How government regulations hurt housing, half of non-owners expect to buy a home in next 5 years, Fannie’s latest consumer sentiment survey and more…
It’s no secret that in coastal cities — plus some interior cities like Denver — rents and home prices are up significantly since 2009. In many areas, prices are above what they were at the peak of the last housing bubble. Year-over-year rent growth hits more than 10 percent in some places, while wages, needless to say, are hardly growing so fast.
It’s impossible to say that any one reason is responsible for most or all of the relentless rising in home prices and rents in many areas.
Unfortunately, thanks to the continuing role of government in housing production, attempting to meet the needs of renters and buyers continues to be an exhausting quest to deal with an endless assortment of ordinances, mandates, regulations, and plans. The current planners don’t want more housing. The government planners only want a certain type of housing. Meanwhile, the renters live in smaller and smaller units, and drive further and further.
A must read and there is no doubt that too many regulations can hurt home building as well as most other industries. However, this does not mean that all regulations are bad.
It just means we need to apply some common sense when enacting regulations so as to not hurt the economy.
Sadly, common sense and the government don’t often get along…
Roughly half of U.S. adults who currently do not own a home, 49%, say they will buy a home within the next five years, up slightly from recent years. An additional 20% say they plan to purchase a home in the next 10 years, leaving just 28% who expect to remain renters or in other living arrangements for the foreseeable future.
Wow! Where all the homes these buyers are going to purchase are? If you compare population growth to the number of homes being built, the tight inventory of today will pale in comparison to what we will see in a few years.
Cleveland Fed President Loretta Mester said:
The U.S. Federal Reserve has now met its employment goal and is nearing its inflation goal, despite some weak recent economic data, so it should continue raising interest rates
This is by no means a guarantee that the Fed will raise rates or that mortgage rates are going to increase. But it should help to motivate home buyers…
Your adult children are coming back — for good. Even people who are now in their 40s and 50s are considering mom and dad an option. Older millennials are 2.7 times more likely to live in their parents’ home than people under 55 years old than in 1999, while Generation-Xers, who are now in their mid-30s to early 50s, were 2.2 times as likely to live with their parents…
Interesting article. How many of the children that moved back in with their parents are planning to buy a home in the next 5 years?
From Fannie Mae’s latest Home Purchase Sentiment Index:
Is It Good Time to Buy a Home?
Is It Good Time to Sell a Home?
Will Home Prices Increase?
Home Prices Versus Rent Expectations
Would You Rent or Buy a Home If You Moved?
Where Is the Economy Going?
Personal Finance Expectations
Are Mortgage Rates Going to Increase?
Is It Hard to Get a Mortgage?
Interesting results to the survey but what do you think? Do you think buying a home makes sense for you? Well that are some good reasons to seriously consider buying a home:
Reasons to Consider Buying a Home
Lots of people dream about owning a home. Maybe you are on the fence so let’s look at some of the monetary benefits of owning a home:
Buying Is Cheaper Than Renting
The latest Rent vs. Buy Report from Trulia revealed that owning a home is still less costly than renting if you use a 30-year fixed rate mortgage in the 100 biggest metropolitan regions in the US. They said:
Interest rates have remained low, and even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation…Nationally, rates would have to reach 9.1% for renting to be cheaper than buying. Rates haven’t been that high since January of 1995 according to Freddie Mac.
Yes, mortgage rates are STILL at historically low levels. But low mortgage rates aren’t the only reason to think about buying a house.
Owning a Home Is a Great Way to Save
Owning a home is a fantastic way to save as reported by SavingAdvice.com:
Homeownership is a “forced” savings account because you own the home, you have no choice – that monthly housing cost has got to be paid no matter what…Homeownership can be an outstanding way to force yourself to be more frugal in the rest of your spending so that you can save and build equity in your home.
There is no doubt that owning a home is a great way to build wealth. I know some will argue that you can beat the returns by investing on Wall Street. But you have to live somewhere so why not select the way that will pay you back in the years to come?
Home Prices Forecast to Continue Rising
Every 3 months, Pulsenomics asks a over 100 economists, real estate experts, and investment & market strategists about what they think home prices will do in the next 5 years. Over the next 5 years, house prices are predicted to increase 3.22% annually and to rise 17.3% cumulatively, according to Pulsenomics’ most recent Home Price Expectation Survey.
While this may be overly optimistic for some areas of the U.S. it is very possible in others. Remember that real estate or owning a home isn;t a get rich quick scheme. I suggest thinking even longer term than 5 years since most people own a home for an average of 7 years now.
On Monday, the FHFA asked for public input on the GSE’s new proposed Underserved Markets Plans under the Duty to Serve program. The plans, also released Monday from Fannie Mae and Freddie Mac, must find a way to reach three specified underserved markets including manufactured housing, affordable housing preservation and rural housing in a safe manner for residential properties that serve very low-, low-, and moderate-income families.
One very interesting proposal is to start helping owners of mobile homes to get mortgages. You see many mobile homes sell cheaply and for cash because most buyers cannot obtain financing for a mobile home unless it is a new one at the dealership. And you see lots of foreclosed mobile homes because the owners could not refinance into a mortgage with better terms and rates.
So I really hope that something is done to help this underserved market. Manufactured homes can be a great way for very low, low and moderate income families to buy a home. Sadly, the financing issue often causes problems. Just because you can get a loan from the mobile home dealer does NOT mean you will be able to refinance or sell easily later.
Construction employment increased by 5,000 jobs in April to the highest level in more than nine years amid strong demand for new construction services, according to an analysis of new government data by the Associated General Contractors of America. Association officials cautioned, however, that a shortage of available qualified workers likely limited the number of new jobs added last month.
Construction employment totaled 6,877,000 in April, an increase of 5,000 from the March total and an increase of 173,000 or 2.6 percent from a year ago. The year-over-year growth rate was almost double the 1.6 percent rise in total nonfarm payroll employment. The sector’s unemployment rate is now 6.3 percent, up slightly from 6 percent a year ago.
Good news but it is disturbing that we keep hearing about the difficulty in finding qualified workers. This is an issue that should have been addressed while the economy was really hurting instead of funneling money to Wall Street and the big banks…
Charles Munger, the vice chairman at Warren Buffett’s Berkshire Hathaway Inc., said the leaders of his political party risk going too far in their efforts to reduce oversight of banks.
“My fellow Republicans — the ones taking away all this regulation of major finance — I think that’s bonkers,” Munger, 93, said Monday on CNBC.
So very true. Again, we need common sense levels of regulations to ensure a healthy economy without repeating the mistakes of the past. Letting the banks do whatever they want is not going to be good for the average American.
The NFIB Index of Small Business Optimism posted another historically high reading in April, but expectations for future business conditions plunged by eight points, a sign that business owners were shaken by Congress’ failure at the end of March to repeal and replace Obamacare.
The Index dipped 0.2 points April, settling at 104.5. April was the sixth straight month for historically high optimism, a hot streak not seen since 1983. Five of the Index components posted a gain, reaching levels not seen since before the previous administration. Three of the components declined, and two were unchanged. Nearly all of the slight decline was attributable to an 8-point plunge in expected business conditions. Most of the data were collected immediately after Congress failed to repeal and replace Obamacare.
The House narrowly passed a bill last week to repeal most of Obamacare. Whether expectations for better business conditions will recover in the May Optimism Index remains to be seen.
I am very concerned about what will take the place of Obamacare and if it will wind up being just another government screw up.
Well that’s it for today!