MReport May 2018

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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 Understanding the Millennial Buyer Millennials are looking at alternate down payments under the conventional 20 percent guideline. W hile it might be the industry gold stan- dard, the "typical" 20 percent down payment doesn't exactly glitter with the majority of first-time millenni - al mortgage getters. When queried about their quintessential down payment level, two in three—or 68 percent—of homebuyers in this cohort say they'd prefer to put down under 20 percent, according to the latest ValueInsured Modern Homebuyer survey. At least in terms of ideal down, the "new normal" down payment seems to be 10 percent. Nearly one in four (24 percent) opted for this level; another 11 percent say that a 15 percent down would be just fine with them. If granted the option to select their down payment level, 7 percent of all millennial first-time buyers fancy a zero-percent- down pay - ment loan, the survey reveals. In a perfect world, 26 percent desire to put down 3 to 5 percent. Strictly speaking, one in three (33 percent) say their ideal down payment is up to 5 percent, the survey notes. Why such diminutive down payments? Most of the respondents cited "eagerness to buy immedi - ately" as their prime motivator, with the understanding that their more paltry down payment could result in a higher interest rate and a bigger monthly mortgage bill. But it ap - pears that for one in three home- buyers in this age group, trading less upfront cash for more money on the backend is the perfect tradeoff. Then, there's this: 12 percent sur - veyed contend they could afford to give more money but would rather free up capital for other investments instead. For the record, 15 percent of survey takers selected a 20 down payment as their ideal, while 17 percent prefer a payment of more than 20 percent, effectively mak - ing buyers who want to put a down payment of 20 percent or more a minority (32 percent). Almost all in this group maintain that having a lower monthly mort - gage bill is the impetus behind their squirreling away more dough for their down payment. Another 10 percent say they're planning to put down more because they're receiv - ing a cash gift to help augment their own down payment nest egg. Bidding 'Sight-Unseen' Homebuyers are making offers for homes without first seeing them in person. A n increasing number of homebuyers are making offers for homes with- out first seeing them in person, according to an analysis by online brokers Redfin. The study, which surveyed 1503 respondents who purchased a home in the last one year in November and December 2017, found that 35 percent of people who bought a house last year made an offer without seeing it in person, showing an increase from 33 percent in May 2017 and 19 percent in June 2016. It found that millennials were even more likely to make an offer on a home sight-unseen with 45 percent of millennials surveyed saying that they had made an offer on the home before seeing it, re- flecting their comfort on relying on online information about homes for sales and neighborhoods. In fact, the study found that many buyers who can't get to tour a home right away because they are busy or relocating rely on online tools such as virtual tours, online maps, housing apps, statistics, and online reviews to understand the subtler aspects of the neighborhood where they plan to live. Regionally, homebuyers in Los Angeles were most likely to bid on a home before seeing it, the sur- vey indicated, with more than half (57 percent) of the respondents in this area saying that they had suc- cessfully made an offer on a home they had not seen in person. Los Angeles' neighbors, San Diego and San Francisco with 46 percent and 44 percent respec- tively were other hot Californian markets where homebuyers put a bid before actually seeing the home. The study found that the prevalence of foreign investors in Los Angeles might have played a role in the popularity of sight- unseen offers. Apart from the competitive California markets, this trend was also prevalent in Chicago, Austin, Denver, Washington, D.C., Phoenix, Portland, and Sacramento. Location Takes a Backseat Increasing home prices in metros has buyers opting for properties in smaller cities. B uying a house in 2018 has become steadily more intri- cate with consistent declines in availability and continued price increases, according to an analy- sis by that identified a shift in buyer activity. The report ana- lyzed thousands of views to Realtor. com's website covering the 100 largest metropolitan areas in the fourth quarter of 2017 compared to 2016 and identified a major trend: affordability and availability over location. The analysis primarily focused on a metro's inbound to outbound ratio, which was defined as the ratio of views to that metro from other metros with notable interest from more expensive markets to less expensive nearby markets. The report found shifting interests included demands for properties in smaller cities such as Bakersfield and Fresno as compared to their more expensive Californian counterparts such as San Francisco, Los Angeles, and Sacramento. On average the metropolitan areas with the most inbound views had a median listing price of $291,000 com- pared to the $521,000 of areas such as San Francisco, New York, Washington, D.C., and Seattle. Home buyers instead focused their searches on more affordable locations outside of major metropolitan areas where markets with the highest overall interest were more affordable, had higher expected employment growth, and more available inventory than the markets they receive their inbound views from, the report noted. Another contributing factor in this shift was the significantly lower inventory available for buyers in these major metros. "This low inventory availability, coupled with unaffordability and only average employment performance, could explain why these markets are seeing a lower ratio of inbound views to outbound views," said Sabrina Speianu, Economic Research Analysist for and the writer of this report. "The markets with the highest overall inbound to outbound ratios are more affordable, have higher expected employment growth, and more avail- able inventory than the markets they receive their inbound views from."

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