Instant Reaction: Mortgage rates, March 18, 2021 | #YajneshRai #01924991 #SangeetaRai #02026129

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Instant Reaction: Mortgage rates, March 18, 2021

Mortgage rates continue their upward trend. Freddie Mac reported today that the average rate on the 30-year fixed rate home loan ticked up to 3.09% from 3.05% last week. However, a year after the pandemic struck our country, mortgage rates are still hovering into record lows around 3%. Even though mortgage rates will likely continue to rise later this year, with the Fed keeping interest rates low, mortgage rates will remain favorable for would-be homebuyers and owners to refinance.

The recent increase in mortgage rates doesn’t seem to have had any impact on homebuyers. Home purchase mortgage activity continues to be strong. Sales of both new and existing-homes have been running at 14-year highs. In the meantime, housing is more affordable than a year earlier. While mortgage rates are historically low, people’s income is higher due to the stimulus packages. Specifically, median family income jumped by 9.4% while the monthly mortgage payment increased 1.8% in January from one year ago.

However, home prices continue to rise, offsetting the benefits of the low mortgage rates. With significantly fewer homes available for sale, the imbalance between housing supply and demand may exacerbate further as we are entering the spring season. In the meantime, homebuilders report as their most urgent concern the high costs and delays of building materials due to supply chain disruptions. For instance, lumber prices continue to soar, creating additional hurdles to homebuilders to deliver more homes in the market. From the consumer perspective, these shortages in supply also have an impact on owners who want to improve where they live now with delays and additional costs. Following lumber, windows and doors seem to be the hardest items to find. Furniture and appliances are also facing the same supply shortage due to manufacturing disruptions. With historically low mortgage rates, it may make more sense for many existing owners to sell than improve their home and buy a new or fully renovated home. This also means that the supply of homes needs to grow so that additional demand would make sense. Housing starts may have cooled off in February but it seems that this was mostly due to weather effects. Expect construction to wrap up in the following months.

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Aspiring First-Time Buyers Persevere in Hot Market | #YajneshRai #01924991 #SangeetaRai #02026129

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Aspiring First-Time Buyers Persevere in Hot Market | Realtor Magazine

Between rising home prices and shortages of homes for sale, the market has been difficult for buyers, with those trying to buy for the first time particularly feeling the effects. A don’t-give-up mindset may be key for first-time home buyers.

Forty-three percent of more than 800 prospective home buyers recently surveyed by realtor.com® say they’ve been searching for a home for more than a year. One-third of respondents say they’ve been in the market searching for a home between six and 12 months.

“Americans, even millennials who many thought would never buy, have a strong preference for homeownership for the same reasons many generations before them have—to invest in a place of their own and in their communities, and to build a solid financial foundation for themselves and their families,” says George Ratiu, realtor.com® senior economist. “However, today’s first-time home buyers face unprecedented challenges brought on by a lack of available homes for sale and double-digit price growth. They are resilient, though, with many in the market searching for their home for more than a year.”

With housing inventories at all-time lows and list prices rising rapidly, first-time home buyers are finding it challenging to close on a home. Thirty-four percent of respondents said they are unable to find a home within their budget.

Still, first-time buyers comprised 31% of existing-home sales in February, down only slightly from 32% a year earlier,according to the National Association of REALTORS®’ latest existing-home sales report.

Here are additional highlights from realtor.com®’s survey:

The top reasons first-time home buyers want to buy:“I want to be a homeowner” at 59%; “I want to live in a space that I can invest in improving” at 33%; “The need for more space” at 31%; and “I want to build equity” at 22%.

What factors are delaying home purchases:Not enough money for a down payment (44%) and unable to find a home within their budget (34%).

Top factors in a home search: Location (38%); quiet location (33%); large backyard (32%); and garage (29%). Also, 43% indicated they wanted a move-in-ready home, while only 11% said they were willing to purchase a fixer-upper.

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97 Offers on One Listing? | #YajneshRai #01924991 #SangeetaRai #02026129

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97 Offers on One Listing? | Realtor Magazine

The buying frenzy continues as multiple offers become the norm and buyers offer thousands or tens of thousands above the asking price to try to get the home they want. In many cases, buyers also are increasingly waiving appraisals and even some inspections to make their offers stand out.

Buyers are also feeling a greater sense of urgency as mortgage rates begin to rise, and they’re eager to lock in a low rate ahead of any further increases.

“Fifteen offers, 25 offers, we even had one last week with 97 offers—and the list price is the starting point,” Mark Wolfe, broker-owner of RE/MAX DFW Associates, told the Dallas Business Journal. “An agent in our firm received 17 offers on a property before they cut off receiving additional offers. Twelve of the offers were cash, all above list, and most buyers not even seeing the home. They are just grabbing.”

Nationwide, 36% of homes sold above list price in February, the highest share on record, according to housing data from Redfin. The most competitive markets in February were Oakland, Calif., where 70.5% of homes sold above list price, followed by San Jose, Calif. (66.6%); Tacoma, Wash. (65.7%); Sacramento, Calif. (62.3%); and Austin, Texas (57.3%), according to Redfin’s research.

“This is the strongest seller’s market since at least 2006,” says Daryl Fairweather, Redfin’s chief economist. “Buyers outnumber sellers by such a huge margin that many homeowners are staying put because they know how hard it would be to find a place to move to. It seems like the only move-up buyers who are confident enough to list their homes are those who are relocating to a more affordable area where they’ll have an edge on the local competition.”

Despite the rapid price increases, this isn’t a housing bubble, housing economists say.

“Yes, some buyers are overpaying for homes, particularly those who are moving to affordable destinations and paying well over asking prices to win homes in bidding wars,” Fairweather says. “But these buyers are often covering any shortfall in the bank’s appraisal amount and locking in low monthly mortgage payments that they can easily afford. As mortgage rates rise, I expect demand to settle down and be better balanced by more new listings as high home prices lure more sellers to the market.”

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Despite Buyer Demand, Builders Slow Production | #YajneshRai #01924991 #SangeetaRai #02026129

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Despite Buyer Demand, Builders Slow Production | Realtor Magazine

Construction on new homes weakened in February as material costs—notably on lumber—continued to challenge growth in new-home construction.

Housing starts—including for single-family and multifamily building—fell 10.3% to a seasonally adjusted annual rate of 1.42 million units in February, the U.S. Department of Housing and Urban Development and Census Bureau reported Wednesday. Broken out, single-family starts fell 8.5% last month to a 1.04 million seasonally adjusted annual rate while the multifamily sector—which includes apartment buildings and condos—fell 15% to a 381,000 pace.

However, buyer demand still remains strong.

“Despite strength in buyer traffic and lack of existing inventory, builders are slowing some production of single-family homes as lumber and other material costs, along with interest rates continue to rise,” says Chuck Fowke, chairman of the National Association of Home Builders. “Shortages of lumber and other building materials, including appliances, are putting future construction expansion at risk.”

Still, regardless of last month’s dip, NAHB Chief Economist Robert Dietz notes that single-family starts for the first two months of the year remain 6.4% higher than the first two months of 2020. Overall, “there has been a 36% gain over the last 12 months of single-family homes permitted but not started as some projects have paused due to cost and availability of materials,” says Dietz.

Single-family home building is still forecasted to increase in 2021, but Dietz says it likely will be at a much slower rate as housing affordability is challenged by higher mortgage rates and rising construction costs.

Regionally, combined single-family and multifamily housing starts only rose in the West last month, up 17.6% compared to the previous month. Meanwhile, housing starts dropped by 39.5% in February compared to January in the Northeast, declined 34.9% in the Midwest, and were 9.7% lower in the South. Dietz notes that February’s winter storm prompted home building to decline in Texas and some neighboring states.

Homebuilding likely will continue to face declines over the coming weeks. Housing permits—a gauge of future activity—declined 10.8% in February to a 1.68 million unit annualized pace. Broken out, single-family permits fell 10% to a 1.14 million unit rate and multifamily permits decreased 12.5%.

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Google Bets Big on a Return to the Office | #YajneshRai #01924991 #SangeetaRai #02026129

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Google Bets Big on a Return to the Office | Realtor Magazine

Some tech companies are still betting big on the return to the office once the pandemic fades. Google’s Alphabet Inc. is the latest, with a commitment to spend $7 billion this year on expanding its offices and data centers across the U.S. The company also plans to hire at least 10,000 new full-time staff over the next year as it becomes bullish on a post-pandemic recovery, The Wall Street Journalreports.

“Coming together in person to collaborate and build community is core to Google’s culture,” Sundar Pichai, Alphabet and Google chief executive, said in a blog post this week. “And it will be an important part of our future.”

Soon after the COVID-19 outbreak began in the U.S., Google was one of the first major companies to extend the time so that its employees could work remotely. That date has since been pushed to July. However, the company now expects employees to return to offices, while still leaving the door open to remote work two days a week.

Other tech giants have also committed to growing their office footprint, even at a time when other companies are looking to shrink theirs from the growth of remote work. Amazon announced this summer it would be expanding its physical offices to six U.S. cities, spotlighting the importance of still being able to one day work and collaborate once again in the same space. (Read more about Amazon’s plans.)

Google has thrived during the pandemic as online ad spending rose. Google has more than doubled its data centers since 2018 as it heavily invests in its cloud business. Still, its $7 billion commitment to expanding office and data centers this year is lower than its pre-pandemic office expenditures, which had an annual average spend of $11 billion in 2018 and 2019.

Google said that its investment plan this year will target growing its existing sites. It does plan to create three office sites in Minnesota, Texas, and North Carolina,The Wall Street Journalreports. Overall, that will then expand Google’s presence to 19 states.

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Housing Equity in Practice, Not Just Theory | #YajneshRai #01924991 #SangeetaRai #02026129

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Housing Equity in Practice, Not Just Theory | Realtor Magazine

Property developers are creating company policies and taking tangible steps toward achieving greater housing equity, buoyed by a renewed national focus on antidiscrimination and closing the racial homeownership gap, experts said Tuesday at the Urban Land Institute’s virtual Housing Opportunity Conference.

While it may feel like the road to housing equity is long, with many stops and starts, “diversity and inclusion is a strategy that evolves over time,” said David Quart, Northeast regional real estate manager for civil engineering and design firm VHB. “It’s not something to hurry up and get done.”

Quart’s New York-based company has developed a recruiting initiative, partnering with local universities to find and hire diverse workers who are early in their careers and eager to help VHB evolve its services to cater to more communities. VHB is involved in many affordable housing projects in the New York suburbs, which often rouse community backlash. A diverse workforce familiar with a wide range of neighborhoods can communicate more intentionally with the community and lower the temperature of opposition, Quart said. “Addressing that is a challenge; there’s no one single policy or solution—it really needs to be a whole set of tools.”

Dawnita Wilson, vice president of diversity and inclusion at real estate investment firm JBG SMITH, said her company is launching a supplier diversity program in the near future. The program aims to ensure that JBG works with diverse vendors that can offer insights into many different markets. “We want to be more intentional with diversity,” Wilson said. “Whether you’re doing something internally in your workforce or externally in your community, intentionality and commitment are important.”

A Moment for Change

With an administration that has promised to make racial equity a cornerstone of its policies, the political environment is opportune for making headway on housing equity work, Ethan Handelman, deputy assistant secretary for multifamily housing at the Department of Housing and Urban Development, said in one ULI session. He added that the challenges created by past governmental disinvestment in Black and other minority neighborhoods are “real and rooted in history. State, local, and federal governments built on segregation and exacerbated the wealth disparity.”

Handelman pointed to FHA insurance programs, which are compatible with aid programs like rental assistance, capital grants, and housing credits, as a means of reinvesting in neglected communities. “We want to create more and better opportunities in places where people want to live,” he said. “And the solutions for affordable housing line up nicely with the solutions for dealing with issues of segregation and disinvestment.”

That also extends to issues of vacancy and property blight. The National Association of REALTORS® is hosting a six-part webinar series, “Policy, Practice, Process: Transforming Neighborhoods through Equitable Revitalization,” the first installment of which also was held Tuesday. Liz Kozub, associate director of national leadership and education for the Center for Community Progress, spoke during the webinar “Systemic Vacancy: Community Costs and a Pathway Forward,” outlining the historic impact of racist policies such as redlining, blockbusting, and exclusionary zoning. “Our nation has historically enacted policies that perpetuated bad properties,” Kozub said. “Many of these policies created racial inequity and disparate impact on communities of color.”

COVID-19 also has disproportionately affected urban and low-income communities. NAR says it’s intensifying its focus on developing new, strategic approaches to revitalization in places where vacant properties remain common.

Further, “collaboration is a key part of addressing widespread vacancy and our country’s complicated past of racism and discrimination,” says Akilah Watkins, CEO and president of the Center for Community Progress, which is partnering with NAR for the webinar series. “Our success hinges on our ability to work together from community to national stages.”

Reconciling the Past

Local governments play a critical role in promoting housing equity as well, and some cities are already implementing policies and plans to achieve just that. Philadelphia was the first city in the nation to complete the Affirmatively Furthering Fair Housing process, unpacking in an 852-page report about the long-term ramifications locally of redlining and other housing policies. The city created a robust outreach program to get on-the-ground information from residents about their housing experiences, surveying more than 5,000 residents and holding three public hears on the topic.

Vincent Reina, faculty director of the Housing Initiative at the University of Pennsylvania, said that during the process, it was important for the city to capture “those stories that have for far too long been undocumented” in its report. From the research, officials created a citywide housing plan called “Housing for Equity: An Action Plan for Philadelphia,” including measures to increase affordable housing and desegregate neighborhoods. But the plan is not meant as a one-time evaluation of fair housing. It will constantly be evolving to meet new needs, Reina said. “If we want to meaningfully address issues of discrimination, we can’t expect one plan to do that, two plans to do that. It requires a long-term, evolving response.”

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Mortgage Rates Continue to Climb | #YajneshRai #01924991 #SangeetaRai #02026129

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Mortgage Rates Continue to Climb | Realtor Magazine

Sub-3% mortgages are slowly fading into the rearview mirror as the 30-year fixed-rate mortgage continues to inch up. The 30-year fixed-rate mortgage averaged 3.09% this week, Freddie Mac reports.

Economists continue to remind consumers that mortgage rates are still near historical lows and are hovering around 3%. “Even though mortgage rates will likely continue to rise later this year,with the Fed keeping interest rates low, mortgage rates will remain favorable for would-be home buyers and owners to refinance,” Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®, wrote on the association’s Economists’ Outlook blog.

So far, the increase in mortgage rates has not appeared to deter would-be buyers. Home purchase mortgage activity continues to remain elevated and sales of both new and existing homes are at a 14-year high, Evangelou notes.

Freddie Mac reports the following national averages with mortgage rates for the week ending March 18:

  • 30-year fixed-rate mortgages: averaged 3.09%, with an average 0.7 point, rising from last week’s 3.05% average. Last year at this time, 30-year rates averaged 3.65%.
  • 15-year fixed-rate mortgages: averaged 2.40%, with an average 0.7 point, increasing from last week’s 2.38% average. A year ago, 15-year rates averaged 3.06%.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.79%, with an average 0.3 point, increasing from last week’s 2.77% average. A year ago, 5-year ARMs averaged 3.11%.

Freddie Mac reports average commitment rates along with average points to better reflect the total upfront cost of obtaining the mortgage.

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NAR Study: Young Adults Eagerly Entering, Dominating Housing Market | #YajneshRai #01924991 #SangeetaRai #02026129

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NAR Study: Young Adults Eagerly Entering, Dominating Housing Market | Realtor Magazine

First-time home buyers are swooning over housing. Millennials are comprising the largest share of buyers at 37%, shows the National Association of REALTORS®’ newly released 2021 Home Buyer and Seller Generational Trends report. The youngest buying generation–Gen Z—is also starting to emerge. The majority of millennials and Gen Z buyers are first-time home buyers and are increasingly relying on real estate professionals to navigate their homebuying debut in what has become a very competitive housing market during a pandemic.

In particular, younger millennial buyers—ages 22 to 30—were the most likely to cite a real estate agent as a prime information source they used during their home search at 91%, according to NAR’s survey.

“Buyers used all tools available to them—whether it be a mobile device, yard sign or an online video–but at some point, nearly all buyers turned to an experienced agent to assist with the transaction,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. “This is especially true among younger millennial consumers as they are likely first-time buyers and need help navigating the market and all steps involved in the process.”

The use of virtual tours in-home shopping has skyrocketed since the pandemic, particularly among 22- to 40-year-old buyers. “Home buying aside, this segment of the population was already accustomed to doing research online,” Lautz says. “So, to see them really embrace virtual tours and virtual open houses was a given, nonetheless, real estate agents are the top information source, and the data shows these buyers ultimately used agents to purchase a home.”

A graphic of survey data showing what buyers want most from real estate agents

In navigating this road to homeownership, many of these young adults may be leaving their parents’ homes to buy a home of their own. Twenty-eight percent of buyers between the ages of 22 to 30—which comprise the younger set of the millennial generation—are living with their parents, relatives, or friends prior to purchasing, the NAR study shows. Living with family first tends to allow flexibility toward saving for a down payment and finding a home, given the low housing inventory, NAR notes in its study.

These young adults aren’t shy about going at homeownership alone, either. Twenty percent of buyers between the ages of 22 to 30 were unmarried. In particular, “single women remain a large buying force,” Lautz said.

One of the biggest challenges first-time buyers are facing is finding adequate housing options. Inventory levels have fallen to record lows over recent months. Nearly six in 10 buyers between the ages of 22 to 40 say that finding the right property is the most challenging step in the buying process. That is a problem widespread across age groups: More than half of all buyers—53%–report finding the right property as the most challenging step.

A graphic of survey data showing the most difficult steps in the homebuying process

Many young adults are searching for homes in the suburbs. Fifty-four percent of homes purchased by buyers between ages 31 to 40—considered older millennials—were located in a suburb or subdivision.

Despite the growth in remote work since the pandemic, “convenience to the workplace” remains a strong factor in neighborhood choice among the 22 to 30 age group. “The younger millennials overwhelmingly answered that they prefer to live closer to work, as many don’t want a long commute, and this was evident in their buying habits,” Lautz said. “Additionally, both of these groups also placed a high value on being close to family and friends, as 57% said that dynamic factored into what neighborhood they ultimately chose.”

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Cash-out Refis Surge to Highest Levels Since Financial Crisis | #YajneshRai #01924991 #SangeetaRai #02026129

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Cash-out Refis Surge to Highest Levels Since Financial Crisis | Realtor Magazine

Cash-out refinances are on the upswing, to the likes of numbers that haven’t been seen since the financial crisis. But economists say they aren’t concerned—at least yet. After all, home prices are still rising. During the financial crisis, home prices started to drop.

Cash-out refis surged 42% year over year in 2020, according to Freddie Mac’s data. Homeowners cashed out $152.7 billion in home equity last year, the highest level since 2007.

Low interest rates are part of the reason leading to the surge in cash-out refinances. With a cash-out refi, homeowners pay off their old mortgage and start a new one that allows them to have extra cash left over.

Many homeowners have withdrawn some of their home equity to be able to purchase larger homes or take on home renovations. “There are genuinely a lot of people who want to buy homes to live in,” Daryl Fairweather, chief economist at real estate brokerage Redfin Corp., told The Wall Street Journal. “They’re not just buying them to buy them or speculating that home prices will continue to rise. People are buying because they want them and they’re not trying to sell again the next year.”

Home equity has been on the rise this year, as home prices post double-digit annual increases. Read more: As Home Equity Increases, Renters Are Taking Notice

On average, borrowers who took a cash-out refi last year withdrew $50,000, which is down from $59,000 the year before, according to the New York Federal Reserve office.

However, financial experts do caution homeowners considering cash-out refis to make sure they factor in that they could end up paying more in interest over the long run as they take out a new loan. They should also consider potential tax implications: The 2017 tax overhaul said that borrowers typically can’t deduct the interest on the cash-out portion of a refi unless it is used to improve a home, The Wall Street Journal reports.

Cash-out refis were a cause of concern in the run-up to the 2008 financial crisis as borrowers increasingly sought refuge in their homes to generate extra finances. But when home prices fell, many homeowners were left owing more on their homes than they were worth.

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Renters Take Notice of Home Equity Increases |

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Renters Take Notice of Home Equity Increases | Realtor Magazine

Home prices are up sharply, and the average annual homeowner equity gains in the fourth quarter of 2020 reached the highest level since 2013, CoreLogic reports in its latest Home Equity Report. These gains among homeowners have helped to offset some of the financial difficulties from the pandemic.

“This growing bank of personal wealth that homeownership affords was noticed by many but in particular for first-time buyers who want a piece of the cake,” says Frank Martell, president and CEO of CoreLogic. “As a result, we may see more of those currently renting start to enter the market in the near future.”

In the fourth quarter of 2020, the average homeowner gained about $26,300 in equity during the past year. California, Idaho, and Washington saw the largest average equity gains at $54,500, $48,500, and $47,200 respectively.

 

Map showing equity gains by state

 

 

Meanwhile, properties in a negative equity position—reflecting borrowers who owe more on their mortgages than their homes are currently worth—dropped to 2.8% of all properties with a mortgage in the fourth quarter of 2020, a 21% decrease compared to the previous quarter.

The increase in equity is enabling more families “to finance home remodeling, such as adding an office or study, further contributing to last year’s record level in home improvement spending,” says Frank Nothaft, chief economist at CoreLogic.

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