MReport August 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 51 of 66

TH E M R EP O RT | 51 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Buying vs. Renting: A Financial Perspective On average, it takes just under two years to break even on purchasing a home versus renting an identical home in the same market, though timelines vary by region and market. I n a little under two years, owning a home becomes more financially viable than renting an identical home, according to the latest Zillow Buy-Rent Break- even Horizon. It takes just under 1 year and 11 months for homeown- ership to be more beneficial than renting as of the first quarter of the year, which is just over a month less than in the previous quarter. Zillow compared the cost of owning versus the cost of renting the same home, considering a 20 percent down payment, a monthly payment on a 30-year mortgage loan, current property taxes, homeowner's insurance, 3 percent purchase costs, 8 percent selling costs, home-maintenance estimates, and federal tax deductions. Zillow compared these purchas- ing costs to the cost of renting the same home with a deposit of one month's rent, monthly rental payment, renter's insurance, and 5 percent annual investment gains on the sum that would have gone toward a down payment or other homeownership expenses. It generally takes the least amount of time for homeowner- ship to make more financial sense than renting in Southeastern markets and the longest amount of time in "pricey coastal markets," according to Zillow. Comparing the largest U.S. markets, it takes the least amount of time to break even in Memphis, Tennessee, where it takes just 1.32 years. This compares to 3.7 years to break even on owning a home in Los Angeles, the longest time of any major U.S. metro. Portland, Oregon (3.07 years); San Francisco, California (2.98 years); Washington, D.C. (2.96 years); and San Diego, California (2.94 years), also had long break-even timelines. These markets also have high me- dian home values. Other markets with short break-even points tend to be in the Southeast, including Birmingham, Alabama (1.39 years); Tampa, Florida (1.40 years); Orlando, Florida (1.44 years); and Atlanta, Georgia (1.45 years). In contrast to the high median home values associated with long break-even points on the West Coast, these Southeastern markets tend to have low median home values. All except Orlando have median home values below the national median. However, as Zillow explained, the factors contributing to the break-even point "can be com- plex," ranging from purchasing transaction costs to the potential savings and investment gains that could be earned by investing the cost of a down payment. While many markets with high home values have long break- even timelines and many markets with low home values have shorter ones, there are some outliers. Hartford, Connecticut; Virginia Beach, Virginia; and Milwaukee, Wisconsin, all have home values near the national median. However, their break-even points range be- tween 2.8 years and 3.23 years. Also, while the major U.S. met- ros tend to have break-even points between Memphis' 1.32-years and Los Angeles' 3.7-years, there are some smaller markets with break- even points outside of this norm. There are several smaller markets, mostly in the eastern half of the U.S., where the break-even point for owning a home is less than one year. On the other hand, it takes 7.5 years to break even on owning a home in Idaho Falls, Idaho, and just over six years to break even in Riverton, Wyoming. Compromise Common Among Millennial Homebuyers Millennials are having to be flexible on everything from house size to location and amenities in order to find a home priced within their budget. M ost millennials still believe in the American Dream of homeowner- ship—77 percent want to own a home someday, according to a ValueInsured Modern Homebuyer Survey. However, those hopes and dreams sometimes face an uphill climb when it comes to the challenges of the modern housing market. ValueInsured's survey provides some insights into where millennial homebuyers are compromising when it comes to purchasing a home—and why. As ValueInsured pointed out, millennial homebuying isn't match- ing the generation's aspirations in 2018, either in terms of homeown- ership rates or the homes they're purchasing. While nearly 80 percent of millennials report being interested in homeownership, the actual U.S. millennial homeowner- ship rate is only 35.3 percent—"the lowest level since the U.S. Census began tracking homeownership by age groups in 1982." How many millennials report having to revise their housing wish lists when it comes time to buy? Eighty-five percent, accord- ing to ValueInsured's survey, as compared to only 56 percent of homeowners in all other age groups. For baby boomers, the number is 34 percent, well under half the millennial rate. So, what form are those con- cessions coming in? Forty-one percent of surveyed millennial homebuyers report having to set- tle for a smaller home than they wanted in order to stick within their budget. Given the continued increase of home prices in many markets, that's not surprising. Forty percent report having to expand their search for a home beyond their target location, and 41 percent report having to sacri- fice some desired features in order to make the buy, including air conditioning, fireplaces, or floor- ing options. Thirty-nine percent said their new homes came with less accompanying land than they would have liked. There are definitely some instances of buyer's remorse in the mix, to one degree or another. Of those surveyed, 37 percent said they didn't like the style of home they eventually settled on. Eighty percent of those surveyed reported planning to move again within five years. A full 52 percent planned to move again within three. 85% of millennials report having to compromise their housing wish lists when it comes time to buy. In this world of record number of defaults, complex loss mitigation solutions and changing government regulations, who can you count on to manage your most valuable assets, your customers? The Name You Can Count On in Loan Servicing. THERE ARE NOT MANY THINGS IN THIS WORLD YOU CAN COUNT ON For more than 40 years, Cenlar partners have counted on us for: Better default management solutions Improved management of regulatory compliance Reduced portfolio risk Increased fl exibility to achieve your strategic objectives Superior customer service Our loan servicing is as dependable as the sun setting in the west. Visit us at or call 1-888-SUBSERVE (782-7378) to learn how you can count on Cenlar FSB to manage your loan portfolio.

Articles in this issue

Links on this page

Archives of this issue

view archives of TheMReport - MReport August 2018