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First-Timers Shocked / Market Update January 2021

First Time Homebuyers Shocked by How Much Home They Can Afford

February 23, 2021 – Low mortgage rates, financial assistance from parents, and personal savings are helping first-time buyers stretch their housing budgets more than they thought they could, according to a survey from realtor.com® of 1,000 prospective and recent first-time home buyers. More than two-thirds of survey respondents say they are surprised at what they can afford; 47% say their budget is larger than they thought it would be.

“The dramatic decline of mortgage rates in 2020 was a pleasant surprise for many buyers,” says George Ratiu, senior economist at realtor.com®. “For first-time buyers, the drop in the 30-year mortgage rate from 3.65% in March 2020 to a record low of 2.65% in January has provided unexpected leverage. Lower rates allowed many buyers to stretch and buy more expensive homes while keeping their monthly budget the same.”

Still, many first-time buyers acknowledge having to compromise on their recent purchase, and nearly half of survey respondents say they have been outbid on homes they wanted to purchase. Twenty-one percent of respondents had to expand their housing search to less expensive neighborhoods, 20% had to increase their housing budget, and 18% had to eliminate some items on their wish lists, such as a garage, large backyard, finished basement, or pool, the survey shows.

First-time buyers also are saving for a home faster than they expected. Half of recent first-time buyers surveyed say they were able to save for a home in less than three years by putting aside a portion of their paycheck each month, cutting out discretionary spending, and saving lump-sum payments like tax refunds. Also, many first-time buyers are getting help from their family: 52% of Americans who bought their first home in 2020 say they received down payment assistance from friends or family, most notably their parents.

Buyers Snatch Up New Listings as Quickly as They’re Available

Home sales could easily be 20% higher if more homes were for sale, says Lawrence Yun, chief economist of the National Association of REALTORS®. Existing-home sales—completed transactions for single-family homes, townhomes, condos, and co-ops—rose 0.6% in January compared to December 2020 and are up nearly 24% over a year ago, the National Association of REALTORS® reported Friday. All four major regions of the U.S. recorded double-digit annual gains for home sales in January.

“Home sales continued to ascend in the first month of the year, as buyers quickly snatched up virtually every new listing coming on the market,” Yun says. Seventy-one percent of homes sold in January were on the market for less than a month, according to NAR’s report.

While most of the economy has felt the toll of the lingering COVID-19 pandemic, the housing sector has remained a bright spot, Yun adds. Sales remain high and home prices have continued to rise, adding equity to home sellers.

“Home sales are continuing to play a part in propping up the economy,” Yun says. “With additional stimulus likely to pass and several vaccines now available, the housing outlook looks solid for this year.” Yun predicts employment to increase, which could spur even more homebuying over the coming months. He predicts existing-home sales to reach at least 6.5 million in 2021.

Here’s a closer look at key indicators from NAR’s existing-home sales report, reflecting January sales data:

Home prices: The median existing-home price for all housing types in January was $303,900—a 14% jump over a year ago.

Inventory: Total housing inventory at the end of January was 1.04 million units, down nearly 26% from a year ago. Unsold inventory sits at a 1.9-month supply at the current sales pace.

Days on the market: Properties typically remained on the market for 21 days in January, down from 43 days a year prior.

First-time buyers: First-time buyers comprised 33% of sales in January, up slightly from 32% a year earlier.

Cash sales: All-cash sales accounted for 19% of transactions in January, down from 21% a year ago. Individual investors or second-home buyers tend to make up the biggest bulk of cash sales. They accounted for 15% of sales in January, down from 17% in January 2020.

Regional Breakdown

Here’s how existing-home sales fared in January across the country, according to NAR’s report:

  • Northeast: Existing-home sales dropped 2.2% in January, but are up 24.3% compared to a year ago. Median price: $361,400—up 15.8% from January 2020
  • Midwest: Existing-home sales rose 1.9% last month, a 22.7% jump from a year earlier. Median price: $227,800—a 14.7% increase from January 2020
  • South: Existing-home sales increased 3.2%, up 25.1% from January 2020. Median price: $263,300—a 14.6% increase compared to a year ago
  • West: Existing-home sales fell 4.4% compared to a month earlier but are still up 21.3% compared to January 2020. Median price: $461,800—up 16.1% from a year earlier

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5 Housing Trends in A Pandemic Year

February 2nd, 2021 – Every month, the National Association of REALTORS® conducts the REALTORS® Confidence Index Survey to gather on-the-ground information from REALTORS®.1 This feedback from REALTORS® provides valuable information at the local level that are then aggregated to create a national or broad picture of housing market trends. Here are five key trends from the RCI survey of how the pandemic impacted the housing market in 2020.

1. Buyers competed more intensely for fewer homes

With the Fed’s quick and massive policy to prevent a recession, mortgage rates fell to below 3%2 starting in July, spurring an increase in demand from both first-time and repeat buyers that saw existing home sales rise to 5.6 million, their highest level since 2006. However, the supply of homes on the market has tremendously lagged behind demand, intensifying buyer competition and quickening the pace at which homes sold. REALTORS® reported that there were nearly four offers per sold property from about 2 in 2019. Properties typically sold at an average of 26 days compared to 34 days in 2019.  With more intense demand, the median sales price rose 13% to $309,100 as of December 2020.

Line graph: Offers Received Per Sold Property, October 2015 to October 2020

2. More first-time buyers

With low mortgage rates, the first-time buyer share rose to 33% from  32% in 2019. In level terms, there were 1.86 million first time buyers, a 9% increase from 1.7 million in 2019 (compared to 5.6% overall increase in existing home sales).

First-time buyers could have made a bigger entry with mortgage rates falling by nearly a percentage point in 2020, but rising prices made a home purchase less affordable.3 The lack of supply for lower-priced homes on the market and the higher down payment and closing costs that go with rising home prices likely kept potential buyers on the sidelines.

Bar chart/Line graph: First-Time Homebuyers of Existing Homes as Percent of Existing-Home Sales, 2009 to 2020

According to NAR’s Profile of Home Buyers and Sellers, the starter price of first-time buyers is about 85% of the market price, or around $250,000 (85% of the median sales price of $296,500 in 2020 ). However, supply is tight at that price range, equivalent to 1.8 months of monthly housing demand, well below the 5 or 6 months that keep prices from rising faster than income growth. The average weekly wage was about 6% higher in December 2020 from one year ago, a pace that is just about half the home price appreciation in December 2020.

Bar chart: U.S. and Regional Months' Supply of Existing Homes by Price Range, December 2020

Rising prices also mean a higher down payment.  As of December 2020, a 10% down payment and a 3% closing cost on a starter home amounted to $34,2334, an increase of $4,800 compared to the amount based on prices one year ago. While some buyers may have used their unspent leisure or travel budget for down payment and bought a home, some interested buyers may also have decided to postpone a home purchase due to job loss, to have a liquid financial asset (cash) on hand to meet an unexpected turn of events (sickness, job loss), or because of concerns that house prices may fall during the economic downturn.

Line graph: 10% Down Payment on a Starter Home, January 2019 to December 2020

3. More vacation home buyers  and sales in suburbs, rural, small towns, resort areas

With people able to work from home (anywhere) and with people seeking less congested places, REALTORS® reported more vacation home sales. Home sales of vacation homes rose to 310,600, up 16.3% from the level in 2019, outpacing the 5.6% growth in total existing home sales in 2020 and the 9% growth in first-time buyer sales. The share of vacation homes rose to 5.5% in 2020 from about 5% in prior years.

Bar chart/Line graph: Share of Vacation Homes to Total Existing-Home Sales, 2016 to 2020

Based on a sample of 180 vacation home counties (a county where vacation homes account for at least 20% of the housing stock), 81% of these counties had higher sales in 2020 compared to 2019. Counties that are popular vacation destinations had double-digit growth in sales, such as Lee, Florida (10%); Barnstable, Mass. (20%); Horry, South Carolina (15%); Sussex, Delaware (19%); Brunswick, North Carolina (31%); Cape May, New Jersey (19%); Worcester, Maryland (26%); Camden, Missouri (35%); Crow Wing, Minnesota (16%), Summit Utah (44%), among others.

Related to more buyers purchasing vacation homes, nearly 40% of REALTORS® reported they have a higher share of clients who live in a city who want to purchase a property in a suburb or rural area compared to the share in January 2020 (pre-pandemic).

The fraction of REALTOR® respondents who reported an increase in city clients seeking to purchase outside the city is higher in Northeast states like Vermont (70% of respondents), New Hampshire (60%), Connecticut (58%), New Jersey (58%), and Maine (57%).

In the West region, half of respondents reported more city dwellers purchasing outside the city in Montana and Wyoming.

Around the Washington, DC area, 46% of REALTOR® respondents from West Virginia reported a higher share of city clients purchasing in suburbs and small towns. To be clear, these percentages reflect the areas where the respondents are coming from.

4. Buyers looked for bigger homes and home features to support working from home

With 24% of the workforce still working from home5, most buyers looked for a bigger home or home features that could function as a space to use for working from home such as a basement or a den, according to 62% of REALTOR® respondents.

The preference for single-family homes can also be gleaned from the increase in sales of detached single-family homes and townhomes versus the decline in condominium sales. In 2020, single-family home sales rose 6.3% while condominium sales decreased by 0.3%.

Bar chart: Buyers Looking for a Work-From-Home Room as a Home Feature, August 2020 and September 2020

5. Rise, then decline, in the fraction of buyers purchasing a property based on virtual showing only

At the height of the pandemic in March and April, 9% of buyers purchased a property based on a virtual showing alone.6 With states ending the stay-in-place measures, that share has declined to 6%. Housing is the biggest investment most persons will make in their lifetime, so understandably, and properly so, most buyers prefer to see the home physically before making a purchase. Some buyers could be buying a home without seeing the home, but they may still have a trusted agent, relative, or friend who viewed the home.

In May, 7% of sellers also just sold the home based on a virtual showing, but the share has also gone down to 4% as more buyer prefer to view the home physically before making a purchase.

Line graph: Buyers and Sellers Who Bought or Sold a Home Based Only on a Virtual Tour, April 2020 to December 2020

What’s 2021 Looking Like?

The year 2021 can only be better for the housing market than 2020, with the economy continuing to improve in 2021 under continued low mortgage rates, higher fiscal spending, and aggressive COVID-19 immunization. NAR projects existing-home sales to increase to 6 million in 2021 (from 5.6 million in 2020).  Low mortgage rates hovering at 3% will continue to attract first-time and repeat buyers. Housing starts have started to increase, to an annualized rate of 1.7 million as of December, and if this pace continues, the higher supply will help keep prices from appreciation at double-digit rates by the second half of the year. Buyers may also wait for the $15,000 First Down Payment Tax Credit to make a home purchase, so that could push sales in 2022. For All Market Updates, Talk To Tammy – 636.931.9100

Coronavirus: Mortgage and Personal Finance FAQs

January 19th, 2021: On December 21, 2020, Congress struck a deal on a nearly $900 billion coronavirus relief bill for a new round of support. President Trump signed the bill on December 27, 2020. Read a short summary of the bill here. Congress has passed three relief packages to respond to COVID-19. Bank regulators have also adopted many new policies in light of needs resulting from the COVID-19 crisis. See below for those provisions and actions that are designed to address homebuying, homeowner/landlord, and personal finance issues:

-I’m worried about my credit score. What should I do if a miss a few payments due to the crisis?

The CARES Act implemented provisions to protect credit scores from January 30, 2020 through 120 days after enactment of the national emergency. If customers are making payments, or made arrangement to not make payments, customers must be reported as being current. If a customer was delinquent, but was able to make an arrangement with the servicer and is now current, then their account must be reported as current. The important thing is to reach out to your servicer, bank or credit card company if you are having trouble making your payments.

-My lender indicated that the IRS has shut down and they cannot process loans without an income verification document that only the IRS can generate. Is this true?

Luckily, there is precedence for an IRS shutdown based on several recent government shutdowns. Some lenders may require this document, but Fannie Mae, Freddie Mac, and FHA do not so this is a lender overlay.

Fannie and Freddie both issued guidance in January 2019 following the previous  government shutdown to note that they do not require the 4506T IRS tax transcripts at closing. Rather, they only require a request for the document be signed by the borrower. However, they do require the tax transcript be submitted as part of their post-closing review. NAR has asked both Fannie and Freddie to clarify and publish updated guidance given the unique challenges posed by COVID-19.

Furthermore, the IRS recalled critical staff to process tax transcript request on April 27th. The tax transcript issues appears to have eased.

-I’ve been told that I won’t be able to refinance or get a new mortgage if I take forbearance or even look into it or that I would have to wait for 12 to 18 months. Is that true?

No. If your mortgage is backed by Fannie Mae or Freddie Mac and you take forbearance you can refinance or get a new mortgage immediately, if you are current on your payments. If you took forbearance and stopped making payments, but are on a repayment plan and make 3 consecutive payments on that plan, you are eligible for credit to refinance or purchase another home.

The FHA has not clarified its position on this issue, but has indicated that it will come to a decision in the near future. Private lenders may or may not allow a homeowner who took forbearance to get mortgage credit in the future. You should check with your lender.
While Fannie Mae and Freddie Mac do allow for owners who took forbearance to get credit, a lender can place their own restrictions and choose not to refinance the loan or provide a mortgage. In such a case, the consumer can work with a different lender.

-I have heard that the FHA, Fannie Mae, and Freddie Mac have raised rates and fees on borrowers with lower credit scores or smaller down payments?

These claims are not true. To date, neither the FHA nor Fannie Mae and Freddie Mac have made any changes to credit scoring or down payment requirements. The only change they have made for borrowers is to allow MORE flexibility in how a lender can verify employment.

However, some individual lenders are adding their own, higher standards on these products. The rational is that the cost of servicing these loans has surged due to the widespread forbearance that is taxing servicers’ resources. Under forbearance, the servicer must continue to pay PITI to the investor, but the sheer volume of forbearance to deal with the COVID-19 response is unprecedented. Since lower-credit borrowers are more likely to take forbearance and servicing is harder to get, lenders are less willing to extend this credit regardless of the FHA or GSEs’ standards.

NAR sent a letter to the Treasury, Federal Reserve, and the Federal Housing Finance Agency requesting help for servicers dealing with the unprecedented demands on funds due to broad forbearance requests. Improving servicing is one key to improving the flow of funds to borrowers and homeowners.

Ginnie Mae has announced the creation of a new program, that should help alleviate lender concerns and improve access to mortgage financing. The program will provide cover for lenders by advancing them the money so they can make the required pass-through payments to investors during the forbearance period.

-In my area, appraisers have stopped appraising; Now what?

FHFA has directed Fannie Mae and Freddie Mac to utilize appraisal alternatives to reduce the need for appraisers to conduct interior property inspections for eligible mortgages through January 31, 2021. Fannie Mae and Freddie Mac have provided detailed appraisal alternative guidance, including directions on using desktop appraisals and exterior-inspection only appraisals with specific language that appraisers are to use in their reports.

FHA and the Rural Housing Service of the USDA are allowing exterior-only appraisals. The VA is allowing exterior-only appraisals with enhanced assignment conditions, or in limited instances a desktop appraisal to complete the VA loan requirements in light of the COVID-19 crisis.

-What are the federal requirements related to an eviction moratorium?

The CARES Act requires all housing providers with a federally-touched mortgage (including FHA, VA, RHS, Fannie Mae, Freddie Mac), as well as federally-assisted properties (FHA, Freddie Mac, Fannie Mae, RHS, Low-income Housing Tax Credits, etc) to provide 120-days moratorium on evictions, along with 30-days notice before an eviction filing.

-Are rental housing providers eligible for mortgage forbearance?

Multi-family (properties with more than 5 units) housing providers with federally connected –backed mortgages (mortgages insured by federal agencies or held or securitized by Fannie Mae or Freddie Mac) are eligible for up to 90 days forbearance (in an initial 30 day period, one-month increments, with two 30-day extensions upon request). However, if you accept the forbearance, you are also subject to the prohibition on eviction for the length of the forbearance. Multifamily owners with federally-backed mortgages are also subject to a separate 120-day eviction moratorium (plus 30 days’ notice) that expires on March 31, 2021.

Single-family rental providers with federally backed mortgages are eligible for the 180-day forbearance (with another 180 days extension) provided to single-family mortgage holders. They are also required to place a moratorium on evictions for 120 days, up until March 31, 2021 (plus 30 days’ notice). However, they are not required to extend that prohibition throughout their forbearance.

For all your Real Estate needs, Talk To Tammy636.931.9100

Contract Signings Surge to Record HIGH for November

January 5th, 2021 – Looking back to the year 2020: Real estate pros are quickly submitting offers for clients as the buyer frenzy, unusual for the winter season, continues.

Sales have slowed slightly from the high levels recorded this fall. Pending home sales slid in November by 2.6% compared to those in October, according to the National Association of REALTORS®’ Pending Home Sales Index, released on Wednesday. November’s decline marked the third consecutive month for monthly decreases in pending home sales.

“The latest monthly decline is largely due to the shortage of inventory and fast-rising home prices,” says Lawrence Yun, NAR’s chief economist. “It is important to keep in mind that the current sales and prices are far stronger than a year ago.”

BUT: Pending home sales are still up 16.4% compared to a year ago. All major regions are posting double-digit year-over-year increases.

“The market is incredibly swift this winter with listed homes going under contract on average at less than a month due to a backlog of buyers wanting to take advantage of record-low mortgage rates,” Yun says.

NAR’s Pending Home Sales Index reached a reading of 125.7 in November—an all-time high. An index reading of 100 is equal to the level of contract activity in 2001.

Yun predicts home sales to continue to perform strongly in 2021. He expects existing-home sales to increase about 10% and new home sales to surge by 20% in the new year.

“Economic growth is guaranteed from the stimulus package and from vaccine distribution, but high government borrowing will put modest upward pressure on interest rates,” Yun says.

If you are ready to list your house, Talk To Tammy636.931.9100

Property Ownership: Bedrock of the Economy

December 08, 2020: Property Ownership: A Bedrock of the Economy in Troubled Times

It’s been a rough few months for the economy, and we could all use a little good news. For America’s millions of home and property owners, here is some: While retirement accounts and the stock market may have cratered, property values are hanging tough.

The National Association of REALTORS® (NAR) reported in May that the median existing-home price for all housing types was up eight percent. And with a proper recovery and the right policies, there is a great chance that home values will remain fairly stable even as home sales temporarily fall while Americans shelter-in-place.

The pandemic also hasn’t stopped business activity outright like in many other sectors. A recent NAR survey of members found that one-quarter of REALTORS® had at least one client go under contract during the second week of April without physically seeing the property. Deals are proceeding with the growing use of new technology like remote notarization. Even those pausing their real estate transactions still plan to buy and sell once again within a few months.

Property ownership is turning into a financial pillar for many Americans during this crisis, and in a surprising show of alacrity and bipartisanship, Congress went to great strides to help protect that investment. For those who can no longer pay their mortgage, new mortgage forbearance rules allowed them to put off payments for up to a year without impacting their credit. Other new benefits like forgivable small business loans and unemployment assistance not normally available to the self-employed or independent contractors are helping them weather the storm. Congress deserves credit for responding in a bipartisan and lightning-fast way even if the rollout of those programs was less than perfect.

If real estate is still viable, land real estate may be in an even better position to take advantage of changing social trends and shifting demographics. Increased time inside close quarters during the coronavirus pandemic is causing some urbanites to consider moving toward the suburbs and even further, a recent survey shows. A survey from the Harris poll showed that nearly 40 percent of U.S. adults living in urban areas indicated they would consider moving “out of populated areas and toward rural areas,” compared to 29 percent of overall respondents. Anecdotal evidence from agents in Seattle and along the West Coast indicates that smaller cities in the region like Boise, Idaho, are becoming increasingly attractive. This demographic movement could encompass the development of new communities that cater to telecommuters and to new resort developments.

. . . it has never been clearer that property ownership is still one of the best and safest investments an American family can make.

Russell Riggs

Developers will be searching for land that will enable them to build properties that enhance “community” but also cater to a buyer’s desire to spread out. Virtual tours of neighborhoods, homes, and land are among the new tools that are helping to facilitate the interest.

Of course, the pandemic may also create unknown economic dynamics that could negatively impact land and real estate markets in the future. Fears of COVID-19 could exacerbate the trend towards online commerce and away from greenfield brick and mortar developments. This could reduce the demand for large, new commercial developments.

There could also be severe long-term impacts on the agricultural sector. As we see growing levels of concern, recommendations for social distancing, reduced travel, avoiding crowds, and other protective practices to slow the spread of COVID-19, consumers will be making tough choices about food, eating away from home, and overall spending. This will likely have an impact on markets and prices. Concerns about the impact of the virus on the broader economy may have an even larger impact on dairy prices. Many countries of the European Union were already hovering just above a recession prior to the viral outbreak and this event is likely to push them over the edge.

As supply chains and logistics are disrupted, the agricultural sector will continue to be impacted. We have already seen livestock euthanized and crops plowed under because of the inability to get these commodities to market. All of these trends could disrupt the farm economy for the long-term.

Despite the possible adverse impacts on land real estate markets, it has never been clearer that property ownership is still one of the best and safest investments an American family can make. Economic downturns and public health crises—no matter how severe— will never change this fundamental fact. But what has become even more apparent is that, during this crisis, home has become more important than ever.

If you are looking for properties or need help selling your piece of land, Talk To Tammy 636.931.9100

Pending Home Sales Dip 1.1% in October

December 1st, 2020 – Pending home sales fell slightly in October, according to the National Association of Realtors. Contract activity was mixed among the four major U.S. regions, with the only positive month-over-month growth happening in the South, although each region achieved year-over-year gains in pending home sales transactions.

The Pending Home Sales Index (PHSI),* www.nar.realtor/pending-home-sales, a forward-looking indicator of home sales based on contract signings, fell 1.1% to 128.9 in October, the second straight month of decline. Year-over-year, contract signings rose 20.2%. An index of 100 is equal to the level of contract activity in 2001. “Pending home transactions saw a small drop off from the prior month but still easily outperformed last year’s numbers for October,” said Lawrence Yun, NAR’s chief economist. “The housing market is still hot, but we may be starting to see rising home prices hurting affordability.”

Both the inventory of homes for sale and mortgage rates are now at historic lows, according to Yun.

“The combination of these factors – scarce housing and low rates – plus very strong demand has pushed home prices to levels that are making it difficult to save for a down payment, particularly among first-time buyers, who don’t have the luxury of using housing equity from a sale to use as a down payment,” said Yun. “Work-from-home flexibility has also increased the demand for both primary and secondary homes.”

Realtor.com®’s Housing Market Recovery Index, which reveals metro areas where the market has recovered or even exceeded January 20 levels, showed Las Vegas-Henderson-Paradise, Nev.; San Francisco, Calif.; Seattle-Tacoma-Bellevue, Wash.; San Jose-Sunnyvale-Santa Clara, Calif.; and Los Angeles-Long Beach-Anaheim, Calif., had enjoyed the most significant recovery as of November 14.

October Pending Home Sales Regional Breakdown

The Northeast PHSI slid 5.9% to 112.3 in October, a 18.5% increase from a year ago. In the Midwest, the index fell 0.7% to 119.6 last month, up 19.6% from October 2019. Pending home sales in the South increased 0.1% to an index of 151.1 in October, up 21.0% from October 2019.

The index in the West remained the same in October, at 116.8, which is up 20.8% from a year ago. The National Association of Realtors® is America’s largest trade association, representing more than 1.4 million members involved in all aspects of the residential and commercial real estate industries.

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing. The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales.

In developing the model for the index, it was demonstrated that the level of monthly sales contract activity parallels the level of closed existing-home sales in the following two months. An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

Infographic: October 2020 Pending-Home Sales

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Seller to Sell Faster, Market Changes

The coronavirus pandemic initiated several shifts in America’s housing market over the past eight months. Changes in the behaviors of home buyers and sellers were especially notable as buyers’ usual tendencies altered, and the urgency to sell accelerated.

This is according to new data from the National Association of Realtors®’ 2020 Profile of Home Buyers and Sellers,1 a yearly report which discusses demographics, preferences and experiences of buyers and sellers across America.

Those who completed their transaction after March were more likely to purchase a multi-generational home. Multigenerational home purchases accounted for 15% of sales after March, compared to 11% for those who closed before April. In light of stay-at-home orders, instituted within the early weeks of the pandemic, 14% of buyers who bought after March said their transaction was delayed because of COVID-19.

“The coronavirus without a doubt led home buyers to reassess their housing situations and even reconsider home sizes and destinations,” said Jessica Lautz, vice president of demographics and behavioral insights at NAR.

“Buyers sought housing with more rooms, more square footage and more yard space, as they may have desired a home office or home gym,” she added. “They also shopped for larger homes because extra space would allow households to better accommodate older adult relatives or young adults that are now living within the residence.”

Among other updated statistics, this year’s report includes two new sections on active home buyers and sellers during the COVID-19 pandemic. Purchases and sales that closed in April 2020 or after are considered transactions that occurred during the pandemic. The survey evaluated buyers’ and sellers’ behaviors prior to the virus taking shape and then assessed consumer and seller patterns in the midst of the outbreak.

Buyers who purchased after March were more likely to relocate to the suburbs and were more likely to pay more for that home – regardless of its location – paying an average of $339,400 compared to $270,000 for those who purchased before April. Findings show those who bought a home  during the pandemic are expected to remain there for 10 years. That is compared to 15 years for those who purchased prior to the COVID-19 outbreak.

Five percent of buyers who purchased after March did so without physically seeing the home in-person, compared to 3% of buyers who purchased before April. Those who went to closing after March were less likely to be denied by a lender – 2% compared to 5% for pre-April buyers. This group also had higher household incomes – $100,800 compared to $94,400 for pre-April buyers.

Lautz notes several additional, significant behavioral changes among home sellers due to the pandemic, including a desire from many to accelerate their transactions.

“So many sellers were eager to get out of their old home and move to something bigger that would better meet their needs during quarantine,” she said.

The NAR report reveals that owners who sold in 2020 were more likely to say that their need to sell was “at least somewhat urgent.” Those who closed in April or later were more likely to sell because their home was too small – 18% compared to 13% of those before April.

Sellers after March were more likely to use incentives to help sell their home, and they sold for 98% of the list price compared to 99% for those before April. However, those homes sold after March ultimately had higher selling prices – $300,000 compared to $270,700 for those that sold before April.

Fifty-six percent of homeowners who sold after March sold in the suburbs, compared to 48% who sold before April.

Other Shifts in Buyer and Seller Behaviors

The average buyer age of 55 was an all-time high, according to the NAR survey. The average first-time buyer was 33 years old. There was a slight rebound in single women buyers – 18% from 17% in 2019. A record-low 33% share of buyers with kids at home under the age of 18 was recorded – a drop from 58% in 1985.

The proportion of first-time buyers dropped to 31%, down from 33% in 2019. This is the lowest share since 1987’s recording of 30%. Twenty-two percent of first-time buyers moved from a family member’s home directly into ownership. This is also a lower share than last year’s.

The NAR study found that 97% of buyers searched for their home online. This is the highest percentage for an online home search and is a jump from last year’s 93%. The time spent looking for a home declined to eight weeks from 10, which is the shortest search since 2007.

“Some buyers purchased their homes before ever physically seeing them in person,” said Lautz. “They researched, viewed photos online and did virtual tours from their computers and phones, and ultimately made an offer through their agent.”

On average, buyers looked at nine homes in person, and an additional five homes via virtual tour listing online only. Fifty-three percent of buyers said finding the right property was the hardest step in the home buying process.

The market changes and so do we. We’re watching the market closely and grow with all changes.

For all of your Real Estate needs, Talk To Tammy 636.931.9100!

COVID Update: COMMERCIAL VS. LAND SALES

Commercial Sales Declined Across All Property Types in 2020 Q3

Sales transactions volume among REALTORS® fell on average by 3% year-over-year in the third quarter of 2020, a smaller rate of decline compared to the second quarter (-5%), according to members of the National Association of REALTORS® who responded to NAR’s 2020 Q3 Commercial Real Estate Quarterly Market Survey. NAR commercial members’ transactions are typically below $2.5 million (small commercial market). Sales transactions volume of properties or portfolios of at least $2.5 million (middle to large commercial market) plunged 57% year-over-year in the third quarter, also a smaller rate of decline compared to the second quarter (-68%), according to Real Capital Analytics. The heaviest decline was for acquisitions of retail malls (-7%), retail strip centers (-5%), retail free-standing (-4%), and office class A (-5%). Sales transactions declined the least for industrial flex (-1%) and apartments (-1%) an remained unchanged compared to a year ago for land and industrial warehouses.

Commercial Prices Decreased Except for Industrial Properties

Commercial prices of properties in the small commercial market space (less than $2.5 million) fell 2% year-over-year in 2020 Q3. Commercial property prices in the small commercial market where REALTORS® typically engage in were down across all commercial property types except for industrial warehouse properties where prices were up 1% year-overyear. The largest sales price decline was in hotel/hospitality (-7%), retail (-7%), and retail strip
center (-5%). Among transactions in the large commercial market ($2.5 million or more), commercial prices were essentially flat, according to Real Capital Analytics. Commercial properties held by REITS declined in 9% year-over-year, according to the Green Street Commercial Property Price Index.

Strong Increase in  Sales of Land for Recreational and Residential Use

In contrast to the sales decline among sales of commercial buildings, REALTORS® reported more land sales transactions in 2020 Q3 compared to one year ago, except for timber (-3%). The strongest growth was in sales of land for industrial use (4%), recreational use (5%), and developed residential land (6%). Prices rose at the strongest pace for developed residential land (8%) and land for recreational purposes (7%). With urban/city recreational activities (dining, movies, etc.) curtailed by the pandemic, people are spending their more leisure time in outdoor back-to-nature activities.

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Here’s How Much Homeowners Could Save

Mortgage rates have hit a record-low once again. According to Freddie Mac, the average interest rate on 30-year, fixed-rate mortgage loans is now just 2.80%, the lowest point recorded since 1971 — when the company began tracking rates.

It’s just the latest drop in a long string of decreases in 2020. At the start of the year, the average rate was 3.62%. On a $200,000 loan, that’s a difference of $90 per month and more than $32,000 in interest over the course of 30 years.

According to Sam Khater, chief economist at Freddie Mac, the low rates offer big opportunities for existing homeowners.

“Mortgage rates remain very low, providing homeowners who have not already taken advantage of this environment ample opportunity to do so,” Khater says. “Mortgage rates today are, on average, more than a full percentage point lower than rates over the last five years. This means that most low- and moderate-income borrowers who purchased during the last few years stand to benefit by exploring refinancing to lower their monthly payment.”

Given today’s 2.8% rate, about 18.5 million homeowners could reduce their interest rate by at least 0.75%, according to data from analytics firm Black Knight. The average homeowner would save about $304 per month.

At the purchase level, today’s low rates aren’t spurring as much demand as you’d expect. Though applications to buy a house are up 26% over the year, they actually dropped over the week, falling 2% from the week prior.

The dip is likely due to ever-dwindling supply, which now sits at its lowest level ever. The U.S. currently has just a 3.3-month supply of available homes (a balanced market is typically around six months).

The shortage has caused home prices to rise, particularly on entry-level properties, making it harder and harder for first-time buyers to make their move.

As Frank Nothaft, chief economist at property data firm CoreLogic, puts it: “The imbalance between homebuyer demand and for-sale inventory is particularly acute for lower-priced homes.”

Prices on the lowest price tier increased 8.6% over the last year, according to CoreLogic’s most recent data. Across all price tiers, the jump was just 5.9%.

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Covid-19’s Impact On New Home Purchases And Designs

We have gone past the phase where working from home was a Covid-19 forced anomaly to one that looks like it will be a permanent part of our business work style and culture.

Large businesses are adapting to this work-at-home style and redesigning their office complexes to accommodate staff who must be on the premises. So office desks are now at least 6-feet apart. No more open spaces where people sit side by side to work. They are also creating dedicated areas for larger meetings and video conferencing rooms that will accommodate social distancing.

The work from home trend is having a dramatic impact on the way we work, eat, learn and even recreate. And the idea of working from home on a more permanent or semi-permanent basis is having a significant impact on the real estate market and future home designs.

The biggest impact we are seeing from our research on this subject comes from when people look to buy pre-existing homes. In the past, the number of bedrooms was on the priorities list. While bedrooms still matter, buyers now are looking at homes with an extra bedroom or an area that can be turned into a home office.

For example, if a person or family is looking to buy a two-bedroom home, they are now looking for a three-bedroom home and want to designate that third bedroom as a home office space.

They want to have a home with a dedicated room or area that they can work in and have room for privacy, a noiseless environment that is big enough to have room for larger monitors, stand-alone printers and optimized as a Zoom room.

While the home office is now a larger priority, it needs to be functional, not just attractive. These rooms might also need to be multifunctional as learning-from-home continues to be apart of school interaction for kids. And as a sign for our times, there is also interest in designing an area for package deliveries and drop-off that is more secure.

Interest in buying a second home is higher, too. The idea that a person can work from anywhere suggests that while they may not want to move to Hawaii or the Bahamas for work, they do want to move to areas with great scenery and open spaces. In homes with barns, sheds and garages, many seek to convert them into dedicated offices or play areas for their children. These areas could also serve as spaces for kids who are forced to learn from home and parents want them to do it in a better environment than utilizing their small bedrooms.

An interesting tech twist is related to reimagining the home theater. When we moved from analog to digital TV and HD, many homes created what is known as home theaters. Some were very elaborate, and in very high-end homes, they were large dedicated rooms with Barca lounger seats and wall-sized screens. Now, many of these larger home theaters and even smaller ones are being converted into dedicated Zoom rooms and optimized for video conferencing. Productivity now trumps home theater entertainment.

People are re-imagining their lives in a post-pandemic world where so much has changed. They realize the future seems to point to both work and learn-at-home being with us well into the future. This has changed the dynamics of the home real estate market and is now determining what types of homes sell or what new designs will be imagined and built.

 

The Fall Real Estate Market Is Very Hot

It is abnormally hot for fall as mortgage rates break records. The coronavirus pandemic has remade what’s normal, and homebuying is no exception. Typically, the real estate market tends to hit the brakes in the fall, as kids return to school and families juggle work, extracurriculars and the upcoming holidays.

But that’s not what’s happening as we head into the second week of September, closing in on the official start of fall: Sept. 22. Homes are getting snapped up faster as home values rise and mortgage rates continue to slide.

“Home sales are currently stronger than they were pre-pandemic and show no signs of slowing,” says Cheryl Young, senior economist at Zillow. “Demand is being fueled by low mortgage rates. We’re also seeing deferred home buying as the economy and housing market pressed pause in the spring.”

The median listing price on single-family homes grew for the 17th straight week, jumping 10.8% year-over-year, which is the most rapid growth in over two years. Meanwhile, mortgage rates have broken new records. The average rate on the 30-year fixed-rate mortgage is now at 2.86%, and the 15-year hit 2.37% this week—both all-time lows, according to Freddie Mac’s recent Primary Mortgage Market Survey.

As the number of homes for sale continues to shrink, new listings are being snapped up quickly. They’re lasting 12 fewer days on the market than they were 12 months ago, according to Realtor.com’s latest housing trends report.

“With unusually high buyer interest this late in the homebuying season, buyers are moving much faster than this time last year to beat out competition and lock in low mortgage rates. This means homes are sitting on the market for much less time, despite notably higher price tags,” the report’s author, Realtor.com economist Danielle Hale, wrote.

Whether this buying trend will continue is up in the air as supply is lagging behind demand, which appears to be the only real obstacle. What’s holding homebuying back now are chronically low levels of inventory, Johnson says, and stiff competition for homes that do come onto the market.

New listings dropped 12% during the week ending on Sept. 5, which spells trouble if construction doesn’t pick up. This is especially harmful for first-time buyers who are competing against a slew of bids for the same listing.

“Multiple offers are quite common for starter homes,” says Lawrence Yun, chief economist at the National Association of Realtors (NAR).

Why Is Homebuying Taking Off Now?

Experts can’t point to one reason why homebuying has defied expectations as we face a still uncertain economy and elevated levels of unemployment. Certainly, the Federal Reserve and GSEs, Fannie Mae and Freddie Mac, helped keep the market liquid so lenders could continue to do business as well as contain mortgage rates. But why is there such a big appetite for real estate now?

Low mortgage rates? People fleeing cities? The need for more space as working from home and remote learning become realities? Dormant buyers who were waiting for the pandemic to subside? It’s likely a combination of a few or all of these factors.

“Homebuying is currently on a tear, but much of this is likely due to the fact that those looking to buy during the spring homebuying season had to wait as the pandemic took hold,” Young says.

One influence that is undeniable in the recent buying spree is the rise of the ultra-low mortgage rate, says Yun of NAR. Buyers who were held back from buying during the spring watched mortgage rates drop. Now that businesses are opening up and more people are finding ways to live with the coronavirus safely, the homebuying hesitancy has subsided. Low rates are just adding extra impetus to what was already a motivated buying segment.

“Low rates are the key reason for the robust homebuying, despite the still-high unemployment rate,” Yun says. “Those with secure employment are taking advantage of the low interest rates.”

The circumstances surrounding the pandemic have created homebuyers, as well, says Bill Cosgrove, president and CEO of Union Home Mortgage. People are using their kitchens for office space and spare bedrooms for classrooms, so many of them are looking to upsize. Not only do they want more square footage, but they want to get away from urban cores so they can also have outdoor space.

Are you trying to find the right home? Talk To Tammy, 636.931.9100

Housing Market Changes: From Urban to Suburban and Rural Living

A new report by youth marketing experts YPulse titled “No Place Like Home” provides significant new insights on how the Covid pandemic has changed how Gen-Z and Millennials view the homes. The following statement summarizes key findings: “As young people look to their spaces as mental health retreats, at-home items and services that comfort, declutter, or foster a feeling of escape that from the outside world will resonate.” The opportunities for marketers are clear and will be elaborated on below.

YPulse previously observed that millennials have homebody tendencies, with a majority preferring to go to a  café or watch Netfix at home as opposed to going to a party on a Saturday night. A recent survey confirms that this sentiment was present even prior to the pandemic, with, “…67% of 19-37 year olds telling YPulse in January this year that they would rather stay in on the weekends than go out.”

Both Millennials and Gen-Z (widely regarded as the most stressed out generation in history) are seeing the home as a refuge from the outside world, as many have felt stressed by issues such as climate change, the 2008 recession, student debt, and now Covid-19.

Shifts in How Young People Use Their Homes Will Create Opportunity

With a strong majority of Millennials and Gen-Z having the goal of owning a home, how they use that home will be of interest to markets in many product categories. YPulse points out several Covid-related shifts in emphasis among the younger consumers in terms of how they will use space, including heightened demand for:

  • Fully equipped home offices (seating, lighting, desks, temperature control), with many indicating a preference to work at home even after the pandemic.
  • Home fitness space and equipment, with 63% indicating that when the pandemic ends they would prefer to exercise at him.
  •  Private outdoor space, with many preferring having their own private space even after Covid passes as opposed to using public parks for this purpose
  • Cooking supplies and well-equipped kitchens. While the demand for eating out does not appear to have done away, there has been an uptick in the number reporting that cooking is a hobby.
  • Play space for children; this has been spurred by many dealing with home schooling while trying to keep them busy via fun and productive entertainment.

Renewed Emphasis on Comfort, Simpler Design, and Home Improvement

YPulse reports that Covid has led to 80% of young people self-quarantining and, 83% reporting that their home has provided them with comfort during the pandemic. In addition, 71% actually indicate that they actually enjoy being able to spend additional time at home. This “shelter from the storm” as YPulse puts it, brings comfort to young consumers, who describe their ideal home as being comfortable, cozy, safe, calming, and quiet. Accompanying these feelings is a desire for simplified décor that is calming and reflects a less cluttered environment. The report also suggests that “Cozy, homier ads are more relevant than ever to young consumers,” advice that would appear very sound going forward.

The “comfort” element of the home is making young consumers more likely to indicate they want to engage in do-it-yourself home improvements. The report indicates that 64% of young consumers say they are more interested in-home improvement than before Covid. DIY may be especially important in the short-term, as these young consumers look to make improvements while limiting expenditures, and may become a longer-term trend as well.

A Shift from Urban to Suburban and Rural Living

The report observes that while about 3 million Millennials have moved back with their parents during the pandemic,  a majority live on their own. Prior to the pandemic, 34% of Millennials and 8% of Gen-Z consumers owned their own homes, with and additional 46% of Millennials and 9% of Gen-Z being renters. Clearly, it is a goal of both of these generations to own their own home in the future, with 85% of young people reporting that they plan to eventually buy a house.

Once the pandemic ends, this desire to should produce good times for the housing market. Assuming a reasonably healthy economy and no dramatic changes in federal tax code, it remains likely that once the crisis passes that there will a boom in Millennial wealth, leading to an even better housing market.

Ypulse’s report indicates that 48% of those ages 19-37 who rent or live with parents are putting off home ownership because of Covid. So where will they live? A notable trend that is that more urban Millennials are considering or planning a move to a suburban or rural area. YPulse’s data shows that the top reasons for this sentiment are lower housing costs, low crime rates, being close to friends, being able to afford a larger home, and having more outdoor space. Unless the significant violent crime increases taking place in many major cities can be held in check via policy changes, it would appear that this trend could be exacerbated as real estate experts are already reporting exodus from many major cities as a result of increased crime and high tax rates. As YPulse’ report states, “Moving out of cities is also becoming a dream as some plan for a new future.” If more work remains remote post-Covid, this may become a very realistic dream for many young people.

For example, As the pandemic devastated New York City in March, schoolteacher Ali Iberraken and her young family rushed to relocate outside the city—way outside the city. They left their two-bedroom Brooklyn brownstone for an Airbnb in the woods of Virginia’s Shenandoah Valley. The Iberrakens had planned to decamp for three weeks but ended up staying for two months, not least because they loved the peace and beauty of the bucolic environment.

“Virginia made me realize that’s exactly the lifestyle I wanted,” Iberraken said. “We tried to stay as long as we could, and upon coming back to New York, it was such a big difference. Now we’re going back to the same old playground in 90-degree heat and horrible humidity.”

She’s not the only one pining for a rural escape during the COVID-19 crisis. A spate of recent headlines such as “Coronavirus may prompt migration out of American cities” and “Americans flee cities for the suburbs” suggest a major demographic shift is underway—a shift that could have profound consequences for housing prices and the broader real estate market.

Are you looking for the right home for you and your family or want to list your house now? The market changes so fast even in times like this. We’ve got the right guidance for you! Talk To Tammy, 636.931.9100