With even interest rates rising, homes sales are expected to be slightly up in 2018 and boosted by job growth and wage gains. While the tax law changes may dampen upper-tier homes. While rising job labor costs, increase in government spending and the prolonged housing shortages are main pressure points, you may see homeowners backing off as homeownership rises.
The mortgage rate jump from 4 to 4.5% adds an extra $60 monthly payment on a typically priced home and for a million-dollar mortgage, a monthly increase of $300. The Local Records Office views the specs of persistent housing shortages being one of the main causes of annualized rates increases in recent months, from a 3.3 percent rise in the fourth quarter of 2017 and 6 percent spurt in January, rent increases have exceeded 3 percent annually for four years straight and home prices have risen even faster.
Big cities like Chicago, Pekin, Illinois, Los Angeles, Bellflower, San Diego, Miami and San Francisco are seeing the housing prices spike
The Local Records Office notes that another source of the price pressure will be from the current labor market. The current 4% in the unemployment rate is considered full employment. And for companies to attract workers, they need to offer increasingly higher wages, which will get passed along to consumers. Additionally, the massive tax cuts and increases in government spending, plus the need to hire more workers, will further fuel price pressure. Though, one solution many are pointing to is to build more homes, as more inventories will mean a slower rise in the home prices and rents.
The ten counties with the largest gains between July of 2015 to July of 2016 were largely in the Sunbelt; Arizona, Texas, Nevada, Washington, California, and Florida.
And the counties with biggest population loss were in the Midwest and the Rust belt states –notably the Chicago area
And while people are drifting out of Chicago, greater New York, Los Angeles and Washington DC, (as the statistics show the biggest loss due to domestic out migrations), “There was huge growth into the Sunbelt – Florida, Texas, Phoenix, Las Vegas” William Frey, a demographer and senior fellow at the Brookings Institution said, “it had to do with the huge economic engines that were creating jobs in those areas, coupled with a very favorable housing market (and) low-interest rates.”
And the number of people leaving Boston, New York, and Washington is also rising, while these skyrocketing housing prices have become more unaffordable for many young families, retirees and recent immigrants, and appears to be the major reason, says Mark Zandi, the chief economist at Economy.com some are looking into moving towards these less-glamorous destinations. The change seems to be more prevalent in California, as some are heading to the growing cities, like Las Vegas or Phoenix, as some “people are saying, ‘Even though I have to take a 10% wage cut to go to Vegas or Phoenix, it’s actually a wage increase,'” explained Ross C. DeVol, the director of regional economics at Milken Institute, in Santa Monica, California. “They look at what housing costs here, and they’re making decisions to go elsewhere.”
A couple who sold a 3-bedroom house in Los Angeles for $450,000 bought a 4-bedroom house with 2 kitchens and a swimming pool for $185,000 in Gladstone, Mo., near Kansas City.
Another couple with two young children outgrew their 2-bedroom apartment even with the budget of $450,000. they discovered quickly that they were not able to afford anything less than 70 miles from the office. So the family moved a suburb in a Detroit and took a job at an Internet marketing firm. They bought a house for $315,000 near good schools and only a 15-minute drive to the office. While the couple does miss California’s “culture and excitement and food,” they lamented that “housing isn’t getting any cheaper there.”
A census data report shows that millennials have been moving in droves to places where they have never even thought of living.
A rough breakdown Drew Housman shares where his money in Los Angeles went to 45% rent, 30% gas, 20% entertainment, 4.95% parking tickets and 0.5% savings. Housman shares his experience living in L.A. and describing it as treading water and wanted to ‘break that cycle’, as many others are experiencing, the realism sets in when working in the entertainment industry with only a few really getting there.