Vulnerability to a Cyberattack Could Land You in Court

You’re putting your livelihood at risk if you’re “asleep at the wheel” when it comes to creating a data security plan, especially as the real estate industry faces growing cyberthreats, says Maame Nyamekye, staff attorney at the National Association of REALTORS®, in NAR’s latest “Window to the Law” video. The impact of a cyberattack on your business could be great: “A data security breach could potentially hurt your business financially, lead to a lawsuit and tarnish your reputation,” Nyamekye says.

Still, many businesses are unprepared. Only 35% of companies have programs in place to detect, prevent and respond to fraud threats, according to a survey earlier this year by tax services firm KPMG. “Fraud, compliance risk and cyberattacks are increasing at an alarming rate, eating away profits across the U.S.,” says Amanda Rigby, forensic service network leader at KPMG. “Collectively, these issues create a ‘threat loop,’ which can quickly overwhelm companies with economic loss, regulatory loss and reputation loss. Despite the potential for calamity, the majority of U.S. companies are not ready to fight the threat loop.”

Get Smart

• 5 Signs Your Device Is Infected With a Virus
• Quiz: Test Your Cybersecurity Know-How
• Being Your Clients’ Frontline Defense Against Fraud
• 6 Steps to Secure Your Router Against Cyberattacks

In the video, Nyamekye highlights what brokers and agents can do to minimize their risk in the event of a data security breach. The tips are based on Federal Trade Commission principles for creating a data security plan. Nyamekye urges members to:

1. Take stock of the information your brokerage handles and where it’s being stored. You also need to know who in the company has access to what.
2. Have a retention policy outlining what information your company will retain and for how long based on legal requirements and your business’s needs, Nyamekye says. At least 35 states have laws addressing the proper disposal of personal information.
3. Be proactive in having safety measures in place both for your technology and physical space to protect any sensitive information and prevent unauthorized access.

Get all of Nyamekye’s tips in the latest “Window to the Law.”

©National Association of REALTORS®
Reprinted with permission

Inventory Issues Block Foreign Investors

Worsening housing affordability and stubborn inventory shortages are not only pushing more Americans out of the real estate market but also blocking many foreign investors from purchasing homes in the U.S., according to the National Association of REALTORS®’ newly released 2022 Profile of International Transactions in U.S. Residential Real Estate.

The annual number of home purchases in the U.S. by foreign buyers was the lowest on record in the 12 months from April 2021 to March 2022, the report shows. International buyers purchased 98,600 U.S. homes in that time, marking a 7.9% drop from the previous year and the lowest number since NAR began tracking such data in 2009. This is the second straight year of steep declines in foreign investment in the U.S. since the COVID-19 pandemic began. NAR Chief Economist Lawrence Yun notes that “restrictions and general caution tied to international travel during the pandemic” continue to hinder demand from abroad. However, he adds, affordability and inventory challenges were the top issues cited by international buyers who decided not to purchase a home in the U.S.

Despite fewer sales, the overall dollar value of foreign home purchases in the U.S. has spiked because of record-high home prices. Foreign investors purchased $59 billion worth of U.S. real estate from April 2021 to March 2022, an 8.5% increase from the previous year, according to NAR’s report. The average and median purchase prices for international buyers have increased 17.7% year over year and reached record highs—$598,200 and $366,100, respectively. (In that same time period, the overall median price for an existing home jumped 10% to $374,300, NAR data shows.) Chinese buyers paid the highest average purchase price at just over $1 million, according to NAR’s report. Nearly one-third of Chinese buyers purchased property in California.

Foreign investors tend to be more insulated from volatility in the U.S. market and likely will return in greater numbers in the future, even as the economy softens here at home, Yun says. “Due to rising interest rates, overall home sales will decline in the U.S. this year,” he notes. “Foreign buyers, however, are likely to step up purchases, as those making all-cash offers will be immune from changes in interest rates. In addition, international flights have increased in recent months with the lifting of pandemic-related travel restrictions.”

A Snapshot of Foreign Buyers

The most number of international buyers in the U.S. from April 2021 to March 2022 came from Canada and Mexico. But Chinese and Canadian buyers spent the most, according to NAR’s report.

• Canada: 11% of foreign buyers, $5.5 billion in residential sales
• Mexico: 8%, $2.9 billion
• China: 6%, $6.1 billion
• India: 5%, $3.6 billion
• Brazil: 3%, $1.6 billion
• Colombia: 3%, $1 billion

Florida was the top U.S. destination for international buyers for the 14th year in a row, accounting for 24% of foreign purchases between April 2021 and March 2022, according to NAR’s report. The following are the states that saw the largest shares of foreign purchases in that time period:

• Florida: 24%
• California: 11%
• Texas: 8%
• Arizona: 7%
• New York: 4%
• North Carolina: 4%

Additional findings from NAR’s report on international transactions:

• Forty-four percent of foreign home buyers paid cash, nearly double the rate of all existing-home buyers (24%). Nearly 70% of Canadian buyers made all-cash purchases, the highest share among foreign buyers, while Asian Indian buyers were the least likely to pay cash (9%).
• Forty-four percent of foreign buyers purchased property to use as a vacation home, rental or both.
• The top reasons foreign buyers cited for deciding not to purchase a home in the U.S. were the cost of the property (65%); the inability to find a property to purchase (57%); the inability to obtain financing, or being unable to qualify for a mortgage (24%); and property taxes (21%).
• Foreign buyers who resided in the U.S. as recent immigrants or who were holding visas purchased $34.1 billion worth of U.S. real estate, a 5.2% increase compared to the previous year. These buyers accounted for 58% of the dollar volume of purchases.
• Foreign buyers who lived abroad purchased $24.9 billion worth of U.S. real estate, up 13.2% from the prior year and accounting for 42% of the dollar volume.

©National Association of REALTORS®
Reprinted with permission

Volatility in Mortgage Rates as Recession Fears Grow

Mortgage rates are showing volatility as the economy slows and recession fears take center stage. The 30-year fixed-rate mortgage rose to an average of 5.51% this week, up from 5.3% last week, according to Freddie Mac.

Home buyers are facing rising costs across the spectrum. Inflation shot to a new 40-year high in June and is accelerating even faster than expected, according to Consumer Price Index data released Wednesday, raising the prospect of a recession. The CPI jumped 9.1% last month, leading to a spike in grocery costs, record-high gas prices, and escalating rents. To boot, monthly mortgage payments soared 51% higher year over year, according to data from the National Association of REALTORS®. The median price for an existing home rose 14.6% year over year in May.

“With the potential of a more aggressive rate hike from the Federal Reserve at the end of the month, mortgage rates will likely rise even further,” says Nadia Evangelou, NAR’s senior economist and director of forecasting. “However, even with this increase, mortgage rates will continue to be historically low—below 8%—in 2022.”

Each bump upward in mortgage rates is being felt hard by home buyers. “Mortgage rates are volatile as economic growth slows due to fiscal and monetary drags,” says Sam Khater, Freddie Mac’s chief economist. “With rates the highest in over a decade, home prices at escalated levels and inflation continuing to impact consumers, affordability remains the main obstacle to homeownership for many Americans.”

Freddie Mac reports the following national averages with mortgage rates for the week ending July 14:

• 30-year fixed-rate mortgages: averaged 5.51%, with an average 0.8 point, increasing from last week’s 5.30% average. Last year at this time, 30-year rates averaged 2.88%.
• 15-year fixed-rate mortgages: averaged 4.67%, with an average 0.8 point, also rising from last week’s 4.45% average. A year ago, 15-year rates averaged 2.22%.
• 5-year hybrid adjustable-rate mortgages: averaged 4.35%, with an average 0.2 point, increasing from last week’s 4.19% average. A year ago, 5-year ARMs averaged 2.47%.

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

©National Association of REALTORS®
Reprinted with permission

Bolder Fed Inflation Policy May Catapult Mortgage Rates

Inflation rose to a new 40-year high in June and is accelerating even faster than expected, according to data from the Bureau of Labor Statistics’ Consumer Price Index. Consumer prices jumped 9.1% last month and posted an annualized inflation rate of 17%, much higher than economists predicted. Consumers faced record-high gas prices and spiking grocery costs last month.

“The Fed may be forced to raise interest rates even more aggressively than planned—even with the rising possibility of a recession on the horizon,” says Lawrence Yun, chief economist for the National Association of REALTORS®. “The mortgage market had already factored in several additional rounds of the Fed’s rate hike but may have to adjust a bit higher based on today’s uncomfortable inflation rate.”

That could be a major blow to aspiring home buyers who have been nervously watching mortgage rates climb drastically over the last few weeks. The 30-year fixed-rate mortgage averaged 5.3% last week, up from 2.9% just a year earlier, according to Freddie Mac. Meanwhile, home prices have risen 15% over the past year. (Note: Home prices are not included in the latest inflation figures. Likewise, the 50% rise in monthly mortgage payments this year versus last year also is not reflected in the CPI, Yun notes.)

A new Forbes.com analysis shows that mortgage rates have contributed to higher monthly mortgage payments more than rising home prices. The publication’s analysis shows that in the past 12 months, the typical monthly payment has increased up to 57%. Higher mortgage rates alone accounted for $408 of the average $725 increase in payments, while higher home prices accounted for $239, the analysis notes. (The remaining balance came from higher mortgage rates that were applied to a higher principal.)

“The homeowners who locked in low interest rates the prior two years have fixed, non-rising monthly mortgage payments,” Yun says. That’s “a different story for renters. Rents rose by 6% from last year and are rising at a 10% annualized rate. Rents will continue to rise in the upcoming years.”

The Federal Reserve’s next meeting is slated for the end of July. Many economists predict the Fed will tighten its monetary policy further to control inflation. That could lead to another 75- or 100-basis point increase in the Fed’s short-term benchmark rate. While the Fed’s benchmark rate does not directly impact mortgage rates, it does influence them. Yun said following the Fed’s last rate hike—its largest since 1994—that the buyer pool could shrink as mortgage rates increase.

©National Association of REALTORS®
Reprinted with permission

Convert Renters to Home Buyers

REALTORS® now have free access to Rental Beast, a software provider with a secure FCRA-compliant online rental application and tenant screening tool. The National Association of REALTORS® announced Tuesday that Rental Beast has become the newest addition to NAR REALTOR Benefits®.

“NAR REALTOR Benefits® aims to provide products and services that deliver value and empower REALTORS® to succeed in their businesses,” says Rhonny Barragan, NAR’s vice president of strategic alliances. “Rental Beast created a lead-to-lease platform, which brings seamless entry into the multibillion-dollar rental industry and its clientele—and we are thrilled to provide this benefit to our members.”

Rental Beast also is integrated with many MLS platforms and association websites, which enables REALTORS® to receive additional access to rental listing management tools. Those could include listing add/edit, rental listing syndication, rental lead generation and qualification, and renter-to-buyer conversion.

“We are proud to be NAR’s exclusive provider of rental solutions,” says Ishay Grinberg, founder and CEO of Rental Beast. “This partnership will help REALTORS® better serve customers countrywide by partnering them with the nation’s more than 113 million renters. With our tools, REALTORS® can also build relationships with potential home buyers by serving as their trusted advisers in the rental process.”

Through the partnership, REALTORS® also have access to Rental Beast University, a digital education platform that includes on-demand webinars and self-paced courses covering topics like sales best practices, social media skills and how to convert renters to buyers.

To gain access and initiate applications for rental properties, NAR members can sign up for a free account at nar.realtor/rental-beast.

©National Association of REALTORS®
Reprinted with permission

Technology REALTORS® Use the Most

REALTORS® use multiple technology platforms daily to promote their business and stay connected to clients. While smartphones and email are key tools that facilitate most of those connections, 53% of REALTORS® also use social media apps or GPS features daily, according to the National Association of REALTORS®’ 2022 Member Profile.

Typing proves more popular than talking to clients. According to the survey, 94% of REALTORS® say they prefer to communicate with their clients over text message, followed by telephone (92%) or email (90%). About 27% of REALTORS® say they prefer to use video chat to connect with customers.

Here’s a snapshot of more technology use among REALTORS®.

Keeping a website presence: Websites continue to be a big piece of maintaining a digital presence online. Eighty-four percent of REALTORS® say they included their own property listings on their residential brokerage website, along with home buying and selling information, links to their brokerage’s website, social media links, and mortgage or financial calculators. Commercial brokerage specialists were more likely to include links to the commercial information exchange, virtual tours, comparative market analysis, and the National Association of REALTORS® on their websites.

While websites are viewed as a key tool among real estate professionals, 57% of REALTORS® reported bringing in no inquiries or business directly from their website; 27% cited one to five inquiries from their website.

Staying connected on social media: Seventy-two percent of members say they use Facebook for professional use; 55% use LinkedIn; and 45% use Instagram professionally. Still, more than a quarter of members—or 29%—say they do not use social media at all for their business. (View: 7 Tips to Help Brokers Master Social Media and Develop a Growth Strategy for Your Social Media Content)

Leveraging business software: Sixty-three percent of REALTORS® use MLS software every day. Other software used regularly includes electronic contracts and forms, along with e-signature, document preparation, contact management, and social media management tools, the survey shows.

©National Association of REALTORS®
Reprinted with permission

REALTORS® Expand Income Despite Low Inventory, Fierce Competition

Fierce competition in the industry didn’t stop REALTORS® from increasing their transaction sides and income over the last year, according to the National Association of REALTORS®’ newly released 2022 Member Profile. The booming housing market has prompted more people to pursue a real estate career, as NAR’s membership rose to an all-time high of 1.56 million in 2021, up from 1.49 million in 2020, the report shows. That marks significant growth from a decade ago when membership stood at just over 1 million. (View the breakdown of REALTOR® members by state association.)

That means real estate pros may have to compete more for customers. But it’s not the competition that REALTORS® cite as the top challenge blocking them from closing more sales—it’s the national inventory shortage, the NAR survey shows. Still, the typical member had 12 transaction sides in 2021, up from 10 in 2020, though COVID-19 lockdowns in 2020 need to be taken into consideration. Also, the typical sales volume rose from $2.1 million in 2020 to $2.6 million in 2021, according to the survey.

With more transactions under their belts, REALTORS®’ median gross income has ticked up as well, rising from $43,300 in 2020 to $54,300 in 2021. Experience level tends to matter greatly when it comes to income level. Fifty-seven percent of members who have two years or less of experience earned less than $10,000 in 2021, the report shows. On the other hand, 45% of members with more than 16 years of experience earned more than $100,000.

Here are some additional demographic trends among REALTORS® as well as business insights from NAR’s 2022 Member Profile:

• The typical REALTOR® has eight years of experience.
• The median age of REALTORS® was 56 in 2021, up slightly from 54 in 2020. Forty-one percent of the membership is over 60 years old while only 4% are less than 30 years old.
• The share of women in the industry jumped from 57% in 2010 to 67% in 2021.
• The majority of REALTORS®—87%—are independent contractors; only 5% are employees of a real estate company.
• The typical REALTOR® worked 35 hours per week in 2021. Those who work more tend to earn more. For example, the median annual income of REALTORS® who worked 40 to 59 hours per week was $85,400. It was $144,400 for those who work 60 hours or more per week but only $13,300 for those who worked less than 20 hours.
• Only 4% of members say real estate is their first career. Many REALTORS® come from various professional backgrounds, most notably management, business, finance, or retail.
• The typical REALTOR® earned 16% of their business from repeat clients, while 20% of their business came from referrals.
• Seventy-nine percent of members say they are certain they will remain in the business for at least two more years.

©National Association of REALTORS®
Reprinted with permission

It’s the Most Expensive Year to Move Ever

Aside from rising mortgage rates and home prices, buyers are being squeezed by another escalating expense: the growing cost of moving services. This year has become the priciest for hiring movers in the nation’s history, according to a new study from HireAHelper, a moving resource. Some states and metros are seeing costs rise by nearly 40% year over year.

The average cost of a move was $427 nationwide in May, about 15% higher than a year earlier, the study shows. Ballooning gas prices, supply-chain disruptions and 40-year-high inflation are primarily fueling moving expenses, says Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®. “This means that people need to spend more of their budget on housing,” she adds. “This additional cost may discourage people from moving, resulting in an even lower mover rate in 2022.”

The demand for moving services has climbed with the rising homebuying and rental markets over the past year, leading to disruptions in availability. In 2021, 71% of moving companies reported delays due to high demand and a labor shortage, according to industry data. “The moving industry is feeling the impact of the current economic climate, and it’s creating a perfect storm for customers looking to relocate,” says Miranda Marquit, chief data analyst at HireAHelper. She equates the current environment to a “financial flash flood for those who made plans to move this summer—potentially washing them out.”

These areas of the country are seeing the biggest jumps in moving costs:

• Maine: up 51% year over year
• Nebraska: up 30%
• Utah: up 28%
• Alabama: up 27%
• Idaho: up 27%

By metro level, costs have significantly climbed in places like Columbia, S.C., which is up 42%, and Seattle, which is up 39%. And with about 40% of moves occurring during summer months, demand for moving services is expected to go even higher.

“Most likely, despite the already higher costs, moving is likely to get even more expensive as we get into the summer and the height of the moving season,” HireAHelper notes in its study. Moving costs tend to peak in August, researchers say, forecasting that the average cost of a move will reach a new record high in August—averaging $454. However, buyers may find some relief if they can hold off on moving until after summer: Costs are expected to drop to an average of $408 by the end of the year.

©National Association of REALTORS®
Reprinted with permission