The housing market has been making a comeback since the big mortgage crisis that began in 2007, although things aren’t stable yet.
The average worker’s income isn’t rising to match the skyrocketing home prices, but experts say this is going to change as well. There are many growing companies willing to pay qualified workers a higher salary. However, for those who don’t have those skills or work in those particular industries, not much is going to change. This potentially puts homeownership out of reach for many.
According to experts, there are more changes in store for 2018. Here are four of those changes:
1. Rising mortgage rates
Although mortgage rates lowered through 2017, top economists from the Mortgage Bankers Association predict rates will rise even beyond 5% in the next few years through 2020. With housing prices on the rise, that’s going to make it difficult for first-time buyers.
Lynn Fisher, vice president of research and economics, says that house prices can’t continue to rise at the current rate forever. Price stabilization is expected in the near future.
Despite the potential for home price stabilization, the rising prices and rising mortgage rates are a bit of a concern in areas where homeowners are struggling. When borrowers fall behind, banks may not be willing to wait to begin the foreclosure process.
2. Fewer foreclosures
In 2009, there were 3,457,643 foreclosure filings, with 2,920,000 completed foreclosures. As of 2016, that number is way down at 956,864 filings with less than 50% of those filings being completed foreclosures.
In March 2017 alone, a total of 36,370 properties in the US began foreclosure, although that number is down 24% from the previous year.
Although foreclosures across the US are declining, according to USAToday.com, there are ten states with exceptionally high foreclosure rates compared to the rest. These states are:
- North Carolina: 1 in every 1,332 houses
- Florida: 1 in every 1,245 houses
- Ohio: 1 in every 1,157 houses
- Connecticut: 1 in every 1,156 houses
- South Carolina: 1 in every 1,146 houses
- Illinois: 1 in every 863 houses
- Delaware: 1 in every 858 houses
- Nevada: 1 in every 857 houses
- Maryland: 1 in every 820 houses
- New Jersey: 1 in every 497 houses
These numbers aren’t surprising given that foreclosure can happen quickly. In New York, for example, a mortgage lender can start the foreclosure process if someone is three months behind in payments, but many wait four to six months.
This lapse in time may create a sense of false security. According to law experts, “once your account is in arrears, even with one payment late or missed, you are likely to hear from your bank or lender.”
3. Lower-priced new homes
Millennials can’t afford to buy newly built homes because the housing shortage has been driving the prices sky high. It’s also driving millennials to move to urban areas and out of the big cities.
Zillow, the online real estate database founded in 2006, predicts a big change coming to 2018: home builders will need to cater to a new, lower-priced market of first time home buyers. Zillow also predicts that rather than sell in the current market, homeowners will remodel their homes instead. Later, when they’re ready to sell, they’ll be able to sell for more.
4. More renters, fewer homeowners
Although Michigan isn’t on the list of states with the highest foreclosure rates, renters now outnumber homeowners in Detroit. This shift has been gradually falling into place since the foreclosure crisis of the last decade when more than 100,000 Detroit residents went through foreclosure.
Although Michigan isn’t experiencing the high foreclosure rates that other states are, the fall of homeownership shows the housing market still isn’t doing so well. Detroit – like many other big cities – is struggling.
“A lot of this is a result of the foreclosure crisis,” says Anika Goss-Foster, executive director of the Detroit Future City Implementation Office. “That really changed the dynamic. Both the number of renters and the number of vacant houses has increased.”
In Detroit, even renters can’t afford some of the basic repairs they need. The gap between income and the cost of living – specifically the housing market – is getting wider. As it appears now, the only people who will be able to handle the higher cost of owning a home are those who have the skills to obtain higher paying jobs.
