US SPOTLIGHT
PROPERTY PICTURE
Graebel Companies, Bill Graebel, CEO The US real-estate market has been on a parallel course
with the improving economy for several years. We have witnessed double-digit increases in homeowner and tenant activity in 2015. This strong uptick can be attributed to a variety of reasons –
most notably customers’ decisions to take advantage of record-low interest rates before the US Federal Reserve’s anticipated hike, which may happen at any time and prompt the banking community to increase lending rates. Residential investment is a key factor in a recovering economy.
The Reserve has been cautious about raising rates prematurely, because low interest rates in a stronger economy with low unemployment can rapidly produce inflation. The influx of Millennials into the housing market is a major
factor in many parts of the US. More than two-thirds of household growth in the next five years is also expected to come from Millennials. Today, about 65 per cent of first-time buyers are Millennials
aged 25–34, with 86 per cent saying that their motivation is a changing family size. According to the BMO Harris 2015 First-Time Home Buyers
Report, first-time buyers, including Millennials, have increased their purchase budgets by 24 per cent over 2014. Interestingly, Millennial buyers may search properties online, but use a ‘real’ estate agent the most of all US buyers when purchasing. For clients’ relocating employees, including assignees unfamiliar
Cartus All indications are that housing markets across the US
continue to move in a positive direction. Confidence is returning on a national level, and homes are appreciating at a rate conducive to a sustainable rebound. Key factors playing an important role in the state of the market
include home price, median income, housing inventory, and the unemployment rate. According to the US Bureau of Labor Statistics,
the
unemployment rate, a leading indicator in the home-sale arena, dropped to 5.3 per cent in June – its lowest level since May 2008. Home prices, including distressed sales, increased by 6.5 per cent
in June compared with the June 2014 figure. Sales of existing homes also increased in June, to their highest level in more than eight years, according to the National Association of Realtors (NAR). Sales increases, experienced by all major regions in June, have
now risen above year-on-year levels for six consecutive months. The positive outlook is shared by real-estate brokers who
participated in the recent Cartus Millennial vs Boomer Real Estate Survey. When commenting on the buying patterns of both groups (Millennials being aged 18–35 and Boomers being 60-ish), survey respondents were fairly optimistic about the numbers of both groups who would move into their markets this year as a result of job transfers, with 45 per cent saying they believed relocation volume would be greater than last year.
with the new city, and to successfully and quickly integrate them within the community, it is imperative for the relocation management company and its recommended supplier to provide a highly personalised service driven by up-to-the-minute market knowledge. Also driving home ownership is a US-wide shortage of housing
to rent. New construction slowed dramatically during the recession, and has not kept pace with demand. The number of US households that rent a home has increased
by 26 per cent since 2007, and now totals 11.25 million. Naturally, supply and demand has caused rents to skyrocket. According to Census data, more than one in four US tenants
pays at least half of their family income for rental housing and utilities. Data from Zillow and the US Labor Department indicate that rent increases across the nation have jumped to almost twice the pace of average hourly wages. The Harvard Joint Center for Housing Studies recently reported
that the nearly 20 per cent of tenants earning from $45,000 to $75,000 annually were among those spending 30 per cent or more of their monthly income on rent. Incomes have remained flat, close to pre-recession
levels. These factors have limited the ability to save money for down payments. This, in turn, has caused more tenants to stay put and face ever-higher rental costs, and in some cases to refuse a job transfer.
Additionally, both Boomers and
Millennials are more likely to purchase homes than to rent, say brokers. Real-estate trends affect relocation,
so, with an improving housing market, employers are able to look outside local areas for talent and be less concerned with the cost of moving employees to other locations. More good news for relocation is that credit restrictions have
loosened, making it easier for borrowers with less-than-perfect credit histories to avoid sky-high rates. Reductions in down payments have occurred, such that a down
payment of 20 per cent is no longer the rule. Incentives such as offering home warranties and selling-agent bonuses may also be considered to remain competitive with new construction, as may mortgage buydowns [a financing technique whereby the buyer attempts to obtain a lower interest rate for at least the first few years of the mortgage], depending on the location of the property and other factors. Companies’ relocation policies that might be updated now
include approval levels for repairs and improvements, and guidelines for allowing relocation providers to perform approvals on behalf of customers.
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