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Personal Lines — Homeownership Growing Unaffordable

Posted By Administration, Tuesday, November 28, 2017

Homeownership in the U.S. is approaching record lows. Demand to purchase housing is rising, however. But construction can’t keep up and rapidly rising prices because of limited numbers available means a lot of people cannot afford to buy.

The mortgage information website HSN.com took data from the National Association of Realtors, Freddie Mac and the Mortgage Bankers Association of America and did a report on the before tax salary it will take to put together a 20% down payment and handle a 30-year fixed-rate mortgage, property taxes, interest and insurance for a home.

The report dealt with the 50 largest cities in the U.S. Here are the PIA Western Alliance state cities in the top 50 largest cities in the country (Alphabetically) :

 

Las Vegas, Nevada

  30-year fixed mortgage rate: 4.01%

  Median home price: $261,600

  Percent of change from 2nd Quarter 2016: +3.6%

  Monthly payment: $1,183.67

  Salary needed: $50,728.93

 

Los Angeles, California

  30-year fixed mortgage rate: 4.12%

  Median home price: $595,100

  Percent of change from 2nd Quarter 2016: +15.73%

  Monthly payment: $2,684.94

  Salary needed: $115,068.77

 

Phoenix, Arizona

  30-year fixed mortgage rate: 4.01%

  Median home price: $248,900

  Percent of change from 2nd Quarter 2016: +0.65%

  Monthly payment: $1,129.94

  Salary needed: $48,426.19

 

Portland, Oregon

  30-year fixed mortgage rate: 4.01%

  Median home price: $389,400

  Percent of change from 2nd Quarter 2016: +0.08%

  Monthly payment: $1,793.96

  Salary needed: $76,883.89

 

Riverside/San Bernardino, California

  30-year fixed mortgage rate: 4.01%

  Median home price: $339,900

  Percent of change from 2nd Quarter 2016: -0.23%

  Monthly payment: $1,664.71

  Salary needed: $71,344.76

 

Sacramento, California

  30-year fixed mortgage rate: 4.01%

  Median home price: $350,000

  Percent of change from 2nd Quarter 2016: +2.94%

  Monthly payment: $1,793.96

  Salary needed: $76,883.89

 

San Diego, California

  30-year fixed mortgage rate: 4.12%

  Median home price: $607,000

  Percent of change from 2nd Quarter 2016: +0.33%

  Monthly payment: $2,709.47

  Salary needed: $116,119.96

 

San Francisco, California

  30-year fixed mortgage rate: 4.12%

  Median home price: $900,000

  Percent of change from 2nd Quarter 2016: -5.26%

  Monthly payment: $3,997.72

  Salary needed: $171,330.88

 

San Jose, California

  30-year fixed mortgage rate: 4.12%

  Median home price: $1,165,000

  Percent of change from 2nd Quarter 2016: -1.55%

  Monthly payment: $5,044.23

  Salary needed: $216,181.25

 

Seattle, Washington

  30-year fixed mortgage rate: 4.01%

  Median home price: $478,500

  Percent of change from 2nd Quarter 2016: +0.65%

  Monthly payment: $2,179.75

  Salary needed: $93,418.01

 

Affording to own a home may not be a problem anyway says a study by Florida Atlantic University, Florida International University and the University of Wyoming. Researchers have concluded that homeownership may save on rent but it may not be the best way to build wealth.

The study’s co-author Ken Johnson of FAU's College of Business said, “On average, renting and reinvesting wins in terms of wealth creation regardless of property appreciation, because property appreciation is highly correlated with gains in the traditional financial asset classes of stocks and bonds,” he said.

However, Johnson added, “When you assume that those monies are reinvested at a rate of return, renting, on average, wins in terms of wealth creation. Of course, many renters will not reinvest those monies and will instead use them for consumer goods, which is the least desirable option in terms of building wealth.”

So buying is better than renting is an argument that only holds up if the renter reinvests the money that would have been spent on a mortgage. Today that not reinvesting has impacted the middle class who — for decades — did not invest in the stock market but instead bought a house. The forced savings of a monthly mortgage helped build wealth and grow the middle class over the last 50 years.

Now that homeownership is growing more difficult to attain, the nest egg is gone, too and it’s a huge impact on the middle class.

 

Source links: CNBC, HSH.com, OregonLive.com

Tags:  Insurance Content  Insurance Industry  Insurance News  Personal Lines — Homeownership Growing Unaffordabl  Weekly Industry News 

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