Vin Walker, a 67-year-old retiree from Plymouth, Mass., has been trying this year to buy a second home in Naples, Fla., so that he and his wife can avoid the cold winters in New England. He scoured real-estate brokerage sites for months, but listings would disappear days after they first showed up. As 2023 went on, the interest rates available to him also kept rising, with a bank quoting Walker a rate at one point of 8% on a 30-year mortgage.
“It felt like a race, watching the interest rates go up, as well as the price,” Walker said in an interview. “So it felt to us that we should accelerate our efforts before things got too far out of reach.”
The search was complicated by a number of factors. Bill Sontag, the Naples-based real-estate broker who worked with Walker, told him that people who take out a mortgage for a second-home purchase are typically charged higher rates because lenders believe they are more likely to walk away from a loan.
But another reason Walker’s search became so difficult is that housing prices in Naples have been skyrocketing.
According to a MarketWatch analysis, Collier County, Fla., which includes Naples, has seen housing prices soar by 89.69% in the five years ending August 2023, making it the American county where housing prices have increased the most since 2018. The median home cost $845,013 in August 2023 there compared to $445,473 in August 2018.
Walker ended up buying a two-bedroom condo with multiple amenities, including access to a golf course, for $579,000 in September, putting down 30% and using a mortgage with a 7% interest rate to finance the rest of the purchase price.
Walker’s experience buying a home in September 2023 shows the central problem facing American home buyers today, that despite rising interest rates, the upward march of home prices has persisted. The housing market has been on a tear over the past few years, as home prices surged during a pandemic period fueled by a flurry of buying.
Even though sales activity has diminished, many continue to find the housing market to be extremely expensive. With homeowners carefully hanging on to low-rate 30-year mortgages they obtained in previous years, there are few homes available to buy and competition is stiff. On the flip side, today’s higher mortgage rates are making it even more expensive to buy a home.
But housing markets are regional and home prices have risen much more in some cities than in others. According to a MarketWatch analysis of home prices, the Sun Belt has seen a sharp run-up in home prices over the last five years. Eight of the top 10 large counties with the biggest jump in median home prices for the five years ending August 2023 are located in the Sun Belt.
In addition to Collier County, the five large counties with the biggest increase in median home prices in the last five year are: Ocean County, N.J., El Paso County, Texas, Lee County, Fla., Hillsborough County, Fla., and Maricopa County, Ariz.
MarketWatch analyzed data from the Multiple Listing Service compiled by Realtor.com to determine the five-year change in median home prices. Large markets were determined by inventory and defined as a county that had at least 5,000 listings in any month of 2017 — the first full year of inventory data that is available.
Use MarketWatch’s interactive below to search for any county with at least 500 listings in any month of 2017 and see the five-year change in home prices and the county’s current median. Click on each row to see the complete trend of prices, and filter by large- medium- and small-sized counties.
Over the last year and a half, buyers’ borrowing costs have doubled as the Federal Reserve attempts to quell inflation in the U.S. economy. With the 30-year rate still well over 7%, buyers have found themselves being able to afford less. A buyer who could buy a $500,000 house last August, with a 30-year rate at 5.5%, can only buy a $429,000 house today with a rate of 7.4%, Redfin said.
Higher rates have also unintentionally caused a “lock-in” effect for homeowners. Why would a homeowner who purchased a house financed with a mortgage that came with an interest rate of 3% or 4% sell their home, unless they truly needed to do so? The lack of an incentive to move has kept housing inventory for aspiring homeowners at depressed levels, which in turn has kept home prices up.
With that dynamic playing out nationally, the housing market has become out of reach for many. U.S. housing market affordability is lower than in 2006, the peak of the housing bubble, according to the Atlanta Fed. The median price of a home in the U.S. for the month of August was $435,450 according to Realtor.com data.
“Sustained affordability challenges in this market have continued to take a toll on existing homeowners and potential homebuyers,” Nicole Bachaud, senior economist at Zillow, said in response to home sales falling in August.
“Homebuyers are stuck between high prices and high rates, causing many to be locked out with few affordable options to choose from,” she added.
Florida is the epicenter of the nation’s rising residential real estate prices
Home prices in Florida have grown far more rapidly than home prices in the rest of the nation, pricing many potential buyers out. In Collier County, which includes cities like Naples and Marco Island, the rise in home prices has been ferocious.
Collier also happens to be the second-richest county in Florida, according to one survey by SmartAsset. Jason Schiering, a real-estate agent with Re/Max Blue Skies who shows homes in Naples, said that Naples saw an uptick of interest particularly during the pandemic, as people looked for remote-work options and more comfortable homes outside of big cities. Plus, the area is popular with retiring baby boomers.
“We’re typically a second-homebuyer destination,” Schiering said. About a third of Collier County’s population is over 65, according to Census Estimates from 2022.
Naples is also partly impacted by downward inventory trend and the “lock-in” effect, he added. Between August 2019 and 2023, inventory fell by almost 43%, according to Realtor.com data. The inventory situation was made worse because many waterfront homes in the area suffered severe damage when Hurricane Ian ripped through town in 2022. “A lot of those properties are being repaired,” Schiering said.
Most of Schiering’s clients are people nearing retirement, typically from the Midwest or Northeast, looking to buy a second home. Many buy these homes with cash.
But rising home prices have made it hard for people who work in Naples’ services industry to buy a home, Lisa Lefkow, CEO of Habitat for Humanity in Naples, told MarketWatch.
“We are a tourism-driven economy, so we do not function without dependence on a very large service industry,” Lefkow said. “But the service industry is notoriously low paid,” she added, “and there is no effort to provide any sort of housing affordability for that service industry.” Her organization underwrites and provides loans, as well as builds affordable housing.
Lefkow noted that many people who work in the services industry have moved out to neighboring cities to find cheaper housing. About “10% of our population commute into the county every day because they can’t afford to live here,” she added.
Home buyers with high incomes are facing inventory challenges in Florida as well. Rami Sleiman, 33, is looking to buy a home in Boca Raton, which is in Palm Beach County, or Parkland, which is in Broward County. The healthcare executive and his wife, who were married earlier this year, wanted to settle down in a safe area with a good school district. But Sleiman found the lack of housing inventory difficult to navigate. Seven offers he made fell apart for one reason or the other.
Sleiman is looking for single-family homes priced within $830,000. He told MarketWatch that he regretted not buying four years ago when he first considered home ownership. Sleiman said he believed home prices would crash at the time and decided to wait.
“But I actually got bit by it — home values have increased by astronomical levels since,” he said. In Palm Beach County, home prices have risen by more than 58% over the last five years, MarketWatch’s analysis shows. Home prices rose by nearly 48% in Broward.
Home listed on a weekday ‘flew off the market’ by the weekend in El Paso
Many people might not consider El Paso, Texas, to be a boomtown, but the data indicates it has seen the nation’s third-biggest jump in home prices in the last five years, at least compared to other large counties. The median home price in El Paso County was $301,403 in August 2023, compared to $177,475 in August 2018, an increase of 69.8%.
Just look at the experience of Elsa Ortega, a 36-year-old medical assistant who grew up in El Paso. She’s expecting her first child at the end of October and wanted a bigger home.
“We were just looking through homes around the area,” she told MarketWatch. Ortega and her husband, Daniel, had casually been browsing listings in her area, and attending open houses. In late June, the couple’s broker found a property near where they presently live.
Ortega wanted a larger back yard, and her husband wanted a bigger kitchen and living area.
So when they found something that ticked all of those boxes, they moved fast. “We had an open house on a Thursday evening, and I fell in love with it,” Ortega said. Despite the three-bedroom single-family home receiving multiple offers, the couple won the sales process, and closed on the home in June.
The Ortegas purchased their home for $321,000. The couple used a Veterans Affairs loan and put 10% down, even though it was not required. Daniel is a former member of the U.S. armed forces, and works for the federal government. They had secured a mortgage that carried an interest rate of 5.5%.
But their transition wasn’t quite done yet. The couple had to sell their current three-bedroom single-family home, something Ortega was worried about with mortgage rates rising. Ortega had purchased the home four-and-a-half years earlier for $117,000. But after she listed the home for $225,000 it sold quickly to a cash buyer for $220,000. Ortega said she had “aggressive” offers, one even offering $10,000 over asking, but those offers were more unattractive since they came with contingencies.
“I thought we were gonna have a hard time selling the home, but no, that house flew off the market,” Ortega said. “We had five offers. We put it on the market on a Thursday and we accepted an offer on a Sunday.”
Prices have gone up steadily in El Paso, but Oretega said the area is not becoming unaffordable like other parts of the state. “We’re privileged to still have pretty low prices compared to the rest of Texas,” Ortega said.
Maggie Garcia, a real-estate agent with Redfin who is working with Ortega for both the homes, said that the main driver of home prices in the city is limited inventory. There are just not enough homes available for sale for the current level of sales activity, which is driven by people looking to sell and relocate, or move into the city, Garcia noted. El Paso is a big hub for government workers working for U.S. Customs and Border Protection, since the city sits on the U.S.-Mexico border.
Even though builders have been active across the Sun Belt, Garcia said she wasn’t seeing strong interest in new homes from her buyers. “They’re still taking a little bit longer to build than they used to,” Garcia said. “Sometimes people will shy away from that and would rather go resale because of the timeframe.”
From coast to coast: Not just the Sun Belt
There are a few counties in the Northeast among the nation’s 20 large counties that have seen the biggest increases in home prices over the last five years.
Ocean County, N.J., for example, ranked third. There, home prices have risen 72% in the five years ending August 2023, partly driven by migration from more expensive areas just north of the area — such as New York City — and immigration, Yosef Friedman, a real-estate agent with RE/MAX On The Move Realty, told MarketWatch.
Inventory is down and the median price of a home in Ocean County as of August 2023 was $562,000, up from $326,450 in 2018.
Across the nation, in Seattle, Wash., Mike and Susie Ritter just recently sold their home in King County. Home prices have increased there by 30% in the last five years, with the median home price hitting $899,413 in August 2023.
The Ritters had prior to the sale owned two homes, including one they rented out. But they faced issues managing the rental property and had grown tired of dealing with tenants. Additionally, Susie Ritter had decided to step down from her role as a nurse manager running two clinics in order to spend more time with her family. “That meant my income was cut in half,” she said.
Many people the Ritters knew urged them to hold onto the rental property, which they bought in 2013, the Ritters said. “A real-estate agent actually told us not to sell,” Susie recalled. “Our mortgage [monthly payment] at the time was about $2,250 and we were taking in $2,900. So we were actually netting cash on the rental with potential to continue to make money because the Seattle rental market is great.”
Even a financial advisor told the Ritters to hang onto the home. “You should not sell it,” Susie recalled one advisor telling her. “It would be smarter right now to take out a high-interest loan just to be able to keep it during this time.”
But they wanted to use the money to renovate their home residence. The Ritters had bought the house they rented out in 2013 for $366,000 and sold the home for $700,000 this summer.
The Ritters also planned to use the profit from the sale to pay off current debts, replace their roof, as well as invest, particularly in their 401(k).
“We just want to live our lives without being so stressed about money all the time,” Susie Ritter said.
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