The Columbia SC real estate market, like most housing markets throughout the U.S., presents a challenge for that segment of the population commonly referred to as “Millennials.” Millennials are generally identified as men and women between the ages of 25-34. Let’s look at the ongoing dilemma many Millennials face in today’s complex real estate environment.
Columbia SC Real Estate: Where Do Millennials Fit?
It wasn’t long ago that home ownership was a goal every red-blooded, hard-working American citizen aspired to achieve. Parents scrimped and saved to provide their children with at least a portion of the down payment needed to buy their first home. Home ownership was viewed as an expectation by some, and a mark of success by others. Being able – or willing – to buy a home was somewhat of a rite of passage, after all, who wants to “throw money away” on rent each month?
Today, more than a few things have changed – no doubt as a result of what a large segment of Millennials have personally experienced – shaping their thoughts, opinions and goals. During the housing crisis of less than a decade ago, millions of Millennials witnessed firsthand the effects foreclosure can have on a family. Even if they weren’t directly affected by rampant foreclosures, they surely know friends or relatives who were. It’s perfectly understandable that for many, the scars associated with the financial battles they and their families faced were both real and memorable.
Couple the housing crash with a recessionary economy and a job market that consistently failed to meet their growing expectations and it’s no wonder many Millennials who probably could be buying homes have opted not to for now.
Columbia SC Real Estate: Statistics
Generation Progress, a national progressive advocacy and action network for young people, recently cited data from the Bureau of Labor Statistics. They expressed an optimistic outlook of the current Millennial labor participation market. Generation Progress said for older Millennials – between the ages of 25-34 – the participation in the U.S. labor force is much higher than the national average. While many Millennials are working again and presumably earning more, the possibility of buying a home is a reality within reach. The question that remains, however, is will they buy?
For many of these potential first-time purchasers, the home buying process is rather daunting. They are finding that a home they can afford now may not fill the bill for their “forever home.” Even though the cozy little two-bedroom starter home is affordable and larger than their one-bedroom apartment, Millennials are pausing to ask themselves, “What happens when we want more room, start a family, or want to move to a nicer neighborhood?” When you’re young, the chances of outgrowing your first home are pretty good. Thus, the Millennial dilemma continues. Should they buy a home they can afford now knowing they will want to move sooner than later, or keep saving for a down payment on a larger home?
Consider this statistic, courtesy of the National Association of Realtors: “… for the last three years, Generation Y/Millennials (buyers 18 to 35) is the largest share of home buyers at 35%.” So, the good news is a number of Millennials have entered the Columbia SC real estate market and have purchased homes. Let’s take a quick look at the positives and negatives that Millennials still wrestle with.
Columbia SC Real Estate: Positives
Nationwide, home prices are expected to continue to rise through the rest of the year. In addition, mortgage interest rates are still very low – despite rumblings from the Federal Reserve that they won’t stay low. Simply put, it’s a good time to buy a home. The most important thing to consider is compared to next year, today’s Columbia SC real estate market may look like a bargain.
Columbia SC Real Estate: Negatives
While many Millennials may have saved enough money for a sufficient down payment, some may not realize that’s only the beginning of their cash needs. In order to close a home sale they’ll need closing costs, property taxes, homeowners insurance, maintenance, utilities and more. In addition, if they plan to do any remodeling, even painting or re-carpeting, they’ll need additional money.
Experts say maintenance and repairs usually run home owners 1% – 2% of their mortgage costs annually. So, conservatively, if your mortgage is $150,000 that 1% would cost you roughly $1,500 per year, or $125 per month. Another point to consider: If you move to the suburbs and have formerly been a one-car family, you may now need two cars. Statistics show most Americans spend nearly half of their household income on housing and transportation.
Millennials, like most first-time home buyers will eventually learn their best option may be to buy something now they can get into relatively inexpensively while interest rates are low and prices haven't gone any higher. Then, as the newly-acquired property appreciates they can sell and move up to a larger home – hopefully enjoying the profits of their investment. With soaring rents nationwide, that may be more appealing than continuing to pay rent.
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The Columbia SC real estate market has begun the year with existing home sales at the highest annual rate in six months. In a recently-released report by the National Association of Realtors (NAR) total existing home sales (by transactions) increased by .4% adjusted seasonally for an annual rate of 5.47 million in January. December's transactions were 5.45 million. Total existing-home sales are defined as the sales of single-family residences, condominiums, townhomes and co-ops.
Columbia SC Real Estate Sales: Good So Far
The recent report reinforced the latest sales numbers that show sales 11% higher than this time a year ago. The totals represents the largest year-over-year increase since July 2013 when year-over-year sales reached 16.3%.
The slight increase in transactions is partly due to the spike in sales attributed to loan closing delays in November 2015. The delays were the result of implementation of the new Consumer Financial Protection Bureau's TILA-RESPA Integrated Disclosures regulations in October. The new disclosures are designed for lenders to be more transparent in their dealings with borrowers. In addition, the regulations were intended to simplify and streamline some of the consumer disclosure documents to make it easier for borrowers to understand various lending programs. Among other documents, the new guidelines include cost estimates that must approved by the borrower in writing before the application process can continue. This disclosure must be given to the borrower within three business days of the loan closing. If the borrower wants to make any changes during the three-day window, the three days start over. As expected, coupled with the additional paperwork, software implementation and training challenges, the new disclosure rules caused closing delays in the Columbia SC real estate market.
Despite the strong start to 2016 in the Columbia SC real estate market, economists warn the biggest obstacle for continued growth is a lack of inventory. Simply stated, supply and demand need to mirror each other in a good real estate market. When demand exceeds supply – in this case where there are more buyers that homes on the market – a seller's market is created, often driving sales prices even higher.
Lawrence Yun, chief economist for the NAR had this to say about the increase in existing-home sales. "The housing market has shown promising resilience in recent months, but home prices are still rising too fast because of ongoing supply constraints," Yun said. "Despite the global economic slowdown, the housing sector continues to recover and will likely help the U.S. economy avoid a recession."
With spring and the official start of the "home buying season" just around the corner, housing supply isn't meeting market demand. Inventory of available homes on the market reached 1.82 million in January, increasing 3.4%. The inventory is 2.2% lower than it was in January 2015. Unsold inventory or MOI (months of inventory) is also tracked as part of the NAR report. Currently the MOI is at a 4-month supply and represents a slight uptick from 3.9 months at the end of 2015. What that means is if buyer demand remained the same and no new single-family housing units were added to the market, they all would be sold in four months.
"The spring buying season is (nearing) and current supply levels aren't even close to what's needed to accommodate the subsequent growth in housing demand," says Yun. "Home prices ascending near or above double-digit appreciation aren't healthy – especially considering the fact that household income and wages are barely rising."
For all types of housing analyzed in January, the median existing-home sales price was $213,000. That's an increase of 8.2% compared to January 2015. In addition, the price increase in January was the biggest since April 2015. The increase marked the 47th consecutive month with year-over-year price gains. Real estate analysts say this trend is likely to continue, given the tight supply and steady demand – a combination that usually bodes well for sales price increases.
In other Columbia SC real estate news, the percentage of first-time home buyers remained stagnant at 32% in January. That percentage was unchanged from December, but is up 4% from 28% a year ago. For the year ending 2015, first-time buyers comprised 30% of all buyers, a slight increase from 29% in 2014 and 2013.
Purchases paid in cash made up 26% of all transactions in January, an increase of 2% over the previous month. All-cash sales were 27% of all transactions this time last year. Individual real estate investors – who account for a large number of all-cash sales – bought 17% of the homes in January. The 17% investment share matched the highest level since January 2015. Economists and real estate analysts attribute some of this activity to investors disillusioned with the stock market and seeking real estate as a means of growing capital as prices continue to rise steadily.
So, what does all this mean for the coming months? Most economists say more of the same. With interest rates near all-time lows and good mortgage availability, home buyers who find a home to their liking will probably continue to buy. And prices will probably remain at or near their current levels. The big question looming is two-fold. Will existing inventory satisfy demand long enough for new housing starts to kick in? And what about economists who say 2016 will suffer a mild recession? Those answers remain to be seen. In the meantime, the Columbia SC real estate market is enjoying the good start. Only time will tell if it will continue.
See more articles pertaining to Columbia SC real estate news in the Columbia SC Real Estate News section of our site below Columbia SC Real Estate Categories in the column to your right. As always, you can find information here on a variety of topics ranging from home buying and home selling tips to home improvements, home inspections, mortgage financing, homeowner's insurance and of course, all the latest Columbia SC real estate news that affects all of these categories.
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If you’re renting in the Columbia SC housing market, now hear this: it isn’t easy to buy a house. It may be easier to stay put. That’s because home price gains are picking up, while rents are leveling off — despite the fact they’ve skyrocketed in recent years. Some economists predict that by the end of this year, rents could actually rise at a slower pace than income levels in many real estate markets throughout the U.S.
Zillow Weighs in on Columbia SC Housing
According to Zillow, the annual rent appreciation rate is forecasted to rise by 1.1% by December 2016. This would represent a decrease of 4.5% in the same appreciation rate for the year ending December 2015.
With home sales prices rising at what has been termed by some economists as “unhealthy and unsustainable,” rents aren’t expected to approach that rate of growth. The rising home prices are the result of fewer listings — a shrinking supply –– and increasing demand. In December 2015, the supply of homes on the market was the lowest in ten years. In addition, annual home sales price gains — meaning the average year-over-year increase in home value –– rose to 5.3%.
Columbia SC housing experts say the hot markets will continue to enjoy brisk activity during 2016. However, rents aren’t expected to rise as fast as they have in the recent past.
Despite the slowdown in rental appreciation, renters will continue to see gradual rent increases. They will just be less dramatic than the increases in the last several years. Strong growth in multifamily apartment dwellings in recent years has helped boost the supply of rental units in major metropolitan urban markets. The trade-off, however, is that developers have been slow to do the same thing in the smaller suburban markets. Renters in those markets seem to be struggling the most with short supply and higher rents. Rental property developers have shied away from settling for lower rents. They prefer to charge top dollar in order to recoup the high cost of construction — especially in the Columbia SC housing market where available land is expensive.
Get more updates on the Columbia SC housing market and news that affects the market by checking back here from time to time, and by checking out the other articles in our Columbia SC Real Estate News section of articles under Columbia SC Real Estate Categories to your right. We also post articles on Facebook and Twitter, so find us there, too.
The Columbia SC housing market can expect a continuation of many of the factors it experienced in 2015. Zillow recently released their 2016 predictions for the housing and real estate markets. Let's take a look at what we can expect.
Columbia SC Housing – Challenges Ahead
According to Zillow, many of the recent market trends will linger longer. Some will turn into challenges facing prospective home buyers.
Affordability will worsen.
While many Americans have known this for awhile now, home ownership simply might not be a reachable goal for some.
First time home buyers will be older.
In 1975, the median age of a first time home buyer was 29. Today, it's 33. This trend is expected to continue as millennials delay important life decisions such as getting married and starting families. In addition, many young people will continue to have a hard time moving from being renters to prospective home owners. The available inventory of starter homes remains low and many millennials have been unable or unwilling to save money for a down payment.
Home price growth will still outpace income.
While home values will grow at a slower rate than they did in 2015, they will still rise. Experts predict a return to increases of around 3.5%, which is the historical average. Home affordability is expected to get worse because income growth has remained stagnant — especially at the bottom end of the job spectrum. It is expected that the bottom third of working Americans will be priced out of home ownership.
Rents will continue to rise.
The rental market is a classic case of supply and demand. There is a high demand for affordable rental units and currently a limited supply. Zillow expects that trend to continue well into 2016.
Suburban areas will grow in popularity.
The affordability crisis will dramatically affect the urban centers. This means people will seek housing in the surrounding suburbs. There they will expect many of the amenities the cities offer – and close access to the urban centers – but with more affordable housing costs.
Get more updates on the Columbia SC housing market and news that affects the market by checking back here from time to time, and by checking out the other articles in our Columbia SC real estate news section of articles under Columbia SC Real Estate Categories to your right.
New single-family Columbia SC home sales were up in November. The increase was lower than anticipated, signaling a slight momentum change in the housing market. Recent Commerce Department statistics show new home sales increased 4.3% during November. This equates to a seasonally adjusted annual rate of 490,000 new homes sold. The number of homes sold in October was revised downward to 470,000 units (from previously reported estimates of slightly over 495,000 homes.)
Columbia SC Home Sales: An Analysis
New home sales comprise roughly 9.3% of the total housing market. The original forecast had been for 505,000 units in November. Despite falling short of projections, sales were up 9.1% compared to November 2014.
The increase is a positive sign to many economists who worried about a downturn in new home sales – especially in the wake of a recently reported drop in the resale of single family homes. According to the National Association of Realtors, previously owned home sales decreased 10.5% during November. The drop was blamed in large measure to the new disclosure regulations that caused delays in loan closings.
When a contract is signed to purchase a new home, that sale is immediately counted in the reported data. Those sales, therefore, were not affected by the new lending disclosure rules. Mortgage insiders say the new rules have added more time to the loan closing process.
December's existing Columbia SC home sales will be reported soon, and experts say a rebound is expected. The higher numbers are anticipated because of a tightening employment market which is slowly but surely increasing wages.
New home inventory increased to 232,000 in November, a rise of nearly 2.2% – the biggest jump in nearly six years. Still, the supply of new homes is down 50% compared to the housing boom levels. And, despite homebuilders across the country gearing up for new construction fueled by the promise of higher sales prices, inventory is still a concerning factor.
Economists say using November's recent sales trend, the current supply of houses would take 5.7 months to sell. In October, the supply was projected to take 5.8 months to sell. Contributing to the slight slowdown is the rise in the median sales price of a new home of .8% compared to this time last year. The median home price is $305,000.
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