Rents are Rising in the Suburbs

– Many renters are looking outside of city centers for more affordable housing, causing rent payments to grow faster in the suburbs than urban areas

– Rents are rising faster in the suburbs than urban areas in some of the nation’s hottest housing markets.

– The monthly cost of a suburban rental in the U.S. is up 2.5 percent, while the cost of an urban rental is up 2.3 percent. This is the first time in four years that suburban rents are rising faster than urban rents.

– Suburban rents are outpacing urban rents in Nashville, San Francisco and Seattle, which are all hot housing markets. In Nashville, the cost of an urban rental is up 1.7 percent, but the cost of a suburban rental is up about 5 percent.

– In San Francisco, the price of an urban rental is falling, down 0.4 percent since this time last year, but suburban rental prices are up almost 3 percent year-over-year.

Seattle, WA – May 19, 2017 (PRNewswire) As rent becomes more expensive, renters are starting to look for cheaper housing options outside downtown cores, prompting rent payments to rise faster in the suburbs than in urban areas, according to a new Zillow® report. For the first time in four years, suburban rents are rising faster than urban rents.

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An increase in multifamily construction has slowed rent growth across the country, with rents rising at their slowest pace in five years. The suburbs often offer larger apartments and more single-family homes for rent with more space — about 19 percent of all single-family homes in the U.S. are rentals, up from 13 percent in 2005.

In the U.S., the median monthly cost of a suburban rental is up about 2.5 percent year-over-year, while the median cost of an urban rental is up 2.3 percent. At this time last year, the median urban rental price was up 5 percent year-over-year, while median suburban rental prices were up 3 percent.

The trend is more pronounced in booming housing markets where rent affordability is worsening. Rents in the Nashville, San Francisco and Seattle metro areas are growing faster in the suburbs than in urban areas as rising costs force renters out of the city, increasing demand in the suburbs. Over the past decade, the share of income needed for the median rent payment in the San Francisco metro has increased from 34 percent to 44 percent. In the Seattle metro, the share has increased from 26 percent to 32 percent.

Expensive coastal cities are coming off about a decade of rapidly rising rents. Years of increases have pushed urban living out of reach for many renters, who may be choosing a longer commute in exchange for cheaper rental payments. Rent affordability is a significant issue for renters across the country, and in many major metros, the share of income needed to pay rent well surpasses 30 percent.

“Because walkable urban centers close to amenities are typically a big draw for renters, you’d expect rents to rise faster in the city than in the suburbs — which is exactly what we’ve been seeing until very recently,” said Zillow Chief Economist Dr. Svenja Gudell. “But a handful of factors are helping turn the tables and beginning to push suburban rents up at a higher clip. These include deteriorating rental affordability in expensive urban cores; new apartments, albeit high-end ones, opening downtown compared to relatively few in outlying areas; and preferences among some renters toward the space offered by single-family homes in the suburbs. Rents themselves are still lower in the suburbs, but if demand keeps growing for suburban rentals and supply continues to lag, that will also start to change. As more formerly urban renters move to the suburbs in coming years, we’ll likely start seeing more apartment buildings and walkable amenities popping up in those communities.”

The price of an urban rental in Nashville is up 1.7 percent since this time last year, but the price of a rental in the suburbs is up almost 5 percent, with the median price of suburban rentals almost $500 less than an urban rental, despite many suburban rentals offering more space. Rents in Seattle are growing strongly across the metro, but the median price of suburban rentals is growing faster than the price of urban rentals by about 2 percentage points.

In San Francisco, urban rents are down 0.4 percent since this time last year, but rents in the suburbs are up 2.6 percent. The median rent price of a suburban rental is about $350 less than an urban rental in San Francisco.

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Zillow

Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow’s Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z and ZG), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc.

(i) The Zillow Rent Index (ZRI) is the median Rent Zestimate® (estimated monthly rental price) for a given geographic area on a given day, and includes the value of all single-family residences, condominiums, cooperatives and apartments in Zillow’s database, regardless of whether they are currently listed for rent. It is expressed in dollars. Data is from March 2017.

(ii) Zillow determines rental affordability by analyzing the current percentage of a metro area’s median income needed to afford the rent payment on a median-priced rental home or apartment. Data is from 2016 Q4.

Foreign Buyers and Immigration Expected to Drive Future Demand for U.S. Housing

Washington, D.C. – May 19, 2017 (nar.realtor) U.S. real estate markets are increasingly becoming international, and changing demographics brought forth by immigration and growing interest from foreigners are positioned to bolster home sales activity and prices. That’s according to speakers at an international real estate forum organized by the REALTOR® University Richard J. Rosenthal Center for Real Estate Studies session here at the 2017 REALTORS® Legislative Meetings & Trade Expo.

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NAR’s Danielle Hale, managing director of housing research, was joined by Alex Nowrasteh, immigration policy analyst at the Center for Global Liberty and Prosperity at the Cato Institute, to share insight on the current and future impact of foreign buyers and immigration on the U.S. housing market.

According to Nowrasteh, the rising U.S. population is being bolstered by a growing number of immigrant households, and their presence will continue to transform the housing market. Referring to data from the 2015 American Community Survey, Nowrasteh said of the roughly 321.4 million residents in the U.S., 278.1 million are born here (natives) and the remaining 43.3 million – made up of 20.7 million naturalized citizens and 22.6 million non-citizens – are foreign-born.

“Immigration affects rents and home prices far more than it affects the labor market,” said Nowrasteh. “An expected 1 percent increase in a city’s population produces a 1 percent uptick in rents, while an unexpected increase results in a 3.75 percent rise.”

Nowrasteh, pointing to studies conducted on immigration and housing, explained that the effects of immigration on real estate are localized, with most of the impact felt where immigrants tend to reside: low-to-middle income counties. Each immigrant adds 11.6 cents to housing value within that county. In 2012, 40 million immigrants added roughly $3.7 trillion to U.S. housing wealth.

Referencing the Legal Arizona Workers Act that went into effect on January 1, 2008, Nowrasteh said the decline in population resulting from the law likely exasperated the drop in home prices the state experienced during the downturn. Fewer households purchasing or renting property subsequently lead to higher vacancies and lower prices. “Immigration is the best way to increase population, housing supply and prices,” he said.

Presenting some of the key findings from NAR’s 2016 Profile of International Activity in U.S. Residential Real Estate released last July, Hale said foreigners increasingly view the U.S. as a great place to buy and invest in real estate. She noted the upward trend in sales activity from resident and non-resident foreign buyers(1) in the past seven years, with total foreign buyer transactions increasing from $65.9 billion in 2010 to $102.6 billion in the latest survey.

“A majority of foreign buyers in recent years are coming from China, which surpassed Canada as the top country by dollar volume of sales in 2013 and total sales 2015,” said Hale. “Foreign buyers on average purchase more expensive homes than U.S. residents and are more likely to pay in cash.”

Perhaps foreshadowing where a bulk of future home purchases from immigrants will come from, Hale said that in NAR’s latest survey roughly over half of all foreign buyers purchased property in Florida (22 percent), California (15 percent), Texas (10 percent), Arizona or New York (each at 4 percent). Latin Americans, Europeans and Canadians – who tend to buy for vacation purposes in warm climates – mostly sought properties in Florida and Arizona. Asian buyers were most attracted to California and New York, while Texas mostly saw sales activity from Latin American, Caribbean and Asian buyers.

NAR’s 2017 Profile of International Activity in U.S. Residential Real Estate survey is scheduled for release this summer. Looking at the past year, Hale said monthly data from the Realtors® Confidence Index revealed a rise in responses from Realtors® indicating they worked with an international buyer.

“Chinese buyers are once again expected to top all countries in both total dollar volume and overall sales,” said Hale.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

# # #

1. The term international or foreign client refers to two types of clients: non-resident foreigners (Type A) and resident foreigners (Type B).

Non-resident foreigners: Non-U.S. citizens with permanent residences outside the United States. These clients typically purchase property as an investment, for vacations, or other visits of less than six months to the United States.

Resident foreigners: Non-U.S. citizens who are recent immigrants (in the country less than two years at the time of the transaction) or temporary visa holders residing for more than six months in the United States for professional, educational, or other reasons.

Media Contact:

Adam DeSanctis
(202) 383-1178
Email

Realtors® Have a Positive Outlook for Commercial Markets in 2017

Washington, D.C. – May 19, 2017 (nar.realtor) While challenges face commercial real estate markets, Realtors® specializing in the sector should have confidence that growth will continue. That’s according to speakers at a commercial economic issues and trends forum at the REALTORS® Legislative Meetings & Trade Expo.

NAR Chief Economist Lawrence Yun led a panel discussion about the economic forces shaping commercial real estate markets; the panelists agreed that the market has improved and that continued growth in the economy will further drive activity, but difficulties remain regarding availability of financing for smaller commercial properties.

George Ratiu, NAR director of quantitative and commercial research, said that increased trade and the rise of e-commerce has boosted rents in the industrial and warehouse sector. “During a time of transformation in consumer shopping habit, vacancy rates will still continue to see a gradual decline in warehousing and strong rent growth will continue,” he said.

Unemployment has declined to 4.4 percent and consumer confidence is at its highest point in 15 years. As the economy improves, the commercial real estate market has continued to improve as well, said Yun. “A rising interest rate environment is likely to halt commercial price growth or even cause a minor decline; that outlook is supported by the expanding economy and the over 2 million jobs gained in the past year,” he said.

Looking at the global market, Ratiu explained that global commercial investors have hit the pause button on investments, which in the first quarter of 2017 decreased nearly 20 percent year-over-year; however, certain U.S. markets are seeing good global cash flow with $76 billion flowing to the U.S. “Overall global investments are down, while the San Francisco, Dallas, Charlotte, Houston and Baltimore markets have experienced large sales volume gains,” he said.

With the blip in overall global investments in the first quarter, international buyers are likely to play a greater role in the U.S. market this year. “Over the past five years, a near majority of Realtors® experienced an increase in the number of international clients. We expect international buying activity to grow in 2017, which will have an overall positive impact on the commercial market’s gradual recovery,” said Yun.

One major hurdle that continues to affect the market is the lack of available financing to small commercial real estate investors, due in large part to regulatory uncertainty.

“Realtors® are seeing evidence of markets being impacted by regulators’ increased scrutiny of banks’ balance sheet allocations to commercial real estate loans,” said Ratiu. “Considering that 64 percent of Realtor® clients get their financing from banks, this is likely to impact deal flow as lending conditions tightened in 37 percent of Realtors®’ markets, a four percent increase from last year.”

John Worth, senior vice president of research and investor outreach at the National Association of Real Estate Investment Trusts, discussed the performance of commercial real estate investment and its status among other investment sectors. “Real estate investment is currently the best performing asset class. Strong returns and the level of new commercial supply we are seeing today is making up for a lot of missing sectors, following the economic downturn. The first quarter of this year saw a slight decrease, but 2017 is experiencing an overall healthy trend,” he said.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.

Foreign Buyers and Immigration Expected to Drive Future Demand for U.S. Housing

Washington, D.C. – May 19, 2017 (nar.realtor) U.S. real estate markets are increasingly becoming international, and changing demographics brought forth by immigration and growing interest from foreigners are positioned to bolster home sales activity and prices. That’s according to speakers at an international real estate forum organized by the REALTOR® University Richard J. Rosenthal Center for Real Estate Studies session here at the 2017 REALTORS® Legislative Meetings & Trade Expo.

NAR logo

NAR’s Danielle Hale, managing director of housing research, was joined by Alex Nowrasteh, immigration policy analyst at the Center for Global Liberty and Prosperity at the Cato Institute, to share insight on the current and future impact of foreign buyers and immigration on the U.S. housing market.

According to Nowrasteh, the rising U.S. population is being bolstered by a growing number of immigrant households, and their presence will continue to transform the housing market. Referring to data from the 2015 American Community Survey, Nowrasteh said of the roughly 321.4 million residents in the U.S., 278.1 million are born here (natives) and the remaining 43.3 million – made up of 20.7 million naturalized citizens and 22.6 million non-citizens – are foreign-born.

“Immigration affects rents and home prices far more than it affects the labor market,” said Nowrasteh. “An expected 1 percent increase in a city’s population produces a 1 percent uptick in rents, while an unexpected increase results in a 3.75 percent rise.”

Nowrasteh, pointing to studies conducted on immigration and housing, explained that the effects of immigration on real estate are localized, with most of the impact felt where immigrants tend to reside: low-to-middle income counties. Each immigrant adds 11.6 cents to housing value within that county. In 2012, 40 million immigrants added roughly $3.7 trillion to U.S. housing wealth.

Referencing the Legal Arizona Workers Act that went into effect on January 1, 2008, Nowrasteh said the decline in population resulting from the law likely exasperated the drop in home prices the state experienced during the downturn. Fewer households purchasing or renting property subsequently lead to higher vacancies and lower prices. “Immigration is the best way to increase population, housing supply and prices,” he said.

Presenting some of the key findings from NAR’s 2016 Profile of International Activity in U.S. Residential Real Estate released last July, Hale said foreigners increasingly view the U.S. as a great place to buy and invest in real estate. She noted the upward trend in sales activity from resident and non-resident foreign buyers(1) in the past seven years, with total foreign buyer transactions increasing from $65.9 billion in 2010 to $102.6 billion in the latest survey.

“A majority of foreign buyers in recent years are coming from China, which surpassed Canada as the top country by dollar volume of sales in 2013 and total sales 2015,” said Hale. “Foreign buyers on average purchase more expensive homes than U.S. residents and are more likely to pay in cash.”

Perhaps foreshadowing where a bulk of future home purchases from immigrants will come from, Hale said that in NAR’s latest survey roughly over half of all foreign buyers purchased property in Florida (22 percent), California (15 percent), Texas (10 percent), Arizona or New York (each at 4 percent). Latin Americans, Europeans and Canadians – who tend to buy for vacation purposes in warm climates – mostly sought properties in Florida and Arizona. Asian buyers were most attracted to California and New York, while Texas mostly saw sales activity from Latin American, Caribbean and Asian buyers.

NAR’s 2017 Profile of International Activity in U.S. Residential Real Estate survey is scheduled for release this summer. Looking at the past year, Hale said monthly data from the Realtors® Confidence Index revealed a rise in responses from Realtors® indicating they worked with an international buyer.

“Chinese buyers are once again expected to top all countries in both total dollar volume and overall sales,” said Hale.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

# # #

1. The term international or foreign client refers to two types of clients: non-resident foreigners (Type A) and resident foreigners (Type B).

Non-resident foreigners: Non-U.S. citizens with permanent residences outside the United States. These clients typically purchase property as an investment, for vacations, or other visits of less than six months to the United States.

Resident foreigners: Non-U.S. citizens who are recent immigrants (in the country less than two years at the time of the transaction) or temporary visa holders residing for more than six months in the United States for professional, educational, or other reasons.

Media Contact:

Adam DeSanctis
(202) 383-1178
Email

Tax Reform Could Deliver a Tax Hike for Homeowners: New Research

Washington, D.C. – May 18, 2017 (PRNewswire) While tax reform proposals swirling around Washington, D.C., promise lower tax bills for American families, new estimates indicate that many middle-income homeowners may actually see a tax increase if those proposals go through.

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The study, “Impact of Tax Reform Options on Owner-Occupied Housing,” illustrates the effects of a tax plan that echoes certain elements of the “Better Way for Tax Reform” or “Blueprint” proposal released last year, as well as the White House tax reform outline released in April, to which the National Association of Realtors® responded.

While most individuals would see a tax decrease under such a proposal, the study estimates that many middle-class homeowners could in fact see a net average tax increase. Homeowners with adjusted gross incomes between $50,000 and $200,000 would see their taxes rise by an average of $815. The study also estimates that combined tax savings from claiming the mortgage interest deduction and real estate property tax deductions would drop 82 percent between the 2018 and 2027 period.

“Tax reform and lower rates are worthy goals, but only if we can achieve them in a fiscally responsible way,” said NAR president William E. Brown, a second-generation Realtor® from Alamo, California and founder of Investment Properties. “Balancing tax reform on the backs of homeowners isn’t an option.”

The study, which was commissioned by NAR and prepared by PwC (PricewaterhouseCoopers), estimates that this tax increase would result from the interaction of several provisions in the reforms under consideration. For many homeowners that currently benefit from the mortgage interest deduction, the elimination of other itemized deductions and personal exemptions would cause their taxes to rise, even if they elected to take the increased standard deduction. For others, the elimination of the state and local tax deduction alone would result in higher federal income taxes.

In addition to increasing taxes on many middle-income homeowners, the report finds that such a proposal could cause home values to fall by an average of more than 10 percent in the near term. In areas with higher property taxes or state income taxes, the drop could be even greater. Although the study doesn’t directly analyze the “Better Way for Tax Reform” plan or the recent White House outline, it examines a proposal with many similar elements.

Those elements include lowering and consolidating marginal tax rates to only three rates, setting a top income tax rate of 33 percent, doubling the standard deduction, eliminating all itemized deductions (other than charitable contributions and mortgage interest) and personal exemptions, eliminating the alternative minimum tax, and capping the tax rate on pass-through business income at 25 percent.

PwC estimated that roughly 35 million households will claim the mortgage interest deduction in 2018, three quarters of which have incomes between $50,000 and $200,000. According to NAR, roughly 70 percent of those eligible for the MID claim it in a given tax year.

“A tax reform proposal that hikes taxes for homeowners is a raw deal, and consumers know it,” said Brown. “Leaders in Washington who are driving tax reform have shown every indication that they have the best of intentions, and we’re hopeful they’ll consider our study as this process plays out in the months ahead.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing over 1.2 million members involved in all aspects of the residential and commercial real estate industries.

Information about NAR is available at www.realtor.org. This and other news releases are posted in the “News, Blogs and Video” tab on the website.

NAR Midyear Forecast: Existing-Home Sales Poised to Climb 3.5 Percent in 2017

Washington, D.C. – May 18, 2017 (nar.realtor) The multi-year stretch of robust job gains along with improving household confidence are expected to guide existing-home sales to a decade high in 2017, but supply and affordability headwinds and modest economic growth are holding back sales and threatening to keep the nation’s low homeownership rate subdued. That’s according to speakers at a residential real estate forum here at the 2017 REALTORS® Legislative Meetings & Trade Expo.

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Lawrence Yun, chief economist of the National Association of Realtors®, presented his 2017 midyear forecast and was joined onstage by Jonathan Spader, senior research associate at the Joint Center for Housing Studies at Harvard University, and Mark Calabria, chief economist and assistant to Vice President Mike Pence. Spader’s presentation addressed past and projected movements in the homeownership rate, and Calabria dove into why reversing weak productivity and the low labor force participation rate are necessary to boost the economy.

The first quarter was the best quarterly existing sales pace in exactly a decade (5.62 million), and Yun expects activity to stay on track and finish around 5.64 million – the best since 2006 (6.47 million) and 3.5 percent above 2016. With several metro areas seeing hefty price growth, the national median existing-home price is expected to rise around 5 percent this year.

“The housing market has exceeded expectations ever since the election, despite depressed inventory and higher mortgage rates,” said Yun. “The combination of the stock market being at record highs, 16 million new jobs created since 2010, pent-up household formation and rising consumer confidence are giving more households the assurance and ability to purchase a home.”

Although sales are currently running at a decade high, Yun believes the healthy labor market should be generating even more activity. However, listings in the lower- and mid-market price range are scant and selling fast, and homebuyers are discovering they can afford less of what’s on the market based on their income.

“We have been under the 50-year average of single-family housing starts for 10 years now,” said Yun. “Limited lots, labor shortages, tight construction lending and higher lumber costs are impeding the building industry’s ability to produce more single-family homes. There’s little doubt first-time buyer participation would improve and the homeownership rate would rise if there was simply more inventory.”

Housing construction has been uneven so far this year, but Yun does anticipate starts to jump 8.4 percent to 1.27 million. However, this is still under the 1.5 million new homes needed to make up for the insufficient building in recent years. New single-family home sales are likely to total 620,000 this year, up 8.4 percent from 2016.

Addressing the nation’s low homeownership rate, Spader said substantial uncertainty exists about its future direction. He cited foreclosure-related housing exits from older adults and delayed buying from younger households as the primary causes in the downward trend since the downturn. He said the good news is that while there was growth in homeowner households in 2016, an aging population, changes in family type and increasing diversity by race and ethnicity all pose as headwinds going forward. Spader’s 2025 projection puts the homeownership rate in a range of 61.0 – to – 65.1 percent.

“Stagnant household incomes, rising rental costs, student loan debt and limited supply have all contributed to slower purchasing activity,” said Spader. “When the homeownership rate stabilizes, there will be an increase in homeowner households. Young and minority households’ ability to reach the market will play a big role in how much the actual rate can rise in coming years.”

Calabria’s presentation focused on his thoughts of what can be done to jump-start economic growth. He attributed prolonged weak productivity and the low labor participation rate as the primary reasons why the current economic expansion is the slowest since World War II.

“A strong labor market will drive a strong housing market, but you can’t have a strong housing market without a strong economic foundation,” said Calabria. “The recovery has been uneven with roughly 70 counties making up roughly half of all job growth. The White House’s proposed plans to cut corporate and individual tax cuts will help large and small businesses grow, hire and ultimately contribute to more households buying homes as more money goes into their pockets.”

Although Yun said economic growth in the first quarter was “a huge disappointment” at 0.7 percent (first estimate), he anticipates that an increase in consumer spending and more homebuilding should provide enough fuel for gross domestic product to finish slightly higher, at 2.2 percent, than a year ago (1.6 percent).

Yun believes the rising interest rate environment is here to stay as the Federal Reserve slowly begins unwinding its balance sheet. He foresees two more short-term rate hikes by the end of this year and for mortgage rates to average around 4.30 percent before gradually climbing towards 5.0 percent by the end of 2018.

“There was a lot of uncertainty at the start of the year, but a very strong first quarter sets the stage for a modest sales increase compared to last year,” said Yun. “However, prices are still rising too fast in many areas and are outpacing incomes. That is why housing starts need to rise to alleviate supply shortages. There will be more sales if there’s a meaningful bump in new and existing inventory.”

Members of the media are invited to attend the upcoming Sustainable Homeownership Conference on June 9 at University of California’s Memorial Stadium in Berkeley. In celebration of Homeownership Month, the conference brings together experts to examine housing trends and real estate’s positive impacts. 2017 NAR President Bill Brown, NAR Chief Economist Dr. Lawrence Yun and Berkeley Hass Real Estate Group Chair Ken Rosen are among the prominent experts scheduled to speak. To register, visit www.nar.realtor.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.

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NOTE: Existing-Home Sales for April will be released May 24, and the Pending Home Sales Index for April will be released May 31; release times are 10:00 a.m. ET.

Media Contact:

Adam DeSanctis
(202) 383-1178
Email