More Homebuyers Making 20% Down Payments and Waiving Appraisal and Inspection Contract Contingencies

August, 10th 2021 – Market Update from the previous months.

Homebuyers who make a 20% down payment and waive appraisal and inspection contingencies are on the rise, based on the May 2021 REALTORS® Confidence Index (RCI) Survey which reports monthly transactions from a random sample of REALTORS®1.

Among all buyers2 who obtained a mortgage in May, the share of mortgages associated with at least a 20% down payment rose to 52% in May 2021, up from around 40% in 2011. Among first-time buyers, nearly one in three made a down payment of at least 20%, up from around 25% in 2011. This trend reflects the decline in the share of buyers who obtain mortgages insured by the Federal Housing Administration (FHA) and the Veterans Administration (VA) which insure zero and low downpayment loans.

Line graph: Percent of Buyers Obtaining a Mortgage Who Made a Downpayment of at least 20%, April 2011 to November 2020

Buyers With Conventional Financing Edge Out Potential Buyers Obtaining FHA and VA Loans

According to information provided by REALTORS®, conventional conforming mortgages (mortgages that conform to guidelines set by Fannie Mae and Freddie Mac), accounted for 74% of mortgages obtained by homebuyers in May 2021, an increase from about 65% during 2018 through 2019. Meanwhile, the share of FHA-insured mortgages to total mortgages in fell to 14% in May 2021 from about 20% in past years. The share of VA-guaranteed loans has also decreased to 7% in May 2021 from about 10% in past years.

Line graph: FHA, VA, and GSE Mortgage Financing, January 2018 to May 2021

Highly Competitive Market Is Resulting in Appraisal and Inspection Waivers on Contract Contingencies

According to REALTORS®, sellers are wary of the appraisal and inspection process. REALTORS® have reported that buyers who make an offer using FHA or VA financing find it hard to compete against other buyers who are offering cash or using conventional financing.

“It is extremely difficult for FHA/VA buyers to get accepted in a multiple offer situation. They are on the bottom of the hierarchy”

“Buyers using VA Loans are being discriminated due to ‘known low appraisals with VA loans’ which is not right at all.”

“VA Loans are at a complete disadvantage — sellers need to be offered an incentive to give more consideration to a VA Loan offer. There are a lot of misconceptions regarding VA appraisals and VA loans.”

Appraisals present a hurdle for homebuyers with VA and FHA financing at a time when prices are rising fast and homes are selling swiftly with little inventory on the market. In May 2021, the total inventory of homes (unsold) on the market was equivalent to 2.5 months of the monthly sales pace, well below the ideal level of 6 months. Appraisals, which are based on comparable sales and/or automated valuation, will always lag behind the “real-time” price based on current demand-supply fundamentals. In May 2021, the median existing-home sales price rose at a record high of 24% year-over-year, the highest annual pace since 19693. VA appraisals take anywhere from 5 to 15 days4, but properties are typically on the market for 17 days.

Homebuyers are waiving appraisals in order to close the transaction quickly. REALTORS® reported that among contract contingencies waived by the buyers, the most common contingency that buyers waived was the appraisal contingency (28%) followed by the inspection contingency (25%).

Bar chart: Percent Distribution of Contract Contingencies that Buyers Waived in May 2021

Homebuyers who are able to waive contract contingencies are those who pay cash or use conventional financing. In contrast, FHA and VA buyers are not able to waive the appraisal or inspection contract contingencies according to FHA and VA guidelines. The home inspection assesses the condition of the home and the property location to ensure that the home meets minimum property requirements (MPRs) pertaining to the safety, structural soundness, and sanitary conditions (e.g., space requirements, entry/exit, drainage, topography, HVAC systems, gas connection, roofing/crawl spaces, lead/radon, etc.).5

FHA inspection standards may be tougher to meet, especially for sellers who want to sell the home “as is.” For example, the FHA inspection guidelines require that the “heating unit is adequate and in good working condition,” the “water heater in good working condition,” that there are “working smoke detectors in the home,” and that the “sink in good working condition and with no leaks.” In fact, FHA standards sometimes even involve stipulations beyond the house itself (e.g. “If the home is in close proximity to an airport and its flight pattern, that may result in extreme noise hazards that could disqualify the home from being financed with an FHA loan.”).6

While inspection standards are important for ensuring that buyers are protected, they can create a disadvantage for prospective homebuyers in a highly competitive housing market. First-time homebuyers, buyers with less than excellent credit scores (FHA borrowers can have a credit score of as low as 580), and low-income and low-asset borrowers who are not able to afford a 20% down payment are mostly likely to get disadvantaged.

A home is the largest investment most people make in their lifetime. Buyers should be protected so that the price paid for the home is worth its value. Unfortunately, in a housing market where sales are moving swiftly, the time to undertake the inspection and appraisal is creating a hurdle for buyers obtaining FHA-insured loans who are typically first-time buyers and buyers obtaining VA-guaranteed loans.

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

Top 5 Outdoor Living Trends to Attract Buyers

August 23, 2021 – Find out the most popular exterior features and designs so far this year.

Homeowners have become much more aware of the importance of having comfortable and usable living spaces outdoors as well as indoors. As many of us reevaluate the priorities we have for our homes, owners are seeking to unlock more potential for their outdoor spaces.

Fixr.com recently surveyed real estate professionals to gain insight into the most popular designs and features this year. For the website’s 2021 Outdoor Living Spaces Trends report, professionals revealed what homeowners can do to increase curb appeal, attract buyers, and add value to their outdoor space. Here are some highlights from the report’s findings:

Outdoor Kitchens Are the Most In-Demand Feature

Which are the most popular outdoor living additions in 2021?

Experts were asked to choose one or more features that they believe will prove popular this year. Sixty-one percent of respondents opted for outdoor kitchens, highlighting their growing appeal.

Outdoor kitchens have been popular for several years but especially during pandemic-related restrictions that kept people from enjoying restaurants or meeting up with friends and family at indoor public spaces. Outdoor kitchens have many different styles and types, from standalone to U-shapes.

Depending on the size and materials, the average cost for a 300-square-foot outdoor kitchen is $13,000. However, many extra features, such as ice machines and pizza ovens, can increase costs. The average cost for a fire pit is $850.

Best Design Combination: Porch and Patio

Which is the most popular outdoor space in single family homes in 2021?

When it comes to outdoor design, homeowners have a few options to consider. Forty-eight percent of experts reveal that the combination of a porch and patio is what most people desire in a home. It makes sense that this combo is most popular because a porch can add to a home’s curb appeal while the patio offers a more private living space.

If your home lacks one or both of these features and you are considering installing one, a porch has an average cost of $20,000 whereas a patio averages just under $5,000.

Folding, Sliding Doors Provide Seamless Transition

Seventy-four percent of real estate pros say folding and sliding doors and windows are growing in popularity as a method to blend indoor and outdoor living. The flexibility of this design feature allows the relaxing vibes to flow from space to space. It also lets the outside in during times of the year when weather conditions are problematic. In addition, the openness and brightness makes rooms feel larger—an added bonus when it comes to selling.

The costs associated with installing a sliding door depend on the size and type of glass panes. The average cost for installing a 72” x 80” aluminum single-glazed sliding door is $2,760.

Outdoor Heaters, Fireplaces Have Year-Round Appeal

Which is the most popular way to adapt outdoor spaces for year-round use?

Outdoor living spaces are no longer only for summer enjoyment. Home buyers want to make the most of their entire property all year long. The growth of outdoor heaters, fireplaces, and fire pits are helping homeowners extend their enjoyment of the outdoors.

Overcoming the issue of being uncomfortably cold allows for using areas like patios. In addition, 27% of respondents also said a hard patio cover like that of a pergola will become commonplace, helping to shield others from weather elements like the rain. Further, outdoor heaters can be used to heat up spaces on cooler days or nights and repositioned for wherever you want them to be.

The average outdoor heater costs between $200 and $300, whereas an outdoor fireplace ranges from $2,000 to $3,000.

A Place to Gather With Friends and Family

When asked about the most common uses homeowners have for outdoor spaces, 80% of respondents agreed that gathering with friends and family is priority number one. So when it comes to preparing a home for sale, keep in mind that home buyers are seeking an area where they can achieve this. So, no matter the size of the outdoor space, you should highlight it as a spot for gatherings. This can be done by placing greater focus on the patio or porch, adding furniture for seating, or creating an open area for children to play.

The summer market is hot! Talk To Tammy to get your house SOLD – 636.931.9100

The Demand for Land

July 20th, 2021 – Market update:

Residential, recreational land transactions grow with homebuying spree

The 2020 Land Market Survey, released in April, documents just how well the land market held up to the pandemic’s severe pressure. Land sales increased 3% on average, and prices rose 2% on average. The survey was conducted by the REALTORS® Land Institute and the National Association of REALTORS®.

The survey’s 314 respondents reported that the number of land sales rose the most in residential, at 6% on average, followed by sales of land for industrial use at 4%, and recreational and ranch lands, each at 3%.

Underpinning the strong demand for residential land is robust homebuying activity. COVID-19 has heightened people’s interest in open spaces, driving the demand for land in the suburbs and for recreational land. NAR’s monthly REALTORS® Confidence Index Survey of members primarily engaged in residential transactions shows homebuying activity in the suburbs and in vacation-home areas was on the rise in 2020. Eighty-three percent of homes sold by REALTORS® last year were in the suburbs, an increase from the 80% share in 2019. Vacation-home sales accounted for 5.5% of existing-home sales in 2020, up from 5% in 2019.

On the commercial side, the continued shift toward electronic and mail-order shopping supported sales of land for industrial use. Industrial accounted for 16% of retail sales, up from 13% in 2019.

Demand for timberland, however, remained flat. Timber production declined in 2020 because of COVID-19–related work stoppages and falling U.S. wood exports. Exports of wood products fell 10% in 2020 as the global economy shrank by 4.4%.

Looking at prices, the sales price of residential land rose 6.8% on average in 2020. Recreational land had the next highest price gain, at 3.6%, followed by land for industrial use at 3.4% ranch land at 3.1%.

Land sales and prices for all types of land—except for office, retail, and hotel use—are expected to increase in 2021 as well, according to respondents to the land survey. As in 2020, the strongest sales growth is expected to be in residential land (5.9%), with prices rising 5% on average, and the strongest price growth will be in industrial and recreational land, each increasing 3% in 2021.

For all Real Estate needs, Talk To Tammy 636.931.9100

Your Tax Refund & Stimulus Savings May Help You Achieve Homeownership This Year

April 6th, 2021

– If you’re planning to buy a home this year, saving for a down payment is one of the most important steps in the process. One of the best ways to jumpstart your savings is by starting with the help of your tax refund.

Using data from the Internal Revenue Service (IRS), it’s estimated that Americans can expect an average refund of $2,925 when filing their taxes this year. The map below shows the average anticipated tax refund by state:Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year | Keeping Current MattersThanks to programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae, many first-time buyers can purchase a home with as little as 3% down. In addition, Veterans Affairs Loans allow many veterans to put 0% down. You may have heard the common myth that you need to put 20% down when you buy a home, but thankfully for most homebuyers, a 20% down payment isn’t actually required. It’s important to work with your real estate professional and your lender to understand all of your options.

How can your tax refund help?

If you’re a first-time buyer, your tax refund may cover more of a down payment than you realize.

If you take into account the median home sale price by state, the map below shows the percentage of a 3% down payment that’s covered by the average anticipated tax refund:Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year | Keeping Current MattersThe darker the blue, the closer your tax refund gets you to homeownership when you qualify for one of the low down payment programs. Maybe this is the year to plan ahead and put your tax refund toward the down payment on a home.

Not enough money from your tax return? 

A recent paper from the National Bureau of Economic Research found that, of the households that received a stimulus check last year, “One third report that they primarily saved the stimulus money.â€Â If you had the opportunity to save your Economic Impact Payments, you may consider putting that money toward your down payment or closing costs as well. Your trusted real estate professional can also advise you on the down payment assistance programs available in your area.

Bottom Line

Saving for a down payment can seem like a daunting task, but it doesn’t have to be. This year, your tax refund and your stimulus savings could add up big when it comes to reaching your homeownership goals. Talk To Tammy if you are ready to buy your Dream Home, 636.931.9100!

 

Housing Inventory Hit Record Lows in 2020. Will This Change in 2021?

March 16th, 2021 – Housing inventory declined 39.6% on a national level in 2020, making 2020 the lowest housing inventory year on record, according to Realtor.com. Adding to the record-breaking low inventory this past year has been increased buyer demand — although, saying “increased demand” is an understatement. Zillow (NASDAQ: ZG) (NASDAQ: Z) calls the persistent demand for homes we’ve seen in 2020 “insatiable.”

Real estate has long been the go-to investment for those looking to build long-term wealth for generations. Let us help you navigate this asset class by signing up for our comprehensive real estate investing guide.

Low inventory and high demand lead, of course, to increased housing prices; in this case a 13.4% increase, which translates to a national median of $340,000 as of December 2020. But where are we headed in 2021?

Some background: sellers

To understand 2021, let’s first look at the reasons the 2020 market has been, shall we say, unique. Part of the reason for low inventory in 2020 was seller uncertainty. And not uncertainty about whether homeowners can sell; the uncertainty comes from what they’ll do after they sell.

Because of this insatiable demand for housing, homeowners are torn on what to do. On one hand, they can get top dollar for their home (assuming it’s in reasonable condition) if they list now, and quickly too, as houses aren’t staying on the market long. But many are afraid they might not get another house they can afford in this market. So homeowners are generally holding on to what they have, slightly more now than last year, further decreasing inventory.

As far as foreclosures: While more are expected to happen in 2021 due to people losing their jobs from the coronavirus pandemic, depending on how the new administration reacts regarding stimulus and forbearance, there might not be the numbers of foreclosures as there normally might otherwise be, further lessening supply.

Some background: buyers

Another reason for low inventory is increased motivation of buyers. There are several reasons for increased buyer demand.

1. Record low mortgage rates: Low mortgage rates have been causing people on the fence to take a stand and buy already.

2. Millennials age up: This group of 24- to 39-year olds who have been putting off homebuying longer than past generations is finally settling down.

3. The coronavirus pandemic (a reason for practically everything in 2020): People who were content as renters in urban cities started leaving for social distancing reasons. Their destination: the suburbs and exurbs, particularly since working from home has become a thing — not to mention as cities locked down, there was nothing much to do in them anymore.

What to expect in 2021

The real estate market always tries to reach equilibrium: the perfect match between sellers and buyers. But that can take time. Because the 2020 market was nowhere near this — instead, a huge sellers’ market — 2021 will be trying to reach equilibrium. So expect to see more of the same until this equilibrium happens: low inventory, high demand, rising prices, and low interest rates.

Inventory

Whenever the supply of new homes on the market is below 6.5 months (a number which represents how long it will take to sell the existing supply), builders become confident to build more homes. As of December 2020, the supply of new homes was 3.3 months — representing a supply so low that builders are not merely confident; they’re downright excited to start building.

Not only is the supply of new homes low, so is the supply of existing homes on the market. Due to high demand, existing homes are also selling fast. As of December 2020, there’s a 2.5-month supply, an all-time low.

So expect to see more housing starts in 2021, but since builders like to get top dollar, don’t expect them to overbuild.

Demand

Demand for houses should remain high in 2021. Low interest rates have a lot to do with this: rates aren’t expected to go much higher than 3% for 2021. Combine that with millennials entering their homebuying years, and demand should remain strong this year.

Prices

The way the market handles low inventory combined with strong demand is with rising prices. This year, prices might rise to the point of keeping many first-time buyers from being able to purchase, as coming up with a down payment could prove to be too big a hurdle. With that said, savings are at historic highs, so many first-time homebuyers, although they don’t have home equity in their arsenal, they do have money in the bank.

Interest rates

There have been no announcements by the Fed of an increase in interest rates anytime soon. If the economy improves due to getting a handle on the coronavirus and a new administration, rates could start to go up from these all-time lows, but since they are hovering around 2.5% at 2021’s start, even if they do rise in 2021, they will still be at historically low.

Are you ready for this spring market? Talk To Tammy, 636.931.9100!

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

Are you ready to buy a new Home?  Talk To Tammy, 636.931.9100

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.â€

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

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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-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