, who added that there is a lot of regional variation, and so metro areas along the Pacific Coast and Northeast corridor are where the home price-to-income ratio is not really sustainable.

Lack of inventory continues to be an obstacle, especially at the entry-level, affordable price points. Danushka Nanayakkara-Skillington, assistant vice president of Forecasting & Analysis for the National Association of Home Builders (NAHB), said one of the biggest issues is a lack of skilled labor in construction.

“There are 338,000 jobs open in construction, but we’re finding it really difficult to fill these jobs,” she said. “Many left the labor force for good after the Great Recession, and not many are now going into construction or to trade schools. The immigration platform has also choked off supply.”

According to NAR, there are markets, however, that are expected to outperform the challenged areas over the long term because of their housing affordability and local economic expansion:

  1. Charleston, S.C.
  2. Charlotte, N.C.
  3. Colorado Springs, Colo.
  4. Columbus, Ohio
  5. Dallas-Fort Worth, Texas
  6. Fort Collins, Colo.
  7. Las Vegas, Nev.
  8. Ogden, Utah
  9. Raleigh-Durham-Chapel Hill, N.C.
  10. Tampa-St. Petersburg, Fla.

“Potential buyers in these 10 markets will find conditions especially favorable to purchase a home going into the next decade,” said NAR President Vince Malta, broker at Malta & Co., Inc., in San Francisco, Calif. “The dream of owning a home appears even more attainable for those who move to or are currently living in these markets.”

According to Yun, economists agreed that these top 10 markets shared the following strengths:

  • Domestic migration into the area
  • Housing affordability for new residents
  • Consistent job growth outperforming the national average
  • Age structure of the population
  • Attractiveness for retirees
  • Home price appreciation

Moving forward, what can we expect of the market?

“We expect mortgage rates to tick up slightly, finishing up between 3.8 and 3.9 percent,” said Danielle Hale, chief economist at®. “We expect median home prices to move up slightly, which is surprising given the limited inventory in the market. We expect slight weakening in home sales, similar to what we saw in 2019, driven more by lack of supply than lack of demand.”

Hale also predicts millennials will make up half of all purchase mortgages in 2020, and that while there will be new opportunities for buyers from an increase in new construction, inventory levels will remain challenging depending on the price point. In higher price points, she said, there will be more availability.

“My opinion is that rates are going to stay on hold at least for the next year,” said James Chessen, PhD, executive vice president, and chief economist at the American Bankers Association, who believes there are five drivers of change: consumer health, which is strong; business sentiment, which is weak; trade—currently uncertain; global GDP, on slowdown; and fed rates, on hold.

“We’re expecting a considerably weaker U.S. economy in the next year, and that’s going to really be reflected at the start of 2020,” said Mike Fratantoni, PhD, chief economist and senior vice president of Research & Industry Technology at the Mortgage Bankers Association (MBA). “But it’s going to be something much milder. Think 2001—very slow growth, enough where the unemployment rate might come up a bit. We expect rising home sales, rising originations, and some additional supply coming onto the market.”

Yun agreed, stating that if we did go into a recession, “it would be a much shallower recession.”

The following predictions are averages based on the responses of all participating economists:

  • Mortgage rates will rise incrementally, possibly hitting 4 percent in 2021—still favorable according to historical conditions
  • 60,000 more housing starts in 2021
  • Slower price appreciation that is more manageable and more closely in line with income growth
  • Rents expected to rise a little faster than home prices

Overall, predictions for the future were relatively optimistic, with concerns over a recession low—a one in three chance.

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Recycle Your Holiday Tree in the Denver Metro Area

December 26, 2019
 Home Maintenance

A few weeks after the holidays end that Christmas tree that brightened up your living room and brought warm fuzzy feelings will turn into a scraggly menace that spews dry pine needles all over your carpet. Before your tree starts terrorizing your living room and ruining the fun holiday memories you made with it, you could recycle it with Denver’s annual treecycle program.

From January 6 to January 17, the city will be picking up trees to recycle. Here is how to participate:

Step 1: Make sure your tree is a real tree and not an artificial one. Artificial trees cannot be recycled.

Step 2: Remove all of the lights and ornaments and wrestle the tree out of the tree stand.

Step 3: Put the tree outside in your normal trash set-out location on your normal trash day before 7 a.m. Set it at least two feet away from other waste containers.

Step 4: Pick up some free mulch your tree helped make at the city’s annual compost sale in the spring.

If watching your tree slowly waste away through mid-January is some sort of annual tradition for you, you can still recycle your tree through Jan. 30 by dropping it off yourself at the Cherry Creek Recycling Drop-off (7352 E. Cherry Creek Drive South) or at the Havana Nursery (10450 Smith Road).

Outside the Denver area? Here are some other resources courtesy of Colorado Public Radio:

Arvada: The city will accept trees for recycling anytime through Jan. 19.
• Lake Arbor Lake Park, 6400 Pomona Drive
• Stenger Fields at West 58th Avenue and Oak Street

Aurora: The city offers three drop-off spots for tree recycling.
• Del Mar Park, 12000 E. Sixth Ave.
• Saddle Rock Golf Course, 21705 E. Arapahoe Road
• Olympic Park, 15501 E. Yale Ave.

Castle Rock: Drop-off trees any time through Jan. 31.
• Founders Park, 4671 Enderud Blvd.
• Metzler Ranch Community Park, 4175 Trail Boss Drive
• Paintbrush Park, 3492 Meadows Blvd.

Colorado Springs: The El Pomar Youth Sports Park offers seven locations to drop-off natural trees with a suggested donation of $5 that will go to area youth sports and service organizations, according to its website.

Dec. 28-29 and Jan. 4-5, 9:00 a.m. to 4:30 p.m. at the following locations:
• Baptist Road Trailhead, Baptist Road and Old Denver Highway
• Falcon Trailhead, SW of Woodmen Road and McLaughlin Road
• Cottonwood Creek Park, Dublin Boulevard and Montarbor Road
• Sky Sox Stadium, Barnes Road and Tutt Boulevard
• Rock Ledge Ranch, Gateway Road and 30th Street
• Memorial Park, Pikes Peak Avenue and Union Boulevard

Jan. 2-31, Weekdays 7:30 a.m. – 5 p.m., Saturdays 8 a.m. – 4 p.m. at this single location:
• 1755 E. Las Vegas St.

Denver: Set your trees out at least 2 feet away from your waste bins by 7 a.m. on your scheduled trash collection day between Jan. 6 and 17 and Denver will pick up your tree for free. Plus, you can come back in May and pick up free mulch made from your tree at the annual Mulch Giveaway & Compost Sale. In 2018, Denver collected over 21,500 trees for recycling.

You can also drop off your tree until Jan. 31:
• Cherry Creek Recycling Drop-Off, 7354 E. Cherry Creek Drive S.
• Tuesday – Friday: 10 a.m. – 5 p.m., Saturday: 9 a.m. – 3 p.m.
• Havana Nursery, 10450 Smith Road
• Monday – Friday: 8 a.m. – 2 p.m. Closed on weekends.

Douglas County: Drop-off trees any time through Jan. 31.
• Bayou Gulch, 4815 Fox Sparrow Road, Parker
• Challenger Regional Park, 17299 E. Lincoln Ave., Parker
• Fairgrounds Regional Park, 500 Fairgrounds Drive, Castle Rock
• Highland Heritage Regional Park, 9651 S. Quebec St.

Fort Collins: Live Christmas trees will be accepted at three locations. Be advised that fees may apply.
• Timberline Recycling Center, Hard to Recycle Materials Yard, 1903 S. Timberline Road
• Hageman Earth Cycle Inc., 3501 E. Prospect Ave.
• Larimer County Green Waste Program, 5887 S. Taft Hill Road

Greeley: Greeley and Weld County residents can recycle Christmas trees at the Greeley Organic Waste Center through Jan 31.
GROW Center, 1130 E 8th St.
10 a.m. – 4 p.m., Tuesday to Sunday

Highlands Ranch: Drop-off trees any time through Jan. 17.
• Dad Clark Park, 3385 Asterbrook Circle
• Redstone Park, 3280 Redstone Park Circle
• Toepfer Park, 9480 Venneford Ranch Road

Mesa County: The county will compost your tree. Drop trees off at the county landfill (3071 U.S. Highway 50). Open Tuesday through Saturday, 8 a.m. to 4:15 p.m.

Parker: Drop-off trees through Jan. 29.
• Salisbury Park (East paved parking lot), 12010 S. Motsenbocker Road, 6 a.m. to 11 p.m.

Vail: Public Works crews will pick up your tree for free through Jan. 31. The department says trees should be left whole and placed at the side of the road, not blocking the roadway. The trees are chipped and turned into mulch for the town’s summer landscaping program. Or drop off your tree: 8 a.m. to 5 p.m. Monday—Friday at the Public Works shops on Elkhorn Drive north of the Vail golf course.

Colorado’s Economy Will Grow Next Year, Just More Slowly

December 20, 2019Market Reports

Colorado will continue to add jobs in 2020, but at the slowest pace in almost a decade.

“No reason to panic,” said Richard Wobbekind, an economist at the University of Colorado Boulder and co-author of an annual economic forecast the university released Monday. Colorado, he said, will still be the envy of much of the nation in terms of job and GDP growth.

The CU forecast predicts 40,100 new Colorado jobs in 2020, which should keep the state in the top 10 nationally. But that’s well off the pace of just a couple of years ago — in 2018 for instance, Colorado added 64,900 jobs. 

The state labor market would grow faster if only there were the workers available to fill jobs. The unemployment rate in Colorado tied the record low in November at 2.6 percent. Wobbekind said the state’s employers are importing labor from other states, and pulling workers off the sidelines with high wages, but that can only go so far.

Despite the constrained labor market, Gross Domestic Product growth in Colorado will continue to outpace the nation through 2020.

“And the reason for that is we’re getting more productivity from the labor force,” Wobbekind said. Productivity is rising in part because employers have squeezed more from the workers they have. 

“Colorado is still outperforming,” said CU Boulder’s Brian Lewandowski, a co-author of the economic forecast. Looking across almost all industries in Colorado, “it’s pretty much across the board a net positive for the state.”

Lewandowski said only the information sector, which includes newspapers and broadcasters, is expected to see a decline in jobs in the next year. Another sector that could have a tough year is oil and gas. Lewandowski said the sector is full of risk.

“There’s uncertainty about oil commodity prices, there’s uncertainty in Colorado about regulation of the oil and gas sector,” particularly around new regulations like Senate Bill 19-181.

But the good news far outweighs the bad. Agriculture, after years of difficult times, had a good 2019, due to higher than expected beef and corn prices.

“And we think that’s going to continue on into 2020 as well,” said Wobbekind.

Economists also expect the construction industry to expand. Colorado’s population is forecast to rise by 49,000 in 2020, supporting the need for more residential construction. Meanwhile, large public works projects on I-70 and at Denver International Airport will continue for years to come.

Probably the best news for Colorado’s economy is that professional and business services, the state’s largest industry sector (think executives, lawyers, and engineers), is forecast to add 11,700 jobs. This is the highest-educated and best-paid sector. Growth in these jobs has a compound effect, the high wages spent on retail, real estate and restaurants add new jobs in all those sectors.

Looking nationally and globally, the economic storm clouds get darker. A trade war with China and other nations continues. The presidential election is less than a year away. And political uncertainty, as impeachment proceedings move through Congress, has businesses skittish. Surveys of Colorado businesses reveal increasing skepticism in the national and local economies.

And many are looking for any warning signs of a slowdown they can find in what is already the longest economic expansion in U.S. history. These expansions don’t last forever.

“All of the uncertainty that we have in the economy right now is contributing to this view that this is not only long in the cycle, but sort of the end of the cycle,” Wobbekind said.

Keep reading at CPR News.

This is the Best Day of the Year to Buy a House

December 12, 2019

The best days of the year to buy a home all fall in the month of December.

This is according to a new analysis released by ATTOM Data Solutions, a real estate data firm.

Buyers who close on a home purchase the day after Christmas—Dec. 26—will likely realize the biggest discounts below full market value compared with any other day of the year, according to the study of more than 23 million single-family home and condo sales over the past six years.

See Properties for Sale

“Closing on a home purchase the day after Christmas or on New Year’s Eve can be one of the most financially beneficial holiday-season gifts you can get,” says Todd Teta, chief product officer with ATTOM Data Solutions. “While lots of folks are shopping the day-after Christmas sales or getting ready to ring in the New Year, our data shows that buyers and investors are buying homes on those days at a discount. That’s a far cry from buying during June when they are likely paying about a 7 percent premium.”

ATTOM researchers pegged Dec. 26, Dec. 31, and Dec. 4, in that order, as the best days for homebuyers to grab the biggest discounts on their home sale.

The best month for buyers may differ regionally. The states that tend to see the biggest overall discounts below full market value in these corresponding months were Ohio (–7.4% in January); Michigan (–7.2% in February); Delaware (–6.3% in February); Tennessee (–6.2% in January); and New Jersey (–5.8% in December).

Search all homes for Sale in Colorado.

Student Loans are Making Millennials Think They Will be Renters for Life

West + Main Homes

It’s just this simple: Many millennials looking at the high cost of housing and their heavy student loan burden don’t believe they can afford to buy homes.

Apartment List surveyed more than 10,000 people between the ages of 23-38 across the nation for the online real estate company’s latest report on millennials and the housing market.

Like earlier generations, millennials want to buy, Apartment List found. But across the country, 70 percent of millennial renters who plan to do so one day say they are waiting because they can’t afford it now. Nationally, 12.3 percent of millennial renters said they never expect to buy, up from 10.7 percent a year ago. Of those who plan never to buy, 69 percent said it’s because they can’t afford to.

In metro Denver, Apartment List found 12 percent of millennial renters expected to remain tenants for life. Of those in the Denver area who do expect to one day purchase a home, nearly half have yet to start saving for a down payment. Just 20 percent of Denver’s millennial renters will be ready to put down 10 percent on a median-priced starter home in the next five years, Apartment List calculated.

Apartment List found that nationally 57 percent of college-educated millennials were still paying off student loans. Their peers lucky enough to be free of such debt were the most likely to have saved for a down payment on a home and averaged more than twice the total savings of those who were debt-burdened. Apartment List found a wider gap between those with and without student debt than between those with and without a college degree.

If student loan debt payments among metro Denver millennials were instead put towards savings, Apartment List estimates the percentage of renters here who would be ready to buy a home would rise from 20 percent to 29 percent.

Apartment List researcher Rob Warnock described millennials as responding to “the collapse of the housing market, quick growth in the cost of housing, and worsening income inequality.”

“By the time millennials were old enough to want to buy a home, many were skeptical they could afford to do so,” Warnock wrote. “This economic uncertainty-characterized by relatively low homeownership rates, delayed marriages, and smaller families-has become a central tenet of the millennial identity.”

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2019 Millennial Homeownership Report: More Millennials Are Preparing For A Life of Renting

By Rob Warnock
 November 19, 2019
  • Nationally, 12.3 percent of millennial renters say they plan to “always rent,” up from 10.7 percent just one year ago.
  • Some millennials recognize the potential lifestyle and financial benefits of renting, but for the most part, the single biggest factor is a lack of affordability in the rental market.
  • The down payment is, for many, the largest expense and biggest financial obstacle to homeownership. But some groups—particularly minority black and hispanic millennials—say that bad credit is a greater barrier.
  • Despite the overwhelming support for homeownership, nearly half of millennial renters have no down payment savings. Some are expecting financial support from their families, but compared to last year, that level of support is declining.
  • Student debt remains another major barrier to homeownership. Debt-free millennials are saving roughly $100 more each month compared to those who are still paying off college loans. When it comes to saving for a home, there is a wider gap between those with and without student debt than between those with and without a college degree.
  • We estimate that at current savings rates, only 25 percent of millennial renters will be able to afford a 10 percent down payment on a median-priced home in the next 5 years. If student debt obligations were dismissed, this would improve to 38 percent nationally, and more than 50 percent in some metropolitan areas like Minneapolis and Houston.

Introduction: Millennials & Housing

Millennials have a uniquely frustrating relationship with the housing market. When baby boomers and gen X hit their thirtieth birthdays, rapid construction and suburbanization were proliferating relatively affordable housing options. For most of the 20th century, purchasing a home was central to the American Dream. But millennials came of age in a very different climate. As young adults, the economy was characterized by the collapse of the housing market, quick growth in the cost of housing, and worsening income inequality. By the time millennials were old enough to want to buy a home, many were skeptical they could afford to do so. This economic uncertainty—characterized by relatively low homeownership rates, delayed marriages, and smaller families—has become a central tenet of the millennial identity.

The vast majority of millennials want to own a home, but millennial homeownership rates have significantly lagged previous generations. To better understand this discrepancy, Apartment List has been surveying millennials for the past five years (see our previous reports on the subject here and here).1 In our survey, we ask renters to describe their homeownership goals and the tangible factors influencing their ability to purchase their first home. This year we received responses from over 10,000 millennial renters across America. Several notable themes emerged. The share of millennials who plan to rent forever is on the rise. Even among those who expect to purchase a home in the future, nearly half have saved nothing for a down payment. Affordability concerns appear to overpower lifestyle preferences. And the enduring effects of student loan debt and a decline in family support are keeping homeownership out of reach for many millennial renters.

The majority of millennials still want to own a home, but the percentage is shrinking

In 2019, 12.3 percent of millennial renters said they plan to “always rent,” up from 10.7 percent just one year ago. Homeownership plans vary widely by geography. In five metropolitan areas—San Jose, Detroit, St. Louis, San Francisco, and Portland—more than 15 percent of millennial renters plan to always rent. In Atlanta and Dallas, the share is less than 10 percent. Unsurprisingly, rates are also high in expensive coastal cities like New York and Los Angeles, as well as other major metropolitan areas throughout California, a state characterized by its high housing costs.

Across renter demographics, black millennials stand out as disproportionately likely to expect to buy a home. Plans for homeownership are quite similar for most racial groups; between 12 and 13 percent of millennials who identify as white, asian, hispanic, or multi-racial expect to always rent. Only 8.7 percent of black millennials, however, responded this way.

Affordability remains the biggest obstacle for millenials who want to own a home

As millennials rent later in life, many are embracing the lifestyle benefits. Renters have more flexibility to explore living in new cities and neighborhoods, they can access new amenities at home, and they can avoid the hassle of home maintenance and unexpected housing costs. But are preferences for these lifestyle elements dissuading millennials from becoming homeowners? 

Our survey finds that the lifestyle benefits of renting remain dwarfed by the burden of affordability. Among millennial renters who plan to own a home, 70 percent are waiting because they cannot afford to buy, compared to just 33 percent to say they are not ready to settle into a more permanent lifestyle. Similarly, among those who do not plan to buy, 69 percent say they will always rent because they cannot afford not to, compared to just 40 percent who cite the benefits of a more flexible lifestyle. While lifestyle benefits play an important role, more millennials still rent because they have to rather than because they want to.

We also find that homeownership continues to be viewed as the financially superior choice. In the wake of the Great Recession, some analysts explored whether the market crash shook millennials confidence in homeownership. The theory is that renting has become more attractive because homeownership, once a secure investment, now carries more risk given the threat of another downturn in the market.2 A growing body of literature also posits that renting can be a powerful wealth-creation tool that, at times, outperforms the housing market.3 But our surveys indicate that most millennial renters don’t share these perspectives. Only 28 percent who plan to always rent are doing so because they perceive homeownership to be a financially risky decision. And in a separate survey from earlier this year, 62 percent of renters stated that in the long run, they believe renting instead of owning is losing them money. 

Financial obstacles to homeownership vary significantly by race

We asked millennials who want to own a home to tell us more about the financial obstacles that stand in their way. By far the biggest obstacle is affording a down payment. 60 percent of millennial renters cited this concern, compared to 38 percent who cite poor credit and 29 percent who cite the burden of future monthly mortgage payments. But these concerns are not universal to all groups of millennials. When we divide the responses by race, for example, we uncover barriers to homeownership that disproportionately affect certain minorities. White and asian millennials are much more likely to be concerned about the upfront cost of a down payment, while black and hispanic millennials are more concerned that poor credit will prevent them from securing a mortgage.4

Down payment savings remain low, and family assistance is declining

There is good reason for so many millennial renters to be concerned about affording a down payment. Putting money down can be the single most expensive moment in the home-buying process. But unfortunately in 2019, millennial renters made little progress towards saving for this important first step. Like last year, nearly half who say they want to buy a home actually have no savings set aside for a down payment. And only 12.9 percent (up slightly from 12.2 percent last year) have over $10,000 saved.

Survey respondents also report how much of their monthly income is put aside for down payment savings. Using these two metrics—total savings to date, plus total additional savings each month—we can estimate how long it will take each millennial to afford the down payment on a median-priced condo in their local metropolitan area.5 Across the country, only 13 percent of millennial renters will be able to afford a traditional 20 percent down payment within the next 5 years. This rises to 25 percent if we cut a down payment in half, and even when we assume just 5 percent down, homeownership is still readily accessible to only 39 percent of millennial renters. In every major metropolitan area covered by our survey, fewer than half of aspiring millennial homeowners will be financially ready in the next five years, even if we assume everyone qualifies for a loan that requires just 5 percent down.

Some millennials who struggle to save enough on their own can turn to family for support. This can be the difference-maker for those on the cusp of affording their first home. But not only did personal down payment savings stagnate this year, expectations for family assistance also declined. 17.4 percent of millennials are expecting support, down from 19.1 percent a year prior. The value of this support is also shrinking; those who expect help in 2019 are expecting less ($8,928) than they did last year ($9,878).

Family support is also not equitably available, and like last year, the majority of it is reserved for higher-income millennials. We find a positive correlation between personal incomes and parental down payment assistance. Millennials who already earn over $100,000 expect over twice as much support as those making between $75,000 and $100,000, and over six times as much as those at the lowest end of the income distribution. This trend highlights the disproportionate, cyclical effect of generational wealth: poorer millennials who cannot afford to buy a home today may have more trouble building wealth in the long run, may be incapable of providing financial assistance to their children, and so forth.

Student loan debt continues to curtail millennial home-buying opportunities

This year’s survey highlights once again the impact of student loan debt on millennials’ ability to save for a house. In addition to asking about monthly down payment savings, we ask respondents how much of their monthly income goes towards paying off student loans. 57 percent of college-educated millennials report having outstanding debt, and those who do are saving nearly $100 less each month for a down payment. This difference adds up quickly. Not only are college-educated, debt-free millennials the most likely to have down payment savings in the bank, they average more than twice the total savings of those who are still paying off student loans. In fact, when it comes to saving for a home, there is a wider gap between those with and without student debt than between those with and without a college degree.

Total student loan debt has increased by millions of dollars every quarter since the Federal Reserve started releasing data in 2006. Economists have drawn causal links between this mounting debt and a declining homeownership rate among young adults. In turn, political leaders are feeling pressure from young voters and some are pushing harder than ever to mitigate the burden. Senators and progressive Democratic candidate hopefuls Bernie Sanders and Elizabeth Warren have offered the most dramatic proposals: the former arguing that all student debt should be forgiven outright, the latter targeting debt forgiveness to lower-income households. To better understand the barrier created by student debt, we simulate Senator Sanders’s proposal with our survey data, assuming that all monthly student debt payments are instead committed to down payment savings. The effect is significant; across the country the percentage of millennials who would soon be able to afford a 10 percent down payment on a median condo would rise from 25 to 38 percent. For those wanting to minimize up-front cost, we estimate that more than half could afford a 5 percent down payment. In some metropolitan areas, this represents a full 20 percentage point increase in the number of millennial renters who can afford to buy their first home. 

Conclusion: What’s next for Millennials, and what about Gen Z?

The national homeownership rate is rising again after more than a decade of decline. But according to our renter survey, millennial homeownership opportunities have not improved over the last year. A greater percentage of millennial renters believe they will rent forever, and while some acknowledge the lifestyle benefits that come with renting, the majority tell us that the main reason for renting is that they cannot afford to buy. Without a dramatic turn of events, it appears unlikely that millennial homeownership will catch up with previous generations anytime soon.

As millennials continue renting through their 20s and 30s, we will also be monitoring the next generation, Z, who are currently ages 22 and younger. Millennials and gen Z have already distinguished themselves in several ways; the younger generation is more diverse, on track to be more highly-educated, and more likely to grow up in a rented home. What remains to be seen is how gen Z interacts with the housing market as they come of age. Will they also face bleak homeownership opportunities? Or will changes in perspective, lifestyle, or the external economy relieve housing stress? Because few members of gen Z have reached the age at which Americans start considering buying homes, data on their perspectives are scant. But a recent Apartment List survey found that 85 percent of gen Z believes homeownership is important for personal success, compared to 88 percent of the millennial generation. While teenage attitudes are telling, the next generation’s housing market experience may still be formed by the next recession, whenever it comes, much like the Great Recession shaped the early outcomes of many millennials.

  1. Methodology note: This year we updated our definition of millennials to be defined by year of birth, per the Pew Research Center. In this report, millennials span the ages of 23-38, whereas in last year’s report they spanned the ages of 18-36. We account for this inconsistency throughout this year’s report. In order to compare results with last year, we applied the new generation definition to last year’s data and recalculated the number. Therefore, 2018 results in this report may not match what was presented in last year’s report, which relied on the outdated definition.
  2. For more information, see Bracha & Jamison (2012) and Rohe & Lindblad (2013).
  3. This discussion focuses on comparing the long-term financial returns of “buying and holding” versus “renting and investing.” For more information, see Florida Atlantic University’s Buy vs. Rent Index or Rappaport (2010).
  4. It should be noted that there is a lot of variation in how much each group expects to need for a down payment: Asian/Pacific Islander: $53,723; White: $24,395; Hispanic: $19,697; Black: $13,119.
  5. To estimate how long it will take each renter to save for a down payment, we project forward their current savings levels, adjusted by historic indices of inflation and wage growth. These projected savings are then compared against median metro-level condominium prices from the National Association of Realtors, which are adjusted for historical home price appreciation.


West + Main Homes

December 4, 2019

Fewer choices for homebuyers in Metro Denver this holiday season. 

Both the number of new listings and homes sold dropped month over month in November.

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The number of new listings added to the Denver-area housing inventory in November was down 32.7 percent month over month and 6.48 percent year over year. This reduction contributed to shrinking the number of active listings from 8,557 in October to 6,988 in November, an 18.34 percent drop. For comparison, in the last quarter of 2018 there was a surge in new housing inventory.

“The number of new listings was as scarce as the sweet potato casserole after the first pass around the table at Thanksgiving,” said Jill Schafer, Chair of the DMAR Market Trends Committee and Metro Denver Realtor®. “The market would have gobbled up even more of our excess inventory if we hadn’t also had fewer sales.”

Closed sales were down 22.78 percent month over month, but sales were still up by 2.17 percent year to date compared to 2018. The number of homes that went under contract dropped 10.84 percent month over month which, according to Schafer, indicates the number of homes sold will likely be down next month, too. 

“Fewer homes on the market means it’s tougher for homebuyers in an already expensive city to own real estate, especially in the very popular housing segment of homes priced under $400,000,” states Schafer. “Many buyers continue to have to put in multiple offers before landing a home.”

The average days on market and the average sold price both increased in the entire residential market. The average days on market was 35 in November, up just one day from the prior month. Year to date the average days on market was at 31, an increase of 24 percent compared to last year. “This is what both buyers and sellers need to know,” adds Schafer. “While homes may be on the market longer, and the close-to-list-price ratio was down to 98.80 percent month over month and 99.23 percent year to date, this is still not a market for low-ball offers.”

The average home price in November was $490,874, up 1.43 percent month over month and 6.76 percent year over year. Breaking it down further, the average single-family home price was $537,624 and the average condo sold price was $365,856.

Our monthly report also includes statistics and analyses in its supplemental “Luxury Market Report” (properties sold for $1 million or greater), “Signature Market Report” (properties sold between $750,000 and $999,999), “Premier Market Report” (properties sold between $500,000 and $749,999), and “Classic Market” (properties sold between $300,000 and $499,999). In November 2019, 166 homes sold and closed for $1 million or greater – down 15.31 percent from October and up 26.72 percent year over year. The closed dollar volume in the luxury segment year to date was $3.45 billion, up 11.33 percent from last year.

The highest-priced single-family home that sold in November was $7,250,000, representing five bedrooms, 10 bathrooms and 11,860 above ground square feet in Cherry Hills Village. The highest-priced condo sale was $5,359,975 representing three bedrooms, four bathrooms and 3,518 above ground square feet in Denver. The Realtors® representing the buyers and sellers in both transactions are DMAR members.

“The highest priced condo sale in November averaged over $1.5 million per bedroom!” said Andrew Abrams, DMAR Market Trends Committee member and Metro Denver Realtor®. “However, notably, only 15 luxury condos sold which represented less than 10 percent of the total luxury sales last month.”

DMAR finds that, while inventory has decreased from the previous month, the close-price-to-list-price ratio has remained steady from both the previous month and previous year. Out of the 166 luxury properties that sold, a little more than 90 percent of them were single-family homes, which could explain why the months of inventory for single-family properties is at the high end of a balanced market with 5.45 months of inventory. Likewise, months of inventory for condos shows a buyer’s market at seven months. The average months of inventory across all price points is 2.13, showing that “the Luxury Market is on its own island.” The condo market has higher months of inventory compared to single-family properties throughout all price points. Abrams adds, “This shows that, overall, there is more demand than supply in single-family homes relative to condos.”

According to Abrams, considering the boom that metro Denver real estate has experienced in Colorado throughout the last 10 years, the amount of luxury properties sold is not surprising nor is the increase in sales volume. He comments, “I did find it surprising, however, that despite there not being a lot of condo sales last month, year to date, luxury condo sales were up 50 percent from the previous year. This could be due to more condo development.”

As always, thank you to our partners at the Denver Metro Association of Realtors for compiling and sharing this information. Download the report

Fannie Mae, Freddie Mac loan limit increases to more than $510,000

December 3, 2019

Conforming loan limit has now increased by nearly $100,000 since 2016

The Federal Housing Finance Agency announced Tuesday that it is raising the conforming loan limits for Fannie Mae and Freddie Mac to more than $510,000.

In most of the U.S., the 2020 maximum conforming loan limit will be raised to $510,400, up from 2019’s level to $484,350.

This marks the fourth straight year that the FHFA has increased the conforming loan limits after not increasing them for an entire decade from 2006 to 2016.

In 2016, the FHFA increased the Fannie and Freddie conforming loan limit for the first time in 10 years, and since then, the loan limit has gone up by $93,400.

Back in 2016, the FHFA increased the conforming loan limits from $417,000 to $424,100. Then, the next year, the FHFA raised the loan limits from $424,100 to $453,100 for 2018. And in 2018, the FHFA increased the loan limit from $453,100 to $484,350 for 2019.

And now, loan limits will top $510,000.

The conforming loan limits for Fannie and Freddie are determined by the Housing and Economic Recovery Act of 2008, which established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.

Data from FHFA shows that home prices increased by 5.38% on average between the third quarter of 2018 and the third quarter of 2019. Therefore, the baseline maximum conforming loan limit in 2020 will increase by the same percentage.

For areas in which 115% of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit. HERA establishes the maximum loan limit in those areas as a multiple of the area median home value, while setting a “ceiling” on that limit of 150% of the baseline loan limit.

Median home values generally increased in high-cost areas in 2019, driving up the maximum loan limits in many areas. The new ceiling loan limit for one-unit properties in most high-cost areas will be $765,600 — or 150% of $510,400.

Special statutory provisions establish different loan limit calculations for Alaska, Hawaii, Guam, and the U.S. Virgin Islands.  In these areas, the baseline loan limit will be $765,600 for one-unit properties.

As a result of generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum conforming loan limit will be higher in 2020 in all but 43 counties or county equivalents in the U.S.

For a map showing the 2020 maximum loan limits across the U.S., click here.

And for a breakdown by county, click here.

If you have questions about this information, or if you would like a recommendation for a fantastic mortgage broker who can walk you through your options, contact me.

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