The US real estate market apparently will take some time to recover from the housing collapse of 2008. If you want to buy a house in the US then you are probably going to have a tough time finding it. Stats clearly indicate that the current US real estate market isn’t as promising for buyers as for sellers.
Let’s analyze the current state of matters in the US real estate market and see where it is leading buyers.
Challenges Faced by Buyers
1. Availability, the BIG Issue:
Simply put, there just aren’t enough houses to meet the demand. The arrival of spring season listed much less houses for sale than expected in many cities. According to Zillow, the worst markets are San Jose, San Francisco, Los Angeles, Seattle, Denver, Dallas, Nashville and Boston.
While in most real estate markets there is the huge availability issue, there are still some markets where buyers can still have a breath of relief. Philadelphia, Chicago, Cleveland, Detroit, Miami-Fort Lauderdale, and Florida are a few markets with sufficient listing for the existing house demand.
2. Home Prices are Reaching New Heights:
House prices are the highest since the housing collapse in 2008 and have continued to rise since 2012. In some markets the prices are so high that buyers can’t find words to describe them other than ‘crazy’ and ‘discouraging’. According to CoreLogic, Colorado, New York, Philly and Texas are the states with highest house price growth rates.
This instability in supply and demand has caused another trouble for buyers. A report by CoreLogic tells that the annual price growth rate for low-priced houses is 9% while for average-priced houses it is 5%. So, even affording a low-priced house is rapidly becoming more difficult.
3. Mortgage Rates are Historic Low But:
Mortgage rate for a 30-year fixed-rate loan has gone below 4%. Although prospect buyers are happy about it, but the trouble is no one has a sure say about how long mortgage rates will remain this low. According to experts, the rates are expected to rise in the time to come.
Ever since the news, a bidding war has begun among buyers in a housing market that is already facing a drought of houses available for sale. Consequently, buying a house has become even more difficult.
What Are the Effects
Flux is Shifting Towards Rental Market:
First, there aren’t many options available for buyers. What is available is simply unaffordable. So, many prospect buyers are holding their decision to buy a house and renting for the time being. But since rents are increasing nationwide, saving enough money for their future house purchase is becoming more difficult for buyers.
According a recent report by Zillow, in San Francisco annual rent growth rate is 15%, which means rents become double every five years. Other markets with high rent growth rate include San Jose, Denver, Kansas City and Portland.
Homeownership is Declining:
There has been some obvious progress since the housing collapse. For instance, foreclosure rate is brought down and mortgage applications for new homes have increased, yet according to a report from Realtor.com, the current homeownership rate (63.8%) is lowest since 1994 (64%).
Main reason being, during the collapse investors bought lots of single-family houses and turned them into rental properties. Plus, houses that were lost in foreclosure during the recession are sitting idle until legal processes are done. Additionally, after the recession construction of new homes also slowed down.
Foreign Investors are Keeping Away:
Dollar is strong, a good news for Americans. But as a result, for foreigners it is becoming a little more difficult to buy a property in the US. A Wall Street Journal article recently quoted, “A strengthening dollar is putting the haven of U.S. homeownership out of reach for some foreign investors.”
Consequently, momentum in foreign real estate markets is picking up, as even US investors are investing outside the US now. According to USForex, property purchase in France by US investors has increased 9 times in past one year. Italy, Germany, Canada, & Latin American countries have similar stories to tell.
Given the current state of the US real estate, sellers are eyeing a quick profit with the rising home prices and low availability. On the other hand, buyers have very limited options where they want to own a house. As a result, the only option they have is renting, which too are increasing rapidly in many cities.
However, there are still some markets like Philadelphia, Chicago, Cleveland, and Florida with lots of new constructions going on and ample availability of houses on sale. So particularly for investors, these markets are right targets.
In case you want to invest in Philadelphia, then partnering with National Realty Investment Advisors can be greatly beneficial for you. You can visit our website to learn more about NRIA’s highly beneficial investment plan.
Don’t forget to share your thoughts on the current state of real estate market in the US. Also, if you have an experience to share regarding buying or selling a house, then we would love to hear that.