Columbia SC housing sector fundamentals remain favorable despite the recent rise in interest rates and the sharp drop in housing starts in June.
The decline in housing starts was almost all in the volatile multi-family sector. Single-family starts remained in a range just below 600,000 nationwide, while multi-family fell 26 percent to 245,000.
Multi-Family Important in Columbia SC Housing
Multi-family starts have been an important growth sector in Columbia SC housing in the past year, but month-to-month changes in multi-family starts – noted for their volatility – are meaningless. Multi-family Columbia SC housing starts rose in March, fell in April, rose in May, then fell again in June.
Even with the recent increase in mortgage rates, Columbia SC housing remain extremely affordable.
The typical household still can afford about 70 percent more than the median house. The (NAHB) housing market index for July reported another big rise in buyer traffic and sales, indicating builder optimism and continued solid demand for new homes.
Fed Chariman Ben Bernanke largely agreed with the positive outlook for real estate when he said to Congress, "Housing has contributed significantly to recent gains in economic activity. Home sales, house prices, and residential construction have moved up over the past year, supported by low mortgage rates and improved confidence in both the housing market and the economy. Rising housing construction and home sales are adding to job growth, and substantial increases in home prices are bolstering household finances and consumer spending while reducing the number of homeowners with underwater mortgages."
Bernanke went on to say, "Housing activity and prices seem likely to continue to recover, notwithstanding the recent increases in mortgage rates, but it will be important to monitor developments in this sector carefully."
Rising mortgage rates are the biggest worry for prospective Columbia SC home buyers. Bigger than rising prices and the lack of available inventory, according to a survey released recently by Trulia.
The survey suggested that rates — which remain below 5% — aren't likely to be a deterrent to Columbia SC home buyers just yet.
Mortgage rates have jumped in recent weeks, creating concerns that the rebounding real estate market could lose steam. A separate survey released recently from the Mortgage Bankers Association showed that interest rates for a 30-year fixed mortgage rose to 4.68% recently — the highest rate in two years.
Trulia surveyed about 2,000 people over three days in late June, just after rates began to spike upward. Some 41% of respondents said their biggest worry was that mortgage rates would rise before they were able to buy a home. That was more than the 37% who were worried about prices rising and the 36% who worried that they wouldn't be able to find a home they liked.
While rising mortgage rates have yet to have a noticeable effect on purchase mortgages, they have already led to a steep decline in refinancing. But, over time, rising rates should slow down recent price growth.
How High is Too High for Columbia SC Home Buyers?
The bigger question is how high is too high? The answer to that, Trulia says, is 6%. After combining the responses to several questions, Trulia found that some 56% of respondents who planned to buy a home would be discouraged if rates hit 6%. Among renters who planned to buy, about 62% would be discouraged if rates hit 6%.
Economists have been expecting rates to increase because the economy is improving and market expectations that the Federal Reserve will ease up on bond buying and other extraordinary measures designed to keep interest rates low.
Columbia SC home buyers who want to take advantage of the low interest rates on buying a home need to move now in order to avoid even higher rates and higher prices. Contact us today for the most current mortgage rates and plans available for Columbia SC home buyers.
Signs of a strengthening housing market continue to surface, with single family new home sales reaching their highest level in nearly five years during May.
The Commerce Department reports that sales increased 2.1 percent to a seasonally-adjusted annual rate of 476,000 units — the highest level since July 2008.
Third Straight Month for New Home Sales Gains
May also marks the third straight month of gains in new home sales.
“Builders are reporting increased demand for new homes as buyers seek to take advantage of historically low mortgage rates while they remain so favorable,” said Rick Judson, chairman of the National Association of Home Builders (NAHB). “Consumers in markets nationwide are definitely becoming more confident about making a home purchase as firming prices and tighter inventories provide further evidence of the ongoing housing recovery.”
The big uncertainty, however, pertains to how increasing interest rates will affect the recovery. Housing analysts expect a slowdown in home price gains — and possibly a loosening of tight inventories.
Even above 4 percent, mortgage rates remain historically low — even though chances are slim to none that the 30-year fixed rate will again see its all-time low of 3.31 percent.
Three out of four regions posted sales gains in May, with double-digit increases of 20.7 percent and 40.7 percent in the Northeast and Midwest, respectively, and a more moderate 3.6 percent gain in the West. The South posted a 9.0 percent decrease following an unsustainably large gain in the previous month.
The inventory of new homes for sale edged up slightly to 161,000 units in May, which is a 4.1-month supply at the current sales pace.
“The latest report confirms that the improvement we have been seeing in housing markets over the past year continues to take place at a gradual and steady pace,” said NAHB Senior Economist Robert Denk. “We expect to see more of this positive momentum in the coming months, tempered by the caution that builders are exercising to avoid getting ahead of demand along with ongoing constraints they face with regard to the availability of credit, materials, lots and labor.”
Did Fed Chairman Ben Bernanke hurt the Columbia SC housing recovery when he said recently that he thought the housing market is strong enough to stand on its own feet. If that was the message Bernanke was trying to deliver for the U.S. economy, investors seemed to have received it loud and clear.
Did Bernanke kill the Columbia SC housing recovery with his recent remarks? Stan Humphries, chief economist at Zillow has the answer…
What do you think? Do you think Bernanke spooked the Columbia SC housing recovery with his recent comments? Tell us what you think using the comment box. Your email address will never be published at this site for your privacy protection.
One of the biggest threats to the Columbia SC housing recovery now seems to be the huge increase in student debt over the past 8 to 10 years.
With students financing their education, many get out of college so deep in debt they cannot even begin to fathom buying a home. It's like the major phone company commercials on TV… "It's not complicated…"
Now the New York Federal Reserve is chiming in and showing that this is starting to happen, not only for Columbia SC housing, but nationwide.
Columbia SC Housing Market Faces Challenges With Student Debt
Total student debt has nearly tripled over the past eight years. The number of borrowers and the average balance per person have grown, along with the number of borrowers past due on student loan payments. Educational debt is now the largest consumer liability after mortgages.
Total student debt stands at $966 billion as of the fourth quarter of 2012, the N.Y. Fed said in press materials, with a 70% increase in both the number of borrowers and the average balance per person. The overall number of borrowers past due on student loan payments has grown from under 10% in 2004 to 17% in 2012. With a fresh new crop of graduating seniors, this number is likely to grow.
Fewer people with student loans are buying homes, according to data in the report. Of borrowers ages 25 to 30 who are taking out new mortgages, the percentage of those with student debt has fallen by half, from nearly 9% in 2005 to just above 4% in 2012.
The higher burden of student loans and higher delinquencies may affect borrowers' access to other types of credit and the performance of other debt. One research report reveals that households with student loan debt are significantly more likely to rent rather than own their home.
The survey found that 85% of the renters making between $50,000 and $75,000 are paying student loans, and we see tighter credit standards for mortgage debt. This is going to equate into the Columbia SC housing market facing a tough road converting these folks into first time home buyers.