U.S. mall traffic rebounded this summer as newly vaccinated Americans felt more comfortable leaving their homes. The surge has continued despite growing threats from the fast-spreading COVID-19 delta variant.

“After a year and a half of staying inside, there was a pent-up demand for doing something, and that something could have been just going to a mall,” Sarah Helwig, an assistant vice president at Morningstar Credit Information and Analytics, told The Wall Street Journal.

Mall foot traffic in July surpassed even 2019 levels, according to Placer.ai, a data analytics firm. Mall visits rose 0.7% compared to July 2019, prior to the pandemic. Outdoor malls continued to be more popular.

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The rising foot traffic increased retail sales. That also offered good news to mall investors who in the initial months of the pandemic saw profits drastically decline from shutdowns and worried shoppers.

Justin Kennedy, managing partner of 3650 REIT, said his first priority is looking for more malls to invest in.

Still, Challenges Lie Ahead

The U.S. shopping mall sector does face some headwinds in the months ahead, however. Rising COVID-19 infections could make shoppers more comfortable staying home once again, analysts told The Wall Street Journal. Also, vacancy rates are still rising: Vacancies were at 13.7% over the past year for malls with securitized mortgages, according to Morningstar Credit Information and Analytics.

Older malls continue to struggle the most, especially those that have lost large department store tenants.

Also, fewer clothing retailers are signing leases, which is also prompting concerns about filling storefronts. More malls reportedly are considering nontraditional tenants that offer more entertainment options, such as trampoline parks or rock-climbing gyms.

“A trampoline park was not the most desirable tenant to bring to a mall a decade ago,” Corey Bialow, CEO of Bialow Real Estate LLC, a brokerage firm that represents retail tenants, told The Wall Street Journal. “Now there’s not a lot of people taking 30,000- to 50,000-square-foot spaces anywhere in the country.”

More real estate listings are coming to the market, but that won’t be able to make up for the fact that America is short millions of homes based on population needs. That likely means home buyers will continue to face inventory shortages and a dearth of homes for sale in the future.

The U.S. is short 5.24 million homes. That is an increase of 1.4 million homes from 2019, according to research from realtor.com®.

“The pandemic has certainly exacerbated the U.S. housing shortage,” said Danielle Hale, realtor.com®’s chief economist.

New-home construction—at its slowest pace since 1995—is not making up the difference either. About 12.3 million American households were formed from January 2012 to June 2021. However, only 7 million new single-family homes were built during that period, CNBC reports. Builders would need to double the new-home production pace to make up the gap in five to six years.

“No matter how you frame the scenario, it will take a more meaningful shift in the pipeline to meet demand in the foreseeable future,” Hale told CNBC.

Builders like PulteGroup say that they are actually slowing sales lately to try to keep pace with the backlog from the high demand over the last few months. Builders are facing labor and lot shortages as well as rising costs for building materials.

Home prices are quickly rising as demand outstrips supply. Homes with a median value of $300,000, which is considered more affordable by today’s standards, comprised just 32% of builders sales in the first half of this year, down from 43% during the same period in 2018, CNBC reports.

Home prices have been rising on existing homes as well as pressure continues from the increasing demand. The median existing-home price in July was $359,000, up nearly 18% compared to a year ago, according to the National Association of REALTORS®.

NAR released a report earlier this summer—Housing Is Critical Infrastructure: Social and Economic Benefits of Building More Housing—that called the state of America’s housing stock “dire.”

“There is a strong desire for homeownership across this country, but the lack of supply is preventing too many Americans from achieving that dream,” Lawrence Yun, NAR’s chief economist, said about the report’s findings. “It’s clear from the findings of this report and from the conditions we’ve observed in the market over the past few years that we’ll need to do something dramatic to close this gap.”

Mortgage rates followed the trend of the 10-year Treasury yield this week and inched lower. But these historically low rates—averaging 2.86% this week for the 30-year fixed-rate mortgage—are expected to rise over the course of the next few months.

The National Association of REALTORS® predicts that mortgage rates will rise to 3.5% by mid-2022 as the Fed will likely start reducing its bond purchases before the end of the year. Expect interest rates to rise in the middle part of next year, Nadia Evangelou, NAR’s director of forecasting, said on the association’s Economists’ Outlook blog.

But for now, the 30-year fixed-rate mortgage is mostly in a holding pattern under 3%.

“It’s Groundhog Day for mortgage rates, as they have remained virtually flat for over two months,” said Sam Khater, Freddie Mac’s chief economist. “The holding pattern in rates reflects the markets’ view that the prospects for the economy have dimmed somewhat due to the rebound in new COVID-19 cases. “While our collective attention is on the pandemic, fundamental changes in the economy are occurring, such as increased migration, the extended continuation of remote work, increased use of automation, and the focus on a more energy-efficient and resilient economy. These factors will likely lead to significant investment and new post-pandemic economic models that will spur economic growth.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 16:

• 30-year fixed-rate mortgages: averaged 2.86%, with an average 0.7 point, down slightly from last week’s 2.88% average. Last year at this time, 30-year rates averaged 2.87%.
• 15-year fixed-rate mortgages: averaged 2.12%, with an average 0.6 point, dropping from last week’s 2.19% average. A year ago, 15-year rates averaged 2.35%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.51%, with an average 0.1 point, rising from last week’s 2.42% average. A year ago, 5-year ARMs averaged 2.96%.

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

Just when the housing market was starting to fall into a seasonal pattern, mortgage demand takes off. Mortgage applications to purchase a home—a gauge of the housing market—rose 7% last week compared to the previous week, the Mortgage Bankers Association reported Wednesday. That marks the highest level since April of this year.

Housing inventories have increased slightly, which may be opening up more possibilities to home buyers who had felt shut out. Also, a new report shows that bidding wars are easing, which also may be an incentive for buyers to come back in the hopes they’re facing less competition.

Bidding Wars Reach Their Lowest Level This Year

Still, mortgage applications for home purchases are 11% lower than the same week one year ago. But that does represent the smallest annual decline in 14 weeks, MBA reports.

Home prices continue to climb, which is reflected in mortgage applications too, MBA economist Joel Kan notes. “Both conventional and government purchase applications increased,” he says. The average loan size for a purchase application rose to $396,800.

“The very competitive purchase market continues to put upward pressure on sales prices,” he says.

Mortgage rates remain historically low, offering home buyers some savings from the higher prices. The average contract interest rate for a 30-year fixed-rate mortgage with conforming loan balances was 3.03% last week, MBA reports.

Real estate firms saw business activity increase over the past year as the housing market surged across the country. In 2020, single-office firms had a median brokerage sales volume of $4.5 million and 19 real estate transaction sides, up from $4.2 million and 18 in 2018, according to the National Association of REALTORS®’ newly released 2021 Profile of Real Estate Firms. The biennial survey reflects responses from more than 6,000 REALTOR® executives and senior managers about business activity.

Firms with four or more offices posted a median brokerage sales volume of $146.2 million and 571 transaction sides in 2020, an increase from $100 million and 478 sides two years ago, according to the report.

Nearly three out of five real estate firms expect profitability or net income from all real estate activities to increase this year too, the survey shows.

But they do expect headwinds could undercut some of that growth over the next year. Real estate firms noted the biggest challenges over the next two years that has them most concerned are:

• Maintaining sufficient housing inventory
• Housing affordability constraints
• Competition from nontraditional market participants

Real estate firms also had some generational concerns over housing’s future outlook, such as young adults’ ability to buy a home (58%); young adults’ view of homeownership (33%); and baby boomers retiring from real estate (26%), according to the NAR survey.

Characteristics of Real Estate Firms

The report also revealed several common characteristics among real estate firms. For example, the majority of real estate firms—80%—operated from a single office and usually had three full-time real estate licensees, according to the NAR study. Nearly nine out of 10 were independent and non-franchised.

“Most REALTORS® are small businesses and work closely with small-business clients in their communities,” says NAR President Charlie Oppler. “The ingenuity, perseverance, and tireless efforts of our members are the lifeblood of local economies, and this has been especially evident during the many challenges brought forth by the COVID-19 pandemic.”

Real estate firms tended to generate about 30% of their sales volume from past client referrals; 30% from repeat business from past clients; 10% from their website; and 10% through social media, according to the report.

The top benefits real estate firms provide to agents and staff, according to the survey: errors and omissions/liability insurance; e-signature platform; comparative market analysis; electronic contracts/forms; and multiple listing. Further, a quarter of all firms offered a virtual office space for their agents and staff and 7% offered a virtual assistant.

Home maintenance can be stressful and it can be a source of tension among couples. Many couples who live together admit to fighting over household repairs—some even breaking up over them, according to a new survey from Cinch Home Services, a home warranty company.

Nearly 52% of about 1,000 respondents said they fought with their partner over home repairs. Millennials were the most likely generation to admit to fighting over household repairs with their partner.

The survey also found that more than 30% of respondents had experienced a breakup over home repairs.

“Only a few couples opted to hire outside help—but maybe more should follow suit, considering that over half of our respondents said they fought with their significant other over home repair needs,” the survey found. “Bringing in a professional would likely eliminate tension between couples when it comes to DIY tasks. It’s also more convenient, safe, and can save both time and money.”

Between Sept. 12 and Oct. 17, the majority of housing markets nationwide will reach their “sweet spot” with a higher number of homes for sale, lower prices, and less buyer competition compared with the average week of the year, according to realtor.com®’s Best Time to Buy Report.

This week kicks off the best time of year particularly for home shoppers in New York City, Los Angeles, Boston, Denver, Detroit, Minneapolis, and Portland, Ore., the survey found.

Overall, house hunters who purchase a home between Sept. 12 and Oct. 17 will see, on average, 31% more listings than a more typical week of the year. They’ll have more than 100,000 new listings to choose from nationwide, realtor.com® said. They are also likely to face less competition. They also could see prices recede somewhat, by as much as $10,000 below their seasonal highs.

“Home prices peaked in the summer, and new listings continue to come on the market helping slow the pace of sales—which is good news for home buyers,” said Danielle Hale, realtor.com®’s chief economist. “As families across the country focus on getting back into school routines, there are fewer buyers in the market, creating a great opportunity especially for first-time home buyers to make a purchase with somewhat less competition.”