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Home» Real Estate»Why you should have bought a home last year Diana Olick

Why you should have bought a home last year Diana Olick

Saheli 31 Mar 2016 Real Estate Comments Off on Why you should have bought a home last year Diana Olick 8 Views

Anyone shopping for a home today has probably had at least one encounter with sticker shock.

No matter the neighborhood, home prices are generally rising, and bidding wars are often the rule rather than the exception. That means fewer neighborhoods are now considered affordable — a lot fewer.

Nine percent of the 456 U.S. counties measured by RealtyTrac, a real estate listing website, are not affordable, when compared to historically normal levels of housing affordability. That is up from just 2 percent one year ago.

It measured affordability based on the share of wages needed to make monthly payments on a median-priced home with a 30-year, fixed-rate mortgage, including a 3 percent down payment, property taxes and insurance. At the peak of the housing bubble in 2006, 99 percent of those counties were considered affordable, but mortgage standards, rates and down payments were far different back then.

“Home prices are floating out of reach for average wage earners in a growing number of U.S. housing markets,” said Daren Blomquist, senior vice president at RealtyTrac. “The recent drop in interest rates has helped to soften the blow of high-flying price appreciation in some markets, but the affordability equation could change quickly if interest rates trend higher and home prices continue to rise faster than wages.”

Home prices were 6.9 percent higher in January of this year compared to January of 2015, according to CoreLogic. The annual gains are accelerating. Behind the gains are not stronger wages but lean supply. Competition for what listings are available has led to homes selling for above asking price.

Investors also appear to be coming back to the housing market after pulling back last year, according to the National Association of Realtors’ February sales report. They made up 18 percent of the months’ sales after falling to just 12 percent last August.

This as inventory declined compared to a year ago to a 4.4-month supply. Six months’ supply of listings is considered a balanced market.

 

“Now that there are fewer distressed homes available, it appears there’s been a shift toward investors purchasing lower-priced homes and turning them into rentals,” said Lawrence Yun, chief economist for the Realtors. “Already facing affordability issues, this competition at the entry-level market only adds to the roadblocks slowing first-time buyers.”

Weakening affordability may also be forcing more buyers to the suburbs. Despite several U.S. cities, such as Cleveland, Pittsburgh and Minneapolis seeing resurging downtowns, homebuyers have been moving farther out. The typical home sold in 2015 was 4 percent farther from a city center than in 2011, according to Redfin, a real estate brokerage.

“Chronically low inventory, surging rental rates and high home prices have shifted the demographic makeup of the urban core in many American cities,” said Redfin chief economist Nela Richardson. “Cities used to be enclaves of cultural and economic diversity, but suburbs are increasingly filling this role.”

Where is affordability worst? Counties in Denver, New York City, Omaha, Austin, Dallas, San Francisco and St. Louis, according to Redfin. On the flip side, affordability is best in some counties in Boston, Baltimore, Chicago, Providence and Birmingham.

[Source:- CNBC]

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