Remote Online Notarization Is One Step Closer

The U.S. House of Representatives passed a bill Wednesday evening to expand the availability of remote online notarization (RON) nationwide, a key advocacy priority for the National Association of REALTORS®. The bipartisan SECURE Notarization Act now goes to the Senate for consideration.

RON allows a notary and signer in different physical locations to safely and securely execute electronic documents using two-way audiovisual communication.

Nearly half of states have expanded RON during the COVID-19 pandemic, enabling real estate professionals to facilitate closings safely and securely. But because of the patchwork of state laws, agents in other states had to adapt to drive-by closings and other social-distancing methods. NAR pressed lawmakers throughout the pandemic to pass a national RON bill while simultaneously working on the state level to enact changes.

“REALTORS® have always been leaders in technology in the real estate profession. NAR supported RON even before the pandemic,” says Shannon McGahn, NAR’s chief advocacy officer. “But now more than ever, this progress makes sense. REALTORS® want to devote their time to helping home buyers, not on paperwork.”

Even as COVID-19 becomes less of a factor, virtual sales and closings will remain in demand. In June 2022, NAR reports, 12% of sales took place virtually.

Speaking about the House bill, McGahn says, “This measure establishes minimum standards to ensure strong consumer protections while providing certainty for interstate commerce.”

©National Association of REALTORS®
Reprinted with permission

Pending Home Sales Tumble as More Buyers Get Priced Out

Pending home sales fell in June as surging mortgage rates and record-high home prices are making home buyers more cautious in moving forward. The median existing-home price hit an all-time high in June ($416,000). Homes were 80% more expensive in June than they were in 2019, the National Association of REALTORS® reports.

Nearly a quarter of home buyers who purchased a home three years ago would be unable to qualify to buy a median-priced home at today’s elevated prices, NAR reports.

NAR’s Pending Home Sales Index—a forward-looking indicator of home sales—posted an 8.6% decline in June compared to May. Pending home sales are down 20% compared to a year ago.

Contract signings fell in all four major regions across the country last month. The West saw the largest monthly decline, with pending home sales dropping by one-third in the past year, NAR reports.

“Contract signings to buy a home will keep tumbling down as long as mortgage rates keep climbing, as has happened this year to date,” says Lawrence Yun, NAR’s chief economist. “There are indications that mortgage rates may be topping or very close to a cyclical high in July. If so, pending contracts should also begin to stabilize.”

Still, NAR has updated its forecast and is now predicting home sales to fall by 13% in 2022. “With mortgage rates expected to stabilize near 6% and steady job creation, home sales should start to rise by early 2023,” Yun says.

©National Association of REALTORS®
Reprinted with permission

Could Solving the Housing Shortage Help Close the Racial Gap, Too?

The nation’s housing shortage has also fueled a housing inequity problem, Bryan Greene, vice president of policy advocacy for the National Association of REALTORS®, writes in an essay included in a new report, “Housing Underproduction in the U.S.” To close the widening racial gap in ownership, housing’s underproduction must be widely addressed, he notes.

And that problem is only worsening: The Up for Growth report puts a new number on the nation’s housing shortage—3.8 million homes, more than double where it stood in 2012. The deepening inventory crisis is widening in scope, affecting urban, suburban and rural areas alike and hitting certain minority groups particularly hard, according to the report.

“Underproduction in this country has many causes,” Greene writes. “Local zoning and land-use restrictions have, for decades, proved to be one of the greatest barriers to housing construction, affordable housing and diverse communities.”

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Report Shows ‘Double Trouble’ for Housing

The report notes long historical racial inequities in access to housing, such as from past discriminatory government grants and programs, widespread exclusionary zoning policies originally designed with racial segregation in mind, racially restrictive covenants written into home deeds from the 1910s to the 1940s, redlining practices that limited access to capital investments to prospective homeowners of color, and urban renewal projects that caused displacement and gentrification. These have led to a widening racial wealth gap that has stretched over generations and has made it more difficult for families of color to qualify for loans and afford homeownership, according to the report. The gap between Black and White homeownership rates has widened over recent years. These historic and systemic constraints combined with housing underproduction and high prices make homeownership even less attainable for buyers of color, the report notes.

‘Double Trouble’

In a report released earlier this year, NAR called record-high home prices and record-low housing inventories “double trouble” for real estate, particularly for Black Americans. The report found that about half of the homes for sale would require a household income of $100,000 or more to purchase. That has placed homeownership increasingly out of reach for a number of households: 50% of Asians, 65% of Whites, 75% of Hispanics and 80% of Blacks do not earn enough income to buy these homes, the report notes.

Where to Go From Here

Housing supply and housing equity can be addressed on multiple fronts such as by expanding the types of housing available for greater income levels and a broadening focus on land use. Greene points to zoning reforms, investments in new construction, expansion of financing, and tax incentives that prompt investment in housing and convert unused commercial space to residential spaces. NAR continues to advocate for incentives in the tax code to promote zoning and land-use changes, such as tax credits or other support to communities that ease zoning rules that had been limiting the supply of homes, like minimum lot sizes and bans on multifamily housing. Such policies can not only help ease housing shortages but ultimately help expand housing opportunities to more people, Greene writes.

“For more than a half-century we’ve witnessed how land-use decisions can limit housing development, affordability and equity,” Greene notes. “We cannot stand by and lament this lack of progress. Now, it is time to act.”

Read more from Greene’s article in the “Housing Underproduction in the U.S.” report.

©National Association of REALTORS®
Reprinted with permission

Mortgage Rates Rise Ahead of Fed’s Big Announcement

Mortgage rates rose slightly this week ahead of the Federal Reserve’s highly anticipated meeting next Tuesday, when it is expected to increase its benchmark rate by up to a full percentage point. What impact could that have on mortgage rates ahead?

“Even though the upcoming rate hike will be more aggressive, it’s expected to have a smaller impact on mortgage rates,” Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®, writes at the association’s blog. “Data shows that mortgage rates have already priced in some of the effects of the upcoming Fed’s rate hikes.”

That would be welcome news to home buyers who are getting nervous about rapidly increasing borrowing costs. Rising mortgage rates are tamping down housing demand, as existing-home sales in June were down 14.2% from a year earlier, according to NAR data. The Census Bureau also reports that builders have slowed new-home construction as more buyers get priced out.

“The housing market remains sluggish as mortgage rates inch up for the second consecutive week,” says Sam Khater, Freddie Mac’s chief economist. “Consumer concerns about rising rates, inflation and a potential recession are manifesting in softening demand.”

Home affordability is worsening, with the costs of buying a home now about 80% more expensive than in June 2019 before the pandemic, Evangelou says. Nearly 25% of buyers who purchased their home in 2019 couldn’t buy at today’s higher prices and mortgage rates, she adds. The median price for an existing home climbed to a record high in June, reaching $416,000—up 13.4% compared to a year earlier, according to NAR data.

Freddie Mac reports the following national rates for the week ending July 21:

• 30-year fixed-rate mortgages: averaged 5.54%, with an average 0.8 point, increasing from last week’s 5.51% average. Last year at this time, 30-year rates averaged 2.78%.
• 15-year fixed-rate mortgages: averaged 4.75%, with an average 0.8 point, increasing from last week’s 4.67% average. A year ago, 15-year rates averaged 2.12%.
• 5-year hybrid adjustable-rate mortgages: averaged 4.31%, with an average 0.3 point, dropping from last week’s 4.35% average. A year ago, 5-year ARMs averaged 2.49%.

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

©National Association of REALTORS®
Reprinted with permission

Existing-Home Prices Hit New Record as Sales Slow

Prices for existing homes climbed to a record high in June, continuing at a breakneck pace with double-digit-percentage annual increases. The median price for an existing home rose to $416,000 last month, up 13.4% compared to a year earlier, the National Association of REALTORS® reported Wednesday.

Home prices continued to climb even as sales cooled in June. For the fifth consecutive month, existing-home sales—which includes transactions for single-family homes, townhomes, and condos—posted a drop. Sales were down 5.4% month over month in June and have fallen 14.2% compared to a year ago, according to NAR’s report. “Falling housing affordability continues to take a toll on potential home buyers,” says NAR Chief Economist Lawrence Yun. “Both mortgage rates and home prices have risen too sharply in a short span of time.”

A separate report released recently by NAR showed that housing affordability has dropped as mortgage payments have spiked 51% in one year. Meanwhile, the median family income has risen just 4.5% in that time.

Still, not all buyers are backing away. More homes are coming on the market, and buyers who can afford the higher prices have more choices and are snatching them up quickly. Existing homes sold at a record-setting pace in June, NAR’s data shows. “Finally, there are more homes on the market,” Yun says. “Interestingly, though, the record-low pace of days on market implies a fuzzier picture on home prices. Homes priced right are selling very quickly, but homes priced too high are deterring prospective buyers.”

Here’s a closer look at additional key housing indicators from NAR’s report on existing-home sales in June:

Housing inventories: Total housing inventory at the end of the month was 1.26 million units, up 9.6% month over month and 2.4% year over year. Unsold inventory was at a three-month supply.

Days on the market: Eighty-eight percent of homes sold were on the market for less than a month. Properties typically remained on the market for 14 days, which marks the shortest duration on record, according to NAR. That’s down from 16 days in May and 17 days in June 2021.

First-time home buyers: This cohort comprised 30% of sales, down from 31% a year ago.

All-cash sales: All-cash sales accounted for 25% of existing-home sales transactions, up from 23% in June 2021. Individual investors and second-home buyers, who comprise the largest share of cash sales, made up 16% of overall sales, up from 14% a year earlier.

Distressed sales: Foreclosures and short sales continued to make up a very small percentage of home sales—less than 1%, unchanged from June 2021.

Regional Breakdown

Three of the four major U.S. regions saw month-over-month sales declines, with the Northeast being the exception. Meanwhile, year-over-year sales fell in all four regions. Here’s a closer look at how existing-home sales fared across the country in June, according to NAR’s index:

• Northeast: Existing-home sales held steady and reached an annual rate of 670,000. Sales, however, were down 11.8% from June 2021. Median price: $453,300, a 10.1% jump from one year ago.
• Midwest: Existing-home sales fell 1.6% from the previous month to an annual rate of 1.23 million, down 9.6% from June 2021. Median price: $306,900, a 10.2% increase from a year earlier.
• South: Existing-home sales fell 6.2% to an annual rate of 2.26 million, dropping 14.1% from the previous year. Median price: $374,900, a 16.8% increase from a year ago.
• West: Existing-home sales dropped 11.1% month over month and reached an annual rate of 960,000, down 21.3% from a year ago. Median price: $624,000, a 9.6% increase compared to June 2021.

©National Association of REALTORS®
Reprinted with permission

Single-Family Construction Is Going Soft

Builders are growing concerned that demand for new homes is leveling off, and they’re slowing production out of fear that too many buyers have been priced out of the market. Single-family construction in June dropped to its lowest level since April 2020, when the COVID-19 pandemic was just beginning, the Census Bureau reported Tuesday. Further, housing permits—a gauge of future construction—also fell, indicating a further decline is ahead in single-family construction.

The news came after a separate report this week showed that builder sentiment posted its second-worst single-month drop on record, behind only the April 2020 level. Builders expressed concern about slowing buyer traffic and sales, and according to a recent survey by John Burns Real Estate Consulting, about a quarter of builders are reducing their prices.

“Homebuilders have become extremely cautious about the prospect of single-family home sales,” says Lawrence Yun, chief economist at the National Association of REALTORS®. “There have been frequent reports of contract cancellations by buyers of newly constructed homes because they had signed a contract at the early stage of construction when mortgage rates were low. But as the completion of construction has taken longer, the home now requires finances at a much higher mortgage rate.”

Adding to the industry’s woes, new-home projects are facing significant delays because of supply chain disruptions. Many homes that were started several months ago have yet to be completed, Yun notes, adding that “homebuilders are waiting to see how these homes will sell before starting new construction.”

A bumpy road is likely to be ahead for the new-home market as housing affordability worsens. Only 10% of new homes sold for under $300,000 in May; the median sales price that same month was $449,000, census data shows. Further, costs are increasing for building materials, and lumber prices alone have added $14,345 to the average price of a single-family home since 2020, the National Association of Home Builders reports. Also, mortgage rates have nearly doubled in the past year, and monthly mortgage payments have climbed 51% in that time, according to NAR data.

“The softening of single-family construction data should send a strong signal to the Federal Reserve that tighter financial conditions are producing a housing downturn,” says NAHB Chief Economist Robert Dietz. “Price growth will slow significantly this year, but a housing deficit relative to demographic need will persist through this ongoing cyclical downturn.”

A Bright Spot: The Rental Market

Meanwhile, multifamily activity remains robust. Multifamily starts reached 577,000—one of the highest levels in the last 30 years, Census Bureau data showed this week.

CoreLogic reported that single-family rental growth continued to remain at a record high in May. Property owners are finding a larger pool of prospective tenants as higher home sales prices sideline more consumers. “Increases in mortgage rates and high home prices can be headwinds to the for-sale housing market but may be continually pushing up single-family rents,” says Molly Boesel, principal economist at CoreLogic.

©National Association of REALTORS®
Reprinted with permission