Yajnesh Rai

Mortgage Applications Are 22% Higher Than a Year Ago | Realtor Magazine

Mortgage applications to purchase a home are 22% higher than a year ago, but last week applications did dip compared to the previous week. Purchase applications week to week were down 2% even as mortgage rates remain near record lows, the Mortgage Bankers Association reported Wednesday.

The lack of supply and rising home prices also may be pressing on home buyers. The weekly headlines of mortgage rates hitting new lows also may be causing some buyers to lose some of their urgency, particularly since rates are largely expected to stay low for the remainder of the year.

The average contract on a 30-year fixed-rate mortgage last week dropped to 3.14%, according to the MBA. Freddie Mac reported mortgage rate averages under 3% last week.

“The MBA’s forecast calls for rates to remain at these low levels, which will continue to spur strong refinance activity and offer homeowners relief in the form of lower monthly mortgage payments during these uncertain economic times,” says Joel Kan, the MBA’s forecaster.

Overall, mortgage application volume decreased 5.1% last week compared with the previous week, according to the MBA’s seasonally adjusted index. Refinance applications dropped 7% last week, but are still 84% higher annually.

At today’s low mortgage rates, nearly 18 million borrowers with good credit scores could benefit from refinancing and lower their monthly mortgage payments, according to Black Knight, a mortgage data and analytics firm.

Still, while mortgage rates remain low, the very best rates are mostly being reserved to top-tier borrowers with stellar credit. Lenders are reportedly being stricter with low down payment loans, such as FHA mortgages, which are usually popular among first-time buyers.

“Purchase loan balances continued to climb, which is perhaps a sign that the still weak job market and tighter credit for government loans are constraining some first-time homebuyers,” Kan says.

Housing Inventory Shortages Stymie Foreign Buyers, Too | Realtor Magazine

Foreign buyers purchased 16% fewer homes in the U.S. from April 2019 through March 2020 compared to the previous year, according to the National Association of REALTORS®’ newly released 2020 Profile of International Transactions in U.S. Residential Real Estate. 

One of the main reasons for the decrease in foreign spending in the U.S. is a familiar one to domestic buyers: the lack of inventory. The issue of fewer homes for sale has become more pressing since the COVID-19 outbreak, as sellers started pulling their homes off the market or delaying listing their homes, leaving buyers with fewer choices.

Indeed, “a lack of housing inventory—the primary factor hindering domestic buyers—is also holding back some foreign buyers,” says Lawrence Yun, NAR’s chief economist. “Additionally, less cross-border travel, falling international trade, and fewer foreign students attending American universities are impacting foreign home buyers.”

As such, “foreign buyers and recent immigrants have become less of a force in the U.S. housing market over the last couple of years,” Yun says.

NAR surveyed REALTORS® about their transactions with international clients who purchased and sold U.S. residential property from April 2019 through March 2020.

In that time frame, recent immigrants or those holding visas spent $41 billion on U.S. existing homes, an 8% decrease from the year prior. Foreign buyers who lived abroad purchased $33 billion worth of existing homes in that period, down 1% from the previous 12 months, according to NAR.

Overall, international buyers accounted for 4% of existing-home sales from April 2019 through March 2020.

Where International Buyers Are Still Coming From

China and Canada remain the top foreign buyers of U.S. residential real estate at $11.5 billion and $9.5 billion, respectively. Rounding out the top five were Mexico at $5.8 billion, India at $5.4 billion, and Colombia at $1.3 billion. Colombia replaced the United Kingdom as the fifth largest country of origin by dollar volume of international buyers in the U.S., NAR reports.

China was the only country among the top five to see a decline in dollar volume compared to the previous year—$11.5 billion versus $13.4 billion the year prior.

Meanwhile, Florida remained the top destination for foreign buyers. The state accounts for 22% of all international purchases in the U.S. California ranked second at 15%, followed by Texas at 9%, New York at 5%, and New Jersey at 4%.

Here are some additional findings from NAR’s latest international buying report:

• Home prices: The median existing-home sales price among international buyers was $314,600, 15% more than the median price of $274,600 for all existing homes sold in the U.S. Chinese buyers had the highest median purchase price at $449,500.
• All-cash transactions: Nearly two out of five international buyer transactions are all-cash. Canadian buyers are the most likely to make an all-cash purchase in the U.S. (at 66%), whereas Asian Indian buyers were the least likely to pay all cash, at just 8%. Asian Indians were the most likely international buyer segment to obtain a mortgage (at 87%). Forty percent of Chinese buyers made all-cash home purchases.
• Why they’re buying: Half of international home purchases in the U.S. were for a primary residence. Seventy-four percent of foreign buyers purchased a detached single-family home or townhome.
• Where they’re buying: Nearly half of foreign buyers—48%—purchased a home in the suburbs and 29% bought a home in an urban area. Those figures have remained mostly steady over the last five years, NAR notes. Seven percent of international buyers purchased property in a resort area, down from 15% in 2009. NAR notes in its report that the decline in the share of foreign purchases in resort areas may partially reflect the fact that there are fewer buyers from the United Kingdom and Canada, who tend to buy vacation homes.

“In the upcoming year, better opportunities may become available for foreign buyers in large U.S. cities like New York and San Francisco,” Yun says. “New patterns of domestic migration are trending away from expensive cities to more affordable suburbs and small communities because of the pandemic and greater work-from-home possibilities.”

Home Features Americans Consider Crucial | Realtor Magazine

Let’s talk windows: Home buyers care about them more than you may have considered.

In a recent survey conducted by Homes.com, consumers said the most important exterior feature of a home is the size and amount of windows, followed by a porch or patio, when sizing up curb appeal.

Homes.com surveyed more than 5,000 U.S. adults to learn their favorite home features, architecture, and more. (View consumers’ favorite architecture picks by state.)

For the interior, consumers ranked the home’s layout as the most important feature by far.

© Homes.com

As Home Prices Rise, More Owners Become ‘Equity Rich’ | Realtor Magazine

Despite the pandemic, home values continued to climb in the second quarter, with 15.2 million residential properties in the U.S. considered “equity rich,” according to a new report from ATTOM Data Solutions, a real estate data firm. That means the combined estimated amount of loans secured by those properties was 50% or less of their estimated market value. About 28% of properties in the second quarter were equity rich, up from 26.5% in the first quarter, according to the report.

“Homeowners saw their equity rise far and wide throughout the United States during the second quarter of this year in yet another sign of the housing market punching back against the coronavirus pandemic,” says Todd Teta, chief product officer with ATTOM Data Solutions. “More property owners rose into equity-rich territory and escaped the seriously underwater lane, putting more money into the average household.”

The housing market still faces “enormous challenges,” given historically high unemployment, the recession, and the pandemic, Teta adds. “If that continues, owner equity will be seriously threatened,” he cautions. “But for now, homeowners are enjoying the gains when it comes to what, for most, is their most significant asset.”

The Midwest and South saw the largest improvements in the share of equity-rich homes during the second quarter, according to the report. In Georgia, the share of equity-rich homes jumped from 17.5% in the first quarter to 20% in the second quarter. Other states that saw some of the largest improvements during the second quarter:

• Idaho (up from 33.6% to 35.4%)
• Mississippi (up from 19.3% to 21%)
• Indiana (up from 23.5% to 25.2%)
• Nebraska (up from 18.2% to 19.9%).

Overall, the Northeast and West continue to have the largest shares of equity-rich homes in the country, the ATTOM Data Solutions report shows. The states with the largest shares are:

• California (43%)
• Vermont (39.1%)
• Hawaii (38.6%)
• Washington (38.1%)

By metro level, the cities with the highest share of equity-rich properties in the second quarter were all in the West:

• San Jose, Calif. (64%)
• San Francisco (56.5%)
• Los Angeles (47.9%)
• Santa Rosa, Calif. (45.3%)
• Seattle (40.9%)

In the Northeast, Boston was the leader, with 35.9% of its properties considered equity rich. In the South, Dallas led with 38.3%, and in the Midwest, Grand Rapids, Mich., had the highest share at 28.8%.

Meanwhile, as home prices rise, fewer homes are falling underwater. The ATTOM Data Solutions report showed that just 3.4 million homes with a mortgage nationwide—or 6.2%—were considered seriously underwater in the second quarter. That means the combined estimated balance of the loans on the properties is at least 25% or more than the estimated value.

New Record Low for 30-Year Mortgage Rate: 2.88% | Realtor Magazine

© REALTOR® MAGAZINE

 

For the eighth time this year, the 30-year mortgage rate hit an historic low. Home buyers and refinancing homeowners could now potentially lock in the lowest rates Freddie Mac has recorded since it began tracking such data in 1971.

“The resilience of the housing market continues as mortgage rates hit another all-time low, giving potential buyers more purchasing power and strengthening demand,” says Sam Khater, Freddie Mac’s chief economist. “We expect rates to stay low and continue to propel the purchase market forward. However, the main barrier to rising demand remains the lack of inventory, especially for entry-level homes.”

The National Association of REALTORS® predicts that rates could fall further over the next few weeks, since 10-year Treasury yields, which mortgage rates tend to follow, also have retreated slightly.

Jumbo mortgages, on the other hand, cannot be sold to Fannie Mae and Freddie Mac and do not carry a government guarantee. Therefore, they are more difficult to obtain, with lenders requiring higher down payments and stellar credit. “The housing market is hot because of the lower mortgage rates, but the luxury market may remain soft due to jumbo loan issues,” NAR economists say.

Freddie Mac reports the following national averages with mortgage rates for the week ending Aug. 6:

• 30-year fixed-rate mortgages: averaged 2.88%, with an average 0.8 point, falling from last week’s 2.99% average. The lowest average for the 30-year fixed-rate mortgage had previously been set in July at 2.98%. A year ago, 30-year rates averaged 3.60%.
• 15-year fixed-rate mortgages: averaged 2.44%, with an average 0.8 point, falling from last week’s 2.51% average. A year ago, 15-year rates averaged 3.05%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.90%, with an average 0.4 point, falling from last week’s 2.94% average. A year ago, 5-year ARMs averaged 3.36%.

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

August Poised for 2020 Homebuying Peak | Realtor Magazine

While May is typically the month for the most robust homebuying activity, the coronavirus pandemic this year has pushed that peak to August, according to a new realtor.com® report. Current growth in home sales, buyer demand, and housing prices have surpassed year-ago levels.

Realtor.com®’s Housing Market Recovery Index, which measures the progress of the real estate market’s recovery, reached a reading of 103.8 for the week ending Aug. 1—3.8 points above the pre-COVID-19 baseline. (The index compares current housing data to January 2020 as a baseline for pre-COVID-19 measurements. Any reading above 100 indicates a stronger recovery.)

“Real estate activity in the U.S. has regained its strength and continues on an upward trajectory as we enter the middle of the summer,” says Javier Vivas, director of economic research for realtor.com®. “However, a sustained seller comeback still hinges on back-to-school plans and extended lockdowns. The housing market will need to remain above pre-COVID levels for at least another 10 weeks to make up for the lost activity in the second quarter of the year.

“As we head into fall,” Vivas continues, “an anticipated resurgence in COVID-19 cases and economic aftershocks are likely to create an uphill battle for home buyers and sellers.”

Nevertheless, August is proving to be a productive month for real estate professionals who are helping their clients close deals. Homes are selling four days faster than a year ago, and median listing prices are 9.4% higher annually—which is “the most surprising aspect of how the housing market has fared” against the economic downturn, realtor.com® notes.

The biggest hurdle for home buyers: limited inventory. The number of homes for sale is dwindling, down by 35% annually. “These conditions set the stage for further price gains ahead, a trend which could eventually cause buyer demand to cool,” realtor.com® notes in its report.

The West region of the U.S. continues to lead in the national housing recovery during the pandemic. The Northeast also registers a higher recovery pace. But the South and Midwest continue to lag, realtor.com® notes.

Fed to Keep Rates Near Zero | Realtor Magazine

The Federal Reserve voted Wednesday to keep its benchmark interest rate near zero. This will keep the cost of loans down until the economy starts to recover from the COVID-19 pandemic. The Fed also announced Wednesday it would be extending its lending and credit initiatives until the end of the year to help make it easier for Americans to get a loan.

The Fed’s key benchmark rate is not directly tied to mortgage rates, but it often indirectly influences them.

The federal funds rate is what banks charge one another for short-term borrowing. That does not reflect the exact rate that consumers pay.

Interest rates are currently low, but “the challenge is that lending standards have gotten much stricter,” Tendayi Kapfidze, chief economist at LendingTree, told CNBC. “Banks are tightening standards pretty aggressively because they are concerned that the damage to the economy is going to be long lasting.”

Greg McBride, Bankrate’s chief financial analyst, says consumers with a credit score of 700 or above are likely to get the best rates. For lower credit scores, “the availability of credit starts to dry up,” he says.

The Federal Reserve is closely monitoring the economic impact of the pandemic.

“The coronavirus outbreak is causing tremendous human and economic hardship,” the Fed said in a statement. “The path of the economy will depend significantly on the course of the virus.”

The U.S. recovery is “extraordinarily uncertain,” Fed Chairman Jerome Powell said in a video press conference on Wednesday. The Fed is “not even thinking about raising rates,” Powell said. “We’re stepping in to provide credit at a time when the market has stopped functioning.”

The Fed has vowed to use “its full range of tools to support the economy in this challenging time.”

In mid-March, the Fed started buying Treasuries and mortgage-backed securities. MBS yields track Treasuries, so both types of purchases are putting downward pressure on mortgage rates, HousingWire reports. Mortgage rates have reached all-time lows in recent weeks. The 30-year fixed-rate mortgage dipped below a 3% average in mid-July.

The Fed reportedly may also adjust its purchases of Treasury bonds and mortgage-backed securities that could nudge already low long-term rates even lower.

The central bank expects to keep its federal funds rate near zero “until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals,” its statement read.

Asking Prices Surge to a Record High | Realtor Magazine

While the pandemic continues, home prices are accelerating and, in some markets, began to edge into previously uncharted territory this month. The national median listing price in July was $349,000—a record high, realtor.com® reports in its latest Monthly Housing Trends report.

Further, homes are selling just as fast as they were last year. Buyers are in a rush for fewer homes for sale. Nationally, the housing inventory has declined to nearly one-third of what it was last summer, realtor.com® reports.

National listing prices grew 8.5% in July year over year. Homes are selling six days faster than a year ago. Homes are selling the fastest compared to a year ago in markets like Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.; Boston-Cambridge-Newton, Mass.-N.H.; and Hartford-West Hartford-East Hartford, Conn., realtor.com® reports.

When the COVID-19 outbreak first struck the U.S. in March, home prices tumbled. But, since April, home prices have reversed course and accelerated each month. July’s listing price increase of 8.5% marks the largest jump in median listing prices in one month since November 2018, realtor.com® notes, equating to a $27,000 increase from a year ago.

The Northeast is now leading the nation’s housing recovery, realtor.com® reports. “After being particularly hard-hit in March and April, new coronavirus cases remain stable in the Northeast and we’re seeing buyers return to the market in force,” says Danielle Hale, realtor.com®’s chief economist. “If this same trend follows in the South and Midwest—where outbreaks continue to rise—we could see a flurry of activity well into the fall, especially as schools delay their openings.”

Indeed, Hale notes that “the U.S. housing market performance is closely mirroring COVID’s path, which is providing clues into what we can expect for various housing markets in the months to come.”

Housing inventories remain tight across the country. Inventories of new listings are down 34.8% compared to a year ago, according to realtor.com®. The metros that have seen the largest declines in inventory are Riverside-San Bernardino-Ontario, Calif. (down 50.4% annually); Baltimore-Columbia-Towson, Md. (down 48.7%); and Providence-Warwick, R.I.-Mass. (down 47.4%).

 

© realtor.com

 

 

Brokerage Survey: 45% of Contracts Are ‘Sight Unseen’ | Realtor Magazine

Virtual tools have helpedg home buyers feel more comfortable shopping online to choose a home and even make an offer, without first stepping inside. The real estate brokerage Redfin says the trend of “sight unseen” offers is reaching record highs.

Redfin reports that 45% of its consumers who purchased a home in the past year made an offer on a property without first seeing it in person. That is up from 28% in 2019 and the highest share since at least 2015, when Redfin first started collecting such data.

Redfin commissioned a survey in May and June of more than 1,400 consumers from across 29 major metros.In a separate survey conducted by realtor.com® in April, shortly after the coronavirus outbreak in the U.S., 24% of 1,300 consumers surveyed said they’d be willing to buy a home without first seeing it in person.

Real estate pros cite health concerns around the COVID-19 pandemic and heated competition from a shortage of homes for sale as reasons for the sudden urgency from buyers. Real estate pros are increasingly turning to virtual tours and a video walk-through to guide skittish buyers through homes.

Sight-unseen offers will likely climb over the next few months, predicts Daryl Fairweather, Redfin’s chief economist. “I predict that by the end of the 2020 homebuying season, the majority of home buyers will have made a sight-unseen offer,” Fairweather says. “The pandemic has changed the way many people view homes, and on top of that, the market is highly competitive. If you aren’t using this strategy, another buyer who is could beat you to the punch.”

While the offer might come before the buyer has seen the property in person, they do often visit the property before completing the process, real estate pros say.

These transactions can turn tricky when they don’t visit. Real estate pros say that buyers don’t always stick to agreed-upon timelines and may submit high offers just to remain in a bidding war but eventually back out after more carefully weighing their decision, real estate pros say. That has prompted some home sellers in Los Angeles to even refuse to consider sight-unseen offer altogether.

“FaceTime is pretty good, but it’s typically better for everyone if the buyer can see the house in person,” says Lindsay Katz, a Redfin real estate pro in the Los Angeles area. “Most people who make sight-unseen offers find a way to visit the home before actually closing the deal, even if it’s just a few days before getting their keys. If the pandemic gets significantly worse, that could change.”

Buyers Are Waiving Contingencies to Sweeten Their Offers | Realtor Magazine

The pandemic and high unemployment rate haven’t slowed the housing market. With home buyers facing heightened competition this summer for a limited number of homes for sale, some have decided to try to gain an edge by waiving contingencies to make their offers more competitive.

In June, nearly 20% of successful offers submitted by Redfin real estate professionals in select major U.S. markets reportedly waived the inspection contingency, compared to 13.2% during the same month in 2019. Further, 20.6% of winning offers waived the appraisal contingency, up from 17.4% a year ago.

Home buyers are waiving the contingencies to make their offers more attractive to home sellers. The inspection contingency allows the buyer to cancel a purchase or request repairs during the inspection period. The appraisal contingency allows buyers to cancel a deal or renegotiate the price if the appraisal comes back lower than the specified amount. Both an inspection and appraisal contingency are used in offers to protect home buyers in a transaction.

But with bidding wars on the rise recently, buyers are trying to make their offers more competitive. More than half—53.7%–of Redfin offers faced competition in June, according to the brokerage’s research. Mortgage rates, which fell below 3% for the first time ever this month, may be driving some demand. But buyers are facing tight inventories of homes.

“Today’s market remains tipped in favor of sellers as would-be spring buyers are shopping well into what would normally be summer vacation season,” Danielle Hale, realtor.com®’s chief economist, said in a recent report on realtor.com®’s Weekly Recovery Report. “Home buyers, trying to take advantage of record low mortgage rates and make up for lost time, are finding limited and more expensive options. Although sellers are slowly acclimating to this unexpected surge in buyer interest, inventory is still lagging behind demand, which is driving quick time on market and listing price growth on par with this time last summer.”

“The situation is out of control,” adds Lindsay Katz, a Redfin real estate professional in Los Angeles. “I put a house on the market the other day and within about 24 hours I already had 42 showings booked.”

Katz says she recently sold a home listed at $685,000 to a buyer who triumphed over 11 other bidders by waiving the appraisal and inspection contingencies. The buyer also agreed to get their loan approved in 10 days and paid $770,000 for the home.