Let’s Talk Real Estate – April 2015
It looks like 2015 will be a great year for sellers to sell their homes and buyers to buy a home! It’s unusual that it’s a great market for both… but here is why.
For home sellers: the number of homes that have resold has increased by 18% and the median price of those homes sold has gone up 13%. This is the number of homes sold in Jackson County for the last 90 days, December 1st-February 28th, compared to the same time last year. During the same time, the median home price in Jackson County has increased by 13% to $208,430. In Jacksonville, the median home price increased by 28% to $363,500. Just a reminder that the median price can increase or decrease due to both home prices going up and with the mix of the properties sold. In other words, if four homes sell for $1,000,000, in one month, in Jacksonville, that will increase the median price of home sales but not necessarily the price of each home sold. However you look at it, home sales are off to a great start in 2015!
For home buyers: As homes become more expensive, you would think it’s more expensive for buyers to own their own homes, and it is, but it still costs less to own than to rent in the majority of cases. The cost of buying a home is still only about half the cost of renting.
Zillow, one of the largest real estate websites, estimates that U.S. homeowners spend, on average, 15.3% of their income on monthly mortgage payments. For younger homebuyers, who typically make smaller down payments, that figure is only slightly higher at 17.4%. Renters, meanwhile, are spending 29.9% of their monthly income on their living space. In Jackson County, we are seeing higher growth in home prices than rental prices but they are both increasing.
Homes for younger buyers remain affordable thanks to continued low mortgage interest rates and many new loans that allow you to borrow up to 97% of the purchase price. However, coming up with the down payment and closing costs is still a struggle for many. If a renter purchases a $150,000 home, they will need $4500 for a down payment and about the same amount for closing costs.
While continually-rising rents might be expected to drive more Americans into purchasing homes, they’re also making it difficult for renters to save-up for a down payment. In a recent survey, Freddie Mac found that 61% of current renters don’t expect to buy a home in the next three years, with half of respondents saying they can’t afford to save for the initial costs.
For those buyers that can scrape together a down payment, homeownership remains very accessible. It’s nice to have fixed housing payments and the opportunity to build wealth through home equity will draw more buyers out of rentals and into homeownership.
A few months do not make a year, but if the numbers keep trending in the same direction and the interest rates remain low, 2015 will be a great year for both buyers and sellers!