Multi-zone kitchens, upgraded lighting, and oversized rectangle tiles are among the trends sweeping home design in the new year, according to home design website Houzz. The online resource recently released the following 10 trends it expects to get hotter in 2021.
1. The multi-zone kitchen. Kitchens traditionally use a three-zone “work triangle” setup with a connection between the fridge, sink, and range, Houzz notes. More homeowners are adding touch points and creating additional work zones. Houzz refers to the trend as a “work trapezoid,” which might include dedicated areas for baking, prepping and chopping, or separate stations for snacks, drinks, and homework.
2. Sconce lighting. Interest is growing in swing-arm and other sconce fixtures. Besides adding to decor, sconces have the benefit of adding task lighting around a sink or range, Houzz notes. “A sconce brings in a sculptural element above eye level and adds a bit of shimmer from its metal finish, two details that can help break up walls of cabinets or tile,” Houzz notes. “Plus, a swing-arm sconce is a good solution for adding accent lighting to open shelves to highlight objects on display.”
3. Rejuvenating bathroom design. Bathrooms are being designed to help reduce stress. Forty-one percent of homeowners who have undergone a bathroom renovation say they wanted their new space to evoke more of a relaxing vibe, according to the 2020 Houzz Bathroom Trends Study. “Some homeowners are rejuvenating with steam showers, aromatherapy shower heads, and bathtub fillers that can hold a cup of tea or glass of wine,” Houzz notes.
4. Oversized rectangle tile. Large rectangular tiles can help visually expand a small space, and fewer grout lines means less cleaning. Houzz says the larger tiles are being used in several classic patterns, such as herringbone, stacked, and brick. Houzz designers recommend using a matte finish on bathroom floor tiles to reduce slipperiness.
5. Browns and beiges return. “Warm taupes, beiges, sands—basically any earth tone is surging in popularity,” Houzz notes. “Some designers say the trend is an evolution from popular whites and grays of recent years and that brown as an accent color works well to bring warmth to a palette heavy with those colors.”
6. Home offices and nooks. Homeowners are creating efficient spaces for offices, work nooks, and even backyard cottages as remote work grows and likely remains elevated in 2021.
7. Video conference-worthy backgrounds. Homeowners are feeling the need to have an aesthetically pleasing background for their video meetings and are discovering the art of a good vignette, Houzz notes. “Well-hung artwork, pops of color, good lighting, a little greenery, and objects of different sizes can create a stylish backdrop for a meeting but also make our homes more enjoyable to be in,” Houzz notes.
8. Open floor plan scrutiny. “Perhaps no other design element was put under the microscope this year more than the open plan,” Houzz reports. “Anyone who had multiple family members attempting concurring video meetings in an open layout quickly saw the disadvantages to a lack of walls.” While this trendy floor plan isn’t likely to go away, many homeowners are considering sliding doors or partitions that can close off rooms for privacy.
9. Pergolas. To extend usable living space, homeowners are turning their attention to the outdoors. To create an inviting outdoor space, they’re adding pergolas, a relatively quick and affordable solution, Houzz notes. These structures can add shade for dining, lounging, and other outdoor activities.
10. Backyard cottages and ADUs. For more privacy, some homeowners are adding a dedicated area to their backyard that’s separate from their main home. “A backyard cottage or accessory dwelling unit (ADU) is a great solution for adding a dedicated space,” Houzz notes. “These standalone structures are used as home offices, gyms, meditation areas, or extended living spaces to house relatives or kids who had to stay home from college due to the pandemic.”
Some real estate pros are having their best year ever for home sales, despite the pandemic. Existing-home sales in November climbed 25.8% compared to last year, the National Association of REALTORS® reported Tuesday.
Existing-home sales—completed transactions on single-family homes, townhomes, condos, and co-ops—did dip down by 2.5% in November compared to October’s unseasonably high levels, however. The slight decrease last month ended a five-month streak of month-over-month gains. Still, all four major regions across the country posted significant year-over-year growth.
“Home sales in November took a marginal step back, but sales for all of 2020 are already on pace to surpass last year’s levels,” says Lawrence Yun, NAR’s chief economist. “Given the COVID-19 pandemic, it’s amazing that the housing sector is outperforming expectations.”
A buyer frenzy for a limited number of homes for sale continued to press on many housing markets in November. Home prices are rapidly rising in response to the high demand, posting double-digit increases compared to a year ago, NAR reports.
Despite the booming housing market, the pandemic continues to wreak havoc on the economy. Unemployment remains high, and rapidly rising coronavirus cases mixed with stricter lockdowns are weakening consumer confidence.
“Circumstances are far from being back to the pre-pandemic normal,” Yun says. “However, the latest stimulus package and with the vaccine distribution underway, and a very strong demand for homeownership still prevalent, robust growth is forthcoming for 2021.”
6 Key Housing Indicators
Here’s a closer look at findings from NAR’s latest housing report:
Home prices:Median existing-home prices in November were $310,800—a 14.6% jump compared to a year ago. Prices rose in every region across the U.S.
Inventories:Housing shortages abound with inventories falling to record lows. Total housing inventory declined annually in November to 1.28 million, reflecting 2.3 months at the current sales pace.
Days on the market:Homes are selling faster. Seventy-three percent of homes sold in November were on the market for less than a month. Properties typically remained on the market for 21 days, down from 38 days a year ago. “The positive momentum that home sellers are seeing will carry on well into the new year,” Yun says. He cited record-low mortgage rates (the 30-year fixed-rate mortgage averaged 2.77% in November) and the growth in remote-work flexibilities as helping to propel that momentum well into the new year.
First-time buyers:First-time buyers continue to face affordability challenges as home prices rise. First-time buyers made up 32% of sales in November, about equal to a year ago, NAR’s data shows. “Housing affordability, which had greatly benefited from falling mortgage rates, are now being challenged due to record-high home prices,” Yun says. “That could place a strain on some potential consumers, particularly first-time buyers.”
Investors and second-home buyers:Individual investors and second-home buyers purchased 14% of homes in November, a small decline from 16% a year ago. Investors and second-home buyers tend to account for the largest share of cash sales. All-cash sales comprised 20% of transactions in November, unchanged from a year ago.
Distressed sales:Foreclosures and short sales are hard to find in the current market. They made up less than 1% of sales in November, down from 2% a year ago.
Regional Breakdown
Here’s how existing-home sales fared across the country in November.
Northeast:Existing-home sales dropped 2.2% to an annual rate of 880,000—a 25.7% increase compared to a year ago. Median price: $354,100, up 17.4% annually.
Midwest:Existing-home sales fell 2.5% to an annual rate of 1.59 million in November. However, that is up 24.2% from a year ago. Median price:$239,100, a 14.6% increase from November 2019.
South:Existing-home sales decreased 3.8% to an annual rate of 2.82 million in November, up 25.9% from the same time last year. Median price: $270,000, a 15% increase from a year ago.
West:Existing-home sales held steady last month recording an annual rate of 1.4 million in November, a 27.3% increase from a year ago. Median price: $467,600, up 13.8% from November 2019
More Americans are taking out mortgages this year, the level of which is on pace to top that of the housing boom in the 2000s. And borrowers are saving hundreds of dollars per month by locking in the lowest mortgage rates in history.
In the first nine months of 2020, lenders issued $2.8 trillion in mortgage loans, according to Inside Mortgage Finance. As mortgage rates continue to break record lows, homeowners and buyers are rushing to take advantage. Mortgage originations remain elevated in the final quarter of the year.
Analysts predict mortgage origination volume this year to top the $3.7 trillion record previously set in 2003, The Wall Street Journal reports. The 2003 record is something “nobody thought would ever be achieved again,” Guy Cecala, CEO of Inside Mortgage Finance, told the Journal. Low mortgage rates in 2003 fueled a surge in refinancings but weren’t anywhere near today’s lows. The 30-year fixed-rate mortgage first dipped below 3% in July and has remained there. Last week, the 30-year fixed-rate mortgage averaged 2.67%—the lowest ever on record, according to Freddie Mac.
Refinancings comprise 65% of all mortgage originations right now as homeowners rush to lower their monthly payments. More than 9 million homeowners have saved money by refinancing this year, often saving hundreds of dollars per month, according to Black Knight. Homeowners also are increasingly using refinancing to pull cash from their homes. Cash-out refis can increase the balance of a loan but provide money that homeowners can use for renovations or paying bills. Nonbanks such as Quicken Loans and United Wholesale Mortgage have grown rapidly during the pandemic, the Journal reports.
Still, mortgage companies are facing headwinds even as business booms. They’ve had to front mortgage payments for struggling borrowers who entered forbearance programs. Many of the companies with origination businesses, however, have more than made up for it by making new loans, the Journal reports. But refinancing origination rates likely will drop next year unless mortgage rates move even lower, analysts predict.
Also, beginning this month, Fannie Mae and Freddie Mac began charging an additional fee on refinance loans that they purchase from mortgage companies. That fee will likely increase the interest rate on refinances in the future and could deter some homeowners as well.
More consumers are being drawn to new-home construction and homebuilders are rapidly filling orders. But they’re struggling to keep pace as challenges within the industry mount.
Single-family starts flattened in November as builders struggled to meet demand, the U.S. Census Bureau reported this week. Overall housing starts rose 1.2% to a seasonally adjusted annual rate of 1.55 million—nearly a 13% jump over a year ago. The pace of building permits is also at its highest level in 14 years.
“Though single-family construction continued to be strong in November, builders are unable to keep up with demand due to rising regulatory and construction costs and shortages of lots and labor,” said Chuck Fowke, chairman of the National Association of Home Builders. “The incoming Biden administration needs to focus on policies to improve housing affordability and to increase supply to help housing continue to lead the economy forward.”
Single-family construction has been a “true bright spot amid economic challenges in 2020,” said Robert Dietz, chief economist of the NAHB. Single-family starts are 10% higher than a year ago and have posted their best year since the Great Recession.
“However, the backlog continues to grow, with the number of single-family homes permitted but not started construction up 16.3% from November 2019 to November 2020 as material delays and higher costs hold back building,” Dietz added.
Combined single-family and multifamily starts have been highest in the Midwest, up 14.4% from January through November when compared to a year ago. The South has seen starts increase by 7.6% in that time period, followed by a 5.4% uptick in the West. The Northeast has seen the only decrease in that time—3.3% lower.
Permits—a sign of future homebuilding activity—rose 6.2% in November, but a bulk of that was from an increase in multifamily permits, which reflect apartment building and condo construction. Permits are highest on a year-to-date basis in the South (up 6.9%), followed by the Midwest (up 5.7%), and the West (0.7%). Permits dropped 4.4% in the Northeast.
Tout those smart-home features in listings. More than a third of young Americans say they’re more interested in smart-home tech for safety and security, energy efficiency, and entertainment and relaxation since the COVID-19 pandemic, according to a new survey from realtor.com®.
Overall, a quarter of Americans say they’re more interested in smart-home technology now that they’re spending more time at home. Forty-one percent of smart-home technology owners say they’ve bought at least one device since the coronavirus outbreak began. The interest has been highest among 18- to 34-year-olds, according to realtor.com® and YouGov, which surveyed more than 2,000 Americans earlier this month to learn their thoughts on smart-home technology.
“The survey results show that many Americans, especially younger people, are leveraging smart-home technologies to enhance their quality of life, even more so now that most of us reshaped our homes into live, work, learn, and play spaces,” said George Ratiu, realtor.com®’s senior economist. “In a year defined by a global pandemic, and fraught with civil unrest and economic volatility, it’s not surprising that people are prioritizing the safety and security of their home, their finances, and having a comfortable place to relax and unwind.”
Indeed, security-related smart-home products topped consumers’ lists. Survey respondents said smart-home features that could even make new homes more desirable include a smart doorbell with a camera and a high-tech security system. About 21% of respondents also said they’d be willing to pay more for a home with a high-tech security system or a smart doorbell with a camera.
Some additional highlights from the survey:
When respondents were asked to select just one smart-home feature to add to their home, the majority chose a high-tech security system.
More than half—or 57%—of all consumers surveyed and 61% of those 18- to 34-year-olds already own some smart home technology. The most common products owned are smart TVs, smart-home speakers, smart doorbells, robot vacuums, and connected climate control systems and smart thermostats.
On energy efficiency preferences, consumers said a feature that would make a new home more desirable would be solar roof tiles, a home battery pack to store solar energy, and standalone solar panels.
On entertainment, 26% of consumers said a high-tech home theater and 18% said TVs that pop up out of dressers or drop down from the ceiling are features they say would make a new home more desirable.
Mortgage financing giant Fannie Mae announced it would be extending some of its flexible lending standards into 2021 due to the COVID-19 pandemic. The extensions include allowing verbal verification of employment and power of attorney flexibilities, as well as some appraisal alternatives to ensure that transactions don’t get delayed. The extensions also require more checks on payment histories of self-employed borrowers.
The temporary measures were originally set to expire Dec. 31. Fannie Mae will now allow these measures to be extended until at least Jan. 31. “We are actively monitoring the spread of COVID-19 in the United States and understand there are concerns about its potential impact on borrowers, businesses, and loan originations,” Fannie wrote in a letter to lenders.
The temporary appraisal alternatives include reducing the need in some situations for appraisers to inspect a home’s interior. At the beginning of the pandemic, the Federal Housing Finance Agency directed Fannie and Freddie Mac to use drive-by appraisals and, in some situations, desktop appraisals.
Employment verification also has become more challenging, since many businesses have either shut down or instituted remote work policies. The FHFA then allowed the GSEs to begin accepting other forms of employment verification, such as recent pay stubs, to help prevent delays in transactions.
This week marked the 15th record low for mortgage rates this year. The 30-year fixed-rate mortgage dipped further to an average of 2.67%, the lowest rate ever recorded by Freddie Mac, with records dating back to 1971.
“The housing market continues to surge higher and support an otherwise stagnant economy that has lost momentum in the last couple of months,” said Sam Khater, Freddie Mac’s chief economist. “Mortgage rates are at record lows and pushing many prospective home buyers off the sidelines and into the market. Homebuyer sentiment is sanguine and purchase demand shows no real signs of waning at all heading into next year.”
Freddie Mac reports the following national averages with mortgage rates for the week ending Dec. 17:
30-year fixed-rate mortgages: averaged 2.67%, with an average 0.7 point, falling from last week’s 2.71% average. This time last year, 30-year rates averaged 3.73%.
15-year fixed-rate mortgages: averaged 2.21%, with an average 0.6 point, falling from last week’s 2.26%. A year ago, 15-year rates averaged 3.19%.
5-year hybrid adjustable-rate mortgages: averaged 2.79%, with an average 0.3 point, unchanged from last week. A year ago, 5-year ARMs averaged 3.36%.
Freddie Mac reports points along with average commitment rates to better reflect the total upfront upmost of obtaining a mortgage.
The Consumer Financial Protection Bureau issued final rules Thursday that revise its definition of “qualified mortgages,” or QM, which could impact a significant number of mortgage originations across the country. The federal government requires lenders to verify that a borrower has the financial means to repay a mortgage before issuing a loan to him or her. The borrower must meet legal standards for QM loans.
The CFPB’s two final rules aim to simplify the definition of “qualified mortgage” and provide alternatives to QM safe harbor status on certain mortgages. The move replaces the QM patch before it expires Jan. 10.
One of the CFPB’s final rules establishes a new general QM standard, adopting a pricing threshold to determine if loans can avoid liability under ability-to-repay requirements. The rule also replaces the current debt-to-income limit of 43% with a limit based on the loan’s pricing. CFPB officials noted that limiting QM status to a specific DTI limit could impair access to “responsible, affordable credit.” The second rule creates a new category called “seasoned” QMs. If a lender holds a loan for at least three years, and the loan meets certain underwriting requirements, it could be eligible for automatic “seasoned QM status.”
The National Association of REALTORS® commented on the CFPB’s replacement for the QM rule “and its onerous 43% debt-to-income requirement while working to balance the best interests of consumers, American real estate, and our nation’s economy,” NAR President Charlie Oppler said in a statement. He joined Immediate Past President Vince Malta on a phone call with CFPB Director Kathy Kraninger last week to express their appreciation for the agency’s efforts and stress the need to continue refining the rule to maximize consumer access and affordability under all economic conditions. “As underwriting remains critical to the American dream of homeownership, NAR believes this final rule must be flexible enough to serve all communities, including individuals with nontraditional income documentation,” Oppler said. “And with the pandemic straining the finances of so many, it’s even more critical for the rule to intentionally consider and address the ongoing impact on housing access and affordability.”
In a separate letter to Kraninger, NAR thanked the director for her service over the last year and asked for further assistance refining the rule. “REALTORS® hope that our concerns raised regarding potentially higher and inconsistent costs for consumers, discrimination, and a weakening of safety and soundness are addressed in final implementation,” the letter reads. We look forward to working with the CFPB to refine this rule to better support consumers and protect the market.”
Despite the economic uncertainties continuing to surround the pandemic, one fact has become crystal clear: Americans are ready to buy a new home. Low inventory, bidding wars, and record-low mortgage rates are giving consumers a new sense of FOMO—fear of missing out—and spawning a hot housing market, Ali Wolf, chief economist for real estate analytics company Zonda, said Thursday during the National Association of REALTORS®’ virtual Real Estate Forecast Summit. “To our surprise, the housing market has not only recovered but roared past pre-pandemic levels,” added NAR Chief Economist Lawrence Yun, who presented a consensus real estate forecast based on a survey of 30 leading economists.
Danielle Hale
John Burns
For some Americans, soaring home equity and gains in the stock market are padding the financial impact of a pandemic-fueled recession. Pending home sales are up 20% from a year ago, buyer traffic is up 32%, and mortgage applications are up 27%—all indicators thatthis winter may be the best ever for the housing market, Yun said. Mortgage rates also remain at record lows. The 30-year fixed-rate mortgage averaged 2.71% for the week ending Dec. 10, according to Freddie Mac.
Sellers, Builders May Ease Inventory Crunch
Inventory remains constrained as buyer demand surges. Potential sellers who are hesitant to list their home during a pandemic may not be aware of the housing market’s strength, said Danielle Hale, chief economist for realtor.com®. Sellers are often buyers, too, and they may not want to face the challenge of finding a home amid low inventory. These realities have limited the number of homes on the market during the pandemic, panelists said.
Why can’t builders construct more housing to meet demand? Labor shortages and escalating prices for building materials have held many builders back, with 80% saying they had to raise their new-home prices last month due to higher expenses, according to Zonda research. Further, most new-home construction in recent years has occurred near expensive urban cores.
Now that more buyers want to live farther from the city, builders are snatching up land in far suburbs and exurbs, said John Burns, CEO of John Burns Real Estate Consulting. Builder sentiment indexes are running at record highs, Burns said. “Builders have never been more optimistic, so we’ll see more construction—but it’s still going to take a while.”
Suburbs Grow, But Cities Aren’t Dead
While the suburbs are in a growth phase, not all buyers are giving up on city living. “The popularity of the suburbs is real, but [the housing market] is not reflecting a full-fledged urban flight either,” Hale said. “Real estate is booming everywhere. The suburbs have bounced back relatively quicker than the urban areas nationwide.”
The suburbs were growing before the pandemic as millennials started migrating away from cities to form households. That trend has only accelerated, Wolf said. “The work-from-home environment has really fueled the ability for more people to migrate,” he said. “Home has become a focal point” as people hunker down during the pandemic.
Demand from investors also is surging, panelists said.Build-for-rent subdivisions are popping upas investors see a growing appetite from renters for single-family homes. Investor groups also are crowdsourcing funds to buy properties together, and home flippers are reemerging to turn around fixer-uppers for a quick profit, Burns said.
Assistance Programs Boost Affordability
Low mortgage rates can help buyers offset higher home prices, but not when prices are soaring into double-digit annual increases like they are now. First-time buyers are particularly in danger of being priced out of the market. “Affordability is going to be a key challenge in 2021 for first-time buyers,” Hale said.
Wolf added thateducation on down payment assistance programswill help would-be buyers find a purchase path amid higher prices. One positive sign: 60% of millennials are saving more money this year than last year despite the economic downturn, according to Zonda research. Millennials also say part of their increased savings will go toward a down payment.
Low mortgage rates may also be helping to keep elevated delinquencies in check, according to a new report from CoreLogic.
“Our analysis of CoreLogic public records shows that more than one-half of all home mortgage loans created since the onset of the pandemic have been no-cash-out refinance,” says Frank Nothaft, chief economist at CoreLogic. “By reducing their mortgage rate with these types of loans, homeowners have been lowering both their interest expense and risk of delinquency.”
As the COVID-19 pandemic rages on and hampers the economy, many homeowners may be looking for greater mortgage relief. Foreclosure moratoriums are in place and many lenders are offering assistance to those struggling.
Regardless, the rate of non-current loans is significantly higher this year due to the impact of COVID-19 on the economy. The national delinquency rate—loans that are 30 or more days past due or are in foreclosure—stands at 6.3%, which is higher than the 3.8% rate from a year ago, according to CoreLogic’s Loan Performance Report.
“Although delinquencies remain high, it’s clear the economy has passed an initial stress test,” says Frank Martell, president and CEO of CoreLogic. “High home equity balances and structural protections put in place as a result of the Great Recession contributed to surviving the test. Housing demand remains strong, and rates low, which provides optimism that the housing market will continue to be a bright spot in this COVID-ravaged economy.”
The foreclosure inventory rate—the share of mortgages in some stage of foreclosure—is at the lowest rate since at least January 1999. In response to the pandemic, Congress issued a foreclosure moratorium as part of the CARES Act to help homeowners who may be struggling to make payments.
Still, every state saw its delinquency rate increase in September compared to a year earlier. States that rely heavily on tourism have been hit hardest, such as Nevada, Hawaii, and Florida, CoreLogic’s report shows.
