Tag Archives: real-estate
UK parents lending to offspring to help buy a home set to reach £5 billion in 2016
Parents are set to lend over £5 billion to their offspring to buy a home by providing deposits for over 300,000 mortgages, purchasing homes worth £77 billion in 2016, according to new research. It means that the so called Bank of Mum and Dad is the equivalent of a top 10 mortgage lender in the UK and will be involved in 25% of all property transactions that take place in the country this year. Research from financial services group Legal & General and economics consultants says that this is likely to continue as long as the supply problem persists in the UK housing market. ‘The Bank of Mum and Dad plays an increasingly vital role in helping young people take their early steps on the housing ladder,’ said Nigel Wilson, chief executive officer of Legal & General. He pointed out that younger people today don’t have the advantages the baby-boomers had, including cheap housing that delivered windfall gains. ‘People will always want to help family members as it is a natural thing to do. Relying so heavily on the Bank of Mum and Dad however risks increasing inequality as many young people today are not lucky enough to be able to access parental support when buying a home, or can’t afford to buy even with parental help,’ Wilson explained. ‘We have a supply problem in housing as we are simply not building enough houses. We need to build more, especially as the Bank of Mum and Dad could soon start to experience a funding crisis of its own,’ he added. The research also found that the Bank of Mum and Dad’s average financial contribution is £17,500 or 7% of the average purchase price. Some 256,400 purchases are likely to be assisted by parent with a further 22,500 and 27,000 supported by grandparents and other family members or friends respectively. Some 57% of Bank of Mum and Dad contributions are gifts, 18% are loans with no interest and 5% are loans with interest. The report suggests that the Bank of Mum and Dad will not run into a nationwide ‘funding crisis’ for another generation, around 2035, but the regions with the highest and fastest growing house prices will face this problem much sooner. London is already at the tipping point when it comes to such funding. In 2016 London home owners that received some financial assistance from family and friends, got an average of 6.2% of their home’s total purchase price from the Bank of Mum and Dad. This represents 51% of the average Bank of Mum and Dad household net wealth in London, excluding property assets. In the South East, the average family contribution towards a loved one’s home purchase will cross the 50% mark in 2025 while for the East of England this will happen in 2028. Families clearly cannot continue to use all of their net wealth to help their offspring onto the housing ladder without putting their own financial stability at risk. This… Continue reading
US pending home sales up for 19 months in a row
Pending home sales in the United States increased slightly in March for the second consecutive month and reached their highest level in almost a year, according to the latest index. The Pending Home Sales Index from the National Association of Realtors, a forward looking indicator based on contract signings, increased by 1.4% in March and is now 1.4% above March 2015. It means that after the slight gain, the index has increased year on year for 19 consecutive months and is at its highest reading since May 2015 and Lawrence Yun, NAR chief economist, said it signals a solid beginning to the spring buying season. ‘Despite supply deficiencies in plenty of areas, contract activity was fairly strong in a majority of markets in March. This spring’s surprisingly low mortgage rates are easing some of the affordability pressures potential buyers are experiencing and are taking away some of the sting from home prices that are still rising too fast and above wage growth,’ he explained. He also pointed out that in the short term, the healthy labour market and favourable borrowing costs should lead to sustained buyer demand and a durable pace of sales. However, Yun he believes that the consequences from a failure to construct more single family homes in recent years are starting to impact some top job producing markets, where endless supply shortages continue to limit choices for buyers and are driving up prices beyond what a growing share of households can comfortably afford. ‘Demand is starting to weaken in some areas, particularly in the West, where the median home price has risen an astonishing 38% in the past three years. As a result, pending sales in the region have now declined in four of the last five months and are lower than one year ago for the third month in a row. Closed sales in the region in March were also below last year’s pace,’ Yun said. A breakdown of the figures show that the index in the Northeast increased 3.2% and is now 18.4% above a year ago while in the Midwest the index inched up 0.2% but is now 4% above March 2015. Pending home sales in the South rose 3% but are still 0.6% lower than last March and the index in the West declined 1.8% in March and is now 7.9% below a year ago. Continue reading
Research shows US first time buyers battling against less choice and higher prices
First time buyers in the United States are facing a lack of affordable homes to buy and higher prices, according to new research. Home values are rising the fastest among entry-level homes in more than half of the largest housing markets, according to latest real estate market report from Zillow which covers the first quarter of 2016. It says that rising home values in this segment of the market can be attributed to a lack of supply, with 10% fewer homes for sale this year compared to last. The median value of entry level homes, that is those in the bottom third of the market, have increased the most over the past year in Denver, up 20%, followed by Portland and Dallas. The report also shows that there are 13% fewer entry level homes available in Denver than there were a year ago. The number of entry level homes available declined the most in Portland where there are 40% fewer entry level homes available than there were a year ago. The findings signal difficult times ahead for first time buyers looking to enter the market. Going into home shopping season this spring, buyers will find fewer homes in the bottom and middle of the market which are the properties most affordable for first time buyers. The trend also highlights the different experiences buyers are having in the recovering housing market. Buyers looking for the most expensive homes will find slower price growth, a larger selection, and less competition this spring than entry level buyers who are likely to face stiff competition, bidding wars, and very few homes to choose from. ‘It's going to be a tough home buying market this spring, especially for first time buyers or even people looking to move up into a slightly more expensive home,’ said Zillow chief economist Svenja Gudell. ‘In order to stand out in a competitive market, buyers should get pre-approved for a loan, find an agent who has experience with bidding wars, and consider coming in at the asking price, so the seller knows they're serious,’ she added. In all of the largest US housing markets, more than a third of the homes available for sale are in the most expensive segment in the top third of the overall housing stock in the market. In nine markets, top tier homes make up more than half of the inventory. The most expensive homes on the market are more likely to have a price cut, a signal that there's less demand for top tier homes. The share of top tier listings with a price cut has increased 1.6% over the past year. Continue reading
