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The fear of missing out, or “FOMO” as it’s called on social media, could prove to be a strong motivation for potential home buyers to enter the market quickly as mortgage rates rise. The potential loss of homebuying power may “supercharge the housing market ahead of the spring homebuying season,” says Mark Fleming, chief economist at First American Financial Corp., in a recent analysis.

The average 30-year fixed-rate mortgage has climbed by about 50 basis points in the first weeks of the year. Last week, rates averaged 3.56%, up from 2.77% a year ago, Freddie Mac reports.

The Federal Reserve has signaled an end to ultra-low rates, which observers expect to start climbing as soon as March. Mortgage rates tend to follow long-term bond yields, which also are expected to increase due to the Fed’s tightening of its monetary policy and its efforts to control inflation.

Economists foresee a 30-year fixed mortgage rate of 3.7% by the end of 2022, according to the National Association of REALTORS®. That still reflects a historically low rate but is well above what buyers have grown accustomed to in recent years.

“When mortgage rates increase, holding income constant, consumer house-buying power decreases,” Fleming says.

A scenario Fleming offers suggests that if the average mortgage rate stayed at its current level of about 3.5% through the spring homebuying season, assuming a 5% down payment and holding average household income constant at the November 2021 level of $69,800, homebuying power would fall by about $25,000. If rates increase to 3.7% by the end of 2022, however, homebuying power would drop by $36,000 compared to November 2021, while if mortgage rates reach 4%, homebuying power would fall by nearly $52,000.

“Rising mortgage rates impact affordability, but one of the root causes of rising mortgage rates is an improving economy, and an improving economy often leads to stronger wage growth,” he says. If incomes continue to increase at the current rate through the end of 2022, income growth could reduce the projected decline in homebuying power this year to a less severe $700 instead of $36,000, Fleming says. Source: First American Financial Corp.

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Home shoppers are showing less willingness to waive appraisals, home inspections, or other contract contingencies during the purchase of a home compared with just a few months ago, according to the December 2021 REALTORS® Confidence Index Survey, a survey of REALTOR® transactions conducted by the National Association of REALTORS®.

Nineteen percent of buyers waived the inspection contract contingency in December, down from a peak of 27% in July 2021, NAR’s survey shows.

Twenty-one percent of buyers waived the appraisal contract contingency, down from a peak of 29% in June 2021.

Buyers also were less willing to waive other contract contingencies, like a financial contingency (10%), a home sale contingency (8%), or a title contingency (1%).

“With home prices continuing to rise, buyers are making sure they are getting their money’s worth,” Gay Cororaton, an NAR researcher, writes on the association’s blog.

The median existing-home sales price increased to $358,000 in December 2021, marking a jump of nearly 16% year over year, according to NAR’s data.

Another possible reason buyers are less willing to waive contingencies is that appraisals appear to be moving faster, Cororaton says. “With the onset of the pandemic, appraisal issues accounted for a higher fraction of contract settlement delays, from about 15% prior to the pandemic in January 2020 to a peak of 27% in July 2021,” she writes. In the past three months, appraisals comprised just 22% of contract settlement delays for comparison.

“The decline in buyers who are waiving appraisal and inspection contingencies is a healthy trend,” Cororaton writes. “Buyers should pay for what a home is worth and be informed of potential issues that need to be addressed by the seller or anticipated by the buyer if the buyer wants to take the responsibility for addressing this issue at their own cost.” Source: “December 2021 REALTORS® Confidence Index Survey: Fewer Buyers Waiving Appraisal, Inspection Cotnract Contingencies,” National Association of REALTORS® Economists’ Outlook blog (Jan. 24, 2022)

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Reprinted with permission

A growing number of single women are moving ahead with a real estate purchase. More than two-thirds of single women recently surveyed said they’d rather not wait until marriage to purchase a home, according to a Bank of America survey that suggested more single females are “skipping the spouse ahead of the house.”

Eighty-seven percent of single women agreed that it’s an “outdated idea” that someone must be married to purchase a home. Once they have the finances in place, single females surveyed say, they won’t hesitate to buy on their own.

Women are second only to married couples as a homebuying presence in the real estate market, according to 2021 data from the National Association of REALTORS®. Currently, 19% of the homebuying market are single women, while 9% are single men and 60% are married couples, according to NAR. Read more: Single Women Buyers Outnumber Single Men

What’s more, 71% say they intend to have their future partner move in if they buy a home while single, according to the Bank of America survey.

Finances are the main hurdle in the way of single females’ homebuying ambitions. Nearly three-quarters of single women who have not purchased a home yet say they haven’t done so because they want to feel financially stable first, compared to 64% of men. They say they’re working to save more for a down payment and improve their credit score.

Single women report saving more diligently than single men. Seventy percent of single women say they save money first and only spend what’s left after covering the basics. That is a higher percentage than 63% of single men who report such an aggressive saving plan.

Eighty percent of single women who are prospective home buyers also say they feel excited by the idea of buying a home themselves. The majority also feel it would be a great accomplishment to buy a home on their own. Source: “Bank of America Homebuyer Insights Report: Spotlight on Single Women Homebuyers,” Bank of America (2022)

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Applications to purchase new homes remain skewed toward higher-priced homes, the Mortgage Bankers Association reports.

The average loan size for a new home soared to a record high last month, reaching $423,102, the MBA reports. That marks an increase from $414,114 in November on new-home loan sizes.

Higher sales prices are following higher building costs. They’re also sidelining the buyers who are priced out of a new home. Mortgage applications for new-home purchases fell 5% in December 2021 compared to November and are down by 7.1% from December 2020.

“Applications to buy a new home slowed in December, while the activity remains tilted to higher-priced homes,” says Joel Kan, the MBA’s associate vice president of economic and industry forecasting. “Supply chain challenges, labor shortages, and higher materials costs also contributed to last month’s decline, as projects were delayed or cost more to complete.”

The MBA also recently reported a record high average dollar amount of a mortgage purchase application overall—for both existing and new homes—to $418,500.

“The continued rise in purchase loan application sizes is driven by high home price appreciation and the lack of housing inventory on the market—especially for entry-level homes,” Kan said.

The larger loan balances also are occurring while government loans are making up a lesser share. On new-home applications, conventional loans comprised 77% of loan applications, while FHA loans accounted for 12.6%, VA loans 9.8%, and USDA/RHS 0.4%. Source: “MBA Says New Home Sales Tilting to Higher Priced Properties,” Mortgage News Daily (Jan. 21, 2022)

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Builders ramped up construction on new homes last year as buyers eagerly sought more housing options. Single-family housing starts jumped 13.4% in 2021 compared to 2020, the Commerce Department reported Wednesday. But builders say supply-side challenges pose challenges to keeping that pace in 2022.

In December, builders pointed to supply challenges as the main culprit behind a 2.3% month-to-month decrease in single-family construction.

“The price and availability of building materials, and the supply chain in general, remains the most pressing, immediate challenge for builders as they seek to add housing supply,” says Chuck Fowke, chairman of the National Association of Home Builders. “Policymakers must focus on easing production bottlenecks and eliminating tariffs on Canadian lumber to help address the issues builders are currently facing.”

A shortage of homes for sale among the existing-home market is prompting more consumers to consider new-home construction. Builders say buyer demand has soared over the past year.

“The double-digit gain for single-family starts in 2021 was a continuation of the rebound and expansion of home building that took place in the wake of the pandemic,” says Robert Dietz, NAHB’s chief economist. “However, as mortgage interest rates are rising and construction costs increase, affordability headwinds are steepening. NAHB’s outlook for 2022 calls for relatively flat conditions for single-family construction, with additional gains for multifamily and remodeling.”

The multifamily sector, which includes apartment buildings and condos, rose 10.6% in December 2021 compared to November 2021. Demand for rentals has soared as some buyers get priced out of the housing market. Starts in the multifamily sector climbed 22.1% in 2021 compared to the previous year.

On a regional and year-to-date basis (January through December of 2021 compared to a year earlier), combined single-family and multifamily housing starts rose by the highest amount in the Northeast, up 22.2%, followed by a 16.9% jump in the West, a 15.3% increase in the South, and a 10.9% rise in the Midwest.

Permits for both single-family homes and multifamily homes—viewed as a gauge of future home buying—rose 9.1% in December on an annual basis. Single-family permits were up 2% and multifamily permits jumped nearly 22%. Source: National Association of Home Builders

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The kitchen pantry has become a craved amenity in more homes today. They may be worthy of your attention if staging the space in a home listing.

Larger, more functional pantries are a popular add-on in home remodels, according to the latest trends study released by the National Kitchen & Bath Association.

Sixty percent of designers and industry professionals said adding a “working pantry” has become one of the leading emerging kitchen ideas, the survey shows. The pantry has become a space not only for storing food but might also have working areas for small appliances, like coffee machines, as well as storage space for serving dishes, pots, and pans, Forbes.com reports on the trend. Microwaves are increasingly being placed in the pantry too.

Also, beyond just shelves in the pantry, homeowners are adding in roll-outs, specialty organizers, and deep drawers in upgrading their pantry spaces.

James Barry, CEO of seasonings brand Pluck and a private chef, told Forbes.com that he’d even suggest converting a kitchen utility closet to a food pantry. A walk-in food pantry would be even better, he says.

Barry also recommends having shallow shelves so you can see everything easily in the pantry. “I want everything to be visible,” he told Forbes.com. “The deeper the shelf, the harder it is to see everything. If the shelf is wide and deep, a rack that elevates or tiers the pantry items is great.”

Get staging and storage ideas for making over a kitchen pantry: Kitchen Pantries You’ll Envy Source: “Bigger, Better Kitchen Pantries Are a COVID-Inspired Wellness Design Trend,” Forbes.com (Jan. 18, 2022)

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Reprinted with permission

Buyers May Find Opening With Mortgage Credit