Zillow forecasts some relief in sight for renters
Steadily rising rents have created a major problem for many families. In some cases, it has made it impossible for them to save for a needed down payment on a home they would like to buy.
Now there is relief in sight for struggling renters.
Rent appreciation will level off in coming months, slowing to an annual rate of 1.1 percent by December 2016, according to the new Zillow Rent Forecast. At the end of 2016 the average residential rent is projected to be $1,396 - compared to $1,381 in Dec. 2015.
"Zillow is forecasting a decrease in the rate of rental appreciation amid a rental affordability crisis that has renters in some markets spending almost half of their income on rent. Some of the fastest growing metros had double-digit annual rental appreciation at the end of 2015.
"Rental appreciation is expected to slow down most significantly in Nashville, Tennessee; San Francisco; Portland, Oregon; and Denver. Rents in San Francisco saw 12.5 percent appreciation in 2015. Zillow forecasts rent in San Francisco will grow half as fast in 2016 - 5.9 percent."
The report notes that with the slowdown, rents will remain unaffordable in many of the major markets across the U.S., especially on the West Coast. Renters in San Francisco and Los Angeles can expect to spend 40 percent of their income on a rental payment.
"Hot markets are still going to be hot in 2016, but rents won't rise as quickly as they have been," said Zillow Chief Economist Svenja Gudell.
"The slowdown in rental appreciation will provide some relief for renters who've been seeing their rents rise dramatically every single year for the past few years. However, the situation remains tough on the ground: rents are still rising and renters are struggling to keep up."
Q. Are commercial mortgages expected to grow this year?
A. Yes, the market looks very strong for growth in this area. The Mortgage Bankers Association projects originations of commercial and multifamily mortgages will grow to $511 billion in 2016, an increase of 3 percent from 2015 volumes and slightly more than the previous record of $508 billion originated in 2007.
"This past year was extremely strong for commercial real estate finance," said Jamie Woodwell, MBA's vice president of commercial real estate research, as reported in a news release.
"Property incomes are rising, interest rates are low and property values are up. We expect the momentum to continue into 2016 and to support both the demand for and supply of commercial and multifamily mortgage capital.
"We anticipate a growing economy, coupled with only gradual increases in interest rates, will continue to support a strong commercial property market. But, there is a chance that cap rates could increase more rapidly in response to rising interest rates, impacting property sales and mortgage originations."
Q. Are many homes still underwater?
A. Yes, a surprising number are underwater.
"RealtyTrac, a source for housing data, released its Year-End 2015 U.S. Home Equity & Underwater Report, which shows that as of the end of 2015 there were 6.4 million U.S. properties seriously underwater - where the combined loan amount secured by the property is at least 25 percent higher than the property's estimated market value - representing 11.5 percent of all properties with a mortgage.
"The report is based on publicly recorded mortgage and deed of trust data collected and licensed by RealtyTrac nationwide along with an industry standard automated valuation model updated monthly on RealtyTrac's entire database of more than 140 million U.S. properties."
Q. Are mortgage rates rising as predicted?
A. Those rates are on a downward trend, as noted in a news release from Freddie Mac. The release focuses on its Primary Mortgage Market Survey, showing recently mortgage rates moving lower for the fourth consecutive week as the Fed held interest rates steady.
The 30-year fixed-rate mortgage averaged 3.79 percent with an average 0.6 point for the week ending Jan. 28, down from the previous week when it averaged 3.81 percent.
A year ago at this time, the 30-year FRM averaged 3.66 percent. The 15-year FRM averaged 3.07 percent with an average 0.5 point at the end of January, down from 3.10 percent the previous week. A year ago at this time, the 15-year FRM averaged 2.98 percent.
• Email Jim Woodard at storyjim@aol.com.
© 2016, Creators Syndicate