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Posted On Monday, 15 January 2024 11:39
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Rising supply has led to rising vacancies, motivating landlords to lower asking rents, which fell 1% from a year earlier.

The median U.S. asking rent fell 0.8% year over year in December to $1,964, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. That’s the third consecutive decline, following a 2.1% annual drop in November—which was the largest since 2020—and a 0.3% dip in October.

December rents were little changed from the prior month (-0.2%).

The rental market has lost steam largely due to a jump in supply fueled by a building boom in recent years. That has left many landlords struggling to fill vacancies, motivating some of them to drop asking rents. Some landlords are also offering one-time concessions like a free month’s rent or reduced parking costs to attract renters. This means the prices renters are paying in total are likely coming down faster than they appear to be in the data.

Other reasons rents have cooled include economic uncertainty, slowing household formation, and affordability challenges, as rents are still only 4.4% below their record high. Additionally, there are new signs that the economy is slowing; Americans are starting to tighten their belts, which could be contributing to the decline in rents.

“High supply—more so than low demand—is driving rent declines. But if mortgage rates continue to drop at a fast clip in 2024, slowing rental demand could become a major driver of rent declines,” said Redfin Economics Research Lead Chen Zhao. “That’s because more Americans would ditch the rental market to become homeowners, leaving landlords with even more vacancies.”

There are more newly built and under-construction apartments in the U.S. than there were a year ago; the number of completed apartments is near the highest level in more than 30 years, and the number under construction is just shy of its record high.

Because renters have an increasing number of buildings to choose from, vacancies have climbed. The rental vacancy rate rose to 6.6% in the third quarter—the most recent period for which data is available—the highest level since the first quarter of 2021.

Rents Rise in the Midwest and Northeast, Fall in the West and South

The median asking rent in the Midwest rose 3.7% year over year to $1,434. Rents also rose in the Northeast, climbing 1.7% to $2,439. Meanwhile, rents fell 1% year over year to $1,632 in the South, and declined 0.6% to $2,346 in the West.

Rents are likely holding up best in the Midwest and Northeast because those regions haven’t been building as much as the South and West, meaning some landlords have less incentive to drop prices because they’re not dealing with as many vacancies.

“With rents falling and vacancies rising, now is a good time to shop around or try to renegotiate your rent if your lease is up—especially if you’re a renter in the South or West,” Zhao said.

To view the full report, including charts and methodology, please visit:
https://www.redfin.com/news/redfin-rental-report-december-2023

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Posted On Friday, 12 January 2024 11:57
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Posted On Friday, 12 January 2024 11:42
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The share of homeowners with relatively low rates has fallen because some have given up on waiting to move until rates nosedive, and everyone who has purchased a home in the last year did so when rates were above 6%

Nationwide, 88.5% of U.S. homeowners with mortgages have an interest rate below 6%, down from a record high of 92.8% in mid-2022, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

That means more than 88.5% of homeowners with mortgages have a rate below the current weekly average of 6.66%, prompting many to stay put instead of selling and buying another home at a higher rate—a phenomenon called the “lock-in effect.”

But for most people, it’s not realistic to stay put forever. The share of homeowners with a rate below 6% has fallen from its record high partly because some homeowners are opting to bite the bullet and give up their low rate in order to move. Many are selling because a major life event like a divorce has given them no other choice, while others are putting their homes on the market because they want to live in a different house or city.

Another reason the share has dipped: Everyone who purchased a home in the last year—repeat buyers and first-time buyers alike—was entering the market at a time when the average mortgage rate was above 6%.

“I’m working with a lot of homeowners who are selling because of things like divorces, new jobs or deaths in the family,” said David Palmer, a Redfin Premier real estate agent in Seattle.

“I’m also working with homeowners who are bursting at the seams and selling because they’ve outgrown their current home.”

It’s worth noting that for some homeowners, the fact that home prices soared during the pandemic means they have enough equity to justify selling and taking on a higher rate—especially if they’re downsizing or moving somewhere more affordable.

The Lock-In Effect Continues to Fuel America’s Housing Shortage, But Listings Have Started to Tick Up

Americans continue to face a shortage of homes for sale, and a primary reason is the lock-in effect.

But home listings have been ticking up year over year, in part because some homeowners simply have to move, as discussed above. Listings are also rising because mortgage rates have fallen enough in recent weeks to convince some homeowners to let go of their low rate. Today’s 6.66% average mortgage rate is down from a peak of roughly 8% in October.

“Sellers have started coming out of the woodwork because that’s typical for January and because mortgage rates have dropped,” Palmer said. “They’re also coming to terms with the fact that rates aren’t going back down to 3% any time soon, which makes it easier to pull the trigger on selling. But a lot of sellers are worried about finding their next house because even though listings are rising, there’s still a housing shortage. That’s part of the reason so many sellers remain on the sidelines.”

Breakdown of where today’s homeowners fall on the mortgage-rate spectrum

The following is according to a Redfin analysis of data from the Federal Housing Finance Agency’s National Mortgage Database as of the third quarter of 2023, the most recent period for which data is available. The share of homeowners with rates below 6% likely fell further in the fourth quarter because a dip in mortgage rates drove more people to buy and sell homes, even as rates remained above 6%.

  • Below 6%: 88.5% of mortgaged U.S. homeowners have a rate below 6%, down from a record 92.8% in the second quarter of 2022.
  • Below 5%: 78.7% have a rate below 5%, down from a record 85.6% in the first quarter of 2022.
  • Below 4%: 59.4% have a rate below 4%, down from a record 65.3% in the first quarter of 2022.
  • Below 3%: 22.6% have a rate below 3%, down from a record 24.6% in the first quarter of 2022.

Mortgage Rates Have Dipped, But It’s Still More Expensive to Buy and Sell Homes Than It Was a Year Ago

The typical homebuyer purchasing today’s median-priced U.S. home at the average mortgage rate takes on a monthly payment of $2,399. While that’s down more than $300 from the all-time high in 2022, it’s still up 7.4% from a year ago. That’s because both mortgage rates and home prices are higher than they were at this time last year.

Nearly all homeowners with a mortgage have a rate below the one they would get if they bought a home today, but the difference in monthly payments varies depending on each individual situation. A mortgage holder in the 3% to 4% range is more likely to feel handcuffed to their home than someone in the 5% to 6% range, for instance.

To view the full report, please visit:
https://www.redfin.com/news/mortgage-rate-lock-in-housing-2023

Posted On Friday, 12 January 2024 06:42 Written by
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