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Personality traits may predict your real estate home buying decisions of buying vs. renting as well as preference for fixed rate mortgages vs. adjustable rate loans.
In Real Estate, Your Personality Makes You Predictable
Are you neurotic or agreeable? The answer matters, since your personality affects your home-buying decisions.
By Stefanos Chen
Are you efficient, organized, thorough, diligent and detail oriented? Then you’re a good candidate for a fixed-rate mortgage.
A
new study finds that personality traits can help predict our
real-estate decisions. Similarly, a second study finds that in states
with a relatively predominant personality type, real-estate decisions
often reflect that personality.
Researchers in the first study administered
a widely used personality-assessment test to a diverse sample of 1,138
respondents. The test asks takers to rate themselves on a scale from 1
to 5 on questions that measure standard personality traits: Openness
(think: artistic and imaginative), Conscientiousness (efficient,
organized), Extroversion (sociable, energetic), Agreeableness
(forgiving, undemanding) and Neuroticism (tense, moody).
Once
the researchers established the personality types of the respondents,
they then asked five questions about their real-estate preferences, such
as the type and duration of a mortgage, whether to rent or buy, and
whether to invest in real estate or stocks. (The findings were
controlled for variables like level of education, homeownership, age,
gender and income.)
The results showed “a very solid correlation” between personality and
real-estate choices, said co-author
Danny Ben-Shahar,
a professor at Tel Aviv University. Neurotic people, for example,
prefer homeownership over renting. When they do buy, they opt for a
mortgage with a lower loan-to-value ratio, which means the loan amount
is low relative to the value of the home. Prof. Ben-Shahar suspects this
is because neurotic people are more averse to risk.
In another example, conscientious people preferred investing
in real estate over stocks. One explanation: They are more willing to
postpone gratification and invest in something that is considered less
risky and offers diversification to a portfolio.
The overall findings will be published in the Journal of Behavioral and Experimental Economics.
In a second study by the same team, researchers looked at existing results
of the same personality test, but from a much larger sample—about 1.6
million people. Predominant personality types were then matched with
housing data from the U.S. Census and the Federal Reserve Bank of New
York. Here, too, the personality made a difference on real-estate
choices.
States with relatively high marks for Openness—South
Carolina, for instance—tend to choose fixed-rate mortgages. The more
Agreeable ones, like Tennessee, prefer owning to renting. Neurotic
states, like New York, choose lower loan-to-value ratios on the
mortgage.
This isn't to say that every state’s real-estate
profile lines up exactly with personality traits, Prof. Ben-Shahar said.
Still, an individual personality can have real consequences on the way
we choose to live, he noted.
People are getting wiser weighing all their options and taking the time to plan before taking the leap to just buy as it has been engrained traditionally to those generations in the past. The upscale rental market is meeting the needs of the millennials, empty-nesters, and newly single as we are shifting to an accepted rental culture.
Having the flexibility to adjust to the changing needs of a new reality is important to many who don't want the long term commitment home ownership brings. Also when purchasing a home they may not be able to afford all the amenities they want in their price range. Rather than purchase a home far too early in their lives, they are
taking their time to plan out their choices and options. Americans are looking at real estate with more rational eyes to meet their current needs.
Hot New Real Estate Trend
Mary BuffetPosted:
Updated:
Why more Americans are aggressively entering into upscale rental marketplace.
As
people begin to seriously think about where to live, there is a
remarkable sea change afoot with millennials, empty-nesters, and the
newly single. Instead of plunging in to buy a home, people are weighing
other options. We all know how life is supposed to work. Boy meets
girl, they graduate from college, get married, and spend an exciting
turn in The Big City before they settle down to raise a family in the
suburbs.
Developers instilled that home ownership was at the
heart of creating a safe place for all families. After the first
generation of 30-year mortgagees found their way into the marketplace,
home ownership rates soared. Soldiers returning after World War II used
the GI Bill to purchase their very first home with a down payment of a
dollar.
In good times and bad, home ownership remained a safe
bet even when the contours of life changed. Somebody always got the
house in a divorce. Even after the children were fully grown and on
their own, parents would keep the Big House and it would fill with
grandchildren during the holidays.
Then everything went to hell.
As the housing refinance industry became a financial behemoth, home
values rose beyond the point of sustainability. We all know what
happened after that. A sick housing market nearly killed the financial
industry and we almost had the Second Great Depression. Only
substantial federal intervention kept the nation from revisiting the
breadlines of the 1930s. Worse, a generation of young teenagers saw the
fear and anxiety on the faces of their parents as they fell behind on
their house payments and stumbled into foreclosure.
Nearly a
decade later, those same teenagers have graduated from college, entered
the job market and are looking for places to live. However, unlike their
parents, they are waiting before they purchase their first home.
Meanwhile, empty-nesters are downsizing and looking to jettison square
footage they no longer need. Those who are newly single or are taking a
job in the Midwest, where there is job growth, need a nice place to
live. Rather than go through all of the paperwork of purchasing a home,
more and more of them are looking at upscale rentals. What's more, they
are staying. The rate of home ownership, which crested at nearly 70
percent before the meltdown, fell dramatically to its current rate of 65
percent.
What is driving all of this? First, Americans are
looking at real estate with more rational eyes than they did a decade
ago. A herd mentality dominated the period between 1995 and 2007, where
people bought any parcel to ensure they would not be left behind. The
housing appreciation of that period seemed too good to be true.
Homeowners soon refinanced their mortgages and many used it to
underwrite their own extravagance as they lived beyond their means.
Even after the economy has rebounded, millions still remain handcuffed
to zombie mortgages that will remain upside-down for the rest of their
lives.
Second, qualifying or refinancing a traditional 30-year
mortgage is far harder today than it was during those go-go years. The
days of "Alt A" loans other subprime tools are long gone. The times
when you needed little more than a smile and a signature to purchase a
home have been replaced by a stricter regulatory demand for full
documentation for all phases of the loan origination process. Even Ben
Bernanke, who, while chairman of the Federal Reserve, worked overtime to
keep the nation from a complete economic collapse, was recently turned
down to refinance his mortgage.
Third, we are shifting from an ownership to a rental culture.
This has a greater social implications impact far beyond real estate
and we can see it in our everyday lives. Instead of spending thousands
of dollars on DVDs for home use, people are paying Netflix $8 per month
for access to their entire film library.
"When it comes to
choosing a home," remarked Jay Madary CEO of JVM Realty Corporation, a
Chicago-area privately held multi-family investment and property
management company, "many Americans now consider renting upscale
apartments because they can get amenities they may not otherwise find in
a home within their price range. They can have granite countertops,
high ceilings, walk in closets, as well as access to private fitness
centers and resort style pools and gathering areas." If they purchased a
pre-owned home, chances are that it will be far older than an upscale
apartment and if they wish to upgrade to those modern amenities, it will
come out of their own wallet. With an upscale rental, you can get what
you want today. Best of all, there is no long-term commitment and no
ongoing maintenance obligation.
Homes can become "long in the
tooth" after a decade. Appliances need to be replaced and exteriors as
well as interiors need to be repainted. Older homes come with older
problems. They were designed and built for what families wanted in the
1960s, '70s, and '80s, but you're living in 2014. Who knew what a
"smart home" was back in 1973? Also major upgrades can quickly become
expensive and these costs will compete alongside college tuition
payments for children or extra support needed for aging parents. Besides
having to pay back those college loans.
Let's not forget the
disruption that comes with life's little surprises like marriages,
divorces, blended families, job changes, or even periods of
unemployment. Having the flexibility to adjust to your new reality is
critical. Should you choose the upscale apartment option, you can
simply move out at the end of your lease and resettle into something
else that better suits the needs of the moment.
Yes, renters will
lose the tax benefits that come with home ownership but if you rent an
upscale apartment, you need to see the bigger picture. Before you sign
that mortgage paperwork for that "fixer-upper" of your dreams, you need
to take into consideration the additional costs of modernizing your new
purchase. Those costs alone could quickly eat up any tax benefits. If
you don't believe me, check out the cost of a basic kitchen remodel.
In this area, Americans have become wiser.
Rather than purchase a home far too early in their lives, they are
taking their time to plan out their choices and options. Rather than
deal with the headaches that come with modernizing an older house, more
and more of them are opting for a turn-key solution that comes within
the upscale rental market where they have their cake and eat it too.
With this trend comes the opportunity for investors to balance their portfolio with holdings in a real estate fund.
For affluent buyers with well established credit there's an upside to the plunging stock market as mortgage rates have fallen again. With investors balling out of the stock market and moving their monies into treasury bonds it's pushing down the government's borrowing costs to the lowest level since June 2013. When treasury yields fall so do mortgage rates as cost of borrowing is lower. This is good news for those looking still to refinance too. Mortgage rates for 30 year loans are predicted to drop to 4%. Construction loan rates should follow and drop as well. Lower rates for home loans boost new
construction as well as purchases. Though with lower rates may create demand for home sales again and may drive home prices up again as well.
Lower mortgage rates a silver lining of stock market drops
With
investors piling into ultra-safe U.S. Treasury bonds, fixed mortgage
rates are trending down, which could perk up the lethargic real-estate
industry. (Keith Srakocic / Associated Press)
By E. Scott ReckardOctober 15, 2014 4:08pm
If there's an upside to a plunging stock market, it's that mortgage rates are falling too.
Investors
bailing out on stocks have piled into ultra-safe U.S. Treasury bonds,
pushing down the government's long-term borrowing costs on Wednesday to
the lowest level since June 2013 — about 2.1% annual interest on the
10-year Treasury note. That yield was more than 2.5% at the end of
September.
That means fixed mortgage rates, which tend to track
the long-term Treasury yield, also are trending down. And that could
perk up the lethargic real-estate industry.
First-time
homebuyers and those with less than perfect credit histories still
struggle to qualify for loans, a byproduct of the mortgage meltdown. But
the lowest-risk buyers and refinancers have been enjoying loans at 4% —
or even less — in recent months. That's a surprise during a period when
the Federal Reserve has been winding down its program aimed at lowering
long-term rates.
Mortgage broker Roger Kumar delivered good news
this week to a refinancer with plenty of home equity: a 30-year loan at a
fixed rate of 3.875% with almost no fees.
"The only cost was a $480 appraisal fee," said Kumar, president of Trident Mortgage Group in Solana Beach.
The
latest market movements may mean that low rates could become the norm
again, according to Barclays Research analysts who track the market.
"If
[Treasury] rates stay where they are currently, we believe it is only a
matter of time before primary mortgage rates drop sharply, too," the
analysts wrote in a note Wednesday to investors who buy mortgage bonds.
They
projected the average rate for a 30-year home loan could drop to 4%.
The rate, they said, has averaged 4.3% since the middle of last year —
the point at which mortgage costs shot up on word that the Fed would
pull back on its economic stimulus program which involves massive
monthly bond purchases.
Barclays analysts said buyers of 30-year
mortgage bonds backed by Fannie Mae were getting a stream of payments
equivalent to a 2.75% annual return as of Wednesday morning — the lowest
level since May 2013.
Lower rates for home loans boost new
construction as well as purchases, said Mark Zandi, chief economist at
Moody's Analytics. A decline of half a percentage point in mortgage
rates ultimately lifts home sales by close to 250,000 a year, Zandi
said, and a half-point cut also increases housing starts by 110,000
units per year.
"This is roughly the decline in fixed mortgage rates from the start of the year, from 4.5% to 4%," Zandi said.
To
be sure, other factors can keep mortgage rates from immediately
following trends in Treasury yields. For example, lenders sometimes
resist cutting rates to boost profit when they sell their loans.
Mortgages at higher rates command higher prices, assuming all else is
equal.
The nation's leading home lender, Wells Fargo & Co.,
said in its earnings report Tuesday that its third-quarter profit on
mortgage sales rose by $266 million, or 38%, compared with the second
quarter, even though it wrote only 2% more home loans, largely because
it maintained higher rates.
The
biggest question, though, is whether lenders will loosen their mortgage
standards, enabling more borrowers to take advantage of the low rates.
First-time
and marginal borrowers continue to be rebuffed by lenders that set
standards higher than those required by Fannie Mae, Freddie Mac and the
Federal Housing Administration, which buy or guarantee nearly all
non-jumbo mortgages.
The
reason, Wells Fargo Chief Executive John G. Stumpf said in a call with
analysts Tuesday, is that these government-backed operations have made
unreasonably high demands that bankers buy back soured loans. Banks can
be required to take back bad loans even in the absence of serious
underwriting mistakes, he said, and even on loans that borrowers had
paid for years.
In an interview, Wells Fargo Chief Financial
Officer John R. Shrewsberry said stricter regulation has in effect
created two mortgage markets, only one of which — the one for affluent
borrowers with well-established credit — serves borrowers well.
"Every
bank wants that customer," Shrewsberry said. "But the first-time buyer,
or someone with recovering credit, may have enough income to repay a
loan but have a hard time getting one."
Home sales in mid-September have begun to pick up gains again. It's a sign the housing market is reaching an equilibrium after years of big swings which is better for realistic serious buyers. Home prices have been heading towards a better balance than in the past few years. Median price is up on average about 8.1% compared to a year ago with double digit gains. The market now has something to offer both sellers and buyers. It's prime time to get back in the market and when many do the market may pick up again.
Home sales post gains
Higher prices have pushed many investors and cash buyers out of the
market, while still-low interest rates and an improving economy are
luring more so-called regular buyers. Above, a home for sale in Long
Beach. (Cheryl A. Guerrero / Los Angeles Times)
By Tim Logan- October 13, 2014 , 5:18pm
Home
sales in the six-county Southland grew for the first time in a year in
September as prices moderated from last year's torrid gains, according
to figures out Monday.
The data are the latest sign of a housing market that's reaching equilibrium after years of big swings, economists say.
Higher
prices have pushed many investors and cash buyers out of the market,
while still-low interest rates and an improving economy are luring more
so-called regular buyers. And while prices aren't climbing at the
20%-plus pace of last year, they're still rising enough to keep sellers
interested in selling.
"It seems like we're heading toward more of
a balance," said Mark Gonzales, an agent with Redfin in West Los
Angeles. "As long as we can get pricing right in line with people's
expectations, we're in balance."
That
balance helped drive the number of sales across the region up 1.2%
compared with a year ago, according to San Diego-based CoreLogic
DataQuick. It's a modest bump, but the first growth of any kind since
September 2013, and a big swing from the 18% slide CoreLogic recorded in
August.
Sales growth was strongest in Los Angeles and Orange
counties, instead of in less-expensive markets farther east. And prices
actually fell a bit, with the region's median slipping to $413,000 from
its post-crash high of $420,000 in August.
Compared with a year ago, the
median price is up 8.1%, and September was the first month in two years
that none of the six counties CoreLogic tracks notched a double-digit
annual gain.
The market right now has something to offer both buyers and sellers, said CoreLogic analyst Andrew LePage.
"There
are still upward forces on home prices: Jobs are being created and
families started at a time when the supply of homes for sale … remains
relatively low," he said. "Today's home shoppers are more likely to find
a less-crowded market with fewer intense multiple-offer situations and
more serious, realistic buyers."
It's unclear, though, how long this equilibrium will last.
The
California Assn. of Realtors last week forecast that price gains will
keep slowing in 2015, and that sales will increase — after falling in
2014 — as buyers have a better chance to catch up to the new higher
price points. But in a market in which many buyers struggle to afford a
house, the prospect of higher interest rates is a constant threat, said
the trade group's chief executive, Joel Singer.
"Any increase is
going to have a substantial effect on the number of sales," Singer told a
roomful of agents last week at the association's annual convention in
Anaheim.
Right
now, though, rates are as low as they've been all year. The job market
is improving. Even gasoline prices are down, which is putting would-be
buyers in a better mood, said Syd Leibovitch, president of Rodeo Realty.
His firm, one of the largest brokerages in Southern California, is
starting to see both prices and sales pick up again for deals that will
close later this fall.
"It was really unexpected," he said.
"August was a slower month. It seemed like homes were starting to sit
and we were going into a more normalized market. Somewhere around
mid-September it picked back up again. We started getting more
multiple-offer situations."
Gonzales has been seeing things
quicken too. Calls and visits to Redfin's website by prospective buyers
were up 50% in September, and those house hunters are now out shopping.
"They
were frustrated with the way the market was going. A lot of them took a
break," he said. "Now it's a prime time to come back in."
And as they do, the pace of home sales should pick up even more speed, analysts said.
Real estate is taking shape of a more traditional market for 2015 as we transition to a slower price appreciation environment. The slow down in price gains should help would be buyers to get into the market. It helps improve market affordability as housing inventory continues to improve and a modest uptrend for 2015 is predicted rather than in past few years of median home prices rising as much as 27.5 percent.
REAL ESTATE: Slower gains predicted in 2015 for home sales, prices
Boost in inventory will lead to modest upward trends, economist says.
That could be the theme of a real estate forecast that California
Association of Realtors chief economist Leslie Appleton-Young delivered
Tuesday for 2015, as the real estate industry takes the shape of a more
traditional market.
Next year promises to be far less frothy than it has been when it comes to price.
The association’s forecast is projecting a 5.8 percent increase in
existing home sales in 2015 to 402,500 units. Median home price for
California is expected to rise 5.2 percent to $478,700 in 2015, less
than half the projected 11.8 percent rate in 2014.
Sales in 2014 will be down 8.2 percent from the 414,300 existing
single-family homes sold in 2013, the state trade association said.
“We are transitioning into a slower price appreciation environment,” Appleton-Young acknowledged in a conference call.
The real estate scene going forward may seem dull, but is
characteristic of a market that hit a tipping point after the rocket
ride of 2013, she said. Median home prices rose 27.5 percent. Investors
swooped in, scooping up foreclosure stock. Inventory was crimped. Cash
was king.
That dynamic has significantly impacted housing affordability in
California and forced some buyers to delay their home purchase,
association president Kevin Brown said. Any slow-down in price gains
will help would-be buyers get into the market.
“I don’t think it’s out of the question that within two years from
now we could see some declines or retreats in terms of prices,”
Appleton-Young said.
Appleton-Young said it may look ho-hum to some, but it will be a good
pause for people who have gotten exhausted by multiple offers and
competition in the past couple of years.
The percentage of properties fetching multiple offers has dropped to 53 percent from 70 percent in 2013, she said.
“We believe the change will be driven by the increase in inventory we
are already experiencing, as well as improvement in the macro-economy
and job creation,” Appleton-Young said.
The association predicts 3 percent growth in 2015 in the nation’s
gross domestic product, up from 2.2 in 2014. “With the U.S. economy
expected to grow more robustly than it has in the past five years, and
housing inventory continuing to improve, California housing sales and
prices will see a modest upward trend in 2015.”
Source: http://www.pe.com/articles/percent-751496-appleton-home.html
Los Angeles's housing market seems to have stabilized for the time being yet it's still the nation's second most overvalued market.
LA's Housing Market is Second Most Bubblicious in the US
Wednesday, October 1, 2014, by Bianca Barragan
Does Los Angeles's housing market still feel way overpriced? It is, but at least it doesn't seem to be getting any worse (or better) right now. Third quarter results are in from Trulia, and they've found the LA market is holding strong at 15 percent
"overvalued" (Meaning that the value of a house now exceeds its
"fundamental value," based on "historical prices, incomes and rents."
Don't consider the idea of "fundamental value" too long or you'll end up
living alone in the desert.). That makes LA the nation's second most overvalued market,
after Austin, TX, up from third place in the second quarter. LA is
rising in the ranks mostly because the rest of the area is headed back
toward reasonableness: Orange County was previously at the top of the
list, but has moved down to number three, and the Inland Empire
(Riverside and San Bernardino areas), last at number four, has slid down
to number five. The slower gains in housing prices have likely helped those two regions tumble down the overvalued list, points out the LA Times.
