Homeowners Skeptical Over iBuyers

Sixty-six percent of homeowners recently surveyed say they don’t believe iBuyers yield higher sales prices than traditional sales. However, a nearly equal number say they would consider using an iBuyer due to the flexible options for selling, a new survey from Clever Real Estate finds.

The number of iBuyer companies and services has grown over the last few years, offering buyers a way to sell their house quickly by receiving an instant cash offer and setting their closing date.

While survey respondents mostly said they don’t believe iBuyers offer more at closing, they said they would be willing to accept an average of $45,400 less for their home in order to sell it instantly and choose their closing date, the survey finds.

But 72% of homeowners would still want to work with a real estate agent when requesting offers from iBuyers. Some brokerages have added iBuying arms, such as Keller Offers, RedfinNow, RealSure and others, to their companies to allow agents to continue to guide these instant-offer transactions.

Sixty-five percent of homeowners say they would consider selling their home to an iBuyer. Millennial respondents were more open to the idea (72%) versus baby boomers (52%).

That said, even though the iBuyer real estate model is now nearly a decade old, only 27% of about 1,000 homeowners surveyed by Clever Real Estate could correctly define what an iBuyer is. The sales strategy is still relatively uncommon; iBuyers comprised just 1.3% of home sales in 2021.

“The sentiment around iBuyers is complicated because the average American homeowner isn’t completely against them, but also doesn’t know much about them,” the Clever Real Estate survey says.

Source: 

“American Attitudes on iBuyer Companies: 2022 Data,” Clever Real Estate (June 6, 2022)

©National Association of REALTORS®
Reprinted with permission

Aging Housing Stock Prompts Remodeling Boom

The median age of a home in the U.S. is 39 years old. The aging housing stock signals a growing remodeling market ahead, according to a new report from the National Association of Home Builders.

As homes age, they need repairs or updated components such as appliances. Homeowners may add amenities to older homes as well, to have them better compete against more modern home styles and amenities.

“Rising home prices also encourage home owners to spend more on home improvement,” the NAHB says on its Eye on Housing blog. The aging housing stock also likely will lead to rising demand for new construction over the long run as homes get older, the NAHB notes.

More than half of owner-occupied homes were built before 1980. About 38% were built before 1970. Meanwhile, new-home construction has not kept up the pace over the past nine years, with the share of new homes dropping from 15% in 2006 to 7% in 2019, according to the builders’ trade group.

The share of housing stock built 50 years ago or more jumped from 30% in 2009 to 37% in 2019.

The country’s aging housing stock is prompting homeowners to make more home renovations, particularly younger owners who have faced limited housing inventories for sale. Nearly half of U.S. homeowners plan to upgrade or remodel their homes this year, according to a survey from 2021 conducted by LendingHome, a lender to real estate investors. The trend is most prominent among homeowners between the ages of 25 to 44, who are undertaking the most renovations and looking to bring new trends and renovations to the aging homes they purchase.

Source: 

“The Aging Housing Stock,” National Association of Home Builders (June 9, 2022)

©National Association of REALTORS®
Reprinted with permission

Buyers Pause Amid Rising Rates

Some home buyers are backing away from the market, with a plan to wait six or even 12 months before they resume their search, according to a new survey of 900 real estate professionals conducted by HomeLight. About 35% of real estate professionals reported that they have seen buyers drop out of the market completely.

Higher mortgage rates have buyers spooked. The 30-year fixed-rate mortgage averaged 5.23% this week, compared to 2.96% just a year ago, according to Freddie Mac.

Recent surveys confirm buyers’ hesitation: Mortgage applications recently dropped to the lowest level in 22 years, according to the Mortgage Bankers Association. Also, existing-home sales in April fell for the third consecutive month, according to the National Association of REALTORS®.

Does the departure of so many buyers position the housing market for a collapse similar to 15 years ago? “I would probably say no, in part because incomes are strong and there’s still a shortage of inventory,” Michael Neal, a principal research associate in the Housing Finance Policy Center at the Urban Institute, told MarketWatch.

Mortgage Rates Add to Costs

Some aspiring buyers may need to financially regroup before heading back into the housing market, due to rising home prices and mortgage rates. Climbing mortgage rates have caused new monthly mortgage payments to increase by an average of $258.57, or $3,102.84 per year, according to a survey released in May from LendingTree. LendingTree calculated the difference between average monthly mortgage payments of a 30-year fixed-rate loan in each state based on average annual percentage rates in January and April 2022. It found that mortgage payments have risen the most in California, Washington and Massachusetts. Mortgage payments have increased the least in Ohio, West Virginia and Kentucky, the study found.

Source: 

“‘All of This Points to a Broader Weakness in the Housing Market’: Buyers Are Officially Spooked by Rising Interest Rates—Just Don’t Expect a Real Estate Crash,” MarketWatch (June 9, 2022)

©National Association of REALTORS®
Reprinted with permission

Homeowners See 12-Month Equity Gain of $64K

Rising home prices keep pushing up equity for homeowners. The average homeowner gained about $64,000 in equity from the first quarter of 2021 to the first quarter of this year, according to a new report from CoreLogic.

About 62% of all properties nationwide saw an increase in annualized equity gains in the first quarter. California, Hawaii and Washington posted the highest average equity increases at $141,000, $139,000 and $114,000 respectively, according to the report. On the other hand, the states seeing the lowest equity gains were Iowa ($17,300) and North Dakota ($19,000).

This chart from CoreLogic shows the average equity gains from last year’s first quarter to this year’s in each state across the country.

Source: 

“Homeowner Equity Insights,” CoreLogic (June 9, 2022)

©National Association of REALTORS® Reprinted with permission

Mortgage Rates Turn Upward Again

Following three weeks of declines, mortgage rates reversed course and headed back up this week. The 30-year fixed-rate mortgage averaged 5.23% for the week ending June 9; a year ago, it averaged below 3%.

Increased economic activity and incoming inflation data were behind the most recent rate increases this week, says Sam Khater, Freddie Mac’s chief economist. “The housing market is incredibly rate sensitive, so as mortgage rates increase suddenly, demand again is pulling back,” he says. “The material decline in purchase activity combined with the rising supply of homes for sale will cause a deceleration in price growth to more normal levels, providing some relief for buyers still interested in purchasing a home.”

Fed’s Anticipated Rate Hike Looms

Economists will watch the Federal Reserve’s actions closely this coming week. The central bank is largely expected to raise its key benchmark rate at its next meeting, June 14-15.

“Ahead of May’s inflation reading, investors are concerned about inflation and the impact of an upcoming half-percentage point rate hike from the Federal Reserve next week,” Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®, writes on the association’s blog. However, “the upcoming rate hike will likely have a smaller impact on mortgage rates this time.”

In March, when the Federal Reserve raised its short-term interest rates, mortgage rates surged 80 basis points in the following three weeks, Evangelou notes. The 30-year fixed-rate mortgage jumped from 3.85% to 4.67% by the end of March. In May, when the Federal Reserve raised its interest rates even more aggressively, mortgage rates rose by less than 20 basis points. By the end of May, the 30-year fixed-rate mortgage averaged 5.10%.

“It seems that mortgage rates have already priced in some of the effects of the upcoming Fed’s rate hikes,” Evangelou explains. She is forecasting mortgage rates to average 5.6% to 5.7% by late 2022.

Snapshot of Mortgage Rates

Freddie Mac reports the following national averages with mortgage rates for the week ending June 9:

• 30-year fixed-rate mortgages: averaged 5.23%, with an average 0.9 point, increasing from last week’s 5.09% average. Last year at this time, 30-year rates averaged 2.96%.
• 15-year fixed-rate mortgages: averaged 4.38%, with an average 0.8 point, rising slightly from last week’s 4.32% average. A year ago, 15-year rates averaged 2.23%.
• 5-year hybrid adjustable-rate mortgages: averaged 4.12%, with an average 0.3 point, increasing from last week’s 4.04% average. A year ago, 5-year ARMs averaged 2.55%.

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

Second-Home Hot Spots

Many booming second-home locations are seeing a rapid growth in rentals. The pandemic spawned demand for second homes as an increase in remote work options prompted more Americans to relocate to resort areas.

Prices in second-home hot spots have soared, and so have the rental prices. Average rental prices increased 17.1% year over year in popular second-home markets in April, reaching an average of $1,893. For comparison, rental prices in areas that are not second-home destinations posted a 10% increase to $1,484, Redfin reports.

Home and rental prices particularly have been climbing in cities like Phoenix; Cape Coral, Fla.; Naples, Fla.; Myrtle Beach, S.C.; and Las Vegas, the top five second-home markets in the country, according to Redfin. Rental prices have risen by 25% or more year over year in four of the five of those regions, excluding Myrtle Beach. In Phoenix, rental prices grew nearly 33% year over year, to $1,924 in April.

“The popularity of vacation towns has sent housing costs through the roof, making it harder for many locals to afford to live in their hometowns,” says Taylor Marr, Redfin’s deputy chief economist. But “the second-home boom is ending as many vacation home buyers are priced out of the market due to historically high prices and high mortgage rates—but those same factors have already pushed locals to the sidelines. Locals in popular beach towns and vacation spots have spent the last two years competing for a limited number of homes with wealth second-home seekers—and often losing.”

Source: 

“Second-Home Hotspots Saw Outsized Growth in Rental, Home Prices During the Pandemic,” Redfin (June 8, 2022)©National Association of REALTORS® Reprinted with permission

Buyers Boost Spending on Remodeling

Home buying is good for the economy. Each home purchase triggers significant spending on furnishings, appliances and remodeling.

A recent study from the National Association of REALTORS® estimated that, in 2021, the housing market generated a median of about $113,000 in economic impact per home sale. Read more: How Home Sales Help Local Economies

The National Association of Home Builders recently released a study documenting the economic benefit of a home sale. During the first year after closing on a house, a typical buyer of a newly built single-family detached home spends, on average, $9,250 more than a similar non-moving homeowner. A buyer of an existing single-family detached home tends to spend over $5,240 more than a similar non-moving owner, the NAHB analysis found.

The study finds that buyers of newly built homes spend the most on property alterations and repairs following a move, despite the home being brand-new. “A typical new-home buyer … is estimated to spend almost twice as much on these projects ($9,288) compared to an identical household that stays put in a house they already own,” the NAHB notes on its Eye on Housing blog. Researchers say the extra spending is most common for building outdoor features, like patios, pools, walkways, fences, landscaping and various additions to the new home.

Buyers of new homes also spent considerably more on furnishings following their move. They spent an average of $4,729 on furnishings and $4,138 on appliances following a move.

Buyers of an existing home also tended to spend the most on property alterations and repairs following a move—$7,391. (That is still below the $9,288 that new-home buyers spent.)

“In the case of buying an older home, most of this extra spending goes to property repairs, alterations, and various remodeling projects,” the NAHB notes.

Buyers of existing homes spent $2,988, on average, on furnishings and $2,799 on appliances, also less than purchasers of new-home construction, the study finds.

Source: 

“How a Home Purchase Boosts Consumer Spending,” National Association of Home Builders’ Eye on Housing blog (June 6, 2022)

©National Association of REALTORS® Reprinted with permission

Buyers May Be Gaining Leverage

A turning point may be occurring in the housing market. Fewer people were searching for “homes for sale” on Google during the week ending May 21, down 10% from a year earlier. Home tour activity is falling slightly, mortgage purchase applications are down 14% compared to a year earlier, and, while it’s still uncommon, more home sellers are dropping their asking prices.

Meanwhile, housing inventories are showing a slight improvement. Active inventory rose 8% annually, the first time that benchmark has been reached in nearly three years, realtor.com®’s monthly housing trends report shows. A rising number of homeowners may be growing more confident in selling, and they may want to cash out before any slowdowns in the housing market.

Competition is still tight. Fifty-four percent of homes that went under contract had an accepted offer within the first two weeks of being listed, Redfin reports. Thirty-nine percent of homes went under contract within one week of hitting the market.

Home prices are still high. The median national home price climbed to an all-time high in May, reaching $447,000, realtor.com® reports.

Aspiring buyers are expressing greater concerns over prices. Fannie Mae’s home purchase sentiment index showed that 79% of respondents reported that it’s a bad time to buy a home, a new survey high. Affordability is the main reason for their concern, the survey found.

Mortgage rates and home prices have climbed, pushing on buyers’ budgets. “The sudden surge in mortgage rates led to a sudden and significant cool down in the housing market in May,” says Chen Zao, the lead of Redfin’s economics research team. “However, mortgage rates are now stabilizing and homes remain in short supply, so while we do expect home price growth rates to decline, we don’t expect prices to fall much at a national level. For home buyers trying to determine the best timing this year, the main benefit of waiting is that there may be less competition as supply starts to build up.”

Source: 

Fannie Mae and “Housing Market Update: Homebuyers Regain Some Control as Supply Grows and Demand Pulls Back,” Redfin (June 2, 2022)

©National Association of REALTORS® Reprinted with permission

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HUD Program Takes Aim at Housing Supply Crisis

The Department of Housing and Urban Development announced a new program to help remedy the nation’s housing supply shortage by boosting affordable housing. HUD’s “Our Way Home” initiative sets out to increase housing supply by helping local communities preserve and add affordable housing in their area for rentals and homeownership. This may include several initiatives, like advocating for zoning changes, holding roundtables to engage local and state leadership for solutions, and more.

The National Association of REALTORS® welcomed HUD’s announcement to combat the housing supply challenge. “As NAR has long recognized, a collaborative approach that involves local partners is critical to building strong, thriving, and inclusive communities,” NAR President Leslie Rouda Smith said in a statement about HUD’s new initiative. “‘Our Way Home’ promises to not only provide tools and resources necessary to address the supply shortages plaguing the country, but it will also improve vital HUD programs based on feedback gained through this effort.”

NAR commissioned a report last year that found the U.S. faces a housing shortfall of 5.5 million housing units. The gap is so large, NAR says, that eliminating it will likely take more than a decade. The combination of record-high home prices and record-low housing inventories is making homeownership increasingly difficult to achieve, particularly for Americans of color and first-generation home buyers, NAR says in its recent “Double Trouble” report.

“This historic shortage of affordable housing requires a once-in-a-generation response,” Rouda Smith says. NAR supports zoning reform, greater allocations to increase new-home construction, expanded financing options, and tax incentives that will increase investments to convert unused commercial spaces into residential.

“The shortage of affordable housing has been growing for decades—but this is a solvable crisis,” Marcia L. Fudge, HUD’s secretary, said in the “Our Way Home” initiative announcement. “Across the country, we are seeing many communities ending exclusionary zoning, building affordable housing in communities that previously did not allow it. We are seeing communities use innovative building models and materials, and design homes that are sustainable and resilient. And we’re seeing communities tackle homelessness by building permanent affordable housing with services. These are the types of community wins that we want to elevate with ‘Our Way Home’ and encourage others to follow.”

Source: 

National Association of REALTORS® and HUD.gov

©National Association of REALTORS® Reprinted with permission

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