REALTORS® Expand Income Despite Low Inventory, Fierce Competition

Fierce competition in the industry didn’t stop REALTORS® from increasing their transaction sides and income over the last year, according to the National Association of REALTORS®’ newly released 2022 Member Profile. The booming housing market has prompted more people to pursue a real estate career, as NAR’s membership rose to an all-time high of 1.56 million in 2021, up from 1.49 million in 2020, the report shows. That marks significant growth from a decade ago when membership stood at just over 1 million. (View the breakdown of REALTOR® members by state association.)

That means real estate pros may have to compete more for customers. But it’s not the competition that REALTORS® cite as the top challenge blocking them from closing more sales—it’s the national inventory shortage, the NAR survey shows. Still, the typical member had 12 transaction sides in 2021, up from 10 in 2020, though COVID-19 lockdowns in 2020 need to be taken into consideration. Also, the typical sales volume rose from $2.1 million in 2020 to $2.6 million in 2021, according to the survey.

With more transactions under their belts, REALTORS®’ median gross income has ticked up as well, rising from $43,300 in 2020 to $54,300 in 2021. Experience level tends to matter greatly when it comes to income level. Fifty-seven percent of members who have two years or less of experience earned less than $10,000 in 2021, the report shows. On the other hand, 45% of members with more than 16 years of experience earned more than $100,000.

Here are some additional demographic trends among REALTORS® as well as business insights from NAR’s 2022 Member Profile:

• The typical REALTOR® has eight years of experience.
• The median age of REALTORS® was 56 in 2021, up slightly from 54 in 2020. Forty-one percent of the membership is over 60 years old while only 4% are less than 30 years old.
• The share of women in the industry jumped from 57% in 2010 to 67% in 2021.
• The majority of REALTORS®—87%—are independent contractors; only 5% are employees of a real estate company.
• The typical REALTOR® worked 35 hours per week in 2021. Those who work more tend to earn more. For example, the median annual income of REALTORS® who worked 40 to 59 hours per week was $85,400. It was $144,400 for those who work 60 hours or more per week but only $13,300 for those who worked less than 20 hours.
• Only 4% of members say real estate is their first career. Many REALTORS® come from various professional backgrounds, most notably management, business, finance, or retail.
• The typical REALTOR® earned 16% of their business from repeat clients, while 20% of their business came from referrals.
• Seventy-nine percent of members say they are certain they will remain in the business for at least two more years.

©National Association of REALTORS®
Reprinted with permission

It’s the Most Expensive Year to Move Ever

Aside from rising mortgage rates and home prices, buyers are being squeezed by another escalating expense: the growing cost of moving services. This year has become the priciest for hiring movers in the nation’s history, according to a new study from HireAHelper, a moving resource. Some states and metros are seeing costs rise by nearly 40% year over year.

The average cost of a move was $427 nationwide in May, about 15% higher than a year earlier, the study shows. Ballooning gas prices, supply-chain disruptions and 40-year-high inflation are primarily fueling moving expenses, says Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®. “This means that people need to spend more of their budget on housing,” she adds. “This additional cost may discourage people from moving, resulting in an even lower mover rate in 2022.”

The demand for moving services has climbed with the rising homebuying and rental markets over the past year, leading to disruptions in availability. In 2021, 71% of moving companies reported delays due to high demand and a labor shortage, according to industry data. “The moving industry is feeling the impact of the current economic climate, and it’s creating a perfect storm for customers looking to relocate,” says Miranda Marquit, chief data analyst at HireAHelper. She equates the current environment to a “financial flash flood for those who made plans to move this summer—potentially washing them out.”

These areas of the country are seeing the biggest jumps in moving costs:

• Maine: up 51% year over year
• Nebraska: up 30%
• Utah: up 28%
• Alabama: up 27%
• Idaho: up 27%

By metro level, costs have significantly climbed in places like Columbia, S.C., which is up 42%, and Seattle, which is up 39%. And with about 40% of moves occurring during summer months, demand for moving services is expected to go even higher.

“Most likely, despite the already higher costs, moving is likely to get even more expensive as we get into the summer and the height of the moving season,” HireAHelper notes in its study. Moving costs tend to peak in August, researchers say, forecasting that the average cost of a move will reach a new record high in August—averaging $454. However, buyers may find some relief if they can hold off on moving until after summer: Costs are expected to drop to an average of $408 by the end of the year.

©National Association of REALTORS®
Reprinted with permission

Home Buying Is 5% Cheaper Than a Week Ago

Mortgage rates are falling—at least for now—after posting rapid jumps in June. Over the last two weeks, the 30-year fixed-rate mortgage has dropped by one-half of a percentage point. Home buying is about 5% more affordable than a week ago, translating to about $100 less in monthly mortgage payments, economists at the National Association of REALTORS® wrote on the Economists’ Outlook blog.

Rates are dropping as concerns mount over a possible economic recession, says Sam Khater, Freddie Mac’s chief economist. “While the drop provides minor relief to buyers, the housing market will continue to normalize if home price growth materially slows due to the combination of low housing affordability and an expected economic slowdown,” Khater says.

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

• 30-year fixed-rate mortgages: averaged 5.30%, with an average 0.8 point, dropping from last week’s 5.70% average. Last year at this time, 30-year rates averaged 2.90%.
• 15-year fixed-rate mortgages: averaged 4.45%, with an average 0.8 point, dropping from last week’s 4.83% average. A year ago, 15-year rates averaged 2.20%.
• 5-year hybrid adjustable-rate mortgages: averaged 4.19%, with an average 0.4 point, falling from last week’s 4.50% average. A year ago, 5-year ARMs averaged 2.52%.

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

Rapid Rise in Mortgage Rates Stalls

The quick rise in mortgage rates over the last few weeks is taking a pause. The 30-year fixed-rate mortgage averaged 5.7% this week, dropping from last week’s 5.81%, according to Freddie Mac. Still, rates remain well above where they were a year ago, when they averaged below 3%. Higher rates have been sending shock waves through the housing market, potentially adding hundreds of dollars to monthly mortgage payments and spooking interested home buyers.

Since the beginning of the year, home buying has cost about $800 more every month, Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®, wrote on the association’s blog. The higher mortgage rates have hurt affordability, and fewer middle-income home buyers can now afford to buy homes, Evangelou notes.

“The rapid rise in mortgage rates has finally paused, largely due to the countervailing forces of high inflation and the increasing possibility of an economic recession,” says Sam Khater, Freddie Mac’s chief economist. “This pause in rate activity should help the housing market rebalance from the breakneck growth of a seller’s market to a more normal pace of home price appreciation.”

Freddie Mac reported the following national averages for the week ending June 30:

• 30-year fixed-rate mortgages: averaged 5.7%, with an average 0.9 point, dropping from last week’s 5.81% average. Last year at this time, 30-year rates averaged 2.98%.
• 15-year fixed-rate mortgages: averaged 4.83%, with an average 0.9 point, dropping from last week’s 4.92% average. A year ago, 15-year rates averaged 2.26%.
• 5-year hybrid adjustable-rate mortgages: averaged 4.5% this week, with an average 0.3 point, rising from last week’s 4.41% average. A year ago, 5-year ARMs averaged 2.54%.

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

New-Home Costs Rising at Unparalleled Rate

Inflation is pushing up homebuilding costs at an unprecedented rate, according to Bank of America’s Who Builds the House? report. Supply-chain disruptions and labor shortages are adding pressure to rising prices.

The average cost for materials to build a single-family home jumped 42% from 2018 to 2021, adding thousands of dollars to the price of a new home, according to the report. The median sales price of a new home in April reached a record $450,600, a 20% hike from a year earlier, Commerce Department data shows.

The higher material costs have been passed along to home buyers, who are facing the double whammy of rapidly rising mortgage rates. First-time buyers, in particular, are increasingly becoming priced out of the new-home market, with only about 10% of new homes in April on the market priced at less than $300,000, according to the National Association of Home Builders. A year prior, that share was 25%.

As buyers back away from the new-home market, builders are slowing production. Housing starts have fallen to a 13-month low, and single-family construction dropped 9.2% in May, according to the Commerce Department.

“Residential construction material costs are up 19% year over year, with cost increases for a variety of building inputs, except for lumber, which has experienced recent declines due to a housing slowdown,” says NAHB Chief Economist Robert Dietz. What’s more, “The increase for mortgage rates for the first half of 2022 has priced out a significant number of prospective home buyers.”

Some builders are reducing their prices. For example, the share of new-construction homes with price cuts has quadrupled compared to a year earlier in metro areas like Austin, Texas, and Nashville, Tenn., according to Redfin data. Price cuts in new construction have tripled in Phoenix and doubled in Tampa, Fla.

Stuart Miller, executive chairman of homebuilder Lennar, told CNBC that he expects prices will readjust moving forward due to higher mortgage rates, which have nearly doubled over the past year. Rising material costs combined with accelerating mortgage rates have left buyers facing “a little sticker shock, and that will likely lead to a pause … and then some reconciliation,” he said. “But there is still a housing shortage across the country. We’ll adjust prices as need be. … Pricing may come down a bit to accommodate affordability. But America still needs homes, and we’ll continue to fill that void.”

Building Material Woes Continue

Framing lumber and engineered wood have experienced the largest price increases among materials, according to the Bank of America report. Lumber prices have been volatile over the past year; prices hit an all-time high in 2021, adding $18,600 to the average cost of a new home, according to the NAHB. However, lumber prices have fallen in recent weeks and are trading at yearly lows, though they are still higher than in 2020. Still, housing analysts say it likely will take time before consumers see any savings due to the price dip.

Other material costs in home construction also have contributed to rising prices, such as upticks in concrete, flooring and paint. The price of exterior paint jumped 14.5% in the first five months of this year, the NAHB notes. Window and door shortages, which have been blamed for many construction delays, also have added to costs. The plumbing sector has been hit hard by a labor shortage that is also leading to delayed timelines, builders note.

Further, inflation is adding to consumer costs in household furnishings, which saw prices climb 9.3% annually in January, according to the Labor Department. Appliances were up 8.5%, and floor coverings up 7.2% in the same time period.

©National Association of REALTORS®
Reprinted with permission

NAR Earns Green Business Bureau’s Platinum Certification for Sustainability

The National Association of REALTORS® has earned the Green Business Bureau’s platinum certification for sustainability—the highest level awarded—in the first year the association applied for the honor. Only one in five companies that apply meet the requirements to earn the GBB’s platinum certification.

As a trusted authority in green business, GBB provides online solutions to help purpose-driven businesses of all sizes learn, prioritize, manage and certify green initiatives. Their customers use their sustainability framework and solutions to engage employees, manage their sustainability programs and become greener. GBB’s certification process is entirely initiative-based, so companies will receive points for each and every activity it completes. Initiatives are organized by the business area they impact, such as transportation or office materials, and further marked by the effort, cost and greening impact of the initiative.

Certification through membership with GBB highlights NAR’s commitment to sustainability leadership among members, associations and industry groups, underscoring one of NAR President Leslie Rouda Smith’s 2022 strategic priorities and meeting goals laid out in NAR’s Sustainability and Resilience Plan to monitor and measure activity in this space.

Check out NAR’s GBB certification profile, including the rated categories and specific sustainability actions.

Learn more information about NAR’s overall sustainability efforts at nar.realtor/sustainability.

©National Association of REALTORS®
Reprinted with permission

Mortgage Rates Settle In the 5% Range

Mortgage rates appear to be settling in the 5% range after recent dramatic climbs that shocked home buyers. The 30-year fixed-rate mortgage averaged 5.13% this week, down slightly from its 5.22% average a week ago, Freddie Mac reports.

Mortgage rates peaked at 6% in early June, which prompted a pullback in housing demand. However, “home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers,” says Lawrence Yun, chief economist for the National Association of REALTORS®.

Inflation appears to have peaked, which has stopped the rapid increase in mortgage rates, says Sam Khater, Freddie Mac’s chief economist. “The market continues to absorb the cumulative impact of the large price and rate increases that led to a plunge in affordability,” Khater says. “As a result, over the rest of the year, purchase demand likely will continue to drag, supply will modestly increase and home price growth will decelerate.”

Total mortgage demand fell to its lowest level in 22 years last week, the Mortgage Bankers Association reports. A big contributor is falling refinance applications, as homeowners have less incentive to refinance due to higher rates. Still, mortgage applications to purchase a home are 18% lower than a year ago as more buyers step away due to higher mortgage rates and inflation, the MBA reports.

Freddie Mac reports the following national averages with mortgage rates for the week ending Aug. 18:

• 30-year fixed-rate mortgages: averaged 5.13%, with an average 0.8 point, falling from last week’s 5.22% average. Last year at this time, 30-year rates averaged 2.86%.
• 15-year fixed-rate mortgages: averaged 4.55%, with an average 0.7 point, dropping from last week’s 4.59% average. A year ago, 15-year rates averaged 2.16%.
• 5-year hybrid adjustable-rate mortgages: averaged 4.39%, with an average 0.3 point, dropping from last week’s 4.43% average. A year ago, 5-year ARMs averaged 2.43%.

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

Builders Concerned About Sudden Pullback in New-Home Market

Builders say more buyers are backing out of sales contracts for new homes as traffic fizzles, causing homebuilder confidence to drop for the eighth straight month, the Commerce Department reported Tuesday. Single-family home construction last month declined 10% annually, matching the lowest level since the onset of the COVID-19 pandemic in 2020, according to the data.

There has been a dramatic pullback in homebuyer demand this year, for which builders blame rising mortgage rates and material prices. The average cost to build a new home has jumped 35.7% since January 2020—an expense that gets passed to buyers—according to the Commerce Department. Ongoing supply-chain problems also are delaying construction projects, and inflation is adding to homebuyer angst.

Jerry Konter, chairman of the National Association of Home Builders, characterizes the current market as a “housing recession.” About one in five home builders reported reducing their prices in the past month to increase sales and limit the number of buyers canceling contracts, according to NAHB data. Single-family housing starts are expected to post a decline in 2022, which would mark the first decrease since 2011, says NAHB Chief Economist Robert Dietz.

Any Hope on the Horizon?

At the same time, there are growing signs that inflation is peaking and long-term mortgage rates are stabilizing. Lawrence Yun, chief economist for the National Association of REALTORS®, says the persistent housing shortage should keep buyer demand elevated in all real estate sectors over the long haul. “Homebuilders are naturally very cautious about rising unsold inventory during the construction phase,” Yun says. “But those completed homes are finding buyers within three months, which is relatively swift for the new-home market. Improving conditions within the supply chain for the delivery of items such as lumber and appliances will lessen overall uncertainty.”

Lower mortgage rates in the near future also could help. “If mortgage rates remain near 5%—after reaching 6% in early June—there could be renewed buyer activity and additional inventory declines,” Yun says.

Meanwhile, the multifamily market, which includes apartment buildings and condos, continues to be a bright spot for housing. Though starts for multifamily construction projects dipped slightly in July, Yun brushed off the decrease as a reflection of month-to-month volatility rather than a long-term trend. Indeed, multifamily construction activity is on pace to reach its highest level in more than 30 years, says Yun. “Rapidly rising rents are economic incentives for building rental housing,” he adds.

©National Association of REALTORS®
Reprinted with permission

What Climate, Health Care Bill Doesn’t Do

President Joe Biden signed the Inflation Reduction Act into law Tuesday, a sweeping climate, healthcare and tax bill that spares affordable housing investment and other real estate from the most feared new taxes. The $784 billion legislation allows Medicare to negotiate prescription drug prices, invests billions of dollars into clean energy and imposes a 15% minimum tax on corporations with more than $1 billion of earnings. A portion of the revenue raised also will go toward deficit reduction.

But the law excludes an array of tax measures on real estate investment proposed last year. “When discussions began on the original Build Back Better plan, there were nearly a dozen tax changes that could have decimated our efforts to increase the supply of affordable housing,” says Shannon McGahn, NAR’s chief advocacy officer. “After spending more than a year educating lawmakers on these proposals, a bipartisan consensus emerged that they weren’t a good idea, and none of the harmful tax changes made it into the final bill.”

Last year, NAR launched a comprehensive action plan to advocate for affordable housing supply. A study commissioned by NAR showed the U.S. is 5.5 million housing units short and that it could take more than a decade to fill that gap—even with accelerated new construction. “A supply shortage of this magnitude requires an all-of-the-above response,” says NAR President Leslie Rouda Smith. “We are working toward zoning reform, money for new construction, expanded financing options and tax incentives to spur investment, convert unused commercial spaces to residential and increase the supply of construction workers. And our efforts are building consensus that decisive action is needed.”

In March, the White House included a historic funding request for affordable housing in its budget proposal. Then, in May, thousands of REALTORS® descended on Washington, D.C., and hand-delivered to Congress a comprehensive list of actions they could take to address the housing shortage. Also, in May, the Biden administration released a Housing Supply Action Plan. In July, the Treasury Department allowed the use of $350 billion in American Rescue Plan funds for developing, repairing, and operating affordable housing units.

“We aren’t just working with Congress and the administration,” McGahn says. “We’re also working with industry partners and agencies on a wide array of initiatives to expand homeownership—such as the Black Homeownership Collaborative’s 3by30 plan to add 3 million net new Black homeowners by 2030.”

©National Association of REALTORS®
Reprinted with permission