According to the Federal Reserve Bank of St. Louis, up to 10 million Americans lost their homes during the last financial crisis. Now, 10 years later, we’re only slightly above 2016’s low of 63 percent home ownership – at about 64 percent as of June 2018.1
While many metropolitan areas have experienced robust growth in jobs and home prices, young adults moving to large cities in search of work often are priced out of the home market, and leaving rural areas with smaller populations and lower home prices.2
One study found that 30 percent of Americans live in areas where they need to earn at least $100,000 a year to buy a median-priced home. Recently, Denver, Colorado, and its surrounding counties received the dubious distinction of being named the most unaffordable area in the country for housing. Brooklyn, New York, was recognized for costing the highest percentage of one’s income to become a homeowner – 37 percent of the average homeowner’s income goes toward mortgage payments.3
The good news for those looking to downsize in retirement is that there remains a strong market of buyers. Also, if you are looking to move into a smaller, more manageable home for retirement, the ability to pay in cash may provide a distinct advantage over others shopping in this market. Be sure to consult with a professional real estate agent or broker to help decide what’s best for your unique situation.
It’s not likely to get any easier to buy a home. As of mid-October, 30-year mortgage rates were floating up toward 5 percent, the highest level in more than seven years. Rising rates could serve to discourage potential homebuyers.4
The following are some trends real estate experts anticipate on the horizon:5
- Instead of a large second home, we may see conservative (tiny) second homes with a minimal carbon footprint and a luxury feel
- The price difference between luxury and starter homes will increase
- In commercial real estate, fewer parking garages and more drop-off spaces in front of dining and shopping venues, as people take advantage of driving services (Uber and Lyft) or driverless car technology
- Fewer people will need onsite visits to a vast array of homes before making a decision, thanks to virtual reality technology and virtual staging of homes for sale
Inventory is expanding. In September, the number of homes for sale increased 8 percent year-over-year, representing the biggest increase since 2013.6
A new VeroFORECAST for 10 of the most populous metropolitan areas in the United States predicts home appreciation ranging from 9.3 percent to 11.7 percent by September 2019. States boasting some of the top markets include Washington, Idaho, Nevada, California and Colorado.7 Robert Shiller, co-founder of the Case-Shiller Index that tracks home prices around the nation, says he doesn’t foresee a large downturn ahead.8
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1 Rachel Layne and Irina Ivanova. CBS News Moneywatch. Sept. 15, 2018. “A decade since the housing crash, a new story emerges.” https://www.cbsnews.com/news/a-decade-since-lehman-brothers-collapse-housing-market-crash-a-new-story/. Accessed Oct. 29, 2018.
3 Clare Trapasso. Realtor.com. Oct. 4, 2018. “Here’s How Many Americans Can’t Afford to Buy a Median-Priced Home.” https://www.realtor.com/news/real-estate-news/median-priced-home-unaffordable-most-americans/.
Accessed Oct. 29, 2018.
4 Laura Kusisto and Christina Rexrode. Realtor.com. Oct 12, 2018. “Mortgage Rates Fast Approaching 5%, a Fresh Blow to Housing Market.” https://www.realtor.com/news/real-estate-news/mortgage-rates-fast-approaching-5-fresh-blow-housing-market/. Accessed Oct. 29, 2018.
5 Forbes. Oct. 29, 2018. “12 Industry Experts Share Their Near-Future Real Estate Predictions.” https://www.forbes.com/sites/forbesrealestatecouncil/2018/10/29/12-industry-experts-share-their-near-future-real-estate-predictions/. Accessed Oct. 29, 2018.
6 Clare Trapasso. Realtor.com. Oct. 3, 2018. “In a ‘Key Inflection Point,’ Number of New Listings Jumps the Most Since 2013.” https://www.realtor.com/news/real-estate-news/homes-finally-hit-market-means-buyers-sellers/. Accessed Oct. 29, 2018.
7 Eric Fox. Housing Wire. Oct. 29, 2018. “This real estate market will see almost 12% in appreciation.” https://www.housingwire.com/blogs/1-rewired/post/47246-this-washington-state-msa-will-see-the-most-real-estate-appreciation. Accessed Oct. 29, 2018.
8 Michelle Fox. CNBC. Oct. 26 , 2018. “Nobel Prize winner Robert Shiller: I don’t expect a sharp turn in the housing market.” https://www.cnbc.com/2018/10/26/robert-shiller-i-dont-expect-a-sharp-turn-in-the-housing-market.html. Accessed Oct. 29, 2018.