It seems that smaller Columbia SC homes may finally be making a comeback. Data released recently by the Commerce Department shows the median size of a single-family home built in the third quarter was 2,414 square feet, down 2.3% from the second quarter measure of 2,472.
New Columbia SC Homes Smaller
The third-quarter figure is the lowest since 2012's fourth quarter, and it is the second consecutive quarterly decline following a 0.2% drop in this year's second quarter.
Median new-home sizes had been on a general upward swing since 2012 as builders focused on building increasingly larger, more expensive Columbia SC homes to cater to the better-heeled buyers with the income and credit to buy homes. Entry-level buyers, meanwhile, remained largely sidelined by luke-warm wage growth, mounting student debt and stringent mortgage-qualification standards.
Nationwide, construction starts for single-family homes increased by 4.2% from a year earlier to a seasonally adjusted annual rate of 696,000. The most likely source for that greater volume of starts is entry-level buyers.
The third-quarter decline in median new-home size doesn't necessarily reflect changes in preferences, it reflects who's buying new, single-family homes.
The median new-home size now stands 3% below its recent high of 2,491 square feet in the third quarter of 2013. But it still is 8% higher than its recent low of 2,236 square feet in the third quarter of 2011.
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Rising prices of Columbia SC homes have helped restore home equity to many, but more than a third of potential homebuyers — 38 percent — earning the national median household income of $63,900 cannot afford to buy Columbia SC homes that sold over the last quarter.
Rising Prices of Columbia SC Homes Partly to Blame
The rising prices of Columbia SC homes are partly to blame, along with stagnant incomes, mounting student loan debt and tougher credit standards requiring unattainable down payments.
The national median home price increased from $214,000 in the second quarter to $221,000 in the third quarter. Meanwhile, average mortgage interest rates slid from 4.44 percent to 4.35 percent in the same period, according to home builders.
“Even with nationwide home prices reaching their highest level since the end of 2007, affordability still remains fairly high by historical standards,” according to NAHB Chief Economist David Crowe. “Rising employment and incomes, interest rates that remain near historically low levels, and pent-up demand should contribute to positive momentum heading into next year.”
Overall, 61.8 percent of new and existing Columbia SC homes sold between the beginning of July and the end of September were affordable to families earning the U.S. median income. That's down from the 62.6 percent of homes sold that were affordable to median-income earners in the second quarter.
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Columbia SC housing is expected to strengthen along with the economy in 2015, according to Freddie Mac's U.S. Economic and Housing Market Outlook for November.
Frank Nothaft, Freddie Mac's chief economist, said recently that “the good news for 2015 is that the U.S. economy appears well-poised to sustain about a 3 percent growth rate in 2015 — only the second year in the past decade with growth at that pace or better.”
Predictions for Columbia SC Housing for 2015
Mortgage rates: Interest rates will likely be on the rise next year. In recent weeks, the 30-year fixed-rate mortgage has dipped below 4 percent again. But by next year, Freddie projects mortgage rates to average 4.6 percent and inch up to 5 percent by the end of 2015.
Home prices: By the time 2014 wraps up in a few weeks, home appreciation will likely have slowed to 4.5 percent this year from 9.3 percent last year. Appreciation is expected to drop further to an average 3 percent in 2015. Continued house-price appreciation and rising mortgage rates will dampen affordability for home buyers, according to Freddie economists. Historically speaking, that's moving from 'very high' levels of affordability to 'high' levels of affordability.
Housing starts: Homebuilding is expected to ramp up in the new year, projected to rise by 20 percent from this year. That will likely help total home sales to climb by about 5 percent, reaching the best sales pace in eight years.
Single-family originations: Mortgage originations of single-family homes will likely slip by an additional 8 percent, which can be attributed to a steep drop in refinancing volume. Refinancings are expected to make up only 23 percent of originations in 2015; they had been making up more than half in recent years.
Multi-family mortgage originations: Mortgage originations for the multi-family sector have surged about 60 percent between 2011 and 2014. Increases are expected to continue in 2015, projected to rise about 14 percent.
Consumers are more upbeat and businesses are more confident, all of which should lead to faster economic growth in 2015. And with that, the economy is expected to produce more and better-paying jobs, providing the financial wherewithal to support household formations and Columbia SC housing activity.
Stay tuned here, we'll update you as the calendar turns to 2015 on Columbia SC housing and the trends affecting the numbers for the new year.
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First time Columbia SC homebuyers seem to be disappearing right before our eyes. The same is true nationwide, as the percentage of homes that were sold to first-time homebuyers dropped to 33% this year, the lowest percentage in almost three decades.
This drop in first time Columbia SC homebuyers is despite the fact that mortgage rates are hovering near record lows and home prices are still off about 15% compared to the housing boom peak, according to the S&P/Case-Shiller 20-city home price index.
Young adults, who make up the lion's share of first time Columbia SC homebuyers, want to own. According to a Zillow survey released in October, respondents ages 23 to 34 were, in fact, very bullish on home buying, with 83% of young renters expecting to buy a home someday.
First Time Columbia SC Homebuyers Want to Purchase a Home
The problem is not desire. Blame it on heavy student debt loads and incomes that aren't keeping up with rising home prices. Rising rents and repaying student loan debt makes saving for a down payment more difficult, especially for young adults who've experienced limited job prospects and flat wage growth since entering the workforce.
Strict lending standards have also made it more challenging for Millennials to qualify for mortgages, especially since many are carrying thousands of dollars in student loan debt. This has also added costs to mortgage borrowing for many young buyers. With limited credit histories, they usually have lower credit scores and lack the funds to make large down payments.
Columbia SC homebuyers using low down payment FHA loans, for example, pay about $50 more a month for mortgage insurance on loans of $100,000. And borrowers with 640 credit scores getting Fannie Mae- or Freddie Mac-backed loans pay fees that are three percentage points higher than borrowers with 740 credit scores.
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With rents climbing faster than most American's paychecks, the latest trend in Columbia SC housing is finding a roommate to split the bills, and it isn't just for kids straight out of college anymore.
The percentage of adults living with someone other than a spouse or partner hit 32% nationwide in 2012, up from 26% in 2000, according to Zillow's analysis of the latest Census Bureau data.
Judging by the ongoing decline in homeownership rates and tightened supply of rental vacancies, the trend appears to be gaining momentum.
People start pairing up when rents are climbing and incomes aren't keeping up — and in recent years, rents have really been on a tear. They rose 6.5% over the 12 months ended in September, according to Trulia. Meanwhile, wages have remained more or less flat.
Benefits of Sharing Costs With Columbia SC Housing
Working adults in doubled up households tend to earn less, according to Zillow. So sharing their Columbia SC housing enables them to afford and compete for more attractive housing.
Many roommates enjoy not only the savings of splitting costs 50/50, but they also enjoy the companionship that comes with sharing their Columbia SC housing.
Renters who are willing to live together and share costs are also able to afford nicer places as opposed to footing the cost of everything themselves. The same holds true for some who decide to invest in Columbia SC housing by purchasing a home rather than renting. But buying a home together requires careful consideration, as well as legal advice. Co-owning Columbia SC housing can get complicated, much more so than just renting.
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