Tag Archives: affordability

The Amenities Factor: Housing in California is a Better Value Than You Think

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Professor and Students’ Statistical Model Reveals the Counties with the Best Pricing in the State

Orange, CA – June 22, 2018 (PRNewswire-USNewswire) Working together with a class of undergraduate students, economist and professor Jim Doti, Ph.D., developed a statistical model to rank 39 counties in California according to “most undervalued” and “most overvalued.” (See illustration attached.) Nicknamed “the Amenities Factor,” the model takes into account such statistics as the county’s median income level, the average price of a home, adjacency to the Pacific Ocean, and the climate index. The higher the income level in the county and the nearer to the Pacific Ocean, the more valuable the real estate is.

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“I am a transplant from Chicago,” says Doti, “and I have believed for 40 years that there is more value to a home in California than just the price. The Amenities Factor explains why. We hear that the secret to real estate is ‘location, location, location,’ and the Amenities Factor proves the adage.”

An econometrician and the founder of Chapman University’s annual Economic Forecast, now in its 40th year, Doti took the lead on creating the Amenities Factor as a class project for his undergraduate Statistics course at Chapman University in Orange. The students reviewed the data and crunched the numbers. Some surprises resulted.

Real Estate Infographic

Applying the Amenities Factor model, for example, Riverside County is more “overvalued” than both Orange and Los Angeles Counties. Kern and Sacramento County are right in the middle, neither highly over- or under-valued. Meanwhile, Placer County is the most “undervalued” county in California and Santa Clara is the most “overvalued.” (A full list of the counties in order of value is attached.)

About Chapman University: Founded in 1861 and based in the city of Orange, California, Chapman University is one of the oldest, most prestigious private universities in California and is the largest independent university in Orange County. With a student body of 7,020 undergraduate students and 2,367 graduate students, Chapman University offers all the opportunities and resources of a large institution with the personalized attention of a smaller university. The University employs 489 full-time instructional faculty and maintains a 14:1 student-faculty ratio and an average class size of 23 students. Known for its blend of liberal arts and professional programs – including film, science, business, education, humanities and performing arts – Chapman encompasses ten schools and colleges. Professor Jim Doti is President Emeritus of Chapman University, having served as its president for more than 25 years before returning to the classroom to teach in 2017.

U.S. Home Prices At Least Affordable Level Since Q3 2008

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Home Prices Less Affordable Than Historic Averages In 59 Percent of Local Markets; 75 Percent of Local Markets Not Affordable for Average Wage Earners

Irvine, CA – June 21, 2018 (PRNewswire) ATTOM Data Solutions, curator of the nation’s premier property database, today released its Q2 2018 U.S. Home Affordability Report, which shows that the U.S. home prices in the first quarter were at the least affordable level since Q3 2008.

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The report calculates an affordability index based on percentage of income needed to buy a median-priced home relative to historic averages, with an index above 100 indicating median home prices are more affordable than the historic average, and an index below 100 indicating median home prices are less affordable than the historic average. (See full methodology below.)

Nationwide, the Q2 2018 home affordability index of 95 was down from an index of 102 in the previous quarter and an index of 103 in Q2 2017 to the lowest level since Q3 2008, when the index was 86.

“Slowing home price appreciation in the second quarter was not enough to counteract an 11 percent increase in mortgage rates compared to a year ago, resulting in the worst home affordability we’ve seen in nearly 10 years,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Meanwhile home price appreciation continued to outpace wage growth, speeding up the affordability treadmill for prospective homebuyers even without the rise in mortgage rates.”

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Q2 2018 U.S. Home Affordability Heat Map by County

Home prices rising faster than wages in 64 percent of local markets
Nationwide the median home price of $245,000 in Q2 2018 was up 4.7 percent from a year, down from 7.4 percent appreciation in the first quarter but still above the average weekly wage growth of 3.3 percent. Since bottoming out in Q1 2012, median home prices nationwide have increased 75 percent while average weekly wages have increased 13 percent during the same period.

Annual growth in median home prices outpaced average wage growth in 275 of the 432 counties analyzed in the report (64 percent), including Los Angeles County, California; Maricopa County (Phoenix), Arizona; San Diego County, California; Orange County, California; and Miami-Dade County, Florida.

Lowest home affordability indexes in Flint, Denver, Santa Fe, Nashville
Counties with the lowest home affordability indexes in Q2 2018 were Genesee County (Flint), Michigan (70); Denver County, Colorado (72); Adams County (Denver area), Colorado (73); Santa Fe County, New Mexico (73); and Wilson County (Nashville area), Tennessee (75).

Among 40 counties with a population of at least 1 million, those with the lowest home affordability indexes in Q2 2018 were Travis County (Austin), Texas (77); Alameda County (San Francisco area), California (81); Santa Clara County (San Jose), California (82); Oakland County (Detroit area), Michigan (82); and San Francisco County, California (83).

Highest share of income needed to buy a home in Bay Area, Brooklyn
Nationwide an average wage earner would need to spend 31.2 percent of his or her income to buy a median-priced home in Q2 2018, above the historic average of 29.6 percent.

Counties with median home prices requiring the highest share of average wage earner income were Marin County (San Francisco area), California (133.2 percent); Kings County (Brooklyn), New York (123.1 percent); Santa Cruz County, California (121.5 percent); Monterey County (Salinas), California (100.3 percent); and San Francisco County, California (97.2 percent).

Counties with median home prices requiring the lowest share of average wage earner income were Wayne County (Detroit), Michigan (13.5 percent); Clayton County, Georgia (13.7 percent); Rock Island (Quad Cities), Illinois (15.8 percent); Saginaw County, Michigan (16.4 percent); and Richmond County (Augusta), Georgia (16.4 percent).

Median home prices not affordable for average wage earners in 75 percent of local markets
An average wage earner would not qualify to buy a median-priced home in 326 of the 432 counties (75 percent) analyzed in the report based on a 3 percent down payment and a maximum front-end debt-to-income ratio of 28 percent.

Counties where an average wage earner could not afford to buy a median-priced home in Q2 2018 included Los Angeles County, California; Cook County (Chicago), Illinois; Maricopa County (Phoenix), Arizona; San Diego County, California; and Orange County, California.

Report Methodology
The ATTOM Data Solutions U.S. Home Affordability Index analyzes median home prices derived from publicly recorded sales deed data collected by ATTOM Data Solutions and average wage data from the U.S. Bureau of Labor Statistics in 432 U.S. counties with a combined population of more than 217 million. The affordability index is based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate mortgage and a 3 percent down payment, including property taxes, home insurance and mortgage insurance. Average 30-year fixed interest rates from the Freddie Mac Primary Mortgage Market Survey were used to calculate the monthly house payments. Only counties with sufficient home price and wage data quarterly back to Q1 2005 were used in the analysis.

The report determined affordability for average wage earners by calculating the amount of income needed to make monthly house payments — including mortgage, property taxes and insurance — on a median-priced home with, assuming a 3 percent down payment and a 28 percent maximum “front-end” debt-to-income ratio. For instance, the nationwide median home price of $245,000 in the first second quarter of 2018 would require an annual gross income of $61,709 for a buyer putting 3 percent down and not exceeding the recommended “front-end” debt-to-income ratio of 28 percent — meaning the buyer would not be spending more than 28 percent of his or her income on the house payment, including mortgage, property taxes and insurance. That required income is higher than the $55,393 annual income earned by an average wage earner based on the most recent average weekly wage data available from the Bureau of Labor Statistics, making a median-priced home nationwide not affordable for an average wage earner.

About ATTOM Data Solutions
ATTOM Data Solutions provides premium property data to power products that improve transparency, innovation, efficiency and disruption in a data-driven economy. ATTOM multi-sources property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, and neighborhood data for more than 155 million U.S. residential and commercial properties covering 99 percent of the nation’s population. A rigorous data management process involving more than 20 steps validates, standardizes and enhances the data collected by ATTOM, assigning each property record with a persistent, unique ID — the ATTOM ID. The 9TB ATTOM Data Warehouse fuels innovation in many industries including mortgage, real estate, insurance, marketing, government and more through flexible data delivery solutions that include bulk file licenses, APIs, market trends, marketing lists, match & append and more.

Media Contact:
Christine Stricker
(949) 748-8428
christine.stricker@attomdata.com

Data and Report Licensing:
(949) 502-8313
datareports@attomdata.com

Survey: Knowledge Gap Contributing To Housing Market And Affordability Concerns, Cautiousness

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National survey by Laurel Road reveals current housing and financial environment impacting purchasing decisions, despite institutional indicators

New York, NY – June 11, 2018 (PRNewswire) Ten years after the 2008 housing crisis, Americans eye the housing market with caution, as more than half (53%) of Americans who have or plan to buy a home admit they’re concerned about their ability to afford a home in the current market, according to a recent study of college-educated adults. The findings, release today by national online lender and FDIC-insured bank Laurel Road, also reveal that Americans on average believe a similar housing crash will occur in the next five years, and nearly one-fifth of respondents anticipate a crash in less than one year.

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The survey examines how misconceptions and unclear options are inflating anxieties when it comes to housing market decisions. For example, the down payment is often considered one of the biggest barriers to affordability, but nearly half (46%) of Americans are currently unfamiliar with alternative down payment options. Similarly, the National Association of REALTORS® found that in 2017 that the median down payment for first-time buyers was 6% of total home price for three straight years, but nearly three in five respondents (58%) plan to put down a traditional 20% down payment, while 42% feel they would need to tap into other means, such as mortgage insurance (14%). The survey found that women in particular are potentially underestimating affordability, as they are significantly less likely than men (49% vs. 59%) to be familiar with the alternatives.

This lack of knowledge around alternative options potentially contributes to the fact that more than one-third (35%) of respondents – and 46% of millennials – do not feel confident that they could currently afford a 20% down payment. Women (45%) feel particularly less confident than men (24%), while more than two-fifths (42%) of student loan carriers do not feel confident.

A knowledge gap also surrounds current interest rates. The survey revealed that Americans think mortgage interest rates in the U.S. will reach 6%, on average, by the end of the year, while the Mortgage Bankers Association expects a more modest 4.6%. Interestingly, millennials (70%) are the most concerned about the impact of rising rates, compared to 60% of Gen Xers and 35% of boomers. Compared to boomers (78%), millennials (53%) are less likely to think it’s best that others pull the trigger and buy now, suggesting those that are more likely to be buying their first home are apprehensive about purchasing decisions.

In sum, these findings suggest consumers are concerned and cautious about housing decisions in the current market, despite the fact that interest rates are historically low. In fact, the majority of people (74%) who have bought, or plan to buy, a home would only accept an interest rate of less than 6% before they decided not to move forward with a purchase. However, a lack of historical context may contribute to this sentiment. Americans believe the highest U.S. mortgage rates have ever reached was 12.25%, on average. In reality, rates have exceeded 18% – a fact only 8% of Americans know.

“Purchasing a home is a life-changing decision, yet despite the range of resources, people often aren’t aware of the personalized options available to fit their specific situation,” said Alyssa Schaefer, Chief Marketing Officer of Laurel Road. “By arming future homebuyers with the knowledge and support needed to make an informed and confident decision, we are committed to empowering our customers during the homebuying process. Ultimately, through our research and evolving product set, our mission is to meet our consumers where they need us most, by providing an exceptional experience across each major financial milestone.”

Additional findings include:

  • Setting timelines: Americans estimate they will buy a home in the next six years, on average. First-time homebuyers plan to purchase a home in just two years – at age 36, on average. Concern may even play a role in buying patterns, as 62% of those who are concerned about affordability are currently looking or plan to buy in less than five years, compared to 33% of those who aren’t concerned.
  • Planning ahead: Among Americans who have ever bought, or plan to buy, a home, 85% have plans for their savings if they refinanced their mortgage.
    • 48% would put it into savings
    • 41% would pay off debt, such as credit cards or student loans (50% of millennials vs. 45% of Gen X and 32% of boomers)
    • 27% would remodel their home
  • Spurring action: Among current and prospective homeowners, nearly one in three (32%) are more likely to refinance their home, specifically because of the potential for a future rate hike.

About the Survey
The Laurel Road survey was conducted by Wakefield Research (www.wakefieldresearch.com) among 1,000 nationally representative U.S. college-educated adults, with 50% of respondents who have a graduate degree, between April 11 and April 18, 2018, using an email invitation and an online survey.

Results of any sample are subject to sampling variation. The magnitude of the variation is measurable and is affected by the number of interviews and the level of the percentages expressing the results. For the interviews conducted in this particular study, the chances are 95 in 100 that a survey result does not vary, plus or minus, by more than 3.1 percentage points from the result that would be obtained if interviews had been conducted with all persons in the universe represented by the sample.

About Laurel Road
Laurel Road is a national online lending company and FDIC-insured bank, offering online student loan refinancing, personal lending and mortgage products as well as consumer and commercial banking services. Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with graduate and undergraduate degrees to refinance and consolidate more than $3 billion in federal and private school loans, and with our low rates borrowers have reduced their monthly payments and on average saved tens of thousands of dollars. For more information on potential savings, see laurelroad.com/student, in addition to laurelroad.com/mortgage.

Laurel Road Bank is a Connecticut banking corporation offering lending products in all 50 U.S. states, Washington, D.C. and Puerto Rico. The mortgage product is not offered in Puerto Rico. Laurel Road Bank is an Equal Housing Lender, Member FDIC. NMLS ID # 402942.

© 2018 Laurel Road Bank. All rights reserved.
Laurel Road, 1001 Post Road, Darien, CT, 06820

Media Contact:

Kwittken PR for Laurel Road
(212) 352-4651
laurelroad@kwittken.com