The U.S. is facing a cruel reality in the real estate market: home and rent prices are going up. Despite the extra expense, homebuyers are still finding it profitable to buy a house before the mortgage rates go up. According to research done by ATTOM Data solutions, in nine out of 39 metropolitan areas, it was more affordable to buy a home than renting one. These areas include Dallas, Miami, San Antonio, Detroit, Philadelphia, Tampa-St. Petersburg, Cleveland, Pittsburgh, and St. Louis.
This is why Amanda Wright and her husband ended up buying a home in Seattle, even though the home prices rose more than 14 percent the previous year. Wright, a real estate broker, stated that it’s a challenging time for buyers. “The financial planning rule of thumb is to spend no more than 30 percent of a family’s monthly income on housing, but it is nearly impossible to follow that guideline now in Seattle”, Wright explained. Research conducted by ATTOM based on U.S. Bureau of Labor Statistics and Department of Housing and Urban Development data showed Seattle residents are spending 40.2 percent of pay, on average, for a three-bedroom rental. If a buyer were looking to pay the median pricing for homes, $613,500, it would require 62.5 percent of income pay.
Home-buyers in Brooklyn spend close to 67.4 percent on rent. With the median pricing being $640,000, the pay would require 110.9 percent of monthly income. For San Francisco, rent takes 79 percent of pay, and to afford the median price of $1.17 million; it would take 136 percent. Daren Blomquist, senior vice president of ATTOM Data Solutions, commented that renting would be “the lesser of two housing evils.”
Any good or bad news will come from mortgage interest rates. Freddie Mac mortgage finance agency reported the average 30-year mortgage rate was 4.4 percent, rising from 3.9 in late 2017. Right now, the prices are expected to be near 5 percent this year, resulting in costlier home payments. Blomquist states that while the increase will deter some people from purchasing in the market, the drop-in housing demand could elicit a decline in house pricing. Sales already had fallen by 3.2 percent in January.
A jump from 4 to 5 percent in mortgage rates could mean a volume drop of almost 300,000 homes sales, according to the National Association of Realtors economist, Lawrence Yun. Though about 6.1 million homes were sold last year, Yun states a strong economy and job growth could slow the decline.