By Phil Hall
As the Labor Day weekend marked the unofficial end to summer, the latest mortgage application data reaffirmed a continuing sense of stagnation. But while many mortgage professionals view the fall months as a prime season for new housing activity, one key concern arises on whether first-time home buyers will be able to participate in the market. In a recent survey, it seemed that Texas and Colorado have taken the lead as the nation’s top states for attracting first-time home buyers.
First, let’s consider how summer wrapped in housing. According to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Application Survey for the week ending Aug. 29, the Market Composite Index increased 0.2 percent on a seasonally adjusted basis, but decreased one percent on an unadjusted basis from one week earlier. The seasonally adjusted Purchase Index decreased two percent from one week earlier, while the unadjusted Purchase Index decreased four percent compared with the previous week and was 12 percent lower than the same week one year ago.
In comparison, the Refinance Index increased one percent from the previous week and the refinance share of mortgage activity increased to 57 percent of total applications, the highest level since March 2014, from 56 percent the previous week.
The challenge of attracting first-time home buyers to the market has perplexed many across the industry, especially in view of the macroeconomic challenges that impact the U.S. population. However, there are certain slices of the national picture that appear to be enjoying much more first-time home buyer activity than others.
In a survey recently released by WalletHub, 11 of the top 20 markets considered to be the best for first-time homebuyers are located in Texas, while six of the top 20 markets can be found in Colorado. Oklahoma ranked at number one (with Broken Arrow) and number three (with Norman).
On the flip side, the 20 markets considered to be the least-friendly for first-time homebuyers were divided primarily between California, New Jersey, Connecticut and Massachusetts. The city of Richmond, Calif., ranked dead last on WalletHub’s list, which covered 300 local markets, while California cities monopolized the bottom-five rungs for both lowest housing affordability and highest price to rent ratio (Santa Barbara came in dead last in both categories). The one area where California outpaced the rest of the nation came in lowest property crime rate per capita, with Mission Viejo taking the first spot; Miami Beach had the highest property crime rate per capita.
Richie Bernardo, a WalletHub financial writer who presented the data, noted that the determination for these finds were based on a variety of factors, ranging from housing-related factors (including affordability, price to rent ratios, real estate taxes and home price appreciation) and standard of living considerations (including median annual income rates, property crime statistics and home energy costs).
“Those markets at the top of the list tend to have the highest incomes and lowest costs of living,” said Bernardo, adding that the inclusion of non-housing data was included to provide “a well-rounded perspective” on the national picture.
For Texas-focused mortgage professionals, the Lone Star State’s dominance came as no surprise.
“Texas has a thriving economy,” said Mark Greco, president of Austin-based 360 Mortgage Group LLC. “Gov. Rick Perry did an incredible job in getting the word out about how great Texas is. In terms of land mass, the state has a tremendous amount of potential for builders. There is also no state income tax–and we have a huge amount of people moving into Texas from California. Compared to California, Texas is a bargain.”
Greco added that he has been a witness to the bold expansion of the Texas residential markets. “I’ve been here pretty much all of my life,” Greco continued. “I’ve seen Austin grow from 350,000 to just under two million people. A lot of corporations have moved here, and a lot of young talent that commerce has attracted to Austin and central Texas.”
Greco noted, with a laugh, that there was one downside to this boom.
“From an economic perspective, there has been great growth–but from a personal perspective, I wish everyone would get off the road so we would have less traffic,” noted Greco.
Todd Potter, senior vice president and national sales manager for Houston-based Envoy Mortgage, observed that the ethnic and racial demographics in Texas are also helping to encourage first-time home buyers.
“In looking at statistics from the MBA, the minority home ownership percentage has been growing at a much faster pace than other segments of the marketplace,” said Potter. “The MBA projects that about 40 percent of the mortgage market by the end of 2020. Texas, of course, is north of Mexico, and the pride of home ownership for the Hispanic population is very strong. I wouldn’t think that New England or the Northeast or the upper-Northwest would see that sort of growth.”
As for the Colorado market, Erick Strobel, owner and operator of Johnstown, Colo.-based Strobel Financial LLC, was not the least bit surprised by its strong showing in the WalletHub top 20.
“Colorado cities have scored well as the best places to live and best markets for first-time homebuyers as a result of job opportunities, family safety, beauty, space to build and moderate weather,” Strobel said. “As a resident for 30 years, I can say it has been an ideal place to raise a family and own a home. Opportunity continues to be available through the many universities, biotech companies, Denver International Airport and military bases. Families here take refuge in healthy lifestyles, organic foods and beautiful places to visit. The big secret is the weather–moderate winters, and mild, mostly sunny, days convince people to stay.”
However, the WalletHub list had a couple of anomalies: Detroit ranked first for lowest price to rent ratio and second for highest housing affordability, but last for lowest median home price appreciation. Honolulu ranked first for lowest real estate tax rate, but came in last for highest total home energy costs.