Category: Real Estate

Record Low Mortgage Rates for the Long Term? | Realtor Magazine

The Federal Reserve announced Wednesday that it would keep its benchmark interest rate near zero through 2022—a move that could set the course for record low mortgage rates for the next three years. The Fed’s key rate doesn’t directly affect mortgage rates, but it often influences them. The federal funds rate is what banks charge one another for short-term borrowing.

The Fed’s decision was a response to the economic impact of the COVID-19 pandemic. The Fed also announced it will continue to increase its bond holdings to help preserve the flow of credit. “The Federal Reserve’s view that a rate hike will not occur for three years is a signal to the market to expect an all-in accommodative monetary policy,” says Lawrence Yun, chief economist for the National Association of REALTORS®. “It is also very likely that the Fed will be aggressively purchasing mortgage-backed securities behind the scenes.”

Yun says that could help push mortgage rates even lower—at or near 3%—for an extended period of time. “If inflation, for an unexpected reason, should pop up, then mortgage rates will rise independent of the Fed, as loans need to compensate for the loss of purchasing power of the dollar—which happened during the 1970s,” Yun says. But as of now, rates are expected to remain low, and that could be a boon for home buyers.

Pandemic Has Made Americans More Eager to Buy, Survey Finds | Realtor Magazine

The pandemic isn’t scaring off home buyers. More than half—or 53% of about 1,000 home buyers recently surveyed—say they are more likely to buy a home in the next year due to the coronavirus outbreak. First-time home buyers and millennials may be the most eager to buy within the next 12 months, the survey from LendingTree shows.

The top two motivators for buying soon are to take advantage of record low mortgage rates (67%) and being able to save for a larger down payment due to reduced spending (32%). Also, the perception of reduced home prices (30%) and being confined in a smaller space during stay-at-home orders have made homeownership more appealing, the survey finds.

The pandemic is not only prompting more people to pursue homeownership, it’s also influencing their home shopping. For example, the majority of respondents say the coronavirus pandemic has affected how much money they plant to spend on a new home. Forty-four percent plan to buy a less expensive home while 21% want a pricier home. Broken out, 28% of first-time buyers say they’ll purchase a pricier home compared to just 17% of repeat buyers.

Home shoppers may be growing more comfortable with the idea of buying a home sight unseen, too. Three in 10 buyers surveyed say they’d purchase a home without physically touring it in person. Also, about six in 10 home buyers say they’ve toured a home virtually over the last two months.

But a potential roadblock to buying a home could be qualifying for a mortgage. Forty-four percent of home buyers say they’re worried about qualifying for a mortgage because of the pandemic, with first-time buyers and millennials expressing the most concern. Lenders have reportedly tightened credit access during the COVID-19 outbreak. Access to mortgage credit dropped by 12.2% in April, according to the Mortgage Bankers Association.

Home-Buying Demand Up 22% After Seven Straight Weeks of Increases

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Just the Facts: Four Key Housing Market Takeaways for This Week

• Home-buying demand is up 22% from pre-pandemic levels after seven straight weeks of gains.
• Sellers are slowly returning, but new inventory can’t keep pace with demand and the number of homes for sale is down 24% compared to the prior year.
• Mortgage rates near 3% and inventory shortages drove prices up 7% and have increased competition for homes. Noah Goldberg, a Redfin agent in New Jersey said, “I was working with a buyer to purchase a home for over a million dollars that had been on the market more than 100 days. We’d negotiated a good deal and out of nowhere another buyer swooped in and bid it up.”
• Rising prices and the freedom to work from home are causing buyers to reconsider their options. Pageviews on Redfin.com for cities under 50,000 people and rural areas are growing 5x faster than pageviews for cities with more than one million people.

Home-buying demand up seven straight weeks

It’s a difficult time to be reporting on the recovery in the housing market while the country grieves over the unjust killings of George Floyd, Breonna Taylor, Ahmaud Arbery and many others. In cities across the nation, Americans marched to protest systemic racism and a long history of violence and brutality targeted at Black people in America. Redfin supports the protests, and we know we need to do more to help end the cycle of racism in America.

We decided to publish this week’s update, because we also feel an obligation to people who are trying to decide whether to buy or sell a house; to drop their home’s price or hold out for a better offer; to make decisions about what is generally people’s largest financial investment.

For the full week ended May 31, demand was up 22% from pre-pandemic levels in January and February, on a seasonally-adjusted basis. This marks the seventh straight week Redfin’s home-buying demand has increased since it hit bottom in mid-April.

When looking at demand on a daily basis, Redfin’s home-buying demand peaked on Thursday May 28, at 25% above pre-pandemic levels on a seasonally-adjusted basis. By Sunday, May 31 it was up only 17%. Whether people were out protesting, watching the news, or following the curfews that were imposed in many cities, national attention shifted away from home-buying in the second half of the week.

If curfews are lifted and streets are re-opened by next week, we should have a clearer view on whether homebuyers will return to the market with the same energy they had previously, or whether there will be longer-lasting effects on home-buying demand.

Sellers who don’t have to sell are starting to join the market

During the height of the pandemic, very few people who didn’t have to sell put their homes up for sale. Now we’re starting to see a resurgence in sellers who want to sell. Mary Bazargan, a Redfin listing agent in Washington, D.C. said, “It’s a mix. About half of my sellers are moving for a new job or heading out to the suburbs for a bigger home. But a lot of them are landlords that just don’t want to deal with it any more.”

Over the past few years, rising rents and rock-bottom interest rates have made it attractive for home-owners to keep their old place and rent it out rather than sell it, but now many sellers may be looking to simplify their lives as they adapt to life during the pandemic.

Despite the increased interest in selling, new listings were still down 22% for the week ended May 31 compared to the same week last year. Many sellers who do decide to list still have health concerns about buyers in their homes. Some sellers are choosing to move out for the first week or two, heading to the in-laws or to an airbnb, and hoping to catch a buyer before they have to come back.

Prices are up because listings still can’t keep up with buyer demand

After seven straight weeks of gains in home-buying demand and sellers returning to the market more cautiously, the total number of homes for sale was down 24% for the week ended May 31 compared to the same week last year.

Noah Goldberg, a Redfin agent in New Jersey said, “The competitiveness in the market has picked up noticeably. I was working with a buyer to purchase a home for over a million dollars that had been on the market more than 100 days. We’d negotiated a good deal and out of nowhere another buyer swooped in and bid it up.”

Low mortgage rates are motivating many buyers to move now. Rates for a 30-year fixed-rate mortgage are still hovering near all-time lows around 3%, keeping down monthly payments even as prices rise. The median sale price for the week ended May 24 was up 2% compared to the same week the prior year. That is a smaller gain than we’ve seen in recent weeks, but it’s notable because most of those deals were struck in mid-April when the pandemic was at its height.

Looking ahead, the median asking price for new listings is up 7% for the week ended May 31 compared to the same week last year. There’s a good chance sale price gains in late June and July will accelerate as the homes hitting the market now start to sell.

Rising prices and working from home give buyers the motivation and opportunity to get creative

To contend with rising home prices, we’re hearing more stories of buyers purchasing a home with space for their parents or moving in near family to be closer to help with the kids. People are trading a condo in LA for a single-family home in Dallas, selling in D.C. and heading to Atlanta, or moving from Denver to Detroit.

In many cases, buyers aren’t looking in big cities, at all. In April and May, pageviews on Redfin.com for homes in cities with less than 50,000 residents and rural areas are growing five times faster than pageviews for homes in cities and suburbs with more than a million people.

As more companies embrace fully-remote or part-time work-from-home policies, buyers are willing to move a little further away from the office, looking for a bigger home and more outdoor space. Mike Welk, a RedfinNow asset manager in Denver, said, “I am hearing a lot more from people who are looking further out of Denver. They think, ‘If I only have to go into the office three days a week, I can drive an extra 10-15 miles, save a bundle, and get a bigger place.’”

NAR: Contract Signings Likely Won’t Go Any Lower | Realtor Magazine

The COVID-19 pandemic hampered home sales contracts in April, but that will likely mark the low point in pending home sales for the year, according to the National Association of REALTORS®’ latest housing report released on Thursday. April was the second consecutive month of declining pending home sales, as social distancing measures and widespread business closures mounted due to the igniting coronavirus outbreak. Every major region of the country saw a drop in month-over-month contract activity in April.

NAR’s Pending Home Sales Index—a forward-looking indicator of home sales based on contract signings—fell 21.8% in April. Contract signings were 33.8% down for the year. April’s decline also marked the greatest decrease in pending home sales since NAR began tracking such data in January 2001.

“With nearly all states under stay-at-home in April, it is no surprise to see the markedly reduced activity in signing contracts for home purchases,” says Lawrence Yun, NAR’s chief economist.

Yun expects April’s pending home sales to be the lowest point for the year, and the month of May to, therefore, be the lowest point for closed sales. He then predicts a rebound in the housing market in the summer months.

“While the coronavirus mitigation efforts have disrupted contract signings, the real estate industry is ‘hot’ in affordable price points with the wide prevalence of bidding wars for the limited inventory,” Yun says. “In the coming months, buying activity will rise as states reopen and more consumers feel comfortable about home buying in the midst of the social distancing measures.”

More reason behind housing’s optimism: Mortgage applications have been rising over the last few weeks, a gauge used to measure future home sales.

“Given the surprising resiliency of the housing market in the midst of the pandemic, the outlook for the remainder of the year has been upgraded for both home sales and prices, with home sales to decline by only 11% in 2020 with the median home price projected to increase by 4%,” Yun says. “In the prior forecast, sales were expected to fall by 15% and there was no increase in home price.”

 

© National Association of REALTORS®

Mortgage Rates Tick Up Slightly After Last Week’s Record Low | Realtor Magazine

© REALTOR® MAGAZINE

The 30-year fixed-rate mortgage inched up after reaching an all-time low last week. However, mortgage rates continue to hover near the lowest averages ever recorded by mortgage financing giant Freddie Mac.

The 30-year fixed-rate mortgage averaged 3.18% this week, up slightly from last week’s all-time low of 3.15%.

“While the economy is slowly rebounding, all signs continue to point to a solid recovery in home sales activity heading into the summer as prospective buyers jump back into the market,” says Sam Khater, Freddie Mac’s chief economist. “While home buyer demand is up and has been broad-based across most geographies, supply has been slower to improve. In fact, the gap between supply and demand has widened even further than the large gap that existed prior to the pandemic.”

Freddie Mac reports the following national averages with mortgage rates for the week ending June 4:

• 30-year fixed-rate mortgages: averaged 3.18%, with an average 0.7 point, rising from last week’s 3.15% average. Last year at this time, 30-year rates averaged 3.82%.
• 15-year fixed-rate mortgages: averaged 2.62%, with an average 0.7 point, unchanged from last week. A year ago, 15-year rates averaged 3.28%.
• 5-year hybrid adjustable-rate mortgages: averaged 3.10%, with an average 0.4 point, falling from last week’s 3.13% average. A year ago, 5-year ARMs averaged 3.52%.

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

Mortgage Applications Jump 18% Amid Record Low Rates | Realtor Magazine

Mortgage rates again fell to an all-time low last week and home buyers are rushing out to take advantage. Mortgage applications to purchase a home rose 5% last week, putting applications for home purchases 18% higher than a year ago, the Mortgage Bankers Association reports from its seasonally adjusted index.

This marks a strong rebound in applications. Six weeks ago, the COVID-19 outbreak brought mortgage applications down 35% compared to last year.

As states reopen, more home buyers are entering the housing market. Mortgage application indexes are viewed as a gauge for future home-buying activity.

“The pent-up demand from home buyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring,” says Joel Kan, an MBA economist. “However, there are still many households affected by the widespread job losses and current economic downturn. High unemployment and low housing supply may restrain a more meaningful rebound in purchase applications in the coming months.”

The average contract interest rate for a 30-year fixed-rate mortgage decreased to a record low last week—3.37%, the MBA reports.

The low rates are proving a boon for the purchase market but aren’t drawing out more refinancers. Mortgage applications to refinance a home dropped 9% last week, marking the seventh consecutive week of the decline. That said, refinance applications are still 137% higher than a year ago, when interest rates were 86 basis points higher.

Home Design That Promotes a Healthy Lifestyle | Realtor Magazine

Hospital design and the food industry could teach the residential real estate community a lot when it comes to creating healthier space, says Bea Spolidoro, principal at FisherARCHitecture in Pittsburgh. A person’s home can have a physical and psychological health impact, Spolidoro told Forbes.com.

Spolidoro says homes can be designed to limit the spread of germs and bacteria with flatter, smoother surfaces that are easier to clean. Spolidoro recommends reducing seams in countertops, ensuring nothing can easily fall behind built-in cabinetry, and avoiding overly complicated designs in high-touch surfaces such as doorknobs, handles, buttons, operating parts, and railings.

Nonporous materials are easier to clean and sanitize, such as steel, quartz, and Corian. On the other hand, granite and other natural stone countertop surfaces are more porous and can allow for microbial spores to accumulate. Look for materials that have natural antimicrobial properties, such as copper and its alloys—brasses, bronzes, copper, nickel, and zinc, among others.

Also, proper ventilation is important in reducing the spread of bacteria, limiting the accumulation of pollutants inside and outside a home, which can affect those with respiratory problems. Several indoor air quality monitors can help track levels of pollutants. Additionally, outdoor air quality monitors can warn when windows should be closed. Air purifiers and even some indoor plants also can help improve the air quality inside a home.

Home Prices Still Rising, Albeit at Slower Pace | Realtor Magazine

The COVID-19 pandemic may be hitting the economy hard, bringing the highest national unemployment rate since the Great Depression, but median home prices defied the odds and jumped 3.1% year over year last week, according to realtor.com® housing data for the week ending May 23. That’s double the 1.5% annual increase for the previous week.

The National Association of REALTORS® recently reported that prices for existing homes jumped 7.4% in April compared to a year earlier. All four major regions of the U.S. posted annual price gains. “There are still buyers in the market,” says realtor.com® Senior Economist George Ratiu. “But given the very limited number of properties available, buyers are willing to pay more.”

The number of listings on the market fell 22% year over year during the week of May 23, realtor.com® reports. More buyers are competing for a limited supply of homes, prompting home prices to rise. Prior to the institution of state stay-at-home orders, home prices increased 4.4% annually in the first two weeks of March. “The mix of homes that are on the market now is a little bit different,” Ratiu says. “What’s really selling at a premium are lower-priced homes. The higher-priced homes are sitting on the market longer.”

New-Home Sales Post Unexpected Increase | Realtor Magazine

New homes are proving a draw to home shoppers, particularly during the pandemic. Newly built single-family homes increased 0.6% in April, reaching a seasonally adjusted annual rate of 623,000, the U.S. Department of Housing and Urban Development and U.S. Census Bureau reported Tuesday. While sales eked out a monthly increase, they are still 6.2% lower than a year ago.

However, builders point to the unexpected uptick in April, as many companies were shut down and unemployment soared. Builders note that the increase is a potential sign that the housing market is already stabilizing during the pandemic.

“The April data for new home sales show the potential for housing to lead any recovery for the overall economy,” says Dean Mon, chairman of the National Association of Home Builders. “Because the housing industry entered this downturn underbuilt, there exists considerable pent-up housing demand on the sidelines. The experience of the virus mitigation has emphasized the importance of home for most Americans.”

The April estimates on new-home construction sales turned out to be more positive than forecasts expected, says NAHB Chief Economist Robert Dietz. “The data matches recent commentary from builders and reflects recent gains in mortgage applications,” Dietz says.

Housing inventory levels of new homes edged lower in April to a 6.3-month supply, 3% lower than a year ago. About 78,000 of that total are completed and ready to occupy.

The median sales price for a new single-family home sold in April was $303,900, which is down slightly from $339,000 earlier this year. Median prices were lower due to increased use of builder price incentives in April, the NAHB notes.

Across the country, new-home sales saw the largest uptick last month in the Northeast, an 8.7% increase, followed by a 2.4% increase in the Midwest and South. New-home sales fell 6.3% in the West last month.

Most Consumers Aren’t Afraid to Return to the Market | Realtor Magazine

Fifty-six percent of consumers say that despite the ongoing COVID-19 pandemic, they would attend an open house or take a home tour without hesitation, according to the Back To Normal Barometer from research company Engagious. Additionally, nearly half of respondents to the survey say they would return to activities such as taking a cruise, attending a live sporting event, or staying at a hotel. However, an even greater number—61%—are concerned about the overall public health crisis and the U.S. economy, a sign that consumers are more hopeful about their personal circumstances than they are about the country in general. “People are concerned about societal impacts rather than how [COVID-19] affects them personally,” said Jon Last, president of Sports & Leisure Research Group, a marketing research consultancy based in White Plains, N.Y., and a co-creator of the barometer. “And they feel the same about the economy.”

Engagious presented the findings of the Back To Normal Barometer, a biweekly survey that measures consumer interest in a variety of industries and activities during the COVID-19 pandemic, to the National Association of REALTORS® last week. The panel also looked at the survey respondents who said they weren’t ready to go to an open house yet and what conditions it would take for them to feel safe enough to do so again. According to Rich Thau, president of Engagious and co-creator of the barometer, they would need specific assurances, including the approval of a COVID-19 vaccine (47%) and assurances from the local health department that touring open houses would be safe (45%). “Two things that are critical are a certificate stating that [an area] has been properly sanitized according to established protocols and that the certificate has been issued by a local authority,” Thau said.

The real estate–related findings come from a national online survey earlier in May of 1,040 buyers and sellers. The goal was to provide insights about how consumers want to safely navigate residential real estate transactions during the COVID-19 pandemic.

Consumers Prioritize Safety Measures

Gina Derickson, research director of Engagious, expanded on the precautions that are important to consumers: People want to know that cleaning has taken place before they enter an establishment; they want to see professional cleaners rather than staff (or homeowners) working on high-touch surfaces like doorknobs and elevator buttons; and the right products and right wording are important. People prefer terms like “sanitized” and “disinfected” over “cleaned” on signage.

According to Derickson, respondents also saw a difference in risk associated with open houses depending on what side of the transaction a person falls on. The selling side is viewed as having a higher risk than the buying side. Sellers, Derickson explains, are perceived as having less control over who comes into the home and the surfaces people touch. On the other hand, respondents believe that buyers can better avoid COVID-19–related dangers and have a good sense of what a clean home looks like. But whether on the buying or selling side, survey respondents agreed on one thing: Agents are crucial in helping them navigate the open house process. “Buyers and sellers depend on agents to inform them and enforce compliance,” Derickson said. “They want the agent to tell them what to do, and they want vetting to make sure the home is safe.”

In analyzing the survey results, Thau said real estate agents matter more than ever on both sides of the transaction. Fifty-eight percent of sellers and 58% of buyers say the buying and selling of real estate is an essential service, and 62% of sellers and 54% of buyers say a real estate agent’s guidance is especially valued during the pandemic.

Don’t Rely Completely on Virtual Tours

Thau offered some intriguing insights into the characteristics of the buyers and sellers themselves. A majority of both say they are comfortable with technology and conducting business on a computer, as well as taking online tours of homes. In addition, 55% of buyers say virtual tours are great for initially vetting which homes they would seriously consider purchasing, though that number dropped quite a bit when asked if a virtual tour was an acceptable substitute for an actual tour. Despite the drop, two out of five buyers say they would consider buying a home without a visit.

Thau revealed that there are ways to enhance the value of a virtual tour, such as including a tour of the neighborhood or providing written information about home improvements the seller has made. He found that 54% of buyers and 55% of sellers believe it’s important to have a real estate professional help buyers navigate virtual homebuying options.

In terms of traditional in-person home tours, both buyers and sellers see value in precautions, such as providing sanitary wipes, limiting visitors to two to four at a time, providing hand sanitizer, and requiring masks, gloves, and shoe coverings. Thau also noted that buyers and sellers see hand sanitizer, sanitary wipes, and visitor limitations as precautions that will need to remain in place over the long term.

Thau also included a caution for agents in reference to in-person tours: Thirty-eight percent of buyers and 48% of sellers indicate that they would consider legal action if they contracted COVID-19 after a showing. And 29% of buyers and 41% of sellers indicate that they would still consider suing even if they had signed a release. However, 58% of buyers say they’re willing to waive their right to sue.

Agents Expected to Offer COVID-19 Guidance

According to Thau, what matters the most to buyers and sellers about in-person tours is the real estate agent, who is expected to know and enforce health-related safety rules. Sixty-four percent of buyers and sellers state that agents should understand state and local protocols for COVID-19 safety and provide guidance, and 63% of buyers and 64% of sellers say that if someone in the home is not following health protocols during a visit, they expect the real estate agent to address it.

Buyers and sellers also indicated that it is important for an agent to know how to close a real estate transaction electronically, and a majority of both indicated that agents add value to an online search. Helping buyers uncover valuable information about a property, helping them sift through online listings, and providing more in-depth pictures and videos of properties were among the ways agents could be of service to clients. And while 40% of buyers and 52% of sellers stated that they wouldn’t need to meet their real estate agent in person to buy or sell a home, they did place a premium on oral communication—70% of buyers and 66% of sellers said they felt more comfortable talking on the phone or talking via Skype, FaceTime, Zoom, or a similar app that allows face-to-face communication, which are much higher numbers than those who felt comfortable communicating by email or text.

What this means, Thau said, is that agents really matter during the pandemic. Forty-seven percent of buyers and 53% of sellers indicated that relying on a real estate professional for buying or selling a home was more important than before. “Agents’ value has gone up tremendously as a result of the pandemic,” he said. “People need reassurance.” And he offered this advice: “Know the protocols, follow them, and don’t be afraid to enforce them.”