Morning Briefing: Blow to housing market as renters don’t plan to buy

by Steve Randall17 Mar 2016
Blow to housing market as renters don’t plan to buy
It’s not the news that realtors and mortgage brokers want to hear but Freddie Mac says that the vast majority of renters are not ready to make a move into home ownership.

A survey has found that, even though rents keep rising and mortgage rates are still low, 70 per cent of renters believe that renting is more affordable than homeownership. More than half (55 per cent) are not planning to buy a home for at least three years.

"Renting is becoming a popular choice among many age groups," said David Brickman, executive vice president of Freddie Mac Multifamily. "While most renters still have favorable views toward homeownership and aspire to it, many choose to rent because they view it as more affordable and a better fit for their lifestyle right now."

Forty-six per cent of all respondents and 54 per cent of millennials say that renting is a good choice for now. This could be due to the same perceptions uncovered by the NAR poll we reported yesterday, that low housing supply and difficulty getting a mortgage are weighing on renters’ minds.
New York, Los Angeles among world’s top 10 most expensive cities
In 2011 New York was only just inside the top 50 cities in the world for cost of living; in 2016 it is the 7th place. The Economist Intelligence Unit has published its bi-annual ranking of the most expensive cities in the world, which is once again topped by Singapore.

New York has gained 15 places since the last survey and is at its highest place since 2002. Los Angeles is the only other city in the top 10, climbing 19 places.

Currency fluctuations are the main reason for the increases though with the stronger dollar and local inflation pushing New York higher relative to global peers.   

The Economist’s study looks at various metrics including the cost of gasoline, bread, utility bills and rents.
Refi loans down further
The proportion of refinance mortgages has dropped for the second straight week. The Mortgage Bankers’ Association’s Weekly Mortgage Applications Survey for the week ending March 11 shows a 3.3 per cent dip in the Market Composite Index on a seasonally-adjusted basis, and down 3 per cent on an unadjusted basis.

The Refinance Index decreased 6 per cent from the previous week; the seasonally adjusted Purchase Index increased 0.3 per cent to its highest level since January while the unadjusted Purchase Index increased 1 per cent compared with the previous week and was 33 percent higher than the same week one year ago.

The refinance share of mortgage activity decreased to its lowest level since August 2015, 55.0 per cent of total applications from 56.7 per cent the previous week. ARM share decreased to 4.9 per cent; FHA share decreased to 11.7 per cent from 12.0 per cent; VA share decreased to 12.3 per cent from 12.6 per cent; USDA share remained unchanged from 0.8 per cent the week prior.


  • by | 3/17/2016 9:21:40 AM

    Question, how much of the local inflation is caused by regulations on real estate which burdens density and increase cost of construction, barrier to entry for building and population growth cause real estate to go up in value not inflation, there will never be enough inflation to bring property values back in Detroit. Then look at Houston with light zoning laws and see where it is on affordability scale. Have a nice day I love real estate!

  • by 75 year old - been there done that | 3/17/2016 10:39:07 AM

    Every yr. companies raise prices not 3-5% but 20-25% and they now in this past 10 years call it De-Flation. Look at the survey they use the Word cost bread . Now I get it , it used to be lettuce now its bread they pick a item that never goes up in price. Ok more of the same yesterday by the FED accomodate the Market mode and we say there is a shortage of homes. I got it again tell people there is a shortage and raise the price so you pay sky high Real estate taxes ( the power to TAX is the power to destroy.) Get it now. Why buy when for the past 9 years Home Ins. rate go up 20% a year because they earn NO Interest on there money in the Bank. I got it again. I bought my present home 7 years ago and the Tax Assessor on average says my home value is going up 22% a year, Yes 22% ( who wants that cost for getting no benifet < no kids in school and our county has only had 2 small fires caused both by Construction companies. ( and they charge for comomg out to investigate a fire a fee of $450.00) Ya why buy. If there really is a shortage then why are the homes on my street not selling? Answer that. I have paid on $98,000 for R.E. Tax in the 7 years and $14,000 in Home Ins. and $33,000 in home maintenance costs ( added a few small capirtal Improvements that won't return a dime.) and then if i want to sell they charge 6% fee < or $36,000 plus another $4,500 in closing and title fee> YOU DO THE MATH- Is it cheaper to Rent or Own.

  • by | 3/17/2016 12:48:47 PM

    Cheaper to own most definately over the long term. Speak with a tax advisor and make sure you get all the benefits you're entitled to. Your capital improvements increased your cost basis thereby decreasing your capital gains tax once you decide to sell. Oh, forgot to mention, if those were energy efficient capital improvements you may have missed out on the rebates offered by local and federal governments. I'm sure you're deducting your mortgage interest on your income taxes you're paying during the time in which you own. As you mentioned, you're also gaining at present 22% on the 600k home and that's more appreciation than most earn by actually working a job. If you think, renting is still cheaper, then you should take a look at rental statistics. When have you ever know rents to decrease? Never. Are there any tax benefits to renting? None, unless you run a home based business, which most folks don't. I've done the math. Cheaper to own.


Is TILA-RESPA a good or bad thing long term?