Columbia SC home prices may be in for another increase. On the heels of what has been termed an “epic housing crash” of just a few short years ago – when home values dropped nearly 35% – prices are on the rise again. In the past 12-18 months, many hot real estate markets have seen home price increases of as much as 10% or more, and home analysts expect additional new highs may be on the way. Let’s take a look at why prices may rise.
Columbia SC Home Prices May Cost More Soon
According to the National Association of Realtors (NAR), the median price of an existing home sold in May reached a record high of $239,700. The Association has been tracking prices since 1968. The home price increase is good news for homeowners who have their Columbia SC homes for sale now or who may be contemplating selling soon. In addition, it means many homeowners just earned a few thousand dollars in additional net worth.
For others, the rising Columbia SC home prices and the prognosis for further increases is anything but good news.
Lawrence Yu, chief economist of the NAR issued this warning about how the higher home prices may affect one segment of the potential home buying public. “We are seeing flashing yellow lights on affordability. People who are currently renting and want to convert into ownership — that’s a major difficulty," said Yun. "Columbia SC home prices are rising way too fast compared to people's income and wage growth.”
The median price increase in homes for sale means, in part, that there is more activity on the higher end of the real estate market. The median price is defined as the dollar amount where half the homes sold at a lower price and half sold at a higher price. Additional price indexes measure repeat sales of similarly-sized homes show nationwide that prices are still running roughly 10% below the peak levels from ten years ago.
Some housing analysts in their market assessment of Columbia SC home prices contend the tight inventory available continues to restrict sales and put pressure on pricing. Conversely, near-record low mortgage interest rates and job growth help create greater demand. The result, according to the experts, is a “pressure cooker effect” and the market’s release valve – new home construction – isn’t helping to solve the problem. That point is evidenced by new home sales currently performing more than 40% below normal market levels.
According to the Urban Institute, last year over a million new households were created in the U.S., but only 620,000 new housing units were created. That shortage of more than 400,000 units has put an undue strain on both rents and home prices. Analysts say that trend will likely continue in the near future unless there are relatively quick policy changes.
Although the housing market has made great strides in its recovery from the crash of less than a decade ago, affordability is the biggest factor restraining a more complete rebound. Normally, housing would be the driving force behind overall economic growth, but it’s not. That’s primarily due to less than exciting home construction activity. Most of the construction demand has been fueled by rental demand. But, housing starts for multifamily construction are slowing down. The previous activity was mostly found in urban rental centers where rents were higher than normal and the supply has caught up with or exceeded the demand.
While the number of renters still strapped by rising rents continues to grow, the burden of affordable rent payments prevent prospective home buyers from saving for a down payment. Even though the monthly payments on homes for sale may be more affordable than rent, renters who don’t have a down payment are unable to take advantage of that opportunity.
So, what does all this mean for the existing and future housing market? We will likely see Columbia SC home prices remain fairly high and continue to climb in some markets where sales have been brisk in the past few months. Limited supply meets high demand creating higher prices – it’s a basic economic law of supply and demand. Despite interest rates being at near-record low levels, the lending market is still considered tight by historical measurement standards. Some economists argue, in fact, that low interest rates have actually contributed to higher Columbia SC home prices, because home buyers are now able to qualify for larger houses.
At least in the foreseeable future, Columbia SC home prices will likely continue to see slightly higher listing and selling prices. The first-time homebuyer will probably continue to be unable or unwilling to enter the marketplace. And for a housing market that’s been labeled “recovering,” that’s a worrisome commentary on the real estate economy. What’s worse, as NAR chief economist Yun asked rhetorically, “We are facing housing affordability challenges already with low interest rates, but what happens when the rates begin to rise?
See more articles pertaining to homes for sale in the section of articles on Columbia SC Homes for Sale just below Columbia SC Real Estate Categories in the column to your right. And remember, we also post tips daily on Facebook and Twitter.
Columbia SC homes recently built are more expansive and expensive. And when it comes to homes, American homeowners love their space and spaciousness. However, large sized homes come with larger price tags. As home become bigger they’re becoming less affordable for a bigger group of prospective buyers.
Columbia SC Homes: Big Houses, Big Prices
In 2014 the average size of a new home was 2,660 square feet. In 2015 the average size was 2,720. Nearly half the homes under construction in 2015 had four or more bedrooms. In addition, 25% of the new homes built have three-car garages or larger. With the increased size comes a heftier price. U.S. home prices have increased by 25% since the beginning of the housing market recovery in 2011.The average sales price of a new home in 2015 was $351,000 — compared to $251,000 just six years ago, in 2009.
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In our Columbia SC 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. The lingering effects of the Great Recession and housing bust have altered Columbia SC homeownership – a change likely to ripple through the Columbia SC 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 Columbia SC 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 Columbia SC 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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Columbia SC 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 Columbia SC 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 Columbia SC homeowners.
Ten years ago, Columbia SC home prices were unquestionably too hot. As few as four years ago they were too cold. Now, it would seem as if Columbia SC home prices have returned to some form of sanity when compared with incomes, rents and other fundamentals, while rising at lower single digit rates.
Columbia SC 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, Columbia SC 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.
Columbia SC 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 Columbia SC 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 Columbia SC home prices in our section on Columbia SC Real Estate to your right under Columbia SC Real Estate Categories.
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With Columbia SC 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.