Real Estate Digest. 275 Mundy Street, Suite 202, Wilkes-Barre, PA When Cash Was King

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1 Real Estate Digest Home Values Expected to Rise, Even as Investors Sell Off A majority of more than 100 forecasters says they expect largescale investors to sell off the bulk of homes in their portfolios in the next three to five years, boosting inventory and potentially contributing to a smoother market ahead. On average, forecasters also say they expect nationwide home value appreciation of 4.5 percent this year, with a steady slowdown in appreciation rates each year through The survey of 110 economists, real estate experts and investment and market strategists was sponsored by Zillow, Inc. and conducted by Pulsenomics LLC. 275 Mundy Street, Suite 202, Wilkes-Barre, PA info@tigerabstract.com When Cash Was King Throughout the recovery, large-scale investors have purchased hundreds of thousands of homes across the nation, particularly lower-priced vacant and foreclosed homes, fixing them up and keeping them in their portfolios as rental properties. This investor activity helped put a floor under sales volumes during the depth of the housing recession, but also created competition for many wouldbe buyers and contributed to rapid price spikes in some areas. Real estate investors, both large and small, played a crucial role in helping to May 2014 Volume 40 Number 5

2 May 2014 stabilize markets during the darkest days of the housing recession, but a decline in investor activity now isn t necessarily a bad thing, and could have real benefits for buyers, says Zillow Chief Economist Dr. Stan Humphries. Buyers entering the market in the next few months will not be competing with cash-rich investors like they were last year, which should be some small solace given the higher prices and mortgage rates that they will encounter. The gradual decline of investor activity should be viewed as another sign of the market slowly returning to normal, he said. Leveling Appreciation On average, panelists say they expect nationwide home value appreciation of 4.5 percent through the end of this year, a pace that exceeds historically normal annual appreciation rates of around 3 percent. This appreciation is expected to slow to roughly 3.8 percent in 2015 and 3.3 percent by 2018, rates much more in line with historic norms. Based on current expectations for home value appreciation during the next five years, panelists predicted that overall U.S. home values could exceed their April 2007 peak by the first quarter of 2018, and may cross the $200,000 threshold by the third quarter of The most optimistic group of panelists predicted a 5.6 percent annual increase in home values this year, on average, while the most pessimistic predicted an average increase of 3.4 percent. The most optimistic panelists predicted home values would rise roughly 10.6 percent above their 2007 peaks by the end of 2018, on average, while the most pessimistic says they expected home values to remain about 4.5 percent below 2007 peaks. TRENDS Seniors to Flex Housing Muscle Experts speaking at the recent International Builders Show in Las Vegas suggest one of the best niches to be in now and in the future is the over-55 homebuyer market. The 55 and over population is one that will steadily rise over the next several years, and the need for housing to accommodate that group will also rise, said Paul Emrath, vice president of the Home Builders Association. He projected the share of U.S. households age 55+ will increase from 43.3 percent in 2014 to 46.6 percent in Experts said builders need to produce dwellings that will serve a variety of lifestyles. There are more alternatives now for any lifestyle or location that a person wants, said W. Don Whyte, president of Elevated Real Estate Solutions LLC in Biloxi, Miss. Builders and developers understand that they are servicing a population that is considerably different from what it was even five years ago, so there are more homes and communities that meet the specific needs and wants of today s consumer. Not surprisingly, a firm studying global construction in the future has determined there will be two main needs through the year 2023: The first is more senior housing. And the second will be more sea walls to combat rising oceans. Lux Research estimates that the senior housing construction market will more than double to a $123 billion in the next 10 years, and sea wall construction will be a $9 billion business.

3 Will New Urban Burbs Draw More Millennials to Suburbs? Baby boomers who want to downsize and sell their large suburban homes may have trouble finding a buyer, as Millennials look to make roots in urban areas rather than suburbs or rural areas, according to a new report by Nielsen. Sixty-two percent of Millennials say they prefer to live in a mixed-use community in urban centers, where they can live in close proximity to shopping, restaurants and work, the report finds. Millennials currently live in urban areas at a higher rate than any other previous generation, according to the Nielsen report. What s more, 40 percent say they don t plan to leave the city in the future. The American Dream is transitioning from the white picket fence in the suburbs to the historic brownstone stoop in the heart of the city, the report notes. Suburban developers are coining the term urban burbs as suburban communities move toward more urban environments that include walkable downtown areas, transit-friendly areas, and mixed housing types. The report notes that cities such as Miami; San Antonio; Memphis, Tenn.; Portland, Ore.; and Jersey City, N.J., have adopted such principles to make their suburban areas more appealing to younger generations. The highest concentration of Millennials in the country is in Austin, Texas, which has nearly 1.2 times the national average rate of Millennials. Austin fits the ideal for Millennials, with urban energy, an exciting art and music scene, and close proximity to shopping, dining, offices, and education, the report notes. May 2014 Millennials are most concentrated in Western states. According to the report, the following cities have the highest concentration of Millennials: Y Austin, Texas: 16% Y Salt Lake City, Utah: 15% Y San Diego: 15% Y Los Angeles: 14% Y Denver: 14% Y Washington, D.C.: 14% Y Houston: 14% Y Las Vegas: 14% Y San Francisco: 14% Y Dallas-Fort Worth, Texas: 14% Green Homes Get High Marks The large majority of homeowners who purchased green homes in the last three years are satisfied with their purchases, according to the Home Builder s Energy and Green Building Subcommittee. Key findings of the study reveal: Y 94 percent would recommend a green home to a friend Y 92 percent would purchase another green home Y 71 percent believe that green homes are, overall, of higher quality Y 55 percent knew their home may have cost more than a nongreen home, but believed the benefits outweighed the cost Y 90 percent were satisfied knowing they did the right thing in buying a green home.

4 May 2014 INDUSTRY Help Coming for First-Time Buyers? First-time homebuyers are being hit particularly hard by rising prices and tougher credit standards and their decreasing market share proves it. The NAR reports that first-time homebuyers accounted for 26 percent of purchases in January, down from 30 percent a year earlier. It s also the lowest market share for first-time buyers that NAR has recorded since it began measuring it in The falling number of first-time homebuyers has the potential to slow the pace of the recovery, Bloomberg reports. The decline of first-time homebuyers is hampering home sales, which dropped 5.1 percent in January compared to a year earlier, NAR reports. It s a huge problem, says Leslie Appleton-Young, chief economist for the California Association of Realtors. We have a ladder of home ownership and need first-time home buyers beginning the process of owning, building equity, and trading up to have a healthy housing sector. Some housing advocates are blaming investors for pushing out homebuyers, particularly where first-time homebuyers are being outbid by investors offering all-cash offers. Nearly 80 organizations are calling on federal regulators to address investors pushing potential homebuyers out of the market, reports the California Reinvestment Coalition. They argue that federal housing agencies conducting bulk sales of foreclosed homes and distressed mortgages have heightened the problem. We re ringing the alarm bell now and asking regulators to act, says Kevin Stein, associate director of the California Reinvestment Coalition. Wall Street and other cash investors are making it harder for families to buy their first house, for renters to stay in their communities, and for neighborhoods to recover. The housing advocates are asking for greater oversight from federal regulatory bodies, such as more oversight of new investor landlords and ensuring that banks aren t favoring investors over home buyers with FHA loans in REO purchases. The group is also asking for greater research on the disparate impact of REO properties on various communities, particularly the impact on minority communities. Short Sales on Their Way Out In the summer of 2009, distressed sales made up just under 50 percent of all transactions as reported by the NAR. Fast forward to last fall, and that number dropped to only 14 percent. When separated out, short sales alone fell from around 20 percent of all transactions to just five percent in the same time period. Short sales are becoming less common for many reasons. For one, many markets are now well into recovery mode. Home values are rising and sellers who were underwater only a year ago have a bit more breathing room today. With fewer homeowners in financial distress and the worst of the cleanup from the housing bubble behind us banks and courts are finally processing through their backlogs of distressed properties. And employment growth means more homeowners can afford to stay in their

5 homes and make their mortgage payments. In addition, short sales are becoming less favorable for sellers. For the last few years, the Mortgage Forgiveness Debt Relief Act of 2007, which protects sellers from having to pay tax on unpaid or forgiven debt, has made short sales a viable option for many underwater homeowners. However, the Act was sunset at the end of Buyer interest in distressed properties has also cooled. According to the most recent NAR Profile of Home Buyers and Sellers, less than half of buyers surveyed even considered purchasing a home in foreclosure, down sharply from recent years. This may be due to the decline in foreclosed homes available on the market, buyers not being able to find the home that meets their needs, or the perceived hassle of the purchase process, among other factors. Finally, lenders themselves are also less interested in short sales. As market values increase, there is less need for lender/borrower negotiated sales. Added to that, the return of third-party purchasers (institutional investors or cash buyers purchasing at foreclosure auctions) is shifting the pendulum back toward traditional foreclosure auction and REO. MARKETS Multifamily Poised for Another Strong Year The multifamily sector is poised for a healthy 2014, but after this year, growth is expected to moderate to more historical levels, according to a new analysis by Freddie Mac and Fannie Mae. May 2014 As the broader economy continues to grow, we expect the overall multi-family sector to remain strong in 2014, says David Brickman, executive vice president of Freddie Mac Multifamily. Revenue growth in the industry will continue to perform near or above historical averages, but at lower rates than the previous two years. The growth in some markets, however, has already slowed down and vacancy rates in a select few are inching up. Many major markets are posting vacancy rates that are below historical norms, which are decreasing concerns about overbuilding in the sector, Brickman says. However, vacancy rates in Washington, D.C., and Norfolk, Va., are higher than historical averages, which could put these markets at a higher risk of a slowdown if supply increases more, Brickman says. Fannie Mae notes the following factors will be major drivers of continued high demand for the multifamily market this year: improving job growth, an increasing number of renter household formations, new apartment supply, and rising for-sale home prices, says Kim Betancourt, Fannie Mae s director of economics, multifamily economics and market research. AGENTS CORNER Three Ways to Overcome Facebook s Restrictive New Algorithm Even if you thought your Facebook page was doing well in the past, you may have noticed some changes this year. That s because Facebook made algorithm changes that affected all pages, and it slid under the radar of most users. Accord-

6 May 2014 ing to Facebook, the new rules were designed to rank and display content to support the notion that people want to see more relevant news and what their friends have to say about it versus news feeds congested with the latest meme. The re-configured algorithm resulted in a decrease in the shared links, pictures and posts that one normally would see when logging on to the site. For most Facebook pages, a significant decrease in total reach was the result and a pay to play concept is now the best bet to get your message seen, said Erica Campbell Byrum, director of social media for Homes.com and ForRent.com. This is huge for marketing your brand because fewer views reduce the chance that a potential client can discover you. When users see a post for free, whether shared or on their news feed, it s referred to as organic reach. When users see a post because you paid for additional exposure, it s called paid reach. Despite the changes, there are still ways to get ahead with your page. The easier way will cost money, but for those looking to save a few bucks, a little work can help you improve your page organically. According to Facebook itself, there are three ways to improve your feed. 1 Create Likable Content: The more your fans like content on your page, the more often your posts will show up in their feed. If your Facebook page s reach has decreased, it probably means you need to work on presenting relevant content with a natural, non-spammy tone. 2 Improve Reactions: If your post shows up in some users feeds but is ignored or marked as spam, your post is less likely to be shown to more people. Focus on engagement, repeat tactics that have led to your Facebook friends liking your content. Test different times of day to determine when your posts are more likely to be seen and liked, and most importantly, quit using memes! 3 Be Aware of Content Types: If a particular user has a tendency to like videos or photos posted by your page, then they are more likely to be shown that type of content on a regular basis. Sustain that exposure with helpful content, post at the right time and don t cram your posts with the same old marketing lingo. For an agent, this means not just discussing new listings, but publishing content about a variety of things be it books, pets, hobbies, and more locally inspired subject matter, such as events and neighborhood happenings to get more likes and shares. When Markets Are Down, Look to a Higher Power? Bury a St. Joseph statue in your client s yard, and the patron saint of homes and carpentry will help it sell faster. Or so believe some homeowners and their agents. Catholic Supply offers home-selling kits at its St. Louis stores and online. Kits include a St. Joseph statue, prayer card and instructions. The Wall Street Journal compared sales of the kits with home sale figures for the past five years. It found that sales of the kits had an inverse relation with real estate sales when real estate sales slow, sales of St. Joseph statues pick up. Lara Traina, Catholic Supply s director of marketing and web management, told the Wall Street Journal real estate brokerages often buy the kits in bulk. Do they work? As Ms. Traina told the Journal, it s the belief in St. Joseph and your prayer that really matters. more on next page

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