Homes slipping beyond grasp of buyers in US

Bloomberg

This is how housing markets turn. Slowly. Six years of home-price gains outpacing wage growth; bidding wars replaced by sales at the asking price; days or weeks on the market turning into months; rising mortgage rates. First-time shoppers start to get priced out, making it harder for move-up buyers to sell, and the slowdown ripples gradually up the real estate food chain.
“Every single market in the country has an entry-level problem,” said Candace Adams, who oversees Berkshire Hathaway HomeServices’ operations and agents across Connecticut, Massachusetts, New York and Rhode Island. While US home prices have gained almost 60 percent since March 31, 2012, according to the S&P Corelogic Case-Shiller 20-City Composite Index, household income is up a little less than 30 percent in the same period, Bureau of Economic Analysis data shows.
The average rate for a 30-year fixed mortgage rose from about 3.85 percent at the start of 2018 to about 4.74 percent now, Bankrate.com reports. Next year, it’s expected to rise further.
A buyer with a $2,500 monthly housing budget has lost almost $30,000 in purchasing power this year, according to Redfin Inc., a national brokerage.
In Orange County, California, more than 30 percent of homes for sale in the metro area would become unaffordable to buyers with a $3,500 monthly budget, Redfin estimates. In San Jose, that number would be almost 40 percent.
A half-point increase on a mortgage means cutting the price by about $25,000 and the size of the house by as much as 200 square feet.
In cities where prices have gained the most, an increase of as little as half a percentage point in the borrowing rate can be the difference between buying and continuing to rent.
Miami prices are up almost 70 percent since March 2012, according to Corelogic Case-Shiller and many buyers are getting worried about interest rates, said Liz Hogan, a realtor at Compass. She has a client looking at a house in Pinecrest, Florida listed at $899,000. The seller has been out of town, delaying the deal, and the client is getting antsy, she said.