Yajnesh Rai

Home Sellers Are Feeling More Optimistic | Realtor Magazine

As home prices rise by double-digit margins year over year, homeowners are increasingly viewing selling favorably. Consumers reported a significantly more positive view of homeselling conditions month over month in January, jumping 16 percentage points on net, according to Fannie Mae’s Home Purchase Sentiment Index, based on a survey of 1,000 consumers.

“Overall, the index’s monthly increase was driven largely by a substantial jump in the share of consumers reporting that it’s a good time to sell a home, with many citing favorable mortgage rates, high home prices, and low housing inventory as their primary rationale,” says Doug Duncan, Fannie Mae’s chief economist. “Among owners and higher-income groups, however, the other five components of the index remained relatively flat or slightly negative, suggesting to us that some consumers are waiting to gauge the effectiveness of any new fiscal policies and vaccination distribution programs on both housing and the larger economy.”

Duncan notes that lower-income and renter groups were more optimistic in January across nearly all of the index’s components. “We will pay close attention to see if this newfound optimism develops into a trend, which could indicate either that some demographics who have been negatively impacted by the pandemic may be starting to feel the economic recovery or that this is a response to the additional stimulus enacted in December,” Duncan says.

More highlights from the January index reading:

• 52% of consumers say it’s a good time to buy a home, mostly unchanged from December 2020.
• 57% of consumers say it is a good time to sell a home, increasing from 50% the month prior.
• 41% of consumers believe home prices will go up over the next 12 months.
• 75% of consumers say they are not concerned about losing their job in the next 12 months, unchanged from December 2020.
• 21% of consumers say their household income is significantly higher than it was 12 months ago, while the percentage who say their household income is significantly lower decreased to 14%. Sixty-four percent of consumers say their household income is about the same.

Bypassing the Starter Home: Delayed First-Time Buyers Are Going Big | Realtor Magazine

Millennials may have delayed their first step into homeownership more than previous generations, but when they do buy, many want to go big and are skipping the traditional starter home.

“In the past, people bought a modest property, lived in it until starting a family, and then traded up to a larger property,” Bradley Nelson, chief marketing officer of Sotheby’s International Realty, told Bloomberg. “Millennials are finally coming out of the gate, and it’s not uncommon for the first purchase as a first-time home buyer to be a multimillion-dollar luxury home in the U.S. or internationally.”

Millennials—adults born between 1981 and 1996—represent the largest share of home buyers in the country, according to the National Association of REALTORS®. They’re becoming a growing force in luxury real estate. As their wealth increases, high-end housing is surging, too.

Their inheritance may also help them supersize their homes in the future. Millennials are set to inherit more wealth than previous generations, according to a Brookings Institute report from May 2020. Also, the pandemic is shaping where they are choosing to call home, seeking larger homes and outdoor prime spots such as Aspen, Colo.; Austin, Texas; and Montecito, Calif., Nelson told Bloomberg. Indeed, Aspen home sales reached a record high in the third quarter of 2020, according to Sotheby’s 2021 Luxury Outlook report.

“It’s the difference of choosing where you want to live versus living where you work,” Nelson says. “Millennials are thinking about their overall lifestyle. It’s propelled these second-tier markets into the top of the interest list.”

Why Buyers of New Homes May Be Able to Stretch Their Budgets | Realtor Magazine

Thanks to the higher costs of owning and maintaining an older home, some buyers may be able to afford more expensive mortgage payments if they choose a newer home, a new study from the National Association of Home Builders shows. The study finds that buyers could potentially spend 36% more on a newly built home compared with a home built before 1960 because of the lower operating and maintenance costs of buying new.

Annual operating costs include maintenance, utilities, property taxes, and insurance. On average, the annual costs of operating a home amount to about 5% of the home’s value. That rate, however, can be lower on newer homes, the study found. Home owners of single-family homes built after 2010 spend about 3.2% of the home’s value per year on operating costs. The operating cost of homes that were built before 1960 could exceed 6%, the study said.

“Since operating and maintenance costs per dollar value are lower for newer homes, owners of these properties can afford more expensive mortgage payments and still end up with identical overall homeownership costs, compared to owners of older homes,” said researchers on the NAHB’s Eye on Housing blog.

 

National Association of Home Builders

Mortgages for Home Purchases Reach Record High | Realtor Magazine

As home prices rise, home buyers are having to borrow more. The average amount for a mortgage on a home purchase recently surged to an all-time high of $395,200, the Mortgage Bankers Association reported for the week ending Jan. 22.

“Average purchase loan amounts in early 2021 continue to rise across all loan types, driven by a strong pace of home sales, tight housing inventory, and high home price-growth,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement this week in reporting the latest data on mortgage applications for the week ending Jan. 29. “Conventional, FHA, and VA purchase loan sizes all set new survey records last week.”

Record-low mortgage rates may be enticing more buyers to take on greater mortgage debt. Still, financial experts are warning home shoppers to beware of taking on too high of a mortgage and ensure they aren’t stretching their monthly payments beyond what is typically considered financially comfortable. Financial experts often say that families who pay more than 30% of their income for housing are considered “cost burdened,” which could put them in jeopardy of being able to cover other necessities like food, transportation, and medical care costs.

Homeowners Are on a Home Improvement Spending Spree | Realtor Magazine

As homeowners spend more time at home, they’re tackling household projects. The top reason for the increase in home improvement spending last year was to make a home better fit “lifestyle needs,” according to “The State of Home Spending: 2020,” a report produced by HomeAdvisor.

Eighty-five percent of Americans surveyed reported spending more time at home since the pandemic, and 63% are noticing more areas in their home that they want to improve as a result.

The projects range in scope, from the overall acceleration in home buying; baby boomers renovating for age-in-place; millennials seeking to change floor layouts to better accommodate their growing families; repairs due to aging housing stock; as well as the greater cultural focus on home design and home entertainment that is prompting the desire to take on more projects, the HomeAdvisor report notes.

Since the pandemic, 27% of the homeowners surveyed say they have more outdoor living needs; 40% desire more home entertaining; 50% are evaluating projects so they can better work from home; and 70% are doing more home cooking and looking at kitchen updates. Homeowners say they’re using the savings from no longer commuting to work, taking vacations, or eating out since the pandemic and redirecting those funds to spruce up their home.

The average household spent $13,138 on home services in 2020, up from $9,081 in 2019, according to “The State of Home Spending” report. Broken out, home improvement spending was $8,305; home maintenance spending was $3,192; and home emergency spending was $1,640. Landscaping and cleaning projects were on the rise last year.

“This year’s topline growth in spending and projects is a story of both increasing costs of supplies, increasing cost of professional labor, and homeowners shifting spending from things like entertainment and travel to their homes,” the report notes. “While the cost to do projects compared to last year did increase, we also found that homeowners were spending more as well.”

The report found four key takeaways based on the survey of homeowners’ new perceptions of their spaces:

• People are using their homes more, which is causing more wear and tear of existing spaces.
• More time spent at home, also means more time noticing problems in the home.
• Americans have started adopting new uses for existing home spaces.
• Spending substitutions away from other common expenditures and into home services.

Household projects have increased since the pandemic, led by interior painting projects, bathroom remodels, and installing new flooring. Overall, the following were the top 10 household projects in 2020:

1. Painting
2. Bathroom remodels
3. Installing new flooring
4. Landscaping
5. Kitchen remodels
6. Painted exteriors
7. Smart home device installations
8. New roofing
9. Fencing
10. Installing a deck or porch

Spring Buyers Must Be Ready to Act Quickly | Realtor Magazine

This spring will likely be another fiercely competitive one for home buyers. Real estate professionals should prepare their house hunters for record low inventories and rapidly rising home prices.

“Demand for housing was already strong coming into the year and we don’t see that slowing down with millennials reaching prime home-buying age, and many remote workers still in the market for more space,” says Danielle Hale, realtor.com®’s chief economist. “At the same time, sellers failed to materialize in January, which has pushed the number of homes for sale to new lows and suggests that our new normal of rising prices and brisk sales is here to stay at least through the first half of the year. Those thinking of getting into the market this spring should brace themselves for a competitive season, especially in the market for existing homes.”

If January is in any indication of how the spring market will play out, home shoppers will need to be ready to act quickly and have their financing in order. There will be fewer choices and likely continued high buyer competition. The number of homes for sale nationwide in January plunged 42.6% year-over-year, a new low, according to realtor.com®’s records dating back to 2021.

New listings in the 50 largest U.S. metros were down by the largest amounts in Cleveland; Jacksonville, Fla.; and Memphis, Tenn., which posted drops at 37.1%, 36.9%, and 32.6%, respectively, according to realtor.com®’s January Housing Trends Report.

Median national home listing prices increased by 15.4% compared to a year earlier, reaching $346,000 in January. The nation’s median listing price per square foot grew by 17.5% in January compared to a year ago, realtor.com®’s report shows. Median list prices posted the highest annual growth in January in Austin, Texas (up 30.2%); Rochester, N.Y. (up 25.9%); and Los Angeles (up 22.4%).

 

 

 

Rising Lumber, Building Material Costs Press on New-Home Prices | Realtor Magazine

New-home sales tapered off at the end of 2020 as higher home prices offset some of the strong buyer demand seen earlier in the year. While sales of newly built single-family homes increased 1.6% in December, sales had been much stronger over recent months.

New-home sales in 2020 posted an 18.8% increase over 2019, the U.S. Department of Housing and Urban Development and U.S. Census Bureau reported Thursday.

“While the market remains solid, median home prices are increasing due to higher building material costs, most notably softwood lumber, and a shift to larger homes,” says Robert Dietz, chief economist of the National Association of Home Builders.

The median sales price was $355,900 in December. In December 2019, the median new home sales price was $329,500.

“Looking forward, builders are concerned that increased regulatory burdens in 2021 could hurt housing affordability,” says Chuck Fowke, chairman of the NAHB.

The inventory of new homes remains low at a 4.3-month supply, nearly 19% lower than a year ago.

Across the country, new-home sales saw the largest gains for all of 2020 in the Midwest—up 24.2%—followed by a 21.2% gain in the Northeast, an 18.9% increase in the West, and a 17.6% increase in the South.

Contract Signings Surge to Highest Rate Ever in December | Realtor Magazine

Pending home sales reached a record high for December last month as the unseasonable housing surge continued in markets across the country during the COVID-19 pandemic.

Pending sales were up 21.4% year over year in December, reaching the highest reading for a December on the National Association of REALTORS®’ Pending Home Sales Index. All major regions of the U.S. recorded double-digit increases annually.

However, the index—a forward-looking indicator of home sales based on contract signings—did drop slightly, by three-tenths of a percentage point, in December compared to November. December’s index reading was 125.5. (An index of 100 is equal to the level of contract activity in 2001.) The slight month-over-month decline was blamed on fewer contract signings in the Midwest, NAR said. In other regions, contract signings saw an uptick or stayed flat in December.

Housing shortages continue to press on the housing market. “Pending home sales contracts have dipped during recent months, but I would attribute that to having too few homes for sale,” said Lawrence Yun, NAR’s chief economist. “There is a high demand for housing and a great number of would-be buyers, and therefore sales should rise with more new listings. This elevated demand without a significant boost in supply has caused home prices to increase and we can expect further upward pressure on prices for the foreseeable future.”

Yun projects that 2021 will see strong economic growth, supported by low mortgage rates and fiscal stimulus, that could help increase existing-home sales. He predicts the 30-year fixed-rate mortgage to stay near record lows, averaging 3%. He added that these low mortgage rates likely will help bolster existing-home sales to 6.49 million this year, which would be a 15% increase over the total 5.64 million sales in 2020.

30-Year Rates Inch Back Down This Week, Average 2.73% | Realtor Magazine

Mortgage rates headed back down this week, continuing to hover near all-time lows. “As the market reacts to a new administration in Washington and COVID-19-driven economic malaise, mortgage rates continued to decrease this week, just slightly,” said Sam Khater, Freddie Mac’s chief economist.

Also, the Federal Reserve announced this week that it will leave both interest rates and its bond-buying program unchanged, both actions likely helping to keep mortgage rates low.

The low rates continue to attract home buyers. Home sales in 2020 rose to the highest level in 14 years, according to the National Association of REALTORS®’ latest housing report. Demand is surging for a shrinking number of homes for sale.

“Even as house prices increase at the fastest rate we’ve seen in years, competition to buy is strong given the low inventory that exists across the country,” Khater said. “The fact that there are not enough homes to meet demand is going to be an ongoing issue for the foreseeable future.”

NAR is forecasting existing-home sales to rise more than 10% in 2021.

Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 28:

• 30-year fixed-rate mortgages: averaged 2.73%, with an average 0.7 point, falling from last week’s 2.77% average. The lowest on record for 30-year fixed-rate mortgages was 2.65%, recorded earlier this January. A year ago, 30-year rates averaged 3.51%.
• 15-year fixed-rate mortgages: averaged 2.20%, with an average 0.6 point, dropping from last week’s 2.21% average. A year ago, 15-year rates averaged 3%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.80%, with an average 0.3 point, unchanged from last week. A year ago, 5-year ARMs averaged 3.24%.

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

Young Adults Living at Home Are Saving for Down Payment | Realtor Magazine

One of the biggest barriers to homeownership for first-time home buyers has been saving for a down payment. But young adults who moved back home during the pandemic—and kept a job—are finding that homeownership may be within reach, according to a new report from realtor.com®.

Eleven months of living at home and saving on rent amounts to about $17,000 in savings—or a 5% down payment that could go toward buying a median-priced home in the U.S., according to the study.

“Although many members of the millennial and Gen Z generations were forced to move home because they lost their jobs in 2020, others chose to forgo their rental because they had the opportunity to work remotely and preferred to wait out the pandemic with family,” says Danielle Hale, realtor.com®’s chief economist. “For those who have been able to channel their would-be rent into savings, the pandemic’s silver lining could be becoming a homeowner soon than they otherwise would have.”

Realtor.com® researchers analyzed listing and rental data for the U.S. and the nation’s 20 largest metros in December 2020 for the study. Researchers found that some metros offered faster ways to save by forgoing rent than others. Take a look at the metro breakdown below.