Do rising rents make homebuying more attractive?

 Real Estate Market  Comments Off on Do rising rents make homebuying more attractive?
Sep 152015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

Zillow reports that American renters are now paying 30.2% of their income for rent, the highest percentage in recorded data, which dates back to 1979. This is up almost 1% from last year and much higher than the long-term average of 24.4%. The 30% share is important because above this level economists say housing costs are unaffordable.

On the flip side, the Zillow report says that the average homeowner only spends 15.1% of their income on a housing payment. While that huge gap makes for wonderful marketing fodder, I think the number is questionable. The median home price is about $231,000, and the median income is about $53,000. Even if I grant Zillow that the average homebuyer is able to afford a 20% down payment, I still get a $900 principal and interest payment, which is more than 20% of the homebuyer’s income. And I haven’t even considered property taxes and insurance.

But all real estate is local. In Austin, for example, the median home price is $255k, and the median income is a bit over $52k. Assuming a homebuyer has a 20% down payment, she’s looking at a total housing payment that is more than 35% of her income. The average rent payment in Austin is $1445, which is 33% of her income.

So, while rising rents are a strong incentive for renters to consider buying a home, you may not be able to use a lower housing payment as a deal clincher.

Fannie housing survey results say “buy now”

 Real Estate Market, Residential Mortgage  Comments Off on Fannie housing survey results say “buy now”
Aug 252015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

The latest Fannie Mae housing survey holds some cautionary results for those in the real estate industry. Both the share of respondents who believe now is a good time to sell and now is a good time to buy fell last month, with the latter hitting an all-time survey low at 61%.

Fannie economists suspect the results are shaded by global economic headlines, particularly the Greek default and Chinese stock market plunge. Year-over-year, the indicators measured in the survey are as strong as or stronger than a year ago.

If you chalk up these disconcerting results to headline weariness, it’s easy to find some positive news in the numbers.

– Consumers still expect home prices and rents to rise, and they expect rents to rise 50% faster than home prices. Thus, potential homebuyers have an incentive to act sooner rather than later, especially if they’re currently renting.

– An increasing percentage, now 51%, also thinks mortgage rates are going to rise in the next year, providing more incentive to buy now.

– The share of respondents who say their next move will be a home purchase ticked up to 65%.

– Finally, the survey hasn’t shown an appreciable change in consumers’ attitudes about their own finances in the last 12 months. This lends further credence to the analysis suggesting the results may be skewed by world headlines.

Fannie’s housing survey reflects the attitudes of 1000 consumers about the housing market and the economy. Fannie has conducted the survey each month since June 2010. Click here to see the full survey results.

More reasons for renters to become homebuyers

 Real Estate Market, Residential Mortgage  Comments Off on More reasons for renters to become homebuyers
Jul 092015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

by G. Steven Bray

A recent Harvard study gives you more reasons to target renters as potential homebuyers. The study reported that rents are rising at twice the rate of overall inflation and, more importantly, rising faster than paychecks, especially for the middle class.

The homeownership rate has fallen to a 25-year low as more folks choose to or are forced to rent. Apartment vacancies are disappearing, and that is keeping upward pressure on rents.

In 2013, nearly half of renter households were “cost burdened”, meaning their rent ate up more than 30% of their income. Given that rents continue to rise and wages remain stagnant, it’s likely the percentage has grown in the last two years.

Homeownership still seems to be a better financial choice in many US cities. Despite rising home prices, NAR’s first quarter home affordability index shows that Texas homes remain very affordable for median-income folks. The obvious marketing angle is to encourage renters to buy now before rising home prices and interest rates degrade affordability.

A more creative marketing angle might be to focus on rent prices rather than home prices. Rents change, and right now they’re rising more than 5% annually. The Labor Dept reports that incomes are rising at less than 2% annually, so rent is going to eat up an ever-larger share of a family’s income. Buying a home now allows a family to control their housing cost more effectively with a fixed mortgage payment at a low interest rate.