Latest news with #homeaffordability
Yahoo
15 hours ago
- Business
- Yahoo
Spreading housing market weakness sees $23 billion builder offer $50K incentives per sale
Want more housing market stories from Lance Lambert's ResiClub in your inbox? Subscribe to the ResiClub newsletter. The real reason a staggering 40% of U.S. homeowners are mortgage-free Tsunami warning tracker: Map and online tool let you follow alerts in real time after massive earthquake Figma's IPO date is close. The stock could trade even higher after the design startup's latest move Shop Top Mortgage Rates Personalized rates in minutes A quicker path to financial freedom Your Path to Homeownership In a 'normal' housing market environment, giant homebuilder PulteGroup—which is worth $23 billion—spends $18,000 to $21,000 on incentives on a $600,000 home sale. But with affordability strained and housing market softness spreading, the homebuilding giant is now shelling out closer to $52,200 per sale of a home of that value. 'Incentives for the second quarter were 8.7% of gross sales price, which is up from 6.3% last year, and on a sequential basis [quarter-over-quarter] up from 8.0%,' Jim Ossowski, CFO of PulteGroup, said during the builder's July 22 earnings call. Ever since mortgage rates spiked in mid-2022, which followed a historic run-up in U.S. home prices during the Pandemic Housing Boom, U.S. housing affordability has been strained. In housing markets where that affordability strain has manifested into spiked active inventory/months of supply and soft/falling home prices, giant homebuilders have leaned into doing bigger incentives, in particular, mortgage rate buydowns to pull in priced-out homebuyers and keep sales going. Of course, given the widespread housing market softening—most acute over the past year in parts of the West, Southwest, and Southeast—many homebuilders, including PulteGroup, have further increased their incentive spending to prevent a deeper pullback in home sales. 'We have responded to these conditions by adjusting [net] sales prices where necessary and focusing sales incentives on closing cost incentives, especially mortgage interest rate buydowns,' wrote PulteGroup in its earnings report published on July 22. That strategy has led to some additional builder gross-profit compression. PulteGroup's gross margin in Q2 2025 still came in at 27.0%. While that's down from the cycle high of 31.3% at the end of the Pandemic Housing Boom in Q2 2022, it remains above pre-pandemic levels seen in Q2 2018 (24.0%) and Q2 2019 (23.1%). (Some builders, like Lennar, have seen greater margin compression.) Are bigger incentives essentially falling home prices? Sometimes, yes. Sometimes, no. In some cases, increased incentive spending is effectively a price cut—just delivered in a less visible way. But not always. Since 2022, part of the rise in incentive spending in some markets has come from homebuilders increasing base home prices and then using some of that additional revenue to fund incentives. That said, based on PulteGroup's own commentary and the visible margin compression, it's clear that in at least some markets, its increased incentive spending is functioning as a net effective price cut. Instead of bigger incentives, why don't homebuilders like PulteGroup just do bigger outright home price cuts? Some homebuilders prefer offering larger incentives rather than outright price cuts to protect community comps. Outright price cuts can sometimes complicate future sales and upset homebuyers currently in the backlog. Another reason more homebuilders are leaning into bigger incentives is because large builders claim there's currently arbitrage in financial markets, where every $1 spent on a mortgage rate buydown delivers a greater monthly payment reduction for the buyer than a $1 home price cut. 'The focus still has been on rates and rate buydowns [rather than outright price cuts] and keeping consistency of that. And if we see a little weakness in a market or buy community, we may adjust further down, but [it's] still more advantageous to the buyer and the cost is less to increase the rate buy down than to cut the price,' D.R. Horton CEO Paul Romanowski told investors in April. Why does $1 spent on mortgage rate buydowns by builders create more payment savings right now than a $1 price cut? The answer is a little wonky. Here's the in-depth breakdown by housing analyst Kevin Erdmann—who is the author of the Erdmann Housing Tracker. As Erdmann explains to ResiClub: 'One reason that mortgage rates are higher than treasuries is that they have prepayment risk. If interest rates go up, the investors are stuck with fixed income that is lower than the new market rate. If interest rates go down, the borrowers refinance and the investors don't get the extra income from the higher fixed rates. So they charge an extra spread for prepayment risk. When short term rates are higher than [long-term rates], like they are now, the prepayment spread is higher because they expect mortgage rates to drop at some point in the future and the borrowers to refinance. If the builders arrange the terms so that the buyers are paying [a] 4% or 5% [mortgage rate] out of the gate, they [the borrower] aren't going to prepay [because they're less likely to refi] and so the prepayment spread is very low. From the borrowers perspective, the rate buydown only pays off slowly over time as you make the payments based on the low rate. They are incentivized not to refinance, sell the home, or pay the loan off early, so the expected duration of the mortgages is much longer. The builder and borrower can pocket the gains from the lower prepayment spread.' What risks do builder buydowns pose to homebuyers? While mortgage rate buydowns can offer meaningful monthly payment relief, they could also come with trade-offs. If a buyer accepts a builder buydown instead of negotiating a lower sale price, they may be locking in a deal (depending on the terms) that only pays off if mortgage rates stay elevated. Should rates fall soon after closing, that buyer may find themselves unable to benefit fully from refinancing. In that scenario, a lower sale price or another form of incentive might have offered more long-term value. Another risk is overpaying for the buydown. If a buyer stretches their budget or accepts a higher purchase price to secure the incentive, they could be more vulnerable to ending up underwater—owing more than the home is worth—if local home prices decline and they need to sell within a few years. Speaking to analysts last month, KB Home—which tends to favor direct price reductions over incentives when affordability adjustments are needed—indeed warned that some buyers opting for competitors' rate buydown deals may be overpaying for new homes. If those buyers need to sell soon, they could struggle to recoup the inflated base price tied to the incentive-heavy purchase. 'I believe that there are customers [of other homebuilders] that are overpaying for the home to effectively get an incentive. So they're tied into this higher price that they're gonna be stuck with forever until they sell that home. They may potentially be upside down when they try to sell that home versus a clean, simple, transparent way of selling—the value of what we offer,' KB Home COO Rob McGibney said on the company's June earnings call. Builder buydowns have lost a little of their magic lately Over the past year, many public homebuilders have seen mortgage rate buydowns lose some of their magic—at least compared to early 2023, when buydowns played a key role in firming up new construction sales. 'I think the commentary that you've heard from us is that there's actually inelasticity in, you know, pricing. And that more incentives don't necessarily translate into incremental volume. So we're trying to get incentives, you know, to the level where we get the appropriate level of volume. But pouring more incentives on top of that doesn't necessarily translate into the incremental volume that would justify those incentives. So, you know, that's why we've tried to continue to maintain some discipline around what we're doing on the incentive load,' Ryan Marshall, CEO of PulteGroup, said during the builder's July 22 earnings call. Marshall added: 'We think the opportunity is to bring incentives lower over time. We're clearly not there right now, but, you know, I would long for the days of, you know, more normal incentive loads of 3.0% to 3.5%.' Note: Net of incentives, PulteGroup's average sale price was $559,000 in Q2 2025—which is why we used $600,000 in the hypothetical example in the article's intro. This post originally appeared at to get the Fast Company newsletter: Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Forbes
a day ago
- Business
- Forbes
Housing Markets Where Homebuying Has Seriously Slowed Over The Last Year
Lakeland, Florida, gardens at dusk. This housing market has witnessed a substantial decrease in home ... More sales, and an increase in inventory and the number of days a home for sale spends on the market before getting bought. Mortgage rates still much higher than they were four years. As of July, the effective 30-year mortgage rate is 6.72%. That's down from a peak of 7.62% in October 2023. Four years ago, in July 2021, the effective rate was 2.87%. Thus, home affordability is still a problem for many of America's housing markets. But a key development recently has been noticed, namely, a slowing down of homebuying activity. In many housing markets there's been a consequent decline in prices. More importantly, if these trends continue, prices may come down further. Based on a list of the largest American metro areas by population, 100 housing markets were analyzed in terms of the change in the change in the number of home sales and the change in the median number of days on market year over year, from June 2024 to June 2025, as well as year-over-year rate for each year going back to 2020. The median days on market measures how many days a home spends on the market before going under contract, meaning the seller accepted an offer from a buyer. And home sales are the number of home sales in each market. All housing data was sourced from Redfin. Read on to find out which markets have experienced the biggest slowdown in their housing activity over the last year. Housing Markets Where Homebuying Has Slowed Significantly Looking at number of home sales change in percentage terms over the course of one year, the majority of markets that have experienced the largest one-year increase are primarily in the U.S. West and South regions. Leading the way is the Lakeland metro area in Florida, which saw its home sales decline by 17.8%: From 1,425 home sales in June 2024 to 1,172 in June 2025. Out of all the cities analyzed, Lakeland's one-year decrease in home sales was the greatest. Below are the top 10 metro areas that have experienced the greatest decline in home sales over the course of the last year: The Lakeland housing market has another metric that points to a slowdown: days on market. Its median days on market jumped by 42.2%, from 45 days in June 2024 to 64 days in June 2025. Pending sales, too, are down, having declined by 16.3% over the last year. Below is a table containing the top 15 markets where home sales have decreased the most year over year now. It also includes the year changes in days on market, inventory, and pending sales. Trends Among Markets With Decreasing Home Sales There are four Florida housing markets that made the top-15 list: Lakeland metro, Miami metro, North Port metro, and Deltona metro. Every single one experienced an increase in days on market over the last year. Lakeland's pending sales fell by 16.3%, with Deltona coming next with a decline of 14.7%. There are also three California markets: Fresno metro, Bakersfield metro, and San Jose metro. The Fresno housing market also witnessed a 55.6% increase in the number of days on market. Inventory too grew, by a substantial 44.4%. Meanwhile, Bakersfield saw its days on market rise by 25%. Home sales fell by 7.8%, while pending sales declined by 12.7%. There is only one housing market in New York that made the list: the Poughkeepsie metro area. North of New York City, up the Hudson River, this metro area is sizeable with a population of more than 700,000. It had the third largest decline in home sales over the last year, at 13.-2%. Its pending sales decreased by 7.3%. The Poughkeepsie metro area saw its largest year-over-year growth in home sales between 2020 and 2021, when they increased by 55.3%. Since then, every year-over-year change was negative.
RNZ News
3 days ago
- Business
- RNZ News
Home affordability and rent levels improving
National home affordability improved 8.7 percent in the three months to June. Photo: 123RF Houses and rents are more affordable as costs fall and consumers benefit from lower interest rates and higher wages, according to new reports from Massey University. National home affordability improved 8.7 percent in the three months to June, on top of a 9.3 percent improvement in the first quarter of the year. Report author, Massey Business School senior lecturer Arshad Javed said a combination of lower borrowing costs and wage growth has helped offset affordability pressures in many regions, even where house prices stayed high. "It's the continuation of a national trend we've been observing over the past year. While there is still regional volatility, the underlying indicators are showing more consistency." For the quarter, the national median house price was down 1.2 percent to $763,000, while an average two-year fixed mortgage rate was 37 basis points lower to 5.66 percent, and weekly earnings were 1.65 percent higher. On an annual basis affordability improved by nearly 27 percent, with the two year fixed mortgage down by 1.72 percentage points, wages up close to 4 percent and a slight fall in the national house price. Regions more affordable than cities All 16 regions recorded an improvement in affordability over the year, with of more than 30 percent in Northland, Manawatū-Whanganui, and Marlborough. "In most of these regions, a combination of price stability or decline, falling mortgage costs and steady income growth contributed to the improvement." For the June quarter, prices rose in half the regions and were unchanged or weaker in the other eight. Javed said property markets through the country were localised, but the overall picture was one of improving access to home ownership. Rents more affordable - in some places It was a similar story with rents, with higher wages and a fall in rents improving affordability. For the quarter ended March rental affordability improved by 3.5 percent, split nearly evenly between a drop in rents and an increase in average weekly incomes. Compared to a year ago national rentals affordability was slightly improved . But the report noted a widening rent gap between regions, with nine of 16 showing improved affordability during the quarter-- the highest in Canterbury, Manawatū-Whanganui, and Wellington. The most significant decline was in Gisborne, where rents surged by 41.2 percent during the quarter, with smaller increases also for Northland, Bay of Plenty, Taranaki and Southland. "It's a timely reminder that affordability is highly localised and needs region-specific responses," Javed said. On an annual basis Gisborne had the biggest decline in rental affordability, but Javed noted nine of the 16 regions were still below the annual average.
Yahoo
18-07-2025
- Business
- Yahoo
Scott Galloway says the American Dream is now a ‘hallucination' — but has it ever truly been ‘easy' in the US?
Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. Going to an elite school, landing a good job and buying a home may have once seemed like a sure path to achieving the American Dream. But according to Scott Galloway, a renowned marketing professor at NYU's Stern School of Business, that path no longer works. The reason, he explains, is simple: Homes have become so expensive relative to earnings that even graduates with eye-watering salaries can't afford them. Don't miss Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) You don't have to be a millionaire to gain access to this $1B private real estate fund. In fact, you can get started with as little as $10 — here's how 'When I got out of business school, the average salary was $100,000. I went to a quote-unquote elite business school … The average house in San Francisco cost $280,000, so 2.8 times the MBA salary,' Galloway recounted in a recent appearance on the Jay Shetty Podcast. 'Now, the kids at Haas — still an elite business school, incredible compensation, average $200,000 right out of business school — but the average home in San Francisco is $2.1 million.' In other words, while elite graduates are earning more than previous generations, the sheer surge in home prices has left them far behind. Galloway believes the problem stems from the reluctance of existing homeowners to allow new construction in their neighborhoods. 'As soon as you have a house, you become very concerned with traffic, and you start showing up to local review meetings and making sure no new housing is built, which is great if you already own a home,' he explained. A recent Zillow report estimates the U.S. faces a shortage of 4.7 million homes. Dream, hallucination or fantasy? Galloway has a blunt assessment of the situation. 'I think young people have given up on the American dream of owning a home,' he told Shetty. He pointed out that conditions have shifted dramatically against new homebuyers since the COVID-19 pandemic. 'Pre-pandemic, a house is $290,000. Post-pandemic, it's $420,000. Interest rates [went] from 3% to 7%, [the] average mortgage went from $1,100 to $2,200,' Galloway noted. 'All of a sudden, the American dream has become a hallucination, a fantasy.' Research suggests that over the years, homeownership has indeed become substantially more difficult for Americans. According to a 2024 Zillow study, buyers now need to earn more than $106,000 annually to comfortably afford a typical U.S. home. This calculation assumes spending no more than 30% of income on the monthly mortgage with a 10% down payment. In 2020, that income threshold was only $59,000 — meaning the required earnings have jumped by 80%. Zillow also noted that in 2020, the $59,000 needed to buy a home was actually less than the U.S. median household income of $66,000 at the time. That's no longer the case. Today's required $106,000 is well above the median. 'Housing costs have soared over the past four years as drastic hikes in home prices, mortgage rates and rent growth far outpaced wage gains,' Zillow Senior Economist Orphe Divounguy said in the report. How to get on the real estate ladder — starting with $100 Given these challenges, Galloway noted that for young people, saving for a home today ''is almost impossible.' Yet despite the hurdles, real estate remains a popular investment choice for those looking to hedge against rising living costs. When inflation goes up, property values often climb as well, reflecting the higher costs of materials, labor and land. At the same time, rental income tends to rise, providing landlords with a revenue stream that adjusts with inflation. While buying an entire house may feel out of reach, it's now easier than ever to start investing in real estate thanks to crowdfunding platforms like Arrived. Backed by world class investors like Jeff Bezos, Arrived allows you to invest in shares of rental homes with as little as $100, all without the hassle of mowing lawns, fixing leaky faucets or handling difficult tenants. The process is simple: Browse a curated selection of homes that have been vetted for their appreciation and income potential. Once you find a property you like, select the number of shares you'd like to purchase, and then sit back as you start receiving positive rental income distributions from your investment. Another option is Homeshares, which gives accredited investors access to the $35 trillion U.S. home equity market — a space that's historically been the exclusive playground of institutional investors. With a minimum investment of $25,000, investors can gain direct exposure to hundreds of owner-occupied homes in top U.S. cities through their U.S. Home Equity Fund — without the headaches of buying, owning or managing property. With risk-adjusted target returns ranging from 14% to 17%, this approach provides an effective, hands-off way to invest in owner-occupied residential properties across regional markets. Read more: Rich, young Americans are ditching the stormy stock market — Galloway's simple hack: 'forced savings' With so many enticing products and services vying for consumers' attention, Galloway pointed out that 'it is nearly impossible for a young person to save money if it comes through their hands.' His solution? Something he calls 'forced savings' — money you never see, because it's invested automatically. He specifically mentioned using 'the Acorns app that rounds up and puts the money automatically into a low-cost index fund.' Acorns is a popular app that does exactly that. When you make a purchase on your credit or debit card, Acorns automatically rounds up the price to the nearest dollar and invests the difference — the coins that would wind up in your pocket if you were paying cash — into a diversified portfolio of ETFs. Buying a coffee for $3.40? The app rounds it up to $4 and invests the extra $0.60. Over time, those small amounts can add up — especially if you're consistently spending and saving. It's a simple, set-it-and-forget-it way to build wealth from money you might not even miss — and, if you sign up today, Acorns will add a $20 bonus to help you begin your investment journey. What to read next How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you'll need a substantial stash of savings in retirement 5 simple ways to grow rich with US real estate — without the headaches of being a landlord. Start now with as little as $10 This tiny hot Costco item has skyrocketed 74% in price in under 2 years — but now the retail giant is restricting purchases. Here's how to buy the coveted asset in bulk Financial aid only funds about 27% of US college expenses — but savvy parents are using this 3-minute move to cover 100% of those costs Stay in the know. Join 200,000+ readers and get the best of Moneywise sent straight to your inbox every week for free. This article provides information only and should not be construed as advice. It is provided without warranty of any kind. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
11-07-2025
- Business
- Yahoo
These Are the Only 3 US Cities With Affordable Homes, According to the 30% Rule
If it feels like buying a home in a major city is unaffordable, that's because it most likely is if you're following a popular budgeting rule of thumb. The '30% rule' states that you should spend roughly 30% or less of your pretax income on housing to leave room for other non-negotiables in your budget. Find Out: Read Next: Yet in 47 of the 50 major U.S. metros, the monthly cost of owning a median-priced home is more than 30% of the area's median household income, according to a new report. (The analysis assumed a 20% down payment and a typical 30-year fixed mortgage rate of 6.82%.) Here's a look at the only three major U.S. metro areas where the average household can afford the costs of owning a typical home. Median home list price (May 2025): $249,900 Annual mortgage payment + tax and insurance: $19,970 Median household income: $72,935 % of income needed to cover housing costs: 27.4% Check Out: Median home list price (May 2025): $270,000 Annual mortgage payment + tax and insurance: $21,576 Median household income: $72,493 % of income needed to cover housing costs: 29.8% Median home list price (May 2025): $299,900 Annual mortgage payment + tax and insurance: $23,966 Median household income: $79,869 % of income needed to cover housing costs: 30% More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 6 Popular SUVs That Aren't Worth the Cost -- and 6 Affordable Alternatives 10 Cars That Outlast the Average Vehicle This article originally appeared on These Are the Only 3 US Cities With Affordable Homes, According to the 30% Rule
