For the first time since 2021 when Americans relocated in droves, Nashville once again is a top migration destination, according to a new report from Redfin.
Nashville, also known as Music City, is No. 9 on the list of the most popular destinations for homebuyers looking to relocate to a new metro area in October. Most people surveyed relocated there from Los Angeles.
“A lot of Nashville locals have been priced out of homeownership, but when you’re coming from somewhere like California or New York, housing prices here still seem reasonable,” Redfin Premier real estate agent Kristin Sanchez said in a statement. “Nashville has relatively low property taxes, insurance costs and utility prices, along with no state income tax, all of which definitely help if you’re looking for a lower cost of living.”
While a lot of Sanchez’s clients were from California, she also reported working with people from Chicago, New York and Florida. Housing affordability remains one of the strongest assets of the Nashville housing market, but many buyers also relocated for professional reasons. Big companies such as financial firm AllianceBernstein or Amazon have headquarters in the city.
The typical home in Nashville in October went for $448,910 compared to $880,000 in Los Angeles.
Sacramento, Las Vegas and Orlando were the most popular migration destinations in October
Sacramento, California, was the most popular destination among homebuyers relocating to a new metro area in October. Many people moving to Sacramento were from San Francisco, where the typical home costs $1.5 million versus the $578,000 in Sacramento.
Myrtle Beach, South Carolina, came in at No. 4 after appearing on Redfin’s list of most popular destinations for the first time in July at No. 9. Four Florida metros ranked in the top 10 in October: Orlando, North Port-Sarasota, Cape Coral and Tampa.
These metros have some elements in common: their affordability in comparison to outbound destinations, their location in the Sun Belt and their exposure to significant climate risks.
The rising threat posed by natural disasters such as hurricanes and flooding prompted many homeowners insurance providers to pull out from risk-prone areas in recent months. This could have a negative impact on home prices in those markets.
Homebuyers flee expensive cities
Homebuyers are deserting San Francisco, New York City and Los Angeles at a faster pace than any other metros in the United States. That’s according to a Redfin measure, the net outflow, which calculates how many more Redfin.com users are looking to leave a metro than move in.
It’s a common trend for people to leave expensive job centers in search of more affordable housing elsewhere. This explains why many homebuyers leaving Los Angeles chose to relocate to Las Vegas, where home prices are 50% lower.
However, some people are choosing to stay in expensive cities, especially when the median home sale price cools. San Francisco, for example, posted a net outflow of 25,700 in October 2023, down from 35,700 in October 2022.
Redfin attributes this decline to softening home prices in October, when the median home sale price was 10% below the record-high level in April 2022.
After falling through the second half of 2022, Southern California home prices are rising again.
In October, the average home price across the six-county region was $831,080, according to data from Zillow. That’s up 0.12% from the prior month, and the eighth straight month of increases.
Prices fell last year after mortgage rates more than doubled and suddenly sapped the purchasing power of buyers.
But prices resumed their climb in the spring thanks to a newer byproduct of high rates: an extreme shortage of homes for sale.
Note to readers
Welcome to the Los Angeles Times’ newly launched Real Estate Tracker. This page will be updated every month with data on housing prices, mortgage rates and rental prices. Our reporters will explain what the new data mean for Los Angeles and surrounding areas and help you understand what you can expect to pay for an apartment or house.
Many would-be sellers are now choosing to stay put, not willing to swap their 3% and below mortgages for a loan with an interest rate more than double that.
At the same time, real estate agents say buyers — especially first-timers without a mortgage — have been more willing to return to the market, deciding they won’t see rates drop much if they continue to put off what they’re eager to do: buy a home.
The supply-and-demand mismatch has driven up prices, but the market is far slower than during the pandemic boom, since high rates still present a hurdle to buyers.
October’s average home price across the Southern California region remains 1% below the June 2022 peak.
What happens next depends on a variety of factors, including the direction of mortgage rates and the overall economy.
In recent months, mortgage rates have shot up again. In August, rates surpassed 7% for the first time since last fall, and they are now in the mid-7% range. If rates stay there or climb higher, that could sap demand enough to send prices down.
But if higher rates convince another wave of homeowners not to list their homes, prices may keep right on climbing.
According to a recent Zillow forecast, home prices are likely to be largely flat across Southern California over the next year as lack of affordability keeps a lid on prices and low inventory serves as a floor.
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Other housing stories
Explore home prices and rents for October
Use the tables below to search for home sales prices and apartment rental prices by city, neighborhood and county.
Rental prices in Southern California
In recent months, asking rents in Southern California have ticked down, providing at least some relief for frazzled apartment seekers.
Experts say the trend is driven by a rising number of vacancies across the region that have forced some landlords to accept less. Vacancies have risen because apartment supply is expanding and demand has dipped as consumers worry over the economy and inflation.
The large millennial generation is also increasingly aging into homeownership, as the smaller Generation Z enters the apartment market.
Prospective renters may not want to get too excited, however. Rent is still extremely high.
In October, the median rent for vacant units of all sizes across Los Angeles County was $1,920, down 1.6% from a year earlier but 9.3% more than in October 2019, according to data from Apartment List.
Find out where ATL housing stands in terms of pricing and availability.
Atlanta’s housing market is, in a word, competitive, with homes generally receiving multiple offers and selling within a month. However, the market has shown some signs of fluctuation in the last couple of years. Read on to learn more about the ebbs and flows that determine and define the Altlanta housing market.
The general trend
The median sale price in Atlanta was $409,000 last month, marking a 6.0% decrease compared to the previous year. Additionally, the median sale price per square foot was $276, down by 1.8% since last year.
Neighborhood-specific housing trends
Each Atlanta neighborhood featured below is experiencing its own unique trends.
Midtown: Known for its lively vibe, Midtown’s housing market saw a median sale price of $389,000, a decrease of 2.8% from the previous year. The price per square foot showed a minimal increase to $402, indicating a relatively stable market.
Downtown Atlanta: Contrasting Midtown, Downtown Atlanta experienced a 12.7% increase in median home prices, reaching $307,000. Homes stayed on the market for an average of 69 days, significantly longer than the previous year.
West End: A culturally rich area, the West End’s average house price slightly decreased to $331,000, a 1.2% drop from the previous year.
Southwest Atlanta: This neighborhood showed resilience with an average house price increase of 3.5%, reaching $238,000.
Capitol View: Capitol View experienced a 4.4% increase in average house prices, settling at $418,000.
Atlantic Station: Here, the median sale price decreased by 5.3% to $310,000, but the price per square foot rose significantly by 13.0% to $338.
Grove Park: Grove Park saw a remarkable increase in housing prices, with an average of $318,000.
East Atlanta: This area experienced a downturn with home prices decreasing by 6.1%, settling at a median price of $495,000.
Northeast Atlanta: This area saw a substantial increase in median sale prices, which were up by 14.3% to $503,000. The price per square foot also rose by 5.2% to $383.
Edgewood: As one of the most competitive markets, Edgewood’s average house price was $573,000, up by 12.3% from last year.
Peoplestown: This neighborhood saw a significant decrease of 28.5% in average house prices, which stood at $413,000.
Atlanta rental market analysis
The rental market in Atlanta is full of options, with variations depending on the area and style of the apartment.
General rental trends: In 2023, Atlanta’s average rent ranged from $1,662 for a studio to $2,487 for a two-bedroom apartment. One-bedroom apartments averaged $1,912 in rent.
Northeast Atlanta rental market: This area is on the higher end of the rental spectrum, with the average rent for a one-bedroom apartment around $2,187. The market here shows stability with a slight variation in rent prices, indicating a consistent demand.
Further insights on the Atlanta rental market
Several factors, including the economic landscape, population growth and urban development influence the rental market in Atlanta. In recent years, Atlanta has seen an influx of new residents, driven by its growing reputation as the premier cultural, economic and entertainment hub in the Southeast. This population growth has led to increased demand for rental properties, especially in popular areas like Midtown and Buckhead.
Moreover, the city’s growing job market, particularly in sectors like technology, finance and healthcare, has attracted professionals seeking a setup near their workplaces, making it a top contender when we talk about best cities for hybrid work. This demand has led to the development of new apartment complexes and the renovation of older buildings, further diversifying the rental options available.
It’s all about The A
The Atlanta real estate market, both in terms of housing and rentals, presents a nuanced picture. While some areas show increasing home and rental prices, others are experiencing stabilization or even a decrease. This variety reflects the city’s diverse demographic and economic makeup, offering opportunities for buyers and renters depending on their preferences and needs.
Owning a house is a right of passage for many Americans. While buying a home was never particularly easy, in the past few years, it has become especially difficult. An unfortunate confluence of two factors has led to this difficulty: a rise in home prices and a spike in mortgage rates.
With both of these factors working against potential homebuyers, many people are wondering when things will get better. While nothing is certain, markets do move in cycles, so there’s a chance that things could shift to a better position than they are now.
Start shopping for a mortgage here and see what rate you qualify for.
When will mortgage rates fall?
As of October 25, 2023, the average interest rate for a 30-year fixed-rate mortgage in the United States is 8.04%. That is the highest that rates have been since the Great Recession. Elevated rates make it much more expensive over the long term to buy a home — and remember, that’s just the average. Potential homebuyers who already have significant debt or who have a checkered credit history may get an even higher interest rate.
Luckily, it is clear why mortgage rates have increased recently. Mortgage rates have increased over the past 18 months as the Federal Reserve has raised its benchmark interest rate to try and fight inflation. Though the Federal Reserve does not directly set mortgage rates, interest rates for mortgages tend to track alongside the rates set by the Fed.
Eventually, inflation will presumably be under control and the Fed will be able to lower rates. If that happens, there is a good chance that mortgage rates will also come down. When that will happen, however, is still up for debate.
The Fed also recently said they expect to make just two rate cuts in 2024 — fewer than the four cuts some initially expected. Still, if those two cuts go forward next year, there could be at least some reduction in mortgage rates, which would be good for potential homebuyers.
Want to buy a house? Start looking for a mortgage online right now.
When will home prices fall?
Believe it or not, home prices have actually already started to fall in some places. In California, for example, home prices are projected to fall by around 1.5% in 2023 compared to 2022, per a report from the California Association of Realtors — but the group expects prices to go up by 6.2% in 2024. So, there’s a good chance that the small dip we’ve seen in housing prices in California won’t continue into next year.
Part of the issue is that right now, many homeowners who secured rates closer to 3% during the pandemic are hesitant to move and get a new mortgage loan with a much higher rate. This results in a lower supply of homes for sale, which increases the competition for the available inventory, which, in turn, causes home prices to climb.
There is also a chance that when mortgage rates go down, so will home prices, as there will likely be more inventory on the market. However, some experts think the opposite will happen.
“My perspective will be that if rates go down, the prices will go way up,” said Matt Teifke, a broker and co-owner of Teifke Real Estate in Austin, Texas. “If rates go down, [buyers] can afford a higher payment. It’s pretty much just fact.”
In short, it’s unclear if or when home prices will fall — and it could be more likely that they’ll stagnate rather than decline. But when or if that will happen is still unclear.
The bottom line
Buying a home is rarely a walk in the park, but right now it can feel even worse than usual. A combination of high mortgage rates and soaring home prices has led buyers to feel the pain. Many are wondering when either factor will change for the better, making it easier to find a place to call their own.
Mortgage prices could start going down a little bit next year, as the Federal Reserve is expected to lower federal borrowing rates at some point. As for home prices, it’s a bit cloudier; the expert opinions vary — and it could end up being market-dependent.
“Trying to time up the market is something that’s always going to be a guessing game,” said Teifke. “There’s always a tradeoff and there’s never a perfect time to buy.”
Ben Geier is a personal finance writer based in Brooklyn, New York.
Many people claim real estate investors cause homelessness by owning rentals and charging rent, however, they can play a significant role in preventing homelessness by implementing various strategies that promote affordable housing, stability, and supportive services. Real estate investors also provide rentals which are the next step from homelessness as most people in a dire housing situation are not able to buy for various reasons. Here are some key ways real estate investors can contribute to preventing homelessness:
Did landlords cause real estate prices to increase?
There is a growing trend stating that landlords are not needed and the world would be better off without them. This stance is backed up by many statements that tend to be grossly exaggerated or simply false. I am a landlord and of course, I am biased but I have been an investor, agent, author, and influencer in the real estate space for 20 years. I have seen what happens in the real world and know a thing or two about real estate. Many of the opinions about landlords and real estate investors stem from Facebook pages, politicians, or even educators who have zero experience with real estate.
Landlords do not push up prices because they are buying all the houses. In fact, the owner-occupied rate has increased from 62 percent to 66 percent from 2016 to 2023. There are 11 million more owner-occupied units in 2023 compared to 2016 and about the same amount of rental units. The truth is real estate investors have been selling much more than buying.
Rents have been rising because there are fewer rentals available due to landlords selling. That is simple supply and demand. Some people claim landlords buying all the houses is causing rents to go up, but that is the opposite of what happens in the economy when supply increases. The real cause of prices going up is the cost to build, replacement costs, and development costs.
How are landlords needed?
Some hypothesize that if landlords were eliminated (yes some advocate violence) housing would be more affordable and more people could buy. The problem with this theory is that not everyone can or wants to buy. Some people have bad credit or no job history which prevents them from getting a loan. Some want to travel or simply don’t want to buy a house. The theory that all landlords should disappear ignores these people and just assumes they will magically be able to buy a house because prices will be cheaper without landlords.
The theory that housing will be cheaper without landlords comes from the idea that a bunch of housing will be available to buy. However, that housing has occupants and renters living in the homes. There will not be a lot of housing to buy unless you kick those renters out. Sure some renters may be able to buy the house they are currently living in but there still won’t be a massive influx of supply unless there are millions of homeless renters. These theories also assume everyone will get a loan after the laws are all changed eliminating credit and other loan requirements. We saw what happened with loosened lending guidelines in 2008.
Without landlords, there will be massive amounts of homeless because the step from homelessness to housing is a rental not buying. Some people might say more social housing is needed. I can see that argument but landlords are not stopping more social housing from being created, in fact, they help create the social housing that exists.
How do landlords prevent homelessness?
The United States has many programs for those in need including Section 8 housing vouchers, local city and state programs, and affordable housing grants and tax benefits. Most social housing is not built or run by the government, it is run by investors. The government encourages affordable housing projects to be built and redeveloped but they are not the ones doing the work. It is real estate investors who build and create these properties. The US is not alone in this either. Many people point to Austria as having massive social housing programs. They fail to realize that private investors own most of that social housing. Section 8 vouchers are used on properties owned by investors, not the government.
House flippers also buy properties that are unlivable and make them livable again creating more houses which helps reduce homelessness and increases the housing supply as well. I have brought many single-family and multifamily properties up to livable standards after buying them vacant. Do I make money when I do this? Hopefully! If investors do not take on these projects, no one will and there will be less housing and more expensive housing because of supply and demand principles.
Real estate investors also build housing. They build apartments and even single-family homes. Do these turn into rentals? Yes, but that still adds inventory to the market which means more choices for buyers or renters. More inventory means a more stable housing market and fewer opportunities for out-of-control price increases.
Should real estate investors be restricted on what they can buy or build?
There are many people, including people in the real estate industry who feel real estate investors should be restricted on what they can buy or build. The government is trying to restrict investors from buying properties as well. Many of these programs are aimed at huge institutional investors but they are a tiny part of the real estate market. They own less than 1 percent of housing.
As I stated before there is a shortage of rentals on the market. That is why rents have been increasing so much.
The best way to increase rents and increase housing prices is to limit supply which is exactly what more restrictions on investors will do. The most expensive markets in the country have the most restrictions. Many large institutional investors are building houses as well when we desperately need more houses to be built! I can’t believe some of the people saying this is bad and must be stopped.
Without real estate investors there would be less housing, more homelessness, higher prices, and pretty much a disaster. Investors create affordable housing and putting more restrictions on them will discourage them from doing so and create less affordable housing.
The COVID-19 pandemic changed the way that we work. In-office attendance in some U.S. markets dropped 70-90 percent in 2020, according to The McKinsey Global Institute. The same research notes that in-office hours were 30 percent below pre-pandemic levels in 2022, with U.S. workers reporting to the office an average of 3.5 days.
The 2022 Renter Preferences Survey Report supports these findings. The largest group of renters surveyed (39 percent) were hybrid employees who worked from home a few times a week. Another 31 percent worked from home on a full-time basis. Remote work and hybrid work appear to be here to stay.
This shift away from the office hasn’t just changed the way people work in the United States. It’s changed where they live, too.
What hybrid workers want
The top cities for hybrid work are located all over the country. They include major urban hubs and small cities.
To find the best cities for hybrid workers, Rent ranked cities based on the coworking spaces per thousand work-from-home employees. This survey ranks the percentage of the population that works from home and measures the cost of living index. All features were weighted equally to come up with a score.
Commute length isn’t as important when workers aren’t going into the office so often (or at all), so a key benefit of apartments in the often expensive city centers disappeared almost overnight. Yet rent prices rose 4.77 percent across the country between December 2021 and December 2022, followed by another marginal uptick between the end of last year and October of 2023.
Saving money became a key concern for many renters. Many remote or hybrid workers moved away from properties in the city center and relocated to more affordable metros, cities, suburbs and neighborhoods.
A lower cost of living
Relocating to a city with a lower cost of living index can save even more money. In addition to housing prices, the cost of living index also measures the price of food, utilities, transportation, health care and miscellaneous goods and services.
The average cost of living in the U.S. is reflected with a value of 100. So a score of less than 100 means a city is more affordable than the national average. A score over 100 means that city is more expensive than average.
Coworking spaces are a plus for the hybrid workforce. They provide practical resources and technical support, as well as an opportunity to connect with other remote workers.
Many rental properties have expanded amenities designed to attract and retain remote workers. They include reliable, high-speed internet; expanded work and meeting spaces and extras like complimentary coffee and tea or social spaces to relax after hours.
The 10 best cities for hybrid work
Half of the 10 best cities for hybrid work are located in the South. Another three are found in the Midwest. The Northeast and West also claimed one community each.
Tampa is the tenth-best city for hybrid work in the United States. The cost of living in this culturally rich and diverse community on Florida’s Gulf Coast is almost exactly the same as the national average – 99.8.
The city has a robust hybrid workforce. A quarter (25.2 percent) of Tampa’s residents work from home in some capacity. That’s easy to do when there are 56 coworking spaces in the city, roughly one for every two remote workers.
Next up is Pittsburgh, the only Northeastern city on the list of the 10 best cities for hybrid work, Pittsburgh thrived as a Gilded Age industrial and cultural hub. It’s expanded to include 90 unique neighborhoods joined by hundreds of bridges.
The cost of living in Pittsburgh is comparable to the national average (100.4). But it’s much more affordable than many of the other major metropolitan areas in the Northeast, one of the most expensive regions in the country.
A substantial portion of Pittsburgh’s 300,431 citizens (30.3 percent) are hybrid workers. A respectable 42 co-working spaces rest within the city limits.
Bicycle-friendly Everett is the only Western city you’ll see here. Find this creative coastal city just off Puget Sound, 25 miles north of Seattle.
A cost of living index of 111.8 makes Everett the most expensive metro listed here. But it’s still more affordable than many other West Coast communities, which regularly top lists of the most expensive metropolitan areas in the country.
Everett is a small, approachable city (population 110,812), but it still supports remote work employees, who make up 15.6 percent of the city’s population. There are 17 co-working spaces in Everett.
Minneapolis is Minnesota’s artistic and cultural center. Located along the Mississippi River, it also offers acres of parks, green space and lakes for residents to enjoy.
It’s a good bet for remote workers too. There are 50 coworking spaces in Minneapolis. This support system has helped attract 147,591.6 (and counting!) hybrid workers to Minneapolis already. They comprise just over a third (34.7 percent) of the city’s population.
A cost of living score of 98.99 means it’s slightly cheaper to live in Minneapolis than the national average. Some of these savings came in the form of rent reduction; the Minneapolis–St. Paul–Bloomington metro saw the largest year-over-year rent decrease in the country between December 2021 and December 2022.
The genteel southern city of Savannah takes the No. 6 spot on this list. The coastal Georgia city oozes charm and historic ambiance, from its cobblestone squares to the shady parks and stately oak trees draped with Spanish moss.
The cost of living index in this community is lower than the national average at 90.1. A total of 13,237.92 Savannah residents currently work from home in some capacity.
Savannah supports 13 co-working spaces. That’s a relatively high number (nearly one co-working space for every thousand workers), considering that hybrid workers currently make up 9 percent of the city’s workforce.
Remote workers move to Greenville for a quaint Main Street, a robust art scene and easy access to lakes, hills and trails in Paris Mountain State Park and beyond. A low cost of living (90.6) is another benefit for residents.
With a population of just 72,095, Greenville is the smallest city in the top 10. But despite its modest size, it’s still attracted and supported 13,337 hybrid workers.
These hybrid work employees make up 18.5 percent of the city’s population. You can find them working from home and at 10 coworking spaces throughout the community.
Rapid City, SD
With a population of 76,184, Rapid City is the second smallest city here. But it’s the largest community in the Black Hills, a region of jagged peaks, lush forests and almost impossibly scenic byways and hiking trails in western South Dakota.
A cost of living index of 93 means it’s more affordable to live in Rapid City than the national average. South Dakota stayed affordable throughout the pandemic as well. It was one of only two states where rent prices didn’t increase in the early months of the pandemic.
Rapid City is well-equipped to handle remote work, as the city currently houses eight coworking spaces. That means you’ll find 1.1 coworking spots for every remote worker, one of the strongest showings on our list. These hybrid employees make up 9.3 percent of the city’s population.
Atlanta is a commercial and cultural hub and a historical powerhouse that was central to both Civil War and Civil Rights history. With a population of 496,461, Atlanta is both the largest city in Georgia and the most populous city on our list of hybrid work hot spots.
It’s also home to the largest hybrid workforce in the top 10 — 38.7 percent of Atlanta residents work from home at least part of the time, beating the famous Atlanta traffic a couple of days per week. They’re supported by 92 coworking spaces.
The cost of living index is 101.6. That means it’s slightly more expensive to live in Atlanta than the national average.
Orlando is famous for Walt Disney World and Universal Orlando. But the sunshine and comfortable climate that draw tourists to central Florida also attract remote workers ready for a change of scenery.
Hybrid workers currently make up 19.1 percent of Orlando’s population of 309,154. Find them at one of the city’s plentiful coworking spaces. You’ll find 68 coworking spaces in Orlando, just over 1.2 for every thousand remote workers. That’s tied for the most on this list.
The cost of living in Orlando is 104.8. That’s more than the national average.
Green Bay, WI
The best city for hybrid work is Green Bay, Wisconsin. This laid-back, bayside city is perhaps best known for its professional football team, The Green Bay Packers. But Green Bay’s outdoor recreation opportunities and home-grown shops, restaurants and breweries appeal to all ages.
A household budget goes further here. With a cost of living index of 89.9, Green Bay is the most affordable city in our top 10 spots for hybrid working.
Green Bay is one of the smaller metros on this list, with 107,015 residents. But it does a good job of supporting the 12 percent of the population that works remotely. Currently, Green Bay houses 15 coworking centers. That’s 1.2 coworking spaces for every thousand workers – the highest on this list.
The takeaway for hybrid workers
The pandemic changed how — and where — people work in the U.S. The best cities for hybrid work support the remote workforce with coworking spaces, affordability and a sense of community outside of a traditional office.
Looking for the best of both worlds, where you can work in your apartment one day and collaborate in person the next? Find your next rental home or apartment here. Type in one of the cities mentioned above and browse through all your options.
Rent prices are based on an average from Rent.’s available rental property inventory as of November 2023. The rent information included in this article is used for illustrative purposes only. The data contained herein do not constitute financial advice or a pricing guarantee for any apartment.
Foreclosure activity increased 23 percent in the first quarter compared to the previous quarter and was up 112 percent from a year ago, RealtyTrac said today.
Foreclosure filings were reported on 649,917 properties, or one in every 194 U.S. households, during the quarter.
RealtyTrac chief James J. Saccacio said foreclosure activity increased in 46 out of the 50 states and in 90 of the 100 largest metro in the nation areas during the first quarter.
Although he did note that some areas saw a decease in foreclosure activity due to non-market factors, such as the city of Philadelphia, because of their temporary foreclosure moratorium on owner-occupied properties.
However, he was quick to point out that the action to freeze foreclosures would likely just delay the inevitable and lengthen the time until recovery.
Nevada, California, and Arizona posted the highest foreclosure rates, while California led the nation in the total number of filings with 169,831.
Foreclosure activity in the Golden State was up 32 percent from the fourth quarter and nearly 213 percent from a year ago.
California and Florida metro areas accounted for 13 of the top 20 metro foreclosure rates, with Stockton and Riverside-San Bernardino taking the top two spots.
Philadelphia’s foreclosure rate ranked 82nd, thanks in part to a 30 percent annual decline in foreclosure activity.
Home Prices Continue Slide
Meanwhile, the February S&P/Case Shiller 20-city home price index fell 12.7 percent from a year ago, and was off 2.6 percent from January.
The 10-city composite index posted a record-low annual decline of 13.6 percent and a month-to-month drop of 2.8 percent.
“There is no sign of a bottom in the numbers,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Prices of single family homes continue to drop across the nation. All 20 metro areas were in the red for the February-over-January reading. In addition, 19 of the 20 MSAs are still reporting negative annual returns.”
“The monthly data show that every one of the MSAs has now declined every month since September 2007, marking six consecutive months. On top of that, the declines have remained steep with eight of the 20 MSAs and both composites reporting their single largest monthly decline in February.”
High home prices and interest rates have created many challenges for young Americans.
But the boomer generation has fewer reasons to complain.
Many have benefited from high home prices and bond yields and are less hurt by the economy’s cons.
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less affordable than it’s been in decades, but many older Americans are benefiting from the economic environment.
According to the National Association of Realtors, US mortgage affordability is at the lowest level since at least 1989. As of June, the median American had to spend over 43% of their income to meet a mortgage payment on the typical US home, according to the Atlanta Fed, the third-highest monthly figure since 2006.
These trends have been driven by the combination of high home prices and interest rates. This month, the median US monthly mortgage payment hit a record high of over $2,600. In the second quarter of this year, over half of the US housing market saw record price increases. At the same time, the 30-year fixed mortgage rate is near a two-decade high, in part due to the Federal Reserve’s campaign to raise interest rates and cool inflation.
If you’re a young, aspiring first-time homebuyer, these developments may sound dismal. But if you’re a member of the baby-boom generation, the youngest members being about 60 years old, there’s a good chance you have fewer complaints about high home prices and interest rates.
Of course, many older Americans are also struggling in today’s economy, but high prices and rates are generally more advantageous to them than to younger generations. Insider breaks down the reasons below.
Rising home prices increase the wealth of existing homeowners
For the roughly 70% of US 18- to 29-year-olds who didn’t own a home as of 2021, per the Federal Reserve, high prices might’ve made homeownership feel unattainable. First-time buyers accounted for just 26% of US home purchases last year, according to the National Association of Realtors, the lowest share since data collection began in 1981. By pushing up the number of renters, high home prices help keep young Americans’ rent prices high.
For many older Americans, however, high home prices have been a boon to their finances.
As of 2021, 84% of Americans ages 60 and older owned their home. The rise in housing prices over the past few decades — and especially the past few years — has helped boomers accumulate more real-estate wealth than any other generation, a New York Time analysis of Fed data found.
As of the first quarter of this year, boomers held about 53% of total US household wealth, the Fed said. While many Gen Xers and millennials have bought homes over the past decade, they held only 28% and 6%, respectively — partly because they haven’t had as much time to see their home values grow.
Rising interest rates affect you less if you’ve already been locked in a loan payment
Boomers historically faced significant housing-affordability challenges of their own, but many were able to refinance at lower rates over the years. And with their fixed mortgage rates now locked in, the recent spike isn’t a problem for those still paying off their mortgages.
For young Americans, there’s not a whole lot to like about high interest rates.
Elevated rates not only contribute to the high mortgage rates that have helped make homeownership so expensive but also make credit-card debt all the more costly. Americans could pay an extra $45 billion in credit-card interest this year because of the increase in rates alone.
Students who took out federal student loans this fallwere strapped with the highest interest rates in at least a decade. Those with variable-rate student loans from private lenders could see their borrowing costs rise as well.
Meanwhile, the average monthly car payment in the US reached a record high of $733 in the second quarter of this year, driven in part by elevated interest rates.
Older Americans aren’t immune to credit-card debt, but few are taking out student loans at this point in their lives. While some are purchasing new vehicles, many locked in a lower car payment years ago.
High interest rates boost low-risk investments for retired boomers
One of the most common pieces of investing advice for older Americans and retirees is to shift at least some savings away from lucrative but risky investments in the volatile stock market into more-stable but typically lower-yielding bonds.
Generally, investors are forced to accept a much lower return in exchange for bonds’ lower risk, but in today’s high-interest environment, many boomers have been able to have something close to the best of both worlds.
On Wednesday, yields on US government Treasury bonds reached the highest level since 2007. The rate of 10-year Treasurys was about 4.36%, up from a low of 0.32% in early 2020.
For younger investors eager to ride the stock-market roller coaster and grow their wealth over time, bonds are less attractive. Elevated interest rates, however, are weighing on the stock market because high Treasury bond yields have made investors less likely to dump money into stocks.
In the near term, US home prices are likely to continue frustrating young Americans and boosting the net worths of many boomers. High interest rates, meanwhile, are expected to persist, though experts say the Fed could begin cutting rates next year.
If you’re thinking about purchasing a home but you’re not really happy about the current mortgage rates, you’re not alone. According to Freddie Mac, home sales have slowed due to the 30-year fixed mortgage rate staying above 6.5% since May.
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Since the end of 2021, mortgage rates have made quite a leap. For example 30-year fixed-rate mortgages have increased from 3% to over 7.5% and 15-year fixed-rate mortgages have jumped from 2.3% to more than 6.7%. Even so, Dave Ramsey says the increase in mortgage rates shouldn’t deter you from shopping from a home.
Here’s why you shouldn’t wait for mortgage rates to go down to buy a house.
Why You Shouldn’t Wait for Mortgage Rates To Go Down
According to Ramsey’s blog, even though mortgage interest rates are high right now, if you’re financially ready to do so, you should go ahead and buy a house.
“Mortgage interest rates are high right now,” Ramsey said, “but we don’t know for sure whether they’ll go back down anytime soon — they may even keep going up if the Federal Reserve decides to raise the federal funds rate again.”
Ramsey also wrote that, no matter what, housing prices will keep increasing, as is normal, and the best course of action is to buy now and lock in your home’s price. Once interest rates decrease in a year or two, he wrote, you can refinance to a lower rate.
Additionally, Ramsey pointed out that because interest rates are high right now, fewer people are buying homes, which means you won’t have as much competition when you make offers.
Also: Grant Cardone Reveals 6 Cities He Would Buy Investment Property in Right Now (and Where He Would Avoid)
What If You Wait Until Mortgage Rates Go Down?
Matt Ricci, a home loan specialist with national lender Churchill Mortgage, said it’s reasonable to expect lower interest rates in the next 18-24 months.
“The United States will be in an election cycle,” he said, “so the economic climate will most likely favor lower interest rates.”
However, don’t get too excited. According to Ramsey, the drop in interest rates likely won’t be enough to make a significant difference.
“But even if mortgage rates do go down in 2024, odds are the drop won’t be drastic — it’s not like rates are going to quickly return to the 2% to 3% range we saw at the end of 2021,” Ramsey wrote. “The bottom’s not about to fall out here.
“For example, even though the National Association of Realtors believes rates will go down in 2024, they’re only predicting a half-percent drop — from 6.5% to 6% — by the end of the year. A lower rate is definitely nice, but that small of a drop isn’t worth waiting around for.”
Besides that, there are other issues to consider if you wait until mortgage rates decrease.
“While lower interest rates would certainly favor additional inventory,” Ricci said, “the ratio of renters in the market compared to homeowners — in combination with a major gap in new construction — will still favor a larger demand for housing than supply of housing for sale.”
Ricci also said that when rates come down, home prices could increase. “So, while you certainly would have a lower rate on a mortgage, you would also be spending and borrowing more.”
Are You Financially Ready To Buy a House?
Before you start the homebuying process, Ramsey recommends you check the following four boxes. If you can’t check all four, he recommends waiting until you can.
You don’t have any consumer debt. This includes student loans, credit card payments or car notes. This will ensure that you have more room in your budget.
You have at 3-6 months’ worth of typical expenses saved. Unexpected expenses happen and having a solid emergency fund will allow you to pay for them without using your credit cards or dipping into your retirement accounts.
You’ve saved a substantial down payment. If you’re a first-time homebuyer, you’ll need at least 5% to 10%, Ramsey wrote. Additionally, putting 20% down can allow you to forgo mandatory private mortgage insurance, which could save you hundreds of dollars per month.
You can afford the house payment. Your house payment, including principal, interest, homeowners insurance and HOA fees should not equal more than 25% of your take-home pay, according to Ramsey. If it is, you risk not being able to meet your other financial goals.
Ensuring you are financially ready to buy a house will help you avoid your home being a financial burden that you might regret.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: Dave Ramsey: Why You Shouldn’t Wait for Mortgage Rates To Go Down To Buy a House
Rent prices are on the rise, with the average cost increasing 18% between 2017 and 2022. But buying a home requires a hefty down payment and good credit. Renting to own your home can give you the best of both worlds, but there are some downsides.
If you’re thinking about signing a rent-to-own agreement, it’s important to weigh the pros/cons of rent-to-own home deals. Here’s what you need to know before you sign on the dotted line.
What are rent-to-own homes?
When you own a home, part of your monthly payments goes toward paying off the principal. If you stay in the home long enough, you’ll own it.
The same doesn’t apply to rentals. Your monthly rent solely covers your costs of living in that home, whether it’s a condo, apartment, townhouse, or single-family house.
A rent-to-own home lets you pay rent to live on the property, with the option to buy it when the lease runs out. In some cases, a portion of your rent goes toward the purchase price, but that isn’t always the case.
How does rent-to-own work?
A rent-to-own agreement is essentially a lease agreement with an option to buy. Rent-to-own contracts should be read thoroughly. Those options can vary from one contract to another.
When you sign a rent-to-own contract, you pay an upfront fee called an option fee. This is typically 1 to 5% of the home’s purchase price, and it’s non-refundable.
It’s important to note that a lease does not relieve you of the requirements to buy a house. You’ll still have to qualify for a mortgage and make a down payment. It’s merely a way to buy yourself some time and possibly put some of your rent toward the purchase price of a home.
Lease Option vs. Lease Purchase
Before you sign, pay close attention to the lease agreement you’re signing. There are two types, and one contractually obligates you to buy the property.
Lease Option Agreement
A lease option agreement is the best deal of the two for you, the buyer. You’re signing a lease option contract that merely gives you first rights to the house when the lease is up. If you change your mind, find a better deal, or can’t qualify for a mortgage, you can find somewhere else to live and move your belongings out.
Since the option fee is nonrefundable, it’s important to note that you will lose money if you choose not to buy. Calculate this loss when you’re deciding whether to buy.
Lease Purchase Agreement
Unlike a lease option agreement, lease purchase agreements obligate you to buy at the end of the lease. Since it’s a contract, that means you’re legally obligated to purchase the house.
This can be risky for a couple of reasons. Once you’re in the house, you may see issues you didn’t notice when you were first touring the house. Things could change with the neighborhood or your circumstances that you couldn’t know at the outset.
But the biggest issue with a lease purchase contract could simply be that you aren’t eligible for a mortgage to buy the house. Make sure you know, up front, what penalties or liabilities you’ll face if you can’t buy the house when your lease is up.
Even though both agreements operate differently on your end, they do obligate the seller to give you the option to buy when your lease expires. This puts you in a position to own a home at a predetermined future date, giving you the opportunity to start planning.
Length of a Rent-to-Own Agreement
Rent-to-own contracts start with a lease period that can be up to five years but is usually less than three. The thought is that the rental period will give a renter time to qualify for a mortgage. During this time, you’ll work on building your credit, if necessary, and saving for a down payment.
In some cases, a rent-to-own arrangement could have renewal terms. That means if you reach the end of the lease and want more time, you can extend the lease. With this option, though, the property owner could increase your monthly rent or the purchase price.
Preparing for Homebuying
During your lease term, you’ll make each monthly rent payment in exchange for remaining in the house. But it’s important during that time that you work toward purchasing the house when your time is up. Here are some things to do to boost your chances of landing a mortgage once your lease expires.
Boost Your Credit Score
Your rent-to-own deal requires that you qualify for a mortgage once the term is up. To do this, you will need to meet the minimum credit score requirements. You can get a free copy of your credit report each year at AnnualCreditReport.com, but there are also credit monitoring services that can help you stay on top of things.
Although requirements can vary from one lender to the next, Experian cites the following credit scores as necessary to land a mortgage:
FHA: If you qualify, a Federal Housing Association loan will accept credit scores as low as 500.
USDA loans: Those who meet the requirements can qualify with a score as low as 580.
Conventional loan: Generally 620 or higher, but some lenders require 660 at minimum.
VA loans: Eligible military community members and their families can obtain loans with scores as low as 620.
Jumbo loan: These loans cover houses at a higher price, so you’ll need a score of at least 700.
Save for a Down Payment
In addition to a good credit score, you’ll need to put some money down on your new home. Down payment requirements vary by loan type, but it’s recommended that you put at least 20% down. That means if you’re buying a $200,000 home, you’ll need at least $40,000 by closing.
There are lower down payment options, but if you choose those, your mortgage payments will include something called private mortgage insurance. This will increase your monthly payment by $30 to $70 per $100,000 borrowed.
If you can’t save up 20%, you may qualify for an FHA loan, which requires as little as 3.5% down. Both VA and USDA loans have zero down payment options, and there are programs offering down payment assistance to those who qualify.
The best part about rent-to-own properties, though, is that some come with rent credits. With a rent credit, a percentage of your rent will go toward your required down payment. Calculate in advance how much you’ll have in that escrow account at the end of your lease to make sure you save enough to supplement it.
What are the pros of rent-to-own?
Rent-to-own homes can be a great option, especially during a tight housing market. If there’s a house you want to buy, but you can’t make a down payment or your credit isn’t where it should be, it could be a great workaround. Here are some of the biggest benefits of rent-to-own agreements.
Rent May Go Toward Purchase Price
Depending on the terms of the rental agreement, renting to own could help you work toward paying for the home. Instead of the full amount of your rent being pocketed by a landlord, a percentage of your rent could go toward the eventual purchase price. Before signing, pay attention to rent credits and try to negotiate the best deal possible.
The Purchase Price Is Locked In
When a landlord agrees to a lease option, the home’s purchase price is written into the contract. That price will typically be higher than what the market says it’s currently worth. This means if the U.S. housing market sees an unexpected increase, you’ll be buying the home for less than its value. Even if the market dips, once you purchase the house and remain there for a few years, you may be able to sell it at a profit.
You’ll Buy Extra Time
For many renters, the rent-to-own period provides time to qualify for a mortgage. If you’ve researched all the options and found you’re close but not quite there yet, a rental period could be just what you need.
Before you choose this option, though, take a look at your circumstances. If substantial existing debt and poor credit mean you won’t qualify, you may need more than the few years you’ll get with a rent-to-own agreement.
No Moving Necessary
Let’s face it. Moving can be a pain. You have to pack everything up, line up a moving truck and get help moving, and unpack your items once you’re in the new location.
With a rent-to-own agreement in place, you skip the hassle of moving. You’ve already been in that home, making monthly rent payments, for at least a couple of years. You’ll simply go through the closing process and switch from rent payments to mortgage payments.
What are the cons of rent-to-own?
If you can get a mortgage, that’s always going to be a better option than renting or leasing to own. But there are some instances where renting without the buy option could be better for you. Here are some things to consider.
Rent-to-Own Home Maintenance
Before you sign any lease agreement, it’s important to read the fine print. One thing to note, specific to own agreements, is who will be responsible for maintenance during the rent-to-own period. If you rent without the promise of eventual ownership, your landlord will take care of those costs. In some cases, rent-to-own agreements require the renter to handle all repairs.
But there’s an upside to handling repairs on your own. To your landlord, the property is technically yours. That means you likely will give it more TLC. Still, it’s well worth it to pay for a home inspection before you agree to a rent-to-own agreement. This will identify any serious issues that will need to be addressed before you buy.
One distinguishing feature of a rent-to-own property is the option fee. This is usually between 1 and 5% of the purchase price and is non-refundable. That means if you don’t ultimately qualify for a mortgage, you’ll lose that money.
Home Values Could Drop
Property values aren’t guaranteed. Your landlord estimates the value of the property, but if you’re in a rising market, you might get that home at a steal. While that’s good news for you, the reverse can happen. If housing prices drop substantially during that time frame, you could find yourself buying a property for more than it’s worth.
Contract Breaches Can Be Costly
Rental agreements are a legal obligation. If you don’t pay your rent, your landlord can evict you and keep your security deposit. But rent-to-own contracts bring an additional level of risk. Missed payments mean you could be evicted and lose all the money you’ve put in. That includes the upfront fee and any rent credit you’ve earned.
All that money will also be lost if you can’t qualify for a mortgage when your rental time is up. These agreements can give you some breathing room. However, if your low credit scores, income, lack of a down payment, or employment situation make you ineligible for a mortgage, you could be searching for another rental while losing everything you’ve paid on the lease-to-own home.
Steps to Buy a Rent-to-Own Home
Once you’ve decided renting to own is the route you want to take, you may wonder what to do next. The following steps can help you ensure you get the best deal in a rent-to-own agreement.
1. Find a Home
This is more challenging than it might sound, especially if you’re looking in a competitive real estate market. Rent-to-own homes are extremely rare, so you may have to find a home for sale and try to negotiate this type of setup.
Typically, homeowners become renters when they can’t sell their homes. This means your rent-to-own contract might be on a home that’s in a less desirable or convenient area of town. For someone whose home has been on the market for a while, being able to collect rent money with the promise of a sale in a few years can be a huge relief.
For best results, find a real estate agent who can help you track down a home and negotiate with the seller. The National Association of REALTORS® maintains a directory of real estate agents, but you can also ask for a referral or find real estate agents nearby who have brokered these types of deals recently.
2. Research the Home
Even if it’s tough to find a lease-to-own home in your area, don’t snatch up the first one you find. Crunch the numbers to make sure the rent and purchase price make financial sense for you. Look at the sale history of the home to verify that the owner’s estimated purchase price is somewhat within what the median home price will likely be when your lease expires.
3. Research the Seller
The seller needs to be looked into as well. This is even more important with rent-to-own agreements since this person will be your landlord for the entire lease period. If you see any red flags during your interactions with the seller, move on.
4. Choose the Right Terms
Before you make a real estate purchase, you would have a closing attorney review the documents. The same goes for a rent-to-own agreement. Run all the paperwork past a real estate attorney to make sure there’s nothing in the contract that will hurt you in the long run.
Your real estate agent should be able to negotiate the best terms for you, including how each rent credit will help you build equity and what happens at the end of the lease.
5. Get a Property Inspection
Any time you make a home purchase, it’s essential to know what you’re buying. The same is true for rent-to-own properties. A home inspector can check things out and make sure you aren’t purchasing a home with serious issues.
6. Start Preparing to Buy
Once you start making rent payments, it’s time to start preparing for your eventual home purchase. Chances are, you’ll have to make a sizable down payment on a home loan, so plan to have that ready. Also, keep an eye on your score with all three credit bureaus and make sure you’ll qualify.
A rent-to-own contract can be a good deal for both the buyer and the seller. It can give you time to save money and improve your credit score. A real estate lawyer should take a look at your contracts and make sure your best interests are protected.
Rent-to-own homes present a unique option for potential homeowners. This approach offers the opportunity to enter the homeownership arena at a slower pace, allowing individuals to build credit, save for a down payment, and experience living in the home before making a final purchase decision.
However, the rent-to-own path isn’t free from drawbacks. Potential buyers should be wary of unfavorable terms, higher monthly payments, and the risk of losing money if they decide not to buy. Ultimately, like all significant decisions in life, choosing a rent-to-own option requires careful consideration and thorough research.
Frequently Asked Questions
Where can I find rent-to-own houses?
Rent-to-own houses can be found through specialized websites dedicated to these types of listings, local real estate agents familiar with the concept, or sometimes through classified advertisements in local newspapers or online platforms.
Can I find rent-to-own homes on Zillow?
Yes, Zillow does list rent-to-own homes. When searching for properties, you can filter the search results to show only rent-to-own options. However, availability may vary based on the region and market conditions.
How long is the typical rent-to-own contract?
The typical lease term ranges from one to five years, but terms can vary based on the agreement between the homeowner and tenant.
Do I have to buy the house at the end of the lease?
No, the decision to buy is optional. However, if you decide not to purchase, you may lose any upfront fees or additional monthly amounts set aside for the potential purchase.
Can the seller change the purchase price once set?
Generally, the purchase price is fixed in the initial agreement. However, some contracts may have clauses allowing price adjustments based on market conditions.
What happens if the property value decreases during the lease period?
If the home’s value decreases and you’ve agreed on a set purchase price, you could end up paying more than the current market value. It’s crucial to negotiate terms that protect your interests.
Who is responsible for repairs and maintenance?
The agreement should clearly outline these responsibilities. In most cases, the tenant bears the responsibility for maintenance and repairs during the lease term.
What’s the benefit of a rent-to-own agreement for sellers?
Sellers can generate rental income while waiting to sell, often at a premium. It also widens the pool of potential buyers, especially those who need time to improve their credit or save for a down payment.
How do property taxes work in a rent-to-own agreement?
In a rent-to-own scenario, the property taxes are typically the responsibility of the homeowner, as they still retain ownership of the property during the rental period. However, the specific arrangement can vary based on the terms of the agreement.
Some contracts may stipulate that the tenant pays the property taxes directly or reimburses the homeowner. It’s crucial for both parties to clearly understand and agree upon who will cover the property tax obligation before entering into a rent-to-own contract.
If I don’t buy, do I get a refund for the extra money paid?
Typically, the extra money paid above regular rent, often referred to as “rent premium,” is forfeited if you decide not to buy.
Is the rent in a rent-to-own agreement higher than usual?
Often, yes. A portion of the monthly rent may be used for the potential down payment or purchase price, making it higher than the average rent for similar properties.
What’s the difference between rent-to-own and mortgage?
Rent-to-own is an agreement where a tenant rents a property with the option to buy it at the end of the lease. No bank is involved initially, and the tenant isn’t obligated to buy. A mortgage, on the other hand, is a loan specifically for purchasing a property. The buyer borrows money from a bank or lender and agrees to pay it back with interest over a predetermined period.
Does rent-to-own hurt your credit?
A rent-to-own agreement, in itself, doesn’t usually affect your credit. However, if the homeowner reports late payments to credit bureaus, it could hurt your credit score. On the positive side, consistently paying on time and eventually securing a mortgage can benefit your credit.
What is another name for rent-to-own?
Rent-to-own agreements can go by various names, including:
Lease to purchase
Each of these terms represents the concept of renting a property with the potential option to buy it after a set period.