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Rising Rents Offer More Home-Buying Opportunities

Mar 13, 2017 by

Editor’s Note: This was originally published on RISMedia’s blog, Housecall. See what else is cookin’ at blog.rismedia.com:

As rising rents sweep the country, the channel between the cost of owning and the cost of renting continues to slim. According to the latest Florida Atlantic University national index, today’s active rental prices make for a great time to purchase a home.

“We are not where we were in 2012, when nearly any purchase was a sound financial decision,” said Ken Johnson, Ph.D., real estate economist and index author, in a recent press release. “However, overall, we are now in a situation where aggressive marketing from sellers combined with due diligence and sound negotiation from buyers is creating a housing market that’s more in line with what we’ve seen historically.”

The index, called the Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index, shows that 15 of the 23 cities studied are set in buy territory, while another five are only marginally in rent territory. This news only further fortifies the positive outcome of the latest S&P/Case-Shiller Home Price Index, which showed home prices rising at the highest annual increase since June 2014, roughly 5.8 percent year-over-year. Out of the 23 cities studied in the BH&J Index, the only urban places to show discouraging market conditions are Dallas, Denver and Houston.

“The scores for Dallas, Denver and Houston have had worried us for some time now,” said Eli Beracha, Ph.D., co-author of the index and assistant professor in the T&S Hollo School of Real Estate at FIU. “The last time we saw scores of this magnitude, housing market crashes soon followed.”

The overall verdict seems to be, if you can afford to buy in, the time to do so is now.

To reach their finding, the FAU Index incorporated property appreciation from housing markets around the country. This data is joined by rental, maintenance and alternative investment data streams. Together, these factors can indicate when (and why) housing markets might change direction.

For more information, visit business.fau.edu/buyvsrent.

Zoe Eisenberg is RISMedia’s senior content editor. Email her your real estate ideas at zoe@rismedia.com.

For the latest real estate news and trends, bookmark RISMedia.com.

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Rising Rates: Spoiling Homebuyers’ Plans?

Feb 27, 2017 by

Homebuyers are concerned about the effect rising interest rates have on their ability to afford a home, but not enough to spoil their plans, according to a recent survey issued by Zillow Group Mortgages. Eighty-three percent of homebuyers who plan to purchase a home in the next three years expect to see those plans through, even if their monthly mortgage payment increases by $ 100 due to rising rates. Forty-nine percent will forge ahead even if their payment increases by $ 200.

Rising rates will have an impact, however, on the location and size homebuyers settle on, according to the survey. Twenty-five percent of homebuyers with $ 100 in additional costs would change their plans, opting for a home with less square footage or in a more affordable community.

“For years, falling interest rates have been a boon to the U.S. housing market, keeping monthly mortgage payments low for first-time and move-up buyers alike, even as home values rose,” says Erin Lantz, vice president of Mortgages for Zillow Group. “As rates rise this year, first-time buyers and those looking to buy in expensive markets where affordability is already an issue will feel the pinch of higher rates on their budget.”

Homebuyers overall in the majority of the top 35 metropolitan areas would have minimal added expense if their mortgage rate were to rise from 4 percent to 4.25 percent—in fact, a 4.25 percent rate on a median-valued home ($ 195,300) would tack on about $ 23 to a monthly mortgage payment. Comparing an even higher increase in specific areas:

Zillow_Rising_Interest_Rates_Chart

“For most borrowers, there is quite a bit of head room for rates to rise before home-buying becomes unaffordable,” Lantz says.

For more information, please visit www.zillow.com.

For the latest real estate news and trends, bookmark RISMedia.com.

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Market Feels Effects of Rising Rates, Pending Home Sales Pull Back

Dec 28, 2016 by

The housing market is feeling the effects of rising mortgage rates, with pending home sales pulling back to year-lows last month as homebuyers struggled to put purchases in play, according to the National Association of REALTORS® (NAR). NAR’s Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, dipped 2.5 percent to 107.3 in November, down from 110.0 in October.

“The budget of many prospective buyers last month was dealt an abrupt hit by the quick ascension of rates immediately after the election,” says Lawrence Yun, NAR chief economist. “Already faced with climbing home prices and minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract.”

All is not lost, however. Rising mortgage rates, according to Yun, will be balanced by a more robust growth in wages in the next year.

“Healthy local job markets amidst tight supply means many areas will remain competitive with prices on the rise,” says Yun. “Those rushing to lock in a rate before they advance even higher will probably have few listings to choose from. Some buyers will have to expand the area of their home search or be forced to delay in order to save a little more money for their down payment.”

The Northeast saw the most pending home sales activity in November, with the PHSI up 0.6 percent to 97.5—now 5.7 percent above one year ago. In the Midwest, the Index was down 2.5 percent to 103.5, 2.4 percent below one year ago. Pending home sales in the South were down 1.2 percent to 118.7, 1.3 percent below one year ago. The Index in the West was down 6.7 percent to 101.0, 1.0 percent below one year ago.

Existing-home sales are still expected to close out 2016 at 5.42 million, which will eclipse 2015 (5.25 million) as the highest since 2006 (6.48 million), according to NAR. The national median existing-home price is also still expected to end 2016 at a 5 percent growth rate.

Looking ahead, existing-home sales are expected to come in at 5.52 million in 2017, while the national median existing-home price is expected to grow 4 percent.

For more information, please visit www.nar.realtor.

For the latest real estate news and trends, bookmark RISMedia.com.

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