Generation "Y"


Will the S&P Downgrade Affect Interest Rates?

Daily Real Estate News | Monday, August 08, 2011

 

Standard & Poor downgraded the U.S.’s credit rating on Friday, despite Congress reaching a deal in the final hours on the debt ceiling crisis last week. And now many of your customers may be asking: What does this mean for interest rates?“The impact on your wallet of the Standard & Poor’s downgrade of the nation’s credit rating is similar to what would happen if your own credit score declined: The cost of borrowing money is likely to go up,” the Washington Post explained in the aftermath of S&P’s decision.

S&P downgraded the U.S.’s top-notch AAA credit rating for the first time in history, moving it down one notch to AA+; the rating reflects a downgrade in S&P’s confidence in the U.S. government’s ability to repay its debts over time. It’s not clear, however, whether S&P’s downgrade will instantly effect rates, analysts say.

The 10-year Treasury note is considered the basis for all other interest rates. And “the downgrade could increase the yields on those bonds, forcing the government to spend more to borrow the same amount of money,” the Washington Post article notes. “Many consumer loans, such as mortgages, are linked to the yield on Treasurys and therefore would also rise.”

Watch this video with NAR Chief Economist Lawrence Yun for more information.

While consumers who have fixed interest rate mortgages will be immune to any changes in borrowing costs, home buyers shopping for a loan or those with mortgages that fluctuate may see a rise in rates later on, some analysts say.

Mark Vitner, senior economist at Wells Fargo Securities, told the Associated Press that he doesn’t expect the downgrade to drive up interest rates instantly since the economy is still weak and borrowers aren’t competing for money and driving rates higher. However, he expects in three to five years, loan demand will be much higher and then the downgraded credit rating might cause rates to rise.

Analysts are still waiting to see if the other rating agencies, Moody’s and Fitch, follows S&P’s lead in its downgrade of the U.S. credit rating. If so, the aftermath could be much worse, analysts say.

The debt deal reached by Congress last week was expected to save the U.S. from any credit rating downgrade. However, S&P said lawmakers fell short in its deal. Congress’ deal called for $2 trillion in U.S. deficit reduction over the next 10 years; S&P had called for $4 trillion.

Source: “5 Ways the Downgrade in the U.S. Credit Rating Affects You,” The Washington Post (Aug. 8, 2011); Questions and Answers on Standard & Poor’s Downgrading of U.S. Federal Debt,” Associated Press (Aug. 6, 2011); and S&P Downgrade Will Shake Consumer and Business Confidence at a Fragile Time, Economists Say,” Associated Press (Aug. 6, 2011)

Read More

Real Estate OK in Debt Deal But Risks Remain

Young Generation Hit Hard by Recession

Daily Real Estate News | Monday, August 08, 2011

 

The recession has hit the younger generation hard and is forcing them to delay many major life changes and purchases, according to a new survey. About 44 percent of Millennials — people aged 18 to 29 — say they will have to delay buying a home due to economic factors, according to a survey conducted by The Polling Co. Inc./WomanTrend.

About 75 percent say they have or will delay a major life change or purchase due to economic factors, and 30 percent say the bad economy has prompted them to delay changing jobs or cities. What’s more, nearly 25 percent say they will delay starting a family, and 18 percent say they will delay getting married.

Such delays by the younger generation has started to affect household formation. Many young professionals are moving back in with their parents to curb costs, which has caused household to grow in recent years after facing decades of declines.

“The impact of the poor economy, in human terms, has been devastating. This is especially true for young Americans, whose lives have been interrupted and dreams put on hold due to the lack of economic opportunity,” says Paul T. Conway, president of Generation Opportunity.

Source: “Young Americans Waylaid by Recession, Study Shows,” Los Angeles Times (Aug. 5, 2011)

Read more:

What Does Gen Y Want?

How to Win Over Buyers

No matter how well educated your buyers are, they still need information on how a real estate transaction works. Use consultation appointments to inform them and become a trusted resource in the process.

May 2011 | By Rich Levin
 
Buyers are more educated in today’s market. They have more access to information regarding properties and their value. Plus there are practically unlimited real estate resources online for practitioners.

These combined factors should make the real estate professional’s job easier, but for many, they don’t. Why? There are two problems:

  • The information may not be accurate or relevant to a specific market.
  • The information is almost certainly incomplete.

“An Educated Consumer Is Our Best Customer”

Two adages speak to today’s buyer:

Whether the real estate pro finds buyers easier or more difficult to work with depends on whether that practitioner respects and completes the buyers’ education.

Have the buyers obtained a copy of the contract and paperwork online? Probably not, and most paperwork has many pages plus addenda. Do the buyers know what real estate trends apply to their market? Do they know what to do when the inspection reveals a problem?

Contracts, inspections, financing, negotiation — there are far too many steps in the transaction process for most buyers to pick up on their own.

A Simple and Powerful Process

The most successful buyer’s agents learn to ask a few simple questions (adjust to the circumstances of you and your buyer accordingly):

“The purchase documents in our area are six pages, plus disclosures and addenda. Has anyone given you a copy of the latest documents and reviewed with you the parts that are going to be relevant for your purchase? I find it helps a lot to be familiar with the documents so you aren’t seeing them for the first time when you’re making that $200,000 decision. Would you like to get a copy and take a look at those together?”

“There are inspectors, appraisers, attorneys, title companies, lenders, and real estate agents involved in the transaction. Would it be helpful to go through the process step-by-step so you know what to expect and get some idea of what might come up? It often reduces some pressure and allows you to enjoy the process with greater confidence. Would that be helpful to you?”

These simple questions lead buyers to make a consultation appointment, which can establish enormous confidence and trust in you, the agent. Buyers subsequently go along more easily with your recommendations through the negotiations, which actually can reduce the number of homes they need to view. They find the experience so valuable that they begin to refer you to friends and relatives.

At the consultation appointment, review each step of the process, educating and preparing buyers. Do they understand the type of financing they’re trying to get? Do they have any questions about it? Even if you don’t have the answers, you can take the lead getting a clarification and making sure buyers are aware of what’s included in their closing costs and their payments, and in reducing cash needed with seller contributions.

You also should explain what buyers can expect: Describe problems that could arise and how you’ve solved them and protected buyers’ interests in the past.

As you conduct these presentations, you’ll quickly discover two things: how much buyers don’t know — even the educated ones — and how much they misunderstand. As you realize the value and power of these consultations, you’ll learn to go into deep detail, continuously confirming buyers’ understanding.

Changing laws and financing situations — such as explaining short sales and foreclosure procedures — are just a few reasons that the time you spend preparing buyers works to everyone’s benefit.

Gen Y to Lead ‘Massive Increase in Housing Demand’

Daily Real Estate News | Wednesday, July 20, 2011

 

Watch out for Generation Y: This large, diverse, well-educated generation will drive the housing market recovery over the next 10 years, according to economists with the University of Southern California Lusk Center for Real Estate.

Gen Y (15-32 year olds) boasts about 77.4 million members, which is about equal in size to the baby boomers (46-64 years old). Yet, Gen Y is much more diverse and educated (60 percent of Gen Y goes to college), according to the center, which recently presented its findings at the USC Lusk Center Orange County Executive Briefing.

Stan Ross, Lusk Center Chairman of the Board, says that “baby boomers and Gen Y comprise 50 percent of the population and will soon be part of the largest U.S. wealth transfer ever.”

As more of this age group joins the work force, “they will produce a massive increase in housing demand,” forecasts the USC’s Lusk Center.

However, Ross points out “these kids are concerned. They have watched the stock market, financial markets, and economy wipe out their parents’ retirement plans. As a result, they will choose lower-risk investment strategies.”

Source: “USC Lusk Center Says More Educated, Diverse Generation to Drive Real Estate Recovery,” The Hoyt Organization (July 19, 2011) [No Link]

One long, grueling summer for California’s recovery

By Tara Tran • Jun 20th, 2011 • Category: Feature Articles, Journal Articles, June 2011 Journal

This article reviews indicators in the market which signal the long-awaited national housing recovery and evaluates the California real estate market’s progress towards recovery.

The worst is (almost) over

Meditating on the landscape of American housing doesn’t bring much peace of mind, yet economists claim a nugget of hope is wedged somewhere beneath the muck of this real estate bust, even for the more deeply entrenched California.

2011 has thus far failed to yield an economic recovery of leaps and bounds and thrust us beyond the Great Recession. Low interest rates (courtesy of the Fed and generous government housing subsidies) triggered an artificial leveling of home prices nationwide going into 2010, but were insufficient in duration and intensity (or reception) to bridge the recession gap.

Many economists predict an additional 25% decline is not out of reach for reasons now known to all involved.

Prices nationally in the first quarter of this year hit a new low – 5% lower than one year ago, according to the S&P Case-Shiller Index. Thus, the nation’s home prices have returned to mid-2002 levels. Many economists predict an additional 25% decline is not out of reach for reasons now known to all involved. [For more information on tracking the market with the most recent data from the S&P, see the first tuesday Market Chart, S&P 500: Stock Pricing vs. % Earnings (P/E Ratio.]

A look at other circumstances in the national real estate market lead some to believe this is the worst of the storm and a sustained recovery is now on its way, in spite of current price adjustments.

Hints of a national recovery

Positive signs – nationally – thus far include:

  • advantageous home purchasing conditions due to low decade-old prices and very low mortgage rates, both slipping downwards at the same time;
  • gross rent multipliers (GRMs) such as home prices and home price-to-rent ratios of between 9-11 times the annual rental value which mirror the stable long-term trend of pre-bubble years [For more information about the GRM, see the June 2010 first tuesday article, Renting vs. buying: the GRM.];
  • lower apartment vacancies and higher rents, which typically help bolster home prices;
  • an 18% decrease in new foreclosures from the previous quarter and improved household delinquency rates for a fifth consecutive quarter as more borrowers catch up with their mortgage payments versus those who fall behind; and
  • 200,000 new jobs added to the economy in each of the past three months and 1.2 million jobs in the past year (more jobs mean a lot of positive things, but it is a particularly good sign for the construction industry which, if given a leg up, may consequently boost home prices). [For more information on positive indicators in the nation’s housing market, see the Economist article, The darkest hour: Signs of hope among the gloom.]

A gauge for California’s recovery

That’s national, and this is California, the seventh largest economy in the world. But is recovery in California feasible, or just a far-fetched fantasy?

Here we evaluate the Golden State for the same (positive) signs and provide a forecast most Californians will likely have to live with:

  • Are home purchasing conditions advantageous? Yes, you can bet on that. Rarely do we get low prices, low interest rates and low down payment financing at the same moment in time. All that is needed is the will to buy, which in part requires brokers and agents to get the word out that mortgages are available at 4.5% if you apply.

Prices fell 2% in Los Angeles, 4% in San Diego and 5% San Francisco for the year ending with the first quarter of 2011, and further drops are forecasted for the rest of the year. Buyers have this information and what it is telling them is to wait until prices bottom to make offers. Agents have their work cut out to convince buyers that a further drop is likely but the present pricing will look most proper in three or four years, and will make no financial difference in ten years.

Interest rates have also been and are on a continuous decline. The average rate for a 30-year fixed-rate mortgage (FRM) in the U.S. Western region dropped to 4.45% the second week of June. The 15-year FRM also dropped in the same week to 3.63%. However, even with these deals and steals on the market, people are just not buying. The agent’s advice is that rates cannot move much lower, if at all, and they can and will rise in the future as the recovery gains steam – as will prices.

Home sales volume in California has dropped since the first quarter of 2010. 35,202 total homes sold in April 2011, trending consistently down from 37,908 in April 2010. [For more information on home sales volume in the current market, see the first tuesday Market Chart, Home sales volume and price peaks.]

  • Are prices stabilizing? Yes. The lingering drop in home prices across California in all tiers of housing is not a momentary dip from which they will fast rise akin to the fabled V-shaped recovery. Today’s home prices represent a resetting of the artificially high prices of the bubble years (which commenced in 1997) to their more stable levels consistent with historic trends. The end of 2011 may just likely see that reaction to low interest rates and a better informed and more confident public. However, that annual rise is more likely to reflect the consumer price index (CPI) rate of inflation rather than the 5 to 10% annual rate buyers are now thinking they will experience.

Except for those negative equity homeowners imprisoned and burdened by insolvency due to the steep price plunge, price stabilization is good news for California’s housing market in the long run. [For more information on historic home prices in California, see the first tuesday Market Chart, California tiered home pricing.]

  • Are rents higher? Yes. While home prices fall steadily, rents in California continue to rise, 4% for the year ending April 2011, according to the Spring 2011 Housing Report by HotPads.com. (Although landlords in the bedroom cities of the state’s inland and central valley will beg to disagree.)

Rent prices are indicators of which way home prices will go since they are the primary fundamental used to set property values. However, any rise in home prices beyond the rate of consumer inflation will take several years. [For more information on rentals in California, see the first tuesday Market Chart, Rentals: The Future of Real Estate in CA?]

  • Are household delinquency rates better? Sort of. Compared to the 18% nationwide drop in foreclosures, California foreclosure numbers are loitering near stagnancy. 8% more homes were foreclosed upon in California’s high-tier areas in the first quarter of 2011 from a year earlier. An even higher 23% more homes in low-tier areas were foreclosed upon in the same period.

Foreclosures in both housing tiers dropped only 2% over the year ending April 2011. Mortgage delinquency in the state is improving at an equally slow pace. 9% of mortgage payments were seriously delinquent in the first quarter of 2011, a slight but steady decline from 11% a year earlier. Thus we have an inventory problem called excess supply (the REOs), and until the buyers enter and start to cut into that supply, the prices will remain low, market momentum will be negative and competitive buyers for a property will be rare.

California foreclosures and delinquency rates, like other sand states, are higher than the rest of the nation but are improving at a faster rate. So when the market shifts to positive volume and pricing, some buyers will be surprised. [For more information on first quarter 2011 California defaults and foreclosures, see the April 2011 first tuesday article, 1Q 2011 defaults and foreclosure data.]

  • Do we have more jobs? Yes, but not enough and not fast enough. As of April 2011, California has yet to replace 1,298,700 of the jobs lost since the peak of California employment in December 2007. 363,100 jobs have been added since the beginning of the recovery in January 2010 and employment numbers have gradually made small ticks upward since then.

Employment needed to rent or buy a home was up by 148,100 jobs annually in April 2011. But what we need is around 400,000 jobs annually to get back to the pace experienced in the late 1990s. Jobs are slowly returning but will not reach pre-recession employment levels until 2016. [For more information on the effect of statewide employment on real estate, see the first tuesday Market Chart, Jobs Move Real Estate.]

Slow and steady to the end

Now back to the first question: Will California get to the finish line of its recovery? Yes. But if we’re to have a robust and sustained economy, keep in mind, the recovery will – and must – be gradual.

We just need two more ingredients to add to the mix: more jobs and more consumer confidence.

Although California is definitely a step behind the nation heading for recovery (just as it was a step ahead of the nation in growth during the Millennium Boom a few years ago), the conditions for a housing recovery are not completely absent in the state. We just need two more ingredients to add to the mix: more jobs and more consumer confidence.

Brokers and agents can do nothing about jobs. What they can do is give prospective buyers great detail about a property and extensive justification for its value, and then escort them through the loan pre-approval process with a couple of lenders. These simple gestures of due diligence will get the confidence of buyers up immediately. They merely need someone they feel they can depend on for advice.

Without an adequately employed population both poised (read: ready and free of their negative equity homes) and willing to buy, California will continue to march across the rocky plateau of its flat-line recovery. [For more information on building public confidence in a depressed real estate market, see the June 2011 first tuesday Market Chart, A bounty of loan deals, a dearth of willing buyers.]

– ftCopyright © 2011 by the first tuesday Journal Online – firsttuesdayjournal.com;
P.O. Box 20069, Riverside, CA 92516

Readers are encouraged to reproduce and/or distribute this article.

Golden state population trends

By Bradley Markano • Jun 24th, 2011 • Category: Feature Articles, Journal Articles, June 2011 Journal

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This article reviews the shifts in California’s population during the past decade, and examines the potential impact of current migration trends on residential rentals and sales.


Chart last updated 6/24/11

  2011 2010 2009
CA Population
37,510,766
37,266,600
36,887,615

Chart last updated 6/24/11

  Los Angeles
San Diego Orange Riverside San Bernardino
2000
9,519,338
2,813,833
2,846,289
1,545,387
1,709,434
2010
9,818,605
3,095,313
3,010,232
2,189,641
2,035,210

Chart last updated 6/24/11

  Santa Clara
Alameda Sacramento Contra Costa Fresno
2000
1,682,585
1,443,741
1,223,499
948,816
799,407
2010
1,781,642
1,510,271
1,418,788
1,049,025
930,450

Population change: the last thirty years

The first of the above charts tracks the annual change in California’s total population since 1980, based on data about births, deaths and immigration as revealed on the decennial U.S. Census.

The following two charts track population change in California’s ten largest counties. Coincidentally, the five largest are all located in Southern California, and the following five are all in Northern California.

State population growth is essential for a stable housing market. Brokers and agents who know which demographics are likely to move to and from California’s diverse counties will be better positioned to accommodate the needs of those groups when they arrive. To that end, both state and federal governments provide extensive information about California’s changing population.

California’s rate of population growth varies wildly from year to year as seen on the first of the above charts, but it has always increased over time. A year without growth in California is almost unheard of: according to the California Department of Finance (DOF), only three counties statewide (Plumas, Sierra and Alpine) saw their populations diminish in the first decade of the new millennium.

Editor’s Note: Even with all population fluctuations taken into account, California’s population growth rate since 1990 has been slightly lower than that of the nation as a whole. [For a comparison between California’s population growth and national population growth, see the first tuesday Market Chart, Rate of Population Growth.]

The average population growth rate in California during the 1990s was 1.3%, ranging from 1.8% in 1990 to 0.7% in 1994 and 1995, the first years of job recovery after the 1990 recession. Growth in the 1990s and 2000s was far below the glory years of the 1980s, when California’s population grew by an average annual rate of 2.4%, and rose by as much as 3.4% in 1989.

The low growth rates of 1994 and 1995 appeared to be nothing more than a passing abnormality brought on by the 1990 recession. However, high housing prices carried over from the real estate boom of the 1980s and the economic crisis of the 1990s combined to make the mid-1990s growth figures the new norm.

Population growth in the modern age

For the first decade of the new millennium, the average rate of population growth was 1%. The greatest increase in population occurred in 2000, the year before a recession, with a one-year growth rate of 1.48%. A similar jump took place in 1989, just before the 1990s recession, when California’s population rose by a full 3.4%. The smallest increase took place in 2006, at the height of the Millennium Boom, when the population’s decelerating growth rate slipped to 0.5%: the lowest rate since WWII.

While numerous temporary factors influence the rise and fall of California’s population, including birth and death rates, migration, cultural trends and environmental factors, the most important influences by far are economic. When jobs are plentiful, and housing is available at reasonable prices without the need for significant new construction, people feel empowered to realize the dream of residency in the fabled cities on the Pacific West Coast.

A strong economy is an incentive for both interstate and international immigration. A weak economy (like that produced by the Great Recession) discourages the optimistic and causes people to stay where they are. Indeed, a state without jobs can even lose people, as they leave for more employment-friendly environments in other states.

Historical population trends are thus a valuable contextualizing tool for economic recessions (marked by gray bars on the chart above). The recession of the early 1990s, for example, corresponded with a dramatic decrease in the rate of population growth; the year-over year increase in state population has never since risen back to its height at the end of the 1980s, when the plentiful Baby Boomer population formed households across the state. [For more information on the continuing influence of the Boomer generation, see the first tuesday Market Chart, Boomers retire, and California trembles.]

However, the Great Recession of 2007 had no comparable decelerating effect on the rate of California’s population growth. In fact, California’s population has increased at a greater rate since the start of the recession than at any time since 2003. This is likely because the recession of 2007, unlike the 1990s and early 1980s recessions, was accompanied by a tremendous drop in housing prices. This drop returned prices to their historic trend of slow but dependable increases, correcting for the distorted pricing that drove the population away from California in 2000-2006.

Suddenly, California real estate was once again available at prices comparable to real estate in the rest of the nation. Those who had been waiting to move west had begun to take advantage of the opportunity, and more will doubtless come when jobs become more prevalent, as they are beginning to do in 2011. [For historical real estate pricing in California, see the first tuesday Market Chart, California Tiered Home Pricing.]

Immigration

Immigration, both legal and illegal, is a crucial driver of population growth on the West Coast. This includes migration to California from other states and other nations. The largest proportion of international immigrants to California, by far, come north from Mexico. According to the U.S. Census Bureau, 37% of California’s population in 2010 was Hispanic, and this proportion has increased annually for the last twenty years. For reference, the homeownership rate among Hispanics in California is 46% compared to the statewide average of 57% (and dropping).

The vast majority of immigrants (both interstate and international) go to Los Angeles County, with an average of just over 76,000 people migrating legally to Los Angeles every year since 1984. Orange County, Santa Clara and San Diego are also attractive destinations: each has an annual average of over 14,000 (legal) immigrants.

The number of legal immigrants tends to fluctuate at approximately the same rate as the total population. Although the state’s birth rate and statewide emigration are both crucial factors influencing state population, immigration has made up an average 58% of the yearly increase in state population for the last twenty five years.

Illegal immigrants, who are legally able to buy property, borrow mortgage funds and pay property taxes by use of an Individual Taxpayer Identification Number (ITIN), are of equal importance to the state’s housing market. The Pew Hispanic Research Center estimated that an additional 11.2 million illegal immigrants lived in the United States in March 2010, virtually unchanged from 2009. This is down from the peak illegal immigrant population of an estimated 12 million in 2007. The decline is the first significant drop in the number of illegal immigrants in the United States since the 1980s, and was precipitated by the Great Recession and the corresponding decrease in job availability.

Illegal immigrants make up an estimated 3.7% of the national population. California has the highest portion of the nation’s illegal immigrants, with an estimated 2,550,000 illegal immigrants in March 2010.

California’s high rate of immigration, including the unauthorized immigration which results from its proximity to Mexico, is a largely positive economic force that continues to improve the standard of living and employment situation for many California natives. In a recent report, the San Francisco Federal Reserve determined that competition for employment between legal workers and illegal immigrants is far less prevalent a problem than is generally believed. The (generally) less educated migrant laborers, who tend to have less knowledge of the English language, tend to take jobs in different sectors than their English-speaking neighbors. [For more on the beneficial effects of immigration on the state’s housing market, see the January 2011 first tuesday article, Immigration’s impact on the housing market.]

The result is increased wealth across the state. Reports of competition with the native-born population are often exaggerated to become myths.

Just as importantly, every new arrival on California soil needs some form of shelter to live in. Again, in spite of popular opinion to the contrary, immigrants often have a positive effect in the housing market—they have the power to buy and sell property, pay taxes and contribute to all forms of economic activity. As brokers and their agents develop their businesses to meet the new real estate paradigm, immigrants will remain a crucial part of the puzzle, despite often being neglected by trade union brokers. This will be especially true in the suburban areas, as the Boomers retire and sell their property, and are replaced by immigrant homebuyers.

Intrastate migration and age

In 2003, the California DOF released a detailed report tracking migration patterns (people entering and leaving the state) among homeowners statewide. Although population trends have changed since then, the DOF’s reportstill provides a useful snapshot of the moving habits of California residents in times of relative fiscal stability. [For the full DOF report, see The Current Population Survey: 2001-2003.]

64% of relocating Californians remained in the same county as their former residence in 2000-2003. 21% remained in California, but moved to a different county. Only 10% moved to a different state; the remaining 5% left the country entirely.

In this three-year period, 5,378,322 Californians moved from one residence to another (one sixth of the total state population). The vast majority of these movers were under the age of 50. 41% of them were between the ages of 18 and 34. Keep in mind that a large portion of this age group continues to rent rather than buying a home, muting, but not negating, their influence on the single family residence (SFR) housing market.

In 2010, the homeownership rate among those aged 30-34 in the Western Census Region (which includes California) was 44%, and for ages 25-29 was 31%. Renters are far more likely to relocate than homeowners: the annual rates of relocation were 26% for renters, and 9% for owners. Negative equities will continue to drive the owner relocation percentage even lower well into this decade, to the dismay of multiple listing service (MLS) agents and builders. [For more on homeownership rates by age, see the first tuesday Market Chart, Homeownership Rate: Western Census Region.]

Although first tuesday anticipates more and more senior citizens will change their residences in the upcoming years as the Baby Boomer generation retires, DOF data indicates the greatest number of new homes tends to be purchased by the young. In the researched time period, the moving rate among those aged 65 and over was only 5% annually. [For more information on the Boomer generation, see the first tuesday Market Chart, Boomers Retire, and California Trembles.]

Demographics of interstate migration

Aside from age, other demographic factors played a smaller role in determining mover status. Intuitively, men were very slightly more likely to relocate than women, singles were more likely to move than couples and those with more education (a bachelor’s degree or higher) were more likely to relocate than those with less. These profiles will drive Generation Y (Gen Y) coming of homeownership age this decade into rentals, often in urban cultural centers. [For more on the current and anticipated habits of Gen Y, see the May 2011 first tuesday article, Gen Y continues to shy away from homeownership.]

As usual, employment is an essential factor. The unemployed were considerably more likely to move than the employed (the rate of relocation among the unemployed was 24%, as compared to a rate of 17% among the employed). Those with incomes of $50,000 a year or over (often members of the older population) were significantly less likely to move than those with lower incomes. [For information on California income and employment, see the first tuesday Market Chart, Jobs Move Real Estate.]

From March 2000-March 2003, the DOF also tracked movers’ reasons for relocating. By far the largest proportion of those who moved in this time period (53%) relocated for housing-related reasons. The next two most popular motives for moving were family-related reasons (25%) and employment-related reasons (17%).

Interestingly, this did not hold true for those who came to California from another state or another country. Out-of-state immigrants overwhelmingly tended to come to California for reasons related to employment. [For more on California’s business-friendly environment, see the October 2009 first tuesday article, Let my people go! The myth of the vanishing California population.]

Location is everything, when moving

In collaboration with the U.S. Census Bureau, the DOF monitors and forecasts both interstate immigration and intrastate migrations. They present a clear view of which parts of the state are growing or shrinking fastest. While some county populations have remained stable over the last ten years, others have seen their populations explode. By far the most notable increase occurred in Riverside County, which gained 644,254 people during the 2000s; an increase of 41.7%. San Bernardino County was a distant second, growing 19%. Other notable increases took place in Los Angeles, Sacramento, San Diego and Orange Counties. [For a visual display of DOF Population change by numeric increase, see the DOF’s [Map of Population Change (Numerical)]; for a map of counties tracking percent increase, see the DOF’s Map of Population Change (Percent).]

The enormous popularity of Riverside County during the decade is easily explained: as the DOF data indicates, it’s all about housing. For much of the last decade, housing prices in Riverside county grew at a steady rate (one which forecasters erroneously predicted would last forever) while still remaining far more affordable than the coastal cities of nearby Los Angeles, Anaheim/Santa Ana and San Diego.

What’s more, Riverside is close to the jobs and cultural opportunities of those cities, and shares in the fair weather and romantic mystique of southern California. Nearby San Bernardino also benefited from the same combination of advantageous factors. [For a snapshot of some California housing prices in three major cities, see the first tuesday Market Chart, California Tiered Home Pricing.]

It should be noted, however, that Riverside’s population boom was not without its disadvantages. While the county saw new prosperity and expansion in the years leading up to 2007, it was also ravaged by some of the worst job losses (still being experienced in mid-2011), unemployment and negative equity problems of the Great Recession.

Areas which saw less dramatic growth, like San Francisco and parts of Los Angeles, suffered far less and began to recover more quickly than Riverside (although no part of California was wholly spared the ripple effects of the recession’s wrath). In upcoming years, first-time homebuyers may be more hesitant to move to locations like Riverside, which once appeared to be suburban success stories.

The new appeal of urban living

Instead of a continuation of the suburban lifestyle, first tuesday anticipates an increase in centralized urban populations, which will be especially reflected by a boom in rental property and condo sales in urban centers. Urban locations offer access to a world of social and cultural activities which are unavailable in strip-malled suburbia.

More importantly, the Great Recession has exposed the folly of the U.S. Government’s former policy of “universal homeownership.” New buyers will be far more likely to think twice before they invest their life’s savings subordinated to the risk of a long-term mortgage. [For more on the new appeal of rental property, see the February 2011 first tuesday article, Rentals: The future of Real Estate in CA?]

The shift to rentals, and to cities, will only be accelerated by the impending retirement of California’s most powerful demographic: the aging Boomers. Upon retirement, numerous Boomers can be expected to sell their homes and move to new locations, often closer to the coast or closer to their grandchildren. The Boomers are overwhelmingly, a generation of homeowners, and most will continue to be in the future, regardless of where they relocate. The majority will remain in their current communities.

Others, however, will elect to rent in more convenient locations or to move in with family members in the increasingly available casitas or granny flats (which were recently made legal statewide). The first-time homebuyers who will take their place (Gen Y), will be less numerous and less eager to buy homes (much less in suburbia) than their parents. [For more on the Boomers and Gen Y, see the October 2010 first tuesday article, The demographics forging California’s real estate market.]

As the West’s largest city, Los Angeles will undoubtedly remain the population center for the foreseeable future. Los Angeles is forecast to have a population of 11,214,237 by 2020, and will exceed 13 million by 2050. For comparison, the DOF predicts California’s second and third largest counties in 2050 to be Riverside and San Diego, both with anticipated populations of just over 4 million. Orange County is predicted to fall behind, and has already shown signs of being hindered by its governmental and private restrictions on land use and development opportunities. [For more on the pivotal role of urban centers, see the May 2010 first tuesday article, The plight of California to be solved by… cities?]

Although nothing is certain when predicting the future, one thing does seem highly probable: California will continue to grow, and to flourish. DOF forecasts expect the entire population of California to increase by approximately five million people every decade through 2050, and some cities are likely to double in size if they alter land use and height restrictions and allow for population density to increase per square mile.

While an increased population will pose new challenges in water management, energy and housing sectors, it will also be a source of new talent and new opportunities. No other state in the nation has the wealth, resources, entrepreneurial spirit and innovative history that enables California to maintain its distinctive appeal to the rest of the nation. As time passes, and more come to share in that success, the Golden State’s appeal can only be expected to grow.

– ftCopyright © 2011 by the first tuesday Journal Online – firsttuesdayjournal.com;
P.O. Box 20069, Riverside, CA 92516

Readers are encouraged to reproduce and/or distribute this article.

Asian Wealth Adds Up to U.S. Home Sale Boom

 
April 25, 2011 by Robert Freedman · 2 Comments

MarketsAcrossIntro By Robert Freedman, senior editor, REALTOR® Magazine

YB
Yin Bihr, CIPS, CRS, broker-associate, Masters Realty

REALTOR® Magazine Managing Editor Kelly Quigley and Features Editor Katie Tarbox joined me in creating an information-packed video on working with Asian buyers, one of the fastest growing—and wealthiest—populations of non-U.S. home buying households in the country today.

We talked with half a dozen sales associates and brokers in the San Gabriel Valley area near Los Angeles, where Asian households make up almost two-thirds of the population in some parts.

To work in that area (or any area where many households are from outside the United States), you have to know the culture. What was surprising when we spoke with the industry professionals there was how important just good business sense is to succeeding. That’s a universal that never changes.

YLLing Chow, CIPS, SRES, broker-owner, Jonson Global Investments

Even if you’re working with people who don’t have a good command of English, what’s important to the success of the relationship is your straight-forward, common-sense approach to finding the right house, negotiating, and communicating. It all starts with listening to what they want and understanding the norms of their culture. Adherence to the NAR Code of Ethics was also key, because foreign buyers more than anything are looking for professionals on whom they can depend.

Although Asian households are growing throughout the United States, in the San Gabriel Valley, their strong numbers and, in many cases, deep pockets (many households pay cash), helped the area avoid the big downturn that hit so many parts of the country three years ago. Although sales in the area dipped, the market remained relatively strong throughout, and much of the market was fueled by buyers from outside the country wanting to get a piece of the home ownership dream here in the United States.

In the short video above, you’ll find prospecting and marketing tips from the sales associates and brokers we talked to, and there’s a legal caution about how to tailor your approach to foreign households while adhering to federal non-discrimination requirements.

 
 

Responses to “Asian Wealth Adds Up to U.S. Home Sale Boom”

  1.  Great information and tips! The Asian Real Estate Association of America (AREAA) is another terrific resource for learning how to effectively serve the Asian American community.
     

Foreign Buyers Target U.S. Vacation Hotspots

Foreign home buyers have their eye on U.S. vacation areasespecially in southern Floridaand are helping to give a lift to some of these battered housing markets.

More than 30 percent of Florida’s home sales in the 12 months ending in March were to foreign buyers (compared to 10 percent in 2007), according to National Association of REALTORS® housing data. In Miami alone, about 40 percent of buyers are international, says Ronald Shuffield, president of Esslinger-Wooten-Maxwell REALTORS® in Coral Gables, Fla.

“International buyers have been the fuel for the Miami recovery,” Shuffield told the USA Today.

Three of the most popular areas foreigners are searching for real estate: Miami-Fort Lauderdale, Phoenix, and Los Angeles, according to Trulia’s Web site.

And where are these foreign buyers most coming from? Canadians are mostly dominating the market share, with 23 percent of the foreign buyers coming from that country, followed by 9 percent from China, according to NAR data.

Source: “Foreign Buyers Lifting U.S. Home Sales,” USA Today (July 6, 2011)

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