RE Value Blog

A Change in the Whether
February 28th, 2017 7:48 PM

A Change in the Whether

No, that is not a misspelling. As Spring springs into action in the Real Estate Sales Market for 2017, many questions have been raised with regards to whether or not the growth in the markets is sustainable. Three factors threaten the sustenance of growth and market appreciation. Mortgage rates are rising, with the rise in rates overdue. Artificially low rates has led to inflation and an increase in the actual cost of living. Home prices have been increasing for quite some time now, becoming less affordable to the typical buyer. Rising property taxes have thrown more sand into the gears of affordability. This combined with income growth barely keeping up with inflation has led to fewer buyers being able to afford homes, with home affordability falling to its lowest level in seven years by the end of 2016. With mortgage rates having increased in the 4th quarter, monthly payments on 30 year mortgages were found to have increased by approximately 10%, with almost 25% of median income being required to make principal and interest payments on median priced homes. The percentage does not include property taxes, home owners insurance, cost of utilities and, for properties located in a condominium or co-operative development, home owners association fees. As per Core Logic, national sales prices of homes, from the end of 2016 to the end of 2017, were found to have increased 7.2 percent. Anticipated rise in home prices forecast for 2017 would result in home prices reaching a new peak by the end of this year. Some markets are well past their peaks reached approximately 10 years ago. New construction is less affordable than ever to the typical buyer, which has resulted in previously existing homes rising significantly in value. As supply decreases, demand has been growing by those who have been renting seeing the cost of tenant occupancy having become more costly than homeownership. Whether or not growth in the housing industry can overcome the lack of increase in median income along with increasing mortgage rates, property taxes and home owner expenses, will soon be determined in the coming months.

Posted in:General and tagged: Real Estate Market Value
Posted by Joseph J Randazzo, SCRREA on February 28th, 2017 7:48 PMPost a Comment

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