Today’s Real Estate Outlook
The latest monthly report from the U.S. Bureau of Labor Statistics shows that the unemployment rate is still on its way down. This is good news for job seekers and home sellers alike.
The current unemployment rate is now at 8.3 percent. Last year the annual average was 8.9 percent, with nearly 14 million unemployed. February saw an increase of 428,000 employed, movement in a positive direction.
Will these newly employed be entering the housing market? We’ve heard it said over and over again over the last year that affordability rates are at historic highs.
This means more Americans today are able to afford buying a home than ever before. Does this mean more buyers for you home?
The latest Census Bureau’s American Community Survey indicates that while many Americans can now afford to buy, the price range they can afford may be much lower than some sellers had hoped for.
According to the National Association of Home Builders (NAHB) it takes around $26,430 of annual income to afford a $100,000 home. “In 2012, about 28.9 million households in the U.S. are estimated to have incomes lower than that threshold and, therefore, can only afford to buy homes priced under $100,000,” they reported. “These 28.9 million households form the bottom step of the pyramid. Of the remaining 87.5 million who can afford a home priced at $100,000, 23.3 million can only afford to pay a top price of somewhere between $100,000 and $175,000 (the second step on the pyramid).”
The higher the prices go, the smaller the pool of buyers. For many states and towns these average prices are much lower than their area median.
The Department of Commerce’s Census Bureau, both homeownership and rental vacancy rates are practically the same as they were in 2010. Does this mean buyers, even at lower income levels, are taking advantage of today’s affordable rates and prices?
National vacancy rates in the fourth quarter 2011 were 9.4 percent for rental housing and 2.3 percent for homeowner housing.
Among regions, the rental vacancy rate was highest in the South (12.0 percent) and lowest in the West (6.6 percent). The rental vacancy rate in the West was lower than in the fourth quarter 2010, while the rates in the Northeast, Midwest, and South were statistically unchanged.
Builders are building confidence in the multi-family housing market. The NAHB reports that the Multi-Family Production Index rose to the highest level seen since 2005.
Looking forward to the next six months, builder and developer expectations improved in the fourth quarter for all three components: low-rent units, market-rate rental units, and for-sale properties.
“The apartment and condo sector continues to be a bright spot in the housing market, with the overall index at its highest level in six years,” said NAHB Chief Economist David Crowe. “The rental components have been the driving force behind the increased index level. And although the for-sale component remains weaker, it is still double what it was just six quarters ago.”
This is good news since historical trends show that when these indices perform well, we’re likely to see movement in Census figure one to three quarters in advance.