Real Estate Data for the Rest of Us

America’s Fastest Moving Markets Finally Slowing Down

Homes are going especially quickly in the San Francisco Bay Area, Seattle, Denver, and Salt Lake City, but there are finally signs of a cool-off. First-time buyers in the East Coast and Midwest can take their time year round to find their dream home, while frustrated buyers in the fastest moving markets in the West should wait for the winter slowdown.

After years of tight inventory and large price gains in several major housing markets, home buyers can breathe a sigh of relief – we’re now seeing early signs of a slowdown. But what does this mean for home buyers?

To find out, we first calculated how long homes are staying on the market by measuring the share of homes for sale on Trulia over a two-month period. We looked at homes listed on June 17, then counted how many were still for sale on August 17. Faster-moving markets had a lower percentage of homes still on the market after two months, while slower-moving markets had a higher percentage.

Our two-month measure is similar to a common housing statistic: days on market (DOM). In general, housing markets with more inventory and fewer buyers will have a higher share of for-sale homes remaining on the market after two months and a higher median DOM. But we prefer our two-month measure over the widely watched DOM as a way to determine how quickly homes are moving in a market. Why? We think DOM is potentially misleading. If lots of new inventory suddenly lands on the market, then median DOM could fall thanks to all those newly listed homes. Thus, a low median DOM might indicate that buyers are snapping up homes quickly, so homes aren’t staying on the market long (a seller’s market). But it could also signal that a lot of new inventory has just come onto the market (a buyer’s market). As a result, it’s difficult to decipher what’s really going on based on DOM alone.

Home Sales Moving Slightly Slower in 2015 Across All Price Tiers
Nationally, 63% of homes listed for sale on June 17 were still on the market on August 17, which is up a bit from 61% for the same period last year. And it turns out homes across all price tiers have slowed about the same. To see this, we evenly divided all homes in each of the 100 largest U.S. metros into three price tiers based on what’s considered high-end, mid-range, and low-end locally.

Home sales in all three tiers slowed 2-3 percentage points compared with a year ago. The share of low-price and mid-priced homes still on the market after two months increased 2 percentage points, compared with a 3-point increase for high-tier homes. As always though, the national trend hides big differences from one local market to another. In many metros, the sales pace is quickening, while slowing in others.

Trulia_FMM_Price_BarChart

Affordability Plays Role in California Slowdown and Southern Pickup
California continues to reign as the state with the fastest moving markets with San Francisco, Oakland, San Jose, San Diego, and Orange County making the top 10 list of America’s fastest moving housing markets. In fact, less than 34% of the homes for sale in the top three San Francisco Bay Area metros remained on the market after two months. But the news isn’t all bad for California home buyers. The percentage of homes still on the market after two months has increased slightly over the past year. Meanwhile, Seattle, Salt Lake City, and North Port-Bradenton-Sarasota, FL are gaining ground, having decreased between 4-7 percentage points from a year ago.

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America’s Top 10 Fastest Moving Housing Markets

# U.S. Metro % of homes still for sale after two months, August 2015 % of homes still for sale after two months, August 2014 Difference in share still for sale, 2015 vs 2014 Median Asking Home price, August 2015
1 San Francisco, CA 26% 25% +1% $1,190,900
2 Oakland, CA 31% 29% +2% $599,000
3 San Jose, CA 34% 30% +4% $838,000
4 Seattle, WA 40% 44% -4% $420,000
5 Salt Lake City, UT 46% 52% -6% $314,990
6 San Diego, CA 47% 45% +2% $579,000
7 Denver, CO 48% 46% +2% $451,995
8 Cambridge, MA 48% 46% +3% $439,000
9 Orange County, CA 49% 46% +3% $725,000
10 North PortSarasota – Bradenton, FL 50% 58% -8% $329,990
Note: Among the 100 largest U.S. metros. The two-month shares and the difference are rounded to the nearest percentage point, and the difference was calculated before rounding; therefore, the rounded difference might not equal the difference between the rounded shares. 

But housing markets in the South, which have sped up the most year-over-year, aren’t the fastest moving. The share of homes for sale in WinstonSalem, NC, which ranks #23 on the list, still on the market after two months dropped 9 percentage points from 67% in August 2014 to 58% in August 2015. Greensboro, NC and North Port-Bradenton-Sarasota, FL sped up at a similar pace, dropping 8 percentage points, followed by Charlotte, NC, and Cape CoralFort Myers, FL, which dropped 7 and 6 percentage points each.

So what drives a fast moving market? As with our previous findings, increases in home prices are strongly correlated with the share of homes on the market after two months.

Trulia_FMM_Price_Scatterplot

However, affordability may be starting to play a role in the priciest markets. Of the 50 most expensive housing markets, those with fewer homes for sale that are affordable to the middle class in 2014 tended to experience a slowdown. In other words, home buyers, no matter how competitive the market is, have a limit. When the stock of cheaper homes dries up, not every buyer is able to up their budget and put offers on homes in a higher price tier. So some may delay buying a home, which leads to existing homes sitting on the market a tad longer. Still, homes in these expensive markets are moving faster than other less expensive metros.

Trulia_FMM_MiddleClass_Scatterplot

America’s Heartland: Where First-Time Home Buyers Can Take Their Time
Nationally, and in 89 of the 100 largest metro areas, low-tier homes move faster than all other homes. But first-time home buyers in the Midwest and South can take their time because low-tier homes there actually move slower than the market as a whole. To see this, we evenly divided all homes in each of the 100 largest U.S. metros into three price tiers and compared how fast the lowest tier moved compared to the market as a whole.

Trulia_FMM_SlowList

Where First Time Home Buyers Can Move At Their Own Pace
U.S. Metro % of Homes Still for Sale After Two Months, August 2015 % of Entry-level Homes Still for Sale After Two Months, August 2015 Percentage Point Difference between Entry-Level Homes and All Homes Median Asking Home price, August 2015
Detroit, MI 58% 62% +4%  $89,900
Kansas City, MO 55% 59% +3%  $164,900
New Orleans, LA 62% 65% +3%  $187,500
Pittsburgh, PA 64% 66% +2%  $159,000
Newark, NJ 69% 70% +1%  $319,000
Dayton, OH 64% 65% +1%  $119,700
Camden, NJ 70% 71% +1%  $185,000
Charlotte, NC 51% 52% +1%  $235,000
Indianapolis, IN 61% 62% +1%  $169,950
Akron, OH 61% 62% +1%  $120,450
Note: Among the 100 largest U.S. metros. The two-month shares and the difference are rounded to the nearest percentage point, and the difference was calculated before rounding; therefore, the rounded difference might not equal the difference between the rounded shares. 

Detroit tops the list, where entry-level homes on average move 4 percentage points slower than the rest of the market. Kansas City, MO, and New Orleans both have about 3 percent more entry-level homes are on the market after two months. And that number is two percent greater in Pittsburgh, PA. There is just a one-percentage point advantage in the other six metros that round out our top 10 list of markets where entry-level homes are easier to buy.

Winter is Coming: Relief in Sight for Some Home Buyers
For home buyers in some of the nation’s most competitive housing market, waiting to buy in the winter just might pay off. To figure out whether seasonality plays a role in how fast markets move, we calculated how long homes stay on the market in the summer versus the winter. As it turns out, those living in five of the fastest moving markets this summer also top the list of metros with the largest winter-to-summer change in the share of homes still on the market after two month. For example, in pricey San Francisco and Oakland, CA, the pace of sales increased by 19% and 17%  (proportion increase, not percentage points!) between winter and summer over the past three years. In Cambridge, MA, Seattle, WA, and North Port-Bradenton-Sarasota, FL, the increase is between 12% and 14%. So home buyers who were not able to close on the home of their dreams in the fastest moving markets this summer might have better luck come winter.

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Where Winter Brings Home Buyers Relief
# U.S. Metro % of homes still for sale after two months, August 2015 Winter-to-Summer % Change in Share of Homes Still on The Market After Two Months, Three-Year Average, 2012-2015 Winter-to-Summer Price Change (%), Three Year Average, 2012-2015
1 San Francisco, CA 26% -19% 12%
2 Oakland, CA 31% -17% 25%
3 Madison, WI 56% -17% 9%
4 West Palm Beach, FL 60% -16% 0%
5 Cambridge, MA 48% -14% 11%
6 Seattle, WA 40% -13% 13%
7 North PortSarasota– Bradenton, FL 50% -12% 6%
8 Charlotte, NC 51% -12% 9%
9 Boston, MA 51% -12% 9%
10 Chicago, IL 59% -12% 16%
Note: Among the 100 largest U.S. metros. The two-month shares and the difference are rounded to the nearest percentage point, and the difference was calculated before rounding; therefore, the rounded difference might not equal the difference between the rounded shares. 

Just as we found earlier this year, the fastest moving markets were those that had the largest year-over-year price gains. San Francisco and Oakland, which have a greater winter-summer differential, also tend to have larger swings between winter and summer prices. To see this relationship, we calculated the average seasonal increase in median asking price between winter and summer, and then compared it to the winter-to-summer differential in the share of homes on market after two months. As it turns out, there is a moderate and negative relationship between the two – which means markets that see larger seasonal price spikes tend to move proportionally faster during the summer.

Trulia_FMM_Seasonal_Scatterplot

Consolation Relief For First-Time Home Buyers
All of this should be taken as consolatory news for first-time home buyers. In our last two fastest moving market reports, we found that not only were for-sale homes moving faster than the year before, but that cheaper homes moved much faster than expensive homes – and had been increasing in speed year-over-year.

That story has changed course this summer. Compared to last year, a larger share of homes are staying on the market after two months. Even the fastest moving markets have slowed down somewhat. Moreover, in a handful of markets, first-time home buyers looking for entry-level homes can actually take their time to find their dream home. So what this means for first-time home buyers is that they can be cautiously optimistic that normality may be creeping in on what has been an otherwise difficult marketplace over the past two years.

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A Tale of Two Rent-Controlled Cities: New York City and San Francisco

Rent control regulations in New York City and San Francisco couldn’t be more different. Renters in Manhattan are more likely to find a rent-stabilized apartment in cheaper neighborhoods while San Franciscans can find a rent-controlled apartment in neighborhoods with little to no new construction.

Mark Uh
August 20, 2015

Ask any renter in New York City and San Francisco and they’ll tell you that the rents are too damn high. Sadly, they aren’t exaggerating. The median rent for both cities now exceed $3,000 a month – higher than any other rental market in the country. To put that into perspective, you’d need to make well over $120,000 to afford the median rent.

So what’s a renter to do? Well, some renters believe that their best bet is to find a rent-controlled apartment. Unfortunately, this doesn’t mean what most people think this means. Despite what you may have heard, a rent controlled apartment does not prevent a landlord from raising rents. Instead it just “controls” how much landlords can raise rents over the course of a renter’s tenancy in an apartment.

Not All Rent Increase Regulations Are Created Equal
Rent controls are local housing policies that differ from city to city, if they even exist at all. In New York City, there are two types of rent increase restrictions: (1) Rent-stabilization and (2) Rent-control.

For a unit to qualify as rent-stabilized, the rental must be:

  • In a building with at least six units or more
  • In a building that was built between February 1, 1947 and January 1, 1974

Meanwhile, a rent-controlled unit must:

  • Be in a building that was constructed before February 1947
  • Have a tenant that has lived in that apartment continuously since before July 1, 1971

Here’s where it can get complicated: When a rent-controlled tenant moves out, that apartment ceases to be rent-controlled. If the building it’s in has more than six units, the apartment becomes rent-stabilized. Conversely, if it has less than six units, it becomes deregulated – which means future rents will be determined by the free market and the next tenant will likely be in for some serious sticker shock.

There are two exceptions for both rent-stabilized and rent-controlled apartments that may deregulate that unit. First, if the legal rent exceeded $2,700. Or, if the building was converted into a co-op after the current tenant moves out.

Now for the burning question –how much can landlords increase rents in rent-stabilized and rent-controlled apartments? Well, for rent-stabilized units, rent increases are determined by an annual vote among the city’s nine member Rent Guidelines Board. This year, the Board made an unprecedented decision to freeze rents on one-year leases starting between Oct 1, 2015 and Sept 30, 2016, meaning, rent increases are not allowed. This is the first time in the board’s 46-year history to approve a rent freeze. But for 2-year renewal leases beginning between Oct 1, 2015 and Sept 30, 2016, a 2% increase is allowed.

In rent-controlled units, on the other hand, landlords are entitled to raise rents up to 7.5% each year until they have reached the maximum base rent. Rent increases can only happen under the condition that landlords have certified they are providing an essential service (e.g., heat, hot and cold water, maintenance, painting and janitorial services, elevator service, etc.) and have removed housing code violations (e.g., lack of heat and hot water, mold, pests, etc.). That said, maximum base rents are specific to each property.

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By contrast, the rent control rules in San Francisco are a bit more black and white. Under the Rent Ordinance of 1979, only rentals that were issued a certificate of occupancy (i.e., the building is up to code and fit for habitation) before June 13, 1979 are rent-controlled. But if the paperwork for a building was issued after this date, landlords can raise rents however much they please, whenever they want. However, there are several types of housing that are not protected by rent control laws:

  • Government-subsidized housing
  • Residential hotels with less than 32 days of continuous tenancy
  • Dorms, hospitals, monasteries, nunneries
  • Single-family homes or condos – these units usually do not have limits on rent increases if you moved in on or after Jan 1, 1996

Let’s cut to the chase, again–how much can landlords increase rents in rent-controlled apartments? In San Francisco, there are very specific rules. First, landlords can only increase rents by 60% of the increase in the Bay Area Consumer Price Index. Currently, this is equivalent to a 1.9% annual increase, effective March 1, 2015 through February 29, 2016. Moreover, landlords cannot increase rents until the tenant has lived in the property for a full year, nor can they increase the rent sooner than 12 months from the last increase.

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Want a Rent Stabilized Apartment in Manhattan? Move to Inwood.
Knowing the difference between rent control and rent stabilization in New York City, it is clear that getting a rent-controlled apartment as a new renter is pretty much impossible. But this isn’t the case for a rent-stabilized apartment. So, where can you find this unicorn of a rental home?

To figure out which Manhattan neighborhoods have the most rent-controlled apartments, we looked at a combination of the 2012 Assessor’s database and Trulia’s rental listings from the past two years, and estimated the percentage of multi-family rental units that are under rent stabilization for each neighborhood in the Manhattan borough of New York City.

To calculate this percentage, we looked at whether or not a given multi-family home on Trulia was (1) listed with a monthly rent that was less than $2,700 and (2) belonged to a building constructed before 1974 with six or more units. We then ranked the neighborhoods by this percentage. Neighborhoods with less than 100 rentals on the market were excluded from the rankings. This is clearly a very rough approximation. There are various exceptions to New York City’s rent-stabilization rules; therefore, not all units that belong to a pre-1974 building with six or more units and rents for less than $2,700 classify as a rent-stabilized rental.

Rent_control_NY_map_BLOG copy

As you can see from the map above, less expensive neighborhoods such as Inwood, Harlem, and Washington Heights have a higher percentage of rent-stabilized units. This is primarily because these cheaper neighborhoods have more units that would rent for less than the $2,700 threshold (remember: units that rent for more than $2,700 become deregulated). These days, finding units that rent for under $2,700 are rare in expensive neighborhoods such as TriBeCa and the West Village, making it less likely for new renters to find rent-stabilized apartments.

Keep in mind that the figures above are based on Trulia rentals listings from the past two years. Therefore, our analysis does not capture units that have been occupied for longer than two years. Some of these units might still be rent-stabilized, and this limitation might have the greatest impact (i.e., the underestimation of the percentage of multifamily units for rent on Trulia that are rent-stabilized) on more expensive neighborhoods such as TriBeCa where residents may have lived in a rent-stabilized unit, whose rent is still below $2,700, for a long time.

Best and Worst SF Neighborhoods to Find Rent Controlled Apartments
Let’s now turn our attention to the San Francisco rental market, where most of the apartments are rent-controlled. Similar to what we did for Manhattan, we used the 2012 Assessor’s database to estimate the percentage of multifamily rental units that are under rent control for each neighborhood in San Francisco. This percentage calculation was based on the simple rule of whether or not a given multifamily building was built before 1979. We then ranked the neighborhoods by this percentage. Neighborhoods with less than 100 rentals on the market were excluded from the rankings. The screenshot of the table below hyperlinks to the actual tableau table.

Rent_control_SF_map_BLOG

As you can see from the table and map above, 82% of multifamily units in San Francisco are under rent control. Older neighborhoods, such as Downtown, the Marina, Russian Hill, and Nob Hill which feature more historic buildings, rank higher on the list. On the flipside, SoMa and Mission Bay, where much of the newer luxury residential homes are being built right now, ranks lower. Meanwhile, Hunter’s Point, home to the city’s public housing projects which are exempted from rent control, ranks last.

Overall, what this analysis shows is that rent regulation is much stronger in San Francisco than it is in New York City. This is mainly due to the $2,700 rent threshold for New York City, where once a rental unit’s legal rent exceeds this amount, it becomes fully de-regulated. As a result, rent-stabilized units are difficult to come by, particularly in Manhattan, unless one considers apartments in neighborhoods that are less central and less expensive, such as Inwood or Harlem.

In San Francisco, however, upscale neighborhoods such as Pacific Heights and Nob Hill have plenty of rent-controlled units. But the one thing that readers should note is that rent control is not the same thing as having an affordable rent. We often hear about San Francisco rents being the highest in the nation, even higher than rents in Manhattan despite the widespread existence of rent-controlled units. That’s because San Francisco’s rent laws do not regulate the starting rent for a new tenant. So, let’s say a renter signed his lease in 1990 at $500 a month. When he moves out in 2015, a new tenant would start a new lease at the current market rent, which may be much higher than it was in the past. As a result, rent-control has essentially trapped some tenants in their current rentals because they don’t want to start a new lease at a higher rent – even if a new location and home size is better suited for their current life.

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Some New Home Construction Markets Like It Hot

The hottest homebuilding markets of 2015 include New York, Boston, Philadelphia, and Los Angeles for multi-family homes, and Austin, Houston, Charleston and Nashville for single-family homes.

Selma Hepp, Chief Economist
August 18, 2015

In tracking the housing recovery, we have followed construction activity with a keen eye as it has lagged behind other key indicators, such as home sales and home prices, but also job growth. That’s because homebuilding is both a signal of where builders feel most confident about future housing demand and where new jobs are being created. In the last year, homebuilding across the country has been ramping up, but it continues to do so at an uneven pace. At first glance, the housing markets that are struggling with tight inventory still appear to remain tight as most of the new construction has focused on multi-family units for the rental market.

So to better understand what’s really going on, we looked at Census building permit data in the 100 largest U.S. metros to find out which homebuilding markets are hot and which are not. To do this, we first projected the level of building activity for all of 2015 based on the data for the first half of 2015. We then compared each metro’s estimated 2015 activity with its own historical annual average level of building permits from 1990 to 2014.

Where New Construction Is Booming: Metro New York
Compared to last year, many of the same housing markets where new construction was highest above normal-New York, Boston, Los Angeles, San Francisco, Houston, Orange County, and Dallas-are still building a lot. The new kids on the block to the top 10 list this year are Philadelphia, Newark, and Seattle, where the increase in permits is at least 50% to 75% higher than their respective historical norm. In fact, 27 of the 100 largest metro areas are now building more than their historical average with the growth in most having picked up markedly.

Among the top 10 U.S. metros where new construction activity is highest above average, metro New York ranks highest with 2.5 times the historical average. We were a little surprised by the number, so we dug a little deeper and found that the construction activity in the New York metro area is very cyclical and has ranged from about 20,000 permits a year to 50,000. Comparing the preliminary permit data for the first six months of 2015 to the same period last year shows an increase of almost 150%. Comparing it to the first half of 2013, it shows a 242% increase. It seems that metro New York today is again reaching a cyclical peak and thus the levels are so much higher than the average. Cyclicality is in the nature of the home building construction and many of the growing markets are on the upward slope of the current cyclical upswing.

Top 10 Metros Where New Home Construction Is Highest Above Normal
# U.S. Metro 2015 annualized permit activity relative to metro historical norm Year-over-year asking home price change, July 2015 Multi-unit building share of 2015 permits 2015 annualized multi-unit permit activity relative to metro historical norm 2015 annualized single permit activity relative to metro historical norm
1 New York, NY-NJ 255% 6% 94% 423% -50%
2 Boston, MA 94% 5% 84% 295% -50%
3 Philadelphia, PA 75% 4% 70% 138% 5%
4 Los Angeles, CA 74% 12% 81% 161% -44%
5 Newark, NJ-PA 71% 3% 78% 290% -50%
6 San Francisco, CA 69% 18% 89% 102% -36%
7 Houston, TX 56% 20% 36% 114% 60%
8 Seattle, WA 56% 8% 74% 153% -24%
9 Orange County, CA 53% 7% 67% 136% -24%
10 Dallas, TX 47% 12% 45% 103% 30%
Sources: Census and Trulia.

No Where To Go But Up
Throughout much of the recovery, builders have focused more of their efforts on multi-family homes than constructing single-family homes. So to better understand how hot multi-family construction actually is, we looked at where the share of multi-family buildings has been booming. Turns out, it’s very hot everywhere. Since last year, the share of multi-family buildings has increased in most of the metros that topped last year’s hottest homebuilding markets list.

We then took it a step further and compared the estimated 2015 multi-family permit activity to each metro’s historical norm. In some of the top 10 markets, multi-family construction was higher than the historical norm by several fold. For example, New York’s activity is more than four times higher, while both Boston and Newark are almost three times higher.  Even in Dallas and San Francisco where the multi-unit increase was lowest among the top 10, it is still more than double the historical norm. Single-family construction, on the other hand, has been cold. Among the top 10 metros, only three metros had above-average single-family home construction activity, including Houston, Dallas, and Philadelphia, which are markets predominately made up of single-family homes.

Where Homebuilding is Sluggish: Detroit
At the other side of the spectrum are the housing markets where construction activity has not returned to their historical norms. When looking at the housing markets with lowest activity, we only focused on the top 50 of the 100 largest metros to focus on the homebuilding trends in larger markets.

Detroit climbed to the top of the list of the slowest new construction markets with homebuilding activity at two-thirds below historical norms. Last year, Detroit was the second slowest market behind Fort Lauderdale. Other markets that made the list again include Cincinnati, Riverside, and Las Vegas. New comers among the lowest construction activity markets are Milwaukee, Montgomery County-Bucks County-Chester County, PA, Long Island, and West Palm Beach. Riverside and Las Vegas, at 49%, are seeing some improvement in activity relative to normal, but are still growing slowly. In these slower markets, the share of multi-family home building permits is smaller than in the hot markets, and is running well below historical norms.

Top 10 Metros Where New Home Construction Is Lowest Below Normal
# U.S. Metro 2015 annualized permit activity relative to metro historical norm Year-over-year asking home price change, July 2015 Multi-unit building share of 2015 permits 2015 annualized multi-unit permit activity relative to metro historical norm 2015 annualized single permit activity relative to metro historical norm
1 Detroit, MI -65% 1% 26% -70% -59%
2 Cincinnati, OH -57% 5% 18% -65% -51%
3 Milwaukee, WI -53% 6% 50% -45% -58%
4 Montgomery County-Bucks County-Chester County, PA -51% 3% 24% -11% -61%
5 Long Island, NY -51% 7% 19% -48% -61%
6 West Palm Beach, FL -50% 2% 26% -59% -57%
7 RiversideSan Bernardino, CA -49% 4% 26% -6% -61%
8 Las Vegas, NV -49% 15% 24% -59% -36%
9 Cleveland, OH -49% -2% 14% -55% -45%
10 WarrenTroyFarmington Hills, MI -48% 0% 27% -10% -53%
Note: among the 50 of the 100 largest metros. Sources: Census and Trulia.

Home Prices and New Construction Finally in Tandem
Another interesting development over the last year is the positive relationship between construction activity and home prices. Where new construction is booming relative to historical norm is where home prices are on an upward trajectory. The correlation between permit activity relative to historical norms and the year-over-year price change is +0.29, which is modest, but still statistically significant positive relationship. (Remember that correlations range from 1 to -1, where zero means there is no linear relationship.) In other words, builders are generally building where home prices are rising. The positive correlation is a reversal from last year when the relationship between the two measures was negative and builders were not necessarily building where prices were growing.

Trulia_ConstructionPrices_Aug2015

Today, there are generally more markets with building activity above the historical norm. Those markets also tend to be the bigger metro areas where price appreciation remained more robust than in smaller markets. Also, among the colder homebuilding markets, price appreciation is notably slower than last year. Moreover, there is a bigger range in building activity between the hottest markets and coldest markets today than there was last year. That suggests greater polarization between markets where builders are keen on participating in and the markets where they are not.

This brings us to a new connection that we’re seeing in the housing market this year, that between employment growth and construction activity. The correlation between permit activity relative to historical norms and the employment growth since the cyclical bottom is +0.29, which is again a modest, but statistically significant positive relationship.

Trulia_ConstructionJobs_Aug2015

While part of the employment growth is also employment in construction sectors, the scatterplot above also suggests that metros where employment growth has been across a greater number of sectors and robust, we’re also seeing a greater improvement in single-family home construction. In other words, solid and broad-based job market growth is pulling builders back in and giving them confidence to build single-family homes again.

All in all, the housing recovery has reached a new milestone. Builders have become much more bullish on the housing market, with homebuilder confidence haven risen to a near-decade high. New construction is now being driven by steady home price appreciation, but more importantly by stronger economic fundamentals, job growth, and demographic trends which are key fundamentals necessary for a sustainable healthy recovery.

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Where You Can Buy Homes Near “Good” Schools

In housing markets where all the schools are equally good, home sellers are less likely to highlight schools in their listing descriptions. But in markets like California where the quality of the schools can vary from being great to awful, schools can be a major selling point for prospective buyers.

Selma Hepp, Chief Economist
August 12, 2015

When searching for a home, the quality of the local schools is an important factor for families with children. According to a recent Trulia survey, 19% of Americans indicated that their dream home is located in a great school district. But among parents of children under 18, the percentage of Americans who want to live in a great school district jumps to 35%, in contrast to 12% of those without kids. Moreover, the survey also revealed that a great school district is almost twice as important to those who search online for their dream home on a weekly or monthly basis than those who only search annually.

Given the importance of schools in a family’s house hunting decisions, we decided to dig into this topic for the back-to-school season to see where schools are a major selling point. First, we looked at all the homes for sale on Trulia over the last year (June 2015 to June 2014) and analyzed how frequently the word “school” was mentioned in the for-sale listings in the 100 largest U.S. metros. Next, we looked at the frequency in which the word “school” was mentioned with a positive adjective such as: “great,” “winning,” “award winning,” “rated,” “excellent,” “good,” “best,” “top,” “ranked,” “distinguished,” or “performing.” Lastly, we looked at the relationship between mentioning “school” in the listing and the home’s price.

Where Schools Matter Most: Orange County and Silicon Valley
When we compare the frequency of school mentions across markets, we found a wide variation in the share of listings using schools as a major selling point. In metros with highest share of school mentions, as many as 3 in 10 listings talk about schools. Orange County and San Jose ranked highest, with 28% and 25% listings, respectively, mentioning a school. Among the top 10 housing markets with homes noting a school district, five are located in California, two are in Michigan, and three are distributed between Pennsylvania, Colorado and Louisiana. In these top 10 markets, schools appear in 17% to 28% of listings.

Trulia_SchoolSellsBig_Map

Where Schools Are A Real Estate Selling Point

# U.S. Metro % of listings mentioning the word “school”
1 Orange County, CA 27.6%
2 San Jose, CA 25.3%
3 Montgomery County-Bucks County-Chester County, PA 22.5%
4 Grand Rapids, MI 18.8%
5 Ventura County, CA 18.3%
6 WarrenTroyFarmington Hills, MI 17.3%
7 Fresno, CA 17.1%
8 Colorado Springs, CO 16.9%
9 Baton Rouge, LA 16.8%
10 Oakland, CA 16.5%
NOTE: Among the 100 largest U.S. metros

On the contrasting end of the spectrum, there are housing markets where schools are rarely used as a selling point and only about 1% to 5% of listings mention schools. Many of the markets where schools are less pronounced as a major selling point are generally located in Connecticut, Ohio, Pennsylvania, Massachusetts and Nevada.

Trulia_SchoolsSellsNot_Map

Where Schools Are NOT A Real Estate Selling Point

# U.S. Metro % of listings mentioning the word “school”
1 Las Vegas, NV 0.7%
2 Cincinnati, OH 2.8%
3 Nashville, TN 3.4%
4 New Haven, CT 3.4%
5 Hartford, CT 4.1%
6 Pittsburgh, PA 4.4%
7 Providence, RI 4.6%
8 Columbia, SC 4.9%
9 Cape CoralFort Myers, FL 5.0%
10 Rochester, NY 5.2%
NOTE: Among the 100 largest U.S. metros

Where Homes Located Near “Good” Schools Are Notable
We dug a little deeper and looked at the housing markets that not only mention the word “school,” but emphasize it using a positive adjective. It turns out that only 1% of homes for sale are described as being near a “good” school.  More frequently though, in 10% of listings nationwide, schools are mentioned in the description, without necessarily a positive attribute.

Although the frequency of using a positive attribute is less common, some of the same markets rank on top. Among the top 10, four are again located in California: Orange County, San Jose, Ventura County and Oakland. Another four are located in Florida, including Orlando, Fort Lauderdale, Tampa and West Palm Beach. The other two are Atlanta in Georgia and Camden in New Jersey.

Where “Good” Schools Really Matter to Homebuyers

# U.S. Metro % of listings mentioning the word “school” with positive adjective
1 Orange County, CA 6.9%
2 San Jose, CA 4.4%
3 Orlando, FL 3.6%
4 Fort Lauderdale, FL 3.1%
5 Ventura County, CA 3.0%
6 Atlanta, GA 2.9%
7 Camden, NJ 2.9%
8 Tampa, FL 2.8%
9 Oakland, CA 2.7%
10 West Palm Beach, FL 2.7%

Taken together, if a listing doesn’t mention schools, does it suggest that the home is not in a good school district? Not at all.

In housing markets where the local school quality ranges from great to awful, highlighting a school district may be relevant to prospective homebuyers and schools are used a major selling point. This is especially true if a home is located near one of the more sought-after schools. When we look at the top 10 markets where schools are mentioned most frequently and with a positive attribute, we can see that they are generally located in states not recognized for good, statewide school systems, such as California and Florida. In these states, some markets do stand out with good schools. The variation may happen at both the state level and within metropolitan markets. Thus, it may be very important to emphasize the school district.

On the other hand, in markets where the local schools are all relatively consistent in quality either at the state or metro level or where schools are not necessarily an important selling point, schools are not frequently mentioned. For example, some of the Northeast states, such as Connecticut and Massachusetts, are known for good and relatively homogeneous school systems. Consequently, homebuyers in those markets may not be as concerned with good schools as they may be with some other neighborhood amenities. For example, schools are rarely mentioned is Las Vegas, which generally attracts more retirees and international buyers than parents with school-aged kids.

To illustrate this point, here’s a county-level map that reveals the percentage of schools with above-average ratings on GreatSchool.org, which grades public schools on a 1 to 10 scale (here’s how they do their ratings). As you can see, there is a lot variation in most states.

Trulia_GoodSchool_CountyMap

Lastly, does the proximity to good schools impact home prices? The answer to this question is not straightforward. Home prices in great school districts are generally higher, however higher prices may be a result of higher-income residents living in those districts. The connection is hard to detangle and the causality is blurred. Are schools better because of the higher tax base, or did the higher income households move to the areas because of better schools? This answer is still debated among experts.

What we found in our analysis is that mentioning the word “school” in a for-sale home’s listing description does not consistently add to the price of a home or detract from it.  Other neighborhood characteristics may be more important in explaining the variation in prices. In the very least, we can say that for the top three housing markets where schools are mentioned most, being able to highlight the home’s proximity to schools added about 7% to the listing price in Montgomery-Bucks-Chester County, PA, 10% to listing price in Orange County, and 16% in San Jose. But before you go crazy with the listing descriptions, keep in mind that median home prices in these three areas markedly differ.

So what’s the main takeaway for home sellers? In most housing markets, it pays to brag about your local school district if it really is a great, excellent, distinguished, award-winning, or highly-rated school.

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America’s Dream Home: Midsized, Suburban and Modern

Americans are surprisingly practical when it comes to their dream homes. Being married and having children is one of the biggest drivers of homeownership, but age will likely determine the type of homes that people want.

For many Americans, homeownership is part of their personal American Dream. For some, this dream of owning a home is well within reach, but for others it may as well be a dream within a dream. But what does this dream home look like? And where is located? What amenities do people dream of most? To find out, an online survey conducted by Harris Poll on behalf of Trulia surveyed 2,026 Americans in late May 2015 to tell us about their homeownership aspirations and the home they hope to buy one day. Here’s what we found.

First Comes Marriage, Then Comes Baby and House
With the U.S. housing market on the mend, 7 in 10 Americans (71%) said owning a home is part of achieving their personal “American Dream.” While still a majority, this is a notable decrease from 77% in 2010. Yet despite this downward trend, America is not becoming a nation of renters. Most Millennial renters aged 18-34 (89%) plan to buy a home one day – more than any other generation.

American Dream Home_WhoWantsToBuy

But as more people today forgo or delay marriage and children, homeownership has become more of a lifestyle choice than an expected life milestone. Among parents with children under 18 years old, 81% said homeownership is part of their American Dream. In fact, most parents – regardless of their marital status – plan to buy a home as their primary residence once day.

American Dream Home_KidsDriveHomeownership

More than 7 in 10 Millennials Plan to Buy in 2018 or Later
While many Americans aspire to become homeowners, most are not ready to buy a home. Only 14% of those who plan to buy say they will do so within the next year. Most (69%) plan to wait at least two years.

In tracking the housing recovery, the intentions of Millennials has been a key indicator that we’ve been following. Why? This generation of first-time homebuyers was hit hard during the recession, and their ability to find jobs, move out of their parents’ homes and form their own households, and eventually become homeowners is a key part of a healthy housing market. Of the 18-34 years old who aspire to become homeowners, 72% said they plan to buy a home in 2018 or later. The sense of urgency only increased when marriage and children were involved.

American Dream Home_When

When Do You Plan to Buy (Another) Home as Your Primary Residence?
All Married without Kids Under 18 Married with Kids Under 18
Within the next 6 months 4% 6% 9%
7-12 months from now 7% 10% 18%
13-24 months from now 17% 29% 20%
More than 2 years from now 72% 55% 53%
Note: Among Millennials (18-34 year old) who plan purchase a home

So what’s holding Millennials back from homeownership? Money. Only 36% of Millennials are currently saving up to buy a home in the next five years. Most (52%) have their eyes on a new car, while others have shifted their priorities towards college tuition (35%), a trip of a lifetime (26%), a wedding (15%), retirement (9%) or an engagement ring (8%). Nevertheless, this generation remains optimistic with 87% believing that they will be able to purchase their dream home one day.

Most Americans Aren’t Dreaming About McMansions or Tiny Homes
Only a small subset of Americans (just 35% of homeowners) said they’ve already purchased their dream homes – that means an overwhelming majority are still searching for a perfect place to call “dream home”. In fact, over one quarter of Americans are regularly searching for a dream home online with 28% looking at least once a month. So what does the American dream home look like? Well, it really depends on how old you are.

In general, Americans aren’t big fans of McMansions or tiny homes. In fact, 44% want a home between 1,401 and 2,600 square feet – one that’s neither too small, nor too big. However, as people get older, their dream home gets smaller.

American Dream Home_HomeSize

How Big Is Your Dream Home?
All Millennials (18-34 Year Olds) Gen X (35-54 Year Olds) Baby Boomers (55+ Year Olds)
800-1,400 square feet 10% 5% 7% 15%
1,401-2,000 square feet 21% 17% 18% 25%
2,001-2,600 square feet 23% 20% 24% 24%
2,601-3,200 square feet 14% 16% 15% 11%
More than 3,200 square feet 11% 12% 14% 7%
Not Sure 22% 29% 22% 17%

Moreover, Millennials and Gen X gravitate towards modern homes, which can often have newer home amenities and technologies. Baby Boomers, on the other hand, want ranch homes (aka single-story homes that are typically more accessible and without stairs).

And contrary to what you might think, only 6% of millennials would prefer a high-rise penthouse. That said, they are still 6X more likely to prefer this type of home than any other generations – even those with kids under 18. Similarly, only 4% of millennials dream of converted lofts, while Baby Boomers have no affinity for converted lofts at all.

American Dream Home_Style

What Does Your Dream Home Look Like?

All

Millennials (18-34 Year Olds) Gen X (35-54 Year Olds) Baby Boomers (55+ Years Old)
Modern Style Home 18% 22% 17% 16%
Ranch Home 15% 6% 13% 23%
Victorian or Craftsman Style Home 11% 13% 12% 7%
Farm House or Log Cabin 10% 10% 11% 9%
Colonial or Southern Plantation Style Home 8% 8% 8% 7%
High-rise penthouse apartment 3% 6% 1% 1%
Converted Loft 2% 4% 1% 0%
Other

33%

31% 37%

37%

Note: “Other” includes options such as Mediterranean style home, townhouse and houseboat, as well as other.

Americans Dream of Suburbs Over Cities
When describing where their dream home is located, most Americans wanted to live in the countryside (27%) and suburbs (27%) rather than in the heart of a major American city (8%). This was especially true for Baby Boomers and Gen X. But for Millennials, living a short commute to work (34%) and in a great school district (34%) were far more important that the actual location. But generational differences aside, there were some notable geographical preferences.

American Dream Home_GeoLocation

Top Dream Home Amenities: Decks, Gourmet Kitchens and Open Floor Plans
Americans love to entertain and eat. The top dream home features were social spaces where guests could gather and mingle, namely a backyard deck, open floor plan, or balcony with a view. Food-related amenities like a gourmet kitchen or vegetable garden were also popular. But as for private spaces, 44% of men wanted a man cave whereas only 17% women wanted a she shed (aka, a recreational room for the ladies).

American Dream Home_Amenities

Top “Dream Home” Features
% of Americans Who Want This Feature % of Homes Listed for Sale on Trulia as Having This Feature in the Last Year
Backyard Deck 59% 8.5%
Gourmet Kitchen 47% 2.0%
Open Floor Plan 46% 3.9%
Balcony with a View 45% 1.3%
Vegetable Garden 40% 0.1%

Millennials, compared to any other generation, want it all. Given the option, 18-34 year olds would like all the latest and greatest amenities in their dream home – especially want a balcony with a view.

Top “Dream Home” Features for Millennials
Balcony with a View 60%
Backyard Deck 59%
Gourmet Kitchen 53%
Swimming Pool 52%
Open Floor Plan 45%

Generation X, however, followed the national trend with most wanting a backyard deck. The only variation was that 35-54 year olds preferred having a swimming pool over a vegetable garden.

Top “Dream Home” Features for Gen X
Backyard Deck 65%
Gourmet Kitchen 50%
Open Floor Plan 47%
Balcony with a View 46%
Swimming Pool 44%

Similar to Generation X, Baby Boomers want a backyard deck, open floor plan and gourmet kitchen. But unlike other generations, the 55+ age group has a green thumb with 37% wanting a vegetable garden.

Top “Dream Home” Features for Baby Boomers
Backyard Deck 55%
Open Floor Plan 46%
Gourmet Kitchen 41%
Vegetable Garden 37%
Balcony with a View 33%

All in all, Americans are pretty realistic and practical when it comes what they want in their dream home. Most people aren’t looking for a grand mansion, tiny home or even a home with an iconic architectural style – they want a mid-sized, modern home in the suburbs with a backyard deck. This is likely because the dream of homeownership is largely driven by marriage and children. Having a duel income makes buying a home more affordable, while parents often want the stability that comes with owning a home. As a result, many would-be homeowners dream of finding a home where they can raise their families. Such is the game of life.

 

METHODOLOGY
This survey was conducted online within the United States between May 26th and 28th, 2015 among 2,026 adults (aged 18 and over) by Harris Poll on behalf of Trulia via its Quick Query omnibus product. Figures for age, sex, race/ethnicity, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. Propensity score weighting was used to adjust for respondents’ propensity to be online.

All sample surveys and polls, whether or not they use probability sampling, are subject to multiple sources of error which are most often not possible to quantify or estimate, including sampling error, coverage error, error associated with nonresponse, error associated with question wording and response options, and post-survey weighting and adjustments. Therefore, the words “margin of error” are avoided as they are misleading. All that can be calculated are different possible sampling errors with different probabilities for pure, unweighted, random samples with 100% response rates. These are only theoretical because no published polls come close to this ideal.

Respondents for this survey were selected from among those who have agreed to participate in our surveys. The data have been weighted to reflect the composition of the adult population. Because the sample is based on those who agreed to participate in our panel, no estimates of theoretical sampling error can be calculated.

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