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Demographic Shifts Shaping Future of the Housing Market

by Marsha Sell

RISMEDIA, March 7, 2011—With the great recession driving unemployment, foreclosures and vacancy rates to historic highs, the housing market has certainly been on one wild ride the last few years. Today, we see the confluence of a deep recession driving behavioral change and shifts in the demographic distribution of the population poised to impact the real estate market in unexpected ways.

Americans who have experienced or witnessed the loss of jobs, homes and home values have grown skeptical about the benefits of homeownership. Not only will the financial impacts of the housing meltdown burden the real estate market for years to come but so too will the emotional impact. More than ever, Americans of all ages are considering their options.

At a time when aging baby boomers might be retiring, they continue working in order to build back up the retirement savings they lost in the economic chaos. This has a trickle-down effect, preventing younger generations from moving up in the workplace or from moving into the workplace to acquire the wealth they would need to drive new demand for homes.

The Joint Center for Housing Studies of Harvard University reports that real median household incomes across all age groups under 55 have not increased since 2000. It’s been posited that this will be the first decade in 40 years where real median household incomes will end lower than where they started. This has the biggest implications for the baby bust generation (born 1966-1985) as they approach what should be their prime earning years and for younger baby boomers that will be facing a vacuum of demand from younger generations when they want to retire, sell the family home and downsize. Over-building and spiking foreclosures have already produced an over-supply of large suburban homes for which there is little demand or ability to purchase. Gen X and Y will not do much to help solve this problem.

The Gen Y population, or echo boomers (born 1986-2005), the largest pool of renters, is now in their prime rental years, but many have found themselves jobless with no way to pay the rent. Forced to move in with mom, dad or friends, this twenty-something crowd has been hard hit by the recession.

Nonetheless, they are poised to redefine the American dream for generations to come. When employment growth returns, they will be a key driver of rental demand.

Also at play is the fact that aging boomers will be reluctant to sell their homes for two reasons. One, they may be underwater on their mortgages and waiting for the market to rebound and two, they are healthier than their parents’ generation and will likely delay the move to retirement community living. Only time will tell if a market will exist for their homes when they are ready to sell, however the income constraints and lifestyle demands of a shifting population may dictate a very different future.

All in all, there are some big changes afoot in the housing market that shifting demographics will continue to amplify. The changing needs of an aging baby boomer population as well as the demands of the burgeoning Echo Boomer generation will require that the real estate market respond in new and different ways.

The next quarter century is likely to bring a new look and feel to housing, much different than the post-war suburban sprawl that America experienced in the 1950s and 1960s. According to a 2009 study by RCLCO, both retiring baby boomers and maturing echo boomers are looking to move away from the suburbs they’ve spent their lives in. Both groups reported wanting to live in more urban, mixed use, mixed age areas that offer services, community and walk-ability.

Given the lack of wealth that younger generations are anticipated to experience, achieving the dream of urban living may be out of reach for them. While echo boomers also told RCLCO they are willing to give up size to live where they want, it’s possible that living in urban centers may come at too expensive a price tag.

The over-built suburbs and areas hardest hit by home devaluation may be the only places that Gen Y will be able to afford, but it’s unclear how they may deal with this lifestyle dilemma. What is clear is that the growth of an economically challenged echo boomer generation will make affordable housing even more important.

Rent.com is a leading Internet listing site (ILS) in the rental housing industry, enabling renters to find a residential rental property online using a free robust search tool.

 

 

 

The Atlanta Journal-Constitution

For Charles Sevier, a doctor visit used to mean dealing with the hassle of hospital parking and following a blue line on the floor through a maze of hallways.

WellStar Health System’s new health parks will be modeled after a similar concept in Dayton, Ohio (above). In Cobb County, the system plans to offer a host of services in one facility.
Special WellStar Health System’s new health parks will be modeled after a similar concept in Dayton, Ohio (above). In Cobb County, the system plans to offer a host of services in one facility.  

Even though it’s a regular visit, “you’re still going to a hospital, and that scares people,” Sevier said. “It does me.”

The 59-year-old Marietta resident is one of 200,000 people WellStar Health System hopes to reach in metro Atlanta with an ambitious plan to create a convenient “one-stop shop” in Cobb County. The system will offer a host of services in one, roughly 250,000-square-foot facility.

As health care costs continue to soar, medical providers such as WellStar are seeking ways to seamlessly deliver services to improve the quality of care while cutting costs.

One of metro Atlanta’s largest medical providers, WellStar is investing $80 million into its East Cobb Health Park project. Slated to open in 2013, the facility is not attached to a hospital and could include an outpatient surgery center, primary and specialty physicians, a women’s health center, urgent care services, a diagnostic center for imaging and lab tests, a wellness center and a café, hospital officials say.

A mother can get her a mammogram and a massage while her older daughter attends a yoga class and her two younger children are in day care, said Joe Brywczynski, WellStar’s health parks administrator. The health park will bring services to the community instead of people having to drive long distances to hospitals, he added.

Demand for outpatient care that’s not tied to a hospital has been climbing, said Brywczynski, who helped pioneer a similar concept in Dayton, Ohio.

WellStar’s Cobb facility, which will sit on 23 acres near Roswell and Providence roads, is part of a larger $804 million capital improvement plan. The health system is also planning a health park in Acworth, the first phase of which will be between 60,000 and 70,000 square feet, Brywczynski said, and a third facility is planned, possibly in the Vinings area.

While other local providers offer multiple outpatient services in one location, it’s often based around a hospital, said William Custer, a health care expert at Georgia State University. WellStar’s project is innovative because it's being built from scratch, he said.

Medical providers are increasingly seeking ways to create more integrated care, in part because improving communication among doctors -- whether by locating them closer together or connecting them virtually with technology -- fosters efficiency and lowers cost, Custer said.

The industry is moving toward a results-based system -- focused on a patient’s overall improvement -- where physicians would be paid for an overall episode of care instead of being reimbursed for each procedure, Custer said. “That’s a lofty goal," he said, that gives providers an incentive to integrate services and improve communication to avoid duplicating tests and other costly inefficiencies.

Dr. Todd Williamson, former president of the Medical Association of Georgia, said he hasn’t seen anything quite like WellStar’s project, though some hospitals have large outpatient facilities. But whether doctors are under one roof or connected by new technologies such as Skype, any method that increases patient access is good. “Clearly, Georgians right now are underserved by physicians,” he said.

With the health care industry in so much flux because of the federal overhaul, protecting the patient-physician relationship is crucial, Williamson said.

Integrated care predates the new health care law but will likely be accelerated by it, said Kevin Bloye, a spokesman for the Georgia Hospital Association. Companies such as Wal-Mart and Target are successful because “people really do like that one-stop shop effect," Bloye said.

As they compete for market share, many Georgia medical providers are working to give patients an array of services at their fingertips, he said. “We’re probably on the front-end of this trend.”

Northeast Georgia Health System has aggressively integrated its outpatient care, he said. Its 100,000-square-foot Medical Plaza 1 in Hall County includes urgent care, an imaging center and rehabilitation services, as well as physician offices representing 15-plus specialties.

Kaiser Permanente of Georgia has 26 metro offices -- ranging in size from 5,000 square feet to 100,000 square feet -- that provide multiple services, such as specialists and pharmacies, at one location. It will soon open two more offices.

For WellStar, which has five metro Atlanta hospitals, the push toward integrated outpatient care will hopefully create an edge in the market, Brywczynski said.

Investment in outpatient services is common among medical providers but has largely been piecemeal in the past, said Chris Kane, WellStar’s senior vice president of strategic business development. “If we execute this well, we will be noticeably differentiated in the metro Atlanta market.”

It’s a model that saves money for the health system and its patients, Kane said. The cost to build and run an outpatient center is less than a hospital, and more communication among doctors will save money by preventing duplicate procedures, Kane said.

Patients can immediately get follow-up tests after a doctor visit instead of driving to another location, he said.

Patient satisfaction is critical to WellStar’s strategy to set itself apart in metro Atlanta and keep people returning to the health parks, Brywczynski said. The health parks will focus on wellness and preventive care by offering classes and other services -- helping to keep patients healthy and avoid costly hospital and emergency room visits, he said.

Local medical providers are also adopting new technologies to achieve seamless care, Georgia State’s Custer said. Kaiser Permanente is piloting a technology that allows doctors to have virtual visits with patients.

At WellStar's health parks, the technology will include electronic medical records.

Communication can be poor between primary doctors and specialists, wasting money and patient time, said Dr. Mitzi Rubin, who will have an office at the Cobb health park. “Being able to have that information readily available, that’s huge.”

Investors, not first-time buyers, lift home sales

by Marsha Sell

Market shows uptick after lousy year, but foreclosed properties help drive trend

Home sales are starting to tick up after the worst year in more than a decade. But the momentum is coming from cash-rich investors who are scooping up foreclosed properties at bargain prices, not first-time home-buyers who are critical for a housing recovery.

The number of first-time buyers fell last month to the lowest percentage in nearly two years, while all-cash deals have doubled and now account for one-third of sales.

A record number of foreclosures have forced home prices down in most markets. The median sales price for a home fell last month to its lowest level in nearly nine years, according to the National Association of Realtors.

Lower prices would normally be good for first-time home-buyers. But tighter lending standards have kept many from taking advantage of them. With fewer new buyers shopping, potential repeat buyers are hesitant to put their homes on the market and upgrade.

Cash-only investors are most interested in properties at risk of foreclosure. They can get those at bargain-basement prices.

"The cash-rich investors can come in and get foreclosed properties at incredibly favorable prices," said Paul Dales, senior U.S. economist for Capital Economics. "The average Joe can't take advantage because they simply cannot get the credit to buy."

Sales of previously occupied homes rose slightly in January to a seasonally adjusted annual rate of 5.36 million, the Realtors group said Wednesday. That's up 2.7 percent from 5.22 million in December.

Still, the pace remains far below the 6 million homes a year that economists say represents a healthy market. And the number of first-time home-buyers fell to 29 percent of the market — the lowest percentage of the market in nearly two years. A more healthy level of first-time home-buyers is about 40 percent, according to the trade group.

Foreclosures represented 37 percent of sales in January. All-cash transactions accounted for 32 percent of home sales — twice the rate from two years ago, when the trade group began tracking these deals on a monthly basis. In places like Las Vegas and Miami, cash deals represent about half of sales.

In the three states where foreclosures are highest, at-risk homes make up at least two-thirds of all sales. In Florida, 63 percent of sales in January involved homes that were at risk of foreclosure, according to a Campbell/Inside Mortgage Finance survey. And in Arizona and Nevada, a combined 72 percent of sales involved those homes at risk of foreclosure.

A major barrier for first-time home-buyers is tighter lending standards adopted since the housing bubble burst. These have made mortgage loans tougher to acquire. Banks are also requiring buyers put down a larger down payment. During the housing boom, buyers could purchase a home with little or no money down.

The median down payment rose to 22 percent last year in at least nine major U.S. cities, according to a survey by Zillow.com, a real estate data firm. That's up from 4 percent in late 2006 — as the housing bubble began to burst. The cities included some of the nation's hardest hit markets — Las Vegas, Phoenix and Tampa, Fla. — as well as areas that are rebounding, including San Diego and San Francisco.

That has prevented many from buying, even when the median price of a home fell in January to $158,800. That's a decline of 3.7 percent from a year ago and the lowest point since April 2002.

"If you can get the financing, it's a great time to buy a home with prices this low," said Patrick Newport, U.S. economist with IHS Global Insight.

Many potential buyers who could qualify for loans are hesitant to enter the market, worried that prices will fall further. High unemployment is also deterring buyers. Job growth, while expected to pick up this year, will not likely raise home sales to healthier levels.

With mortgage rates rising, mortgage applications have been volatile. They're now near their lowest levels in 15 years. Economists say it could take years for home sales to return to healthy levels.

"Home prices continue to languish," said Steven Wood, chief economist for Insight Economics. "Any recovery will be difficult to sustain given the still-large supplies of homes for sale and distressed properties."

Last year, home sales fell to 4.9 million, the lowest level in 13 years. And even that number, some say, was overstated.

CoreLogic, a real-estate data firm in Santa Ana, Calif., said it's found that 3.3 million homes were sold last year, far fewer than the National Association of Realtors' 4.9 million figure. CoreLogic has suggested that the Realtors figure is too high.

Since 1968, the Realtors group has produced the monthly report on the number of previously occupied homes sold. The group serves as chief advocate and lobbying arm for real estate agents. It says it's reviewing its 2010 yearly estimate.

One obstacle to a housing recovery is the glut of unsold homes on the market. Those numbers fell to 3.38 million units in January. It would take 7.6 months to clear them off the market at the January sales pace. Most analysts say a six-month supply represents a healthy supply of homes.

Story: Housing data may have understated extent of collapse

Analysts said the situation is much worse when the "shadow inventory" of homes is taken into account. These are homes that are in the early stages of the foreclosure process but have not been put on the market yet for resale.

For January, sales were up in three of the four regions of the country led by an 7.9 percent rise in the West. Sales rose 3.6 percent in the South, 1.8 percent in the Midwest and down 4.6 percent in the Northeast.

The January increase was driven by a 2.4 percent rise in sales of single-family homes. It pushed activity in this area to an annual rate of 4.69 million units. Sales of condominiums rose 4.7 percent to a rate of 670,000 units.

Should I Buy a Home Now?

by Marsha Sell

I'm often asked if this is a good time to buy a home. Some clients are concerned that home prices may fall further than they have already. They are assuming that the best course of action is to wait for the bottom in the market and then buy. The problem with this approach is that you don't know where the bottom is until you see it in the rear view mirror, meaning until you've missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Even though interest rates have gone up in the last six months, they are still near historic lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life. It's important to live in a home that reflects your taste and values, yet is within your financial "comfort zone." To that end, it may be more important to lock in today's relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today's market.

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Marsha Sell
Coldwell Banker Residential Brokerage
3535 Roswell Road, Suite 38
Marietta 30062
Direct: (404) 830-2000
Fax: Fax: (404) 830-2000