Bolder Fed Inflation Policy May Catapult Mortgage Rates

Inflation rose to a new 40-year high in June and is accelerating even faster than expected, according to data from the Bureau of Labor Statistics’ Consumer Price Index. Consumer prices jumped 9.1% last month and posted an annualized inflation rate of 17%, much higher than economists predicted. Consumers faced record-high gas prices and spiking grocery costs last month.

“The Fed may be forced to raise interest rates even more aggressively than planned—even with the rising possibility of a recession on the horizon,” says Lawrence Yun, chief economist for the National Association of REALTORS®. “The mortgage market had already factored in several additional rounds of the Fed’s rate hike but may have to adjust a bit higher based on today’s uncomfortable inflation rate.”

That could be a major blow to aspiring home buyers who have been nervously watching mortgage rates climb drastically over the last few weeks. The 30-year fixed-rate mortgage averaged 5.3% last week, up from 2.9% just a year earlier, according to Freddie Mac. Meanwhile, home prices have risen 15% over the past year. (Note: Home prices are not included in the latest inflation figures. Likewise, the 50% rise in monthly mortgage payments this year versus last year also is not reflected in the CPI, Yun notes.)

A new Forbes.com analysis shows that mortgage rates have contributed to higher monthly mortgage payments more than rising home prices. The publication’s analysis shows that in the past 12 months, the typical monthly payment has increased up to 57%. Higher mortgage rates alone accounted for $408 of the average $725 increase in payments, while higher home prices accounted for $239, the analysis notes. (The remaining balance came from higher mortgage rates that were applied to a higher principal.)

“The homeowners who locked in low interest rates the prior two years have fixed, non-rising monthly mortgage payments,” Yun says. That’s “a different story for renters. Rents rose by 6% from last year and are rising at a 10% annualized rate. Rents will continue to rise in the upcoming years.”

The Federal Reserve’s next meeting is slated for the end of July. Many economists predict the Fed will tighten its monetary policy further to control inflation. That could lead to another 75- or 100-basis point increase in the Fed’s short-term benchmark rate. While the Fed’s benchmark rate does not directly impact mortgage rates, it does influence them. Yun said following the Fed’s last rate hike—its largest since 1994—that the buyer pool could shrink as mortgage rates increase.

©National Association of REALTORS®
Reprinted with permission

Convert Renters to Home Buyers

REALTORS® now have free access to Rental Beast, a software provider with a secure FCRA-compliant online rental application and tenant screening tool. The National Association of REALTORS® announced Tuesday that Rental Beast has become the newest addition to NAR REALTOR Benefits®.

“NAR REALTOR Benefits® aims to provide products and services that deliver value and empower REALTORS® to succeed in their businesses,” says Rhonny Barragan, NAR’s vice president of strategic alliances. “Rental Beast created a lead-to-lease platform, which brings seamless entry into the multibillion-dollar rental industry and its clientele—and we are thrilled to provide this benefit to our members.”

Rental Beast also is integrated with many MLS platforms and association websites, which enables REALTORS® to receive additional access to rental listing management tools. Those could include listing add/edit, rental listing syndication, rental lead generation and qualification, and renter-to-buyer conversion.

“We are proud to be NAR’s exclusive provider of rental solutions,” says Ishay Grinberg, founder and CEO of Rental Beast. “This partnership will help REALTORS® better serve customers countrywide by partnering them with the nation’s more than 113 million renters. With our tools, REALTORS® can also build relationships with potential home buyers by serving as their trusted advisers in the rental process.”

Through the partnership, REALTORS® also have access to Rental Beast University, a digital education platform that includes on-demand webinars and self-paced courses covering topics like sales best practices, social media skills and how to convert renters to buyers.

To gain access and initiate applications for rental properties, NAR members can sign up for a free account at nar.realtor/rental-beast.

©National Association of REALTORS®
Reprinted with permission

Technology REALTORS® Use the Most

REALTORS® use multiple technology platforms daily to promote their business and stay connected to clients. While smartphones and email are key tools that facilitate most of those connections, 53% of REALTORS® also use social media apps or GPS features daily, according to the National Association of REALTORS®’ 2022 Member Profile.

Typing proves more popular than talking to clients. According to the survey, 94% of REALTORS® say they prefer to communicate with their clients over text message, followed by telephone (92%) or email (90%). About 27% of REALTORS® say they prefer to use video chat to connect with customers.

Here’s a snapshot of more technology use among REALTORS®.

Keeping a website presence: Websites continue to be a big piece of maintaining a digital presence online. Eighty-four percent of REALTORS® say they included their own property listings on their residential brokerage website, along with home buying and selling information, links to their brokerage’s website, social media links, and mortgage or financial calculators. Commercial brokerage specialists were more likely to include links to the commercial information exchange, virtual tours, comparative market analysis, and the National Association of REALTORS® on their websites.

While websites are viewed as a key tool among real estate professionals, 57% of REALTORS® reported bringing in no inquiries or business directly from their website; 27% cited one to five inquiries from their website.

Staying connected on social media: Seventy-two percent of members say they use Facebook for professional use; 55% use LinkedIn; and 45% use Instagram professionally. Still, more than a quarter of members—or 29%—say they do not use social media at all for their business. (View: 7 Tips to Help Brokers Master Social Media and Develop a Growth Strategy for Your Social Media Content)

Leveraging business software: Sixty-three percent of REALTORS® use MLS software every day. Other software used regularly includes electronic contracts and forms, along with e-signature, document preparation, contact management, and social media management tools, the survey shows.

©National Association of REALTORS®
Reprinted with permission

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