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2018 Staten Island, NY Predictions

Written by Posted On Thursday, 11 January 2018 21:56

Real Estate predictions for 2018 are easier to predict then one would think.

There seems to be a continuation from 2017 into 2018, take a look at our predictions below and decide for yourself.

1) Supply & Demand

With a continuing demand outpacing supply leading to price increases, 2018 looks like its heading for the same fate as 2017. However, as prices increase and affordability index decrease we have the potential for inventory to begin to rise due to first time home buyers being priced out of the home market.

  • 2) Downsizing

Empty nesters taking advantage of the recent price increases will be selling at a higher rate. Whether the timing fits in with their "life plans" or not most empty nesters have taken this roller coaster ride before and have realized taking advantage of the current market makes sense, even if it means having to rent for a period of time.             Whether the kids are still in school or retirement is still years away it's hard to turn down some of the prices being offered. With a homeowners primary residence being one of most families largest asset it could make sense to preserve those gains even if it means creating a logistical hardship. 

  • 3) Millennials being priced out

The coupling of price and interest rate increases are creating fewer opportunities for first time home buyers. Interest rates remain at record lows over the last few years creating a buffer to some of the price increases and maybe even helped fuel it. With an improving economy, (Q3 being +3.2%  Bea ), and the stock market at record highs (YTD +25.61% CNN Money ), it is more than likely that interest rates will continue to rise during 2018. 

 In Richmond County New York the average single family sales price is currently $526,000, and current interest rates for a 30 year fixed rate loan are approximately 4%. Let’s assume a typical buyer in this market has a 10% down payment and takes a $473,400 Mortgage with a P & I payment of $2,260 per month. Add in the average taxes and insurance of $500 per month and you have a total payment of $2,760 per month. The minimum income needed to qualify for a $2,760 mortgage payment is $84,900 annually.

 In 2017 the average price increase was 12%, if it’s 10% for 2018 this brings the new price to $578,600 with a new mortgage amount of $520,740, let’s assume a .5% interest rate rises to 4.5% which leads to a new P & I payment of $2,639 + $500 taxes/ insurance = $3,318. To qualify for a $3,318 mortgage payment the minimum income required is $96,600 per year or $11,600 more than the previous year. Unless first buyers have a large pay increases in their future they will be unable to afford and qualify in the upcoming market. 

  • 4) Student Loan Debt Hurting Home buyers

According to Experian, "Student loan debt for Americans is impacting all generations in regards to credit scores, debt load and delinquencies.”(Expierian) There are 44 million borrowers that carry $1.4 trillion in student loan debt, which can affect their future home purchase. On average the monthly student loan payment for borrowers ages 20 to 30 is $351. This will be taken into consideration when they are applying for a mortgage loan. (Student Loan Debt)

The direct effect of student loans to a home purchase has always been significant, coupled with interest rate raises and double digit housing price increases it just makes a perfect storm worse. Considering what lenders refer to as a back ratio, the percentage of debt as it relates to a borrowers income, the average $351 in debt can reduce a borrower’s ability to borrow by as much as $73,500. In most markets today that could be enough to make the difference between owning and renting!

Tips to lessen the burden:

  1. Consider renting and applying the lower monthly cost towards paying down your debt.
  2. Consider refinancing your student loans to a lower rate and longer term to reduce the monthly payment.
  3. If you are fortunate enough to have your monthly student loan payments paid by a third party, most likely your parent(s), you need to document this to a lender to have the monthly payment eliminated from your ratios. Be sure the payment is made from the third parties account and that the account does not have your name on it. Most lenders will eliminate the liability if you can show 12 consecutive payments made by a third party.

 For any questions visit Martino Realty or call (718) 608-9400.

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Charles Martino

Our commitment as your local realtors is to provide you with the specialized real estate service you deserve. When you are an informed buyer or seller, you’ll make the best decisions for the most important purchase or sale in your lifetime. That’s why our goal is to keep you informed on trends in the marketplace using the latest statistics in your local area.

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