MReport January 2018

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50 | TH E M R EP O RT 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 Millennials in the Market: The Key to a Faster Recovery? The generation has the mass to truly make an impact on the housing market as buyers, according to a recent study. But do their views of homeownership align? W ith a population of more than 88 million, the mil- lennial generation has the vastness to truly make an impact on the housing market as buyers, according to a recent study released by Fannie Mae. However, an underwhelming homeownership demand amongst this age group of mostly 25-34 year- olds has halted the nation's hous - ing recovery as millennials have a lower likelihood of buying homes compared to other generations. According to Fannie Mae's Perspectives blog, the Great Recession serves as the reason be - hind millennials' slow ascent into homeownership. But now that the economy has been recovering for nearly a decade, have millennials begun to increase their homeown - ership goals? Analyzing newly released data from the Census Bureau's American Community Survey (ACS) and using two different change-measurement approach - es, authors Patrick Simmons, Director of Strategic Planning at Fannie Mae, and Dowell Myers, Professor of Policy, Planning, and Demography at the University of Southern California, delve into re - search to discover how millennials are doing in the housing market. The first measurement is the "age-group" approach, which compares the cumulative home - ownership attainment for different groups of individuals at the same age, but at different points in time. Utilizing this approach, the data reports no rebound in millen - nial homeownership rates—even throughout the economic recovery. However, no age group experi- enced an impactful homeowner- ship rate rise. There are two ramifications to this resulting data. One is due to the negative outlook this analysis gives potential millennial home - buyers—as it reassures that home- ownership demand will continue at a low rate in the future. The authors note, "After all, if young-adult homeownership rates have yet to rebound after nearly a decade of economic growth, why should we expect a turnaround in the future?" The second issue is that the results support the idea that millen - nials seemingly prefer not to pursue homeownership, additionally sup- porting the theory that millennial are the vanguards of what the study calls a "renter nation" as homeown- ership is no longer appealing. Conversely, the second method called "cohort analysis" separates current from past homebuying behaviors and tracks increments in the homeownership rate for a group of young people as they grow older, advancing from one age group to the next, the report notes. According to the cohort analysis, the young-adult home purchases accelerated considerably during the economic recovery, starting between 2012 and 2014 at an increase of about 5 percent, and then excelling further through 2016 at about 6 percent— representing a positive outlook for millennial homeownership. The cohort perspective also casts doubt on what the age group perspective suggests, including millennials preferring to stay away from homeownership. Forthcoming research from Fannie Mae's Economic & Strategic Research Group will continue to explore the millennial homeowner - ship rebound. "This future work should not only help us to better understand the geography of the Millennial homeownership awakening but also hopefully provide some insights into its likely durability in the face of intensifying housing market challenges," Fannie noted. Weighing the Pros and Cons of Rising Home Prices CoreLogic recently took a look at accelerating home prices. H ome prices continue to climb both year-over-year and month-over- month, according to the October 2017 Home Price Index (HPI) released by CoreLogic. Nationally, prices increased by 7 percent from October 2016 to Octo- ber 2017—representing the second consecutive month of 7 percent year-over-year increases. Meanwhile, month-over-month home prices increased by 0.9 percent in October 2017 compared with September 2017. Highlighting metro markets—spe- cifically, if average housing stocks are overvalued, undervalued, or at value— the data found that 37 percent of the top 100 metropolitan areas were overvalued, with 26 percent underval- ued, and 37 percent at value. When looking at the top 50 markets based on housing stock, 50 percent were overvalued, 14 percent were undervalued, and 36 percent were at value. "The acceleration in home prices is good news for both homeowners and the economy because it leads to higher home equity balances that support consumer spending and is a cushion against mortgage risk," said President and CEO of CoreLogic Frank Martell. Martell explained that for entry-lev- el renters and first-time homebuyers, however, it leads to tougher afford- ability challenges. In fact, according to the CoreLogic's Single-Family Rent Index, rents paid by entry-level renters for single-family homes experienced an increase of 4.2 percent from Octo- ber 2016 to October 2017, compared with overall single-family rent growth of 2.7 percent over the same time. "Single-family residential sales and prices continued to heat up in October," said Dr. Frank Nothaft, Chief Economist for CoreLogic. "On a year- over-year basis, home prices grew in excess of 6 percent for four consecu- tive months ending in October, the longest such streak since June 2014. This escalation in home prices reflects both the acute lack of supply and the strengthening economy." Look ahead by utilizing values derived from state-level forecasts by weighting indices according to the number of owner-occupied house- holds for each state—CoreLogic proj- ects prices to increase year-over-year by 4.2 percent by October 2018.

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