Run-up in home prices is ‘not sustainable’: Realtors’ chief economist
- Home values have been rising for six straight years, and the gains have been accelerating for the past two years.
- The average rate on the 30-year fixed mortgage is nearly a full percentage point higher today than it was in September 2017, its latest low.
- Homebuyer demand may be weakening. A monthly survey from Redfin found fewer potential buyers requesting home tours or making offers.
Home values have been rising for six straight years, and the gains have been accelerating for the past two years. Unlike the last housing boom, the gains are not driven by fast and easy mortgage money, but instead by solid buyer demand and very low supply. Still, like the last housing boom, some are starting to warn these price gains cannot continue.
“The continuing run-up in home prices above the pace of income growth is simply not sustainable,” wrote Lawrence Yun, chief economist for the National Association of Realtors, in response to the latest price reading from the much-watched S&P CoreLogic Case Shiller Home Price Indices. “From the cyclical low point in home prices six years ago, a typical home price has increased by 48 percent while the average wage rate has grown by only 14 percent.”
Yun also pointed to rising mortgage interest rates as a factor that would weaken affordability. The average rate on the 30-year fixed mortgage is nearly a full percentage point higher today than it was at its most recent low in September 2017.
Millions of U.S. Homeowners Still Under Water on Mortgages
(Bloomberg) — A staggering number of American homeowners remain under water on their mortgages a decade after the housing bubble burst.
Almost 4.5 million households — or 9.1 percent — owed more than their homes are worth in the fourth quarter of 2017, according to data firm Zillow, with an estimated 713,000 owing at least twice as much as their property’s value.
While the percentage is declining, families in communities with stagnant property values are “trapped in their homes with no easy options to regain equity other than waiting,” said Aaron Terrazas, a senior economist at Zillow.
That in turn could weigh on local economic growth.
Virginia Beach, Virginia; Baltimore and Chicago are the hardest hit metropolitan areas, based on effective negative interest rates.