The Social benefits of Home Ownership!

From Lennox Scott:  Great stuff

The benefits of being a homeowner are great in number. Of course there are the financial benefits of building equity and developing one’s own economic foundation for their family’s future. And then there are the personal riches that come with owning a home, including those that fuel a healthier family and community. It is these intangible benefits that people often forget about when one buys or owns a home, but they are certainly worth taking note of.

A few years ago the National Association of REALTORS® authored a report entitled “The Social Benefits of Homeownership and Stable Housing,” which discussed evidence regarding the personal gains that come with homeownership. This report did not focus on the financial aspects, but rather it directed its attention to the social advantages that result from being in an owner-occupied home.

The report provided further support to theories that are already well-founded in American culture. It suggested that homeownership fosters household stability, social involvement, environmental awareness, local political participation, good health, low crime, and favorable community traits.

Homeownership has long been associated with strong neighborhoods and communities. As the research indicates, homeowners are generally more committed to their neighborhoods, therefore they are more likely to make friendships with neighbors, and are more likely to participate in voluntary and political activities that go towards developing a sense of community.

The NAR research reported findings that conclude that homeownership is particularly beneficial to children. It stated that children of homeowners are more likely to perform higher on academic achievement tests and finish high school; these children also report fewer behavioral problems in school. Considerable evidence suggests that homeowners are typically more satisfied with their homes; therefore they are more likely to stay in their homes for longer periods of time. All in all this imparts a sense of security that ultimately impacts the members of that household, including children.

Buying a home is likely the most important financial and emotionally filled decision of a person’s life, but as research and history have shown, the pay-off goes far beyond tax breaks and equity—it leads to happier, healthier families, and communities.

Written by Lennox

April 28, 2010 at 2:06 pm

Posted in Homeownership, NAR Research

They’re HEEERRRRRREEEEE . . .

There are many names for the Echo Boom generation: Gen Y, Millennial Generation, Generation Next, Net Generation, Millennials, Boomerang Generation, and Trophy Generation, to name a few (ok, several). Regardless of what you call them, the members of this generation are quickly coming of age; some are even starting to enter the housing market and there are many, many more to follow.

Echo Boomers were born roughly between 1982 and 1995, a period of time referred to as the “Echo Boom” because they are largely the offspring of the Baby Boomer generation. Fast forward to 2010, there are approximately 76 million Echo Boomers between the ages of 15 and 28, making them second in size only to the Baby Boomers*. According to current U.S. Census figures, 67.2% of this generation can be expected to become homeowners by their mid 30s which equates to just over 35.5 million households**.  The National Association of REALTORS® 2009 Home Buyer/Home Seller Profile predicts that of this 35.5 million, 21% will be single female buyers, 12% will be single males, and 61% will be married couples or partners (couples/partners are counted as a single household). It’s worth pointing out here that the aforementioned U.S. Census figures also state that since 1982 homeownership rates have fluctuated very little; anywhere between 64% and 69% during this 28 year span.

As you wrap your head around those figures, think about the impact that this generation is going to have on housing in the coming years. According to a recent economic report by Moody’s, builders are currently developing about 500,000 housing units a year. Add into this equation that the Echo Boomers will be buying homes along side repeat purchasers from other generations and you can quickly surmise that in the foreseeable future we are going to have a shortage of housing in the “more affordable” markets (affordable = homes priced at or below the median price in a given market).

The onset of the Echo Boomers in the housing market is a stark reminder of how important our community’s growth management plans are. The sheer size of the Echo Boom generation will have a powerful effect on housing demand over the next decade, but will there be enough homes to meet that demand? Current studies say no, reinforcing the importance of implementing smart growth management NOW. The first wave of change will likely occur in the more affordable price ranges – especially in those areas that are close to the job centers. Over time, the effect will fan out and be felt by the outer suburbs, causing a chain reaction of sales up the price points.

The Echo Boom generation has been defined as high-tech, high-touch, social networking, iPod listening natives of the digital realm who trust their peers’ advice over most forms of advertising. This is the generation that will likely find the home of their dreams on a 4G wi-max third-generation iPad and will contact their real estate agent via Twitter or text messaging. But as foreign as some of this may sound to some of you, they are (and will be) home buyers none-the-less, and real estate professionals and companies need to continue to adapt to this generation’s expectations and habits.

So, the moral of this story is that I believe that the Echo Boomers represent the silver lining for the real estate market and U.S. economy. That might be a lot of responsibility for a single generation, but they’re unarguably emerging as the next heavyweights in housing, and I might add, not a moment too soon.

*There are no precise dates for when the Echo Boom generation starts and ends because commentators have used birth dates ranging from the mid 1970s to 2000. This subsequently effects population figures which have been estimated to be anywhere from 60 million to 100 million. The age and population figures cited in this article represent an approximation based upon information found in studies done by the National Association of REALTORS®, current U.S. Census data, Wikipedia, and various media sources.

** U.S. Census homeownership rates are calculated based on households, not people.

Written by Lennox

April 12, 2010 at 5:27 pm

Posted in Echo Boom, Market Trends, The Economy

Helping Keep Kids Healthy And At Home

leave a comment »

One of the things that I am most proud of at John L. Scott is the work we do through the John L. Scott Foundation. We believe it’s our responsibility to live life as a contribution to others by supporting our local communities. But for me personally it goes way beyond that.

Anyone who knows me knows that I sincerely believe that homeownership is the foundation to healthy communities. It’s not to say that you have to be a homeowner in order to be a vital part of your community, but it has been proven time and again that people who own a home unarguably have a greater investment in the well being of the area in which they live. And that tends to lead to stronger, healthier communities.

A major part of healthy communities is keeping our kids healthy. That’s why we founded the John L. Scott Foundation 13 years ago and it’s why we chose Children’s Hospitals to be the primary beneficiary of our philanthropic efforts. There are so many worthwhile organizations and causes to support, but for a company that promotes healthy communities, the well being of our children seemed like a natural choice.

As Seattle Children’s founder Anna Clise’s cousin, a Philadelphia-based physician, told her in 1906 after losing her son to inflammatory rheumatism, “There’s nothing so important to be done as service to children. Find out what is not being done that is necessary and worthy, and do that.”
-Dr. John Musser

At John L. Scott, we couldn’t agree more.

The John L. Scott Foundation currently supports 20 Children’s Hospitals and related medical facilities throughout the Pacific Northwest. It is entirely funded by our agents and staff members through agent commissions and staff pay roll deductions. Our approach to fundraising is to sponsor events that enable us to leverage our charitable dollars so that we can raise even more money for children’s healthcare. Through these efforts, I’m very proud to report that we were able to help raise over 5.7 million dollars in 2009!

Whether it’s by donating money, answering phones at Radiothons, or cooking dinner at Ronald McDonald House, I want to thank everyone who supports the John L. Scott Foundation and the role each of you play in helping keep kids healthy and at home.

For more information about the John L. Scott Foundation and to see our 2009 Annual Report, please visit www.johnlscottfoundation.org.

Written by Lennox

April 9, 2010 at 12:02 pm

Posted in JLS Foundation

Interest Rates Have Nowhere to Go but Up

On Sunday April 11, 2010, 1:00 pm EDT

Even as prospects for the American economy brighten, consumers are about to face a new financial burden: a sustained period of rising interest rates.

That, economists say, is the inevitable outcome of the nation’s ballooning debt and the renewed prospect of inflation as the economy recovers from the depths of the recent recession.

The shift is sure to come as a shock to consumers whose spending habits were shaped by a historic 30-year decline in the cost of borrowing.

“Americans have assumed the roller coaster goes one way,” said Bill Gross, whose investment firm, Pimco, has taken part in a broad sell-off of government debt, which has pushed up interest rates. “It’s been a great thrill as rates descended, but now we face an extended climb.”

The impact of higher rates is likely to be felt first in the housing market, which has only recently begun to rebound from a deep slump. The rate for a 30-year fixed rate mortgage has risen half a point since December, hitting 5.31 last week, the highest level since last summer.

Along with the sell-off in bonds, the Federal Reserve has halted its emergency $1.25 trillion program to buy mortgage debt, placing even more upward pressure on rates.

“Mortgage rates are unlikely to go lower than they are now, and if they go higher, we’re likely to see a reversal of the gains in the housing market,” said Christopher J. Mayer, a professor of finance and economics at Columbia Business School. “It’s a really big risk.”

Each increase of 1 percentage point in rates adds as much as 19 percent to the total cost of a home, according to Mr. Mayer.

The Mortgage Bankers Association expects the rise to continue, with the 30-year mortgage rate going to 5.5 percent by late summer and as high as 6 percent by the end of the year.

Another area in which higher rates are likely to affect consumers is credit card use. And last week, the Federal Reserve reported that the average interest rate on credit cards reached 14.26 percent in February, the highest since 2001. That is up from 12.03 percent when rates bottomed in the fourth quarter of 2008 — a jump that amounts to about $200 a year in additional interest payments for the typical American household.

With losses from credit card defaults rising and with capital to back credit cards harder to come by, issuers are likely to increase rates to 16 or 17 percent by the fall, according to Dennis Moroney, a research director at the TowerGroup, a financial research company.

“The banks don’t have a lot of pricing options,” Mr. Moroney said. “They’re targeting people who carry a balance from month to month.”

Similarly, many car loans have already become significantly more expensive, with rates at auto finance companies rising to 4.72 percent in February from 3.26 percent in December, according to the Federal Reserve.

Washington, too, is expecting to have to pay more to borrow the money it needs for programs. The Office of Management and Budget expects the rate on the benchmark 10-year United States Treasury note to remain close to 3.9 percent for the rest of the year, but then rise to 4.5 percent in 2011 and 5 percent in 2012.

The run-up in rates is quickening as investors steer more of their money away from bonds and as Washington unplugs the economic life support programs that kept rates low through the financial crisis. Mortgage rates and car loans are linked to the yield on long-term bonds.

Besides the inflation fears set off by the strengthening economy, Mr. Gross said he was also wary of Treasury bonds because he feared the burgeoning supply of new debt issued to finance the government’s huge budget deficits would overwhelm demand, driving interest rates higher.

Nine months ago, United States government debt accounted for half of the assets in Mr. Gross’s flagship fund, Pimco Total Return. That has shrunk to 30 percent now — the lowest ever in the fund’s 23-year history — as Mr. Gross has sold American bonds in favor of debt from Europe, particularly Germany, as well as from developing countries like Brazil.

Last week, the yield on the benchmark 10-year Treasury note briefly crossed the psychologically important threshold of 4 percent, as the Treasury auctioned off $82 billion in new debt. That is nearly twice as much as the government paid in the fall of 2008, when investors sought out ultrasafe assets like Treasury securities after the collapse of Lehman Brothers and the beginning of the credit crisis.

Though still very low by historical standards, the rise of bond yields since then is reversing a decline that began in 1981, when 10-year note yields reached nearly 16 percent.

From that peak, steadily dropping interest rates have fed a three-decade lending boom, during which American consumers borrowed more and more but managed to hold down the portion of their income devoted to paying off loans.

Indeed, total household debt is now nine times what it was in 1981 — rising twice as fast as disposable income over the same period — yet the portion of disposable income that goes toward covering that debt has budged only slightly, increasing to 12.6 percent from 10.7 percent.

Household debt has been dropping for the last two years as recession-battered consumers cut back on borrowing, but at $13.5 trillion, it still exceeds disposable income by $2.5 trillion.

The long decline in rates also helped prop up the stock market; lower rates for investments like bonds make stocks more attractive.

That tailwind, which prevented even worse economic pain during the recession, has ceased, according to interviews with economists, analysts and money managers.

“We’ve had almost a 30-year rally,” said David Wyss, chief economist for Standard & Poor’s. “That’s come to an end.”

Just as significant as the bottom-line impact will be the psychological fallout from not being able to buy more while paying less — an unusual state of affairs that made consumer spending the most important measure of economic health.

“We’ve gotten spoiled by the idea that interest rates will stay in the low single-digits forever,” said Jim Caron, an interest rate strategist with Morgan Stanley. “We’ve also had a generation of consumers and investors get used to low rates.”

For young home buyers today considering 30-year mortgages with a rate of just over 5 percent, it might be hard to conceive of a time like October 1981, when mortgage rates peaked at 18.2 percent. That meant monthly payments of $1,523 then compared with $556 now for a $100,000 loan.

No one expects rates to return to anything resembling 1981 levels. Still, for much of Wall Street, the question is not whether rates will go up, but rather by how much.

Some firms, like Morgan Stanley, are predicting that rates could rise by a percentage point and a half by the end of the year. Others, like JPMorgan Chase are forecasting a more modest half-point jump.

But the consensus is clear, according to Terrence M. Belton, global head of fixed-income strategy for J. P. Morgan Securities. “Everyone knows that rates will eventually go higher,” he said.