A Quick Opinion: When will the housing boom be over?

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A Winters Express opinion column

By Charley Wallace
Publisher Emeritus

For some reason I like contests. I don’t care if we are guessing when a baby will be born or how much rainfall we will get. Maybe it is just a family gambling gene, as I’m getting ready to put together another, private, football contest with a dozen friends. My father always ran a football contest in the Express and I liked the merchant Thanksgiving turkey give-a-way contest.

Over the years, I’ve given away Giants tickets, lots of turkeys, cash, subscriptions and gift baskets to the first Winters baby born after the New Year. I’ve been thinking that the housing boom is over, but my neighbor put his house on the market and it was marked pending in less than two weeks. With rising interest rates, houses will become too expensive for a lot of new homebuyers.

Just for an example. If you could find a $600,000 home to buy in Winters, with a 20 percent down payment, 30 year fixed rate loan at current 5.1 percent interest, your monthly payment would be around $2,600. Last year your payment would have been $1,900, with a 2.5 percent loan. My examples don’t include taxes or insurance.

If you were looking to buy a home when interest rates were low, your $2,600 monthly payment would let you buy an $800,000 home. That is a big difference when there are limited number of homes for sale and more buyers than sellers. But, I think that is all about to change with interest rates on the rise and building material costs rising with inflation.

What if you don’t have a 20 percent down payment? A $600,000 home with current interest rates and three percent down would leave you with a monthly payment of around $3,150. A year ago your payment would have been $2,300. Move up to a $800,000 home with a three percent down payment and you would have to come up with $3,100 last year, or $4,200 this month.

You get the idea of what higher interest rates can do to someone looking to buy a home. The question is when will the rubber hit the road and skid to a halt? There are still a lot of foundations being poured in Winters. I believe the homes being built around the Church of Jesus Christ of Latter-day Saints will be marketed as affordable. Read Richard Casavecchia’s recent column (Aug. 10 edition) if you want to understand the different levels of affordability. I’m guessing that they may be the last foundations poured in Winters for awhile, but who knows what a developer might do next week, let alone next year.

When people are looking for a home, banks calculate out how much of a home you can afford, mostly by figuring out your monthly payment, including tax, insurance and maintenance. They compare your annual income and give you a dollar figure and you start looking for a home in that price range. As interest rates go up, you get less of a home, or move to a more affordable area, like Mississippi.

So, make your guess as to when Winters will go a month without a new home being sold. I’ll give you a hint of how bad things can get. One year, maybe 15 years ago, the biggest home builders in Winters were the Fridaes when they built a new home for themselves. The next year the biggest home builders were the Cowans, who also built a home for themselves. There was a 20-year span when we didn’t build a dozen new homes, total and our school population decreased by almost 30 percent.

We are all witnessing the largest housing boom in recent memory. The expansion of East Main Street added several hundred homes, but nothing like what is happening to West Main Street. I’m excited to meet our new neighbors and hope everyone welcomes them to Winters. They might be the last immigrants to arrive for several years.

So grab your pencil and make a guess when no new homes will be sold, month and year. Send it to Charley Wallace, 13 Russell Street, Winters, CA 95694. You’ll get your name in the paper and a prize to be determined later. My guess is March 2023.

Have a good week.

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