Is Housing Affordability Problem Becoming A Crisis?
It is an interesting question.
Last month the National Association of Homebuilders surveyed over 19,000 adults to gauge the public’s attitude on housing affordability in their housing markets. Their findings show that 80 percent of Americans households now believe the nation is suffering from a housing affordability crisis. 75 percent reported housing affordability was a problem at both the state and local level.
Locally here in Pike Township, we have seen average home prices in the past 5 years go up about 30 percent. In the past 10 years, average prices have risen about 48 percent. It seems housing affordability is outpacing wage growth.
If you take the average price of a Pike house today and divide it down, it goes like this;
If an FHA loan
$180,000 – Purchase price
$818.51 – Principle and interest
$ 37.50 – Insurance
$150.00 – Property taxes
$123.04 – Mortgage Insurance Premium
$1,129 – Total
(Disclosure – The above prices are estimates. There are many variables. Contact your local lender for more precise details)
According to RentCafe.com the average rental price in Pike Township is $861 per month. That is a $268 difference per month.
What is causing house prices to rise?
• No houses for sale. Twelve years ago there were over 1000 houses for sale in Pike Township. This morning there are only about 120. There are still buyers for houses and now they have to scramble to fight off other buyers for a house. We get into multiple offers where prices get bid higher than list price. If the buyers have to get a mortgage, and the house appraises, no problem.
• Sellers are not willing to put their houses on the market because they will have to buy a new one with a mortgage and they are looking for lower mortgage rates. If there were more houses on the market, prices would not rise so quickly.
• Over the past 10 years, distressed housing has been dropping. In 2009, there were 395 distressed home sales in Pike Township. Last year there were 31. Distressed housing lowers property values in communities. (My definition of distressed sales – foreclosures, short sales, bankruptcies, bank-owned, and VA owned foreclosed sales.)
• In the past 10 years, more house sales have been made with cash (about 15 percent). This is unusual. It seems that more owners are investing their money into their houses and holding them longer.
• The average homeowner now keeps their house about 10 years. It use to be 7 years.
• Builders are not building affordable housing. They say it is not profitable. Also, builders have to pay high fees to the city in order to build. Add in costly impact fees, outmoded land development regulations and inefficient zoning rules and house prices must rise to cover their costs.
More houses for sale would stabilize pricing. It would cut down on multiple offers which raise prices. Lower interest rates would also encourage sellers to sell and buy a new home if they can find one to their satisfaction.
A recession is predicted but I don’t think it will hurt housing prices as it did in 2008.
There are no easy answers here and a lot of variables.
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