The ability to withstand housing costs will be a great topic in both personal financing and politics next year. It is not your imagination that housing – whether you own or rent – takes a larger bite than your income. The question is what you can or you should do or you should do about it.
The Wall Street Journal recently studied the prices of high homes in Washington, DC, where the new administration of President Donald Trump took office. Members of the wealthy cabinet and executives of technology pay prices for more than $ 10 million to homes, where they can entertain and reach the energy seat.
Meanwhile, housing, which is estimated at more than $ 100 billion, was destroyed at California forest fires. Some of the missing houses have been evaluated by more than $ 10 million, others have for many years by middle -class Americans who will now have to pay current prices for rebuilding – assuming that they have insurance.
House has always been the cornerstone of the American dream. In the rush to build new homes after the Second World War, suburban developments, highways and school systems worked on economic revival after the war.
In the fifties of the last century, the average price of the new house was $ 7,354, which was modified for inflation would be 93,602 dollars in dollars today. But today, the average price of the current United States house is $ 407,500, according to the National Association of Real Estate Justice.
Home prices have not always rose. In the latest memory, amid the mortgage crisis in the period 2007-2008, the average price of the current house in the United States decreased by 12.4 % in the fourth quarter of 2008 compared to the same period in 2007, where the mortgage and virtual numbers increased, some of which were the people. Simply their homes and mortgages that cannot be tolerated.
As for the record, people begged people from not moving away from their homes, even in low values. If you have continued to pay this mortgage, your home will be worth weak today – and it may have been re -funded less than 4 % a few years ago.
The ability to afford costs is the issue
Not only the price of this house is the case. We all know that prices have risen-not only for the wealthy. Over the past seven years, home prices have increased by more than 65 %. The ability to withstand costs revolve around the ability to pay the necessary monthly payments, including the benefit of mortgage, property taxes and insurance – as a percentage of average family income.
Despite the recent discounts in the Federal Reserve in short-term interest rates by a full percentage point since last September, the mortgage prices have moved in the opposite direction-more than one percentage point since the Federal Reserve began to reduce. Fears of future inflation, borrowing for demand due to deficit, and simple economic growth, have kept long -term rates in the long run.
The crisis of the ability to withstand this cost is accelerated. According to real estate brokers, in 2021, when mortgage rates were about 3 % and the average house price was about 357,000 dollars, it took only 16.9 % of the medium family income to pay the price of this house. In 2024, it takes 27 % of this average family income to provide average family home.
Or, in a more specific phrase, for the average house prices today (about 410,000 dollars) with a 10 % batch, the firm mortgage for 30 years for $ 370,000 will cost you $ 2,610 per month (including PMI ).
A slight change in mortgage rates makes a big difference. With a price of 6 % available on the same mortgage earlier last year, the monthly payment was $ 2,304, including the Procurement Manager Index – $ 300 per month.
These numbers do not include property and insurance taxes! Does anyone think that none of these will decrease next year, as insurance companies compensate for the losses of their hurricane coverage and wild fires?
No wonder that current US homes sales decreased in 2024 to the lowest level since 1995!
What are you doing now?
The ability to withstand costs is a problem facing buyers, sellers and tenants. The market in Logjam-with those who have low-level real estate loans for a few years have mostly refused to sell them. Customs tariffs on the building materials imported from Canada will only lead to pricing problems. Returning the demand for both coasts will keep raw materials and employment costs high.
The markets will solve this problem. At some point, builders will have to reduce prices to liquidate stocks. Or the sellers will retract and recite their homes, creating more width. Or the builders will continue to build at higher prices until the ability to withstand costs and transactions will be made at more affordable prices.
The only optimistic result is that the new new incentives are created for small homes and societal solutions to solve the housing problem. We did it in the fifties, and we can do this again. This is the brutal truth.
(Terry Savage is a registered investment advisor and a four -selling books, including “The Savage Truth on Money.”
