What’s changed in the last 10 years: home owners are paying their mortgages on time & few are seeking cash-out refinances. According to Lawrence Yun, NAR chief economist expects home prices to rise continuously as long as mortgage rates remain under 6%. It will rise, of course. The U.S. needs more robust job creation and meaningful increases in income levels to help propel home prices. For now, though, NO BUBBLE or impending CRASH is in sight.
46% of Texas households can only afford a house up to $150,000 if 3% paid for a down payment. This means they could not meet the 35% limit of monthly housing cost to monthly income requirement. As interest rates increase then either purchase less house OR increase down payment. In Texas over the past decades home price increases have been modest with income going up some. Since the 2007 recession there is a wider margin as incomes have NOT increased as fast as home prices. This creates UNCERTAINTY ON FUTURE TEXAS HOME AFFORDABILITY.
When interest rates, taxes, insurance, utilities rise in price, then the overall affordability of a new home is REDUCED. From 1989 to 1999 they tracked tightly together. More recently trying to get lenders to require less down payment but then monthly payment go UP. Lenders only want principal, interest, taxes, insurance & utilities to be NO more than 35% of the monthly income. More down payment then buyers can afford a pricier house. MORE TO COME
Texas’ median home price typically increases about 4% per year, bUt has increased 24% between 2012 – 2014 and may show that much increase in 2015. During the same period, Texas nominal household income rose just 11.2%, less than half the ratE of increase of the median home price. This shows a widening gap between home price and nominal household income, so a decline in the affordability of Texas homes. As the gap widens, households are forced to pay a higher multiple of income for home. MORE TO COME!
Webster’s Dictionary defines a ranch as a “large farm, especially in the Western U.S., for raising cattle, horses or sheep”. This only scratches the surface. Raising livestock and agricultural production are often primary concerns, but in today’s dynamic market, other factors like recreation and scenic amenities are becoming just as important when considering the value of property. Technology now allows individuals to work in remote & isolates areas, so media moguls and institutional investors are entering the market and changing the game. MORE TO COME.