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According to a new study from Owners.com, the city of Virginia Beach, Virginia, is the country's leading home buying market.
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When Todd and Marisa Bluth bought a $ 188,000 startup house in Commerce City, Colorado, in 2012, they realized that it would take at least a decade to build enough equity and money. savings to be able to trade their dream.

Yet just four years later, they sold the 1,600-square-foot unit for $ 284,000, earning a profit of nearly $ 100,000 and buying a five-fold cost that seemed like a good deal – $ 375,000 -. upscale neighborhood.

"I never thought the house would enjoy such speed," says Todd, 34. "We played the market against himself."

Since the beginning of the US housing recovery in 2012, affordable housing in low-income neighborhoods has seen the largest price increases, while luxury homes in affluent neighborhoods have experienced the smallest percentage gains. In other words, on average, the lower the level of house prices, the more dramatic the price increase, with mid-range housing appreciating moderately.

No more room to recover

This trend is largely due to the fact that cheap home prices fell sharply during the real estate crisis and that there was more room for recovery, says economist Kwame Donaldson of Moody's Analytics.

In addition, affordable entry-level housing has been sparse, driving up their prices, said Issi Romem, chief economist at Trulia, a real estate research firm.

Unusual dynamics allow owners such as the Bluth to move faster in their "forever homes". It also helps many low- and middle-income Americans to accumulate wealth to improve their lifestyles or strengthen their goals. But first-time buyers seeking to enter the market can be squeezed out.

Sales of new homes in the United States rose 4.9% in February, according to the latest data from the US Census Bureau. The increase from one year to the next was much more modest (0.6%). (Photo: Feverpitched / iStock)

The Bluth, who had a daughter when they lived in their first home, needed to move because another child was on their way and they had a third. "There would have been a lot of people," says Todd, a lawyer.

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With a combined income of about $ 70,000, the couple took out a mortgage on the government for their startup home, allowing them to pay a deposit of only 3.5%. The strong appreciation of the price of their housing allowed them to acquire 20% more for their larger home, which saved them from paying mortgage insurance and helped them repay the $ 10,000 they had owed on a new home. car loan.

As a result, they paid the same amount each month for their new home as for their first home and car.

"We were very lucky," says Todd.

According to a Moody & # 39; s analysis, in the country's 204 most populous counties, the 10% of the poorest neighborhoods with the lowest median household income recorded the largest increases in average annual home prices. 2011 to 2018, according to an analysis of 7.6%. The 10% richest neighborhoods with the highest median income recorded the lowest annual price gains at 5.2%.

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Trulia found similar results in a study based on house prices rather than the neighborhood's median income. From 2012 to February 2019, the bottom third of the lowest-priced homes averaged 8.03% per annum, compared to 6.39% for mid-level homes and 5.01% for homes. the most expensive units, according to the analysis.

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Affordable homes hurt in times of economic downturn

One of the main reasons for this disparity is that house prices in the lowest-income neighborhoods were the most affected by the housing crisis (7.4% on average per year), while in the richest areas fell the least, by 4.3%, according to Moody's. That's probably because low-wage workers lost their jobs during the 2007-2009 recession and many were unable to make their monthly mortgage payments, says Donaldson. Many also had subprime mortgages that they could not repay because house prices were starting to fall. As a result, homes in these neighborhoods experienced more foreclosures and were resold by lenders at advantageous prices, reducing the average values ​​of these postal codes and paving the way for a larger rebound.

Another factor is that even though the number of homes on the market remains historically low and affordable, basic housing is particularly scarce and their prices have therefore risen faster, says Romem de Trulia. Builders build few start-up houses because they can not make a profit given the high costs of labor, materials and land, he said. According to Trulia figures, in February, there were more than twice as many high-end housing as low-income housing.

In Chattanooga, Tennessee, where there is the strongest correlation between low median earnings and the sharp price increases of the 204 countries surveyed, "There is no new build at less than $ 200,000" says Mark Hite, a Keller Williams broker in the city.

Many low- and moderate-income buyers are buying affordable homes, taking advantage of rising prices to get home equity loans for renovations, then selling larger homes and taking them to bigger homes, says Hite. . Others use the extra funds from their home as collateral to start small businesses, says Geoff Ramsey, a broker at REMAX Properties.

Northern homeowners make profits

In northern New Jersey, some homeowners with lower wages accumulate a large portion of their profits and buy cheaper homes in the south of the state or in low-cost locations such as Florida and Carolina. South, says Andee Post, a broker at Keller Williams in Woodcliff. Lake, New Jersey.

"If you're thinking of moving south, you can get a lot of home for your money," she says.

All residents of low-income homes have not benefited from rising prices. Many seized homes were seized by investors and leased. According to Donaldson, in the poorest neighborhoods of the country, two-thirds of the homes are owned by investors. Nevertheless, this means that one-third are occupied by low-to-moderate income earners who are reaping gains. And a larger share of homes belong to residents of still modest neighborhoods with slightly higher median incomes.

The profits of less expensive homeowners are likely to decline now that home prices, across all categories, have largely exceeded their pre-recession highs. Gains for affordable housing are still in the lead, but the gap has narrowed considerably since early 2017, according to Trulia. This is largely because price increases have made starter homes less affordable for low-income Americans, in particular, by moderating demand, says Romem.

In addition, in the final stages of economic expansion, strong wage growth tends to support demand and prices in the wealthier communities, Donaldson said.

Yet, many middle class Americans already have a length of time ahead.

"For me, it's peace of mind to know that we've managed to achieve a great situation," said Bluth. "Everything is sustainable in the long run," regardless of how the economy and house prices are changing.

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More and more Americans prefer to head south when they leave their country. Sean Dowling of Buzz60 has more.
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Read or share this story: https://www.usatoday.com/story/money/2019/04/05/u-s-housing-market-less-expensive-homes-rose-more-sharply-price/3356733002/