Cautious Buyers May Be Overestimating Costs

Affordability is the top concern for potential home buyers entering the summer season. That’s not a surprise. With prices and mortgage rates up, it’s natural that Americans who are hoping to buy might be leery when seeing news of rising housing costs. But, though affordability conditions are challenging in some markets, buyers may have some misconceptions that are adding unnecessary stress and anxiety. For example, according to the results of one recent survey, potential home buyers see saving for a down payment as the biggest obstacle preventing them from buying a house. But, at the same time, they overestimate the amount of money they’ll need to put down in order to buy. The survey found 58 percent of participants said they are planning for a 20 percent down payment. But though that may be the recommended down payment amount, it isn’t required. The National Association of Realtors, for example, found that the median down payment for first-time buyers has been at 6 percent for the past three years. In other words, though home buyers are right to take seriously the costs and responsibilities of becoming a homeowner, they may want to explore all of their options before deciding they can’t afford to buy. More here.

Pending Home Sales Slow Slightly In April

Between the time an offer is accepted and the deal is closed, a home’s sale is typically referred to as pending. That’s because, there’s a chance, during this period, that the sale won’t go through, as there are a number of hurdles yet to clear. The buyer’s loan and financing have to be finalized and steps like the home inspection and appraisal can also alter the terms of the deal or end it altogether. In short, buying a home is a major transaction and there’s usually a few weeks between the contract signing and closing. For that reason, the National Association of Realtors tracks pending home sales each month, as they can be a good indicator of what future home sales will look like. According to their most recent report, pending sales fell 1.3 percent in April, with most regions flat from the month before. The slight decline was mostly due to a drop in the Midwest. Still, the report is an indication that inventory levels in much of the country are holding sales back. With a fewer-than-normal number of homes for sale, buyers are having more difficulty locating the right house and, as a result, the number of home sales has not matched the level of demand. More here.

How Much Does Your Neighborhood Matter?

When you buy a house, you’re also buying the surrounding neighborhood. And, depending on your lifestyle and wishlist, the neighborhood may be even more important to you than the actual home you’re buying. After all, most of your life happens outside your home. So your proximity to schools, shopping, healthcare, recreation, and nature will have a large effect on how much you enjoy living in a particular house. In short, finding your dream house in the wrong neighborhood could make it a nightmare. Unconvinced? Well, a recent survey of Americans found large majorities who said the feel of a neighborhood was important when deciding where to live. In fact, 80 percent said the surrounding neighborhood had to fit their personality and an almost equal amount said they’d consider moving if they found they didn’t like their new neighborhood. In other words, when shopping for a new house, be sure to spend as much time considering the area around it as you do the areas inside it. It could even work out to be a better idea to find a smaller house in a great location than a big house somewhere you may grow to dislike. More here.

The Latest On Where Home Prices Are Headed

Home prices are a top concern for both home buyers and sellers. After all, a lot of the calculus that goes into determining whether or not it’s a good time to sell or buy a house is based on where home values are and where they are expected to be in the future. For that reason, it’s good to follow the S&P Case-Shiller Home Price Indices, as they are considered the leading measure of U.S. home prices. According to the latest data, prices have continued to rise at around the same pace they’ve been increasing, with both month-over-month and year-over-year data showing little change. In short, prices are going up but no faster than they have been. David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, says things aren’t expected to change any time soon. “Unless inventories increase faster than sales, or the economy slows significantly, home prices are likely to continue rising,” Blitzer says. But despite rising prices, Blitzer notes that the market is calmer today than it was during the last price boom in the early 2000s. More here.

Why The New Home Market Matters To You

If you aren’t in the market for a new home, why should you care about the new home market? Well, for starters, it plays a very important role in the health of the housing market. And that affects all buyers, not just new home buyers. How? Simply put, new home construction is the quickest way to add homes for sale to the market. And, when more homes are added, buyers can be more choosy, which results in less competition and fewer home price spikes. In other words, when new homes are being built and sold, the overall real estate market benefits, including buyers looking for an existing home in a more affordable price range. So, if that’s true, how’s the new home market doing? According to the latest numbers from the Commerce Department, new home sales were 11.6 percent above last year’s level in April, which is good. But, though year-over-year numbers are positive, recent revisions to totals from the first three months of the year were revised downward, indicating some lingering weakness in the market. More here.

What Is The Most Prosperous City In The US?

Prosperous is defined as “successful in material terms; flourishing financially.” And, while money isn’t everything, it’s safe to say we all want to be successful and wouldn’t mind flourishing financially. So where in the country is the best place to live if you want some prosperity? Well, the answer might surprise you. That’s because a new study – looking at factors such as population, median income, home values, share of inhabitants holding higher education degrees, poverty rate, and unemployment – determined that Odessa, Texas was the the top city for prosperity, beating out heavy hitters like Washington DC, New York, Los Angeles, Atlanta, and Charleston. So what about Odessa makes it the most prosperous city in America? Well, from 2000 to 2016, the city experienced a 38 percent spike in income growth, home values rose 91 percent, and the poverty rate dropped by 36 percent. Those are some impressive numbers but the story behind the story is that Odessa benefited from a surge in crude oil production, which boosted the city’s fortunes and lifted it to the top spot on the list. More here.

Generation Z May Become Homeowners Earlier

Generation Z – which is defined as people born between the mid-1990s and early 2000s – is quickly approaching adulthood and will soon face the decision of where to live and whether to rent or buy. But, according to a recent analysis, they may be facing challenges past generations didn’t. For example, the results of one study show that they will spend less time renting but will pay more than young people have in the past. With current median rent at $1,418 per month and rising, generation Z is expected to spend $226,000 on rent in their lifetime. That’s a lot. And it’s more than baby boomers or millennials spent. But despite that, generation Z is expected to become homeowners earlier than millennials have. One reason is the cyclical nature of the economy. Another is the fact that more than half say they considered buying before renting their current place. Also, they are just as likely as older generations to say they consider owning a home to be part of achieving the American Dream. In other words, if long-term economic trends hold up, the next generation of home buyers will have a better economy and job market to help fuel their dreams of homeownership. More here.

Changes Come To The Luxury Home Market

The high end of the real estate market has followed a different path since the financial crisis and housing crash. But while the luxury home market was able to avoid some of the ups-and-downs the rest of the market has endured, things are beginning to change. In fact, one recent analysis shows the number of homes for sale priced at or above $1 million dollars fell significantly during the first quarter of this year, as compared to the year before. And, if inventory continues to drop, the luxury home market could see some of the spiking prices and competition for available homes that buyers have found in more affordable price ranges. However, those this may be true, the effects have, so far, been far more muted than in the overall market. For example, the average luxury home was on the market for 82 days during the last quarter. That’s faster than the same time last year but much longer than the overall average. For comparison, the National Association of Realtors’ most recent numbers show the typical existing home was on the market for just 30 days, with 50 percent of homes sold in less than a month. More here.

How Builder Confidence Affects Home Prices

If you’re considering becoming a buyer in today’s housing market, you’re likely wondering what’s happening with home prices. Well, the primary factor driving values upward is a lack of available homes for sale. Simply put, there are more buyers than homes in many markets. This, of course, means home sellers can get a higher price for their house but it also means buyers can expect competition for the best available properties. So will this dynamic ever change? Well, one good indicator of where home prices are heading is new home construction. If new homes are being added to the stock of homes for sale, home prices will begin to moderate. That’s why the National Association of Home Builders tracks builder confidence each month. If builders are optimistic about the market for new homes, they will build more, which will help boost inventory. According to the most recent results of the NAHB’s Housing Market Index, there is reason for encouragement. That’s because, builder confidence rose in May and is now at 70 on a scale where any number above 50 indicates more builders view conditions as good than poor. In short, home builders are feeling positive about their prospects, which could mean a more balanced market. More here.

Rising Incomes Help To Offset Affordability Challenges

After the financial crisis and housing crash, there were plenty of homes for sale but very few interested buyers. Americans were financially unstable and worried about keeping their jobs. And while they may’ve liked to buy a home, it wasn’t the right time. Gradually, though, Americans became more secure in their jobs and more interested in buying a home. But, at the same time, the housing market also began bouncing back. And with prices higher and mortgage rates beginning to rise, Americans wanted to buy but began to worry about whether or not they could afford it. This year, with inventory low, prices rising, and mortgage rates creeping up, buyers face some challenges. Fortunately, though, new research shows incomes are also on the rise. The National Association of Home Builders’ Housing Opportunity Index, for example, shows Americans are making more money, which is helping to offset declining affordability. In fact, median family income is up from $68,000 last year to $71,900. And, at that income, 61.6 percent of recently sold homes were affordable. More here.