Situs Newswatch 5/31/2017

Delayed Parenthood Forcing Real Estate Changes
Last year, for the first time ever, there were more women in their early 30s having babies than younger moms.The Centers for Disease Control and Prevention reports, in 2016, there were 103 births per every 100,000 American women between 30 and 34 years old. Among women ages 25 to 29, there were 102 births. The average age when women have their first child is now 28, up from 24.6 about 15 years ago.

The overall birth rate in the U.S. was 62.9 births for every 1,000 women ages 15 to 44, down from 70.9 births for every 100,000 in 1990.

Further, many women who are pursuing higher education appear to delay motherhood, Pew research found. The median age of a woman when she has her first child is 30 for those with master’s degrees, 28 for those with bachelor’s degrees, 25 for those who attended a two-year college or some college and 24 for those who attended high school or less.

Clearly all this is having profound effects on society as a whole, and on the commercial and residential real estate industries.

“These are just some of the socioeconomic and cultural reasons that the millennial generation has put off starting a family — and entering the housing market,” says Situs Assistant Vice President, Jennifer Rasmussen, who has a Ph.D. in psychology.

“College-educated millennials are more likely to have financial constraints such as higher student loan obligations, high apartment rents, stringent underwriting standards for home loans, and decreased wages compared to previous generations” adds Rasmussen. “Remember, millennials are at least five years behind — economically — their parents. Many millennials entered the job market during the Great Recession and many became marginally attached to the labor market. Wages have only just begun to improve for this cohort.”

For the first time in a decade, more new U.S. households in the first quarter chose to buy homes than to rent, suggesting a long-term decline in homeownership rates might be coming to an end.

About 854,000 new-owner households were formed during the first three months of the year, more than double the 365,000 new-renter households formed during the period according to the Census Bureau.

“We’ve been waiting a long time for millennials to create households; now it’s finally happening at a blistering pace,” says The Collingwood Group Chairman Tim Rood. “More importantly, the households are predominantly new-owner households versus rental households.”

A survey by The Collingwood Group found millennials were willing to sacrifice visiting Starbucks and subscribing to cable television to come up with down payments for homes.

But Collingwood’s Rood warns, “90 percent of millennials would still struggle to come up with $1,000.”

Both the commercial and residential real estate industries need to figure out how to cater to these new moms and their families; a good advisor such as Situs can help.

Fannie, Freddie Futures Top Conference Agenda

Treasury Secretary Steve Mnuchin is reportedly opening the door for the first time to an explicit government guarantee for the mortgage market that would dramatically restructure Fannie Mae and Freddie Mac, according to the Wall Street Journal.

In an exchange with key senators Mike Crapo (R., Idaho) and Bob Corker (R., Tenn.), Mnuchin said he would consider a government backstop for the mortgage market. “If there is a guarantee, we would want to make sure that there is ample credit and real risk in front of that guarantee, so that taxpayers are not at risk,” he said.

The Journal reports these comments suggest the Trump administration’s thinking is in line with a range of compromise proposals put forward by private think tanks, the Mortgage Bankers Association and others. These plans would dramatically restructure Fannie and Freddie, and put in place a federal guarantee on certain mortgage securities. This protection would kick in after private investors have taken initial losses through the new “credit risk transfer” market.

Speaking last week at FHLBanks Director Conference, The Collingwood Group Chairman Tim Rood said, “I applaud lawmakers for continuing to press for bipartisan housing reform legislation. However, the FHFA has been driving reform at Fannie Mae and Freddie Mac for almost nine years. Mel Watt, director of the Federal Housing Finance Agency, has put Congress and Treasury on notice that he has the authority and will to address the next big reform issue — the net worth sweep by Treasury and paper thin capital levels of Fannie Mae and Freddie Mac.”

Also speaking at the conference, Crapo, the new chairman of the Senate Banking Committee, is pledging to seek “bipartisan support for legislation” to reform and reduce federal financial regulations. “We will have a strong grounding from which to build a common-sense financial regulation reform process in America. My goal this Congress is to work in a bipartisan manner with members of the Senate Banking Committee, the administration, with (House Financial Services Committee) Chairman (Jeb) Hensarling, and with the regulators to strike a smart balance with thoughtful regulation that promotes economic growth.”

HUD Secretary Ben Carson tweeted after the FHLB event “Talking with @fhlbanksvoice about the abiding value of owning a home.”

Blame Millennials for Housing Problems
The rush of young people to U.S. cities over the past few years is partly to blame for America’s worsening housing shortage.

In some of the country’s largest and most prosperous markets, such as New York, San Francisco, Boston and Los Angeles, housing construction has been stronger than normal in the urban core but weaker in the suburbs, where new housing can be built abundantly and more cheaply, according to an analysis set to be released next Monday by BuildZoom, a website for construction contractors.

That is a problem because suburbs are typically the main drivers of housing construction.

For decades during the late-20th century, suburbs were the place to build, as urban cores suffered from high crime, poor schools and stagnant or shrinking populations.

But preferences have changed among young people, many of whom want to live closer to transit, restaurants and their workplaces. The share of young, educated people living in the urban core of Washington, D.C., for example, increased 8.6 percentage points between 2000 and 2014, according to Jed Kolko, chief economist at job-search site Indeed and senior fellow at the Terner Center for Housing Innovation at the University of California, Berkeley. Portland, Ore., and Chicago each saw increases of 6.4 percentage points.

“The expensive cities tend to be shifting toward a paradigm that says having a better location is better than having a fresher, greener, newer place,” said Issi Romem, chief economist at BuildZoom.

As builders have shifted focus toward trendier urban markets and away from cheaper suburbs, they have produced less housing overall than they otherwise might have. While starter-home construction has bounced back in recent months, it remains far from reversing this long-term trend.

read more: Wall St Journal

U.K. Home Ownership Among Young Way Down 
The number of young British families owning their own homes has halved across large parts of the country in the space of a generation, and the struggle to get on the housing ladder is not restricted to the South East.

Research by The Resolution Foundation found that 31 percent of 25- to 34-year-olds surveyed were homeowners in 2016, compared to 58 percent in 1994. Regionally, 30 percent of those surveyed in West Yorkshire owned homes last year, compared to 61 percent in 1994. The decrease was most pronounced in outer London, where homeownership dropped to 20 percent in 2016 from 55 percent in 1994. Big falls were also recorded in other areas of the South East including Brighton, Southampton, Reading and Milton Keynes, where homeownership in the younger age group bracket declined to 34 percent last year from 64 percent in 1994.

read more: This is Money

Young Men Slide Down Income Ladder
“The loss of blue-collar jobs … is forcing more men into low-wage service jobs, and in some cases causing them to drop out of the workforce altogether,” according to a Boston Globe front-pager by Katie Johnston:

  •  An analysis last month by the U.S. Census Bureau (“The Changing Economics and Demographics of Young Adulthood: 1975-2016”) found that many young men have fallen to the bottom of the income scale, “despite the fact that they are better educated and working full time at the same rate.”
  • What caused it: “Wages have stagnated, while the cost of living and student debt have skyrocketed, and college graduates are taking lower-level jobs. … [M]en are being hit particularly hard, as many of them are forced to take contract or part-time work.”
  • Key fact: “The jobs that are growing the fastest … are concentrated in female-dominated professions, such as health care.”
  • Why it matters: “Many young men — defined by the Census Bureau as ages 25 to 34 — are starting out their working lives at a distinct disadvantage, compared with previous generations. And as more of them live at home and delay marriage, young adulthood has started looking much different than it used to.”

read more: Axios

Sears Makes Profit By Selling Its Real Estate
Sears Holdings Corp reported its first quarterly profit in nearly two years, helped by the retailer’s $1.25 billion cost-cutting plan amid doubts about its ability to continue as a going concern.

However, sales continued its years-long decline, hurt by lower demand for groceries, apparel and home appliances at its Sears and Kmart stores.

Sears, once the largest U.S. retailer, has been struggling to adjust to the changing retail landscape and rising competition from Wal-Mart Stores Inc, Target Corp and Amazon.com Inc.

The company said in April it expected a net profit of between $185 million and $285 million for the first quarter, helped by cost cuts, including through shutting stores, selling its real estate and reducing management jobs.

Sales at Sears’ U.S. stores open more than a year fell 12.4 percent, while at Kmart it fell 11.2 percent in the first quarter ended April 29.

Net income attributable to Sears’ shareholders was $244 million, or $2.28 per share, compared with a loss of $471 million, or $4.41 per share, a year earlier.

Excluding items, the company reported a net loss of $2.15 per share.

read more: Reuters

Maybe It Is a Best Buy
Shares of Best Buy are up after the consumer electronics retailer beat profit expectations, reporting a surprise increase in same-store sales and provided an upbeat outlook.

The net profit for the quarter to April 29 fell to $188 million, or 60 cents a share, from $229 million, or 70 cents a share, in the same period a year ago. Excluding non-recurring items, adjusted earnings per share rose to 60 cents from 43 cents, beating the FactSet consensus of 40 cents. Revenue increased to $8.53 billion from $8.44 billion, above the FactSet consensus of $8.28 billion. Same-store sales grew 1.6 percent, compared with the FactSet consensus of a decline of 1.3 percent, with domestic growth of 1.4 percent beating expectations of a 1.8 percent decline.

The company expects second-quarter revenue of $8.6 billion to $8.7 billion, above the FactSet consensus of $8.48 billion, and adjusted EPS of 57 cents to 62 cents, which surrounds expectations of 59 cents. “Compared to our expectations going into the quarter, our revenue was higher due to strong performance in gaming, a better-than-expected result in mobile, and the improvement of overall sales trends due to the arrival of delayed federal tax refund checks,” said Chief Executive Hubert Joly. The stock has rallied 18 percent year to date.

read more: MarketWatch

Losing Money-Management Talent Going to Tech
The battle for quantitative talent has turned some of the richest money managers into underdogs. Why? Because they are up against the likes of Alphabet Inc.’s Google and Facebook Inc. for hiring the world’s top minds.

“Google is trying to hoover up every data scientist in the world,” said Luke Ellis, chief executive of Man Group PLC, the world’s largest publicly traded hedge-fund manager based in London. “Google has got more money than I have. I can’t compete with Google just on that.”

Man Group attempts to get these data scientists at their source. The firm has donated millions to Oxford University to put its name on a quantitative research laboratory, hoping that prospective employees get acclimated with the firm and its culture early in their career.

The trouble is that across the corporate world — be it hedge funds, tech giants or even the Fortune 500 — companies are desperate to hire the same type of people. They seek top graduates or postgraduates who can build software that learns to spot patterns in anything from photos on social media to financial futures markets. To appeal to tech talent, some financials firms offer the kind of office perks common at tech companies.

read more: Wall St Journal

How Much Will that Modest Home Cost?
A New Yorker needs to earn $95,729 a year to afford a modest home, making the Big Apple one of the country’s least affordable regions for owning property, according to a quarterly study by mortgage research group HSH.

The only more expensive home-buying areas:

  • San Francisco Bay   $161,100
  • San Diego                 $111,665
  • Southern California   $ 98,542

The greater Boston region was the fifth most expensive area with Red Sox fans needing to make $91,419 a year to buy.

Have a prosperous day ahead!


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