Welcome to today’s roundup of the latest in real estate news, where we delve into the dynamic housing market and explore various facets affecting home buyers, builders, and renters alike. From enticing discounts in new-home markets to predictions about future affordability, and from the challenges of rising insurance costs to the impact of housing on economic growth in Kentucky, our coverage spans crucial insights that could influence your decisions and perspectives. Whether you’re looking to buy, rent, or simply stay informed, join us as we unpack these developments and more, providing you with the essential information you need to navigate the complex world of real estate.
Buyers May Be Drawn to Discounts in New-Home Market
With builders touting more housing options and deals, aspiring home buyers may want to consider new construction. According to a report by Harvard University’s Joint Center for Housing Studies, new-home construction has accounted for about a third of the national single-family inventory since 2021, providing more options for buyers in a tight resale housing market.
Builders are offering mortgage rate buydowns to improve affordability without lowering prices. This allows buyers to benefit from an interest rate reduction paid for by the builder, offsetting higher interest rates and lowering monthly mortgage payments. Additionally, builders are building smaller, lower-cost options like townhomes to attract buyers and bring new-home prices closer to existing-home prices.
While builders face challenges such as labor shortages and rising material costs, they are exploring alternative construction methods like modular and manufactured housing to lower costs and provide a wider range of price points. Real estate professionals see the new-home market as a bright spot in the housing industry, especially in markets experiencing a boost in construction.
Housing Market Predictions For 2024: When Will Home Prices Be Affordable Again? – Forbes Advisor
The housing market in 2024 continues to present challenges for prospective home buyers, with high mortgage rates and inflated home prices making affordability a major concern. While there has been some increase in resale inventory, it is not enough to meet the demand and ease the upward pressure on home prices.
Experts believe that for the housing market to improve, there needs to be a considerable increase in the supply of homes for sale, along with a cooling off of mortgage rates. However, it is advised that rate reductions happen gradually to avoid a surge in demand that could wipe away any inventory gains and cause home prices to rebound.
Despite the obstacles, experts remain optimistic that the housing market will see improvement as inflation eases and the Federal Reserve starts cutting interest rates. Factors such as Millennials entering their prime home-buying years and wage growth are expected to sustain housing demand in 2024.
To navigate this tight housing market, experts recommend being in a solid financial position before buying a home and focusing on long-term goals. While short-term investment may carry more risk, purchasing a home for the long term can help build equity and net worth.
Builders slow new apartment construction, but landlords will keep ‘jacking up’ rental prices | Fortune
The U.S. housing market is facing a shortage of 4.5 million homes, exacerbating the affordability crisis for both renters and homeowners. However, builders are not doing much to bridge this gap and are slowing down new apartment construction.
Permits to build multifamily housing units have dropped by 30% this year, making it more difficult for property owners to find tenants. Only 47% of new apartments completed in 2022 were rented within three months, the lowest share since 2020.
Landlords have started offering concessions to attract tenants, but this may not last long. Prospective renters are advised to consider signing a lease sooner rather than later, as property owners may start increasing rents once the market fills up with tenants.
The slowdown in new construction can be attributed to the high cost of building due to inflation, elevated materials costs, and limited financing options. Builders are facing challenges in finding affordable financing and available land for construction.
While the lack of housing starts has led to competition among landlords, the slowdown in permitting is expected to catch up with the inventory, potentially leading to rent increases in the coming years.
It’s important to note that the rental market’s direction varies significantly by location, with cities experiencing rapid growth likely to see rent prices increase, while cities facing declining populations may see stabilization or even declines in rent prices.
What Buyers Expect to Pay vs. Actual Home Prices | NAHB
There is a significant gap between buyers’ expectations and actual home prices, according to recent surveys. While a large percentage of buyers expect to pay less than $250,000 for their next home, the share of new homes being built in that price range is much lower. On the other hand, the share of new homes being built above $250,000 exceeds the share of buyers seeking homes in that price range.
The limited supply of existing homes in the starter market, coupled with record-high prices, contributes to the mismatch between expectations and reality. The interest rate “lock-in effect” also plays a role, as homeowners are reluctant to sell their homes due to their current mortgage rates being below market rates.
The cost of new home construction, including rising residential construction wages, stable but previously increased building material prices, and regulatory costs, further contribute to the disparity. Regulatory costs alone account for a significant portion of the cost of an average new single-family home.
For more analysis on this topic, you can read NAHB Senior Economist Paul Emrath’s blog post here.
Insurance costs impact home-buying, new construction
The rising insurance costs in Louisiana are not only affecting homeowners but also those involved in building houses. Higher insurance rates have suppressed new construction, particularly due to the impact on mortgage rates. However, the new homes being built are designed to be resilient and are receiving lower insurance rates. The increased insurance premiums, following hurricanes, have created challenges for potential homeowners. Builders are also facing higher builders’ risk insurance and reinsurance prices. To mitigate insurance premiums, homeowners can consider getting a wind mitigation survey to identify features that qualify for discounts. While insurance costs and mortgage rates have made homeownership difficult for many, there is a need to increase housing inventory. Converting commercial buildings into condos and apartments is being considered as a solution. Despite some resolved supply chain issues, challenges remain with items like electrical transformers. In the forecast for the year, it is predicted that inflation and mortgage rates will decrease.
Home Builders Association of Kentucky Releases New Study, Shows Impact Of Housing On Kentuckians
A new report from the Kentucky Chamber Center for Policy and Research, in collaboration with the Home Builders Association, highlights the significance of housing for Kentuckians. The report emphasizes the importance of safe housing throughout the year and its impact on economic growth, homelessness, and workforce development in the state.
The study emphasizes that overcoming housing challenges should be a top priority for state and local leaders as they work towards sustainable growth. The report argues that sustainable growth requires increased housing availability and home building across all areas of Kentucky.
The study provides valuable insights into the impact of housing on the lives of Kentuckians and serves as a call to action for addressing housing needs in the state.