Boston Area Real Estate News – July 2015

Boston Area Real Estate News - July 2015

In our Boston Area Real Estate News for July 2015:

American Dream: Not What It Used to Be

Owning a home is no longer the American Dream it once was.

Owning a home is no longer the American dream it once was. The lingering effects of the Great Recession and housing bust have altered Boston Area homeownership – a change likely to ripple through the Boston Area housing market for years to come, according to a recent study conducted by the Joint Center for Housing Studies of Harvard University.

Because of a lack of jobs, slow income growth and other financial factors – including the weight of student and other debt, homeownership continues to lose steam, sales of existing homes are lagging and single-family construction is at near historic lows.

The homeownership rate stands at 64.5 percent, where it stood in 1993. The rate fell for eight consecutive years after peaking in 2004 at nearly 70 percent.

While homeownership has dropped off, those living in apartments continues to increase along with rental rates.

Rents on a national basis have nudged up by 3.2 percent, meaning affordable housing is becoming out of reach for a segment of the population.

The flip side of falling Boston Area homeownership rates has been exceptionally strong demand for rental housing, with the 2010s on pace to be the strongest decade for renter growth in history. With no signs of a slowdown in renter household growth, rental markets are likely to remain tight in the near term.

Meanwhile, if you are renting and plan to continue doing so, or if you're an up and coming first time renter, the next article is for you…

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5 Tips for Renters This Summer

Roughly 45 million people will choose to rent a home instead of buy this year– many for the first time.

When they move into their new place, they will quickly discover a number of things they didn’t realize they needed – whether it’s something aesthetic like wall art or essential like a recycling bin. Here are five rental reminders before the next big move:

1. Make Sure You Can Afford It

Popular advice insists that renters should not spend more than one third of their annual salary on rent – but that doesn’t necessarily mean that’s how much you actually end up spending. Rent is only one of your monthly expenses; so don’t forget to budget for things like utilities, cable, Internet or even weekly groceries.

2. Know Your Landlord

Surprisingly, not a lot of new renters research their landlord or rental company before signing a lease. People research restaurants before dining, so why not do the same with someone you’ll be paying rent to for a year?

3. Get Renters Insurance

Studies show that 66% of burglaries happen in the home, and renters are just as likely to be victimized as homeowners, yet fewer than 45 percent of them actually purchase insurance. The average price of renters insurance is only $15 a month, and saves you from financial disaster in the event of theft, accidents or property damage.

4. Pay Your Rent On Time Every Month

It’s important to build a good credit score in case you want to buy a Boston Area home someday. The easiest way to do that is to pay rent on time each and every month, and if you do miss a payment or have to pay late, include a formal letter of apology to your landlord with your rent for his or her records.

5. Think Safety

A neighborhood can seem safe and active during the day, but nighttime can tell a whole different story. Familiarize yourself with your new neighborhood by looking up local crime maps and signing up for sites like EveryBlock, which aggregates crime news from local outlet sources, public police reports and comments from local residents. Do your research and find a safe and fun neighborhood that suits you.

Why is the rental market so hot everywhere? Partly because being able to afford a home is shrinking…

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Boston Area Home Affordability is Shrinking

Home sales could be off to their best year since the housing and economic downturn, with May marking the fifth straight month that contract signings have climbed, according to the National Association of Realtors.

The Realtor’s Pending Home Sales Index, which is based on contract signings, climbed 0.9 percent to 112.6 in May from a slight downward revision of 111.6 in April and is now 10.4 percent above May 2014 (101.9).

The index has now increased year-over-year for nine consecutive months and is at its highest level since April 2006

This year’s stronger sales — coming with similarly tight housing supplies from a year ago — have caused Boston Area home prices to rise to an unhealthy and unsustainable pace.

Housing affordability remains a pressing issue with home-price growth increasing around four times the pace of wages. Without meaningful gains in new and existing supply, there’s no question the goal post will move further away for many renters wanting to become Boston Area homeowners.

Boston Area Home Prices Return to Sanity

Ten years ago, Boston area home prices were unquestionably too hot. As few as four years ago they were too cold. Now, it would seem as if Boston area home prices have returned to some form of sanity when compared with incomes, rents and other fundamentals, while rising at lower single digit rates.

Boston area home prices seem to have returned to some form of sanity when compared with incomes, rents and other fundamentals.

Boston area home prices seem to be settling into a balance in which buyers are comfortable spending what they can afford given their income and savings, but aren’t willing (or able to persuade lenders) to stretch beyond that. Among buyers there is neither a sense of desperation to buy now on the assumption prices will rise rapidly, nor of fear they will plummet.

For a while in 2013 and early 2014, Boston area home prices were rising at a double-digit percentage rate, which if sustained could have rapidly led housing back to its bubble-era extremes. But the reality — of caution on the part of home buyers and their lenders — took over. In the 12 months ended in March, the S & P Case-Shiller national home price index rose only 4.1 percent, not much higher than the rise in Americans’ incomes and broadly consistent with longer-term trends.

Boston Area Home Prices Dependent on Mortgage Rates

The collapse that began in 2007 created a different set of problems, as the lengthy process of foreclosures and short sales dragged out, and the only buyers in the market seemed to be investors looking to buy cheap houses to rent out.

Now, investors are retreating as prices recover, and people buying houses to live in are returning — though not with the fervor and pay-anything sensibility of a decade ago.

The fact that the relatively balanced Boston area home prices of today are dependent on mortgage rates being near historic lows does create some risks. If rates were to rise abruptly, it could sharply reduce housing affordability and push down prices.

It all depends on why rates rise, and how quickly. If rates are rising because of stronger economic growth, the housing market should be able to absorb the hit and it will be perfectly manageable. But if mortgage rates rise for external factors or for reasons not warranted by growth in the economy, it would be damaging.

In other words, a reversal in the era of low interest rates and cheap money wouldn’t have consequences just on Wall Street. It could matter a lot on your street as well.

Get more information as it pertains to Boston area home prices in our section on Boston Real Estate to your right under Boston Real Estate Categories.

Remember, we post tips daily to Twitter, and also on our Facebook Page. We’d love you to check us out there too.

Boston Area Home Prices Continue Rising

With Boston area home prices continuing to rise, some fear that another housing bubble like we experienced in 2006 to 2008 may be on the horizon. We’re seeing some of the same signs again like bidding wars, offers above asking price, closings before houses even hit the market. Signs that are once again becoming the norm in the real estate industry. But some economists say, any potential housing bubble this time around will be different than the one we all went through before.

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Because interest rates are still hovering near all time record lows, it’s a good time to get into the market before those rates start to rise as everyone is forecasting them to do. But as Boston area home prices keep rising, and then when rates start to rise, home buyers will have to settle for a lot less house for the same monthly payment later versus what they can get now, IF they have good enough credit to qualify.We have more news almost daily in our Boston Real Estate News section of articles under Boston Real Estate Categories to your right.

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And don’t forget, we also post tips daily on Twitter and Facebook, sometimes pertaining directly to Boston area home prices. Find us there as well.

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Mortgages Rising Faster Than Boston Area Home Prices

Mortgage amounts are rising more quickly than Boston area home prices, an unusual phenomenon that seems to confirm continued weakness at the lower end of the housing market, according to the Mortgage Bankers Association.

When Mortgages Began to Exceed Boston Area Home Prices

Mortgages are rising more quickly than Boston Area home prices

The average size of mortgage loans began to outpace the recovery in Boston area home prices in September 2011. By December 2014, according to the trade association’s weekly mortgage application survey, the average mortgage loan amount had risen by nearly 32 percent. The average for the week ending March 6, for example, was $294,900, a record high. In other words, the average mortgage now exceeds levels reached before the recession when Boston area home prices climbed to unsustainable heights.

There is a lot more activity at the higher end in general. Jumbo loans (which exceed conventional conforming loan limits) account for about 25 percent of mortgages. The brisker activity among jumbo borrowers — those who take out loans greater than $417,000 — is partly because, while there has lately been some loosening of credit for borrowers at the lower end, for the most part, the easing of guidelines has been a bit more on the jumbo end.

Buyers on the lower end — looking for Boston area home prices at $250,000 and below — are generally of moderate credit and are having trouble or being intimidated from applying for mortgages.

Borrowers are still being rejected at a historically high rate. According to the Federal Reserve, consumer attitudes towards the availability of applying for, and getting, a mortgage is not changing. Fully 40% of those who might want a mortgage think they’ll be rejected if they apply.

Just in the last year, the mortgage refection rate jumped 10%, from around 15% of mortgage applications being rejected to nearly 25% being rejected. Even though word may be getting out that there are more types of mortgages available, such as the recent low-down-payment options from the government-sponsored enterprises, the sad reality is that of those people who think they can get a mortgage, too many aren’t even applying.

We will continue to monitor Boston area home prices and the mortgage market as it relates to prospective buyers and their desire to get their own home in 2015.

Remember, we also post daily on our Facebook Page, and over at Twitter. We’d love you to find us there too.

Boston Area Real Estate News – March 2015

Boston Area Real Estate News - March 2015

In our Boston Area Real Estate News for March 2015:

Home Prices Up Year-Over-Year

Home prices across most of the country were down for December, but still faired better than they were a year ago.

Black Knight Financial Services released its latest Home Price Index Report this past week, which showed that home prices nationwide were down an almost-flat 0.1 percent in December. At the same time, 2014 ended with home prices doing 4.5 percent better than a year prior.

Boston Area home prices were down in December, but up overall in 2014 over the previous year

According to the report, the average home prices in the U.S. in December were around $241,000, up from $230,000 a year before and inching closer to the June 2006 peak of $268,000.

The Northeast and Midwest showed the most notable price drops in December, while a few metro areas actually showed rising home prices for the month.

It's not unusual to see home prices and sales drop off during December, as most people have their focus on the holidays.  However, data suggests that's all about to change…

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Why Boston Area Home Prices May be Ready to Lift Off

Data suggests that Boston Area home prices are about to accelerate.

Earlier this week, the S&P/Case-Shiller Home Price Index, on a month-over-month nonseasonally adjusted basis, posted an increase for the first time since August. Winter's chill is beginning to thaw, even though old man winter is still clinging on in many areas. On a seasonally adjusted basis, the index posted its best price gain since 2014. Prices, however, are still more than 16 percent below their prerecession peaks.

A few things have been holding back Boston Area home prices lately. For one, inventories have dried up a little, limiting choices. The National Association of Realtors (NAR) notes that families are staying in their homes longer, an average of 10 years vs. the long-term norm of seven years. Wage gains have also been lukewarm so far in the recovery, which is hampering first-time buyers. And evidence shows that student loan debt is limiting the ability of many Millennials to get a mortgage.

Yet positives are showing up.

The household formation rate has increased to its highest level since the housing bubble. New-purchase mortgage applications are inching higher, thanks to the recent decline in home loan interest rates. (See our next story below)

New first-time homebuyer affordability, according to the NAR, has returned to early 2014 levels. And thanks to deleveraging efforts — defaults, short sales and the like — household mortgage debt has returned to 2001 levels, according to data from the Federal Reserve.

While some hurdles still remain, including relatively tight mortgage credit conditions, Boston Area home prices look ready to accelerate as winter — which has been brutal in much of the country — gives way to the summertime peak in housing activity. Plus, this year's prices could get a boost because relatively fewer homes are available. As Boston Area home prices rise, new construction activity will follow, providing a lift to U.S. economic growth later this year.

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Boston Area Mortgage Rates Rise for Third Straight Week

Boston Area mortgage rates are still well below year-ago levels, but rates rose for the third consecutive week this past week.

Freddie Mac says the average rate on a 30-year fixed-rate mortgage rose to 3.80 percent in the week ending Feb. 26, up from 3.76 percent last week. A year ago, 30-year rates averaged 4.37 percent.

A 15-year fix averaged 3.07 percent this week, up from 3.05 percent. A one-year adjustable-rate mortgage averaged 2.44 percent, down from 2.45 percent.

Freddie Mac says rates rose this week, in part, on strong housing data. New home sales topped expectations in January, hovering near a six year high. The monthly S&P/Case-Shiller Home Price Index showed prices in December in the 20 largest cities were up an average of 4.6 percent from a year earlier.

Stay plugged in with us right here, and we'll keep you up to date on Boston Area mortgage rates, as well as news affecting interest rates overall.