The average prices of homes rose 6.2 percent from a year ago, seeking a robust increase in real estate. However, price gains potentially see more residents staying as renters than buyers
With booming job markets in metro areas, home price increases are the steepest, but wage growth lags behind.
Unlike the bubble period, when subprime mortgages led to a housing bust, today, the shortage of properties for sale causes a steady rise in housing prices.
“Since home prices are rising faster than wages, salaries, and inflation, some areas could see potential home buyers compelled to look at renting,” said David M. Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices.
Making matters more economically unfeasible is the new tax bill signed by Donald Trump last week.
Although tax experts work to completely analyze the extensive tax reform, serious changes to tax rates is known. As well, a shift in tax brackets and tax deductions are anticipated. Homeowners can expect changes in how much mortgage interest they can deduct. As well, they should expect a limit on property tax deductions, making homeowners not likely to itemize to claim their deductions.
Another affected in the market boom is multifamily units.
Real estate markets show a decline in their construction, while permits for building them increase. Contrasting to the boom in apartments and condos that catered to young adults over the past ten years, now millennials opt to rent. Because of rising rents, purchasing has leveled. Rent increases have forced people to move back with parents; or the desire to start a family slowly push older millennials to purchase a single-family home.
Another indicator of the slowing construction is a sluggish economy where rents have also peaked. Rising costs over the years displaced so many people; especially in cities with a major transitory population created gaps in residential areas.
As home prices swell, a federal regulator raised the dollar amount of mortgages qualifying buyers for backing by Fannie Mae and Freddie Mac.
Cities experiencing the steepest hikes in prices are Seattle, San Diego, Las Vegas and Washington DC.