Housing Affordability to get ‘Worse in Spring”

As mortgage rates continue to inch higher, consumers are bracing for steeper homebuying costs this spring. Households earning the national median income of $68,000 a year could afford about 59.6 percent of new and existing homes that were sold in the fourth quarter of 2017, according to the National Association of Home Builders. The trade group’s latest report looks at home prices, mortgage interest rates, and median household income across 238 U.S. metros.

Mortgage rates have increased for the past five consecutive weeks. Lawrence Yun, chief economist for the National Association of REALTORS®, predicts that mortgage rates will reach 4.5 percent by the second half of the year. Inventory shortages along with high buyer demand, have prompted home prices to escalate, fueling bidding wars.

Source: “Will It Become Harder to Afford a Home? Experts Say Yes,” realtor.com® (Feb. 9, 2018) and National Association of Home Builders

‘Granny Flats’ Are Finding a Bigger Purpose

Accessory dwelling units are increasingly being used by homeowners to add small secondary housing options on their property. These “granny flats” may be in the form of a converted garage or even a tiny home in an over sized backyard.

As more municipalities look to grant permits for these structures, some hope the trend can help alleviate housing shortages. Many forms of guest houses were deemed illegal in California up until recently. But a new law that took effect at the beginning of this year makes ADUs easier to add, leading to an upswing of these units in the state. If just 10 percent of California’s single-family homeowners added granny flats to their properties, 600,000 new units could be added to the state’s housing supply, according to USMondularInc, a firm that specializes in secondary housing units.

“California is in a housing crisis, and allowing people to modify their existing home or build a small cottage in their backyard will increase the rental supply at no cost to taxpayers,” state Sen. Bob Wieckowski, D-Fremont, said in a statement late last year.

Source: “Granny Flats Are on the Upswing – and They’re Not Just for Grannies Anymore,” San Gabriel Valley Tribune (Sept. 10, 2017)

Buyers Say Price, Not Inventory, Is the Problem

Home buyers say that affordability is a bigger concern than the lack of homes for sale — the first time since early 2012 that price has trumped inventory in buyers’ minds, according to a new survey.

Nearly 33 percent of 1,300 home buyers say that “affordability in the area I want to buy” was the biggest obstacle to a home purchase in November, according to results from Redfin’s Real-Time Buyer Survey. That compares to 11 percent of buyers who cited the biggest obstacle as “not enough homes for sale.”

“If you can’t afford any of the homes for sale, it doesn’t matter how many homes are on the market,” says Leslie White, a Redfin real estate professional based in Washington, D.C. “Despite the low interest rates, prices in D.C. are so high right now, many home buyers feel priced out of the market. They’re being forced to decide between putting their home search on hold and renting another year, buying a significantly smaller home, or looking in neighborhoods farther away from the city.”

But some housing analysts are optimistic that the supply of homes under $300,000 will likely improve next year, as more home owners regain enough equity to put their homes on the market. Prices for homes in the low- to mid-range (generally below $310,000) rose by 12 percent this year — double the price increases for more expensive homes, according to Redfin’s Research Center.

Source: “Homebuyers More Concerned About Affordability Than the Lack of Homes for Sale,” Redfin Research Center (Dec. 29, 2014)

Will High Rents Push People to Buy Homes?

With Marcus & Millichap’s National Apartment Report showing that the U.S. average for asking rents in 2011 came in at $1,061 a month, housing analysts believe more tenants will look to own. 

Some expect the average monthly rent to rise to as much as $1,101 this year, which Paul Bishop of the National Association of REALTORS® says should prompt more potential home buyers to “think twice before renting.”

Plus, another reason some consider buying is that a limited supply of rentals exist fitting their needs. This has been the case in our Placerville, El Dorado County region of California for the past few years.

 Source: “High Apartment Rents Seen Pushing People to Buy Homes,” Investor’s Business Daily (Jan. 27, 2012

 More news at: www.sierraproperties.com or email: zeller@realtor.com