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Low-income earners battle high-priced houses
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The housing market is making a comeback. But for many low-income earners, owning a home is becoming less of an option as the rental business starts to fade away as well. - photo by Matthew Jelalian
Buy low, sell high is the investors mantra.

Usually when stock prices are high its good news for stockholders, but its not always good news for those who wish to start investing because chances are that those stock prices will go down instead of up.

Its no different with housing.

Housing starts are at their highest level in seven years, with new-home construction up 4.4 percent in December, according to the latest numbers, wrote MarketWatch. That pushes up 2014s total to over 1 million housing starts, the highest mark since 2007 and up almost 9 percent from 2013.

Although this is great news for construction companies and contractors, the increased production and value of houses makes it much more difficult for lower-income earners to buy homes. MarketWatch reported that some companies are trying to fix that problem.

In the wake of the financial crisis, regulators and the mortgage industry were concerned with enacting more stringent lending standards to stabilize the American housing market and the economy, wrote MarketWatch. But now, the pendulum is swinging back the other way, with the Federal Housing Administration drafting plans to boost lending to those with lower-income levels and first-time homebuyers.

Although there is nothing wrong with responsible lending to lower-income owners, bad lending practices still exist.

Rent-to-own schemes have long exploited the poor, wrote ProPublica. Today, it's called lease purchase. The arrangements work in myriad permutations, but the basic deal is that a person rents a home and pays for an option to buy it at a later date.

Apart from bad lending practices, there are larger problems for people who wish to find affordable housing.

In many places, housing prices rise faster than wages. This holds true even in rural America where housing prices are generally lower than suburban and city housing prices.

It can be hard to understand how finding affordable housing could be an issue in areas where housing is substantially cheaper than it would be in the nearest city or suburb, wrote the Atlantic. But the fact of the matter is, despite lower costs of living, income for many in rural areas is also significantly lower thanks to limited economic opportunities and struggling industries, like coal.

A lack of economic opportunity may make it more difficult to own a home but the solution does not necessarily mean that enriching an area with more higher-end jobs will help. Quartz reported that the Starbucks bump, a sign of higher earning wage owners, might just exasperate the problem.

Lets look at the historical home value appreciation of areas that now are located within a quarter mile of a Starbucks, wrote Quartz. A home that is now near a Starbucks would have sold, on average, for $137,000. A home that is not near a Starbucks would have sold, on average, for $102,000.

As housing appreciates in value, prices continue to climb for houses in areas affected by the Starbucks bump.

Fast-forward 17 years to 2014, wrote Quartz. That average American home has now appreciated 65 percent, to $168,000. But the Starbucks-adjacent property has far outpaced that, appreciating 96 percent to $269,000.

With housing prices what they are, buying a house isnt an option for many people. However renting isnt a good second option either anymore. Its becoming harder and harder to rent a home as well, according to the U.S. Department of Housing and Urban Development's Shaun Donovan.

Donovan said that it was critical to provide affordability across all segments immediately, reported HousingWire. This is the worst rental affordability crisis this country has ever known, he said.
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