Housing Trends eNewsletter- Elena Zimina

Housing Trends eNewsletter- Elena Zimina

NEARLY HALF OF RENTERS PUT TOO MUCH TOWARD RENT

NEARLY HALF OF RENTERS PUT TOO MUCH TOWARD RENT
Source: Wall St. Journal

A record number of renters are spending more than 30 percent of their incomes on rent, which is a ratio that economists consider financially burdensome, according to a report released this week by Harvard University’s Joint Center for Housing Studies titled, “America’s Rental Housing: Expanding Options for Diverse and Growing Demand.”

Making sense of the story

• More than 21 million households are burdened by how much they pay in rent, up from fewer than 15 million in 2001.

• Nearly half of renters are paying more than 30 percent of their incomes in rent, the report says. While that is a slight improvement from 2011, it remains above where it has been for most of the last 13 years.

• Inflation-adjusted rents rose 7 percent from 2001 to 2014, while renter household incomes fell 9 percent, creating affordability challenges for many renters.

• In contrast, the number of rental units expanded by just 8.2 million, most of that from the conversion of single-family homes into rentals.  

• Another factor exacerbating affordability is that much of the new supply is aimed at higher-income renters. The median asking rent for new market-rate apartments hit $1,372 last year, a 26 percent increase from 2012.

• The number of higher-income renters earning $100,000 or more has grown by 1.6 million over the last decade.  Households over age 40 now make up the majority of renters, according to the report.

• It is likely to take years for some of housing being built now to come down in price, leaving cities struggling to hold onto middle-class families.

Mortgage rates:

Mortgage rates: Week ending 12/3/2015 (Source: Freddie Mac)

• 30-yr. fixed: 3.93% fees/points: 0.6% 
• 15-yr. fixed: 3.16% fees/points: 0.5% 
• 1-yr. adjustable: 2.61% Fees/points: 0.3%

2016 HOME SALES TO BE BEST SINCE 2006

2016 HOME SALES TO BE BEST SINCE 2006
Source: CNBC

New home construction and moderate gains in the existing home market will deliver the necessary one-two punch to push total home sales to the highest levels since 2006, according to the 2016 housing forecast issued today by realtor.com®.

Making sense of the story

• The 2016 housing market is expected to be a picture of moderate but solid growth as acceleration in existing home sales and prices both slow to 3 percent year over year due to higher mortgage rates, continuing tight credit standards, and lower affordability.

• The new construction market will see more significant gains in the coming year as new home starts increase 12 percent year over year and new home sales grow 16 percent year over year.

• Total sales for existing and new homes will reach 6 million for the first time since 2006, a result of a strong gross domestic product increase of 2.5 percent and continued job creation.

• These healthy economic indicators will be tempered by lack of access to credit and rising home prices, which will ultimately limit housing demand and growth.  

• Chief Economist Jonathan Smoke commented, “Next year's moderate gains in existing prices and sales, versus the accelerated growth we've seen in previous years, indicate that we are entering a normal, but healthy housing market."

• Millennials are expected make up the largest demographic of home buyers in 2016, having represented 30 percent of the existing home market. Driven by increasing income, millennials will seek out homes that meet the needs of their growing families.

• Providence, Rhode Island, is ranked as the hottest market for 2016, with the San Diego region and Sacramento also in the top 10.