Yajnesh Rai

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.”

30-Year Mortgage Rate Hits New Record Low | Realtor Magazine

© REALTOR® MAGAZINE

 

Borrowing costs fell this week, with the 30-year fixed-rate mortgage setting a new record low for the third time in the last few months. The 30-year fixed-rate mortgage averaged 3.15% this week, the lowest average in Freddie Mac’s records dating back nearly 50 years.

“These unprecedented rates have certainly made an impact, as purchase demand rebounded from a 35% year-over-year decline in mid-April to an 8% increase of last week—a remarkable turnaround given the sharp contraction in economic activity,” says Sam Khater, Freddie Mac’s chief economist. “Additionally, refinance activity remains elevated, and low mortgage rates have been accompanied by a $70,000 decline in average loan size of refinance borrowers this year. This means a broader base of borrowers are taking advantage of the record-low rate environment, which will benefit the economy.”

Freddie Mac reported the following national averages with mortgage rates for the week ending May 28:

• 30-year fixed-rate mortgages: averaged 3.15%, with an average 0.8 point, falling from last week’s 3.24% average. Last year at this time, 30-year rates averaged 3.99%.
• 15-year fixed-rate mortgages: averaged 2.62%, with an average 0.7 point, falling from last week’s 2.70% average. A year ago, 15-year rates averaged 3.46%.
• 5-year hybrid adjustable-rate mortgages: averaged 3.13%, with an average 0.4 point, falling from last week’s 3.17% average. A year ago, 5-year ARMs average 3.60%.

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

Consumers Worry About Pandemic Financial Options | Realtor Magazine

 

The Consumer Financial Protection Bureau says it has received a record number of consumer complaints in March and April as consumers grew concerned over their finances at the onset of the global pandemic.

In March, CFPB says it received about 36,700 complaints from consumers about financial services providers. In April, they received 42,500 complaints. Both March and April made up the highest the agency has ever received in its history.

Complaints mostly centered on credit reporting, which jumped 29%. Complaints about title loans increased by 20%, and complaints about mortgages increased by 10%.

Many consumers expressed dissatisfaction with the wait times to get answers to questions. “Some consumers are reporting hold times of several hours,” CFPB noted in the report. “For those who are pursuing payment options, some described no methods other than phone to access potential options.”

With mortgages, forbearance rules and requirements were a hot topic of confusion. “Consumers raised concerns whether they will have to pay lump-sum payments at the completion of forbearance periods,” CFPB noted. “Many of these consumers reported that companies offering forbearance periods informed them that there would be a balloon payment equal to the entire amount placed in forbearance. Some consumers report that the 90-day forbearance period offered is insufficient and they will not be in a position to submit a lump sum payment in 90 days.”

The National Association of REALTORS® has been helping to provide brochures that real estate professionals can customize and use to help inform their clients and also help dispel myths about forbearance. One brochure—“Protect Your Investment”—is available atrealtorparty.realtorand outlines what homeowners should ask lenders about their options and payback when weighing forbearance.

More First-Time Home Buyers Are Entering the Market | Realtor Magazine

A shift in the mix of home buyers has been occurring since the pandemic began. Investor numbers are shrinking, while the number of home shoppers purchasing their first home ever is on the rise. These buyers are freed from having to sell a home prior to purchasing, and they are valuing homeownership in a pandemic.

The share of first-time buyers rose to 36% in April 2020, up from 32% a year ago, the National Association of REALTORS®’’ April 2020 REALTORS® Confidence Index Survey shows.

“Home buyers are facing less competition from investors, and they are also benefiting from low mortgage rates,” notes Scholastica “Gay” Cororaton, an NAR researcher, on Economists’ Outlook blog. With fewer investors, cash sales dropped to 15% of existing-home sales in April, which is down from 20% a year prior.

Record low mortgage rates are enticing some first-time buyers. The estimated monthly mortgage payment on a home purchased at the median price of $286,800 with a 10% down payment on a 30-year fixed-rate mortgage was $1,131—which is $90 less than the median rent of $1,041 in the first quarter of 2020.

Meanwhile, as first-time buyers increase in the marketplace, investors are retreating. They may be perceiving greater financial risk associated with renters due to the COVID-19 pandemic. Also, Cororaton speculates that investors are unlikely to purchase single-family properties at the rate they did during the Great Recession, which had sparked a wave of discounted foreclosures. “In the current health and economic crisis, properties are not being foreclosed,” Cororaton notes. Also, so far, home prices are standing firm.

 

 

 

 

Mortgage Applications Continue Surprising Rebound | Realtor Magazine

Buyers are reemerging in the housing market much faster than anticipated. Mortgage applications are often an indicator of future home buying activity, and applications for home purchases have increased for five consecutive weeks. After increasing 6% last week compared to the previous week, applications for home purchases are now just 1.5% lower than a year ago, the Mortgage Bankers Association’s seasonally adjusted index shows.

The rebound is significant considering purchase volume was down 35% annually just six weeks ago as the U.S. ramped up its battle against the COVID-19 pandemic.

“Applications for home purchases continue to recover from April’s sizable drop and have now increased for five consecutive weeks,” says Joel Kan, an MBA economist. “Government purchase applications, which include FHA, VA, and USDA loans, are now 5% higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months.”

Record low mortgage rates and strong pent-up demand are bringing home buyers back to the market as states begin to reopen. The average contract interest rate for the 30-year fixed-rate mortgage decreased from 3.43% to 3.41% last week (with 0.33 points on the loan).

Refinance applications, meanwhile, are falling. Applications for refinancings dropped 6% last week and reached the lowest level in activity in more than a month. However, refinance applications are still 160% higher than a year ago as homeowners continue to lock in lower rates.

Prices Strong Despite Lockdowns Hindering April Sales | Realtor Magazine

The latest existing-home sales numbers show a housing market facing the headwinds of the COVID-19 pandemic in April. Existing-home sales fell 17.8% last month compared to March, marking a two-month decline in sales, the National Association of REALTORS® reported Thursday.

Still, home prices remain resilient in the face of the pandemic. The median existing-home price for all housing types in April jumped 7.4% compared to a year ago ($286,800). All four major regions of the U.S. saw annual gains in home prices, too.

But total existing-home sales—which are completed transactions that include single-family homes, townhomes, condos, and co-ops—fell to a seasonally adjusted annual rate of 4.33 million in April. Sales were down 17.2% compared to a year ago (5.23 million existing-home sales in April 2019). Existing-home sales are at the lowest level since July 2010

“The economic lockdowns—occurring from mid-March through April in most states—have temporarily disrupted home sales,” says Lawrence Yun, NAR’s chief economist. “But the listings that are on the market are still attracting buyers and boosting home prices.”

Record low mortgage rates likely will be a key factor in driving housing demand as state economies gradually reopen, Yun adds. “Still, more listings and increased home construction will be needed to tame price growth,” he notes.

Here is an overview of additional key indicators from NAR’s latest housing report:

• Inventory: Total housing inventory at the end of April was 1.47 million units, down 19.7% from a year ago. Unsold inventory is currently at a 4.1-month supply at the current sales pace.
• Days on the market: Properties typically stayed on the market for 27 days in April, up from 24 days a year ago. Fifty-six percent of homes sold in April were on the market for less than a month.
• First-time home buyers: More sales last month were from buyers who were purchasing their first home. First-time buyers accounted for 36% of sales in April, up from 32% a year ago.
• All-cash sales: All-cash sales comprised 15% of transactions in April, down from 20% a year ago. Individual investors and second-home buyers, who make up the biggest bulk of cash sales, purchased 10% of homes in April, down from 16% in April 2019.
• Distressed sales: Foreclosures and short sales represented 3% of sales in April, which is about the same as a year ago.

Regional Breakdown

The following is a closer look at how existing-home sales fared across the country in April:

• Northeast: Existing-home sales dropped 16.9% in April to an annual rate of 540,000—an 18.2% decrease compared to a year ago. Median price: $312,500, up 8.7% from April 2019.
• Midwest: Existing-home sales fell 12% to an annual rate of 1.10 million—an 8.3% decrease compared to a year ago. Median price: $229,200, a 9.3% increase compared to April 2019.
• South: Existing-home sales dropped 17.9% to an annual rate of 1.88 million in April, down 16.8% from the same time a year ago. Median price: $249,400, a 6.4% increase compared to April 2019.
• West: Existing-home sales dropped 25% to an annual rate of 810,000 in April—a 27% decrease compared to April 2019. Median price: $419,300, up 6.1% from a year ago.

 

© National Association of REALTORS®

 

 

FHFA: Forbearance Won’t Have Long-term Effect on Borrowers | Realtor Magazine

Borrowers who have taken forbearance can still take advantage of record low mortgage rates for purchasing a home or refinancing their existing home, the Federal Housing Finance Agency announced Tuesday. The FHFA made the announcement to try to clear up some confusion about what limits are placed on those who have taken forbearance during the COVID-19 pandemic, which now totals about 4.1 million homeowners.

Fannie Mae and Freddie Mac, which the FHFA oversees, will permit borrowers who went into forbearance due to the pandemic to refinance their loan or buy a new home as long as they’ve reinstated their mortgage and made three straight months of payments under their repayment plan, payment deferral option, or loan modification from their missed payments.

Also, there is no waiting period for borrowers who requested forbearance but ultimately were able to make their payment in full and on time, Fannie Mae notes.

“Homeowners who are in COVID-19 forbearance but continue to make their mortgage payment will not be penalized,” said FHFA Director Mark Calabria. “Today’s action allows homeowners to access record low mortgage rates and keeps the mortgage market functioning as effectively as possible.”

“NAR applauds the FHFA and Director Calabria for taking additional steps to secure the U.S. housing market and ensure mortgage and refinance options remain available to creditworthy Americans,” said NAR President Vince Malta, broker at Malta & Co Inc., in San Francisco. “Homeowners who have been forced into forbearance by no fault of their own but continue to make payments should not be penalized because of this pandemic. With the real estate industry driving nearly one-fifth of our national GDP, assurances that homebuyers can access credit and capitalize on record low mortgage rates remain critical to America’s economic recovery.”

Some borrowers who are in forbearance have been under the impression that they would be shut out from qualifying for another Fannie Mae- or Freddie Mac-backed mortgage for up to 12 months after they exit forbearance. The CARES Act requires that mortgage servicers report borrowers as “current” on any loan that goes into forbearance due to a COVID-19 financial hardship.

Mortgage Rates Hover Near Record Lows, Could Decline Further | Realtor Magazine

The 30-year fixed-rate mortgage continued to near its lowest average on record. The lowest average on Freddie Mac records dating back to 1971 is 3.23%, which was set the week ending April 30. This week, 30-year fixed-rate mortgages averaged close to that, at 3.24%.

“For the fourth consecutive week, the 30-year fixed-rate mortgage has been below 3.30 percent, giving potential buyers a good reason to continue shopping even amid the pandemic,” says Sam Khater, Freddie Mac’s chief economist. “As states reopen, we’re seeing purchase demand improve remarkably fast, now essentially flat relative to a year ago. Going forward, mortgage rates have room to decline as mortgage spreads remain elevated.”

Freddie Mac reports the following national averages with mortgage rates for the week ending May 21:

• 30-year fixed-rate mortgages: averaged 3.24%, with an average 0.7 point, falling from last week’s 3.28% average. Last year at this time, 30-year rates averaged 4.06%.
• 15-year fixed-rate mortgages: averaged 2.70%, with an average 0.7 point, falling from last week’s 2.72% average. A year ago, 15-year rates averaged 3.51%.
• 5-year hybrid adjustable-rate mortgages: averaged 3.17%, with an average 0.4 point, falling slightly from last week’s 3.18% average. A year ago, 5-year ARMs averaged 3.68%.

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