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Everyone knows that housing affordability has been negatively impacted by rising prices and increasing mortgage rates, but there is another piece to the affordability equation – wages.
How much a family earns obviously impacts how easy or difficult it is for them to afford to own a home. Because of an improving economy, wages are finally beginning to increase – and that dramatically affects home affordability.
According to the National Association of Realtors’ (NAR) September 2018 Housing Affordability Index, wages have increased in every region of the country:
After applying current salaries, home prices, and mortgage rates to their Home Affordability Index equation, the index, though still lower than this time last year (160.1 to 146.7), increased over the last month (141.2 to 146.7). For the complete methodology used by NAR, click here.
The percentage of income needed to own a home has also decreased each of the last three months. It currently sits at 17% which is substantially lower than historic numbers.
If you are a first-time buyer or a move-up buyer who believes that purchasing a home is not within your budget, let’s get together to determine if that is still true.
One hundred years ago, on the eleventh hour of the eleventh day of the eleventh month, we marked the end of the “war to end all wars.” That day, which was to be observed annually on the eleventh day of the eleventh month, became known as Armistice Day and then, later on, became Veterans Day.
But Veterans Day is not for veterans. They don’t serve for thanks or recognition. Veterans Day sets aside a day for those of us who haven’t worn the uniform to acknowledge those who have.
If you ask a military family, ANY military family, how you can help them, they will respond without hesitation, “Make sure my service member is taken care of.”
If you ask a service member, ANY service member, how you can best honor them, they will respond without hesitation, “Take care of my family.”
Don’t know anyone who has served or is serving? More than likely, there are veterans in your midst. Each year, 260,000 military personnel relocate to new communities, and another 230,000 transition out of the military. In total, there are 22 million veterans among us in the world.
For those who relocate through a Permanent Change of Station (or PCS), it can be a pretty stressful time. There isn’t a lot of time to find a new place to live and the timeline is more accelerated for finding a place to call home.
MILLIE is an online community and digital marketplace that connects members of the military and their families with specialized knowledge and trusted resource providers to alleviate the stress of PCSing.
According to MILLIE, “70% of active duty families live off the installation and in the surrounding communities.” Wondering what you can do to help make a recently PCSed family feel welcome?
A recent survey of military families revealed that,
“When respondents described the support they most appreciate, family, friends, and faith-based communities rose to the top. When they described the support they needed, they called for more networking, communication, and support groups.
Families said that when leaving service, they feel as though they do not fit into the civilian world. Forging partnerships between military and civilian support systems will encourage pathways of understanding.”
If you find out that your new neighbor may have been PCSed, make an effort to share what you know about your community, from the best pizza place to where you can get your oil changed.
If you know that the service member of the family is actively deployed, helping out with tasks like mowing the lawn or bringing over a home-cooked meal are small gestures that will go a long way towards welcoming this family into their new home.
Today, we honor and remember those who have served for our country. Everyone always asks what they can do to help, sometimes the simplest answer is the best one.
MILLIE is an online community and digital marketplace that connects members of the military and their families with specialized knowledge and trusted resource providers to alleviate the stress of PCS’ing. Check out MILLIE’s Installation Guides, their network of Veteran and military spouse real estate agents, and MILLIE Scouts, their on-demand task service comprised of military spouses.
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Recently, multiple headlines have been written asserting that homeownership is less affordable today than at any other time in the last decade. Though the headlines are accurate, they lack context and lead too many Americans to believe that they can’t partake in a major part of the American Dream – owning a home.
In 2008, the housing market crashed and home values fell by as much as 60% in certain markets. This was the major trigger to the Great Recession we experienced from 2008 to 2010. To come back from that recession, mortgage interest rates were pushed down to levels that were never seen before.
For the last ten years, you could purchase a home at a dramatically discounted price and attain a mortgage at a historically low mortgage rate.
Affordability skyrocketed.
Now that home values have returned to where they should be, and mortgage rates are beginning to increase, it is less affordable to own a home than it was over the last ten years.
However, what is not being reported is that it is MORE AFFORDABLE to own a home today than at any other time since 1985 (when data was first collected on this point).
If you take out the years after the crash, affordability today is greater than it has been at almost any time in American history.
This has not been adequately reported which has led to many Americans believing that they cannot currently afford a home.
As an example, the latest edition of Freddie Mac’s Research: Profile of Today’s Renter reveals that 75% of renters now believe it is more affordable to rent than to own their own homes. This percentage is the highest ever recorded. The challenge is that this belief is incorrect. Study after study has proven that in today’s market, it is less expensive to own a home than it is to rent a home in the United States.
Thankfully, some are starting to see this situation and accurately report on it. The National Association of Realtors, in their 2019 Housing Forecast, mentions this concern:
“While the U.S. is experiencing historically normal levels of affordability, potential buyers may be staying out of the market because of perceived problems with affordability.”
If you are one of the many renters who would like to own their own homes, let’s get together to find out if homeownership is affordable for you right now.
According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), the inventory of homes for sale this year compared to last year has increased for the last four months, all while sales of existing homes have slowed compared to last year’s numbers.
For over three years leading up to this point, the exact opposite was true; Inventory dropped as sales soared.
NAR’s Chief Economist Lawrence Yun shed some light on what could be contributing to this shift,
“This is the lowest existing home sales level since November 2015. A decade’s high mortgage rates are preventing consumers from making quick decisions on home purchases. All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country.”
Since January, 30-year fixed mortgage interest rates have increased nearly a full percentage point (from 3.95% to 4.9%). Fannie Mae, Freddie Mac, the National Association of Realtors, and the Mortgage Bankers Association are all in agreement that rates will continue to increase to about 5.2% over the next 12 months.
“The rise in [mortgage] rates paired with this very strong price appreciation absolutely is slowing housing,” said Fannie Mae’s Chief Economist Doug Duncan.
Even though rates are higher than they’ve been in a decade, they still remain below the average for the 1970s, 80s, 90s, and 2000s!
Elizabeth Mendenhall, President of NAR, said it best, “Despite small month over month increases, the share of first-time buyers in the market continues to underwhelm because there are simply not enough listings in their price range.”
Prices of starter and trade-up homes have appreciated faster than their higher-priced counterparts. Over the last 5 years, the lowest-priced homes have appreciated by 47% while the highest-priced homes have appreciated by only 24%.
According to the Institute of Luxury Home Market’s Luxury Market Report, the $1M-and-up price range is now experiencing a buyer’s market. This means that supply (inventory) has finally caught up with demand and buyers are in the driver’s seat when it comes to negotiations. Additionally, many listings in this price range have experienced price cuts in order to entice buyers to put in offers.
Although not fully to blame for the national shortage in sales and inventory, natural disasters like Hurricane Florence, Hurricane Michael, and the wildfires on the West Coast have certainly had an impact.
Additional inventory coming to market could help normalize the housing market and allow incomes to catch up to home prices. For more information about sales and inventory in our area, let’s get together so we can help you make the best decision for you and your family.