Looking at trends

Last week we examined how some of the latest news could well impact the housing market, and this week we are going to look at how the trends that are detected might play a part in what’s to come.

Rentals

One-third of Americans live in a housing market where rent for a three-bedroom home takes more than 30% of their monthly median income, according to RealtyTrac. This is the traditional threshold for affordability. The percentage is even higher in some cities. Renters in the Bronx, N.Y., are spending the most for rent in the country. In this area, a household spends 66% of its monthly income to rent a three-bedroom apartment that averages $1,800 a month.

Since the economic downturn, demand for rental housing has increased rents more than 21% since the housing market peaked in 2006. In comparison, real income has decreased approximately 14% over the past six years.

The study by RealtyTrac found that nearly 25% of renters were paying more than 50% of their income in rent, forcing some to make substantial reductions in spending on food, health care and retirement.

In Greenwich, the rental market has been strong. Currently, there are more than 150 rental listings ranging from $1,200 per month to $40,000 per month for a furnished, three-month summer rental and another for $40,000 per month for a long-term rental. The traditional threshold for affordability is a three-bedroom rental, and in Greenwich it can currently cost $2,450 per month to $12,500 or more, depending on the additional costs to be assumed by the tenant, such as maintenance and utilities.

Retirees paying cash for homes

Homes being purchased with cash are on the rise again. This is attributed to retirees instead of investors.

Approximately a third of existing homes sold in the United States were purchased in full with cash during the first quarter of this year. This is an increase from 31% in 2013 as well as from the 29% level we were at in 2012, according to a National Association of Realtors Survey. Retirees are using the equity in their existing homes to purchase different homes to down-size.

Some home buyers would rather avoid the challenges of stricter policies in getting a mortgage. Also, cash buyers may also receive a discount by paying cash. Some retirees are also buying properties with cash and renting them out to realize a return of their investment that is higher than alternative investments.

Housing market analysts note that small investors remain active in the home market as institutional investors reduce their home buying. The number of all-cash sales increased despite declines in investor purchases and the reduction of foreclosed homes (down 15% in 2013). Understandably, cash deals are primarily in the lower price points of real estate markets across the country.

First-time buyers are competing with these cash buyers and finding it difficult to get a sought-after property.

Last week, RealtyTrac released a report that 42.7% of existing-home sales in the first quarter of this year were cash transactions as compared to 19.1% in the first quarter of 2013. The survey is based on a sampling of transaction deeds and loan data. There is a trend of buyers trying to work around the need to get a mortgage since the economic downturn.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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