Housing-News-Report-February-2018

HOUSINGNEWS REPORT

PERSISTENT HOME PRICE APPRECIATION PRESSURES MARKET ORTHODOXIES

The National Association of Realtors reports that in 2017 first-time buyers represented just 34 percent of market, down from the 39 percent long- term norm. Many renters could reduce monthly costs with ownership. A January report from ATTOM Data Solutions found that in 240 of 447 U.S. counties a median-priced home was actually more affordable than renting a three- bedroom property. Mortgage Rates & Affordability The usual way to consider affordability is to see if the typical buyer, with the typical income, can afford today’s typical home given current mortgage rates. In a general sense it’s a very workable formula but 2018 will re-shape traditional notions of affordability.

NAR figures show that nationwide affordability fell between 2014 and November 2017. This happened despite the fact that during this period family incomes rose from $65,910 to $74,502 while interest rates dropped from 4.31 percent to 4.19 percent. Rising incomes and falling interest rates are a great combination in terms of affordability, but in this case they could not keep up with home prices which soared from $208,900 to $248,800. Affordability trends on a local basis rather than national estimates give us a better idea of what’s really practical. NAR’s 2016 metropolitan affordability index tells us that virtually anyone with a job and decent credit can buy a home in Youngstown, Ohio, Peoria, Illinois, or Cumberland, Maryland. Alternatively, affordability is virtually impossible with the typical salary in

San Jose, California, Naples, Florida, and San Diego, California.

It’s widely predicted that mortgage rates will rise in 2018, perhaps reaching 4.5 percent or even higher. However it’s also suggested that incomes will increase. NAR President Mendenhall explains that “weakening housing affordability for both renting and buying is a growing concern for the country right now. As the economy and job market prospers, we’re starting to see a meaningful uptick in wages. Let’s hope this continues, as it would certainly help the budgets of those renting and/or wanting to buy a home.” Average weekly wage growth exceeded home price growth in 52 percent of the 406 U.S. counties analyzed in the

Q3 2017 HOME AFFORDABILITY HEAT MAP

Q3 2017 AFFORDABILITY INDEX* (UNDER 100 IS LESS AFFORDABLE THAN HISTORIC AVERAGE)

1.6%

90.9%

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FEBRUARY 2018 | ATTOM DATA SOLUTIONS

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