Building your own house or buying a new house is an important dream of every person, but the problems like lack of wage growth have been a very big hurdle for millions of Americans from past years. The sales of new houses have unexpectedly fallen in the last three months. The sales rate is dropping by 0.4%, as per the reports of the Commerce Department. However, economists are expecting an increase in the sales rate of new houses to 1.5%. The lower Interest rates are not homes most affordable due to problems like lack of wage.
The central bank interest rates
The central bank has cut the interest rates; it typically encouraged the people to buy new houses. Since it makes new houses more affordable and manages the demand to build new homes. The Fed had cut the rates by three times in the past year. It managed it to work by keeping rates in the current target range of 1.50% to 1.75%. However, still, there are many reasons due to which mortgage rates have been remained in the air at around 3.7%.
Significant factors
One of the significant factors that the prices of the house are not lowering down despite a decline in the tax is that the prices of houses are continuously increasing. Wages have remained low for most of the workers, with the pace of hourly declining below 3% from the past few months. Yet the prices of new houses remained up with an average price for a new house going up to $331,400 with an increase of 0.5%. A decline in the demand for houses in the market has also served to keep home prices high. The U.S. housing market is still short to 3.8 million new homes as per the latest analysis.
Several American citizens who are not able to buy new houses are left with only one option that is living in the house by paying the rent. An incredible increase in the demand for apartments and rentals has reported, as people don’t have any other option instead of living in rented houses.
The other reason is that the new generation wants to be more flexible and more mobile. That’s why they prefer to rent houses. The brokers and the owners of the apartments are also benefited as the number of people renting the houses is increasing day by day.
Low-interest rates in home sales
Low-interest rates have, though, provided a small boost in the sales of existing homes, which represent about 90% of U.S. home sales. New homes that are being constructed at present are more expensive than existing homes. It is always difficult for the people of the middle class to buy a new house, and it is becoming even tougher for them to earn and then invest it in buying houses at higher rates.
The people had already hit badly in the fourth quarter of last year. This brings the more problems Higher stock prices are making everybody richer, but still, many people find it difficult to invest in the stock market as it is very risky, and also buying expensive housing is still a difficult task. It is also difficult for rich people to buy houses in good localities of the country. Therefore, it is quite clear that despite the decline in the tax it is still difficult to buy a new house.
