First-Time Buyers Still Want a Bathtub

Bathroom remodeling trends in recent years have focused on removing the bathtub and supersizing the shower. But that could actually hurt a property’s resale value, depending on the buyers you’re trying to attract.

Bathroom Remodeling Trends Focus on Spa-Like Upgrades

First-time home buyers say they want a shower-tub combo, ranking it highest among 18 bathroom features, according to the National Association of Home Builders’ What Home Buyers Really Want, 2021 Edition. The study asked first-time buyers to rate key home features, from “essential” to “do not want.”

Forty-two percent of first-time buyers surveyed call a home with both a shower stall and bathtub in the primary bath desirable; 30% called it essential and a must-have, according to the survey. They also ranked linen closets and a private toilet compartment in the primary bath to be important in their home search.

Source: “In the Bath, First-Time Buyers Really Want Both a Shower & Tub,” National Association of Home Builders’ Eye on Housing blog (March 30, 2022)

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Property Taxes Rising at Slower Pace

The average property tax on a single-family home in 2021 rose at the smallest pace in five years. Taxes rose by 1.8% last year, from $3,719 in 2020 to $3,785 in 2021 nationwide, according to a new report from ATTOM Data Solutions, a real estate data firm.

“It’s hardly a surprise that property taxes increased in 2021, a year when home prices across the country rose by 16%,” says Rick Sharga, executive vice president of market intelligence at ATTOM. “In fact, the real surprise is that tax increases weren’t higher, which suggests that tax assessments are lagging behind rising property values, and will likely continue to go up in 2022.”

The report shows that effective rates dropped last year even as total taxes went up, as home values increased significantly faster than taxes nationwide. Source: ATTOM Data Solutions

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Inflation Edges Higher, Affecting Housing

The rate of inflation reached 8.5% in March, continuing at a 40-year high and showing few signs of relief for consumers. Higher gas prices, food, and housing costs fueled the consumer price index’s jump.

“Aggressive inflation will force the Federal Reserve to raise interest rates multiple rounds this year and actively pursue quantitative tightening,” says Lawrence Yun, chief economist of the National Association of REALTORS®. “That is why mortgage rates recently have shot up so high. Higher mortgage rates will inevitably pull home sales down in the coming months and slow home price appreciation.”

Yun projects a 10% decrease in home sales this year. But he continues to say home prices will increase, gaining 5% by the end of the year.

The rising costs of living will likely hurt more Americans’ wallets. Rising prices are outstripping the fastest wage gains in four decades, MarketWatch reports. Surveys show consumers are increasingly concerned about inflation as well.

Gas prices are up 48% from a year ago. The price hikes account for more than half of the increase last month in the cost of living. The Russian invasion of Ukraine has driven up the price of oil to a 13-year high. That has a widespread impact on consumers, not just because of the increasing costs of driving but also flying and transporting goods.

Grocery prices have increased 10% in the past year, the largest jump since 1981, MarketWatch reports.

Also, the cost of rent and shelter costs are rising. Over the last year, the cost of shelter has increased 5%, marking the largest increase in four decades, MarketWatch reports. Housing costs tend to comprise about a third or more of a typical household budget.

Rents rose by 4.4%, but many other data sources have pointed to even higher increases, Yun says.

“Home price is not part of the consumer price index but has hurt first-time buyers, especially with rising mortgage rates,” Yun says. “Clearly, more construction of both apartments and single-family homes is needed.” Source: “Instant Reaction: Inflation, April 12, 2022,” National Association of REALTORS® Economists’ Outlook blog and “U.S. Inflation Rate Leaps to 8.5%, CPI Shows, as Higher Gas Prices Slam Consumers,” MarketWatch (April 12, 2022)

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Realtor.com® Aims to ‘Close the Gap’ in Homeownership

Homeownership rates for many minority groups continues to be well below that of whites, and discriminatory policies are often blamed for that. During National Fair Housing Month in April, many housing groups and organizations are bringing the racial housing gap to the forefront and asking others in the real estate industry to support programs that seek to make a change.

Realtor.com® announced it is teaming with the Homeownership Council of America to donate the first $100,000 to the new Equity Down Payment Assistance Fund, for people of color and low- to moderate-income buyers. Realtor.com® says it will match every donation by HCA’s Equity DPA fund through June 30, up to $100,000. It’s asking leaders in the real estate industry to donate to HCA’s Equity DPA fund to help minorities and low- to moderate-income consumers afford down payments and closing costs.

“Survey data shows having enough for a down payment is one of the largest barriers to homeownership and, with this fund, we can directly help people break through to start building generational wealth,” says Mickey Neuberger, chief marketing officer for Realtor.com®.

The homeownership rate for Blacks is 43.1%, 48.4% for Hispanics, and 61.2% for Asian Americans and Pacific Islanders. The ownership rate for Whites is 74.4%, realtor.com® says.

“We believe it’s our responsibility to not only address [the] disparity in homeownership but bring others alongside to take up the challenge,” Neuberger says. “As a company, we strive to make a positive impact on fair housing issues, but as an industry, we have the power to eliminate it.”

Realtor.com® has launched its Closing the Gap Challenge focused on increasing the homeownership rate of racial minorities. Other initiatives in the program include a new down payment assistance search tool where consumers can see if they’re eligible for programs, a down payment assistance guide, and a free First-Time Homebuying 101 e-book offered in both English and Spanish, among other programs.

Companies that want to participate in the Closing the Gap Challenge can complete an inquiry form at homeownershipcouncil.org/equitydpa. Source: realtor.com®

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Reprinted with permission

Sellers Are Lowering Asking Prices

With mortgage rates now nearing 5%, many aspiring home buyers may have reached the top of what they can afford, especially as 40-year-high inflation affects the threshold for them.

As a result, the number of sellers dropping their asking price is growing at a faster clip than in the recent past. About 12% of homes for sale had a price drop during the four weeks ending April 3, according to Redfin. That marks a jump from 9% a year ago.

“Price drops are still rare, but the fact that they are becoming more frequent is one clear sign that the housing market is cooling,” said Daryl Fairweather, Redfin’s chief economist. “It goes to show that there’s a limit to sellers’ power. There is still way more demand than supply, and buyers are still sweating, but sellers can no longer overprice their home and still expect buyers to clamor at their door.”

‘There May Be a Limit to Sellers’ Power’

Rising Rates Constrain Buyers’ Budgets

Home prices are well above levels from a year ago. The average borrower is paying about 40% more than they would have for the same home a year ago on a monthly payment due to higher mortgage rates and higher home prices, according to the National Association of REALTORS®.

More consumers believe that mortgage rates and home prices will rise further, according to a monthly consumer sentiment index from Fannie Mae. “If consumer pessimism toward homebuying conditions continues, and the recent mortgage rate increases are sustained, then we expect to see an even greater cooling of the housing market than previously forecast,” Mark Palim, vice president and deputy chief economist at Fannie Mae, wrote about the consumer sentiment index’s findings.

However, some buyers may see an opening in the market. They may want to rush ahead of further mortgage rate increases or may see an uptick in new listings.

Housing demand remains high, Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®, writes on the association’s blog. Plus, a severe housing shortage due to underbuilding over the last decade will cushion the housing market from rapid deceleration.

“Housing demand will remain strong due to favorable demographics and shifts in buyers’ preferences as teleworking remains in place,” Evangelou writes. Source: “Rising Mortgage Rates Are Causing More Home Sellers to Lower Their Asking Prices,” CNBC (April 7, 2022)

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Rising Rates

Home buyers this spring are facing a double whammy of rising home prices and mortgage rates. The 30-year fixed-rate mortgage rose to 4.72% this week, from 3.13% when compared to a year ago, Freddie Mac reports.

Over the last three months, mortgage rates have risen by 1.5 percentage points, the fastest three-month rise since May 1994. Also, during the first two months of 2022, home prices have climbed by more than 15% compared to a year ago, Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®, writes on the association’s blog.

But housing demand remains high, Evangelou says. A severe housing shortage due to underbuilding has occurred over the last decade. “Housing demand will remain strong due to favorable demographics and shifts in buyers’ preferences as teleworking remains in place,” Evangelou says.

As such, home prices are expected to rise 5.1% in 2022, according to NAR’s projections.

Buyers are weathering the higher mortgage rates for now. Mortgage rates still remain low by historical standards. A more typical historical average is 8%, according to NAR.

Freddie Mac reports the following national averages with mortgage rates for the week ending April 7:

• 30-year fixed-rate mortgages: averaged 4.72%, with an average 0.8 point, increasing from last week’s 4.67% average. A year ago, 30-year rates averaged 3.13%.
• 15-year fixed-rate mortgages: averaged 3.91%, with an average 0.8 point, increasing from last week’s 3.83% average. A year ago, 15-year rates averaged 2.42%.
• 5-year hybrid adjustable-rate mortgages: averaged 3.56%, with an average 0.3 point, rising from last week’s 3.50% average. Last year at this time, 5-year ARMs averaged 2.92%.

Freddie Mac reports points along with average commitment rates to better reflect the total upfront costs of obtaining a mortgage. Source: Freddie Mac and “Instant Reaction: Mortgage Rates, April 7, 2022,” National Association of REALTORS® Economists’ Outlook blog

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Reprinted with permission

Housing Inventory Turnaround Possible

A new survey shows many homeowners plan to list their home over the next six months, with high expectations for making a profit on the sale. Sixty-four percent of about 3,000 consumers recently surveyed by realtor.com® said they intend to sell their home this spring or summer. That could bring some welcome relief to a housing market that has been starved for inventory.

“While sellers are expected to hold the upper hand in 2022, navigating the listing process remains a challenge—particularly for those also buying in today’s fast-paced market,” says George Ratiu, senior economist and manager of economic research at realtor.com®. “Homeowners who are ready to move forward with pandemic-delayed plans will find plenty of opportunity this spring and summer. Although accelerating inflation is leading to higher housing costs and living expenses, many buyers remain interested in finding a home. At the same time, recent housing trends suggest demand is beginning to moderate as higher mortgage rates push monthly payments out of some buyers’ budgets, underscoring the long-term need for more affordable inventory.”

Homeowners have great expectations for when they do decide to sell. Aspiring sellers responding to the survey say a top reason is the desire to profit from the current market.

Millennials are expected to represent nearly half—49%–of sellers who plan to list within the next six months. They have financial motivation to stick to their plans, the survey found. Their top reasons for selling are pressure from rising inflation and economic uncertainty. They showed higher shares than other generations of wanting to move to a more affordable home and a need to sell for financial reasons.

Regardless of age, aspiring sellers are readying their homes to list. They are taking steps to prepare, such as making repairs, cleaning, and decluttering.

The majority of those who have already listed found success: Eighty percent of recent sellers say they sold at or above their asking price, according to the realtor.com® survey. They also reported other benefits of selling in the competitive market, such as buyers forgoing repair concessions (28%); offers within a week (27%); and waived contingencies like inspections (25%). Source: Move Inc.

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Reprinted with permission