If you loved shoulder pads, Cabbage Patch Kids and the Rubik’s Cube, you probably loved the 80s. But one thing not to love about the 80s was the home buying affordable rate, which has just been outdone this past June.
Today’s housing market is the most difficult in decades. This has been an ongoing frustration for first-time home buyers in the Gen Z and Millennial generations. Home buying affordability dropped last fall to the lowest level since September 1985, and it fell near that level again in June.
The good thing for the mid-80s buyers is they had much more housing supply. Homes became more affordable as mortgage rates fell in subsequent years, adding to the inventory. In September 1985, 72% of consumers said it was a good time to buy a home, according to the University of Michigan’s consumer sentiment survey. In June 2024, just 12% said the same.
And it gets worse. According to the National Association of Realtors’ affordability index, in January 2021, a family needed an income of $49,152 to afford the median-priced single-family home with a 20% down payment. In June 2024, just three years, the family would need an income of $110,544 to make the same purchase. Added to this is the cost of property taxes, home insurance, car insurance and a list of other expenses related to homeownership that have increased.
In addition to the affordability rate, there is the number of home sales. The existing home sales slid in 2023 to the lowest level since 1995 and have held at lower levels in the first half of 2024.
There is a group of buyers, however, who are somewhat unfazed by the affordability rate that first-time buyers are facing. And those, of course, are the wealthy. The high-end market is doing a lot better than the 30-year-olds looking for their first home. Wealth allows people to care more about having their ideal home than holding on to a 3% mortgage rate. They know they can always refinance later if the rates drop. But nonluxury buyers typically finance their purchases and are more sensitive to interest rates.
The Federal Reserve met last week and took action on interest rates for the first time in several years, cutting their rate by half a percentage. This does not always translate into lower mortgage rates, which have been going down and are now just above 6%, but it might, and it could also have a positive effect on restoring confidence in the market.
Now it’s time for the August Manatee County home sales, reported by the Realtor Association of Sarasota and Manatee. Single-family homes closed 0.2% fewer this August compared to last August. The median sale price was $494,000, down 5.9%, and the average sale price was $609,789, down 14.8%. There were 3.6% more new listings and the month’s supply of available properties was 3.9 months, up 39.3%.
Condos closed 11.2% fewer this August. The median sale price was $329,990, down 8.1%, and the average sale price was $385,931, down 2.0%. New listings were up 3.8% and the month’s supply of available properties was 5.7 months, up 7.27%.
If I were spinning, I could say it’s summer and it’s always slow, condo buyers are still cooling off in their northern homes and more new listings is a good thing. But I won’t insult your intelligence; the market is slow, and I think we have a few more months before we can get a real read on what’s going on.
No one really wants to go back to the 80s – didn’t we all hate Cabbage Patch Kids? Hopefully, an adjustment in mortgage rates will benefit non-luxury buyers and move the market up. A rising tide lifts all boats.
