[REN #827] Real Estate News Brief: Conforming Loans, the Silver Tsunami, the Single-Family Home Sacrifice

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Real Estate News Brief: Conforming Loans, the Silver Tsunami, the Single-Family Home Sacrifice, Real Wealth Show Podcast Episode #827

In this week’s Real Estate News Brief… a new limit for conforming loans, the upcoming Silver Tsunami, and what millennials are willing to give up for a single-family home.

Economic News

We begin with a short week for economic news due to the Thanksgiving holiday. The government reported that the sale of new single-family homes remained above the 700,000 mark for a third month in a row. They were down slightly in October compared to September, but the September numbers were higher than they were in June, when they broke a 12-year record.

Pending sales for existing homes fell 1.7% in October, mostly due to low inventory. The National Association of Realtors says they were down in every U.S. region except the Northeast. But they follow two months of an increase in pending home sales because of low mortgage rates. They also remain higher than they were a year ago. 

Home prices continued to move higher in September, although they remain a little sluggish. The Case-Schiller 20-city index rose 0.4% on a seasonally-adjusted basis. They also varied a lot from city to city. MarketWatch says prices were up the most in smaller cities. Phoenix led the way with a 6% increase. Charlotte, North Carolina was in second place with a 4.6% price jump. Tampa was third at 4.5%.

Consumer spending rose again in October. It’s the eighth month in a row that consumers pulled more money out of their wallets. And, as MarketWatch reports, it’s a positive sign going into the holiday shopping season. (1) Consumer spending is also one of the main drivers for economic growth. The government revised its third quarter estimate for gross domestic product from 1.9% to 2.1%.

Inflation is still idling along below the Federal Reserve’s 2% target. It was up slightly in October, but the annual rate is just 1.3%.

The U.S. consumer confidence index is dipping a bit this month. The Conference Board says consumers are somewhat worried about the economy, but that overall confidence levels remain strong. As MarketWatch reports, hiring has pulled back and it’s a bit more difficult to find a job, but the jobless rate is still close to a 50-year low.

Mortgage Rates

Mortgage rates are about the same as they were last week. Freddie Mac says the average 30-year fixed-rate mortgage was up two basis points to 3.68%. (2)

In other news making headlines…

Higher Limit for Conforming Loans

Homebuyers with good credit will be able to borrow more money for their purchase. The Federal Housing Finance Agency raised the limit for 2020 conforming loans to $510,400. It’s the fourth year in a row that the FHFA has upped the limit. It’s now up almost $100,000 from where it was in 2016.

The loan limit increases are determined by the average increase in home prices. They were up 5.38% from the third quarter of 2018 to the third quarter of this year, so the new loan limit went up by that amount. The loan limits are higher in some areas due to higher home prices. They can go as high as $765,600 for places like the San Francisco Bay Area, New York City, and Hawaii. (3)

Silver Tsunami Will Flood Some Markets

The tight inventory that we’re seeing now could turn into a major surplus because of what Zillow is calling the “Silver Tsunami.” Zillow describes the Silver Tsunami as a massive number of homes that will hit the market as more and more baby boomers leave their homes or pass away. (4) And the number is staggering. The turnover could be as many 20 million homes in the next 20 years. But the Silver Tsunami won’t hit all at once. We’ll see a higher number of vacated homes as we get further into the 2020s and 2030s. 

The Silver Tsunami will also have an uneven impact on metros across the country, and will hit the hardest in areas that attract a lot of retirees. Zillow says that Miami, Orlando, Tampa, and Tucson will see the biggest turnover because they are well-known destinations for retirees. But metros across the nation will be impacted. At the other end of the spectrum, where there won’t be much of an impact, are Atlanta, Dallas, Houston, Austin, and Salt Lake City.

Zillow researchers say it will impact about one quarter of the nation’s owner-occupied homes and provide a “substantial and sustained boost to the housing supply.” That’s expected to help reduce inventory shortages and eliminate a gap that builders haven’t been able to fill.

Single-Family Homes in High Demand

Millennials are showing their love for single-family homes. Redfin says that 93% of those surveyed would prefer to have a single-family home with a long commute than a condo or multi-family home for the same price with a shorter commute. Redfin says there are fewer searches for single-family homes, but that’s probably because of the high prices, not because buyers don’t want them. (5)

If you combine the results for millennials, gen X’ers, and boomers, 85% said they would compromise on the commute to get a single-family home. Gen Z doesn’t have the same preference — at least not yet. Only 58% of them said they’d go with a longer commute for the benefit of a single-family home.  

Links:

(1) MarketWatch Article

(2) Freddie Mac Article

(3) Federal Housing Financing Agency Data

(4) Zillow Article

(5) HousingWire Article

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