Finding a home to purchase with a budget of under $250,000 seems close to impossible in today’s housing market. Labor, land and material costs continue to rise, which is resulting in slowing down the production and supply of homes on the market. As these prices continue to swell, new construction homes are far and few to come by.
“The concern over material costs, especially lumber, is making it more difficult to build homes at competitive price points, particularly for newcomers entering the housing market. Moreover, the soft permit report does not suggest a significant increase in housing production in the near term,” said National Association of Home Builders (NAHB) Senior Economist Michael Neal. “However, consumer demand for single-family housing continues to increase as the overall economy and labor market strengthen,” via https://bit.ly/2wlgfyy.
According to a study done by the United States Department of Commerce (https://bit.ly/1pRnqsp), construction of new residential housing projects decreased by 12.3 percent in the month of June. As for existing homes, sales fell 0.6 percent in June, as well.
With housing inventory at an all time low, existing homeowners are holding onto their current homes for longer periods of time. This low inventory creates problems for first-time homebuyers and those families that are looking to expand into a bigger space. There are less and less options for homebuyers, not to mention the market is tight and competitive. Affordable, entry-level homes are facing extreme amounts of demand causing today’s buyers to overstretch their budgets.
Housing prices are rising, buyers are outstretching their budgets and monthly mortgage payments are increasing. According to a study done by Arch Mortgage Insurance (https://bit.ly/2NojFH), based off a medium priced home, the average mortgage payment increased 5 percent in the first quarter of 2018. It is projected that by the end of 2018, this number will go up another 10 to 15 percent.
While home prices are high, sellers can take advantage by listing their homes and cashing in on the equity the housing market has brought. Home builders can also look at the current market as a benefit for the need for new construction.
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