A Housing Bubble in Daytona Beach? NO!
CoreLogic, a leading provider of consumer, financial and property information, analytics and services, says the housing bubble doesn’t exist for this market. In their monthly Market Pulse, they’ve based their statement on two factors:
- Rising mortgage rates will hold down prices
- Home affordability is still very attractive
Mortgage rates are very important because mortgage amounts are based on monthly payments. As interest rates rise, monthly payments rise and this changes the amount that can be financed. Since people can afford less of a mortgage amount, price pressure is reduced, keeping prices from rising significantly. See our recent post Daytona Beach Homes and Condos Becoming More Expensive for a deeper discussion on mortgage rates.
Home affordability is very good based on the CoreLogic Affordability Index. This index looks at median income against median home prices with a debt to income of 25% and a down payment of 20%. In the Daytona Beach area, 8.3 out of 10 people can afford a median priced home. That’s the third highest affordability rate in the state. In the Miami area, only 6.6 out of 10 people can afford the median priced home.
Median prices for Daytona Beach homes sold in June 2013 were $99,500 for 2 bedrooms and below, $160,000 for 3 bedrooms and $218,000 for 4 bedrooms and above. The median price for all homes sold was $150,000. (Median means 1/2 sold above that price and 1/2 sold below that price.
What it Means
We are still in a very good market for buyers. Affordability is at very low levels and mortgages are becoming a bit easier to secure and will become more readily available as rates rise. Prices have risen over 11% in the Daytona Beach area since in the past year or so. We believe prices will continue to rise but would be surprised to see 10% annual increases. It’s a good time to buy because we are past the bottom and we can’t see prices dropping again.