Housing Affordability: Will be even a bigger problem in the next few years (Here’s why)
With inflation running at a 40-year high and the cost of everyday living and goods on the rise, it’s perhaps not surprising to learn that Americans have become increasingly concerned. They’re worried that their personal finances will suffer, and cause them to miss out on their long-term financial goals, which include homeownership, a new survey shows.
More than half of about 1,000 U.S. adults surveyed in March said that higher costs may have a “big negative impact” on plans like buying a home or retiring comfortably, according to the Country Financial’s Security Index. About 90% of those surveyed are concerned about inflation.
Adding to their inflation concerns, Americans also are concerned about stock market volatility, rising interest rates, and recession fears.
The average consumer is spending $500 more a month on living expenses than a year ago, according to a National Association of Realtors blog post from late April.
Homebuyers may need to lower their budgets to keep pace. House hunters would be smart to search for a home that is about $40,000 cheaper than they would have a year ago as a result of the rising costs, Gay Cororaton, a NAR research economist, writes on the association’s blog.
“The increased cost of spending on other items impacts the ability of the average consumer to have enough leftover income to purchase a home,” Cororaton said in a post.
Troy Frerichs, vice president of investment services at Country Financial, told CNBC that consumers should create a budget and consider how the increase in costs may affect monthly household budgets and how it affects long-term financial plans. Some financial plans may need to be changed, he added.
Click Here to view: Google Ford Realty Inc Reviews
An affordable home is now the most important consideration for Boston condo buyers – above neighborhood and location. This is an ominous sign that consumers are now more confronted with than ever the ability to own a piece of Boston real estate.
Why housing affordability will even be a bigger problem in the future
These historic low-interest rates have created such a demand for real estate that we now have a shortage of real estate for sale, and that has created one big problem. It’s impacted Boston’s real estate affordability.
More Housing is Needed
Some say we can solve the Boston real estate affordability issue by increasing the number of Boston condos for sale. So we need to build more Boston condo buildings. But is unlikely to help much as acquisition and construction costs keep rising.
To make matters worse, Boston condo owners may not have much of an incentive to move. With current interest rates at historic lows, downtown Boston real estate owners may have refinanced.
Now follow me on this, imagined you are one of those Beacon Hill condo owners who just refinanced, and it’s now 2021 or 2022, and rates have risen tremendously. The question is will you really want to sell your Boston downtown condo while you are locked into those low rates? Or are you going to stay put?
Boston Real Estate and the Bottom Line
I think we will be heading into an era where we might see Boston condos that turnover at a much slower pace as owners will stay put or decide to rent out their property as Beacon Hill apartments as their carrying costs will be manageable because of the low-interest rates.