HOME PRICES ESCALATE TOO FAST THAT YOUNG BUYERS TURN TO PARENTS FOR HELP
In different parts of the world, house price is one issue that young buyers such as the millennial are grappling with. The Wall Street Journal reported that in Hong Kong, because home prices are going up faster than household income, young buyers seek some financial assistance from their parents.
Demographia, a research company, said that the median yearly family household income of HK$319,000 ($40,000) represented only five percent of the average HK$6.19 million ($788,924) price of an apartment in the city in 2017.
Same situation in the US
In the US, Bloomberg reported that home prices jumped 8.8 percent in February. It was the largest gain in four years as buyers fought for houses which have become increasingly scarce resources.
Redfin, a brokerage company, said in a report it released on Thursday that the median price across 172 large metropolitan areas increased to $285,700. It noted that the jump in home prices was the 72nd consecutive month of year-over-year increases since 2012 when the market bottomed.
S&P CoreLogic Case Shiller, a national home-price index, said that US home prices are now 6.3 percent higher than its peak in July 2006 and 46 percent above its trough in February 2012. The company added that the home price increase is fueled by a strong job market, although the number of homes for sale went down 11.4 percent in February compared to a year ago as mortgage rates reached four-year highs.
Wages left behind
Mike Frantantoni, chief economist at the Mortgage Bankers Association, said that they are still seeing home prices increase at two times the rate of income growth. He noted that compounding the problem is that the wage growth of American workers is being left far behind, CNBC reported.
Citing the latest government employment report, Frantantoni noted that wages in February grew at less than expected 0.1 percent. It represents a 2.6 percent advance on a yearly basis.
He referred to the S&P report as adding insult to injury for homebuyers with stagnated earning power while national home prices go up 6.2 percent yearly. It means home prices nationally are now 6 percent higher than its 2006 peak prior to the housing crisis.
Frantantoni pointed out that the major constraint in the market right now is the lack of supply. He noted that the absolute number of units on the market is near an all-time record low. Although builders of houses are trying to increase their pace of construction, they are not fast enough.
He noted that the insatiable appetite for housing is happening even before the peak of the millennial generation reaches first-time homebuyer age. Over the next four to five years, Frantantoni predicts a wave of housing demand would hit the American economy which he thinks will bolster steady growth over that time period.
Home sales dipped
DSNews noted that just because the prices grew, as the national median price went up almost nine percent to $285,000 in 2017, in February the number of homes for sale dramatically declined more than 11 percent compared to January and flat compared to 12 months ago. While prices keep on going up, it was the 29th straight month that inventory suffered.
The report said that only 6 of 73 metros registered sales growth by double digits from 2017. It was led by Louisville with a 25 percent growth, followed by Greenville in South Carolina with a 16-percent growth rate.
Although affordability and availability continue to hold back the market, interest in purchasing a house is doing along nicely. In February, it took 53 days to market homes sold. It was 7 days faster compared to a year earlier.
But it is just the average. In Seattle, it took only eight days for half of all homes pending sales, four days faster compared to a year ago. It was 9 and 10 median days in Denver and San Jose, respectively, while homes in Oakland and San Francisco spent an average of two weeks in the market.
The latest report about homebuyers and seller generational trends by the National Association of Realtors identified the millennial as the largest share of homebuyers at 36 percent. Of these buyers, 65 percent were first-time homebuyers.
The next group with the highest percentage of homebuyers are members of Gen X. They comprise 26 percent, followed by Baby Boomers (14 percent) and the Silent Generation at 6 percent.
The first-time buyers comprised 34 percent of all homebuyers which slightly went down from 35 percent the previous year. Married couples continued a three-year decline indicating that there are now fewer married couples in the market for housing, while single female buyers went up for three straight years. The use of agents by buyers and sellers remain at historical highs of 87 percent and 89 percent, respectively.
[researchpaper 리서치페이퍼=Vittorio Hernandez 기자]