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

Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing the 30-year fixed-rate mortgage (FRM) averaged 6.66 percent.

“Mortgage rates have not moved materially over the last three weeks and remain in the mid-six percent range, which has marginally increased homebuyer demand,” said Sam Khater, Freddie Mac’s Chief Economist. “Even this slight uptick in demand, combined with inventory that remains tight, continues to cause prices to rise faster than incomes, meaning affordability remains a major headwind for buyers. Potential homebuyers should look closely at existing state and local resources, such as down payment assistance programs, which can considerably help defray closing costs.”

News Facts

  • The 30-year FRM averaged 6.66 percent as of January 11, 2024, up from last week when it averaged 6.62 percent. A year ago at this time, the 30-year FRM averaged 6.33 percent.
  • The 15-year FRM averaged 5.87 percent, down from last week when it averaged 5.89 percent. A year ago at this time, the 15-year FRM averaged 5.52 percent.

The PMMS® is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit. For more information, view our Frequently Asked Questions.

Freddie Mac’s mission is to make home possible for families across the nation. We promote liquidity, stability, affordability and equity in the housing market throughout all economic cycles. Since 1970, we have helped tens of millions of families buy, rent or keep their home. Learn More: Website | Consumers | Twitter | LinkedIn | Facebook | Instagram | YouTube

Posted On Thursday, 11 January 2024 13:30 Written by

In 2024, economic results will likely remain mixed. While a total collapse is unlikely and a recession may be avoidable, some Americans will still struggle to make ends meet in the face of relatively high rates and higher-than-ideal inflation. Here are LendingTree's predictions for the state of housing, jobs and the economy in 2024.

Potential economic positives in 2024:

  • The housing market likely won’t crash this year
  • Inflation will likely come down
  • Across the board, rates should level off, if not eventually fall
  • Wage growth will continue to outpace inflation
  • We may avoid a recession 

Potential economic negatives in 2024:

  • The housing market will remain prohibitively expensive for many
  • Home sellers could face challenges
  • Savings will stay depressed
  • Total debt will stay high

You can find our full 2024 housing and economic predictions here:  https://www.lendingtree.com/home/mortgage/housing-economy-expectations-study/

LendingTree's Senior Economist, Jacob Channel, added:

"Like any year, 2024 will doubtlessly be harder for some than it is for others. Those who are struggling should remember that the sooner they ask for help and the more proactive they are about trying to get their finances in check, the better off they’ll be. No matter how bad things may seem, burying your head in the sand and hoping that problems go away on their own is usually nothing more than a recipe for disaster." 

Posted On Sunday, 07 January 2024 07:00 Written by

To create the next great product or service, it has been standard practice to ask the customer questions like: “What do you want? What do you need? What will make your life easier?”

These simple inquiries should lead to a simple answer. It is then our responsibility as businesses and organizations to respond with products, services, or processes that meet customers’ needs while increasing our margins and market share. This has been the process of the past and has worked for generations, but does it truly work in today’s accelerated, technology-driven business environment?

In my many years as a strategic advisor and futurist, I have concluded that asking the customer what they want is no longer reliable. First, customers are telling others in your industry the exact same information, which leads to a high level of competition. Unfortunately, a professional footrace to a perceived finish line is not beneficial to anyone, especially the customer.

Second, customers rarely know their true wants or needs or what can really be achieved to satisfy them. They under-ask because they do not know what is possible. But in switching from reactionary to Anticipatory thinking, our job as business leaders is to show them what is possible. This is not as difficult as it may seem. We can show them what the future can be!

Underinflated Confidence in Current Products and Services

Now, looking for customer problems that need solving or listening to customers for new ideas can go only so far. This is a reactionary, “lead from behind” mindset that puts you at a disadvantage — not only with your competition, but with your customers as well.

What you need to do — similar to what serial entrepreneurs do — is look for pain points you already know about. These can range from a mild annoyance to a complete inconvenience. Let’s have a look at a simple product nearly everyone in this world has had an experience with at one point or another: bicycles.

Bicycles have been around longer than anyone now living can remember. And throughout the many different iterations of this two-wheeled vehicle, what makes it a vehicle and allows a cyclist to move forward on it are the tires.

With the mechanics involved in a bicycle, something is bound to break or require repairs, right? Well, the inner tubes inside bike tires sustain punctures frequently, ultimately being a pain that cyclists worry about.

One thing is for sure: customers are certain to worry about a popped inner tube at one point or another. Indirectly, bicycle manufacturers know that this is a concern without customers directly telling them about it.

Looking Beyond the Surface of Perceived Customer Problems

My Skip It Principle states that the perceived problem a customer faces is not the real problem. In the way of anticipating customer problems, the perceived problem is the worry surrounding what may happen, whereas the real problem is the event itself.

Solving the perceived problem of a flat bicycle tire is a bicycle business simply providing affordable tires, or perhaps a roadside service that will come to a customer and change their bicycle tire for them. Solving the real problem is eliminating the possibility of a bike tire going flat altogether, as the company Tannus has done with their new airless bike tires, made from puncture-proof multicell foam.

Here’s another example: iRobot. Customers were searching for a more effective vacuum and an easier, low-maintenance way to clean and sweep. The issue was not that households wanted to pick up more dirt. No, the time spent cleaning was the real problem. But again, this ask was not a literal, word-for-word request. iRobot looked at the pains of having to clean a house and created a product now that solves the problem.

And even now, iRobot has yet again solved a problem that autonomous vacuuming encounters with regard to pet “messes,” so to speak. They created a feature that detects incidents and avoids the possibility of making a bigger mess.

The Future Is Determined Today

Determining what a customer base needs without them telling you directly is being Anticipatory. Tannus and iRobot both looked to Hard Trend future certainties, which in this case are future problems customers will continue to have. They then used science (Tannus) or digital technology (iRobot) to show customers what is possible, which led them to realize the problems they were facing and put a level of trust in the company.

They are leading from the jump rather than leading from behind!

Not only should you hopscotch over your initial reaction of solving the top layer of customer wants, you also need to anticipate what needs and desires are to come next. Progress waits for no one, and if you want to be at the head of that progress as a leader in your industry, it is essential. Being the first to find a solution to a real problem shows customers that you are at the cutting edge of innovation and have a commanding lead in your industry.

To be more Anticipatory in identifying and meeting customer wants and needs without them asking you directly, instead ask yourself the following questions:

  1. 1. What challenges are your customers currently facing? (Think: bicycle inner tubes going flat.)
  2. 2. If a solution is posed to these challenges, what will be a potential problem that results from this solution? (Think: iRobot avoiding the pet messes.)
  3. 3. If a solution is posed, what will be the next challenge customers face? (Nothing is perfect — what issues will an airless bicycle tire have?)

 

Also, consider these points:

  • Where are your customers headed?
  • Where is the market headed?
  • What future certainties will affect your customers?

 

If it can be done, it will be done. And if you don’t do it, someone else will! So be proactive in identifying the issues your customers are currently having, as well as the ones they are going to have, and use Hard Trends and my Skip It Principle to pre-solve them before they happen!

Most do not realize they are having a problem. You have the unique opportunity to show them what their future can and should be.

Posted On Tuesday, 09 January 2024 00:00 Written by

Some superheroes are born, and some are made. The same is true of leaders in the professional world. Whether an individual leads a for-profit company, a nonprofit organization, a government body, a pedestrian organization, or a university, truly extraordinary leaders are continuously created through education and endless learning to perfect their craft.

During the latest Opportunity Hour: Conversations with the Masters, I had the pleasure of speaking with a longtime friend of mine, Dr. Nido Qubein. Dr. Qubein is first and foremost an entrepreneur, serving on several Fortune 500 boards, including La-Z-Boy and Truce. He has authored 12 books and received numerous awards as a leader himself.

His abundance of accolades and entrepreneurship capabilities have enabled Dr. Qubein to effectively speak on what it takes to be an extraordinary leader, which is the foundation of today’s blog post.

Back in 2005, Dr. Qubein became the president of High Point University, a struggling college that he turned around with a vision and the consistency to fulfill that vision. During Dr. Qubein’s time with High Point University:

  • Their economic impact went from $160 million to over $1 billion
  • 28 buildings grew to 122
  • 385 employees grew to over 2,000
  • Their operating budget went from $38 million to over $400 million
  • 10 new academic schools were founded
  • 99% of graduates have found fulfilling employment within 6 months after graduation

Professional Success Versus Career Significance

No matter what you are leading, your actions as a leader should positively impact the people you serve, the people your actions affect, and so forth. Your interactions with people should incorporate trust and dignity no matter what.

This all goes back to the focus of significance over success that both Dr. Qubein and I believe in.

Yes — we all want to be successful, but success is defined differently with different people. For some, success is financial well-being or a certain level of wealth. For others, success is making an impact, teaching underprivileged children, or providing food for the needy. This intricate difference is what extraordinary leaders find between success and significance.

I have talked about significance in the past, and I have loosely defined it as what we hope to achieve for others instead of just focusing on our own personal gain. I view significance not necessarily as something that you should prioritize over success, but as something that must come before success.

The way both Dr. Qubein and I view the connection between significance and extraordinary leaders is those individuals’ ability to look further ahead than everyone else and attempt to turn the impossible to possible. They focus on wants, needs, goals, assumptions, and fears of their stakeholders and customers to take significant actions now by being an Anticipatory Organization.

Conversely, many traditional leaders and organizations are only inclined to stay ahead of the competition, gaining every inch of profit and margin they can while staying in the same lane indefinitely. By focusing only on achieving some type of success over your competition, you are putting yourself in a reactionary mindset where you merely react to adversity and client needs as they come your way. But by the time you solve them, you have already let the future pass you by.

An Anticipatory mindset of an extraordinary leader puts significant actions and the impact we have on others at the forefront, with a confidence that success is sure to follow. As Dr. Qubein stated in our recent discussion, “The value of our existence on this Earth will be defined not by the accumulation of our achievements or acknowledgments, but rather it will be defined by who we’ve impacted and influenced in the world.”

How to Shift to Being an Extraordinary Leader

Dr. Qubein and I agree that no matter the type of organization you are leading, there are three P’s to running a business: Product, Process, and People. While the product and process may be slightly different depending on the industry, how you influence and project values and significance on the people the product and process impacts is fundamental.

To shift to the life of an extraordinary leader, it is time to ask yourself: 

  • What is your vision for your company? 
  • What is your vision for your customers? 
  • What is your vision for your employees? and most importantly, 
  • Are yours and their visions aligned?

 

The essence of an extraordinary leader is expressing a vision to the employees and customers alike with extreme clarity. Even if they do not necessarily agree with you, if you put forth effort to respect them with fairness and justice, people will respect what you are doing.

Here are some steps to consider, brought forth by Dr. Qubein and myself:

  1. 1. First, Be Anticipatory: Never wait for problems to come your way and react to them with feverish crisis management. Instead, use Hard Trend future certainties to anticipate the known future and pre-solve any issues before they become issues.

  2. 2. Create Clarity in Value: No matter what you are trying to achieve with the strategy you are attempting to implement, if employees do not recognize value in it, they will not work with you toward a common goal. Be sure to clearly identify the value for all involved in your strategy!

  3. 3. Interpret That Value: Value must be interpreted from the perspective of the other people involved, not just you alone. In Dr. Qubein’s case with High Point University, this meant interpreting the value that parents (the market), students (the customers), and stakeholders (campus faculty, alumni, donors, and more) observed.

  4. 4. Remove Irritants: There are many fears and hesitations within the market and between both customers and stakeholders. The only way to fully gain acceptance into what you are trying to do is to remove these fears, or minimize them as much as possible. This goes back to pre-solving problems by paying attention to Hard Trend future certainties shaping the industry and thus impacting your vision.

  5. 5. Never Stop Learning: The best leaders never stop learning while continuously honing their craft. That is how they stay at the top of their game and remain extraordinary. They hire coaches, consultants, and other leaders to continuously learn from to be able to take risks based on facts, analysis, and a healthy abundance of valuable information.

  6. 6. Create Trust: Trust is based on honesty, transparency, and vulnerability. Tell both your customers and employees what you are going to do, why you are going to do it, and why it is important to do it the way you intend. Also, if something does not go your way, own up to it and ask for input! Charisma is important in leadership, but authenticity always wins it all.

  7. 7. Find the “Wow” Factor: Finally, show everyone why your vision has merit, but do it in a way that instills confidence and acceptance. By doing this, you are encouraging positive word-of-mouth advertising, obtaining advocates for your business.

The paths to becoming both an extraordinary leader and an Anticipatory Leader are quite similar. You must first have a clear vision added to the ability to interpret that vision and passion to create value from that vision to whom you serve. This will equate to a product or service that people want to be a part of, and one that creates positive disruption to help further the betterment of your industry and society!

Posted On Tuesday, 23 January 2024 00:00 Written by

You all know that I am very committed to business planning and scheduling. Knowing what you are trying to accomplish and then plotting the course and scheduling the work is a foundational part of what I share with my clients. It is so important that not only you have a plan and a schedule to execute, but being very specific in what you are trying to do and the results you are expecting are critical.

Too many people in our business don’t plan at all, they just prognosticate and then hope it all works out. As I have said before, “Hope is NOT a strategy for success!” Mortgage professionals have a very bad habit of just throwing numbers out there into the universe like, “I’m going to do ten deals a month”, or “I want to close $50M in loans.” But very rarely do they break it down as to HOW it is going to happen. Key questions you need to ask yourself are:

  1. 1. What is my conversion rate on the leads coming from all sources?
  2. 2. Who are the specific people who I expect to refer to me this year?
  3. 3. Based on the “Referral Triangle” concept, am I as balanced as I need to be, or do I still have targets to acquire still?
  4. 4. Am I basing my estimates on actual data or just projections?
  5. 5. How frequently will I review my numbers and adjust?
  6. 6. Given my market, how many purchase transactions can I expect in 2024?
  7. 7. Given my database and social media connections, how much will they need to grow?
  8. 8. IF we see a steady decline in interest rates, what are my additional expectations for both purchases and refinances based on my business plan?

 

It helps to have names and faces to go with your plan, even if they are just known potential targets or even if they are unknown future targets, having that listed helps keep you moving forward toward your ultimate targets of production and referral partners. Scheduling time to review and adjust will help keep you on track!

If you have questions or comments, please feel free to reach out: This email address is being protected from spambots. You need JavaScript enabled to view it. and HAPPY NEW YEAR!

Posted On Wednesday, 03 January 2024 00:00 Written by

The share of U.S. homebuyers looking to move to a different metro area declined for the third straight month in November, dropping to 23.9%. That’s the lowest share in a year and a half, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. It’s down from 24.1% a year earlier–a tiny drop, but the first annual decline in Redfin’s records–and down from a record high of 26% over the summer.

Overall homebuying slowed in 2023 because it was the least affordable year on record and there was a severe supply shortage. There were 4% fewer Redfin.com users looking to move to a new metro in November than a year ago, compared with a 3% year-over-year drop for Redfin.com users searching within their home metro. The slightly bigger drop for house hunters looking to relocate explains why migrants are making up a smaller share of overall home searchers.

The portion of house hunters who are relocating to a new area is coming down for a few reasons. One, there’s less flexibility to work remotely as employers call workers back to the office. That means the flow of homebuyers moving from the Bay Area to Austin, TX or Boise, ID, for example, has slowed. Two, home prices generally increased more in popular migration destinations than they did in expensive coastal metros during the pandemic, making the case for moving a bit less compelling. For example, prices in Sacramento–the most popular destination this month–are up about 35% since before the pandemic, compared with an 8% increase in the Bay Area.

Still, the migration rate remains above pre-pandemic levels of around 19% as some Americans are still chasing affordability. All 10 of the most popular migration destinations have lower prices than the most common origin of buyers moving in.

Spokane, WA lands on list of popular destinations for the first time

Spokane has made it onto Redfin’s list of popular migration destinations for the first time on record, landing at number 10. Popularity is determined by net inflow, a measure of how many more Redfin.com users looked to move into an area than leave.

The number-one origin of homebuyers moving to Spokane, the second most populous city in Washington, is Seattle, followed by Los Angeles and Portland, OR. Spokane has comparatively low housing costs: The typical Spokane home sells for $416,000, compared to $775,000 in Seattle.

Top 10 Metros Homebuyers Are Moving Into, by Net Inflow

Net inflow = Number of Redfin.com home searchers looking to move into a metro area, minus the number of searchers looking to leave

Metro*

Net Inflow, Nov. 2023

Net Inflow, Nov. 2022

Top Origin

Top Out-of-State Origin

Sacramento, CA

5,100

7,000

San Francisco, CA

New York, NY

Las Vegas, NV

3,800

6,400

Los Angeles, CA

Los Angeles, CA

North Port-Sarasota, FL

3,700

3,700

New York, NY

New York, NY

Cape Coral, FL

3,700

4,000

Miami, FL

Chicago, IL

Salisbury, MD

3,600

2,000

Washington, D.C.

Washington, D.C.

Myrtle Beach, SC

3,600

2,800

Washington, D.C.

Washington, D.C.

Orlando, FL

3,500

3,300

New York, NY

New York, NY

Portland, ME

3,400

2,800

Boston, MA

Boston, MA

Nashville, TN

3,000

2,800

Los Angeles, CA

Los Angeles, CA

Spokane, WA

2,500

2,300

Seattle, WA

Los Angeles, CA

*Combined statistical areas with at least 500 users searching to and from the region in Sept. 2023-Nov. 2023

Los Angeles tops list of metros homebuyers are leaving for first time

More homebuyers are leaving Los Angeles than any other metro area in the country. That marks the first time on record it has been the number-one place homebuyers are leaving and the first time in over two years the Bay Area has dropped out of the number-one spot. The Bay Area comes in second, followed by New York. That’s based on net outflow, a measure of how many more Redfin.com users are looking to leave a metro than move in.

Migration out of both Los Angeles and the Bay Area has slowed since the height of the pandemic, when remote workers were fleeing both California metros in favor of more affordable places. But Los Angeles has surpassed the Bay Area because the flow out of the Bay Area has steadily slowed, while the flow out of Los Angeles has picked back up in recent months.

Top 10 Metros Homebuyers Are Leaving, by Net Outflow

Net outflow = Number of Redfin.com home searchers looking to leave a metro area, minus the number of searchers looking to move in

Metro*

Net Outflow, Nov. 2023

Net Outflow, Nov. 2022

Top Destination

Top Out-of-State Destination

Los Angeles, CA

26,100

30,300

Las Vegas, NV

Las Vegas, NV

San Francisco, CA

25,400

32,000

Sacramento, CA

Seattle, WA

New York, NY

24,900

20,700

Miami, FL

Miami, FL

Washington, D.C.

13,300

16,100

Salisbury, MD

Salisbury, MD

Seattle, WA

11,900

1,300

Spokane, WA

Phoenix, AZ

Chicago, IL

7,600

7,100

Cape Coral, FL

Cape Coral, FL

Boston, MA

5,000

6,100

Portland, ME

Portland, ME

Philadelphia, PA

3,000

1,300

Salisbury, MD

Salisbury, MD

Detroit, MI

2,100

3,400

Washington, D.C.

Washington, D.C.

Denver, CO

2,000

3,200

Chicago, IL

Chicago, IL

*Combined statistical areas with at least 500 users searching to and from the region in Sept. 2023-Nov. 2023

To view the full report, including charts and methodology, please visit: https://www.redfin.com/news/housing-migration-trends-November-2023

Posted On Monday, 01 January 2024 00:28 Written by

Freddie Mac (OTCQB: FMCC) released the results of its Primary Mortgage Market Survey® (PMMS®), showing the 30-year fixed-rate mortgage (FRM) averaged 6.61 percent.

“The rapid descent of mortgage rates over the last two months stabilized a bit this week, but rates continue to trend down,” said Sam Khater, Freddie Mac’s Chief Economist. “Heading into the new year, the economy remains on firm ground with solid growth, a tight labor market, decelerating inflation, and a nascent rebound in the housing market.”

News Facts

  • The 30-year FRM averaged 6.61 percent as of December 28, 2023, down from last week when it averaged 6.67 percent. A year ago at this time, the 30-year FRM averaged 6.42 percent.
  • The 15-year FRM averaged 5.93 percent, down from last week when it averaged 5.95 percent. A year ago at this time, the 15-year FRM averaged 5.68 percent.

The PMMS® is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20 percent down and have excellent credit. For more information, view our Frequently Asked Questions.

Freddie Mac’s mission is to make home possible for families across the nation. We promote liquidity, stability, affordability and equity in the housing market throughout all economic cycles. Since 1970, we have helped tens of millions of families buy, rent or keep their home. Learn More: Website | Consumers | Twitter | LinkedIn | Facebook

Posted On Saturday, 30 December 2023 07:11 Written by

Housing affordability is expected to improve in 2024 as mortgage rates fall and more homes go up for sale

Just 15.5% of homes for sale in 2023 were affordable for the typical U.S. household—the lowest share on record, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. That’s down from 20.7% in 2022 and more than 40% before the pandemic homebuying boom.

The number of affordable homes for sale also dropped to the lowest level on record. There were 352,500 affordable listings in 2023, down 40.9% from 596,135 in 2022 and down from over a million per year during the prior decade. While the decline is partly due to a drop in listings in general—listings overall fell 21.2% year over year—it’s also due to the fact that elevated mortgage rates and stubbornly high prices made the listings hitting the market more expensive.

Mortgage rates have fallen from their October peak, but remain higher than they were in 2022; the typical homebuyer’s monthly payment is roughly $250 more than it was a year ago. Elevated mortgage rates have also propped up housing costs by limiting supply. Many homeowners are staying put instead of selling because they don’t want to lose their ultra low interest rate. That’s bolstering home prices because it means buyers are competing for a limited pool of homes.

The good news is that housing affordability has already started to improve, and Redfin expects it to continue improving in 2024.

“Many of the factors that made 2023 the least affordable year for homebuying on record are easing,” said Redfin Senior Economist Elijah de la Campa. “Mortgage rates are under 7% for the first time in months, home price growth is slowing as lower rates prompt more people to list their homes, and overall inflation continues to cool. We’ll likely see a jump in home purchases in the new year as buyers take advantage of lower mortgage rates and more listings after the holidays.”

Housing Affordability Was Three Times Worse for Black Households Than for White Households

Only 6.9% of homes for sale in 2023 were affordable for the typical Black household, compared with 21.6% for the typical white household. The share was nearly as low for Hispanic/Latino households (10.4%) and was highest for Asian households (27.4%).

Housing has become unaffordable for a lot of Americans, but Black and Hispanic/Latino families have been hit especially hard because they’re often less wealthy to begin with. On average, these groups earn less money, have less generational wealth, and have lower credit scores (and sometimes no credit scores at all) than white Americans due to decades of discrimination. That makes it tougher to afford a down payment and qualify for a low mortgage rate. Black Americans, in particular, also frequently face racial bias during the homebuying process.

The racial housing affordability gap exists nationwide, from the least affordable metros to the most affordable metros. In Detroit, which has the lowest mortgage payments in the country, 31.8% of listings were affordable for the typical Black household this year and 50.2% were affordable for the typical Hispanic/Latino household, but that’s much lower than the 66% affordable for the typical white household. In Anaheim, CA, one of the most expensive markets in the country, people across the board have a hard time finding affordable housing. Still, Black and Hispanic/Latino house hunters have fewer options. Less than 0.5% of listings were affordable for the typical Black household and the typical Hispanic/Latino household in 2023, compared with 1.8% for the typical white household.

It’s worth noting that wages have grown faster for nonwhite households than for white households this year, helping to shrink the income gap. Rents have also started to fall, which disproportionately impacts communities of color because they’re more likely to be renters.

Affordable Markets Became Much Less Affordable in 2023

In Kansas City, MO, 27.9% of homes for sale in 2023 were affordable for the typical local household, down from 42.8% in 2022. That 14.8 percentage point decline is the largest among the metros Redfin analyzed. Next came Greenville, SC (-14.1 ppts), Worcester, MA (-13.7 ppts), Cincinnati (-13.7 ppts) and Little Rock, AR (-13.5 ppts).

Relatively inexpensive metros have seen affordability erode quickly because housing costs have relatively more room to rise, and local incomes are often climbing at a fraction of the pace that mortgage payments are.

In San Francisco, 0.3% of homes for sale in 2023 were affordable for the typical local household, down from 0.4% in 2022. That’s the smallest decline among the metros Redfin analyzed. Next came Detroit (-0.2 ppts), Los Angeles (-0.2 ppts) Boise, ID (-0.3 ppts) and Oakland, CA (-0.5 ppts).

Markets that have long been expensive like San Francisco, Oakland and Los Angeles already had so few affordable homes that the share didn’t have much room to fall. In the five aforementioned metros aside from Detroit, less than 5% of listings were affordable for the typical household in 2023.

To view the full report including charts, methodology and metro-level breakouts, please visit:

https://www.redfin.com/news/share-of-homes-affordable-2023

Posted On Sunday, 24 December 2023 06:15 Written by

Existing-home sales grew in November, breaking a streak of five consecutive monthly declines, according to the National Association of Realtors®. Among the four major U.S. regions, sales climbed in the Midwest and South but receded in the Northeast and West. All four regions experienced year-over-year sales decreases.

Total existing-home sales[i] – completed transactions that include single-family homes, townhomes, condominiums and co-ops – elevated 0.8% from October to a seasonally adjusted annual rate of 3.82 million in November. Year-over-year, sales fell 7.3% (down from 4.12 million in November 2022).

“The latest weakness in existing home sales still reflects the buyer bidding process in most of October when mortgage rates were at a two-decade high before the actual closings in November,” said NAR Chief Economist Lawrence Yun. “A marked turn can be expected as mortgage rates have plunged in recent weeks.”

According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.95% as of December 14, falling below 7% for the first time since August 10. That’s down from 7.03% the previous week but up from 6.31% one year ago.

Total housing inventory[ii] registered at the end of November was 1.13 million units, down 1.7% from October but up 0.9% from one year ago (1.12 million). Unsold inventory sits at a 3.5-month supply at the current sales pace, down from 3.6 months in October but up from 3.3 months in November 2022.

The median existing-home price[iii] for all housing types in November was $387,600, an increase of 4.0% from November 2022 ($372,700). All four U.S. regions posted price increases.

“Home prices keep marching higher,” Yun added. “Only a dramatic rise in supply will dampen price appreciation.”

REALTORS® Confidence Index

According to the monthly REALTORS® Confidence Index, properties typically remained on the market for 25 days in November, up from 23 days in October and 24 days in November 2022. Sixty-two percent of homes sold in November were on the market for less than a month.

First-time buyers were responsible for 31% of sales in November, up from 28% in October 2023 and November 2022. NAR’s 2023 Profile of Home Buyers and Sellers – released in November[iv] – found that the annual share of first-time buyers was 32%.

All-cash sales accounted for 27% of transactions in November, down from 29% in October but up from 26% in November 2022.

Individual investors or second-home buyers, who make up many cash sales, purchased 18% of homes in November, up from 15% in October and 14% one year ago.

Distressed sales[v] – foreclosures and short sales – represented 1% of sales in November, virtually unchanged from last month and the previous year.

Single-family and Condo/Co-op Sales

Single-family home sales increased to a seasonally adjusted annual rate of 3.41 million in November, up 0.9% from 3.38 million in October but down 7.3% from the prior year. The median existing single-family home price was $392,100 in November, up 3.5% from November 2022.

Existing condominium and co-op sales recorded a seasonally adjusted annual rate of 410,000 units in November, identical to October and down 6.8% from one year ago. The median existing condo price was $350,100 in November, up 8.6% from the previous year ($322,400).

Regional Breakdown

Existing-home sales in the Northeast slipped 2.1% from October to an annual rate of 470,000 in November, down 13.0% from November 2022. The median price in the Northeast was $428,600, up 4.8% from the prior year.

In the Midwest, existing-home sales rose 1.1% from the previous month to an annual rate of 940,000 in November, down 8.7% from one year ago. The median price in the Midwest was $280,800, up 4.9% from November 2022.

Existing-home sales in the South improved 4.7% from October to an annual rate of 1.77 million in November, a decline of 4.3% from the prior year. The median price in the South was $351,500, up 3.4% from last year.

In the West, existing-home sales slumped 7.2% from a month ago to an annual rate of 640,000 in November, down 8.6% from one year before. The median price in the West was $603,200, up 5.3% from November 2022.

“Agents who are Realtors® deliver vital objective expertise, counsel and valuable information for consumers throughout the home buying and selling process,” said NAR President Tracy Kasper, a Realtor® from Nampa, Idaho, and broker-owner of Berkshire Hathaway HomeServices Silverhawk Realty. “NAR members nationwide remain committed to placing their clients’ interests first as they pursue the dream and benefits of homeownership.”

 

[i] Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings from Multiple Listing Services. Changes in sales trends outside of MLSs are not captured in the monthly series. NAR benchmarks home sales periodically using other sources to assess overall home sales trends, including sales not reported by MLSs.

Existing-home sales, based on closings, differ from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which account for more than 90% of total home sales, are based on a much larger data sample – about 40% of multiple listing service data each month – and typically are not subject to large prior-month revisions.

              The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

              Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

[ii] Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982 (prior to 1999, single-family sales accounted for more than 90% of transactions and condos were measured only on a quarterly basis).

[iii] The median price is where half sold for more and half sold for less; medians are more typical of market conditions than average prices, which are skewed higher by a relatively small share of upper-end transactions. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if additional data is received.

The national median condo/co-op price often is higher than the median single-family home price because condos are concentrated in higher-cost housing markets. However, in a given area, single-family homes typically sell for more than condos as seen in NAR’s quarterly metro area price reports.

[iv] Survey results represent owner-occupants and differ from separately reported monthly findings from NAR’s REALTORS® Confidence Index, which include all types of buyers. The annual study only represents primary residence purchases, and does not include investor and vacation home buyers. Results include both new and existing homes.

[v] Distressed sales (foreclosures and short sales), days on market, first-time buyers, all-cash transactions and investors are from a monthly survey for the NAR’s REALTORS® Confidence Index, posted at nar.realtor.

Posted On Tuesday, 26 December 2023 06:34 Written by
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