(TNS)—Homeownership is a marathon, but homebuying is a sprint. Maybe you came up short in previous attempts. Maybe you “just weren’t ready.” But if you’ve decided that now is the time, here are four ways to get a lead right off the starting block. Of course, working with a real estate agent will offer the support you need, but it never hurts to arm yourself with your own insights as well.
Gather financial information Too many potential buyers find the house and only then worry about financials. That might be why they’re only potential buyers. Instead, first take an X-ray of your financial life, says Eric Tyson, co-author of “Home Buying for Dummies.”
Put exact numbers on the figures you’ve probably been estimating up to now, he says:
— What do you make every month?
— How much do you spend every month?
— How much do you have in your down payment account?
— What are your assets and liabilities?
— How much are you carrying in debt — credit card and otherwise?
— What big expenses or windfalls (like a raise or bonus) do you expect in the next six months or year?
— What’s your ideal monthly house payment?
While you’re at it, this is the time to assemble information that potential mortgage lenders will need, says Adam Leitman Bailey, author of “Finding the Uncommon Deal: A Top New York Lawyer Explains How to Buy a Home for the Lowest Possible Price.”
Get a ring binder and include two years of tax returns, three months′ pay stubs, and three months’ statements for all of your checking, savings, investment and retirement accounts.
Get preapproved for a mortgage In most cases, you can’t get the actual mortgage until you have a house to plug into the equation, says Robert Van Raaphorst, spokesman for the Mortgage Bankers Association.
But you can get the next best thing: Preapproval, which “carries more weight with the prospective seller” than a prequalification, Tyson says. Preapproval means the bank has pulled your credit, looked at your financial records and is likely to offer you a loan of up to a specific sum.
Shop around and get preapprovals from several banks, Baily advises. If you make those applications within a 45–day period, your credit score will count them as one application.
Decide how much you want to spend on a home. It might be a lower number than the amount the bank is willing to lend, says Bailey.
Line up your helpers When you find the right home, you want to be able to act quickly. One key move: Vet and line up pros you’ll need to speed that sale – like home inspectors, agents or attorneys – in advance.
You can do the same with services you’ll need, like moving companies, cleaning services, locksmiths, handymen and contractors.
Learn your local market “Buyers should right now be educating themselves on the market,” says Bailey. And as you learn more about your target market, narrow that focus to “several towns – a small radius,” he recommends.
You know you’re ready when you can walk into a house in your target market, look at what it offers and know exactly how much it should cost, Bailey says.
A rise in the key interest rate could come "relatively soon," Federal Reserve Chair Janet Yellen reiterated on Thursday, heightening the probability the Fed will forge ahead with a hike in December, despite initial doubts in the wake of Donald Trump's presidential victory. Mortgage rates, which generally follow the key rate, shot up this week, with the 30-year fixed rate mortgage topping out at an average 3.94 percent from 3.57 percent the week prior.
"This week, the verdict is in - over the last two weeks, the 30-year mortgage rate jumped 40 basis points to 3.94 percent, almost identical to the 39 basis point increase in the 10-year Treasury yield," says Sean Becketti, Freddie Mac's chief economist. "If rates stick at these levels, expect a final burst of home sales and refinances as 'fence sitters' try to beat further increases, then a marked slowdown in housing activity."
Yellen's position - which comes as the dust settles after one of the most contentious elections in history - reinforces the sentiments of Federal Reserve Bank of Philadelphia President Patrick Harker and Federal Reserve Bank of St. Louis President James Bullard, who both voiced support for future hikes this week.
Yellen also echoed the Fed's intent to only gradually raise the key rate. The Fed last raised the rate in December 2015.
DAILY REAL ESTATE NEWS | WEDNESDAY, DECEMBER 09, 2015
Aside from the need to upgrade worn out features, two of the biggest reasons owners put money into remodeling are to increase the home's value and to improve their enjoyment of the home. But according to a new report from the National Association of REALTORS® and the National Association of the Remodeling Industry (NARI), there's not a lot of overlap between those two goals.
The first - ever "Remodeling Impact Report" looks at the resale value and customer satisfaction of 12 interior and eight exterior projects. The projects range from upgrades (a new HVAC system) to full-scale remodels (a new master suite). Members of NARI reviewed specs and provided cost estimates for each project.
Projects with Greatest Cost Recovery REALTORS® reported that three interior projects and two exterior projects - all estimated to cost under $10,000 - provide the greatest cost recovery at resale:
Now that the U.S. has regained its job-creation mojo, as the October employment report showed, the demand for housing is only going to grow.
After all, when people have jobs they can break off and form new households - ditching the roommates behind or finally moving out of Mom and Dad's basement - and that's what fundamentally drives home purchases.
Most of the households created over the past two years have been renting households, but based on U.S. Census data for the third quarter of this year, it appears that homeownership has started to recover.
This especially makes sense now that it is cheaper to own than rent in more than three-quarters of the counties in the U.S. And it's not getting better - rents are rising year over year at twice the pace of listing prices. Meanwhile, mortgage rates remain at near record lows but appear poised to increase over the next year. And home prices are rising, too.
So if you qualify for a mortgage and have the funds for a down payment and closing costs - and if you intend to live in a home long enough to cover the transaction costs of buying and selling - you will be better off financially if you buy as soon as you can. After all, if you are tired of your current home now, you won't feel better about it in six months.
The top factors driving home shoppers this summer were pent-up demand and recognition of favorable mortgage rates and home prices. These drivers will likely remain well into next year.
Yet demand for housing is extremely seasonal. In most markets in the country, we are conditioned to believe that we should buy homes in the spring and summer. So come each October, plans to purchase shift to the spring. While the school calendar and weather do influence the ideal time to move, many buyers would benefit from buying this fall and winter rather than waiting until next spring.
In October, the percentage of would-be buyers on realtor.com® saying that they intend to buy in seven to 12 months was the highest it has been all year and represented the largest time frame for purchase. Likewise, October produced the lowest percentage of would-be buyers saying they intend to buy in the next three months.
In other words, people's stated plans point to a very strong spring for home sales. Great, right? But here's the problem: Inventory isn't likely to be higher in March and April than it is now. And while inventory should grow in late spring and into summer, it won't grow as fast as the seasonal demand.
So, if you are ready, consider getting in the market now instead of early spring. You will have more choices and less competition, and you can lock in today's rates rather than risk rates being 25 to 50 basis points higher. (A basis point is 0.01 percentage point.)
A 50 basis-point increase in rates (for example, from 4.05% to 4.55%) would cause monthly payments to be 6% higher. And that increase would not only affect your monthly cash flow but could also affect your ability to qualify.
So if you are considering buying a home this spring, it's worth exploring the inventory now and reaching out to a local Realtor®. A new home could be the best gift you give yourself and your family this holiday season.
DAILY REAL ESTATE NEWS | WEDNESDAY, OCTOBER 21, 2015
Winter is on the way, and home owners should preparing their homes for the colder temperatures. The National Association of Home Builders Remodelers suggested home maintenance tips to increase energy efficiency and lessen the chance of emergency repairs.
Soon, The Snows Will Come.
Bad Winter Coming? 10 Ways to Get Ready.
Remind Clients: Winter Prep Saves Money.
"Before winter weather sets in, spend some time improving and protecting the inside of your home," says NAHB Remodelers Chairman Robert Criner. "Fall is a good time to check mechanical systems and combat drafts. It's also an opportune time to organize the details of your next remodeling project and save space on the calendar of a professional remodeler."
Ensure there are no gaps in insulation or crawl spaces that expose pipes to cold air, which could put the pipes at risk of freezing and bursting.
Have your heating system checked by a licensed technician before cold weather requires daily use.
Block drafts around doors, windows and baseboards with weather stripping, window film and caulk to control heat loss.
Install storm doors and windows to improve energy-efficiency and get rid of drafts.
Have chimneys cleaned by an experienced chimney sweep to prevent the risk of a fire from buildup or blockages.
Spray door locks with powdered-graphite lubricant to prevent freezing and sticking.
Set ceiling fans to rotate clockwise to force rising warm air back towards the floor.
Source: National Association of Home Builders Remodelers
It's the perennial question, and one that both consumers and the media have asked me incessantly over the past few weeks: When is the best time of year to buy a home?
The question inspired me to look at the seasonal patterns for supply and demand a couple of weeks ago, revealing the upper hand that buyers who are willing to close on a home in off-peak times like the fall and winter might have.
But upon closer inspection I found this: September could be the best month all year to sign a contract to buy a home.
Why? Multiple factors are coming together to make this September unique.
The first factor is supply. Buyers will now have more choices than they have had for the past 10 months. According to our daily survey of visitors to realtor.com®, the single biggest factor holding back buyers from making a purchase all year long has been the inability to find a home that meets their needs. That's because both existing- and new-home supply has been tight all year. Happily, listings inventory on realtor.com has been growing all spring and summer, a pattern that continued into August. As of the third week in August, inventory was at 1.91 million units, up 3% from July and up 21% from January.
Normally inventory peaks in August and begins to slow as the nights grow longer. But this year the typical seasonal decline will start a bit later. There will be more choices in September than any other month in 2015.
The second factor is demand. Now that school has started, demand has already started to decline. You can see the evidence in the nonseasonally adjusted pending home sales data reported by the National Association of Realtors® last week. The nonseasonal estimated number of new contract signings in July was down 12% from June. This kind of decline is entirely normal for July, since most contracts signed in July won't close until after school starts.
And, of course, with less competition for the most listings all year, pricing power weakens as inventory takes longer to sell.
The seasonal pattern to pricing and median age of inventory tells us that the best deals come in the dead of winter. Signing a contract in September will likely mean you could close before Thanksgiving. That means September buyers won't have as much moving hassle from winter weather, since for most of the country the threat of snow and ice picks up in December.
The third, and final, factor: the current low level of mortgage rates. Thirty-year fixed rates ended last week under 4% as a result of the recent stock market declines - sometimes a little turbulence in one area stabilizes others.
Why pay more later when you can pay less today? The average 30-year fixed rate touched 4.2% in June but has since pulled back and danced around 4%. Rates are likely to be closer to that June peak by the end of the year. So signing a contract to buy a home soon would enable buyers to lock in today's lower rates before they start their long-awaited ascent.
With low rates, more choices, less competition, lower prices, and the chance to move before “harsh winter” enters our regular vocabulary again - this September sounds pretty enticing, especially if you're ready and have been looking but unable to buy so far this year.
Source: Jonathan Smoke is the chief economist of realtor.com, where he analyzes real estate data and trends to develop market insights for the consumer.
For now, first-time home buyers have mostly found themselves in a sellers market, faced with above-average price appreciation and bidding wars due to limited inventories of homes for-sale.
But in the second half of the year, the market is expected to shift toward more of a balance as more sellers – motivated by higher home prices – put their homes on the market, alleviating the inventory shortage. This will help provide buyers with more choices of homes to buy as well as likely soften the speed at which home prices are rising.
For potential first-time home buyers, the housing market will soon be more inviting, writes Jonathan Smoke, realtor.com®'s chief economist, in recent commentary.
"Combined with a temporary reprieve from rising mortgage rates and slightly easier access to credit, buyers should find it easier to purchase a home in the months ahead," Smoke says.
For-sale listings have risen, on average, 4.5 percent over the past three months, realtor.com® notes. Also, new construction is finally stepping up to relieve inventory pressure too, with single-family permits up 9 percent year to date over last year.
What's more, it's getting easier to get a mortgage. Mortgage credit availability was 5 percent higher in June than a year ago, according to the Mortgage Bankers Association.
"The upcoming change of season should favor you first-time buyers, assuming you are flexible about timing and can find a home that fits your needs," Smoke notes. "Families with school-age children are far less likely to compete for homes on the market after the beginning of the school year, which for many is in August. While inventory levels will also be lower due to the season in most areas of the country, the fall could turn into a great time to buy."
In some cities across the country, homes are selling faster than ever.
Nationally, properties typically stayed on the market for 34 days in June, the shortest number of days since the National Association of REALTORS® began tracking in May 2011. Short sales spent the most time on the market with a median of 129 days, foreclosures sold in 39 days, and non-distressed homes were on the market for 33 days. NAR reports that 47 percent of homes sold in less than a month in June.
The real estate brokerage Redfin's barometer is showing the median time on the market dropped to just 26 days in June, the shortest time on record. In some hot housing markets, homes were falling under contract in 11 days or less.
Denver homes sold in six days or fewer in June; Seattle's median was nine days; Portland was 10 days; and Boston was 11 days, according to Redfin.
But some cities are seeing longer selling times. For example, the median time on the market for homes in Brownsville, Texas was 122 days; Myrtle Beach, S.C., was 105 days; Miami was 75 days; and metro New York 68 days, according to June data from realtor.com®, which is based off of information from local MLSs nationwide.
The strength of the local economy, employment and income growth, and low inventories of homes for sale compared to demand are all factors that lead to faster selling times, according to economists.
After setting a record in April, single-family home sales dipped two percent to 2,767 home sales in May, according to the May 2015 Multiple Listing Service (MLS) report released today by the Austin Board of REALTORS®.
Single-family home prices remained high, both setting a record for the month of May and increasing at a rapid rate that is outpacing historical appreciation, which is typically four percent annually according to the Real Estate Center at Texas A&M University. The majority of homes entering the market continue to be priced outside of an affordable price range for many residents, with only 25 percent of single family housing options in Central Texas below $200,000.
Barb Cooper, 2015 President of the Austin Board of REALTORS¬®, explained, “Affordability remains an issue across the region, identifying a need for Central Texas to address the “missing middle” with an influx of diverse housing stock.”
According to the report, the median price for Austin-area single-family homes increased nine percent year-over-year to $271,000 in May 2015, while average price increased seven percent to $348,201 during the same time frame.
New listings for single-family homes decreased three percent year-over-year to 3,865 listings, while active listings increased by six percent to 6,323 listings in May 2015. Pending sales remained unchanged at 2,936 pending sales compared to the same time frame last year.
A combination of a slight decrease in home sales and an increase in active listings caused inventory levels to rise in May 2015. Austin-area housing inventory increased 0.1 months year-over-year to 2.7 months in May 2015, a figure still well below the 6.5 month level the Real Estate Center at Texas A&M University estimates as a balanced housing market.
“Unfortunately, the majority of single-family homes can no longer be developed within the region in an affordable price range for most homebuyers. Creating conditions that allow for housing options for all of our residents, such as medium-scale housing options, will help increase housing affordability, improve the tax base and potentially provide income for homeowners,” said Cooper. “Equally important, this type of housing stock allows for greater density and helps residents to live close to where they work and go to school.”
Recent news regarding employment rates has housing professionals breathing a sigh of relief. Friday's May Jobs Report reported that employers added a plush 280,000 jobs last month, which hints that there will be no slowdown in job growth anytime soon.
“The May Jobs Report was a good affirmation that indeed the economy is back on a positive track after another dismal winter,” says realtor.com® Chief Economist Jonathan Smoke. “This is very positive for housing.”
Smoke notes that the consensus expectation for May was for 220,000 jobs and a static unemployment rate of 5.4 percent. The reality tops that, with more jobs added than anticipated and a general rosy outlook for the rest of the year.
“The economic backdrop is that we've created 3 million jobs over the last 12 months,” says Smoke. “And almost as important, the critical age group of 25-34 year olds has seen 1 million jobs created over the same time frame”
Why is this such exciting news for housing? According to Smoke, the 25-34 age group is the typical range for the average first-time buyer household, which still represents the largest chunk of home buyers in the market.
“As that group's economic situation continues to improve, their housing activity follows and has a material impact on both existing and new home sales,” says Smoke. “With more jobs, more people in the labor force, and higher wages materializing, this spring's strong pace for home sales will continue.”
So here we are, smack in the middle of the busiest season for the residential real estate market. With all the activity, shoppers are already facing challenges in finding their ideal home. Now, they're starting to face a new one: rising mortgage rates.
Although the health of the real estate market has much improved this year, thanks to a better labor market and the end of the foreclosure crisis, the situation isn't as good for the home buyer. The number of people looking for homes is outpacing the growth in inventory of both new and existing homes. In April, the No. 1 problem in home buying reported by active shoppers on our site was simply finding a home that met their needs.
Mortgage rates have remained low since the housing crisis of 2008, but we've been warning consumers since the end of 2014 that rates would go up in 2015. Fixed-rate mortgages are now 30 to 40 basis points higher than the lows for the year. But “I told you so” doesn't help someone trying to determine what to do.
A basis point is 0.01 percentage point. That may sound confusing, but it's an easy way to discuss the difference between two rates. For example, if the rate for a certain type of mortgage was 3.50%, and it went up to 3.75%, the difference would be 25 basis points.
The financial math is straightforward: A higher mortgage rate will increase the monthly payment when all other factors remain the same. An increase of 10 basis points (0.10) in an interest rate adds 1.2% to the monthly payment. And a higher payment will affect qualification ratios, potentially limiting what you can buy.
The increase in fixed rates that we've seen so far would result in about $40 added to the monthly payment on the purchase of a median-price home with 20% down.
That increase is not minor, especially for a median- or lower-income household. Home buyers could limit the increase, or avoid any increase, by doing a bit more research and considering financing alternatives.
One tactic for lowering the monthly payment is paying upfront for a discount point, which is knocked off your mortgage rate. Economists like to say “there's no such thing as a free lunch,” and that's true here, too. By paying a discount point, you are basically buying a lower rate but increasing your upfront fees. The cost of a point varies depending on your market, but 1% of your mortgage amount is not uncommon. But this approach could be worth it if you have the funds for closing and you intend to hold the mortgage long enough to recoup the upfront investment.
Another approach would include taking advantage of alternative hybrid mortgage products with lower rates. Indeed as rates have been rising, the share of adjustable and hybrid mortgages that only have fixed rates for a defined period, such as one year or up to 10 years, has been on the rise.
But you also might be able to get a lower rate just by shopping around. Realtor.com's mortgage rate page and mobile app can get you started. An expert local mortgage broker would be of great help in working through options and the financial trade-offs between various products that are available to you.
Also, take heart that the reported average rates are not necessarily what you can get on the market. Mortgage rates are very personal and very local. The rate you end up with is a function of the market overall, local market conditions, the type of property, the type of mortgage, and the financial profile and credit history of the borrower.
To give you a perspective of rate differences around the country, even though the average 30-year fixed conforming mortgage across the U.S. is now above 4% again, in Washington, California, Illinois, Georgia, and Massachusetts the average is still under 4%.
We are forecasting even higher rates by the end of the year, so what you've seen in recent days is likely just the beginning. By knowing your options and staying informed, you can still take advantage of what are still very low mortgage rates.
Source: Jonathan Smoke - Chief Economist of realtor.com®
By Claire Osborn and Sean Collins Walsh - American-Statesman Staff
In 2010, the San Marcos City Council voted to make the city's motto “We'd love your company.”
They got company all right.
The U.S. Census Bureau on Thursday named San Marcos the fastest-growing city in the country for the third consecutive year. Its estimated population is now 58,892, which is 30 percent more than it was when the council adopted the motto in 2010. The city has roughly doubled since 1990.
Austin's 2.9 percent population increase was the most among any city with more than 250,000 residents. It now has an estimated 912,791 residents, making it the 11th-largest U.S. city.
The growth in the capital city has been spilling out into the historically sparse towns surrounding it, causing several Central Texas cities to join San Marcos near the top of the overall fastest-growing list: Georgetown was second, New Braunfels was 13th and Cedar Park came in at 24th.
The boom in San Marcos has had additional fuel from increasing enrollment at Texas State University, which is in a period of massive expansion as it strives to become a major university. More than 36,000 students attend the university.
How to manage the population explosion has become the No. 1 political issue in San Marcos, where development and business interests often face off against environmental advocates and people who want the city to stay small.
Hays County Commissioner Will Conley, who is from San Marcos and represents part of it, said he wants to see development that will encourage higher-income residents to move in and bolster the local economy.
“It's no longer about if we're going to grow or not. It's about the quality of that growth,” he said. “There's certainly a migration of people coming into Hays County and San Marcos because of the low cost of living. But income levels have been low in San Marcos historically for some time, so there's just more of us now.”
In Georgetown, with an estimated population of 59,102, the “growth issue” is always on the minds of city officials, said Mark Thomas, the city's economic development director. There are about 25,000 new homes in some stage of development in Georgetown or its extraterritorial jurisdiction, Thomas said.
“If you think what that means in magnitude to a city of 50,000, that's pretty staggering,” he said.
City officials are working with developers to create more jobs so that people can live and work in Georgetown, Thomas said. “In a general way, that takes the people off the highways so it affects the transportation issue,” he said.
Georgetown voters approved $105 million in road bonds on May 9 to help with traffic issues.
To calculate the growth rankings, the Census Bureau looks only at cities with populations greater than 50,000. That has the effect of overemphasizing gains made by cities on the lower end of the spectrum such as the fast-growing but still small suburbs in Central Texas.
New York City, for example, gained the most people last year with 52,700 - almost the population of San Marcos - but it is not near the top of the fastest-growing list because it would take many more people to significantly move the needle in a city of 8.4 million.
Unlike the results of the once-a-decade census survey, annual figures from the bureau are estimates based on sampling and trends, not a head count, and are consequently less reliable.
Central Texas cities among nation's fastest-growing:
1. San Marcos (population 58,892): 7.9 percent growth in 2014
2. Georgetown (59,102): 7.6 percent
13. New Braunfels (66,394): 4.8 percent
24. Cedar Park (63,574): 3.7 percent
45. Austin (912,791): 2.9 percent
Source: U.S. Census Bureau population estimates for 2014
AUSTIN, Texas – May 21, 2015 – Austin-area single-family home prices once again hit an all-time high, while single-family home sales volume set a record for the month of April, according to the April 2015 Multiple Listing Service (MLS) report released today by the Austin Board of REALTORS®. This marks the eighth-straight month of annual home sale increases, as housing affordability continues to be a challenge in the Austin market.
Barb Cooper, 2015 President of the Austin Board of REALTORS®, explained, “The summer selling season doesn't usually start in April, but it arrived early this year with significant increases in single-family home sales and prices for April 2015. Showing the impact of these increases, it cost nearly $20,000 more to buy a home in April 2015 than in March 2015 – one of the largest jumps in median home price that we've seen in years.”
According to the report, the median price for Austin-area single-family homes increased 14 percent year-over-year to $274,000 in April 2015, while average price increased 11 percent to $341,054 during the same time frame. Once again, less than three in 10 single-family homes sold in the Austin area were priced below $200,000.
New listings for single-family homes increased nine percent year-over-year to 3,807 and active listings increased by 11 percent to 5,915 in April 2015. Pending sales also rose during the same time frame, increasing four percent year-over-year to 2,909 in April 2015.Austin Board of REALTORS® releases real estate statistics for April 2015
More listings entering the market caused inventory levels to spike in April 2015, with Austin-area housing inventory reaching 2.5 months in April 2015, 0.2 months higher than April 2014, but a figure still well below the 6.5 month level the Real Estate Center at Texas A&M University estimates as a balanced housing market.
“While this influx of housing stock is badly needed, unfortunately the majority of homes entering the market continue to be priced outside of an affordable range for many Austin residents, driving home buyers to look to surrounding markets outside of Austin,” added Cooper. “More than half of Austin-area homebuyers continue to purchase homes outside of Austin's city limits in areas like Kyle, Pflugerville, and Georgetown.”
Single-family home sales volume also set a record for the month of April, increasing eight percent year-over-year to 2,568 home sales in April 2015.
Cooper concluded, “The Austin Board of REALTORS® is pleased to see that city leaders are taking Austin's need for affordability relief seriously with the establishment of the City of Austin Regional Affordability Committee. We expect lasting, impactful affordability solutions to come out of this committee and encourage Austin residents to get involved and voice the affordability challenges in their community. The Austin Board of REALTORS® looks forward to working alongside committee members and the community to find a long-term solution.”
The gap between rental costs and household income is widening to unsustainable levels across the country. As more renters face steeper costs, it may put them even further away from home ownership, according to a new study released by the National Association of REALTORS®. NAR evaluated income growth, housing costs, and changes in share of renter and owner-occupied households over the past five years in metropolitan statistical areas across the U.S.
Over the last five years, a typical rent rose 15 percent, while the income of renters grew by only 11 percent, according to their research.
"The gap has worsened in many areas as rents continue to climb and the accelerated pace of hiring has yet to give workers a meaningful bump in pay," says Lawrence Yun, NAR's chief economist.
New York, Seattle, and San Jose, Calif., are among the cities where combined rent growth far exceeds wages, according to the survey.
"Current renters seeking relief and looking to buy are facing the same dilemma: Home prices are rising much faster than their incomes," says Yun. "With rents taking up a larger chunk of household incomes, it's difficult for first-time buyers – especially in high-cost areas – to save for an adequate down payment."
Meanwhile, those who were able to buy a home in recent years have been insulated from the rising housing costs since they were able to lock-in a low 30-year fixed-rate mortgage with a set monthly payment, according to NAR's study. As such, home owners were able to grow their net worth as home values increased and their mortgage balances went down.
"The result has been an unequal distribution of wealth as renters continue to feel the pinch of increasing housing costs every year," according to NAR's study.
"Many of the metro areas that have experienced the highest rent increases are popular to millennials because of their employment opportunities," says Yun.
The key to relieve housing costs: Builders need to ramp up the supply of new-home construction, according to Yun. He estimates that housing starts need to rise to 1.5 million. Over the past seven years, housing starts have fallen far short from that historical average – averaging about 766,000 per year.
"With a stronger economy and labor market, it's critical to increase housing starts for entry-level buyers or else many will face affordability issues if their incomes aren't compensating for the gains in home prices," Yun says.
In many parts of the country (OK, not Boston), the busy spring home-buying season is already underway - March typically ushers in a significant increase in home searches online. This year, even more people than last year are jumping into the search process as a result of improving financial circumstances, like a new job, or life events, like a new baby.
That said, many users of this website report that it's still difficult to find a home that fits their needs and budget. That means this process may take longer than you expect. So, like the Fed keeps telling us, be patient. And be prepared.
1. Consider your alternatives Mortgage rates are low for now, but they'll be moving up, and likely remain volatile, in the months ahead. In any case, the average interest rate you see in the news is not necessarily the rate that will apply to you.
The specific rate you get is a product of several factors, including the lender, the loan type, when you applied, the home and its location, the nature of the purchase, and, of course, your credit history and financial circumstances.
What you can afford to buy is significantly affected by the specific mortgage options available to you. A 10-basis-point difference on a mortgage rate has a 1.2% impact on your monthly payment, so what seems like a minor difference from one rate to another can really add up. Plus, if you can't afford a 20% down payment, you'll also face mortgage insurance premiums that get added to the monthly payment.
Due to recent changes by housing agencies, you now have more options for low-down-payment programs and even lower mortgage insurance premiums than were available just a few months ago. But that also means you need to think through what is best for you and your circumstances. Our Mortgage 101 crash course is an excellent way to quickly learn the basics about mortgages.
2. Consider new construction If you are shopping in an area where new homes are being built, don't assume a brand-new home is out of your price range. While new-home prices have indeed increased at a faster rate than existing-home prices in recent years, that's partly because low demand from first-time buyers encouraged builders to feature bigger and more expensive homes. In some parts of the country, we are seeing builders open up more affordable communities.
For example, in markets like the greater Cincinnati; Chicago; Washington, DC; and Raleigh, NC, areas, substantial portions of new homes for sale are within budget for households earning the median income for the area.
Having a new home built for you is one way to solve the problem of not being able to find a home on the market that fits your needs. That's exactly what I did 20 years ago when I bought my first home.
3. Consider an expert local Realtor The single best piece of advice I can give anyone looking to buy a home is simple: Find an expert local Realtor® to help you through the home-buying journey. All three of those words are important.
When I say “expert,” I mean a professional with substantial experience and insight. This is critical to helping you find the right neighborhood and home, negotiating the best deal for you, and completing the process as smoothly as possible.
“Local” means someone who knows your real estate market, neighborhood, and streets intimately.
And finally, “Realtor” should not be taken for granted as just another name for a real estate agent. A Realtor is a real estate professional who is a member of the National Association of Realtors® and subscribes to its strict code of ethics. That standard of professionalism is important.
Congratulations on making it to this point! You may have weathered an economic storm, but now you're able to consider buying a home. Buying a home is a journey, but if you follow these tips, you'll be well on your way.
By now you've probably heard that 2015 is expected to be a pretty good year for real estate. It's a prediction that we chief economists are all fairly aligned on.
But what I can't emphasize enough is why I'm so confident this is a defining year for the housing industry.
It comes down to three simple factors:
1. Home sales will increase.
2. Prices will increase.
3. Mortgage rates will increase.
When combined, those three indicators point to an extremely strong real estate market. And potential home buyers should move fast if they want to spend less.
Buy before it's too late
Buyers should act now––delayed purchases will only result in higher monthly mortgage payments as prices and rates rise. In fact, our forecast data show affordability may decline as much as 10% over the course of the year.
Plus, we won't get another head fake on mortgage rates like we did in 2014. The economy is much stronger now, and the Federal Reserve continues to communicate loudly to the financial markets that it will raise the target for the federal funds rate this year.
Right now, the Fed is using the word “patient” to describe its approach to picking the time to raise the target rate.
However, when the Fed “loses patience,” rates will go up at least 20 to 40 basis points in anticipation of the target rate officially going up.
The last time the word “patient” disappeared from the Fed's language, it raised the target two months later. And when “patient” disappeared from the Fed's language, mortgage rates went up in anticipation of the official move.
So, buyers beware: The clock on these low mortgage rates may be ticking.
Job growth, global economy will boost housing
From a macro level, the economy and the housing market are in far better shape now than a year ago. We are creating jobs at a pace now that we haven't seen in 15 years.
Friday's initial report on fourth-quarter GDP came in at 2.6% growth. Underneath the number was mounting evidence that consumer spending is indeed strong and wage growth is finally accelerating.
Low prices at U.S. gas pumps have turbocharged consumer confidence and are enabling households to spend more and save more for big purchases - say, buying a home.
Besides global factors that bode well for buyers, the U.S. housing market is also in much healthier shape. Foreclosure inventories have fallen to nearly normal levels everywhere except for a few slow markets. As a result, distressed sales are no longer weighing on the market.
We're back to a normal and upward trajectory for housing prices, and there's little risk of prices declining because inventories are very low. I'm actually more worried about listings and new home construction not keeping up with the demand.
Market is primed for first-time buyers, sellers
I've said it before and I'll say it again: 2015 is the year of the millennial when it comes to real estate. Millennials are at a critical demographic tipping point where their sheer numbers will naturally drive demand for more home sales. Most first-time buyers move into their first home when they're between the ages of 25 to 34.
Sellers should also be encouraged - especially if they're sitting in affordable homes waiting for a long-overdue upgrade. With recent clarification of mortgage standards, new low-down-payment programs, and lower FHA insurance premiums, access to credit should improve. That means those folks who've been sitting on equity in entry-level homes can finally upgrade to bigger homes and retirement homes.
What are the downsides?
There are some risks to keep in mind.
Supply must keep pace with demand, otherwise affordability declines more rapidly and would-be buyers can't find the home of their dreams.
The U.S. economy could hiccup from global weakness.
Consumers could take the money they're saving on gas and buy lottery tickets instead.
The probability of those risks completely reversing the recovery is slight, but it is strong enough to limit the potential. On the flip side, if the economy ends up growing more than expected and first-time buyers come roaring back, we could end up in an even stronger market. Here's to a robust and strong 2015!
The average house hunter is probably not going around with Janet Yellen on the brain - but he should. Yellen, chairwoman of the Federal Reserve, is the single most important person in the financial world when it comes to interest rates. What she says, and doesn't say, affects not only what you pay for your mortgage, but also how much home you can afford.
Yellen removed one little word, “patient,” from her statement after the Federal Reserve Board's two-day meeting on Wednesday. Without the word indicating that the Federal Reserve will continue to keep interest rates at zero, market volatility is inevitable, and that's not good.
But the Fed wasn't saying that change would come overnight.
“The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term,” said the Fed's press release.
The Fed has been propping up the economy since the economy collapsed into recession at the end of 2008 by providing near guarantees that interest rates would remain low. Now with low unemployment rates, and a stronger economy, the Fed is eyeing interest rates. While many economists have been predicting 2015 to be the year when rates would inch up, this new development is a clear signal rates will move more than an inch.
“I would expect that we will likely see 40 to 80 basis-point increases in longer-term rates like the 30-year fixed over the next six to nine months,” said Jonathan Smoke, chief economist at realtor.com®. Changes in rates are often described in basis points - 100 basis points equal 1 percentage point.
Not since the days of Alan Greenspan has Fed policy direction been so unintelligible. Be prepared. If you're shopping for a home, lock in your rate. Rates are now subject to wild movements, and rates may climb as early as June, while some economists are forecasting rates will jump closer to October.
With the Spring selling season in full swing, now is the time for your clients to start making changes to improve their home's comfort level and the way it functions to make it more appealing to potential buyers.
Where should they start? Peter Chovanes, a REALTOR® with Van Guard Properties in San Francisco, advises that clients start with the four home improvement basics: foundation, roof, plumbing, and electrical. Of these the roof is the most important. "I am almost always asked 'How old is the roof?'" he says. "And keeping the roof in good shape alleviates other problems; for example, water can run laterally and once a leak starts it can follow plumbing and even electrical conduits. So what you think is a plumbing leak might really be a hole in the roof."
Repair: First take a good look at the state of the home, inside and out. Fix the obvious areas that need maintenance.
De-clutter: Find ways to store odds-and-ends in containers and cabinets or donate belongings to charity.
Lighten up: Brighter, light-filled rooms are more appealing and make a house feel more spacious. Consider replacing heavy drapes with shutters, shades, or blinds.
Add eco value: Replace old windows with energy-efficient versions to reduce home energy costs and add value.
Update: Water heaters, furnaces, and toilets are also good to update for energy and water conservation but probably will not add significantly to the home's value.
Refinish: If wood floors are looking tired, refinish them. Replace worn carpeting where possible.
Kitchen clean-up: The kitchen is an obvious focal point for buyers. Consider a light upgrade in the kitchen, by replacing the sink or replacing cabinets. If you are planning to replace counters try solid surface quartz-based materials, which have become the popular alternative to granite.
Better bathrooms: Bathrooms are typically less expensive to remodel than kitchens so there is more potential for a return on the investment. Buyers frequently request double vanities and a walk-in shower so consider upgrading accordingly.
Remodel: It is usually more cost-effective to remodel attics and basements than to add entirely new rooms.
Spruce up: Add curb appeal by weeding and sprucing up the garden with low maintenance, drought-tolerant plantings -- also called xeriscaping. Giving the front door a new coat of paint is a low cost way to add curb appeal.
The Federal Reserve may be inching closer to raising interest rates, a move it hasn't taken in years.
> The Fed's benchmark short-term rate has stayed near zero since December 2008, which has helped to keep interest rates near historical lows.
But this week, the Federal Reserve removed the word "patient" on its policy statement in reference to rates, and analysts say the removal is a strong hint that the Fed plans to raise rates in the second or third quarter of this year. The Fed, however, continues to sound caution on a fragile economic recovery. If it does raise rates soon, it's unlikely to push borrowing costs too high, analysts say.
Still, "just because we removed the word 'patient' from the statement doesn't mean we're going to be impatient," Fed Chair Janet Yellen said at a press conference on Wednesday about looming rate hikes. Yellen has chosen to continue to keep rates at near zero since taking over at the central bank in February 2014. The last time the Fed raised rates was June 2006, during the housing boom.
The timing for an increase remains unclear. A rate increase is "unlikely" at the Fed's April meeting, but Yellen said an increase in June cannot be ruled out.
Any increases will likely hinder on the state of the economy, and the Fed has been cautious on the economic recovery lately, scaling back its inflation outlook this year and reducing its expected economic growth.
"The committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium-term," the Fed said.
On Wednesday, the Fed downgraded its economic activity outlook, saying growth has"moderated somewhat." That marks a contrast from its report in December, which said economic activity was expanding at a strong pace.
Renters Feeling Heat from Heightened Housing Costs
The gap between rental costs and household income is widening to unsustainable levels in many parts of the country, and the situation could worsen unless new home construction meaningfully rises, according to new research by the National Association of REALTORS®.
NAR reviewed data on income growth, housing costs and changes in the share of renter and owner-occupied households over the past five years in metropolitan statistical areas across the U.S. The findings reveal that renters are being squeezed in many metro areas throughout the country due to the disproportionate growth in rental costs to incomes. New York, Seattle and San Jose, Calif. are among the cities where combined rent growth is far exceeding wages.
Lawrence Yun, NAR chief economist, says the disparity between rent and income growth has widened to unhealthy levels and is making it harder for renters to become homeowners. “In the past five years, a typical rent rose 15 percent while the income of renters grew by only 11 percent,” he says. “The gap has worsened in many areas as rents continue to climb and the accelerated pace of hiring has yet to give workers a meaningful bump in pay.”
According to Yun, the share of renter households has been increasing and homeownership is falling. Those financially able to buy a home in recent years were insulated from rising housing costs since most take out 30-year fixed-rate mortgages with established monthly payments. Furthermore, a typical homeowners' net worth climbs because of upticks in home values and declining mortgage balances. The result has been an unequal distribution of wealth as renters continue to feel the pinch of increasing housing costs every year.
“Meanwhile, current renters seeking relief and looking to buy are facing the same dilemma: home prices are rising much faster than their incomes,” adds Yun. “With rents taking up a larger chunk of household incomes, it's difficult for first-time buyers - especially in high-cost areas - to save for an adequate down payment.”
NAR's research analyzed changes in the share of renters and homeowners, mortgage payments, median home prices, median household income for renters and the rental costs in 70 metro areas.
The top markets where renters have seen the highest increase in rents since 2009 are New York (50.7 percent), Seattle (32.38 percent), San Jose, Calif., (25.6 percent), Denver (24.14 percent) and St. Louis (22.26 percent).
Looking ahead, Yun says a way to relieve housing costs is to increase the supply of new home construction - particularly to entry-level buyers. Builders have been hesitant since the recession to add supply because of rising construction costs, limited access to credit from local lenders and concerns about the re-emergence of younger buyers. Yun estimates housing starts need to rise to 1.5 million, which is the historical average. Housing starts have averaged about 766,000 per year over the past seven years.
“Many of the metro areas that have experienced the highest rent increases are popular to millennials because of their employment opportunities,” adds Yun. “With a stronger economy and labor market, it's critical to increase housing starts for entry-level buyers or else many will face affordability issues if their incomes aren't compensating for the gains in home prices.”
There are a lot of things you can't control in the home-selling process. You can't force people to come see your home or make an offer on it. But you can make sure to take care of some easy repairs that would otherwise turn off prospective buyers. Look around and make sure you haven't ignored any of these 10 repairs that can make a buyer think twice about your asking price.
1. Paint colors that just don't blend in The color of your home is one of the first things a buyer will notice. If it's a very different color from your neighborhood or general area, you should paint it something more innocuous. (Hear that, Sandra Cisneros?) Most buyers don't want to live in the only pink house in town.
The same goes for the interior. If your living room is bright orange, paint over it. Choose a neutral color so buyers can project their own ideas onto it.
2. A front door that's not inviting The front door is one of the next things a buyer will notice. If the door is flimsy, cheap, or outdated, it'll discourage the buyer before it's even opened. Spring for a new one - it's the most reliable update you can perform to recoup your cost.
3. A busted doorbell While you're at it, don't forget the doorbell! Having one that works with a friendly, crisp chime is a sign that your house has been well taken care of.
4. Tattered window and door screens Buyers will notice screens that look more like Swiss cheese than insect shields. You don't necessarily have to spring for a whole new set - just grab some screen repair patches (they're cheap) and fill in the tears.
5. Depressing landscaping As potential buyers drive up to your home, they'll notice everything - the trees, the grass, the rock pathway, and the plants out front. And it matters. If your lawn is home to a half-dead tree, yellowing grass, unkempt shrubs, and a pathway swallowed by weeds, you might get more lowball offers than you anticipated.
Keep the plants trimmed and the grass freshly cut. Make sure the walkway is clear and fallen branches are removed from the lawn. A fresh layer of mulch will brighten up the outside, too.
6. An unpleasant smell of ... something Nothing can turn a buyer off faster than the stench of faded cigarettes or poorly trained pets. Of course, it's hard for us to smell our homes after we've lived in them for a while, so ask a diplomatic friend to sniff your place. If it stinks, start cleaning.
7. Eerie dripping sounds If potential buyers hear a dripping faucet or running toilet when touring the house, they might start questioning the building's integrity or the seller's level of care. These are quick DIY fixes that shouldn't go ignored.
8. Bad lighting Replace harsh lights with bulbs that have a softer glow. Clean out light fixtures to get rid of dirt or dead bugs that can mute the lighting (not to mention look gross).
9. Squeaky hinges Doors that groan when they open are for horror movies, not homes for sale. Grab a lubricant (such as white lithium grease, but in a pinch you can use cooking oil) and grease the hinges to stop the squeak.
10. An outdated kitchen Completely renovating a kitchen can get real expensive, real fast. Keep it simple by adding a fresh coat of paint. Although we did say you should keep paint colors neutral, here's where you can try something more inviting - like pale yellow, a color we associate with light and joy. Switch out old cabinet knobs and handles for something fresher like nickel cup pulls.
It's getting more expensive to buy a house. Prices rose 6% in the fourth quarter of 2014 as buyers competed for fewer and fewer available homes for sale, according to new data from the NAR, National Association of Realtors®.
The NAR report shows most cities (86%) are experiencing rising prices, with fewer available homes to choose from. Just 24 cities, or 14%, recorded lower median prices in 2014 than in 2013.
“Home prices in metro areas throughout the country continue to show solid price growth, up 25% over the past three years on average,” said Lawrence Yun, chief economist at NAR. “This is good news for current homeowners but remains a challenge for buyers who are seeing home prices continue to outpace their wages.”
Still, as more jobs are created, consumer confidence rises, driving the demand for housing. But with fewer sellers putting their homes on the market, the housing market just chugs along.
“This should signal existing home owners, who may have been slow to think of selling, to consider now a great time to list,” said Jonathan Smoke, chief economist at realtor.com®. With prices rising by double digits in 24 areas across the country, according to the report, many sellers would find a pool of buyers vying for their homes.
To be sure, Smoke scoured 200 of the largest metro areas across the country on realtor.com and found that the prices in 98 of them had increased by 6% or more. In 66 of those markets, houses are spending 8% less time on the market, he said.
Prices and inventory go hand in hand. The average supply of available homes for sale was 4.9 months' worth, according to the report. In a normal market, there would be a six- to seven-month supply of available homes.
“This is a clear sign that demand is growing faster than supply,” said Smoke. Once more homes are listed, prices would moderate, he said.
The NAR wants more new construction. “Unless homebuilders significantly boost construction, housing supply shortages could develop and lead to further price acceleration this spring,” said Yun.
Average fixed mortgage rates are moving higher amid a strong employment report,
according to the results of Freddie Mac's recently released Primary Mortgage Market Survey® (PMMS®). Regardless, fixed-rate mortgage rates still remain near their May 23, 2013 lows.
“Mortgage rates rose last week following strong economic data,” says Len Kiefer, deputy chief economist, Freddie Mac. The economy added 257,000 new jobs in January after robust increases of 329,000 in December and 423,000 in November. The unemployment rate edged up to 5.7 percent last month from 5.6 percent in December. Average hourly earnings rose 0.5 percent, following a 0.2 percent decline in December.”
The 30-year, fixed-rate mortgage (FRM) averaged 3.69 percent with an average 0.6 point for the week ending February 12, 2015, up from last week when it averaged 3.59 percent. A year ago at this time, the 30-year FRM averaged 4.28 percent.
The 15-year FRM last week averaged 2.99 percent with an average 0.6 point, up from the week prior when it averaged 2.92 percent. A year ago at this time, the 15-year FRM averaged 3.33 percent.
Data shows that the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.97 percent last week with an average 0.5 point, up from the week prior when it averaged 2.82 percent. A year ago, the 5-year ARM averaged 3.05 percent.
Additionally, the one-year Treasury-indexed ARM averaged 2.42 percent last week with an average 0.4 point, up from the week prior when it averaged 2.39 percent. At this time last year, the 1-year ARM averaged 2.55 percent.
President Obama announced last week a new policy that will reduce annual mortgage insurance premiums (MIP) on FHA loans. The National Association of REALTORS® estimates that a reduction in the annual MIP of .50 to .85 percent will enable many first-time borrowers and other borrowers who are typically undeserved by the lending community to obtain home loans and help them into the buying market (and out of renting!)
Ray Brousseau of Carrington Mortgage Services, which specializes in FHA loans for first-time borrowers and those with a FICO score below 640, offers the following tips for consumers who wish to buy a home with an FHA loan with this new lower MIP:
Buying a house with an FHA loan is now more affordable in many cases, so check back with your preferred lender about how much home you may now qualify for with this reduction. 50 bps off the premium could amount to either meaningful savings on a monthly basisor an opportunity to purchase more home. Remember you will still have to demonstrate your qualifying income; FHA loans are government backed and require full documentation from borrowers.
Always consider what you can comfortably afford. While you may be able to “buy more home” with this reduction - getting you more for your money - be aware of your monthly cash flow so you don't bite off more than you can chew long term.
Take action now. More people may now start to look for a home, which means competition could spike in your preferred area. When competition increases, home prices rise as well. This could also mean a rush of new loan applications for lenders, which could mean extended loan closing times (like what occurred in 2013 when the average loan closing time topped 50 days for an FHA home purchase loan).
If you already own, consider refinancing. With mortgage rates at 20-month lows and a reduction in the premium, borrowers may be able to achieve monthly savings by refinancing. Borrowers with an FHA loan have a potential opportunity to reduce their monthly payment with a user friendly refinance option called an FHA Streamline loan, which is typically faster to close than a regular refinance because no appraisal is required, and there are no out-of-pocket costs.Cash-out refinancing may also be an option, but be responsible. This shift in the market will allow some individuals to take cash out of their loans to pay for things like college tuition, weddings, etc. but don't take out more than you can afford to repay.
Discuss the opportunity of a reduced term loan (25, 20, 15 or 10 year loan) with your lender. This could not only result in interest savings through the reduced term, but may also lower your rate and offer an opportunity to take advantage of the annual MIP savings.
Don't let anxiety about financing a home paralyze you. Certain lenders offer educational tools to help keep you knowledgeable and informed throughout the loan process.
Austin #1 City to invest in for 2015 (Forbes WEB site)
With the housing market stabilizing and last year's dramatic price increases behind us (on a national basis, at least), it's not as easy to quickly flip homes for a profit. Instead, now might be a good time to think about buying housing to hold for the long-term.
Whether you're an investor looking to pick up a few rental properties or a young professional interested in purchasing a first home, there are plenty of places where housing should be a pretty safe bet. The key is to buy in cities with strong job growth that people are moving to, so that the stock of potential tenants for would-be landlords is abundant. We teamed up with Local Market Monitor, a North Carolina-based data company that tracks home prices and economic factors in more than 300 housing markets, to find 2015's Best Buy Cities - the top 20 housing markets to invest in this year.
Local Market Monitor screened the 105 largest Metropolitan Statistical Areas (a geographical designation used by the U.S. Census Bureau that generally includes a core city and its surrounding suburbs), all with populations of at least 550,000. Each of our Best Buy Cities has strong population and jobs growth, and relatively low home prices. In most - but not all - of the cities, homes are still undervalued, by Local Market Monitor's reckoning. (Last year, the average home values in every single city on our Best Buy list were considered under market.) This year four cities have reached the point where prices are a slight bit overheated–Salt Lake City, West Palm Beach, Denver, and Austin–though given their fundamentals, they're still a pretty safe bet.
Where To Invest In 2015: To gauge whether homes in a particular market are over- or undervalued, Local Market Monitor calculates what it calls the “Equilibrium Home Price,” or the “Income Price.” Essentially, this measure attempts to capture what the average home price for a particular market would be absent speculation and distortions (like the housing crash). This Income Price corresponds to the average income for the area over a multi-year period. “In every market there's a relatively fixed relationship between home prices and income,” says Winzer. “When prices go above that level, that's really when markets are overpriced. In this strong real estate recession, prices have gone under this income price.” When homes are under the equilibrium or income price, investors can feel fairly confident that they'll make a good return.
With the recovery getting long in the tooth, there are fewer markets that are undervalued. “Getting a good deal is less likely, frankly,” says Winzer. “But in these markets you're getting a strong rental stream. So now economic growth is relatively more important.”
The cities on our list are places where opportunities are increasing–and so are their populations. While our top 20 could all offer good opportunities for investment, we favored those with the strongest population growth, which should promise a steady supply of renters. For example, both booming Austin, Texas (No. 1), and Grand Rapids, Mich. (No. 20), boast 3.6% and 3.7% annual job growth rates, respectively, according to the latest figures from the Bureau of Labor Statistics - both beating the 2% national average. However, the Austin metro area's population expanded by an impressive 8.9% between 2010 and 2013, while Grand Rapids' grew at a slower 2.8% clip. As a result, Austin gets a higher ranking. (On average for markets across the nation, population growth has been relatively flat at less than 2% for the three-year period, according to U.S. Census data. Thus, all the Best Buy Cities are faring better than the national average.)
The downside of strong population growth–at least for investors just getting into the market–is more rapidly rising home prices. The average home price in Austin is now about 8% over the income price for the area, whereas average home values in Grand Rapids are still 23% under what LMM pegs as the equilibrium home price. “Expensive markets are bad place to invest in single-family homes,” says Winzer. “I don't see San Francisco in there ever.”
Given strong economic engines like the energy industry in Houston and the vibrant tech scene in Austin, it's not too surprising that Texas is the state with the most Best Buy cities–five, or 25% of the list. Austin is followed by Houston (No. 3), Dallas (No. 5), San Antonio (No. 6) and Fort Worth (No. 10). Average home prices are highest in Austin, at $261,923, and lowest in Fort Worth, at $180,312, but have been accelerating at a rate of 7% to 12% in all the Texas cities. But with the energy boom starting to look shaky amid the plunge in oil prices, the Texas cities on our list, as well as Denver, remain decent housing investment bets because they have more diversified economies than other oil boomtowns, Winzer notes. “Places like Bismarck, N.D., and Midland, Texas–you want to stay away from those like the plague if you're looking for long-term investment,” Winzer advises.
Florida is the state with the second-greatest number of cities on the Best Buy list: Orlando (No. 4), where home prices average $187,568; North Port (No. 14), where homes average $223,523; West Palm Beach (No. 15), $260,846; and Jacksonville (No. 16), where homes average $196,538.
Only one metro area in the Golden State makes our Best Buy list: Sacramento. Like Minneapolis, Atlanta, and Grand Rapids, California's capital city fared badly during the recession but is recovering. “They're large, lots of people there, lots of renters,” Winzer says of these markets. “Like ocean-liners they move slowly, but now we can expect this to continue for some time, so they'll be stable markets. Regular investors like some predictability and stability.”
Eleven of the cities on our list this year also made the list last year; among the nine debutantes are Austin (No. 1), Provo (No. 2), and Tacoma, Wash. (No. 18).
Austin is at the convergence where great legacy meets lost opportunity. The big question is how will this bustling Texas capital city cope with rapid growth and maintain its cool caliber of life?
That was the discussion that unfolded Thursday at the 2015-2016 Austin Economic Forecast presented for the 30th year by AngelouEconomics.
Local economic development expert Angelos Angelou presented the data and his interpretations, and local business titan Tom Meredith gave his take on what future holds - or should hold - including a plan for a subway system.
Here's a look at some of the other salient points from the program:
• About 66,000 people moved to Austin last year. Some 39,100 jobs were created, the most in the professional and business services sector followed by leisure and hospitality, retail, education and health, construction and financial activities.
• Austin is expected to add 69,400 new jobs in 2015 and 2016. Most of those will be in professional and business services.
• Austin has the most expensive housing in the state with average home costs inching towards $300,000 - up 187 percent since the early 1990s. "We're not overpriced. We have a high price," Angelou said. "Our home prices have gone up way too fast too quickly. We need (more) supply to take care of that."
• More than 40 percent of Austin residents pay more than 35 percent of their income on housing. "That's a huge percentage. I hope this trend does not continue," Angelou said.
• The escalating real estate appreciation makes it particularly difficult for people in creative fields to find affordable housing. Houses costing $150,000 or less are practically non-existent. "Austin might eventually price itself out of that market ... I hope prices will stabilize," Angelou said.
• In the next two years, about 3.6 million square feet of office space will be absorbed. Those numbers are 700,000 square feet in the industrial sector and 1.6 million square feet of retail space. About 18,500 single family residents should be added to the housing stock as well as 16,500 new apartment units. "Let's hope that all the single-family homes are built," Angelou said.
• The Austin of tomorrow will include a more shared economy - sharing of resources, talents and amenities. Medical and life science-related businesses will proliferate, the so-called "Internet of Things" will continue steady and the economy will be entrepreneurial driven.
• Austin needs to focus on providing more higher education opportunities, which have grown at a very modest rate for many years - "or we could lose our edge," Angelou said.
• The economic drivers in Austin 30 years ago were population growth, government activities, emerging high technology and education. Today's economic drivers are population growth, technology and enterprise, education and health and the festival economy led by South By Southwest, the Austin City Limits Music Festival, Fun Fun Fun Fest and the Formula 1 U.S. Grand Prix at the Circuit of The Americas race track. Collectively, those special events have contributed about $1.4 billion to the economy in the past two years.
• Work commutes have increased 57 percent between 2000 and 2013. Vehicle miles have increased 283 percent in that time frame and hours delayed on the roads is up 1,037 percent. The cost of congestion is up 2,356 percent.
• The rate of personal savings has started to fall again after several years of more frugal spending. A low savings rate "makes our economy more susceptibe," Angelou said. "We need to do more to save. (This is) our pervasive Achilles' heel."
Newly elected Mayor Steve Adler also briefly addressed the crowd of about 800 people about his leadership and the new configuration of 10 City Council members representing geographic districts.
Angelou presented the numbers - numbers about population growth, job growth, retail sales, tax collections, housing starts, venture capital investment and household income, to name a few.
The numbers don't lie, of course, but then again, they don't always tell the full story.
There's no doubt, based on the data, that Austin and Texas as a whole have excelled greatly during the past decade - attracting hundreds of thousands of jobs and new residents.
But all of this could come to a screeching halt if three pivotal issues aren't quickly and sufficiently addressed - the lack of sustainable water sources, antiquated transportation systems and housing costs that have skyrocketed.
Angelou also addressed concerns about falling oil prices and how disastrous that could be with the energy industry heavily entrenched throughout Texas.
Though he believes 150,000 jobs related to oil-and-gas production could be lost - primarily in Houston and West Texas - if crude oil prices remain around $55 a barrel, Angelou also believes other industry sectors will benefit and expand with lower fuel costs. So current oil-and-gas conditions shouldn't spell doom or gloom for the state.
Jan Buchholz covers commercial and residential real estate, construction and architecture and retail and restaurants for the Austin Business Journal.
As 2015 rolls forward, there are several economic indicators that the housing market may have a break-out year. Let's review the top three.
The job market is stronger With the recession behind us, more and more companies are adding new employees to the payroll. The unemployment rate has dropped 5.8 percent and 321,000 jobs were opened up in November, with all of this added work equating to improved consumer optimism. The Conference Board's latest Consumer Confidence Index highlighted confidence weighing in at 19.5 percent higher than a year ago. As jobs continue to stabilize and moods lift, more potential homebuyers will enter the market as they become more eligible for a mortgage, and more capable of taking on those pesky mortgage payments.
Home prices are stabilizing Home prices between January and October, 2014 rose 4.5 percent nationally, which - while still an uptick - is much mellower than the same period of time during 2013, when prices jumped 11 percent. Additionally, mortgages have settled below 4 percent for 30-year fixed rates, and the combination of stable prices and low mortgage rates creates a cocktail of affordability that will shine a bright light on housing in 2015.
Rents are high There's nothing like a sky high rental market to send on-the-fence buyers scurrying into homeownership. As more Americans took to renting when the housing market took a tumble, rents began to increase, and are currently at a seven-year high.
And while, sure, renting offers flexibility and low-stakes living for millennials, a recent survey by Fannie Mae showed 9 in 10 would prefer to own, if it were possible. In December, both Fannie Mae and Freddie Mac announced programs that would allow first-time buyers to secure homes with low down payments (3 percent instead of the previously stated 5 percent) which will open up the doors for young people with high debt and low savings.
“With rents now rising at a seven-year high, historically low [interest] rates and moderating [home] price growth are likely to entice more buyers to enter the market in upcoming months,” Lawrence Yun, the National Association of Realtors' chief economist, says in a recent release.
However, it's not all peaches and cream for housing in 2015. Economists are predicting that, as prices stabilize, mortgage rates may begin to drift upward, settling near 5 percent by the year's end. While this number is still low, historically, it's higher than those low, cushy numbers we've been seeing of late.