A weekend topic starting with KERA. “If you don’t make more than $100,000 per year, you can’t afford to buy a median-priced home in three of Texas’ largest metro areas: Dallas-Fort Worth, greater Houston, and the Austin area. That’s one of several findings from a new Harvard University study of the nation’s housing situation that shows huge swaths of the population — renters and homeowners alike —pay more for housing than they can afford. Would-be homeowners face a market in Texas where home values have risen far faster than incomes. In Dallas-Fort Worth, for example, the median home price was three times the median income in 2013. A decade later, the median home price was nearly five times the median income in the region.”
WFAA in Texas. “The extra monthly costs associated with buying a home instead of renting won’t fall back to pre-pandemic levels until the end of 2028 — another measure of how drastically the residential real estate market has shifted in recent years, according to a March analysis by real estate giant CBRE Group Inc., which calculated that it cost 115% more to buy than rent in Dallas at the end of 2023. This trend is seen across the country. CBRE reported that the cost to own has risen 75% nationally since 2019 — and was 38% higher than the cost to rent at the end of 2023. But Dallas still had a smaller spread between the cost of buying versus renting than Austin, where the premium was 164% at the end of 2023. In Houston, the premium was 106%. Los Angeles had the steepest premium at 173%.”
“Recalcitrant interest rates and modest projected rent growth could make it a protracted process. ‘That has created a lot of people with essentially golden handcuffs because they don’t want to sell their homes because if they have to sell their homes, then they have to originate a new loan … with an extremely high interest rate,’ said Travis Deese, CBRE associate director of multifamily research.”
From Go Banking Rates. “The concept of a half-million-dollar home has changed quite a bit over the last 30 or 40 years. ‘In the 1980s, $500,000 could buy you a mansion in many parts of the country,’ said 17-year real estate industry veteran, Teddi Schill of Portland Area Home Group. ‘Today, that same amount of money will barely buy you a starter home in many major metropolitan areas.’ Adjusted for inflation, $500,000 in 1985 dollars has the purchasing power of $1.43 million today. If housing inflation had kept pace with general inflation and today’s median home sold for $241,140, the ratio would have tracked nearly to the dollar — $1.43 million would be almost enough for six houses. But according to the St. Louis Fed, the median home price in the United States is $431,000. That means the 2023 equivalent of $500,000 in 1985 money — $1.43 million — can buy only a little more than three houses today. In short, a dollar bought about twice as much real estate in 1985 than it does today.”
KCTV in Missouri. “The scorching heat of the summer isn’t coming hand in hand with a scorching hot home market in many parts of the country, but one local realtor says it’s a great time to get into the market. ‘We get into a more even market in June, July, and August. We actually get a little nicer balance in the summer in Kansas City, especially here over the last couple of years, where there is a little more inventory,’ said David Conderman, Keller Williams Kansas City Metro Owner. ‘It’s going to allow more first-time homebuyers to be able to buy. As a matter of fact, one of the things that the lending industry has done recently is they have created more opportunities for zero down payments or 1% down payments. That’s really going to help those first-time homebuyers.’”
The Columbus Dispatch. “Central Ohio home shoppers are getting a summer surprise: A lot more homes to choose from. As of Thursday, 6,356 homes were actively on the market in the Columbus area, compared with 3,678 a year ago — a 73% jump and the highest level in at least seven years, according to the Columbus Realtors trade association. ‘We’re moving from a sellers’ market slowly to a more neutral market,’ said Howard Hanna agent Terry Penrod. ‘It creates a bit of comfort. We don’t have to write offers on the back of our cars all the time. Multiple offers just aren’t as common.’ The rise in inventory will help dampen price hikes, but buyers shouldn’t look for prices to actually decline in the Columbus area, say experts. ‘None of the trends would tell us that housing prices will be dropping soon,’ said Columbus Realtors President Scott Hrabcak. ‘Prices are not going to go down. Prices are not going to go down.’”
From Fortune. “Thinking about buying a home? You might be in for a rude awakening: a 20% down payment is no longer enough for most people to afford monthly payments—not when home values are 45% higher than before the pandemic, and mortgage payments are roughly 115% higher, according to Zillow. ‘In more expensive markets, where home values have long outpaced incomes, middle-income households need an even bigger down payment share on top of the bigger price tag,’ wrote Zillow’s chief economist, Skylar Olsen, pointing to some sunny California cities, among others.”
“In Los Angeles, for one, a median-income household needs to put down 81.1%, or $780,203, to afford the typical home and its monthly payments; she called that percentage, the highest in the nation, ‘nearly impossible.’ In San Jose, they’d need to put down 80.9%, or more than $1.3 million, ‘which is more than the typical home is worth in every other major market.’ In New York City, median-income households would need to come up with a more than 60% down payment, in Miami, they’d need to come up with a 64.5% down payment—and the list goes on.”
From Semafor. “A startup that spun out of Airbnb to manufacture tiny homes at a factory in Mexico is launching a mortgage product it hopes will relieve California’s housing crisis. Samara, which raised $41 million in 2023, is now getting into the financing business. It will start offering a mortgage that lets homeowners take equity out of their primary house to install backyard units, technically called accessory dwelling units, or ADUs. The company is seizing on two financial trends: Rising prices that have left homeowners sitting on a gold mine of equity in their houses, and Wall Street’s insatiable appetite for newfangled loans.”
“Samara declined to name its financing partners. Its CFO, Chris Wasley, said it will work with banks, investment funds, and securitization channels. ‘Clearly this should be an asset class,’ Wasley, Samara’s CFO, told me, using the language of this massive post-2008 shift in how seemingly everything is being paid for these days. Samara’s loans ‘should trade below second mortgages and slightly above first mortgages’ in terms of investor returns, putting it in a sweet spot for Wall Street investors.”
The Miami Herald in Florida. “Are homebuyers retreating from the market? The number of sales in Miami-Dade and Broward dropped this May compared to May 2023, dragged down by fewer condo transactions, according to a new monthly housing report from the Miami Association of Realtors. About 53% of the new condo inventory is at or above $600,000. Condo owners also are facing increases in maintenance, assessments and insurance. Mariya Letdin, a business professor at Florida State University, said the softer housing market could be due to a an increase in inventory, longer-term listings and more sellers dropping the price over time. According to the report, single-family median prices in Miami-Dade have risen for more than 12 years, the longest running-streak on record. In that time, single-family prices rose 242.1% from May 2012 to May 2024, from $190,000 to $650,000.”
“If you’ve noticed homes and condos sitting a little longer on the market, Letdin said there’s a gap in what buyers and sellers want. ‘The sellers still have prices from the super low interest rate environment in mind, and annual princess increases that we saw happening from 2020 … to 2022,’ she said. ‘Things were going so amazing if you’re a seller. There’s been a lot of price appreciation and sellers would like to see that continue.’ But buyers, she said, are faced with the challenge of interest rates nearly three times higher. ‘They just don’t see it the same way nor can they afford it,’ she said.”
From Local 10. “Some South Florida condo owners are being hit with six-figure assessments that are forcing them to flee. The situation is leaving many unable to sell or afford the staggering cost. Howard Konetz, a condo owner on Williams Island in Aventura, never thought he’d be in this situation at 79 years old. ‘I don’t know how we are going to live or where we are going to live,’ said Konetz. ‘We can’t afford it and we are going to go broke, especially with the special assessment that has been levied on us.’”
“Local 10 News investigative reporter Jeff Weinsier was sent to closely examine the numbers. ‘The total assessment from the apartment we are sitting on is what?’ asked Weinsier. ‘Approximately $224,000,’ said Howard Konetz. ‘When you say that number, can you believe it?’ asked Weinsier. ‘No. Not at all,’ Howard Konetz replied. That’s on top of monthly maintenance that’s gone from $1,500 to $3,000. ‘We never anticipated this escalation,’ said Konetz. ‘Someone also told me, ‘If you’re not able to pay, you shouldn’t be living here.’ The assessments at Williams Island can’t be passed onto a potential buyer. Howard and Shiela Konetz have had their condo on the market and dropped the price several times. Howard Konetz said he was turned down for a reverse mortgage due to strict condo rules. ‘At this point in time, maybe I can give it away for pennies on the dollar,’ he said.”
From News.com.au. “Millionaire Chinese investors are splashing massive sums on homes and market pundits believe they are driving prices up in pockets of Melbourne.In the final three months of last year, Chinese nationals invested $800m in Australian homes. ‘People want to get their money out of China and into a safe haven, and buying in a prestige property market like Toorak is as safe as you can get,’ said buyer’s advocate to Melbourne’s top end, David Morrell. Some foreign purchasers pushed property prices up by millions, Mr Morrell added.”
Independent Online. “Seeff Property Group agents, along with data from Lightstone Property, say millennials (individuals born between 1977 and 1994) are immensely active in the South African property market, making up between 30% and 42% of all property purchases. According to Lightstone, one of South Africa’s leading property information providers, another side of the coin is that millennials are also likely to spend three times more on their first-time home than the generation before them. Dr Katlego Lekalakala who revealed how the successional increase in the repo rate, and subsequently the prime interest rate in the last two years, led to her forking out more and more money towards her home loan instalment each month, a rise from R8,000 to R17,000. Qualifying does not mean affordability, being eligible for a home loan is only the tip of the iceberg.”
The Telegraph. “Barcelona is introducing a blanket ban on Airbnbs in a desperate bid to stop rents spiralling and lure more young people back into the city. Mayor Jaume Collboni said by 2029 there will be no tourist apartments in Barcelona, and that the municipal government will do this by not issuing new licences and not renewing existing ones. The Spanish politician hopes to bring over 10,000 short-term lets back onto the residential market to stop young people being forced out of the city by unaffordable rents.”
The Independent in the UK. “Stickers appearing to threaten arson attacks on second homes have been posted in the Lake District. The stickers have been stuck on signs near the popular destination of Lake Windermere. Thought to be a rise in the use of properties in the area as second homes, the stickers read ‘F*** your second homes,’ with a drawing of a house going up in flames. Second home-ownership has become an increasing concern for residents in popular tourist destinations such as Cornwall, Devon and the Lake District. Similar stickers have cropped up in other areas of the country before. In 2023, a mystery protest was launched against Air BnB in the Welsh village of Llanberis. Villagers came across stickers with ‘Death to AirBnb’ written on them, along with a picture of a noose.”
The Wall Street Journal. “It’s time to confront the possibility that China’s economy has changed permanently in recent years. Is anyone ready for the new reality? Data released this week by China’s National Bureau of Statistics suggest that the country’s real-estate deflation—soon to enter its fifth year—accelerated in May. New-home prices in 70 large and medium-size cities fell 4.3% year-over-year in May, compared with a 3.5% year-over-year drop in April. Existing-home prices fell 7.5%, compared with April’s 6.8% drop. This bell can’t be unrung. Even if Xi Jinping eventually succeeds in putting a floor under the property market, the middle class now is on notice that house prices can go down. The consequences of this shift could be profound, because an expectation that property prices will always increase is the bedrock on which China’s modern political economy was built.”
The Globe and Mail. “Prime ministerial interviews aren’t usually comedic material, but Prime Minister Justin Trudeau’s chat this past month with The Globe and Mail’s City Space podcast did offer up a chuckle or two. On the one hand, Mr. Trudeau insisted his government was going to make housing more affordable for younger Canadians. On the other hand, he also declared that housing would retain its value for existing homeowners. Got all that? Apparently, home prices will fall for the young, but stay stratospheric for everyone else.”
“Um, right. Anyone who listened to the Prime Minister bob and weave around the topic began to understand why Canadian housing policy is a maze of contradictions. To be fair, though, many of us would not do a whole lot better than our country’s leader if we were asked the same questions. I know this because I’ve been asking friends how they would like to see home prices perform over the next five or 10 years. The answers vary hugely and they’re not necessarily any more logical than the Prime Minister’s responses.”
“Why does this matter? Because the first step in devising good housing policy is deciding where we want to go. At the moment, most of us are still in the early stages of grappling with the realities of what it would take to bring Canada’s housing crisis under control. The only way to durably guarantee affordable housing is to do our best to make real estate a long-term mediocre investment. I realize this is not a platform any politician wants to run on, but it’s hard to argue with the numbers. So long as home prices climb faster than people’s wages, affordability tends to deteriorate.”
“What might be an equally big challenge, though, is changing psychology. Canadians have grown used over the past quarter-century to thinking of their houses as gushers of wealth. Maybe it’s time to ease back on the dreams of painless real estate wealth and once again think of homes as simply shelter. You may, of course, disagree with this. You may want homes to continue being a hot investment. But if so, I challenge you to put a number on your beliefs and think through the implications.”
“The nub of the problem is that it’s difficult to imagine a scenario in which young people can afford to enter the real estate market but in which today’s lofty home prices don’t have to fall or at least stagnate for a long time. Politicians don’t want to tell us that unfortunate truth, but we shouldn’t be surprised by it.”