Real Estate News & Updates from the Monadnock Region
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Different Housing Needs for Different Generations

June 14th, 2012 | Posted by Dick Thackston in Mortgage News | News | Real Estate News - (0 Comments)

I see America changing every day when I talk to home buyers. American’s expectations about housing are switching rapidly from the “American Dream” of Mom, Dad, kids and a house in the suburbs, not as much because of the financial decay of the last three years, but rather because the current generation of Home Buyers, the so called “GenY”, has moved away from the highly conformist expectations of their grandparents – the “Baby Boomers” – to a highly diverse, multicultural, multidimensional society.

The Baby Boomers experience, viewed as a cultural event or milestone, has had more impact on American society, real estate and home ownership than any other event in American society since the Civil War. Boomers were raised with these expectations and typically only owned three or four homes in their lives – this is the generation that had mortgage burning parties when they paid off their homes and built a pool.

The Gen X’ers, the children and grandchildren of the Baby Boomers, never fully adopted the lifestyle of their elders. This is the generation that came of age in the boom years of the 80’s and 90’s. This generation used credit cards, car loans and mortgages like no generation before. This is the generation the treated their homes as Piggy Banks and expecting to buy low and sell high on every home they would ever own and they expected to own a lot of them too! Gen X’ers as a group expected to stay in multiple homes for short periods – three to four years max – disposable lifestyles. Their generation is much smaller then the “Baby Boomers” as a group but has had a disproportionate impact on the housing market. While these Gen X’ers have had an immediate short term negative effect on housing and the American Economy as a whole, the effect on real estate will be short term because this is a small generation. The dramatically different “Generation Y”, aka “The Microwave Generation”, influence is already being felt on the real estate market and the economy as a whole.

“Generation Y” is much larger than the Gen X’ers and has a completely different agenda. Financially, socially and educationally, Gen Y is dramatically different than either of the two prior generations of Americans. Gen Y is much more likely to have an IRA or a 401K than either of the earlier generations and at a much earlier stage in life: Baby Boomers expected a pension, Social Security and the equity in their home to carry them through retirement; the Gen X’ers expected to flip houses to infinity and beyond with minimal reserves and limited funding of retirement accounts.

“Generation Y’s” effect on housing will be as dramatic as that of the post World War II baby Boomers or greater. The Y’s are happy to not own a home any time soon if at all. It’s more important to the Y’s to have flexibility and cash. This is a generation that has student loans like no other before but that’s because as a group they view education not as just as important but imperative to their lives. Lifestyle choices such as access to services, an elegant downtown – clubs and shopping – is more important than owning a home. Y’s as a group are looking for housing that meets those criterion rather than a quarter acre lot and a three bedroom house.

Sure, Generation Y’s expect to own homes, but it is not an urgent first order of business as it was for their parent and grandparents. Generation Y’s perspective on real estate ownership is colored by their willingness to rent. (Sixty plus per cent of renters want to own their own home someday according to a recent survey by PulteCorp.) The Y’s interest in savings is reflected in the much higher contribution rates to IRA’s and 401K’s than either of the prior generations combined with their much higher student loans and need for “a lifestyle” that is more cosmopolitan and focused on convenience than the Generations of “Boomers” and “X’s” that came before them.

By Dick Thackston CRB, ABR, ABRM

Broker NH, MA & VT

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Reality or Fear Based View of Real Estate in the US The Choice is Yours.

January 26th, 2012 | Posted by Dick Thackston in Buying Tips | Mortgage News | News | Real Estate News - (0 Comments)

Prior to 2007-2008 most of the American public and most mortgage lenders believed, and often would state in conversation, “real estate never goes down!” Since that time frame buyers and sellers have gone to the other extreme and now the common wisdom is “real estate will never go back up.”

Well never is a long time. Both perspectives are wrong.

For the last several years we have been pummeled for a seemingly continuous stream of negative events: tidal wave and earthquake in Japan, un-employment over 10%, European Debit crisis looms as Greece nears default on its debt, (The last one just kills me: the entire GDP of Greece in 2010 – $310 Billion +/- – is approximately the same as the State of Maryland in 2010 – $300 Billion +/-. Do we actually believe if the State of Maryland defaulted there would be a worldwide financial crisis?), and each of the events has run a shock wave through people’s emotions which does affect their willingness to make the long term commitment to home ownership. It’s not reality! Fear sells newspapers, magazines and broadcasts. Fear does not ever produce the best results or good decisions.

Truth be told, the down turn in housing started in the third quarter of 2005. In June of 2005 the Fed bumped rates up in order to stimulate “a soft landing in housing” the curves between housing units sold and housing prices began to diverge at that point with house prices continuing to increase for another two years, while units of sales began to decline at an ever increasing rate. By the time the reality hit it was already too late. That being said, let’s look at the sunnier side of the situation. All of this is clearly tracked by something called the Housing Affordability Index published by the National Association of REALTORS.

The Housing Affordability Index has two basic components: average mortgage rates and average house prices which is then compared to the average household income. The higher the number, the easier it is for people to buy homes, and the lower the number, the harder it is for people to own homes. The number is designed to indicate how affordable the median home is to the median income family in the United States. An index of 100 means that the median income household has exactly enough income to afford the median income home; when the index is greater than 100 then the median household has more than they need to purchase the median home and when it’s below 100 then they don’t have enough. (When I started selling homes in Pasadena, Maryland in 1982, the Housing Affordability Index was well below 100 due to very high interest rates, in the 13-15% range). Today due to all the price declines and interest rates being at historic lows, the Housing Affordability Index has soared to a record high number well over 100.

So what’s the point? The point is that a balanced perspective and a positive outlook on life are the key to making good decisions in housing as well as in other areas of ones life. Scientific studies have shown, (See Dr. David Lykken’s work), that your happiness set point is about 50% genetic and the rest is up to you. There can be little or no doubt that the homes that are being purchased today at historically low interest rates and the lowest prices in a decade or more will fuel the American economic powerhouse in a few years – so be positive, keep your perspective and never say “never”.

By Dick Thackston CRB, ABR, ABRM

Broker NH, MA & VT

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The only thing that stays the same is change. -Anonymous

December 28th, 2010 | Posted by Dick Thackston in Mortgage News | Real Estate News - (0 Comments)

There are likely to be several good reasons that real estate will look better to both sellers and buyers in the next year / time of course will tell.

Mortgage rates will remain at historic lows. No doubt interest rates will increase but will still remain at historic lows probably in the 6% range which is well below the historic home mortgage rate of the last forty years which has averaged out closer to 10%. Despite indecision and jawboning in Washington as to what to do about both Fannie Mae and Freddie Mac realistically there will be no economic recovery without housing and there will not be without a secondary market with out Fannie Mae and Freddie Mac. Probability is that nothing concrete will be changed in the coming year which is actually good since the proposals originating from the talking heads in Washington are almost all bad, all anti-housing and all likely to lead to a worse rather than a better housing picture therefore nothing is likely to be done.

At the end of the day we are still Americans and as a group we still want to own homes. Probably the approach to home ownership in some regions of the country will be more basic than it has been in many years, (people will go back to buying housing for well housing rather than speculation), but this is probably a good thing in the long run which would lead to greater stability in the lending sector and more confidence in the consumer sector which will bring more of the average home buyers off the sidelines if they don’t fell like they will loose their house once they buy it. (Fannie Mae has recently done a survey that shows the majority of Americans still believe a home is a safe and usable investment.)

Builders and lenders will begin putting new inventory into the system. Builders have not been able to build profitable for several years and many have been saddled with inventory that appears to be going away. Lenders have put most of their “trash” inventory on the market in the last two years in hope that they could force it through the system as buyers would have little or no choice which in many cases was true. It appears that lenders are making plans to release a significant volume of properties after the New Year that is likely to be of a more competitive quality and well priced.

There is talk of tax cuts. For now the current tax code is in place that allows the interest and taxes on both a principal residence and secondary residence to be deducted from most peoples taxes. The Pushme-pullyou activity makes this too close to call but it would appear that the minds set of the new congress forming in a few days is more likely to manipulate the economy through the tax code than the failed one time direct action that we’ve seen in the last two years. Watch and see but something will probably happen here by late spring for the better.

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