Younger Buyers, Renters Express Growing Optimism About Housing Market's Future

Up to one million Home Affordable Modification Program (HAMP) mortgages may be eligible for help through 4 new programs recently announced. Mortgage holders with a good record of payment for 5 years may be eligible to receive assistance to help pay down principle. Other borrowers will have an opportunity to re-amortize to further reduce monthly payments. These changes come before some features of the program are slated for upward adjustments. Check out more info on the issue here, with additional links to check out. 

If the housing market's long-term recovery is dependent on the interest of younger buyers, the latest Housing Confidence Index released by Zillow should offer some promise. The most recent quarterly market research report, based on data compiled through the summer of 2014, was titled "Will Youthful Exuberance Today Mean More Sales Tomorrow?" Its findings revealed a renewed sense of optimism from prospective younger homebuyers - specifically those of the millennial generation - highlighted by the 80 percent of responding 18-to-34-year-old renters who affirmed confidence in their ability to one day own a home. There's a perception that, either because of the residual damage inflicted by the housing market's downturn or a general lack of financial viability, millennials don't view homeownership as a worthy goal. But many of the study's discoveries rendered that notion inaccurate, with nearly two-thirds of young adults reporting that owning a home is necessary to achieving "the good life" and "the American Dream." That budding perception may be partially due to outsized expectations for returns on those investments. Young adults, in particular, have high hopes for property value appreciation rates over the next decade, and they proved more likely than their older counterparts to believe home prices will rise rapidly. Still ground to gain As Stan Humphries, Zillow's chief economist noted, roadblocks related to mortgage credit approval standards and wage increases remain, but there's a growing sense among younger renters that buying is a viable option in their future. Perhaps most encouragingly, millennials who already own homes are exhibiting better rates of mortgage fulfillment than their predecessors - a sign that they don't take their responsibilities lightly and have approached the process with the requisite preparation and savings. "It's heartening to see younger renters express so much confidence in their ability to buy a home in coming years, because today's renters by necessity are tomorrow's buyers," Humphries said. "Cynics might argue that these results represent no more than youthful exuberance, or perhaps some naiveté, but that's missing the point. We need this generation to be confident and wanting to buy, regardless of the difficulties they face." Perhaps the biggest difference in homeowning approaches today from 25 years ago is seen in the timeline. Younger renters have by and large seen their homebuying plans delayed, and that trend manifested itself in the Zillow data. Just 36 percent of younger renters expect to buy a home within the coming year, while a little more than half - 54 percent - foresee a purchase within the next three to five years. Still, those rates reveal more optimism than was exhibited by older renters - only 10 percent of whom plan to buy a home within the next year. Appropriate preparation Regarding homeownership as a long-term investment, millennials surveyed by Zillow displayed more traditional mentalities than some of the older renters. Sixty-five percent of 18- to-34-year-old renters agreed owning a home is the best investment over time, compared with just 59 percent of renting members of Generation X and 61 percent of baby boomers. While that gap is not especially substantial, it's still promising to see the fallout from the recession hasn't totally discouraged millennials from pursuing homeownership. As a HousingWire report noted, post-recession credit approval standards are still tight and the average worker's wages have increased only modestly since the recession ended. Despite those challenges, the outlook for the housing market's future is optimistic, at least as far as most current renters are concerned. That may be in part a function of the rising costs associated with rental units, particularly in major metro areas, but it's an encouraging sign regardless. A separate study released by The Demand Institute noted the dwindling number of younger adults still living in multigenerational households. While most of those millennials are transitioning out of their parents' homes and toward renting, the shift still represents progress. More importantly, there's a sense that young people are assuming a greater level of accountability and understanding when it comes to the responsibilities associated with homeownership. Those who have already bought property are paying their mortgages on time - at more consistent rates than older generations - and many prospective buyers report actively saving and improving upon their creditworthiness. "Although strong aspirations are no substitute for financial capacity or creditworthiness on a mortgage loan application, this feedback from millennial renters is significant because it confirms that they bear relatively few psychological scars from the housing bust, and because the attitudes of this generation will drive housing trends in the decades to come," Terry Loebs, founder of research firm Pulsenomics, told HousingWire. If that attitude results in a renewed sense of fiscal responsibility, consistent home sales activity and improved rates of mortgage fulfillment, then the market as a whole will stand to benefit over the long term.

Why rent when you can buy? Answer that question and you might be onto something perplexing a lot industry people. Millennials, when asked in a recent survey, said they would rather rent than buy, to the tune of nearly 6 in 10. Only 1 in 4 Millennials today owns a home. That is significantly down from the same age group in previous generations, and begs the question: Why? The answers, like the generation, are very unique. The bottom line is that with the right purchase, many could save upwards of 700k over the course of a 30 year mortgage vs. renting, and that is something to discuss. Read more here.

A group of mortgage-bond investors have sent a letter to Ocwen in which they accuse the company of “imprudent and improper” actions that may be the precursor to a lawsuit, according to Kathy Patrick of Gibbs & Bruns LLP. The company has been under the microscope in recent months for improper conduct, highlighted by a tangle with the State of California. Ocwen agreed last Friday after close of business to pay a 2.5 million dollar fine in order to avoid suspension of their operating license in the state. The latest woes only make the outlook more challenging for the beleaguered loan servicer. Read more here

Prospective homebuyers having trouble securing mortgage credit through traditional channels might find it comforting to know they're not alone - and that they have other options. Government-program loans, such as those offered by the Federal Housing Administration or the U.S. Department of Veterans Affairs, offer low down-payment terms for those who are eligible. It's also important to recognize that, even for those who don't qualify, a down payment doesn't have to come entirely from personal income. Many first-timers are finding that generous gifts from friends, family members or other third parties are offering the boost they need to secure the purchase of a new home. A recent Bloomberg report chronicled the growing trend of "Mom-and-Dad banks," which are playing an increasingly important role as lenders and currently helping sustain the housing recovery. Based on data compiled by the National Association of Realtors, 27 percent of first-time homebuyers in 2013 received a cash gift to help with the down payment, usually from relatives or friends. That's the most substantial rate seen since the NAR began collecting that sort of data in 2009, and it's up from 24 percent in 2012. Many economists expect those numbers to remain steady - possibly even balloon further - as many would-be first-time buyers continue to deal with burdens related to heavy student debt and stagnant wage growth. Until mortgage lending standards are relaxed somewhat, alternative products and less traditional methods for financing will continue to be explored. And as property values continue to appreciate in many parts of the country, a lot of younger adults are finding their homeowning parents are suddenly equipped with ample equity. That newfound wealth can result in assistance, especially now, while borrowing costs remain near historically low levels. "Without them, the recovery's not sustainable," Anika Khan, a senior economist for Wells Fargo Securities LLC in Charlotte, North Carolina, told Bloomberg. "[The trend] just moves the housing recovery along." Factors working against the traditional buyer This past July, the Federal Reserve released its annual report on the collective wealth of American households, finding the struggle to save toward a down payment was the most common reason many would-be buyers opted to rent instead. Even those who did buy homes in 2013 admitted they might have done it sooner had they not be hampered by various debts. In fact, 54 percent of first-time buyers acknowledged that their student loan obligations deterred or prevented them from fulfilling their homeowning dreams earlier. That gives further credence to what the NAR and other industry groups have been contending for some time now: Student debt is the primary contributor to the lack of activity from first-time buyers, who comprised just 29 percent of the overall homebuying population in 2013, compared with about 40 percent historically. Over the past two years, the influx of investors who have infiltrated the market hasn't helped the cause of younger buyers. It's nearly impossible for them to compete with such cash-in-hand buyers, who emerged with regularity in distressed markets, often looking to buy foreclosures or short sales with the endgame of rehabilitating - and reselling at a profit - in mind. But as Lawrence Yun, chief economist for the NAR has noted, with home retention rates improved and fewer foreclosures lining most local housing markets, that investor influence has eased. And that means competition is less fierce in many areas. "With the investors stepping away, for some first-time buyers and millennial buyers, they have less competition," Yun said. "So it would be an opportune time to enter the market." Of course, it's not realistic for all homebuyers to be in a position to receive such financial support. But the prospects of lighter competition and improving inventory levels - perhaps buoyed by eventually eased approval standards - should be encouraging for aspiring first-timers nonetheless.

Reducing the amount of space in which you live might be a big idea whose time is here. Its subscribers refer to it as micro living, or the tiny house movement among other names, but the idea is the same: lowering the amount of space, the amount of stuff, and the amount of debt. It's an idea that is finding growing support. However, as with all tradeoffs, the benefits also come with some challenges. How do you part with 'stuff' that you want to keep or that has intrinsic value to your life, and where do you have your private space? A recent story here touches on some of these and other related points.

If staying inside this winter is driving you up a wall, then get yourself motivated by getting your house in shape. Start off with choosing a few projects, and planning them out to complete by the start of opening day. If you need a suggestion, start with the ones that will improve your home's value the most.

1. Make your walls feel like new with fresh paint or wallpaper
2. Tile in a backsplash in your kitchen
3. Brighten up your spirits with new lighting
4. Open a new door by replacing old ones
5. Relax in a new tub after installing it

More info and links are here, good luck!

Mortgage rates are at historic lows for all types of loans. However, the difference in interest rates for 30-year and 15-year mortgages is worth looking at. 15-year mortgages require higher monthly premiums for the same loan amount, but the shorter term brings real money back into your income stream faster, and with significant savings over 30-year mortgages. On the current, average home-sale price, savings are estimated at over $100k for the term of the loan. However, those savings come with higher monthly payments, over $600 for the average home purchase price. Have a look at this great article that compares the options.

At some point, the inevitable hand-over was going to happen, but that it will likely happen this year is somewhat of a surprise. Millennials will be the majority of homebuyers compared to other age groups at some point in 2015, according to current trends. Almost half of Millennials want to buy a home in the next five years. Driving factors include outpacing of rent vs. cost of home ownership, an increase in affordable home construction, and more favorable interest rates and loan options. Have a look here for a little more insight and the five best housing markets for first-time buyers.