CLARK: A Different Market in Many Ways

According to the National Association of Realtors (NAR) the real estate market is doing well. Year-to-date home sales increased slightly over 6% and home prices in May were increased almost 8% when compared to last year. NAR expects sales volume to increase by as much as 15% in 2015 and this excludes new construction.

The affordability of housing remains a concern. Wages are rising annually by 2% while renters are seeing rent increases of 4% on average and home buyers are seeing increases in home prices. Also, mortgage rates are ticking up – 4% in June and more increases are expected into next year.

Today’s real estate market has different characteristics than the prior housing boom. Tight credit continues to contribute to all-cash sales. Home sales are slightly over 5 million and new-home construction is approximately 1 million units. Another development is that total mortgage balances have decreased. Unlike the real estate market in 2005, home owners are timely paying their mortgages and making relatively few want cash-out refinances.

It is hoped that as home prices continue to rise, so will available home inventories. Inventory shortages and price increases remain challenges for buyers.

As rents rise along with home prices, prospective tenants along with buyers search for smaller places. It is hoped that a one-bedroom apartment may have another space that could be used for a bedroom. Landlords in response are limiting the number of occupants; and some condo and co-op boards are specifying how many people can live in a unit.

Landlords are also requiring good credit; and all adults occupying the unit are to be on the lease so all are held responsible for monthly payments. Despite the strength of the rental market, prospective renters are less inclined to: consider a unit which does not have an individual electric meter, and other dedicated utilities (if not included with rent). As utility bills are based on usage, sharing these costs can, understandably, create issues. Landlords should have dedicated utility meters for units. Otherwise one unit may control the temperature for others and other units may subsidize the cost of usage of another tenant.

Condo’s and co-ops for sale that are heated by electricity also present a concern to buyers given the rising costs of this utility. Realtors are also confirming with owners that units for rent are legal apartments and are not at risk of being in foreclosure or are in the process of being sold. Purchasing and renting a home still requires home work to avoid costly surprises.

Utilities are becoming a greater expense in most people’s budget. Electricity is one of the more expensive utilities. Renters and home buyers are looking for gas heat as it is least costly. Conserving energy is not just benefiting the environment, but every one’s bank accounts.

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