Between 2018 and 2028, the number of households is projected to increase by up to 12 million. Generation X and millennials are expected to drive most of that household formation. As they replace dropped households over that time, the two generations could add nearly 25 million new households by 2028, according to the CoreLogic Insights Blog.
The largest cohort of millennial buyers have yet to surface on the market, researchers note. That segment, from ages 28 to 30, numbers nearly 15 million and is approaching the average age to buy a first home, 33 years old, CoreLogic reports.
Even as younger generations wait to enter the housing market in high numbers, the market already faces a home inventory shortage. The number of homes for sale has reached the lowest level on record. That has prompted home prices to increase faster than incomes. Over the past two decades, home prices have increased by 1.6 times the rate of real household incomes, CoreLogic says.
Record low mortgage rates over the past few months have helped to offset high prices. Still, first-time home buyers are facing increasing affordability woes as they try to come up with a down payment. While the monthly mortgage payment and insurance have dropped by 3% compared to a year ago, the down payment needed is up 8% (from about $20,000 to about $22,000 for a median-priced home at $225,000), according to CoreLogic.
“This may be a daunting challenge for some particularly given that the median financial asset holding of families headed by a person under 35 years of age is only about $8,500,” CoreLogic notes on its blog.
The latest housing data shows consumers returning to urban areas after abandoning cities for the suburbs in the early days of the COVID-19 pandemic. In places such as New York, San Francisco, Chicago, and Boston, some rental buildings went from full occupancy to 50% vacant as remote work and school enabled residents to move to less congested areas.
But now there are signs of a reversal of that trend.
The Greater Boston Association of REALTORS® reports that sales of single-family homes and condos in the city were at their highest levels on record in October. In Chicago, home sales surged 39% the same month compared to a year ago, according to the Illinois Association of REALTORS®. In New York, single-family home sales jumped 34% from September to October.
However, real estate experts note that San Francisco—one of the nation’s priciest markets—has not yet seen a major spike in home sales. Still, new listings in the Bay Area surged 46% year over year in October, and the median home price in the city has dropped 1.6% compared to a year ago. Several major San Francisco–based companies like Facebook and Twitter have announced indefinite work-from-home plans, freeing workers to move.
But the appeal of big cities likely will return as the coronavirus vaccine rollout escalates, real estate experts predict. “I expect the big-city market to stay hot for a more gestalt reason: because city dwellers are city people,” Ryan Serhant, a real estate professional who stars in the Bravo network’s “Million Dollar Listing New York,” writes for Forbes.com. “City dwellers aren’t the type who want to live in rural areas, have only one or two local restaurants to choose from, and lose the electric energy that makes our cities such special places to be. Collectively, we are all looking ahead and looking forward to a return to pre-pandemic life.”
Disinfecting took on new prominence in 2020. Keeping bad germs out of your listings and office became critical in the pandemic. Americans learned more about the proper ways to disinfect this year.
For one, cleaning may be what you have traditionally done for prepping listings prior to 2020. Cleaning is all about aesthetics and a home looking spotless and ridding it of dirt. But sanitizing and disinfecting went mainstream in 2020. This is reducing and killing germs. “Sanitizing generally reduces the number of germs on a surface by 99.9 percent or more, whereas disinfecting kills virtually everything,” Apartment Therapy reports.
Apartment Therapy rounded out some of the rules learned about disinfection from a pandemic-filled year, including:
Clean before you disinfect
A disinfectant won’t work on a surface that isn’t cleaned first. “Viruses and bacteria can hide in organic material and dirt lingering on your home’s surfaces, which makes any disinfectant you try to use less effective,” Apartment Therapy notes. “Always use a detergent, like an all-purpose cleaner or soap and water, before using disinfectant.”
Don’t use bleach in a spray bottle
Avoid combining bleach with anything, including a spray bottle, Apartment Therapy warns. It can react with the metal parts of the trigger spray nozzle. It could cause rust and reduce its effectiveness. Instead, when using bleach, use a rag that is saturated with the diluted bleach solution.
70% rubbing alcohol disinfects better than 91%
Rubbing alcohol can be used to kill viruses and bacteria. But don’t assume the higher the percentage, the more effective. “Ninety percent (or higher) alcohol solution can actually be too powerful in some scenarios—like when you’re cleaning food surfaces,” Apartment Therapy reports. “It has to do with the water content, which allows the solution to permeate the bacteria cell wall, and zap the whole thing.”
Wait for contact time
Don’t wipe away disinfectant too quickly after applying it. Disinfectant solutions need to remain on a surface for a specified length of time. This can vary, depending on the product. For example, a surface treated with Clorox Wipes needs to remain visibly wet for four minutes before it’s wiped away in order to work. Check the bottle to see the proper contact time.
As of Dec. 1, about 2.8 million homeowners are in a forbearance plan due to the COVID-19 pandemic. Homeowners who are struggling to make mortgage payments can request from their lender a pause or reduction in their mortgage payments for up to a year.
Forbearance rates are trending highest among higher-priced loans, which are considered loans with a rate spread of 1.5 percentage points or more, according to CoreLogic, a real estate data firm. On the other hand, forbearance rates are lowest for loans with a rate spread of 0–0.25%.
Forbearance is strongly tied to delinquency if a borrower’s financial situation does not improve by the end of their term.
“Higher-priced loans were more likely to experience forbearance than lower-rate spread loans,” according to CoreLogic’s analysis. Once their forbearance period is up, “there is a risk of an increase in mortgage foreclosure, especially among borrowers who remain in financial hardship and have little or no home equity.”
Still, there is hope. Not all forbearance loans are in delinquency, the researchers note. About 30% of homeowners with conventional loans in forbearance plans in October were still current on their mortgage payments. As such, some homeowners may be using forbearance as a fallback plan in case their finances worsen but haven’t needed it yet.
When house hunters walk into a home, they’re wanting to know if it’s been well maintained, and they’re carefully scrutinizing a home for clues of that.
“Corroded air conditioning vents, loose hinges on cabinets, and leaky faucets lead buyers to think, ‘If the seller can’t keep these things up, what big things are lurking behind the walls that haven’t been taken care of?’” Lynn Pineda, a real estate pro with eXp Realty in Southeast Florida, told realtor.com®.
“Sellers need to be careful not to put a lipstick on a pig,” cautions Frank Lesh, ambassador for the American Society of Home Inspectors. “Just do the right thing, fix the problem, and make the deal go through a lot smoother for everybody.”
Lesh and realtor.com® highlighted several red flags of potential problems when a home buyer is evaluating a home to buy, including:
Dehumidifier and air freshener
Could it be covering up a bad smell of mold or mildew in a damp room? “There’s typically a root cause for a room being damp, so you want to correct the cause, not put a Band-Aid on it,” Lesh told realtor.com®. “If there’s moisture getting in the house, that moisture is generally coming from outside. Figure out how to prevent water from getting in, not how to handle it after it gets in.”
Strategically placed planters or shrubs near the home’s foundation
Is water puddling near the foundation? Water should be draining away from the foundation and never collecting against the house. Is the land sloping toward the house? That could cause water to back into the lower level of the home. Are the gutters clogged so water is pouring over the top and landing along the foundation?
Freshly painted trim
Make sure the wooden window frames aren’t damaged. “A lot of times people paint over rotten wood and think nobody’s going to see that, but we can tell that it’s rotting,” Lesh told realtor.com®. “We just put our fingernail on the trim to see if it goes through the wood.” Rotted window frames need to be taken out and replaced, Lesh says.
Fresh coat of paint on the ceiling
Is the ceiling stained, possibly from a water leak? “When we inspectors see cans of new stain-killing primers in the garage, we know that something happened,” Lesh told realtor.com®. Painting over a water stain without taking care of an active leak can make the stain reappear within a month, he says.
2020 was a year of home renovations. As more homeowners spent time at home, they devoted themselves to sprucing up their nests. Kitchens, outdoor areas, and home office updates were all among some of the most popular projects tackled, according to designers.
Apartment Therapy recently asked designers and contractors to highlight some of the most requested home upgrades from their clients this year. Among the popular upgrades they mentioned:
Closet organization
Homeowners are taking control of their closets. They’re clearing items they no longer want and adding shelving to better organize their storage spaces. They may use a full-on closet system, but those can be pricey—hundreds or even thousands of dollars—so some are turning to DIY options. For example, they may bring a dresser into the closet or purchase separate storage units or drawers and then paint them to give them a fresh, custom look.
Sanitizing stations
Adding a sanitizing station by the door has become common. This gives people an area to transition from outdoors to personal space by removing outdoor wear, taking off shoes, applying sanitizer, hanging up or disposing of masks, using sanitizing wipes on belongings, and more. Some homeowners may leave laundry baskets at the doorstep to place dirty items into. These spaces had typically served as mudrooms before the pandemic but received a sanitation focus beyond just being a place to store coats and shoes. Read more about this trend: Organizing and Staging the ‘Disinfection Room’
Kitchen banquettes
A built-in seat for the dining area also is growing in popularity, designers say. “The beauty of a kitchen banquette is undeniable; it makes a space feel cozy and warm, it brings in new tactile materials, and it creates storage solutions,” Alyse Eisenberg, interior designer and owner of Studio Alyse, told Apartment Therapy. “Banquettes work in larger kitchens to make them feel more intimate and can add functional kitchen storage in smaller kitchens when creating drawers under the seating.”
Smart lights
To smarten up households, homeowners have been increasingly purchasing smart lighting systems that can be operated by their phone or voice command. For less than $10, homeowners can switch out current lightbulbs with smart bulbs that can be controlled from a phone app.
New-home sales decreased from October to November as high buyer demand and several building headwinds continued to press on builders’ ability to catch up. Sales of newly built single-family homes dropped 11% in November compared to the previous month, according to the latest new-home sales data released by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.
Despite the monthly dip, new-home sales are still 20.8% higher than a year ago.
“Though the market remains strong, the pace of sales pulled back in November as inventory remains low and affordability concerns persist as builders grapple with a shortage of lots, labor, and building materials,” says Chuck Fowke, chairman of the National Association of Home Builders.
“The home building industry saw a historic gap between the pace of new-home sales and construction of for-sale single-family housing this fall,” adds Robert Dietz, the NAHB’s chief economist. “As a result, the pace of new-home sales was expected to slow to allow construction to catch up. This appears to have occurred in November as inventory of completed, ready-to-occupy new homes was down 43% compared to November 2019 at just 43,000 homes nationwide.”
Inventory increased slightly in November to a 4.1-month supply, with 286,000 new single-family homes for sale. That is 11.2% lower than a year ago. Also, of that inventory, only about 43,000 are completed.
The median sales price of a new home in November was $335,300. A year ago, the median price nationwide was $328,000.
On a year-to-date basis, new-home sales were up annually in all four major regions of the U.S., led by a 28.2% uptick in the Northeast. The Midwest posted a 24% increase, followed by a 20.5% increase in the West and 16.9% in the South.
Mortgages are now taking an average of nearly two months to close as lenders face a surge in business spurred by low mortgage rates and high demand.
The average time it took a mortgage to close in November was 55 days, according to Ellie Mae’s Origination Insight Report.
The 55-day average wait is proving problematic for borrowers who might lock in their mortgage rate for a 30-day or 45-day period. The rate lock will hold a low mortgage rate for a specified time. But if it expires before a buyer closes, buyers could get stuck paying a higher interest rate on their mortgage or have to pay another fee to extend their rate lock, The Motley Fool reports.
“A big reason why mortgages have been delayed lately is volume,” The Motley Fool reports. “Low interest rates are fueling demand for new home purchases and refinances, and mortgage lenders are incredibly busy trying to keep up with everyone.”
Home buyers’ anxiety levels could increase as the frustrating wait to close lengthens, but buyers likely can do little if a mortgage is delayed by a lender processing their loan. However, they could possibly jumpstart the process by making sure they respond to all the information the lender requests promptly and at the time of the application, The Motley Fool reports. The sooner they submit all the requested information, the quicker lenders can get to work processing the mortgage.
The latest REALTORS® Confidence Index report from November shows that 30% of contracts last month were delayed but did eventually reach settlement. The most common delays were related to obtaining financing, which contributed to about 26% of those instances.
On Sunday night, President Donald Trump signed a $900 billion COVID relief package that authorizes rental assistance, stimulus checks to individuals for $600, loans for struggling small businesses, and more.
The president had delayed signing the bill for several days after Congress approved the relief package early last week. Trump had disagreed with extra unrelated COVID relief spending measures contained in the bill and had urged more money than $600 for individuals.
“I am signing the bill to restore unemployment benefits, stop evictions, provide rental assistance, add money for PPP, return our airline workers back to work, add substantially more money for vaccine distribution, and much more,” Trump said in a statement on Sunday evening.
The bill was also attached to a $1.4 trillion spending measure to keep the government running through September. Funding for the operation of the federal government would have run out at midnight on Monday without the approval of the measure.
The National Association of REALTORS® has applauded several items that will assist its members and help homeowners and landlords in the bill. NAR championed several provisions within the bill, including rental assistance. An updated FAQ for landlords and a quick reference guide are available.
“Through this bill, our members will continue to have access to unemployment and small business assistance,” Shannon McGahn, chief advocacy officer at NAR, said last week when Congress approved the bill. “But perhaps one of the biggest wins is rental assistance, which we have fought hard for since the last major COVID-19 bill was passed in April. It will bring instant relief to both mom-and-pop property owners and American families in danger of going over a financial cliff at the end of the year.”
The bill will bring $25 billion in rental assistance to states through Sept. 30, 2022, allowing landlords to apply for funds on behalf of tenants. It includes payments for rent and for other costs related to housing, such as utilities and similar expenses.
The new bill also extends the federal eviction ban through the end of January.
Also, the bill will provide an additional $284 billion for the Paycheck Protection Program and creates a more simplified forgiveness process for borrowers who take part in the loan program. One in five REALTORS® took out a PPP loan after Congress approved the program in the spring soon after the initial outbreak of the coronavirus in the U.S.
Many first-time buyers are being priced out of the housing market as inventory shortages persist. Adding to the woes, home prices have risen annually by double-digit percentages.
While home sales have increased during the pandemic, the market share of first-time buyers has mostly stayed the same. First-time buyers made up 32% of sales in November, about equal to a year ago, according to the National Association of REALTORS®’ latest existing-home sales report. “Housing affordability, which had greatly benefited from falling mortgage rates, is now being challenged due to record-high home prices,” says NAR Chief Economist Lawrence Yun. “That could place a strain on some potential consumers, particularly first-time buyers.”
The median price for an existing home in November was $310,800, a 14.6% jump from a year ago, NAR reports. Prices rose in every region across the U.S. “We have clearly seen a bifurcated outcome in the housing market,” Yun told Newsweek. “People who can work from home or have exposure to the stock market have done well in 2020, but those on the front lines at restaurants, hotels, and grocery stores—who tend to be renters—have not.”
Low mortgage rates and the ability for more people to work from home have helped to lift home sales, he says. Existing-home sales were nearly 26% higher in November than a year ago. Mortgage rates are at the lowest averages since Freddie Mac began tracking such data in 1971. Last week, the 30-year fixed-rate mortgages averaged an all-time low of 2.67%.
As for first-time buyers, they may need to explore down payment assistance programs to help them afford homeownership. Besides federal loan programs that offer low or no down payment options, there are more than 2,500 down payment assistance programs nationwide, according to a 2019 report from the Joint Center for Housing Studies at Harvard University. Real estate pros can educate their clients about down payment assistance programs.
