Pre-bubble Home Prices; Sacramento Ranked Second in Affordability
The Wall Street Journal and CNN Money reported yesterday that, more than half of the 74 markets tracked by Moody’s Analytics show that home affordability may be better than it has been in many years. By the end of last September, “the ratio of home prices to annual household income had fallen to 1.6, well below the historical average of 1.9 between 1989 and 2003”. The biggest question raised from these reports is whether or not there will be a boom in the housing market. Chief Economist Mark Zandi at Moody’s predicts that there won’t be a housing boom due to a few contributing factors. He points out that, although home prices are favorable to the current average household income, it is still cheaper to rent in most U.S. cities than it is to buy. And while there’s a good chance that the price-to-rent ratio may flip later in the year, it still may not be enough incentive for buyers to go out and actually purchase a home. Even as the ratio flips, home prices are expected to drop even further. In that case, many buyers will continue to hold off on buying until home prices are at their lowest.
CNNMoney.com states, “most economists believe that home prices are projected to fall further this year — by an estimated 5% to 10% […while] others predict declines as high as 30%”. The current demand for rentals and the continued plunge of home prices is a direct result of the millions of foreclosures nationwide; a situation that will unfortunately not subside anytime this coming year.
Another fact that may deter potential homebuyers is that with the drop in home prices comes a decline in the overall value of homes. The Wall Street Journal confirms, “price declines are leaving more borrowers underwater, or in homes worth less than the amount owed. Nearly 27% of homeowners with a mortgage were underwater at the end of the fourth quarter, up from 23.2% in the previous quarter […]”.
In the Sacramento region, the average home value has dropped 4.2% in the last quarter. On the flip side, Sacramento is currently ranked second in California for home affordability. According to The Sacramento Business Journal, “more than four of every five first-time home-shoppers can afford to buy an entry-level home in the Sacramento region”. This is great news for a real estate market that has been very bleak in our city the past few years. A first-time buyer in the Sacramento region needs to earn about $23,400 a year in able to afford a mortgage.
While many prospective buyers may find this news enticing, it’s still very important to know all the facts. If you’re thinking of buying a home it’s best to contact a trusted real estate professional to help you through the entire process.
Courtesy of The Wall Street Journal, CNNMoney.com, and The Sacramento Business Journal
Whether you’re a buyer, a seller, or one of the millions currently trying to avoid foreclosure, Angel Lynn Realty is your trusted source for buying a home and your understanding expert in the short sale process.
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