Discussing home builder confidence, how much down payment you need to buy a home and how long it takes to save it, how homes are actually affordable today, if we are seeing another housing bubble plus more!
Home Builder Confidence Unchanged
Builder confidence in the market for newly-built single-family homes remained unchanged at a solid 68 reading in July on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).
NAHB Chairman Randy Noel said:
Consumer demand for single-family homes is holding strong this summer, buoyed by steady job growth, income gains and low unemployment in many parts of the country.
NAHB Chief Economist Robert Dietz said:
Builders are encouraged by growing housing demand, but they continue to be burdened by rising construction material costs. Builders need to manage these cost increases as they strive to provide competitively priced homes, especially as more first-time home buyers enter the housing market.
Good news and we can hope that this will translate into more homes being built!
Congress Approval Rating at 17% in July
Seventeen percent of Americans in July approve of the job Congress is doing, consistent with the 15% to 19% ratings the legislative body has received in Gallup’s monthly readings since February.
The overall average approval rating for Congress over Gallup’s history of asking the question since 1974 is 30%.
This is pitiful! It makes you wonder how many people are NOT voting if the approval rating is this low…
Then again, if you are forced to chose between the lesser of 2 evils, it doesn’t encourage people to vote.
Saving to Buy a Home Takes Time
From Hot Pads:
Our economics team calculated how long renters can expect to spend saving for a down payment while still paying the area’s median rent. On average, a renter in the U.S. can expect to spend nearly six and a half years saving for a down payment on the median priced home, assuming they put 20 percent down and can afford to save 20 percent of the median income each month.
The bottom line: rising housing costs make it tough for renters to save. Experts recommend spending no more than 30 percent of income on housing expenses, yet the typical U.S. renter spends 34 percent of their income on housing. Nationally, the median rent is $1,480 per month, up 2.5 percent from a year ago.
Hold on for a minute people! Please notice that they are assuming a 20% down payment and you do NOT always have to put that much down!
According to NAR’s Realtors Confidence Index, 61% of first time home buyers in 2017 put down less than 6%. Please do not think that you must have a 20% down payment to buy a home!
That being said, rising rents and spending 34% on the rent will make it hard to save to buy a home. It may be hard and take time but buying a home can be a great way to improve your financial standing and lifestyle.
Plus, owning a home can be more affordable than you think…
How Affordable Are Homes Today?
You may think that increased home prices have made owning a home out of reach for many Americans. Most people buy a home based on the monthly payment.
If you look at mortgage payments based on today’s mortgage rates and home prices, homes are more affordable now than they were between 1985 and 2000 according to a Zillow report. However, they said that homes are LESS affordable today than last year but more affordable than the peak of the housing market back in 2006.
Check out this chart comparing mortgage payments as a percentage of income:
As you can see, homes could be considered more affordable today than in the past. But what would happen if mortgage rates were to increase to 5% as some “experts” have predicted?
Let’s look at what could happen to monthly mortgage payments IF rates increase:
Mortgage rates would have to increase to 6% to make homes less affordable than they have been in the past!I know that some people have forgotten how high mortgage rates were in the past.
Check out what the monthly payments would be on a $250,000 house IF rates were the same as years ago:
In case you missed Saturday’s post, 30-year fixed rate mortgage rates averaged 4.53% according to Freddie Mac. Freddie is predicting that mortgage rates will increase to 5.1% in the next year!
Something to think about if you are renting and giving too much of your hard earned money to the landlord!
Is There Trouble Ahead for the Housing Market?
From Dollar Collapse:
The US housing bubble has been inflating for a long time as demand has outstripped supply, sending home prices back to record levels. But supply has suddenly started to rise, setting the stage for the bubble’s burst.
Has supply REALLY started to increase? Maybe a tiny bit but not enough that I am concerned about supply exceeding demand.
They talk about the 3 stages of a housing bubble:
- Mania – prices increasing at breakneck speed to unaffordable levels
- Peak – Prices stagnate and sellers start to flood the market
- Bust – Prices dropping and buyers stop buying because they are waiting for the bottom
Homes are getting too pricey in SOME areas of the country because of high demand and low supply. Most of the increases in prices is due to a lack of supply as home building slowed/stopped after the economy/housing market crashed.
US home prices are still growing but the pace of home price growth is slower. I would NOT say that home prices are stagnating, especially in the Anderson SC area.
I am MORE concerned about the economy getting hammered by a trade ware and/or the political situation getting even worse than it is today. That being said, no one has a crystal ball to predict exactly what the future holds…
The Economy in a Snapshot
The NY Fed just released their July 2018 US Economy in a Snapshot. Here are some of the highlights:
Real consumer spending was essentially flat in May
Housing indicators point to continued gradual improvement in this sector. Tight housing supply and a strong labor market have the potential to provide continuing support to the housing sector, even with higher mortgage interest rates.
Payroll growth remained robust in June, and was upwardly revised for both April and May. The unemployment rate ticked up, partly due to a rise in labor force participation.
Core PCE inflation continued to run at a level roughly consistent with the FOMC’s longer-run objective.
Pretty good news, especially about payroll growth. We really need better income growth for ALL Americans if we are going to see a truly healthy economy.
Remember, we need a healthy economy for a healthy housing market and a healthy housing market for a healthy economy!
A Long View of Home Prices
Comparing May of 2008 to May 2018, the median price of a home increased by 27.5 percent across the U.S., as well as in three of the four regions. The West led all regions with a gain of 38.7 percent followed by the South with 33.4 percent. The Midwest experienced a gain of 28.9 percent. The Northeast was the only region to experience a price decline, of 1.1 percent.
First, remember that NAR is talking about homes prices for the entire country or for large areas of the country.
The key thing for you consider is that real estate is NOT a get rich quick scheme. Owning a home is about building wealth and that takes time…
It is possible to make money by buying and rehabbing homes. BUT it is not easy or simple despite what the gurus may say during their sales pitches or infomercials.
Plus, many of the benefits of home ownership are not about money. Remember, the best things in life are not things!