“Shelter inflation—rent and homeownership costs—is still rising well above a 5% rate driven largely by a nationwide shortage of 1.5 million housing units,” Martinez said. “The only way to tame inflation and bring housing costs down is to remove the barriers preventing home builders from increasing housing production.” Martinez highlighted several factors contributing to the … [Read more…]
Some things to look for are what are known as “horizontals”. These are structural amenities local to the site of the planned build such as paved roads, power lines, and water lines. These prospects can look like an undeveloped lot in an existing suburban neighborhood, or what is known as an “In-fill” in more Urban … [Read more…]
Homes in Nunaka Valley neighborhood of East Anchorage. (Loren Holmes / ADN)
Last year in Anchorage, housing reached its least affordable level in the last 21 years — worse even than during the Great Recession more than a decade ago, according to new data from the Alaska Department of Labor and Workforce Development.
State economists reported a similar statewide trend in May. In 2023, housing in Alaska was at the least affordable level since 2006.
The cost of home ownership in Alaska has increased dramatically since 2018, according to data provided by Alaska Housing Finance Corp. The average mortgage payment — principal loan amount plus interest, but excluding property taxes, insurance and other costs — rose by 52% between 2018 and 2024.
Rents have soared in that same time period.
“The rental market has gone up by about 24% in terms of the pricing escalation across the state,” said Daniel Delfino, an economist and director of planning at Alaska Housing Finance Corp.
City officials have called the situation in Anchorage a housing crisis. They’ve pointed to a tangle of factors: the spike in housing costs, a low rental vacancy rate, a rising number of short-term vacation rentals, a decline in housing development, increasing building costs and a labor shortage, among others.
The new data sheds further light on the difficulties of renting or buying a home in Anchorage today.
It’s become a central issue in recent city policymaking and discourse. Mayor Suzanne LaFrance, sworn in on Monday, says housing is a top priority for her administration.
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The Assembly has aimed to spur more housing development with a series of changes made to city code over the last two years. Late last month, the Assembly voted to essentially eliminate single-family zoning in the Anchorage Bowl, by allowing duplexes to be built in areas that were previously zoned only for houses.
To Assembly Vice Chair Meg Zaletel, one of the sponsors of last week’s measure, a housing crisis means that people across the economic spectrum “can’t achieve appropriate housing, attainable housing that’s suitable to their needs,” she said.
“That’s renters who are stuck at the top of the rental market who can’t move into home ownership. That’s people needing to double or triple up in order to afford rent. That means there just aren’t enough housing units for the market to respond to the various circumstances and needs,” she said.
More expensive, fewer homes for sale
Downtown Anchorage, photographed from Fish Creek. (Loren Holmes / ADN)
The median rent in Anchorage increased by 7.8% since last year, rising from $1,275 to $1,375 in 2024, according to AHFC’s data. That doesn’t include the cost of utilities.
AHFC’s rental data comes from a yearly survey in March done by the state Department of Labor. It “runs the full gamut” of rental housing, from studios to four bedrooms and larger, and excludes rentals that have income restrictions, like those for affordable housing programs, Delfino said.
This year’s increase comes after Anchorage rents rose 14.2% in 2022 and jumped another 5% in 2023, according to state data.
The U.S. Department of Housing and Urban Development defines being “housing cost burdened” as spending more than 30% of a person or household’s monthly income on rent or mortgage payments and utilities.
Among economists, there isn’t a broadly used definition of a “housing crisis,” nor is there a defined level of ideal affordability, said Rob Kreiger, an economist with the Alaska Department of Labor and Workforce Development who authored the May report.
That’s because what may be affordable varies by the circumstances and income of an individual, he said.
But with Anchorage housing at its “least affordable level” in two decades, “I think right now, what we’re seeing is, it’s really prohibitive for first-time buyers to afford a home, and it’s really expensive to rent as well,” Kreiger said.
Statewide, “it’s more expensive, and there are fewer homes on the market,” Delfino said, adding that the reported number of homes sold and mortgage loans recorded has dropped “pretty significantly over the past couple of years.”
According to the National Association of Homebuilders’ chief economist, more than 86% of residents can’t afford the cost of a newly constructed home in Anchorage.
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State economists measure home purchase affordability with the Alaska Affordability Index, a calculation that uses the average mortgage payment and average monthly wages to determine how much income it takes to afford a home.
An average index of 1 would mean that average monthly wages are just enough for one person to afford the average monthly mortgage payment for an average priced home.
The state and Anchorage saw the lowest indexes — the most affordable housing — in 2020 and 2021. Mortgage interest rates dropped significantly during that time as the federal government took actions to stabilize the economy during the pandemic, Kreiger said.
But by 2023, Anchorage’s affordability index jumped to 1.8. That means to afford the average Anchorage home, it takes about two people working full time at the average wage.
The Anchorage-specific data only dates back to 2002, and housing last year was at its least-affordable level in that timespan.
In 2023, Alaska’s overall affordability index was 1.66, the highest since 2006. That dataset dates back to 1992.
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‘Alaska has a problem with keeping young people’
What the state data doesn’t show or quantify is how the rapid increases in housing costs are affecting everyday residents, Delfino and Kreiger said in separate interviews.
“Given that things have moved a lot, and so quickly recently, it’s that stuff underneath the data set that affects real people that I would say is probably really pressing when we talk about the affordability,” Delfino said.
Before passing the zoning measure, the Assembly last month heard an outpouring of testimony from Anchorage residents. Many described struggling to find homes to rent or buy, or told stories of loved ones moving away because housing here is scarce and expensive.
“Based on my experiences as a renter and as a young person in Anchorage, it is very difficult for young people to find adequate housing in Anchorage. If you have a pet — forget about it,” said Sean McDowell, a renter in South Addition. McDowell said he lost his previous housing because the owner turned it into an Airbnb for the summer.
“We all know that Alaska has a problem with keeping young people. If there’s nowhere to live for young people, if it’s difficult to find a long-term rental in Anchorage, young people are going to keep leaving,” McDowell said.
Sean McDowell testified before the Anchorage Assembly about the lack of affordable housing at a meeting in June . McDowell is a renter in the South Addition neighborhood, where he was photographed this week. (Anne Raup / ADN)
“To what extent is housing playing in people’s decision to leave or stay here? It’s hard to say,” Kreiger said.
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As homeownership becomes more expensive, the point in a person’s life when they switch from renting to buying a home moves further out, Kreiger said in his May report.
“That gap is wider and wider, so it’s harder and harder to make that transition. So we see people that, six years ago, would have become homeowners, staying in an increasingly tight renter market,” Delfino said.
And then there’s wages.
For some Alaskans, raises and regular cost of living pay increases have helped to defray the pressure of rapidly rising housing costs.
But for many residents, it’s unlikely wages will increase quickly enough in the near term to make up the difference, Kreiger said.
“When we’re looking at inflation that’s as recent as it is, how quickly everyone’s salaries have caught up to the increased cost of living, I think, drives how acutely people feel the affordability pinch,” Delfino said.
A worker in Alaska, paid at the state’s minimum wage, $11.73 an hour, needs to work 75 hours a week in order to afford a modest, one-bedroom apartment at the statewide fair market rent, according to the National Low Income Housing Coalition’s annual report.
A full-time worker in Anchorage needs to make at least $27.96 per hour to afford a two-bedroom at the fair market rent of $1,454. A person making minimum wage would need to work 96 hours to afford the same apartment, according to the report.
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Getting back to average
Homes in Anchorage’s Westpark development south of Ted Stevens Anchorage International Airport. (Loren Holmes / ADN)
Another factor in increased housing costs is how rapidly mortgage interest rates have risen. Interest rates are a “critical component” making housing less and less affordable, Kreiger said.
When rates dropped during the pandemic, “it brought a lot of competition and buyers to the market that wouldn’t have otherwise been able to participate,” Kreiger said.
The average sales price for a single-family home in Anchorage rose 26% between 2019 and 2023, from $389,477 to $490,596, according to state data.
“Because you had that big rush of buyers and all that competition, and you have on top of that, this limited amount of homes for sale and limited construction … that’s really what I think put prices up so high,” Krieger said.
Since then, the average interest rate for 30-year fixed-rate mortgages has seen an unprecedented rise, according to Kreiger’s May report.
The average rate in Alaska is 6.33% — the highest since 2006.
Not only is it more difficult for a first-time home buyer to purchase a place to live, but the high interest rates can keep people stuck in homes they’ve owned for a few years.
“When the costs go up, especially if you’re a person who locked in an interest rate at 2.5% and you’re looking at moving, it’s the question of, could you afford your own home if you had to buy it today?” Delfino said.
For many residents, the answer is likely no, he said.
It’s another impact that’s difficult to quantify.
“We know all these things are happening,” Kreiger said. “… We know that there’s people who are stuck, we just don’t know how many there are.”
Still, for many longer-term homeowners who’ve built up equity, the market has never been better, Kreiger said in his report.
Housing affordability is unlikely to change much in the near term, Kreiger said. Wages will rise over time, but not quickly. Home sales prices “may level off and may come down a bit,” but not significantly, he said.
Interest rates are the most realistic variable that could help drive the index back down, he said.
Barring another major event like the pandemic, the rate is “not going to come down to where it was,” Kreiger said. “And depending on how things go with inflation, it may not actually happen for quite some time, but eventually they will come back down and create more of a normal situation.”
Anchorage’s average affordability index between 2002 and 2023 is 1.47.
In order to get back to the average affordability, wages would need to increase 22.5%, or home sales prices would need to drop by 18.4% — or around $90,000.
If only the average interest rate for a mortgage changed, it would need to drop to 4.5%.
The Biden Administration is awarding $85 million in grants to 21 local governments to build affordable housing in what officials call a “first-of-its-kind” program.
The Pathways to Remove Obstacles to Housing, or PRO Housing program, will deliver an additional $100 million out of the government’s fiscal year 2024 budget in an application process, officials said. The Department of Housing and Urban Development made the announcement Wednesday with Vice President Kamala Harris.
Cities, counties, states and other jurisdictional entities must describe how they’ll use the funds to address affordable housing barriers in zoning and permitting; financing gaps; infrastructure upgrades; and preservation of aging housing. HUD said combined requests from 175 communities exceeded $13 for every $1 available.
“We have lots of other money to actually build housing,” a senior housing official told the media, mentioning other HUD programs. “So this is not at all the only money that we have to address housing. We have billions of dollars here to help build more affordable housing.”
The Biden Administration asked for another $100 million in PRO Housing grants in its fiscal year 2025 budget, among $258 billion it’s proposed for housing efforts.
The awards come a day after HUD announced an unrelated $142 million in grants and loans, under its Green and Resilient Retrofit Program, to improve over 2,200 properties for low-income residents. The GRRP, created by the Inflation Reduction Act, has $754 million in funding and has aided over 16,400 rental properties.
In another unrelated move, the U.S. Department of the Treasury Monday said its Community Development FInancial Institutions Fund will provide $100 million over three years to support affordable housing production. Officials emphasized the Treasury announcement related to financing tools, while PRO Housing resources will be realized this summer.
Some of the PRO Housing funds will go to projects already underway, officials said. Some of Milwaukee’s $2.1 million award will address aging housing, while some of Denver’s $4.5 million will be used to upgrade utilities. While major cities won awards, Ketchum, Idaho, with a population under 4,000 residents, won $2.5 million.
“When people are doing affordable housing projects, and they find there’s an unexpected need for a new electrical line or sewer line, they can come and have infrastructure funding through PRO for their infrastructure remediation needs,” a senior housing official said.
The effort is part of President Biden’s moves to address the nation’s housing crisis, including a pending bill to provide $25,000 in down payment assistance to first-generation homebuyers.
Treasury Secretary Janet Yellen Monday separately suggested the Federal Home Loan Banks improve upon their affordable housing program, to expand their required net income contributions from a required 10% to 20%. Some banks have already upped their AHP funding to 20% voluntarily.
The Federal Housing Finance Agency last week requested public input on the Banks’ AHP, which critics have called overly complicated. The FHLBs’ contribution to affordable housing amounted to around $350 million last year.
Federal Reserve Chair Jerome Powell said during a Federal Open Market Committee press conference that the central bank must control inflation to keep the housing market from becoming even tighter, but experts say there are things the agency could do besides cutting interest rates that might lower housing costs.
Bloomberg News
The Federal Reserve’s tough love approach for the housing market has fueled a long simmering debate about the central bank’s role in the country’s ongoing affordability crisis.
After this week’s Federal Open Market Committee meeting, Chair Jerome Powell said the best thing the Fed can do for the housing sector is keep interest rates high until inflation is fully under control.
“The housing situation is a complicated one, and you can see that’s a place where rates are really having a significant effect,” Powell said during his post FOMC meeting press conference. “Ultimately, the best thing we can do for the housing market is to bring inflation down so that we can bring rates down, so that the housing market can continue to normalize. There will still be a national housing shortage, as there was before the pandemic.”
When the Fed raises interest rates, its goal is to curb demand in the market by increasing borrowing and financing costs. For the housing sector, the thinking goes, as mortgages become more expensive, fewer people want to buy homes and prices stabilize.
But some economists say reality is not so simple. Mark Zandi, chief economist at Moody’s Analytics, said the elevated rates are not only curbing demand for new mortgages, they are also weighing on the supply side of the housing market in various ways, making it more costly to acquire land and develop both rental and for sale homes.
Zandi added that many existing homeowners feel “locked in” to their current, ultra-low mortgage rates, “thus limiting the supply of existing homes for sale, and reducing demand for homeownership and thus increasing rental demand and rents.” This is especially significant given that rents — and rental equivalents for owned homes — are how shelter costs are measured in inflation indexes.
“Given the unusual circumstances in the nation’s housing market, the higher rates are weighing on housing supply, pushing up rents and housing inflation as measured by the CPI and PCE deflator,” Zandi said.
Meanwhile, other economists and policy experts support the Fed’s approach. Diane Swonk, chief economist at the financial services firm KPMG, said cutting rates would induce greater demand in an already supply-constrained market, thereby increasing prices further without addressing the key factor holding back new supply: local zoning and land use laws.
“Washington can point at the Fed and say fix [the housing market], but the Fed doesn’t really have the tools to fix it,” Swonk said. “The tool they do have, if they were to wield it right now, the fear is that they would just stoke a more pernicious bout of inflation rather than defeat it.”
But others say the Fed has another tool to address housing affordability in a more meaningful way than by cutting interest rates alone: its balance sheet.
At the onset of the pandemic, the Fed purchased mortgage-backed securities en masse as part of a quantitative easing effort aimed at keeping financial markets functional. Its MBS holdings more than doubled during the next two years, peaking at $2.7 trillion before the Fed began allowing the assets to roll off their books. It still holds more than $2.3 trillion of mortgages today.
“The Fed bought way too many mortgages for way too long in the name of COVID relief and is now, somehow, perplexed that home prices continue to appreciate,” said Aaron Klein, a senior fellow in economic studies at the Brookings Institution. “Part of the problem was caused by the Fed’s balance sheet purchases. The solution may also lie on the balance sheet.”
The Fed’s mortgage holdings — which include securities backed by the government-sponsored entities Fannie Mae, Freddie Mac and Ginnie Mae — make up a significant portion of the overall market for outstanding agency MBS, which totals more than $9 trillion.
The Fed’s purchases provided liquidity to the mortgage market, driving down yields and driving up asset prices. To reverse this, Klein said, the Fed could sell its MBS assets into the market, though he noted that such a move would not be welcomed by existing homeowners.
“Having propped up home prices, the Fed is now loath to lower home prices,” he said. “It’s very politically unpopular to lower somebody’s home price.”
Mark Calabria, the former director of the Federal Housing Finance Agency, notes that the Fed’s preference for continued higher rates does not preclude it from driving down its MBS holdings more aggressively.
Calabria agrees that it would be premature to cut interest rates, noting that inflation also factors into mortgage costs.
“Ultimately, expected inflation enters mortgage rates,” he said. “The current rates are not simply a reflection of Fed tightening but also reflect inflation expectations.’
At the same time, Calabria said the housing market would benefit from the Fed shrinking its mortgage holdings more quickly.
“The Fed should never have purchased so much MBS in the first place,” he said. “The best move now would be to sell off more of its MBS.”
Some Fed officials have said the Fed should seek to exit the mortgage market entirely. Fed Gov. Christopher Waller has said he’d like the Fed’s MBS holdings to fall to zero, though he has not endorsed actively selling assets.
As part of its quantitative tightening campaign, which began in June 2022, the central bank is allowing up to $35 billion of mortgage securities to mature monthly without replacing them. During its May meeting, the FOMC voted to maintain the cap on MBS runoff while lowering its limit on Treasury securities maturation from $60 billion to $25 billion. It has also begun reinvesting the MBS principal payments that exceed the cap into Treasuries, accelerating the shift away from mortgages.
To this point, mortgages have rolled off the Fed’s balance sheet more slowly than Treasuries. Since the Fed began this round of quantitative tightening, its MBS holdings have declined roughly 13%, compared to 22% for Treasuries. This is in part because of the higher cap on Treasuries, but also because mortgages typically have longer durations. Higher interest rates have led to fewer refinancings, thus limiting the number of mortgages being paid off early, too.
The debate about whether higher rates do more to help or hurt the housing market has centered, in recent months, on the outsize role shelter costs have played on the overall inflation picture.
The Bureau of Labor Statistics’ Consumer Price Index, or CPI, report for May, which was released this week, showed shelter costs are up 5.4% over the previous 12 months, compared to an overall inflation reading of 3.3%, or 3.4% when factoring out food and energy costs.
During his post FOMC press conference, Powell said the stickiness of housing inflation readings is partially the result of how that category of price growth is measured. U.S. inflation indexes focus on rental costs — along with estimates of owner’s equivalent rent for owner-occupied properties — which rose sharply after the COVID crisis subsided. Because these changes are only recorded when new leases are signed, Powell said it has taken longer than expected for data to reflect recent slower price growth.
“What we’ve found is that there are big lags,” he said. “There’s sort of a bulge of high past increases in market rents that has to be worked off, and that may take several years.”
Mike Frantantoni, chief economist for the Mortgage Bankers Association, noted that the Fed’s preferred measure of inflation — the core personal consumption expenditures, or PCE, price index — applies a smaller weight to shelter costs. This is why this inflation reading, which came in at 2.8% in April, is even closer to the Fed’s 2% target than CPI.
While some say this reading is close enough to begin relaxing monetary policy — with the hope that a more normalized housing market could help carry it the rest of the way — Frantantoni said this is a gamble that carries more risk than reward for the housing sector.
Frantantoni said lower rates would lead to more construction activity and alleviate lock-in effects, but noted that those changes would take a long time to play out and, ultimately, provide benefits to the market. He would rather see the Fed wait until price growth has stabilized across the board before trimming its policy rate.
“Changing their monetary policy framework to ignore shelter prices now, at the onset of a rate cutting cycle, would not be a good tactical move,” he said.
Mortgage rates aren’t budging, and neither is the Federal Reserve… yet.
The Fed’s governing body, the Federal Open Market Committee, is meeting today and tomorrow (June 11-12) to decide whether to make any adjustments to its benchmark interest rate. But experts say the FOMC isn’t likely to break from its holding pattern.
Until inflation cools enough for the Fed to start cutting rates, homebuyers shouldn’t expect mortgage affordability to improve much. However, if inflation continues to decelerate and the Fed is able to make even one rate cut down the road, we may see some modest improvements in mortgage rates by the end of the year, according to Odeta Kushi, deputy chief economist at First American Financial Corporation.
That’s a big “if.”
On Wednesday, we’ll receive an updated Summary of Economic Projections, which could offer clues as to the direction of mortgage rates over the next several months.
“In the SEP, we’ll learn if Fed members still expect to be cutting rates this year or not, and get a sense of where they believe economic growth, unemployment and inflation will be headed for the remainder of 2024 and beyond,” said Keith Gumbinger, vice president of mortgage site HSH.com.
High mortgage rates have made buying a house prohibitively expensive. I spoke with several housing market experts about their expectations for Fed rate cuts and when we might see lower mortgage rates in 2024.
Why is the Fed holding off on rate cuts?
Since progress on inflation has been slow and the labor market remains strong, the Fed has reason to hold off on lowering rates for another month, if not more.
It’s a delicate balancing act. The Fed wants to see unemployment levels increase just enough to bring inflation down, but not so much that we fall into a recession. The Fed also wants to avoid cutting interest rates too soon, only to have inflation rear its head again. By holding interest rates steady, the Fed can continue to assess the overall economy.
“The Fed won’t cut rates until they have good reason to do so,” said Alex Thomas, senior research analyst at John Burns Research and Consulting.
The Fed doesn’t directly set mortgage rates. However, its policy changes, as well as investors’ expectations for future policy changes, influence whether rates on home loans move up or down.
What do inflation and labor market data have to do with interest rates?
The FOMC will be closely monitoring the Consumer Price Index for May, released Wednesday before its meeting concludes. The central bank wants to see inflation move closer to its target annual rate of 2%. The Personal Consumer Expenditures Price Index (the Fed’s preferred measure of inflation) showed prices growing at an annual rate of 2.7% in April.
The other big metric the Fed cares about is employment. Last week’s labor report showed the unemployment rate reaching 4% for the first time since January 2022, with the US adding 272,000 jobs in May, well above investors’ expectations. Another large increase in jobs indicates a still-growing economy, giving the Fed a reason to wait longer before cutting rates.
Economic data, like last week’s labor report and this week’s CPI numbers, may change expectations about the future of rate cuts this year, causing mortgage rates to dip down even before the rate cuts actually happen.
“If the labor data gets weaker, it doesn’t matter what the Fed does; mortgage rates will go lower,” said Logan Mohtashami, lead analyst at HousingWire.
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When will the Fed start lowering interest rates?
The central bank may make its first cut in July, but that will only happen “if the labor market report is weak and inflation comes down significantly,” said Lisa Sturtevant, chief economist at Bright MLS.
A more likely scenario is for the Fed to cut rates in the fall or early winter.
“If the cuts happen, they will happen toward the end of the year,” said Mohtashami. He believes we’ll see only one or two cuts, as opposed to the three cuts previously penciled into the Fed’s outlook.
Another factor to consider is the general election in November.
“Typically, the Fed refrains from making monetary policy decisions too close to a presidential election, to avoid the prescription of influencing the outcome,” said Sturtevant. “If the Fed does not cut rates in July, it is possible there will not be any rate cuts until 2025.”
Where are mortgage rates going this year?
In December of last year, after the Fed indicated it was prepared to lower interest rates in 2024, mortgage rates moved down into the mid-6% range. Some early-year forecasts optimistically called for rates to fall below 6% by the end of 2024.
But then mortgage rates started to climb back up. Since mid-February, the average rate for a 30-year fixed mortgage has held above 7%.
Experts still anticipate that mortgage rates will moderate in the coming months, landing between 6% and 6.5% by the end of the year. But if new economic data shows higher inflation, investors may adjust their forecast for rate cuts, causing Treasury yields and mortgage rates to surge, said Orphe Divounguy, senior macroeconomist at Zillow Home Loans. His baseline forecast calls for rates to fluctuate between 6% and 7% throughout the rest of 2024.
It’s also important to note that the Fed won’t cut rates all at once. Instead, it will be a gradual process over the next few years, meaning it may take a while before we see mortgage rates drop below 6%.
The bottom line? “Rates are going to remain higher than we had been predicting last year,” said Sturtevant.
When will affordability improve for homebuyers?
Today’s unaffordable housing market isn’t due to just high mortgage rates. Homebuyers are also being pinched by elevated home prices, limited housing supply and the pain of high inflation. Unfortunately, there’s no quick fix to all of these problems. But baby steps are better than no steps at all.
“Frustrating for some as it may be, it’s better that conditions continue to align slowly,” said Gumbinger.
For example, a rapid decline in mortgage rates would only spur more homebuying demand. Without the supply to support that demand, lofty home prices could press even higher, according to Gumbinger.
As mortgage rates gradually fall in the coming years, we should see more homeowners come off the sidelines and sell their houses. But most sellers are also buyers, so that won’t repair today’s housing shortage entirely.
Divounguy said the key to long-term affordability lies in boosting residential construction via land-use and zoning reforms. We’ve already witnessed how new construction is proving to be a bright spot in today’s difficult housing market: To lower the barrier-to-entry for homebuyers, many builders are offering sales incentives like discounted prices, closing-cost assistance and mortgage-rate buydowns.
If you don’t live in an area where there’s a lot of new construction (or you’d prefer to purchase an existing home), there are things you can do to make buying a house more accessible:
Build your credit score: Mortgage lenders reward borrowers with excellent credit scores with lower mortgage rates, which can affect your monthly payments. Paying your credit card bill on time and in full, and lowering your credit utilization ratio can help improve your score over time.
Save for a bigger down payment: With a larger down payment, you can take out a smaller mortgage, which will save you interest over the life of your loan. Depending on your timeline for buying a home, consider stowing your money in a high-yield savings account or certificate of deposit to take advantage of higher returns.
Explore first-time homebuyer programs: First-time homebuyer programs can offer assistance with your down payment, closing costs and more. Also consider government-backed loans, such as FHA loans, USDA loans and VA loans, which often have lower credit score and down payment requirements than most conventional loans.
Many people want waterfront lots, and they’ll pay good money for them.
But what about an underwater lot?
A roughly quarter-acre water lot is available in the San Francisco Bay Area city of Alameda, CA, for $400,000.
The listing is quite upfront about the splashy property: “This is a water lot,” it states, adding that the parcel is “an investor’s/developer’s opportunity where location, location is everything.”
However, building in a water lot has its own special set of challenges.
The perfect buyer “is someone who is not afraid of the challenge of being creative,” says listing agent April Jones, with April Jones, Broker.
She suggests there could be “some type of houseboat” here, noting, “There are homes that are currently built in that lagoon already.”
A roadway bridge is near the lot.
(April Jones)
The property assessor’s office in the county lists it as vacant residential land with zoning for a single-family home or a structure with up to four units. The water part wasn’t obvious.
“I was asked to list a vacant lot and went out to take pictures of it and come to find out, it was underwater,” Jones says, adding her GPS took her to a different address. She had no idea that the listing was a water lot.
“I really know how to read street signs to find addresses and kept going when I got there,” she says. “I stopped and said, ‘This is where it should be, this should be the 600 block of Grand.’”
Her next task was to use the county system to view the lot.
“It came up as the water where I was over the bridge, or under the bridge actually, so I was surprised,” she recalls. “I was sure my seller was not aware. He thought he was getting vacant land.”
Jones says the county sold the land because of a tax lien. Currently, there is nothing on the lot, which is near a roadway bridge.
“I’m not sure how deep it is, but it is deep enough that currently where the lot is located, it acts as a waterway or an easement that maintenance workers can go from one side of the lagoon under the street bridge to the other side of the lagoon,” Jones explains, adding that the seller “bought it as an investment for his family. He had been trying to buy land or property since 2014 and said he thought this was a good deal. I’m just hoping to find buyer, so at least my seller can recoup what he put into it.”
Homes nearby are selling in at least the $1 million range.
“It’s a very desirable location,” Jones notes. “It’s near the beach, near shopping, and good schools. There are some nice parks. The lagoon area is peaceful. If you live on the lagoon, you could walk out and have a cup of coffee. It’s just relaxing.”
Jones notes that the buyer will need approval from various agencies before building, but it has potential—for someone who has the money, creativity, and patience for the project—to build something as unique as its locale.
“It’s a lot that is really underwater,” Jones muses. “You don’t come across those very often, so it’s one-of-a-kind.”
As a single woman in my early 40s, I’m drawn to tiny homes for several reasons. Sure, I yearn for the “soft life” free of stress and hustle, but the biggest selling point is affordability.
Since I’m starting to think about retirement, the looming question is whether I’ll ever be a homeowner. I currently live in Los Angeles, where the median price for a home is over 1 million. With home prices so expensive and mortgage interest rates so high, conventional homeownership feels out of reach.
A tiny home fits a tiny budget. Aside from being better for my finances, a tiny house would be more in step with my minimalist lifestyle and would allow me to potentially uproot and relocate as needed.
As my interest in tiny homes grows, it turns out I’m in good company. A recent survey revealed that 73% of Americans would be open to living in a tiny home, in large part because the current housing market is so unaffordable.
I wanted to find out how perceptions of tiny homes are changing, why they’re becoming more popular, and if it’s a good fit for someone like me. Here’s what I discovered.
Tiny homes are for a lot of different folks
The tiny house movement began in the late 1990s as somewhat fringe, but by the early 2000s it started to capture the mainstream as it spread to social media platforms, reality TV shows and documentary films.
Tiny homes are known for attracting people who want to live a simple life and reduce their environmental footprint. But they’re also gaining popularity among unpartnered dwellers in search of temporary housing or those undergoing some sort of transition. According to Abby Shank, a Tiny Home Industry Association board member, the most common tiny home buyer is a 55-year-old single woman.
Shank is the CEO of Tiny Estates, which runs tiny home communities in Pennsylvania and Florida. She says tiny homes are catching on with an array of people of all ages: younger college graduates who are just starting to be independent; retirees who want to downsize or be closer to family; traveling military personnel or nurses; and caregivers who live in the backyard of the person they’re taking care of.
Nonetheless, tiny home living isn’t ideal for families. “A couple can handle a tiny home without too much challenge, but it requires the right mindset,” said Zack Giffin, co-host of the Tiny House Tales podcast. “When you add families to the picture, it becomes more challenging.”
Tiny homes advantages: Affordability and lifestyle
Tiny homes are defined as properties under a maximum of 500 square feet. Technically speaking, that means I’ve been a “tiny home dweller” for the last few years. When I was forced to relocate from my little bungalow in West LA a few years back, I opted to rent a small 300-square-foot cabin nestled in the San Gabriel Mountains.
The price tag for purchasing a tiny home depends on its size, materials, layout, design, features and amenities, but the average cost generally ranges from $30,000 to $70,000. What you’ll pay also depends on location, whether it’s a prefab or manufactured home or built from scratch, and how much customization you require.
Because tiny homes can either be set up on foundations or on wheels, they give homeowners flexibility. A tiny house on a trailer gives you the option of experiencing new places or moving whenever you want, though you might be legally limited to parking in certain tiny home communities, RV parks or campgrounds. A tiny house secured to the ground offers more safety and a higher chance of building equity, though you’ll need to buy the lot of land, or set it up as an accessory dwelling unit (ADU) or backyard cottage.
Another advantage of tiny home dwellings is that they can usually be set up in areas that already have police services, fire services, roads, water and sewage services.
“With a tiny home, you get to enjoy the pride of having a house,” said Shank. “You get to customize and make your dream home.”
Overall, you’ll be spending way less money to own a tiny home, not just on the purchase price but also on maintenance and utilities. Less upkeep means more time to pursue other things.
“Many tiny home dwellers may have originally got into it because it’s more affordable or to downsize,” said Dan Fitzpatrick, president of the Tiny Home Industry Association. “But they’re also so happy to have more time to spend skiing, surfing, spending time on their hobbies or with their families.”
Is a tiny house for you?
Depending on where you want to live, you’ll have to review specific regulations, permits and zoning laws that allow for the building and placement of tiny homes. Tiny homes are often legally categorized into two main camps: tiny houses on foundations and tiny houses on wheels. You’ll want to be familiar with permanent structure rules, temporary structure rules and transitional structure rules.
Consider financing
If you already own a home and want a tiny home on your property as an ADU, you can take out a home equity loan or a home equity line of credit (HELOC) to pay for your new living space. With this kind of financing, you’ll be borrowing against your home equity, so you must offer your home as collateral.
If you want to purchase a mobile tiny home that can be pulled on a trailer, you might be able to get a chattel mortgage, which is a mortgage for movable personal property like an RV.
You’ll need to determine if you’re going with a HUD Code manufactured home or one that’s going to be on wheels. “That’s really going to determine what type of loan you’re going to be looking for,” he said. Make sure to be specific with your lender if you’ll need a chattel mortgage or a regular mortgage to pay for your tiny home.
Look into zoning, land use and building codes
It’s easy to get excited about the features of your kitchenette and how to optimize storage in your new home, but think about zoning, building codes and permitting in the area before you move forward, said Shank. For example, tiny houses on wheels have to follow strict regulations if they’re parked for extended periods of time. Review local zoning and land use regulations to determine if a tiny house is lawful on your lot.
Depending on the size of your tiny house and your jurisdiction, you might have to pay a hefty fee if you break the law. “There’s a local municipality in my hometown that’s a $5,000 a month fine if you have a tiny home, and they will back-fine you,” said Shank.
Work with an experienced builder
If you decide to build your tiny house, you’ll want to work with a seasoned builder with at least four to six years of experience. Tiny home elements like stairways and shelves often have dual use, and there are other nuances when it comes to constructing facilities and cabinetry.
“Every inch means something,” said Fitzpatrick.
There are also practical issues that need to be handled delicately, such as humidity levels. “Make sure you have the air handling systems and proper wall coverings,” Fitzpatrick said.
You might also want to find someone who specializes in homes where you plan to live. A veteran tiny home builder can provide guidance on special considerations and environmental concerns.
A tiny home is perfect for my tiny budget
After halting my efforts to buy a home in pricey Southern California several years ago, I recently started my “house savings fund” again. My aim is to reach semi-retirement in my 50s and to save enough to pay for a tiny home in full by then. After all, it’ll be 20 times cheaper than the average house.
While I still have to research zoning, building codes, rules and regulations, I’m leaning toward tiny home living. Local laws differ, but tiny dwellings are allowed in several Californian cities. Los Angeles, for example, currently allows movable tiny houses as secondary residences in backyards, provided they meet certain requirements.
I’ll always weigh the pros and cons before I make the final decision. But right now, tiny home living is looking like the best and most affordable scenario for me.
Welcome to the picturesque city of Newton where history meets modern charm and a strong sense of community prevails. Nestled just outside of Boston, Newton boasts a unique blend of suburban tranquility and urban convenience. With its tree-lined streets, top-rated schools, and diverse neighborhoods, Newton offers a welcoming environment for residents of all ages. There’s a neighborhood to suit every lifestyle from the historic architecture of Newton Centre to the bustling energy and Italian heritage of Nonantum.
Searching for the perfect apartment in the heart of Newton or a cozy condo in a peaceful corner of the city? You’ve come to the right place. In this Apartment Guide article, we’ll cut to the chase, breaking down the pros and cons of moving to Newton. Let’s get started and see what awaits in this charming town.
Pros of living in Newton, MA
1. Top-notch education
Newton is regionally renowned for its exceptional public school system. It consistently ranks among the best in Massachusetts. The city’s commitment to education is evident through its well-funded schools, dedicated teachers, and a wide range of academic and extracurricular opportunities for students. Newton is also close to several prestigious private schools such as the Newton Country Day School and the Commonwealth School, providing families with diverse options for their children’s education.
2. Green spaces and parks
Residents are fortunate to have access to an abundance of green spaces and parks. Newton has over 1000 acres of parkland, including the picturesque Crystal Lake and the Newton Commonwealth Golf Course. Whether it’s for leisurely strolls, outdoor sports, or simply enjoying nature, the well-maintained parks in Newton provide a tranquil escape from the bustle of Boston.
3. Vibrant cultural scene
Newton is home to numerous art galleries, theaters, and music venues. Events like the Newton Open Studios, run by the Newton Art Association, offer a unique opportunity to engage directly with talented local artists. Arts and culture lovers also have easy access to the incredible museums, theaters, and galleries of Boston.
4. Convenient access to Boston
One of the major advantages of living in Newton is its proximity to Boston, which is only a 15 minute drive away. With just a short commute via car, train, or bus, residents can easily travel to Boston for work, entertainment, and cultural experiences. This convenient access to Boston’s amenities and opportunities adds an extra layer of appeal to living in Newton. Conversely, Newton offers Boston residents a serene and charming alternative to the busy Boston streets.
5. Strong sense of community
Residents of Newton actively participate in local events, volunteer initiatives, and neighborhood associations. The city’s close-knit neighborhoods and friendly atmosphere create a welcoming environment.
6. Culinary diversity
Foodies in Newton are spoiled for choice with an array of dining options representing diverse cuisines. From cozy cafes and family-owned eateries to upscale restaurants like sycamore. and Tartuffo, the city’s culinary scene caters to a wide range of palates and budgets.
7. Historic charm
Newton boasts a rich history and architectural heritage, with many well-preserved historic buildings and landmarks that add character to the city. The Jackson Homestead offers a fascinating glimpse into the area’s past, while the picturesque Newton Centre Historic District provides a charming backdrop for leisurely walks and exploration.
Cons of living in Newton, MA
1. High cost of living
One of the primary drawbacks of living in Newton is the high cost of living, including steep housing prices and overall expenses. The city’s desirable location, excellent schools, and quality of life contribute to the premium cost of residing in this community.
2. Limited public transportation options
Despite its proximity to Boston, Newton has limited public transportation options, which can be a drawback for residents who rely on public transit for their daily commutes. While there are bus routes and commuter rail services, the overall public transportation infrastructure within the city itself may not be as extensive or convenient as in other urban areas.
3. Traffic congestion
During peak hours, the city’s roadways and intersections may become congested, impacting the overall ease of travel within and around the area. However, it’s important to remember that this is common in the Boston area and surrounding towns.
4. Limited nightlife options
For those seeking a lively nightlife scene, Newton may not offer as many options compared to nearby Boston. While there are bars, restaurants, and entertainment venues, the nightlife in Newton is relatively subdued and wraps up early.
5. Harsh winters
The New England region, including Newton, experiences harsh winters with cold temperatures, snowfall, and inclement weather conditions. While the winter season can be picturesque, it also brings challenges such as snow removal, icy roads, tire chains, and the need for extra precautions during the colder months.
6. Limited housing inventory
Housing in Newton primarily consists of single family homes so the share of apartment complexes and rental homes is smaller than many of the major cities. Furthermore, due to the high demand for housing in Newton there may be limited inventory available for sale, leading to a competitive real estate market.
7. Zoning restrictions
Zoning restrictions do not generally affect renters. But if you are hoping to buy a house in Newton eventually, you will want to be aware that the city has strict zoning regulations and restrictions. Many of these restrictions are in place to retain the character and history of the town. However, they can impact property development, renovations, and expansions. These regulations may pose challenges for homeowners looking to make major cosmetic or structural changes to their properties, requiring careful consideration and adherence to local zoning laws.
The cost to buy a home has reached historic highs in the U.S. — the median price of a home is $420,800, according to the Federal Reserve Bank of St. Louis — and housing and mortgage costs are increasingly turning into a November election issue.
Home shoppers today need to an annual income of $114,000 in order to comfortably afford a typical home in the U.S., according to Redfin, nearly double what was needed to afford a typical home in 2020. That figure is far above the 2022 median household income of $74,580, according to the Census Bureau.
Higher monthly payments are driven by higher home prices as well as significantly higher interest rates. Mortgage interest rates, which dipped to an historic low of 2.65% on a 30-year fixed mortgage in 2021, have soared beyond 7%, higher than they’ve been since 2001. Interest rates are set by the independent Federal Reserve, and President Joe Biden has insisted on the Fed’s independence. The Federal Reserve has been raising interest rates since 2021 in order to combat stubborn inflation.
smaller, entry-level homes, several experts agree.
Once interest rates are removed from the picture, “then you’re left focusing mainly on the supply shortfall,” said Jim Parrott, fellow at the Urban Institute and former Obama White House economic adviser.
The housing market has seen a severe shortage of smaller starter homes, Parrott said. Builders, he said, are incentivized to build large, often mansion-like homes, which more easily turn a profit.
“The cost of building larger homes tends to be quite high, and it’s easier to recoup those costs if you’re making big, expensive homes,” Parrott said.
The federal government needs to “make the math for building homes at the bottom of the market more favorable” for developers, Parrott suggested. And Congress can do this with the tax code. One approach would be to give a tax cut to any builder who constructs a residence for a first-time home buyer at below the median home price, Parrott said.
“You need to provide some sort of tax benefit for building homes in the parts of the market where we need them the most,” Parrott said.
But getting this divided Congress to work together on something like this would be challenging, Parrott said.
“I’m afraid that the legislative environment right now just isn’t conducive to this sort of big, bipartisan effort,” Parrott said. “Hopefully after the election we’ll see a reboot that provides a more hopeful window.”
Withhold funding from localities that don’t change zoning laws
Most of the control over zoning lies with state and local governments. And states have been working to overhaul zoning to ease restrictions on denser residential construction. But the federal government isn’t entirely powerless on zoning.
Parrott said the federal government has used a carrot approach to encourage localities to rezone in favor of denser housing, but now he thinks maybe it’s time to use a stick. For instance, any federal funding for communities could be conditioned on how zoning decisions are made. Communities receive substantial financial support from the Department of Housing and Urban Development (HUD), the Transportation Department and other agencies for projects, Parrott noted.
“If federal policymakers were to condition even a little bit some of that funding on whether or not local decision-making is supportive of or prohibitive of more density,…then you could begin to change things at the local level in a way that would really matter,” Parrott said.
Such a move would be almost certain to trigger strict opposition from localities and unions. But more states have already been enacting legislation to supersede local zoning rules, said Alex Horowitz, director of housing policy at The Pew Charitable Trusts. Horowitz said nine states have passed laws allowing accessible dwelling units or ADUs — like small, independent, mother-in-law suites — on homeowners’ properties.
Sell federal land to use for housing
“The federal government owns hundreds and hundreds of millions of acres, and we’re not talking about the National Parks here,” said Edward Pinto, co-director of the American Enterprise Institute’s Housing Center.
But that’s a proposal that Congress would need to authorize.
It has been tried. Sen. Mike Lee’s HOUSES Act of 2022 would have approved the sale of federal land to states and localities for below-market rates for housing projects. The federal government owns two-thirds of the land in Lee’s home state of Utah, and the gap between median household income and median home cost is largest in the West, according to HUD.
But his bill went nowhere. The Bureau of Land Management, which oversees federal land, said in written Senate testimony that it would be forced to “sell land without sufficient evaluation of the values to the public or to future generations, or sufficient compensation to the American taxpayer.”
The sale of unused land could also attract opposition from environmentalist groups, though sometimes that can be overcome. In March, Washington Gov. Jay Inslee signed a law that will allow that state’s Department of Natural Resources (DNR) to transfer some of its property to localities to build affordable housing.
Washington state GOP Rep. April Connors, who introduced the bill, noted that that the DNR had 7,000 acres of land that was unusable for timber harvesting because it was too close to developed land. Building housing on it could ease the shortage of homes in Washington, Connors noted in a statement, pointing out that the state has the “fewest housing units per household in the nation and nearly half of renters spend a third of their income on rent.”
Improve consumer access to financing for manufactured housing
Manufactured homes are factory-built residences built after 1976 — formerly known as mobile homes — that can be placed on land. The average new manufactured home sold for $126,600 in November 2023, according to the Census Bureau.
But loans are harder for homebuyers to secure for manufactured homes than for traditional ones, Horowitz said. And since manufactured housing usually involves shipping over state lines, the federal government plays a big role. HUD controls access to financing for manufactured homes, and rules are stricter than they are for traditional homes.
Interest rates are typically also higher for manufactured home loans than for traditional home loans, in part because unlike traditional homes, which tend to appreciate in value over time, manufactured homes can depreciate. The structures are also viewed as riskier than conventional homes because they’re usually harder to sell on the market. Horowitz suggests HUD could make it easier for borrowers to access loans.
Eliminate tax breaks for second (and third) homes
Congress could increase the national housing stock over time by eliminating tax breaks for any homes that aren’t a primary residence, said AEI’s Pinto.
Getting rid of the mortgage interest rate deduction for non-primary residences would eventually encourage many homeowners to sell, Pinto said.
“Why should they be subsidized by the tax code,” Pinto asked.
Without that tax break, hundreds of thousands of homes would come back onto the market as primary residences, Pinto said.
“It would cost the federal government basically nothing,” Pinto said. “They’d actually save some money on the tax savings, and it would not increase demand at all.”
This isn’t likely to happen soon though. Such a measure would have to be passed by Congress — and many lawmakers own second and third residences. And a number of their constituents and donors own multiple homes. Realtor interest groups would oppose it, too, Pinto said.
The most Congress has done in recent years to address tax breaks for expensive residences was in 2017, when the GOP-controlled Congress capped the deduction limit for state and local income taxes, which hit coastal, heavily Democratic states like New York and California particularly hard.
Still, eliminating the tax break for secondary homes is “low-hanging fruit,” and would increase supply and reduce demand simultaneously, Pinto said.
Economists mostly doubt that action by the Federal Reserve to significantly lower interest rates would help much.
“If the Fed were to cut rates in a way that allowed mortgage rates to fall to the 4% range, we would see both supply and demand increase in the housing market,” said Chen Zhao, who leads the economics team at Redfin.
And whether home prices rise or fall would depend on what then happens to housing supply and demand.
“If demand increases more, then prices would grow at a faster rate than they are currently,” Zhao said. “However, it’s also possible that supply would increase more because sellers have been so locked in by low existing mortgage rates. If that’s the case, then price growth could fall. I think it’s unlikely in either case that prices would fall outright.”
Would Biden or Trump’s policies help or hurt housing costs?
Former President Donald Trump hasn’t offered policy suggestions to address housing affordability yet, although he criticizes mortgage interest rates and home prices under President Biden.
The president has proposed giving a $10,000 tax credit to first-time middle class homebuyers, and up to $25,000 to first generation home buyers. He’s also introducing a $20 billion fund that in addition to helping build affordable rental units, is meant to peel away local barriers to housing development and spur the construction of starter homes.
Down payment assistance may help home shoppers in the near term, although the tax credit probably falls short of the traditional 20% down payment on most homes. With monthly payments at record highs, this down payment assistance would not lower monthly costs. And down payment assistance could have unintended consequences, Pinto said: “It would increase the price of entry level homes.”
What can the White House do about high housing costs?
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The effect down payment assistance or a buyer tax credit would have on the housing market is complicated in a supply-constrained market, Horowitz said.
While Trump hasn’t made specific proposals on housing, his proposals in other policy areas would likely drive home prices up, Parrott said. Mass deportations of undocumented migrants, for instance, could drive the cost of labor higher, and raising tariffs on China could drive up material costs, Parrott said.
“The things that Trump has said relevant to housing almost all cut the wrong way,” Parrot said.
How home costs could affect the election
The cost of home ownership is a top concern for Democrats and Republicans, city dwellers and rural residents alike, said Parrott. Once an issue has broken through the barriers of red and blue, metro and rural, “then it changes the probability of something happening,” Parrott said.
“Housing has found its way to the grownups table, in effect, for the first time,” Parrott said.
And even though it’s the Fed that controls interest rates, Mr. Biden could be held accountable by voters.
“President Biden’s reelection is closely tied to the cost of homeownership and thus, the fixed mortgage rates,” Mark Zandi, chief economist at Moody’s Analytics predicted. “The fixed rate is currently just over 7%. If it rises above 8% for any length of time, his reelection odds will fade, and if it falls closer to 6% his odds will increase meaningfully, all else equal.”
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Kathryn Watson
Kathryn Watson is a politics reporter for CBS News Digital based in Washington, D.C.