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By James P. Furlong | Agent in Boston, MA
  • Is "Generational Housing" a reality that needs to be addressed by developers?

    Posted Under: Market Conditions in Massachusetts, Home Buying in Massachusetts, Home Selling in Massachusetts  |  June 22, 2014 5:43 AM  |  2,429 views  |  No comments

    It’s Official: The Boomerang Kids Won’t Leave


    Slide Show|14 Photos

    ‘Hi, Mom, I’m Home!’

    ‘Hi, Mom, I’m Home!’

    Credit Damon Casarez for The New York Times

    Annie Kasinecz has two different ways of explaining why, at age 27, she still lives with her mom. In the first version — the optimistic one — she says that she is doing the sensible thing by living rent-free as she plans her next career move. After graduating from Loyola University Chicago, Kasinecz struggled to support herself in the midst of the recession, working a series of unsatisfying jobs — selling ads at the soon-to-be bankrupt Sun-Times, bagging groceries at Whole Foods, bartending — in order to pay down her student loans. But she inevitably grew frustrated with each job and found herself stuck in one financial mess after another. Now that she’s back in her high-school bedroom, perhaps she can finally focus on her long-term goals.

    But in the second version — the bleaker one — Kasinecz admits that she fears that her mom’s house in Downers Grove, Ill., half an hour west of the city, has become a crutch. She has been living in that old bedroom for four years and is nowhere closer to figuring out what she’s going to do with her career. “Everyone tells me to just pick something,” she says, “but I don’t know what to pick.”

    One in five people in their 20s and early 30s is currently living with his or her parents. And 60 percent of all young adults receive financial support from them. That’s a significant increase from a generation ago, when only one in 10 young adults moved back home and few received financial support. The common explanation for the shift is that people born in the late 1980s and early 1990s came of age amid several unfortunate and overlapping economic trends. Those who graduated college as the housing market and financial system were imploding faced the highest debt burden of any graduating class in history. Nearly 45 percent of 25-year-olds, for instance, have outstanding loans, with an average debt above $20,000. (Kasinecz still has about $60,000 to go.) And more than half of recent college graduates are unemployed or underemployed, meaning they make substandard wages in jobs that don’t require a college degree. According to Lisa B. Kahn, an economist at Yale University, the negative impact of graduating into a recession never fully disappears. Even 20 years later, the people who graduated into the recession of the early ’80s were making substantially less money than people lucky enough to have graduated a few years afterward, when the economy was booming.

    Some may hope that the boomerang generation represents an unfortunate but temporary blip — that the class of 2015 will be able to land great jobs out of college, and that they’ll reach financial independence soon after reaching the drinking age. But the latest recession was only part of the boomerang generation’s problem. In reality, it simply amplified a trend that had been growing stealthily for more than 30 years. Since 1980, the U.S. economy has been destabilized by a series of systemic changes — the growth of foreign trade, rapid advances in technology, changes to the tax code, among others — that have affected all workers but particularly those just embarking on their careers. In 1968, for instance, a vast majority of 20-somethings were living independent lives; more than half were married. But over the past 30 years, the onset of sustainable economic independence has been steadily receding. By 2007, before the recession even began, fewer than one in four young adults were married, and 34 percent relied on their parents for rent.

    These boomerang kids are not a temporary phenomenon. They appear to be part of a new and permanent life stage. More than that, they represent a much larger anxiety-provoking but also potentially thrilling economic evolution that is affecting all of us. It’s so new, in fact, that most boomerang kids and their parents are still struggling to make sense of it. Is living with your parents a sign, as it once was, of failure? Or is it a practical, long-term financial move? This was the question that the photographer Damon Casarez, who is 26, asked when he moved in with his parents after graduating from art school. So he started searching for other boomerang kids, using tools like Craigslist. The result is this photo essay. And the answer to whether boomeranging is a good or a bad thing depends, as Kasinecz noted, on how you look at it.

    Childhood is a fairly recent economic innovation. For most of recorded history, a vast majority of people began working by age 4, typically on a farm, and were full time by 10. According to James Marten, a historian at Marquette University and the editor of The Journal of the History of Childhood and Youth, it wasn’t until the 1830s, as the U.S. economy began to shift from subsistence agriculture to industry and markets, that life began to change slowly for little kids. Parents were getting richer, family sizes fell and, by the 1850s, school attendance started to become mandatory. By the end of the Civil War, much of American culture had accepted the notion that children under 13 should be protected from economic life, and child-labor laws started emerging around the turn of the century. As the country grew wealthier over the ensuing decades, childhood expanded along with it. Eventually, teenagers were no longer considered younger, less-competent adults but rather older children who should be nurtured and encouraged to explore.

    Jeffrey Jensen Arnett, a psychologist at Clark University who coined the term “emerging adulthood,” sees boomerang kids as the continuation of this centuries-long trend. Returning home, he told me, is a rational response to a radically different, confusing postindustrial economy. In past generations, most people took whatever work was available and, crucially, learned the necessary skills on the job. From 1945 to around 1978, amid the postwar boom, work life in America was especially benign and predictable. The wage gap between rich and poor shrank to its lowest level on record, and economic growth was widely shared.

    But we now know that, during the ’70s, this system was becoming unhinged. Computer technology and global trade forced manual laborers to compete with machines at home and with low-wage workers in other countries. The changes first affected blue-collar workers, but many white-collar workers performing routine tasks, like office support or drafting or bookkeeping, were also seeing their job prospects truncated. At the same time, these developments were hugely beneficial to elite earners, who now had access to a larger, global market and productivity-enhancing technology. They were assisted by changes in government policy — taxes were cut, welfare programs were eliminated — that further rewarded the wealthy and removed support for the poor.

    Millennials’ parents could be forgiven for underestimating the consequences of these trends. For most of American history, it was natural for each generation to become richer than the previous one. Now that’s no longer true. These changes created a new, far less predictable dynamic — some people would do much better than their parents could have ever dreamed; others would fall permanently behind. Given the volatility of the changes, the idea of an “average” worker was becoming obsolete. And while much of the discussion about economic inequality has centered on the top 1 percent, it’s the gap between the top 20 percent and the rest that’s more salient to young people. “That is a dividing point,” says Mark Rank, a professor at Washington University in St. Louis. People in the top 20 percent of income — roughly $100,000 in 2013 — have taken nearly all the economic gains of the past 40 years. (Of course, the top 1 percent and, even more so, the top 0.01 percent, has taken a far more disproportionate share).

    This uncomfortable fact, which many economists have recently accepted, suggests that we are living not simply in an unequal society but rather in two separate, side-by-side economies. For those who can crack the top 20 percent, there is great promise. Most people in that elite group, Rank told me, will spend at least part of their careers among the truly affluent, earning more than $250,000 a year. For those at work in the much larger pool, there will be falling or stagnant wages and far greater uncertainty. A college degree is an advantage, but it no longer offers any guarantee, especially for those who graduate from lower-ranked for-profit schools. These days, a degree is merely the expensive price of admission. In 1970 only one in 10 Americans had a bachelor’s degree, and nearly all could expect a comfortable career. Today, about a third of young adults will earn a four-year-degree, and many of them — more than a third, by many estimates — are unlikely to find lifelong secure employment sufficient to pay down their debt and place them on track to earn more than their parents. If they want a shot at making it into the top 20 percent, they now need to learn a skill before they get a job. And for many, even with their parents’ help, that’s going to be an impossibility.

    For all these grim forecasts, people now in their 20s are remarkably optimistic. Arnett, who recently conducted a nationwide poll of the group, discovered that 77 percent still believe they will be better off than their parents. A Pew survey found that only 9 percent of young adults believe they won’t be able to afford the lives they want. This combination of confidence in the face of historic uncertainty might seem confusing, but Arnett argues that optimistic boomerang kids might not be as blithely naïve as their parents imagine. Many are rejecting the Dilbertian goal of a steady, if unsatisfying, job for years of experimentation, even repeated failure, that eventually leads to a richly satisfying career. Sleeping in a twin bed under some old Avril Lavigne posters is not a sign of giving up; it’s an economic plan. “Stop dumping on them because they need parental support,” Arnett cautioned. “It doesn’t mean they’re lazy. It’s just harder to make your way now than it was in an older and simpler economy.”

    Adrianne Smith, 28, graduated from the University of Central Florida in 2008 and went to work as a behavioral analyst treating children on the autism spectrum. She was quickly making more than $60,000 a year, but in order to earn that money, “I had a huge caseload,” she said, handling 25 clients while paying off more than $40,000 in student loans. She knew of therapists earning $100,000 annually, but they did so by handling 40 or more physically and emotionally demanding cases.

    So Smith came up with a more efficient idea. After doing some research on local clinics, she noticed that a rise in autism diagnoses mirrored the rising demand for clinic services. And with the convenience of modern technology, from smartphones to their attendant payment readers, she could build a clinic serving clients in their homes, one that could be leveraged into a larger regional network. With a bit of hustle, Smith thought, she could set herself up with a profitable business that would give her returns for the rest of her life. To afford the start-up costs, she moved back in with her parents, turned her sister’s old room into an office where she could work and store toys for her clients, and used what would have been rent money to develop a website and hire a few part-time therapists to make house calls. “I couldn’t have opened a clinic without my parents’ support,” she said. Now when Smith meets peers who deride her for living at home, she replies that it’s really just a business incubator.

    I wasn’t surprised that Arnett was impressed by Smith’s plan. But I didn’t expect him to praise Kasinecz too. At 27, she had a lot of debt, no career in mind and a series of unsatisfying jobs. I worried that her prospects were dimming, that crossing that 20 percent threshold would seem harder and harder with each passing year. She seemed worried, too. “We’re kind of in this limbo phase where we’re expected to be these great professionals who come out of college with bomb-ass jobs,” she said of her generation. “And then we’re like, Wait. I’ve got 80 grand in debt. How am I supposed to do that?”

    Arnett told me, however, that I wasn’t seeing her hidden strengths. In fact, he would be far more worried if she had done what the previous generations did — stayed in whatever job she took after graduating, no matter how little she liked it — or if she were similarly underemployed but expressed no urgency about finding a better job. Kasinecz, he said, was still searching for the right fit and refusing to settle for anything less. Somewhat counterintuitively, Arnett said, it’s the people most actively involved in this struggle, the ones who at times seem totally lost, who are likely to find their way. Kasinecz seemed to know this, too. And in that sense, she was emblematic of a generation in which there are no more average workers and even less certainty. Kasinecz may well find a job she likes and, eventually, the right career — even if she terrifies her mother, herself and a few hand-wringing economists in the process.

  • 7 Reasons This Housing Market Recovery is Genuine

    Posted Under: Market Conditions in Boston  |  June 19, 2013 5:59 AM  |  239 views  |  1 comment

    7 Reasons This Housing Market Recovery is Genuine

    • By Gary Gately, Associate Editor, Money Morning
    • June 18, 2013

    The housing market recovery is for real this time. Coming after the housing market crash, the recovery is welcome news to those in the industry - and bodes well for the economy as a whole.

    "It almost seems too good to be true," Lawrence Yun, the chief economist at the National Association of Realtors, told Money Morning.

    The latest confirmation of the market's rebound is the new survey of home builder confidence from Wells Fargo Bank and the National Association of Home Builders, which climbed to its highest level since 2006.

    And housing starts were up 6.8% in May and 28.1% year to date, the U.S. Census Bureau said.

    Why The Housing Market is On the Rebound

    Other reasons that the recovery's the real deal abound. Here are seven of them:

    •  Prices are rising, but not enough to price buyers out of the market and not nearly to reach bubble levels.

      Celia Chen, an analyst with Moody's Analytics, noted in an interview with Money Morning that home prices, which climbed 12.1% in April year over year, still remain 26% below peak bubble levels.

      "What I see is a market that is on a healthy, sustainable growth path," Chen says.

      She's not the only one.

      "Even with the recent price increases, home prices nationally remain undervalued relative to fundamentals and much lower than in the last bubble," Jed Kolko, chief economist at the real estate website Trulia, said on his blog. "That's why today's prices are actually still a rebound, not a bubble."

    • Interest rates on 30-year fixed mortgages, now at about 4%, remain near historic lows, even with their recent uptick.
    • And a moderate increase, which many experts expect, wouldn't be enough to drive buyers away. In fact, David Zugheri, co-founder and executive vice president of Houston-based Envoy Mortgage, told Money Morning the prospect of rising rates may prompt some to purchase homes because they anticipate the increase.

      "With those who have been just kind of thinking about buying and then they're watching rates go down, this [recent increase] has just been a kind of shock to the system, so to speak," Zugheri said. "They're looking and saying, 'Well rates are not going to go down to zero. Maybe they've reached a bottom point and now they're on the way up. I need to go out and buy something before they hit 5%."

      NAR's Yun said he expects rates to climb to around 5% by this time next year as the Fed scales back QE but adds that won't significantly affect home sales. One reason: No less than a third of U.S. homebuyers are paying with cash, Yun said. Most of those sales are to individuals, not to institutional investors that tried to drive down home price with mass purchases during the foreclosure wave.

    • Buying is cheaper than renting in the nation's top 100 largest metro areas, Trulia's Kolko told Money Morning, and demand far outstrips supply in many areas.

       The competition for homes has led to bidding wars in some places, including Los Angeles, Boston, San Francisco, Seattle, Washington, New York, Miami and Phoenix.

    • Sales of new homes rose in April to the second-highest level since 2008. Existing home sales, meanwhile, climbed to the highest level since November 2009.
    • The percentage of Americans who believe now's a good time to sell a home climbed in May to its highest level in three years. According to a survey by Fannie Mae, 40% of Americans said in May it was a good time to buy a home, up from 30% in April and 16% a year before.

      "Sentiment toward buying a home appears to be catching up with the strengthening housing market," Doug Duncan, senior vice president and chief economist at Fannie Mae, told USA Today.

    • The job market has been stable and improving slightly. Secure jobs, naturally, create demand for homes, and job confidence has been high. (The layoff and firing rate reported by the Department of Labor has been stable for the past 12 months.)  And consumer confidence is near a six-year high.


  • Fannie Mae: Economy Will 'Reaccelerate' in 2nd Half of 2013 - DO YOU AGREE?

    Posted Under: General Area in Boston, Market Conditions in Boston  |  May 22, 2013 12:07 PM  |  220 views  |  No comments

    Fannie Mae: Economy Will 'Reaccelerate' in 2nd Half of 2013

    05/20/2013 By: Esther Cho Printer Friendly View

    Fiscal drags such as the sequester may have weakened economic momentum, but the economy should “reaccelerate” in the second half of this year as financial and housing conditions improve, according to Fannie Mae’s Economic and Strategic Research Group.

    In its most recent economic outlook, the group revealed expectations for the economy to continue the modest recovery and grow 2.2 percent this year, up from 1.7 percent in 2012 and 2 percent in 2011.

    “Employment numbers are getting better, albeit it at a relatively slow pace, and the April employment picture should help boost consumer sentiment toward the economy overall. Spending grew in the first quarter at a surprisingly strong pace, and although this rate is unlikely to hold up, consumers continue to show signs of resilience in the face of fiscal concerns,” said Doug Duncan, chief economist for Fannie Mae.

    Duncan though warned of “potential” headwinds, such as the “long-term effects of sequestration, spending constraints, the sovereign debt crisis, and the impending debt ceiling.”

    Amid the expected improvements, the group anticipates the housing market’s recovery will go on as well, reinforced by current levels of home affordability.

    According to the GSE’s analysis, housing affordability should steadily decline from its 2012 peak, but will still hover above normal levels through 2017. By that time, the group expects the 30-year fixed rate mortgage to average 5 percent.

    While affordability provides support to the housing market’s recovery, it’s not the main driver of homebuying activity, according to the GSE.

    “Going forward, the trends in lending standards, regulations regarding lending and securitization of mortgages, and housing finance reform will be key to a transition to normal for the housing market,” the group stated.

    Home prices should also continue their upward trajectory, aided by limited inventory, a smaller share of distressed sales, and increased efforts to prevent foreclosures.

    Looking ahead, the group forecasts single-family starts will increase 24 percent this year, while multifamily starts will rise by about 35 percent during the same time period.

    Total home sales—new and existing—are expected to increase by nearly 8 percent in 2013, while home prices should average a 3.9 percent gain.
    The 30-year fixed rate mortgage is projected to average 4 percent in 2014.

  • Why It’s Still Hard to Get a Mortgage - Great article in Wall Street Journal

    Posted Under: General Area in Boston, Market Conditions in Boston, Financing in Boston  |  April 2, 2013 9:24 AM  |  524 views  |  No comments

    By Nick Timiraos

    The housing market may be coming back, but a growing number of policy makers have expressed concerns in recent months that it’s still too hard to get a mortgage.

    Federal Reserve governor Elizabeth Duke outlined some of these concerns and their causes in a speech last month. She was quick to note — as is anyone else who has sounded similar alarms — that she doesn’t want the market to return to the go-go days of 2005 or 2006 when anyone who could fog a mirror could get a loan. “But I also don’t think it would be a good idea to go back to the quite restrictive credit conditions of the early 1980s,” she said in the speech to mortgage bankers.

    The drop in purchase mortgages — loans for buying a home rather than refinancing an existing loan — has been most pronounced among borrowers with low credit scores. Originations have dropped by 30% for borrowers with credit scores above 780 between 2007 and 2012, but they’ve dropped by 90% for borrowers with credit scores between 620 and 680.

    Duke concedes that some of the decline is probably due to weaker loan demand. But the trend nevertheless “has disturbing implications for potential new households” because younger borrowers typically have credit scores that are more than 50 points below older borrowers, said Duke.

    So why haven’t mortgage credit standards eased up even a little bit, as they have for other consumer loans such as credit cards and autos? First, home prices have fallen so sharply that lenders are worried future price declines and job losses will leave them with more defaulted mortgages.

    Associated Press

    But Duke noted another more surprising cause: the Fed’s campaign to push down interest rates means lenders haven’t had to work very hard to drum up business. Together with federal efforts to ease refinancing rules, low rates have produced a surge of refinancing business. This has delivered a steady stream of high-quality, low-risk borrowers in an industry that already has shrunk significantly. Capacity-constrained lenders have “less incentive to pursue harder-to-complete or less profitable loan applications,” said Duke.

    Fed staff research indicated that purchase-loan originations to borrowers with credit scores between 620 and 680 had dropped by 50% over the past 18 months, and such lending to borrowers with credit scores between 680 and 720 had fallen by 15%. Purchase loans to borrowers with higher credit scores had declined “only to a small degree,” she said.

    The good news: as mortgage rates rise and refinance demand drops, the capacity constraints on lenders will recede and banks will begin to compete for more of those purchase loans. The upturn in home prices could also boost lenders’ confidence.

    The bad news: Duke identified three “non-market” forces that are keeping lending standards tighter than they otherwise might be and that may be less likely to ease on their own:

    –First, banks are requiring tighter rules to guard against the risk they’ll have to buy back defaulted loans from government-backed entities Fannie Mae FNMA +15.43% and Freddie Mac FMCC +14.12%, which have stepped up such demands after they were taken over by the government four years ago. Duke said that an effort by the firms’ federal regulator to clarify lenders’ potential “put-back” liabilities appears to have been insufficient to keep those worries from weighing on the market.

    –Second, new federal and state rules associated with handling defaulted mortgages have raised the costs of mortgage servicing. While Duke said that many of those new rules have been needed to improve borrower protection, banks may find that the best way to avoid having to deal with defaulted loans is to stop lending to borrowers with low credit scores.

    –Third, banks face a series of new federal regulations designed to protect borrowers from receiving unaffordable mortgages, but those rules could also keep credit standards tight if banks decide potential penalties are too onerous.

    One commonly expressed attitude: If banks want to be tight, let them. If the past decade has taught us anything, the thinking goes, it’s that the economy is better off if everyone has to make large down payments and borrowers with only the best credit scores get mortgages.

    The problem, says Duke, is that the economy may actually be worse off if the pendulum stays stuck at too tight, just as the economy was crippled when the pendulum swung too far in the other direction. The ability of newly formed households that are more likely to have lower incomes and credit scores to get loans “will make a big difference in the shape of the recovery,” she said. “Without first-time homebuyers, the move-up market will be sluggish, new and existing home sales will be more subdued, and purchase mortgage volumes will return only slowly.”

  • Homebuilder Confidence Spikes To 6-Year High

    Posted Under: Market Conditions in Boston, Home Buying in Boston, Home Selling in Boston  |  November 21, 2012 9:23 AM  |  208 views  |  1 comment

    Homebuilder Confidence Spikes To 6-Year High


    nahb hmi 201211 Homebuilder Confidence Spikes To 6 Year HighThe National Association of Home Builders (NAHB) released its Housing Market Index (HMI) Tuesday, which showed sharp, 5-point increase to 46 for November 2012, marking the seventh consecutive monthly gain for the HMI, and lifting the index to its highest point since May 2006.

    Readings under 50 indicate unfavorable housing conditions for builders. Readings over 50 signal “good” conditions.

    The Housing Market Index is a measure of builder confidence, published monthly, based on a survey sent to NAHB members which asks them to rate housing market conditions.

    In November, home builders reported gains in two of the three areas surveyed:

    1. Current Single-Family Sales: 49 (+8 from October 2012)
    2. Projected Single-Family Sales: 53 (+2 from October 2012)
    3. Buyer Foot Traffic: 35 (unchanged from October 2012)

    Builders report growing demand for new homes as inventories of distressed and foreclosed homes shrink in many areas around the country.

    Even Hurricane Sandy did little to suppress builder confidence. The NAHB survey was conducted in the two weeks immediately following Hurricane Sandy, so the Housing Market Index does reflect builder sentiment during that period. All regions of the country posted confidence gains in November.

    The South Region showed a 4-point gain to 43; the West Region showed a 3-point gain to 47; the Midwest Region showed a 3-point gain to 45; and the Northeast Region showed a 2-point gain to 31.

    Despite the gains, builders nationwide still report challenges with home appraisals and tight credit conditions. In addition, a shortage of buildable lots in some areas is limiting the ability for home builders to put more single-family homes on the market.

    As builder confidence grows, today’s buyers should prepare for the possibility of higher home prices. Confident sellers are less likely to make price concessions or to offer free upgrades and to get the best deals you should hired an experienced agent.

    As always, Furchin at ReMax Metro is "your real estate solution" in Greater Boston.

    jamesfurlong20@gmail.com,   617620-0669


  • Short Sale or Foreclosure - it's a tough question for many homeowners.

    Posted Under: General Area in Boston, Market Conditions in Boston, Foreclosure in Boston  |  April 12, 2012 8:35 AM  |  510 views  |  5 comments
    Many homeowners are struggling to meet their mortgage obligations in today's economy. They are being bombarded with news stories about short sales, foreclosures, robo-signing, $26B settlements, loan modifications and so much more, while they try hard to keep a roof over their head. The unfortunate fact is that if the homeowner is unable to make their mortgage payment the day will come when they will need to leave their home. Banks will consider the options that are available to them for remedy. Foreclosure occurs when the bank takes the required legal action to take legal ownership of the property. This is the only path open to the bank when there is no contact with the bank from the homeowner. This is also an expensive option which the bank would like to avoid. The bank could accept the deed back from the homeowner - this is known as "deed in lieu". The bank might agree to allow a "short sale" where the property is sold for less than what is owed on the loan. The bank may forgive the debt in both these scenarios if there is proof of "hardship". Both these scenarios provide a level of control to the homeowner unlike in a foreclosure. The bank and homeowner will agree to a timeframe for the homeowner to vacate the property. Looking to the future for the homeowner the long term effect on their credit is less damaging in these two scenarios than with a foreclosure. The most damaging thing for the homeowner to do is to disregard the communications from the bank. It is difficult to make these tough decisions but it is important to do so.
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