More Americans signed contracts to purchase homes in May, as pending home sales climbed to their highest level in more than nine years.
The National Association of Realtors reports that its seasonally adjusted pending home sales index rose 0.9 percent to 112.6 last month. The index has increased 10.4 percent over the past 12 months, putting it just below the April 2006 level — which was more than a year before the housing bust triggered the Great Recession.
Pending Home Sales Numbers Not Sustainable?
Strong sales and depressed inventory continue to push prices higher — perhaps too high, too fast. NAR chief economist Lawrence Yun says prices are now rising at an unhealthy and unsustainable pace.
Housing affordability remains a pressing issue with home-price growth increasing around four times the pace of wages,” Yun added. “Without meaningful gains in new and existing supply, there’s no question the goalpost will move further away for many renters wanting to become homeowners.”
The steady job growth along with low but slowly rising mortgage rates has created greater urgency to buy homes. The gains reflect both a stronger economy but also the pressures to purchase a home before both prices and the cost of borrowing become potentially unaffordable.
Completed sales of existing homes jumped 5.1 percent last month to a seasonally adjusted annual rate of 5.35 million. Median home prices climbed 7.9 percent over the past 12 months to $228,700, about $1,700 shy of the July 2006 peak.
Pending sales are a barometer of future purchases. A one- to two-month lag usually exists between a contract and a completed sale.
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Most people know and understand that you can lower the monthly premium on your Scottsdale homeowners insurance by raising your deductible. But whether it makes sense to do so can vary.
The deductible is the amount of a loss you must cover out of pocket. The deductible for a Scottsdale homeowners insurance policy typically ranges from $500 to $1,000, but may be as low as $250 or as high as $5,000.
An analysis done for an online insurance site found that raising a deductible to $2,000 from $500 lowers the average annual premium by a wide range, depending on where you are, anywhere from 6 to 40 percent.
For the analysis, the study was based on premiums for a two-story, single-family home insured for $140,000 (which is a price range that is a challenge to even find anywhere these days).
The catch of a much higher deductible, of course, is that you risk not having enough cash on hand to cover the deductible if you need it. Many Americans lack significant savings, so paying several thousand dollars to cover a major loss may be a stretch.
Homeowners with a robust emergency fund can afford to raise their deductible, but if you're living paycheck to paycheck, or if you're not a consistent saver, be careful. Plus, if you raise your deductible significantly, that means you’ll be responsible for more minor damage. You’ll be self-insuring for smaller losses.
Other Ways to Save on Scottsdale Homeowners Insurance
Many insurers offer discounts if you buy multiple policies, like Scottsdale homeowners and automobile coverage, or if you take steps to reduce risk, like installing security or sprinkler systems. Others may offer a discount if you have your premium automatically deducted from your bank account. So you should check with your insurance agent.
Also, according to the Insurance Information Institute, If you’re at least 55 years old and retired, you may qualify for a discount of up to 10 percent from some insurers (the rationale being that you’re probably at home more, so you may spot potential problems more quickly).
To get more information on Scottsdale homeowners insurance and how premiums are calculated for different homes and different coverages, check out our other articles over in the Scottsdale Insurance section under Scottsdale Real Estate Categories.
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First time Scottsdale homebuyers are in a trap they can't seem to get out of, and it's called a "Rent Trap."
Everyone has pretty much come to the conclusion that interest rates won't stay low much longer, and home prices continue to rise. New three percent down programs from Fannie and Freddie sweeten the deal for new buyers. FHA’s mortgage insurance premium cut makes FHA affordable again. Incomes are up.
To top it all off, greedy landlords everywhere seem to be practically pushing their tenants out the door, with rents rising every month. Rent vs buy comparisons show renters how much they are losing by staying put. According to Reis, Inc., the average US monthly rent has climbed 14 percent in the past five years—double the rate of home price appreciation. Rents rose 3.5% last year according to Zillow, which forecasts another 3.5% hike this year. Rents are forecasted to keep rising in 2016, though record numbers of new apartment openings are expected to slow down increases to about 2 percent, according to Zillow.
Renters Not Rushing to Become Scottsdale Homebuyers
In what could be considered a reverse trend, rising rents do not appear to be playing a significant role in motivating renters to become Scottsdale homebuyers. This contradicts what some in the housing market think as they expect more renters ought to be actively looking to purchase a home. Rising rents are primarily a sign of increased demand rather than a signal that home purchases will be increasing.
Instead of acting as an incentive to buy a home, rent hikes are keeping renters captive by siphoning off cash that otherwise might have been saved to make a down payment or pay closing costs. Even to save the 3 percent down required of the new Fannie and Freddie programs, it takes two years or more for the average first-time Scottsdale homebuyer to muster enough for a down payment. Every time rent increases, it’s going to take even longer to save enough to become a homeowner.
In the past, renters making the national median income could expect to pay about 25 percent of their income on a typical apartment. Today, renters should expect to spend roughly 30 percent of their income on the median apartment
Find more news pertaining to the recent number of Scottsdale home sales under our Scottsdale Real Estate News Section of articles to your right just below our Scottsdale Real Estate Categories.
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A recent S&P/Case-Shiller Home Price Index was the latest report to show a relentless rise in housing prices, causing some economists to ask: Is another Scottsdale housing bubble forming?
Economists point to several reasons why this isn’t a concern, namely that while prices keep rising, the rate of growth has slowed. In the first three months of this year home prices gained 0.8%, according to the S&P Case-Shiller national index. That’s down from 2.8% in the first three months of 2013 and 1.2% during the same period of last year.
Over the long-term, housing has tended to rise about 1% annually above inflation. According to the Bureau of labor Statistics, $1 in pre-bubble 1997 is $1.46 in 2015 dollars. A 1% gain over the past 17 years adds 18.4%.
If we add inflation and a 1% annual gain, we find a historically justified target around 110 on the Case-Shiller index.
The chief economist for the National Association of Realtors has gone on record as saying that prices could surpass the peak set during the last housing boom…
Economists also aren’t concerned about a Scottsdale housing bubble because far fewer new homes are being built than a decade ago so there is little concern about oversupply. And most buyers are using cash or getting 30-year, fixed-rate mortgages that don’t carry the same risks as the sub-prime, adjustable-rate mortgages that many received during the boom.
Some economists said that’s a sign of a normal housing market because in a bubble prices typically rise in tandem across the country, rather than responding to the strength of local economies. That doesn't seem to be happening now, which is strength for the argument that a Scottsdale housing bubble is not in the picture, at least not for now.
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