MReport October 2018

TheMReport — News and strategies for the evolving mortgage marketplace.

Issue link:

Contents of this Issue


Page 60 of 67

TH E M R EP O RT | 59 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 Price Growth Slows for Luxury Homes The luxury home market is experiencing high demand and quick turnaround, although prices showed some relief in the second quarter. L uxury home prices rose 5.2 percent year over year and did especially well in lower-tax states in Q2. Even so, the rate of growth was down, according to new data from Redfin. The report found luxury home prices, predominantly in Florida, Nevada, and Washington, grew to an average of $1.9 million in the second quarter. In Q1, that growth was up 7.3 percent. The average price for the bottom 95 percent of luxury homes was $350,000. That's 5.4 percent higher than in Q2 of 2017. "Demand for luxury homes in the U.S. has strengthened this year because stock-market gains and tax reform put more money in the pockets of the wealthy," said Sheharyar Bokhari, Senior Economist at Redfin. "Yet the inventory shortage is ongoing—even among multi million-dollar homes. As a result, we are seeing luxury homes sell in record time. The good news is that inventory declined at a slower rate last quarter, which has alleviated some of the upward pressure on prices, resulting in slightly lower price growth in the luxury market last quarter." Luxury homes, which spent an average of 65 days on the market nationally, sold much faster in the Bay Area. Luxury homes in Oakland sold in an average of 17 days, followed by San Jose at 19 days and San Francisco in 29 days. Seattle's luxury homes moved in an average 43 days, while Washington, D.C. luxury homes moved in 44. Cities across Florida and the Western United States saw the nation's largest increases in luxury home prices in Q2, according to Redfin. In West Palm Beach, Florida, the average sales price for a luxury home was up 85 percent over last year, closing at $2.24 million. Luxury home prices were up 59 percent in Boynton Beach, Florida, as well. Redfin said some portion of the gains "can be attrib - uted to the $10,000 cap on state-income and property-tax deductions established in the new tax code, enacted in December 2017." The biggest drops in luxury prices were east of the Mississippi. The average price for a luxury home fell the most in Boston, down 16.7 percent year-over-year in Q2, the report stated. However, prices for nonluxury homes in Boston grew 9.7 percent. Prices for high-end proper - ties also dropped 15.6 percent in Clearwater, Florida, and were down less than 2 percent in Sandy Springs, Georgia, and Alexandria, Virginia. How the Likelihood of Homeownership Is Inherited Research finds parental homeownership and wealth have strong correlations with homeownership among millennials. P arents pass a lot of traits on to their children: perhaps their eye color, an affinity for a particular sport or hobby, and maybe even their work ethic. However, now there is evi - dence that parents also pass another trait on to their grown children: their odds of homeownership. "We now know that a fam - ily habit of homeownership is passed down among generations," stated researchers from the Urban Institute in a recent blog post. "Whether your parents are homeowners influences whether you'll be a homeowner," the re - searchers said. Furthermore, "your parents' wealth influences your future homeownership status." And the difference isn't subtle. The likelihood of being a homeowner increases 8.4 percent - age points for millennials whose parents own homes when con- trolling for race, education level, and incomes. Without controlling for such factors, the gap widens to 17 percentage points. For the millennial generation, the homeownership rate for those whose parents are homeowners is 31.7 percent. Among those whose parents are renters, the rate is just 14.4 percent, according to the research. When it comes to wealth, a 1 percentage-point increase in pa - rental wealth correlates to a 0.009 percentage-point increase in the likelihood of a young American owning a home. For millennials whose parents have less than $10,000 in net worth, the rate is 14.14 percent. For those whose parents have $300,000 in net worth, the home - ownership rate is 36.39 percent. While the researchers said they "don't know exactly how homeownership or wealth affects adolescents," they suggested this influence is important. When it comes to owning a home, there ex - ists a growing gap between differ- ent races in the United States "even as our nation becomes increasingly diverse." This new evidence of a generational link suggests this gap will widen over time. Among young Americans, white millennial households have a 37 percent homeownership rate. The rate is 27 percent for Asians, 25 percent for Hispanics, and 13 percent among black millennials. White parents have a home - ownership rate of 84 percent, while homeownership among Hispanic parents is 64 percent. Black parents have a 48 percent homeownership rate. Wealth is also lower among minority families than for white families. The research found the median net wealth for white par - ents of millennials was $171,000. For Hispanic parents, the median net wealth was $20,700, and for black families, the median net wealth was $17,600. "Our results provide strong evidence that the intergenerational transfer of homeownership and wealth reinforce and exacerbate ex - isting gaps," the researchers stated. As a policy center, the insti- tute suggests, "We need to better understand how this inheritance factor works so we can craft poli- cies that will slow if not reverse widening gaps in prosperity."

Articles in this issue

Archives of this issue

view archives of TheMReport - MReport October 2018