For those who are renting, the number of mortgage applications does not seem to personally affect them. Yet when there are few mortgage applications, it can often translate into a large number of families remaining renters. When demand remains high, renters feel the pinch in terms of reduced inventory and higher rental prices.
Unfortunately, the mortgage market has seen an 8 percent decrease in applications for new home purchases nationally during the month of October. Still, when comparing the number of applications to last year, there was a 7 percent uptick.
This modest mortgage decrease is not yet alarming
What is more concerning is the differences in housing concerns from coast to coast. For example, Boston is seeing a shortage of housing for its middle class, as the inventory continues to fall short of demand. Yet within the greater Los Angeles area, there continue to plenty of luxury housing options. Builders are focusing on luxury rental builds because developers want to take advantage of the high market rents before converting their properties into condos.
Rents in Boston, according to the Greater Boston Housing Report Card of 2015, have grown so much that it is estimated that a family would need to make $100,000 a year to afford the median rent of $2,497. However, the current median income in that area is less than $60,000. While income has gone up, reflecting the decrease in unemployment, the increase is clearly not matching up with rising rents. New housing has been geared toward the luxury market and Boston is not alone is seeing that trend.
However, Los Angeles is having an up year in terms of its luxury market. Housing prices continue to climb and sales remain brisk. According to the Sotherby’s International Report on the Greater Los Angeles Market, the Pacific Palisades area has seen a boom in housing sales with a 94 percent increase in single home sales.
Still it is important to note that for renters, these increases are translating into a greater chunk of income being devoted to housing costs. For those still hoping to move into home ownership, these increases will continue to have a negative impact on their ability to save for their down payment and the additional costs associated with applying for a mortgage.
Many community outreach programs, including the Boston Foundation, are working with developers in various urban areas to increase access to affordable housing. In addition, these groups are encouraging construction of housing for young professionals and families making the median area incomes. While it does not immediately solve the housing and rental crunch of today, these initiatives can contribute to increasing rental inventory to match the future demand. Increasing inventory available for sale in the single family housing market will also give families more opportunities to move out of the rental market altogether. Yet industry experts agree that without a concentrated effort on many levels, the demand will continue to outpace the amount of inventory available.