The renter population is expected to only get bigger in the next 15 years and will likely exceed new homeowners by a significant number, according to a newly released report by the Urban Institute and posted on mynorthwest.com, "Headship and Homeownership: What Does the Future Hold?" Between 2010 and 2030 - the year millennials are to reach peak homebuying age - new renters will exceed new homeowners by 4 million, according to the report. Broken out, the report estimates 13 million new renters to 9 million homeowners by 2030. "The rapid growth of the renter population will create significant demand for new rental housing construction and encourage a shift of owner-occupied dwellings to rentals," according to the report. "In the next 15 years, many more rental households will form because of the size and ethnic composition of the millennial generation. Rental housing vacancy rates are already low, and rents are rising. Single-family homes are shifting to renter occupancy throughout the nation, and this trend is likely to continue." Still, the total number of homeowners is expected to see growth in the next 15 years due to net household formation, the report notes. In particular, the rate of Hispanics in home ownership is expected to make gains, from 47.3 percent in 2010 to 48.2 percent by 2030. Household formations are mostly expected to be driven among nonwhite populations from 2010 to 2020 with 77 percent of new households expected to be nonwhite, according to the report. In the following 10 years, that growth is expected to be at 88 percent. Also, household formation growth also is expected to be driven by a growth among senior households, those who are 65 or older.
It's human nature for homeowners to be overly optimistic about the value of their homes. A new study published in the Journal of Housing Economics estimated how much - eight percent. Researchers say that the overvaluations often are from owners who miscalculate their estimations over the capital gains they've accumulated in the house. The study echoes similar findings from a recent survey conducted by Quicken Loans, which found a "widening gap" between what homeowners think their home is worth and appraisers' valuations. In a recent article, The Seattle Times asked appraisers why owners tend to overvalue their homes -- besides the emotional attachment they likely have to it. The appraisers said homeowners tend to have unrealistic expectations about how much their improvements add to the home's resale value. Appraisers also note that homeowners often don't realize that they may have over-improved their home compared to others in the neighborhood, which can lead to overestimated values.
Sixty-five percent of consumers have misperceptions about the credit score, down payment, and income requirements needed to qualify for a mortgage, according to a survey released by Wells Fargo and Ipsos Public Affairs of more than 2,000 U.S. adults. A high percentage of home owners are still unaware of recent efforts by lenders and the government to enhance the availability of credit through lower-down payment programs. Two-thirds of consumers surveyed believe they need a very good credit score to purchase a home, with 45 percent believing a "good credit score" is over 780 (many lenders consider scores over 660 to be "good"). Consumers also tend to overemphasize credit scores as a single factor that determines whether they'll be able to buy a home. But a credit score is not the sole criteria. Many lenders will consider a loan applicant's entire financial picture, including income, assets, debt-to-income ratio, credit history, credit scores, and the amount of the loan compared to the value of the property. Also, the survey found that consumers tend to overestimate the down-payment funds needed to qualify for a home loan. Thirty-six percent of respondents said they believe a 20 percent down payment is always required, the survey showed. However, down payment options are available as low as 3 percent or 3.5 percent for some loan programs.
The Consumer Financial Protection Bureau seeks to delay until October 1 implementing the new Truth in Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure regulation. The new rules were originally set to take effect Aug. 1. The proposal must still undergo a public comment period before it becomes official. The new "Know Before You Owe" mortgage disclosure rules aim to streamline the disclosure process for home buyers during closing by merging the Truth in Lending Act and the Real Estate Settlement Procedures Act into one form.
Matthew Gardner does not see a housing bubble on the horizon even though many local markets are overheated. Gardner, who recently became the chief economist for Windermere Real Estate, headed Seattle-based Gardner Economics for 17 years. He points to fewer house flippers, rigid lending guidelines, higher interest rates and rising home prices as reasons for his no-bubble theory. In a blog post, Gardner noted that the number of foreclosed homes continues to drop. Foreclosures are the preferred property type for flippers-investors who rehabilitate properties and immediately list them for resale with hopes of a quick profit. Oversupply is a necessary prerequisite for a price crash. The inventory of existing homes, new homes and in-city condominiums has become scarce in the Puget Sound area.
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