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WOODARD: Skyrocketing rents create crisis for some

Rents are increasing at such a pace that they are creating a crisis for many families and individuals.

The National Association of Realtors reports that rental costs are climbing faster than wages across many parts of the country, a problem that has only worsened in the past year, according to a growing number of housing surveys.

“Rents have skyrocketed so much and incomes haven’t kept pace, so we have an affordability crisis in some of our major metropolitan areas for the middle housing market,” Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, told The Wall Street Journal.

Economists are blaming the crisis on supply and demand issues, with a limited supply of rentals combined with more renters prompting prices to rise across the country.

The share of renters aged 25 to 34 who are considered cost-burdened rose from 40 percent to 46 percent, according to a report by Harvard University’s Joint Center for Housing Studies. Economists usually consider a household “cost-burdened” if they’re paying at least 30 percent of their income on rent.

Rental rates increased 5.2 percent from a year earlier, reaching a 15-year high, according to MPF Research. The West saw some of the highest increases in rental costs, with Oakland, California, posting the largest increase, at 11.8 percent in the past year.

Rents there rose 5.1 percent in the second quarter compared to a year earlier and are outpacing income growth, which was at a 2.4 percent growth rate between 2013 and 2014, MPF reported.

Q: Are down payments increasing in home sale transactions?

A: Yes, during the second quarter of this year, down payments increased. The average down payment on a 30-year fixed-rate mortgage increased to 17.34 percent in the second quarter.

The previous quarter’s down payments averaged 16.98 percent. In dollars, the average down payment in the second quarter was $44,204.

“The spring and summer home buying season naturally creates more demand in the housing market,” says Doug Lebda, founder and CEO of LendingTree. “With a more competitive housing market, it is common to see down payments rise.

“However, we also saw volume for FHA (Federal Housing Administration) loans increase a little over 5 percent quarter over quarter, signaling more first-time homebuyers entering the market. For potential buyers who have been sitting on the fence, it’s still a good time to explore the housing market, as interest rates remain historically low.”

Lebda was quoted in a report carried by the National Association of Realtors.

Q: Is “home flipping” still popular for investors?

A: It’s still popular, but its share of total home sales is falling, according to RealtyTrac’s second quarter Home Flipping Report.

It shows that 30,013 single-family homes were flipped — sold as part of an arms-length sale for the second time within a 12-month period — in the second quarter, or 4.5 percent of all single-family home sales during the quarter.

The 4.5 percent share of second-quarter home sales that were flips was down from 5.5 percent in the previous quarter and down from 4.9 percent a year ago. Going back to the first quarter of 2000, the peak in flipping was in the first quarter of 2006, when 8.0 percent of all single-family home sales were flips.

Q: Are there more applications for mortgages to finance the purchase of commercial properties?

A: Yes, applications for those mortgages are rising.  According to the Mortgage Bankers Association’s Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations, second-quarter 2015 commercial/multifamily mortgage loan originations were 29 percent higher than during the same period last year and 16 percent higher than the first quarter of 2015.

“Driven by increasing property values, improving property fundamentals and still low interest rates, commercial and multifamily lending and borrowing continued its strong pace in the second quarter,” said Jamie Woodwell, MBA’s vice president of commercial real estate research.

 

WOODARD has been writing about real estate news and trends since 1971 and is the resident storyteller at the Ronald Reagan Presidential Library in Simi Valley, Calif.

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