Charleston SC Homes: Good Signs From The Market That Buying Is The Right Choice
If you have thought about buying Charleston SC homes for sale, but aren’t sure if that is the best decision, then here is some news that will help.
In my last post, I discussed misconceptions that have been holding back many would be buyers, especially the Millennial Generation.
This segment of the market is important, as they represent the next wave of first time buyers. The Millennial Generation is also on pace to become the largest generational group this year, outnumbering the Baby Boomers.
But there is some news out there that indicates more and more renters are at least looking into buying, and that is a good sign.
The more people explore their options, the more they will learn and realize their initial perception about buying a house was wrong.
Buying a home is possible, and the current market is very favorable.
A recent MSN.com article “Millennials Shift To Buying As Rents Surge” by explains that many Millenials are moving towards buying simply because of rising rents.
Rents are increasing at a rapid pace, and renters are feeling the squeeze because income isn’t keeping pace:
“Young people are getting squeezed because the gap between rents and incomes is widening to an unsustainable level in many areas of the country, according to a study this month from the National Association of Realtors.
In the past five years, the typical rent jumped 15 percent, while the income of renters increased by just 11 percent.”
Another factor is the fact that, according to the US Census Bureau, the US rental vacancy rate hit a 21-year low at the end of 2014.
In many cases, a mortgage payment can be less than a rental payment. Especially given the low interest rates currently available.
Mortgage rates are expected to start rising over the course of the year, and this is also a factor bringing more renters into the market.
As we all know, rents continue to go nowhere but up.
A person that has $1200/month mortgage payment today will still be paying $1200/month in 5 years.
But there is no way today’s renter paying $1200/month would likely still be paying that same amount.
There is more good news out there that makes this a good time for buyers. FHA recently made a couple changes.
First, they changed the minimum down payment from 3.5% to 3%. They also decreased the rates for Mortgage Insurance which is a component of most FHA loans.
After the real estate market crash and mortgage meltdown, banks tightened up lending guidelines to borderline ridiculous levels.
Getting a mortgage was very difficult.
However, banks are loosening up a little. Too many would be buyers simply do not think they will qualify for a mortgage.
However, getting a mortgage pre approval is a simple, quick process. And, it costs nothing.
If there are credit issues, a mortgage Loan Officer can help set you up a plan to correct and repair credit to get you in a position to qualify. This can save you a lot of time and aggravation.
Another positive sign is more Millenials have positioned themselves to be ready to take advantage of the favorable market.
However, this was not a strategic plan, rather a result of necessity. From the MSN.com article:
“Demand from first-time buyers is slowly getting back to normal, said Ara Hovnanian, chief executive officer of Red Bank, New Jersey-based home builder Hovnanian Enterprises Inc.
“A lot of people doubled up after the recession,” he said Wednesday in an interview on Bloomberg Television’s “In the Loop” with Betty Liu.
“They went back home or rented with friends and they’re waiting for the right opportunity, waiting to qualify. Everything is going up, and that really helps the cause for buying homes.”
This is evidenced by a recent report from the US Census Bureau that shows new household formation are starting to skyrocket.
This isn’t just people that bought new homes.
This is comprised of people that moved out of Mom and Dad’s basement, or were sharing a rental with others.
So What Is Really Holding Back Millennial Buyers From Owning Charleston SC Homes?
That is a factor, however, that is not the main issue.
Earlier in this post I referenced the misconceptions Millennials had regarding down payment and qualifying.
This is highlighted in the source article, “Nomura: Fear Is Keeping Housing Demand Pent Up”, from HousingWire.com based on a study by Nomura:
“A generational smart take looks at the various reasons that first-time homebuyers – mostly Millennials – aren’t buying and says student debt and meager income is a big factor.
Nomura’s note to clients has a take few have offered: The first time homebuyers are holding out and it’s not student debt, a shift away from home ownership as a choice by Millenials, or any of that.
“One lingering concern is that many conventional home buyers that need mortgage financing for purchasing homes haven’t been entering the housing market as the share of first-time home buyers of existing home sales dropped 2pp to 27% in May and mortgage applications are still subdued,” Nomura says.
Analysts say it’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment.
It’s that they think they’re not qualified or that they don’t have a big enough down payment.”
The other big issue is simply a lack of inventory, especially in the first time home buyer price range. The MSN.com article gives the example of a Denver first time Millennial buyer Eric Arther that sums this issue up (emphasis mine):
“There is less inventory in the traditional price range, where somebody is trying to buy their first home,” said Arther’s agent, Anthony Rael of RE/MAX Alliance.
“They’re under $300,000 and it’s tough. If we doubled our inventory in that range tomorrow, it would be gone tomorrow.”
Many of these home owners quickly saw their new home investment turn into a negative equity situation.
Several years later, most of them are finally not under water.
However, 2015 could be a break out year in real estate.
I recently posted in more detail on this, so check it out here.
The main thing is we simply need more inventory.
While the market is very favorable to Millennial and first time buyers, there is another large segment that buying also makes a lot of sense: move up buyers.
Especially people that are still in their first home.
Financially it makes sense to move up.
Plus, many of these families have grown in size, so a larger home makes sense.
If more of these potential move up buyers would make the move, that would help usher in a large wave of new home owners that are out there waiting.
New construction is heating up to meet the demand.
From the MSN.com article:
“Home builders have been waiting for pent-up demand to kick back in since construction started sliding in 2006.
Purchases of new homes rose to a 539,000 annual pace in February, the most in seven years, the Commerce Department reported Tuesday.
Earnings reports last week from Los Angeles-based KB Home and Miami-based Lennar Corp. pointed to stronger orders and growing confidence that buyers are finally returning.”
Based on the information out there, it appears that buying makes a lot more sense than renting in the current market. However, everyone’s situation is unique.
Visit my Pam Marshall Realtor website to learn more, and feel free to reach out to me with questions. I will take the time to answer your questions, explain the process as well as your options, and help you overcome any fears you may have.
Now is a great time to buy (and sell) Charleston SC homes for sale, and I am the right agent to help make that dream a reality.