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Nearly 60% Of Homes Within Reach of Typical Buyer
Not surprisingly, affordability ranks high among home buyers’ concerns. Rising prices and rumors of future mortgage rate increases have some prospective buyers questioning whether or not they can handle the financial obligations that come along with homeownership. However, new data from the National Association of Home Builders says, in most markets, they can. That’s because, the NAHB’s quarterly measure of affordability found 58.3 percent of new and existing homes sold between the beginning of July and the end of September were affordable to families earning the median income of $68,000. That’s encouraging news for hopeful home shoppers. And, according to Robert Dietz, NAHB’s chief economist, there are a rising number of them hoping to take advantage of conditions while they’re still favorable. “Solid economic growth, along with ongoing quarterly job gains and rising household formations, are fueling housing demand,” Dietz said. “Tight inventories and a forecast of rising mortgage interest rates through 2018 will keep home prices on a gradual upward path and slowly lessen housing affordability in the quarters ahead.” More here.
Despite Price Spike, No Evidence Of Housing Bubble
Along with rising home prices, there has also been increasing concern that the housing market may be entering a bubble. And that’s not surprising, considering the housing crash is still fresh in peoples’ memories. So as home prices reach or exceed previous highs, potential buyers and current homeowners are naturally concerned about the possibility of another housing bubble and crash. According to a recent analysis from Freddie Mac, however, there is a pretty good reason to doubt that today’s price spikes are, in fact, evidence of an emerging bubble. Put simply, one of the primary reasons bubbles form is a perception that home prices will always rise. This causes investors to bid prices up and some mortgage lenders to offer easier credit. In short, a bubble isn’t real. Today’s price increases, on the other hand, are being driven by a lack of for-sale inventory and slower-than-normal new home construction. That means, it is more likely that prices aren’t being driven upward by irrational confidence but, instead, are being driven by an unbalanced market. “The evidence indicates there currently is no house price bubble in the U.S., despite the rapid increase of house prices over the last five years,” Freddie Mac’s chief economist Sean Becketti said. “However, the housing sector is significantly out of balance.” More here.
Figuring Out The Best Down Payment Strategy
Coming up with a down payment strategy can be difficult for some buyers – especially first-time home buyers who don’t have the benefit of a home to sell. In fact, among first-time home buyers, nearly 60 percent put less than 20 percent down on their house. And while that can be a good option for some buyers, it does have downsides. For one, smaller down payments typically mean you’ll have to pay mortgage insurance. It also means you may be edged out when making an offer on a home. Data from Zillow shows that buyers with larger down payments are more likely to get their offer accepted. On the other hand, waiting to save a larger down payment means risking an increase in home prices that makes it so you can’t afford next year what you could afford right now. What is the best move for today’s buyer? Well that depends a lot on their personal financial situation and how much they already have saved. But, according to Zillow, the median home will be worth just over $6,000 more next year at this time – which means you’ll have to save an additional $105 per month to cover the rise in prices. More here.
Housing Sentiment Cools Heading Into Fall
There are many reasons autumn is a good time to buy a house. But, because spring and summer are traditionally seen as the best seasons for home shoppers, the housing market often cools in the months following its busiest season. Evidence of this can be found in Fannie Mae’s most recent Home Purchase Sentiment Index. The index – which asks Americans for their feelings about buying and selling homes, mortgage rates, home prices, etc. – reached an all-time high in September but saw a decline in October. In short, fewer Americans feel now is a good time to buy or sell a house. But that’s normal, according to Fannie Mae’s chief economist, Doug Duncan. “The modest decrease in October’s Home Purchase Sentiment Index is driven in large part by decreases in favorable views of the current home-buying and home-selling climates, a shift we expect at this time of year moving out of the summer home-buying season,” Duncan said. “Indicators of broader economic and personal financial sentiment remain relatively steady.” In other words, because Americans generally feel better about their economic security, the dip in sentiment is likely to be temporary. More here.
Early Forecast Sees Housing Gains Next Year
This year’s real-estate market has been a mixed bag. On the one hand, demand from home buyers has been strong and an increasing number of renters say they hope to one day own a home. But though there has been strong demand from buyers, there has been a lack of homes available for sale in many markets. Low inventory has caused home prices to continuing rising and sales – though higher than the year before – to fall below expectations considering the level of demand from potential buyers. So what’s in store for next year? Well, Lawrence Yun, the National Association of Realtors’ chief economist, sees improvement. According to Yun, continued economic gains should lead to more home sales and more new home construction. However, because for-sale inventory will remain a concern, Yun is cautiously optimistic. “An overwhelming majority of renters want to own a home in the future and believe it is part of their American Dream,” Yun said. “Assuming there are no changes to the tax code that hurt homeownership, the gradually expanding economy and continued job creation should set the stage for a more meaningful increase in home sales in 2018.” More here.
How Will Homes Change As Americans Grow Older?
Ipsos, an independent market research company, recently gathered a panel of experts to weigh in on the future of housing. From climate concerns to home automation, the panel looked at what changes may be necessary in order for our homes to meet our needs in the future. One of the topics focused on the fact that Americans are growing older. In fact, by 2060, nearly 100 million Americans will be over the age of 65 and – if current numbers are any indication – the vast majority of them will prefer to stay in their own homes and communities as they age. According to Rodney Harrell, director of livable communities for AARP’s Public Policy Institute, the current housing stock may not be suited to the needs of an aging population. “The problem is you can’t create a new housing stock overnight, so we have to start working now,” Harrell said. “Nobody should be forced from their home because it doesn’t work for them.” How our homes adapt to our needs will depend, in part, on advancements in smart-home technology but also on how soon builders and home remodelers begin installing features that make it easier for the elderly to preserve their independence. More here.
November Newsletter
