Renting vs. buying
In the age-old debate of renting vs. buying, the scales are continually tipping. Lately, there's been a market update that stands to significantly impact this discussion, particularly for buyers. Some cities are now showing better rent rates than buying rates, which can greatly influence the decisions of potential homeowners and investors alike. A prominent exemplar of this trend is the Minneapolis Metro area. Like many metropolitan areas across the country, it has its own unique real estate market dynamics. To gain a clear understanding of which option – renting or buying – is more beneficial, a comprehensive analysis of these dynamics is essential. Recently, Minneapolis has shown a more favorable climate for renters than buyers. This shift has been precipitated by several factors including fluctuating interest rates, property taxes, and the overall cost of homeownership. High demand and low availability of houses for sale have also contributed to higher buying rates, thereby making renting more appealing for many people in this area. Renting offers a higher degree of flexibility and less financial commitment upfront. The cost of maintenance and other incidental expenses associated with home ownership are also borne by the landlord, thereby reducing the overall cost of living for the renter. As such, even though you're not building equity, the financial freedom that comes with renting can be very attractive, especially in a city like Minneapolis where the rent rates are favorable. However, while the current market dynamics might seem discouraging for prospective buyers, it's important to take a long-term view. Buying a house is not just about having a place to live; it's also a significant investment. Over time, a house can appreciate in value, providing a substantial return on investment. Homeownership also comes with a sense of permanency and stability that renting cannot always deliver. Still, it's essential for buyers to carefully analyze the market and their personal finances before making a decision. Higher buying rates don't necessarily mean that buying is a bad decision, it might just mean that it's a decision that requires more planning and thought. The real estate market is always fluctuating, and what might be a good decision today might not be the best decision tomorrow. It's important to keep a close eye on market trends and to adapt your real estate strategy accordingly. In conclusion, while the Minneapolis Metro area currently shows better rent rates than buying rates, this doesn't necessarily mean that buying a house is a bad decision. The choice between renting or buying a home largely depends on an individual's personal circumstances and long-term plans. You can use my handy mortgage calculator to help you decide: Mortgage Calculator - Brian Leneweaver.homes It's essential to conduct thorough research, perhaps with the help of a real estate professional, before making any major decisions. Knowing the current market climate and understanding how it can affect your decision will empower you to make the best choice for your future.
What happens when the mortgage rates fall?
The interest rate on a 30-year loan has averaged above 7% for four consecutive weeks. It’ll have to come down significantly for most prospective buyers to return to the market, a new survey shows. Photo by Aziz Acharki on Unsplash The magic number for home buyers may be 5.5%. That’s the mortgage rate threshold at which many would-be buyers would jump back into the market, according to a survey from John Burns Research and Consulting. Seventy-one percent of prospective home buyers say they won’t accept a rate on a 30-year mortgage above 5.5%, the survey shows. But it may be a while before rates fall to that point. While the interest rate on the 30-year loan eased to 7.12% this week, it has averaged above 7% for four consecutive weeks, Freddie Mac reports. Higher rates are having a so-called “golden handcuff effect,” discouraging homeowners who locked in low rates a few years ago from selling. This has created an inventory logjam in the housing market. Nearly 82% of home buyers say they feel “locked in” by their existing low-rate mortgage, according to a separate survey from realtor.com®. The inventory crisis, however, has fueled housing competition in spite of higher mortgage rates. Thirty-five percent of homes are fetching more than their asking price due to a limited number of homes on the market, says Jessica Lautz, deputy chief economist at the National Association of REALTORS®. The typical seller is still receiving three offers on their property. “The economy remains buoyant, which is encouraging for consumers,” adds Sam Khater, Freddie Mac’s chief economist. “But while inflation has decelerated, firmer economic data have put upward pressure on mortgage rates, which, in the face of affordability challenges, are straining potential home buyers.” Buyers are being forced to revisit what they can afford. At this week’s 7.12% mortgage rate, a loan for a typical single-family existing home costs $2,221 a month and $1,926 a month for condo buyers, Lautz says. The mortgage payment for a $400,000 home today compared to a year ago is about $259 more per month, Lautz says. Freddie Mac reports the following nationwide averages with mortgage rates for the week ending Sept. 7: 30-year fixed-rate mortgages: averaged 7.12%, dropping from last week’s 7.18% average. A year ago, 30-year rates averaged 5.89%. 15-year fixed-rate mortgages: averaged 6.52%, falling from last week’s 6.55% average. A year ago, 15-year rates averaged 5.16%. When is the best time to buy or sell? The answer is ALWAYS when YOU are ready! Buying now will keep some of the competition on the sidelines. Waiting for rates to improve will likely result in chaos as there will be many more buyers that can afford homes at lower rates. Selling now still allows you to receive TOP DOLLAR as we are still in a seller's market with historically high home values maintained due to the lack of inventory. There is a little volatility with the higher rates pushing some buyers out, so you may be waiting a little longer to capture that deal! Have more questions? Contact me at brian.leneweaver@cbrealty.com or by phone/text at (612) 208-3859. By: Melissa Dittmann Tracey Melissa Dittmann Tracey is a contributing editor for REALTOR® Magazine, editor of the Styled, Staged & Sold blog, and produces a segment called "Hot or Not?(link is external)" in home design that airs on NAR’s Real Estate Today radio show. Follow Melissa on Instagram and Twitter at @housingmuse.
What is Modular Construction?
Modular Stacks Up to Stick-built As a way to deliver quality housing faster, communities are embracing modular options. ©Ed Caldwell Using modular construction, Alchemy created a resilient rebuild for a family that lost a home in a California wildfire. The same techniques can help communities deliver higher-density housing to areas where affordable inventory is in short supply. There have never been more options available in home building than there are today, and yet site-built construction remains the predominant method of building single-family homes. According to analysis from the Urban Institute, site-built (also known as stick-built) construction accounts for 97% of new single-family homes. In fact, over the last two decades, factory-built homes fell from 5% to 3% of single-family home production, peaking just before 2008. Despite this trend, factory-built homes—also referred to as prefabricated, or “prefab,” homes—offer unique opportunities to address the nation’s housing supply challenges. “Factory-built has the potential to not only increase supply but also solve the implied mismatch,” says Michael Neal, principal research associate and equity scholar at the Urban Institute. The mismatch Neal refers to is the difference between what’s being built and what area households can afford. “Prefabricated houses are the best-kept secret in America,” says Sheri Koones, a prolific writer on the variety and value of prefab homes. Koones regularly encounters a general lack of knowledge and prevalent misconceptions among consumers. Prefabricated homes encompass several different types of factory-built housing, including modular, panelized and pre-cut. A distinguishing factor among prefab methods is the degree of assembly before the pieces arrive on site. Panelized and pre-cut packages require more assembly, whereas modular units are nearly complete. One common confusion is the difference between modular and manufactured homes. While both modular and manufactured homes are assembled in factories, they are built to two different codes. Manufactured homes, previously called “mobile homes,” are built on permanent metal chassis in compliance with the federal Manufactured Housing Construction and Safety Standards, also called the HUD code, which preempts state and local codes. Modular homes are built to the same International Residential Code, or IRC, as site-built homes and must conform to state and local regulations. Modular homes are being built and delivered across America. “We’re designing houses for literally all around the country,” says Geoffrey Warner, principal architect and owner of Alchemy, based in St. Paul, Minn. In Chicago, Joshua Braun, founder and CEO of Kinexx Modular Construction, observes that “modular has been very popular on the West Coast. Primarily what has been driving modular is really the cost of land and the cost of construction. I think that people are starting to realize that modular makes sense because we’re experiencing labor shortages across the country.” Koones shares similar data: “It’s very popular in Washington, Oregon, California. A lot in New England ... not so much in the South, where there is cheap labor.” There is a surprising diversity in modular’s suitability for different sites. The suburban environment is an obvious application, but builders have had success with narrow urban in-fill and large commercial developments. Modular construction offers advantages for rural and remote sites, too, including islands, and has found a niche in off-grid designer dwellings. © Ed Caldwell The Santa Rosa, Calif., home is essentially two boxes. A public box includes a living room, dining room, and kitchen. A private box, not shown, includes two bedrooms and two baths. ‘An Engineered House’ Modular housing’s defining characteristic begins with design, Warner says. “It’s box space as opposed to, say, barn space. Modular is basically saying, I’m going to build all these rooms, finish everything outside and inside as much as possible and stick that on a truck—a small house made either from one box or multiple boxes.” Consumer demand for prefabricated homes is hampered by stigma about quality and customization. “People assume that because it shows up in pieces, the quality is less than” a site-built home, Braun says, “and that’s actually completely the opposite. “Most of my colleagues would agree that modular homes are actually a superior product because you’re getting an engineered house,” Braun adds. “Imagine your home. Now attach a crane to it, pick it up, shake it around, and then put the whole thing back down. That’s essentially what a modular home has to endure. Every modular builder makes some semblance of a box, and the box has to move around the shop, be put onto a truck, driven down the road, and then be put onto the foundation by a crane. In order to maintain the rigidity of the box, it has to be engineered to withstand the rigors of transport. We build a two-story home, and our same material could be used to build a 15-story building.” Working in a factory has its advantages. Builders can control variables that could compromise and delay site-built construction. “Because we’re building in a controlled environment, our material, our homes, don’t see a drop of rain on the inside,” Braun said. Greater Sustainability A tight building envelope is critical for energy efficiency. “When a house is being built on-site, it’s built from the outside in because it needs to be closed up,” says Koones. “You have a chance that the wood could get wet, and at some point, it’s going to turn and twist. That makes a place where air can infiltrate. Modular houses are built from the inside out and all of the components are kept dry.” Modular construction, by process and design, lends itself to greater sustainability than site-built construction, Koones says. In addition to a tight building envelope, the factory-floor environment allows for more insulation to be packed into walls, roofs, and everywhere in between. “When you build from the inside out, you have an opportunity to put in more insulation, around all the outlets and everything,” Koones said. A highly insulated home is a passive strategy to save on energy costs over a lifetime. Proponents say precision building on an assembly line also reduces waste during construction. © Structured Development The three-bedroom Harrison Row townhomes showcase Kinexx’s mission to help developers deliver affordable housing with good design. Speed and Savings The primary benefit of factory-built construction is efficiency. “Your workforce is all going to this one place every day,” Warner says. “Your kit is right there, and you can take advantage of industrial machinery.” “Our goal is 90 days or less,” says Braun. “We build a home in about 7 days; our homes are 10 modules each; we deliver each in typically about 6 hours. Then it typically takes us 45 to 60 days to finish it on-site.” While a custom modular home isn’t necessarily cheaper than a stick-built one, the opportunities for savings multiply with volume-based building. “In our first full year of operation, we delivered 43 affordable homes in the city of Chicago,” says Braun. “These are neighborhoods that desperately need housing on the South and West sides.” Kinexx was tapped by Structure Development and Fain’s Development to complete the Harrison Row Townhomes project on Chicago’s West Side after the first seven stick-built townhomes were mired by delays and cost increases. In quick time, Kinexx delivered 28 duplexes with three to four bedrooms each at a sale price of about $245,000, compared to Chicago’s median $315,000 home price. In Koones’ latest book, Prefabulous for Everyone, she addresses America’s housing shortage head-on and profiles a wide variety of homes to illustrate the possibilities of prefab solutions. One home she describes, the Ashford Weehouse, designed by Geoffrey Warner, is a resilient rebuild of a family home burned in a California wildfire. The artistic three-modular-unit house was designed with future fires in mind and features fire-resistant exterior elements. Braun knows that “Stick-built buildings are never going away.” But for modular to succeed, consumer education must be a top priority, and land use regulations and construction financing will have to adapt. “After working on this for 25 years, it’s not a panacea, but it does have utility,” Warner agrees. “I think we can eventually make a difference in terms of how housing and buildings, in general, are produced.” Myth: Lower Standards Modular homes are built to the same International Residential Code as site-built homes and must conform to state and local regulations. Myth: Lower Cost The speed and efficiency of factory-built housing offers opportunities for cost savings, especially at scale. However, individual buyers shouldn’t expect that a comparable prefab house will be cheaper than a site-built house.
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