It’s the Student Debt, Stupid: Quickie Recap of NAREE15 – Changes in the Way We Buy, Sell & Consume Real Estate

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The Jills: Killing it in Miami Luxury RE

Just returned from NAREE15, that is, the National Association of Real Estate Editor’s annual conference in beautiful Miami, Florida. Steve Brown was there. And Candace Carlisle. We picked up another award — yeah! — but we also picked up the latest in the state of real estate.

(Gave you the economic outlook last week.)

This is how we keep working for our readers, staying on top of the pulse not just of the market, but the industry. Because if you are in the market for a Realtor, or selling your home, don’t you want a professional who doesn’t sell “accidentally”? Just because your agent has their pretty Botoxed face on a billboard or in a $7,000 ad doesn’t mean they are the best for you. Did you know that that 35 to 40% of Real Estate agents in the D.C./Maryland area haven’t sold one home in an entire year? The industry is taking a hard, long look at the “accidental” or part-time agent. In fact, maybe that’s a good question for your agent — how many homes have you sold this year?

Couple take-aways: smart agents (those who are selling) have caught on to where the action is — the web. Print is becoming less relevant, this evident even at a conference of predominantly print journalists! (More than one reporter told me his paper is pushing online over the print product.)

90% of home buyers are searching online six months before contacting a real estate agent, so technology is SUPER driving the industry. Buyers literally come to the agent armed with more information than they can handle. And it’s all from mobile devices. About two-thirds of visitors on Zillow now come to the site through some sort of mobile device. 117 million people visited real estate websites in May with Zillow and getting the largest share. You’ve got to update content constantly in a hot market like our’s — 15 minutes may even be too long!

Who is shaping the market the most? Millennials and Baby Boomers. In fact, the Millennials will shape it even more than the Boomers. We are now told, and I am so glad to hear this, that Millennials DO want to buy homes and do not mind living in the suburbs. I say this because I am so sick of hearing the BS that Millennials only want to lease and live in walkable urban environments. Some do, of course, but not all. Millennials do use less of stuff. Don’t necessarily have cars or want to pay for parking spaces they don’t use. They also do not want as big of homes as Boomers have/had.

Twenty-somethings are not borrowing money to buy homes at the rate they were a decade ago—a trend that may have as much to do with high levels of student debt and poor job prospects as it has to do with trauma from the housing bust, according to new research and analysis from Equifax Inc.

Dennis Carlson, deputy chief economist at Equifax, said that in 2004, consumers under the age of 30 in the United States had$146 billion in student loan debt, a number that had more than doubled to $369 billion by 2014.

All that student debt is like an economic noose on millennials. Equifax data shows a high correlation between income and student loan delinquency rates. Those earning less than $30,000 are at the highest risk for delinquency. The delinquency rate is reduced by 20 percent with each additional $10,000 of income, a phenomenon that demonstrates the strain student debt puts on young consumers starting their careers.

While mortgage debt fell among twenty-somethings both with and without student debt, it fell at a faster clip among those with student loans, according to data from Equifax and the Federal Reserve Bank of New York. In 2006, 33.2 percent of consumers under 30 with student debt had mortgage debt. By 2014, the number fell to 20.9 percent. In 2006, 29.6 percent of consumers without student debt had mortgage debt. By 2014, the number fell to 21.7 percent.

To borrow an old campaign slogan, It’s the Student Debt, Stupid. Which banks pushed to students like medical marijuana.

Ask renters why they did not purchase a home: the No. 1 answer was “too much debt/not saved enough.” More than half of respondents—55.7 percent—gave that response in the Federal Reserve Bank of New York Survey of Consumer Expectations. Only 7.9 percent said they were concerned housing prices would fall.

“Equifax data suggests that the conventional theory—millennials are the rental generation and uninterested in home ownership—is only a part of the story,” Carlson said. “Importantly, large amounts of student debt and less than stellar job prospects for recent college graduates make the dream of home ownership shine less brightly than in the past. But we also see indications that they will eventually want the family, the car, and the house that older generations desired, just with a significant delay.”

Thank you Dennis Carlson. And thank you Don Ganguly of HomeUnion who said the key to homeownership is jobs. Only 10 million jobs in the U.S. pay over $40 per hour. This is a problem as home prices and rents climb higher.

Like in California, where most of the new construction coming online is luxury, leaving a shortage of affordable options. Well, that’s because land prices are so high. Home buyers still value convenience, proximity to amenities, newness and size, according to economists. Why do Americans prefer new homes so very much? (1) Customization, (2) Modern Features, and (3) No repairs needed, this from Trulia’s Chief Economist Selma Hepp. That gal is a fount: what’s an “Exurb”? It’s a prosperous community beyond the suburbs. A commuter town for an urban area, like Prosper, Allen. In Cali, people are buying is where there is supply. (Here, too. And decent schools, lower crime.) Where there is supply is exurban areas, said Selma Hepp.

Millennials may want to live in cities but are being pushed out to exurbs because there aren’t affordable homes in the cities, says Selma, who added that though the majority of Americans prefer new homes, only 17% said would pay 20% more for a new home.

NIMBYism is alive and well not just in Preston Hollow or Highland Park, but in California, too. Folks there using drought as an excuse to push building moratoriums. Where are people supposed to live?

But the One Percent is snapping up real estate like we buy Fruit of the Loom. Not a trend necessarily, but in Sarasota, FLA where the beachfront property is sky high, the uber rich are buying neighboring homes as guest lodges, even as a place to contain one owner’s vast collection of music and sound equipment.  Agents tell me this is happening here in Dallas in Greenway Park.

Miami was a great location for the conference because it is the epicenter of condo living. Luxury condo living. We saw the new Ritz-Carlton Residences on Meridian Ave, uber luxury units being built in the shell of a Heart Institute Hospital. Then we took in the fragrance, ambiance and natural environment at the 1 Hotel South Beach, Barry Sternlicht’s new middle-age creationon the ocean at 20th and Collins.  I will get those written up later in the week, promise. You will die for those interiors.

Still, regular Joes and Jills are buying homes as investments. 15 million single family homes in the U.S. are held as investment real estate, 98% of them by “everyday” investors. Companies are now taking the business of real estate investment and professionalizing it.


The Jills
The Jills and Luxury RE panel

As you know from reading this blog, luxury real estate is alive and well. We got the annual overview from top Miami luxury agents “The Jills”: Jill Hertzberg and Jill Eber, Coldwell Banker and Judy Green, president and CEO, Premier Sotheby’s. Jay Parker, CEO, Douglas Elliman Real Estate-Florida talked about an upcoming breed: the Concierge real estate agent to the uber rich. We will definitely be looking at this concept. The Jills are epic in Miami real estate lore, $552 million in sales in 2013 and also sold the Versace mansion in South Beach where the famed designer was murdered — take a peak at how they have branded themselves: 

Together the Jills have sold perhaps more Miami real estate in terms of dollar volume than any other team in the coastal city’s recent history.

In 2013, they racked up nearly $552 million in residential sales, according to a report from REAL Trends and The Wall Street Journal. Considering the most expensive home sale in Miami’s history is $47 million, that’s a whole lot of volume. (Manhattan’s residential record famously stands at nearly twice that.)

The Jills were also behind that 2012-benchmark sale in the yacht-encrusted island enclave of Indian Creek, having listed the property in collaboration with New York-based duo Tal and Oren Alexander of Douglas Elliman, who also represented the buyer. One year later, the Jills sold the Versace mansion, known as Casa Casuarina, for $41.5 million.

Did you know that in Miami, buyers once plopped 50% down payments on condos, now they only have to put down 35%? Did you know that the IRS is looking at taxing those deposits sitting in the developers’ bank accounts?

Is It Still Smart to Invest in Single Family? Oh yes, now maybe more than ever, if you can swing it. Bigger down payments still, stiff mortgage writing standards even nine years after the housing crisis:

Almost nine years have passed since the start of the housing crash that kicked off the recession, home prices and sales have rebounded, and the U.S. economy is growing.

But getting a home loan is still a lot harder than it was a decade ago.

Don’t expect that to change. Lenders aren’t eager to relax their mortgage standards.

“It’s still quite a bit tighter than it had been in the past,” said Franklin Codel, executive vice president with Wells Fargo.

Dearth of inventory for the Baby Boomers, most of whom will be out of their big homes in ten years, where ARE they going to go? We feel sorry for the poor millennials who were told not to buy homes, who are stuck leasing and with rising rents, cannot save up for the larger down payment they need to buy a home. But the clock is ticking away on pricing. The market goes up, the rent goes up, the underwriting standards go up: the renting millennials are stuck.

We have created a generation of renters, not by choice. It’s the damn banks. They enticed the millennials with easy debt to finance college, then they tightened the noose on lending once they got jobs. I just think they are so rotten!

Down payment chart


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Candy Evans

A real estate muckraker, Candy Evans is one of the nation’s leading real estate reporters. She is also the North Texas real estate editor for, CultureMap Dallas, Modern Luxury Dallas, & the Katy Trail Weekly. Candy has written for Joel Kotkin’s The New Geography, Inman Real Estate News, plus a host of national sites. Constantly breaking celebrity real estate news, she scooped former president George W. Bush's Dallas home in 2008. She is the founder and publisher of her signature, and, devoted to the vacation home market. Her verticals have won many awards, including Best Blog by the venerable National Association of Real Estate Editors, one of the nation’s oldest and most prestigious journalism associations. Candy holds an active Texas real estate license but does not sell. She is on the Board of Directors of Braemar Hotels & Resorts (BHR).

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