Existing-Home Sales Slip Again

Existing-home sales slipped further in August as economists blame the “housing recession” mostly on higher mortgage rates, though home prices continue rising, according to newly released data from the National Association of REALTORS®. But while existing-home sales, which reflect transactions for single-family homes, townhomes, condos, and co-ops, fell a modest 0.4% month over month in August, they’re down about 20% compared to a year ago.

“The softness in home sales reflects this year’s escalating mortgage rates,” says NAR Chief Economist Lawrence Yun. “Nonetheless, homeowners are doing well, with near-nonexistent distressed property sales, and home prices are still higher than a year ago.”

Home prices rose 7.7% in August compared to a year ago, according to NAR. The median existing-home sales price for all housing types increased to $389,500, with every major region of the U.S. posting hikes in home prices last month. But August did mark the second consecutive month in which the median sales price dropped from its record high of $413,800 from June. NAR’s report notes that follows a typical seasonal drop in home prices after they peak in early summer.

Here are additional key indicators from NAR’s August housing report:

• Days on the market: Eighty-one percent of homes were on the market for less than a month. Properties typically remained on the market for 16 days, down from 17 days a year ago.
• Housing inventory: Fell 1.5% month over month but is unchanged from last year’s levels. Unsold inventory is at a 3.2-month supply at the current sales pace. “Inventory will remain tight in the coming months and even for the next couple of years,” Yun says. “Some homeowners are unwilling to trade up or trade down after locking in historically low mortgage rates in recent years, increasing the need for more new-home construction to boost supply.”

• All-cash sales: Accounted for about a quarter of transactions, up slightly from 22% a year ago. Individual investors and second-home buyers tend to make up the biggest bulk of cash sales. They purchased 16% of homes, which is up from 14% a year ago.
• First-time buyers: Comprised 29% of sales, holding steady from last month and a year ago.
• Distressed sales: Foreclosures and short sales comprised just 1% of sales, continuing a historically low level.

Regional Snapshot

Existing-home sales dropped on an annual basis in all four major regions of the U.S. in August. But month-over-month figures varied.

• Northeast: Existing-home sales rose 1.6% month over month, reaching an annual rate of 630,000. However, sales in the Northeast are down 13.7% from a year ago. Median price: $413,200, a 1.5% increase from August 2021.
• Midwest: Sales dropped 3.3% compared to the prior month, reaching an annual rate of 1.16 million. That’s down nearly 16% from August 2021. Median price: $287,900, up 6.6% from last year.
• South: Existing-home sales held steady month over month but were down 19.3% from a year ago. Sales reached an annual rate of 2.13 million. Median price: $356,000, an increase of 12.4% from August 2021.
• West: Sales rose 1.1% month over month but are down 29% compared to a year ago. Sales reached an annual rate of 880,000. Median price: $602,900, a 7.1% increase from last year.

©National Association of REALTORS®
Reprinted with permission

Builders Aim to Win Buyers Back

Even as demand for new homes fizzles—about a quarter of homebuilders are reducing their prices to attract more buyers as foot traffic falls—single-family construction jumped 3.4% in August, the Commerce Department reported Tuesday. Economists are calling it a “surprising bounce back” after five consecutive months of declines.

Still, builder sentiment fell in September to its lowest level since 2014, according to data from the National Association of Home Builders. Rising mortgage rates, which topped 6% last week, and construction delays due to supply chain disruptions are among builders’ top concerns, the NAHB’s report shows. More than half of builders surveyed say they are using incentives to bolster sales, including offering mortgage rate buydowns, free amenities and price reductions, according to the NAHB/Wells Fargo Housing Market Index.

Talking Points to Calm Consumers’ Housing Bubble Fears

Lawrence Yun, chief economist for the National Association of REALTORS®, lays the blame for the new-home market’s slump squarely on mortgage rates. “However, this month’s increase in housing starts implies that builders still see profit opportunities, even as they concede on prices,” Yun says. “Material prices, including for lumber, have been moderating, and fully completed homes are selling fast.” Unfinished homes that remain under construction are the ones sitting on the market for long periods, Yun adds.

The NAHB agrees with Yun’s assessment. “Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new-home purchase out of financial reach for many households,” says Jerry Konter, the NAHB’s chairman. “In another indicator of weakening market, 24% of builders reported reducing home prices, up 19% last month.”

NAHB Chief Economist Robert Dietz adds that the “housing recession” shows few signs of abating as builders continue to grapple with elevated construction costs and buyers now face 6% mortgage rates.

Home building permits—a gauge of future construction—fell in August to the slowest pace in more than two years, the Commerce Department reports.

Multifamily Properties Continue to Shine

Meanwhile, multifamily construction climbed to its best monthly performance in 35 years. “Apartment demand has been strong, with rents rising at a historically high pace,” Yun says. “Those consumers unable to qualify for a mortgage at higher interest rates are renewing their rental leases. Job creation is also boosting the rental demand.” Construction on multifamily dwellings surged 28% in August to an annual pace of 640,000 units, the Commerce Department reports.

Still, builders remain worried. The Federal Reserve meets on Wednesday and is expected to raise its benchmark interest rate by another 75 basis points in an effort to tame inflation. Housing analysts are concerned about the further impact that could have on mortgage rates.

However, some economists point to the stubborn housing shortage as a saving grace that could keep the real estate market from a deep downturn. By some estimates, the nation was short about 5 million homes before the onset of the pandemic. “The shortage is not going away soon,” Yun says. “The near-term single-family outlook is complicated due to high mortgage rates. But the long-term outlook for homebuilders is bright due to the need to build more to fully relieve the housing shortage.”

©National Association of REALTORS®
Reprinted with permission

Skeptical Over iBuyers, But Still Curious?

Sixty-six percent of homeowners recently surveyed say they don’t believe iBuyers yield higher sales prices than traditional sales. However, a nearly equal number say they would consider using an iBuyer due to the flexible options for selling, a new survey from Clever Real Estate finds.

The number of iBuyer companies and services has grown over the last few years, offering buyers a way to sell their house quickly by receiving an instant cash offer and setting their closing date.

While survey respondents mostly said they don’t believe iBuyers offer more at closing, they said they would be willing to accept an average of $45,400 less for their home in order to sell it instantly and choose their closing date, the survey finds.

But 72% of homeowners would still want to work with a real estate agent when requesting offers from iBuyers. Some brokerages have added iBuying arms, such as Keller Offers, RedfinNow, RealSure and others, to their companies to allow agents to continue to guide these instant-offer transactions.

Sixty-five percent of homeowners say they would consider selling their home to an iBuyer. Millennial respondents were more open to the idea (72%) versus baby boomers (52%).

That said, even though the iBuyer real estate model is now nearly a decade old, only 27% of about 1,000 homeowners surveyed by Clever Real Estate could correctly define what an iBuyer is. The sales strategy is still relatively uncommon; iBuyers comprised just 1.3% of home sales in 2021.

“The sentiment around iBuyers is complicated because the average American homeowner isn’t completely against them, but also doesn’t know much about them,” the Clever Real Estate survey says.

Source: 

“American Attitudes on iBuyer Companies: 2022 Data,” Clever Real Estate (June 6, 2022)

©National Association of REALTORS®
Reprinted with permission

Housing Stock Prompts Remodeling Boom

The median age of a home in the U.S. is 39 years old. The aging housing stock signals a growing remodeling market ahead, according to a new report from the National Association of Home Builders.

As homes age, they need repairs or updated components such as appliances. Homeowners may add amenities to older homes as well, to have them better compete against more modern home styles and amenities.

The Home Renovation Boom Continues

Baby Boomers Face Challenges to Downsize

Majority of Aging Adults Say They’re Not Moving

“Rising home prices also encourage home owners to spend more on home improvement,” the NAHB says on its Eye on Housing blog. The aging housing stock also likely will lead to rising demand for new construction over the long run as homes get older, the NAHB notes.

More than half of owner-occupied homes were built before 1980. About 38% were built before 1970. Meanwhile, new-home construction has not kept up the pace over the past nine years, with the share of new homes dropping from 15% in 2006 to 7% in 2019, according to the builders’ trade group.

The share of housing stock built 50 years ago or more jumped from 30% in 2009 to 37% in 2019.

The country’s aging housing stock is prompting homeowners to make more home renovations, particularly younger owners who have faced limited housing inventories for sale. Nearly half of U.S. homeowners plan to upgrade or remodel their homes this year, according to a survey from 2021 conducted by LendingHome, a lender to real estate investors. The trend is most prominent among homeowners between the ages of 25 to 44, who are undertaking the most renovations and looking to bring new trends and renovations to the aging homes they purchase.

©National Association of REALTORS®
Reprinted with permission

Mentorship Program Helps Agents Discover New Niches

As the housing market slows, real estate pros may find it’s a perfect opportunity to explore new niches and expand their business opportunities. They’re finding that NAR Spire, the National Association of REALTORS®’ mentorship program, may provide guidance and encouragement.

The program, which kicked off last year, aims to help real estate professionals in underserved areas grow their businesses. Participants are matched with experienced agents and receive one-on-one mentorship and tips on business operations. Participants also can take advantage of live educational events and use NAR Spire’s online platform to connect.

“Through Spire, it is our hope … to lead new and blossoming members through their own processes of professional growth, advancement and transition,” NAR CEO Bob Goldberg writes in a recent column for The American Genius. The program aims to attract people from different backgrounds to the real estate profession.

Goldberg highlights an example of how the program has helped real estate pros discover new niches and business pathways. He shared the story of real estate pro Ahmed Islam in Lehigh Valley, Pa., who took part in the program to finally fulfill his dream of jumping from residential real estate to commercial real estate. He first became involved with NAR Spire in 2021. Islam said he tried unsuccessfully for seven years to make the jump into commercial real estate, and his mentor helped him make the leap in seven months. They met every other week via Zoom initially and continue to meet at annual NAR conferences.

“Mentors are not there to build your business—they’re there to guide you,” Ahmed said, as noted in Goldberg’s article. “And [my mentor] was a great guide.”

©National Association of REALTORS®
Reprinted with permission

Mortgage Rates Top 6% for First Time Since 2008

The interest rate for the 30-year fixed-rate mortgage crossed a major threshold this week, hitting 6.02%—the first time it has broken 6% since 2008, Freddie Mac reported Thursday. Volatile mortgage rates are sending shockwaves through the housing market and unnerving home buyers who are concerned about shrinking affordability. The 30-year loan averaged just 2.86% a year ago.

The increased rates have pushed monthly mortgage payments 60% higher year over year, says Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®. “There is no doubt that these higher rates hurt housing affordability,” Evangelou writes on the association’s blog. Mortgage rates already marked a grim milestone when they hit 5.7%, a rate that puts a median-priced home out of reach for the typical household.

Mortgage rates this week continued to rise alongside higher-than-expected inflation numbers, adds Sam Khater, Freddie Mac’s chief economist. “Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate,” he says. “This indicates that while home price declines will likely continue, they should not be large.”

Further, homeownership may offer a hedge against inflation, Evangelou says. Fixed-rate mortgages are not adjusted to inflation, and home buyers’ monthly payments will remain the same during the loan period. She says that’s important at a time when rents are rising to their highest level in nearly four decades.

Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 15:

• 30-year fixed-rate mortgages: averaged 6.02%, with an average 0.8 point, increasing from last week’s 5.89% average. Last year at this time, 30-year rates averaged 2.86%.
• 15-year fixed-rate mortgages: averaged 5.21%, with an average 0.9 point, rising from last week’s 5.16% average. A year ago, 15-year rates averaged 2.12%.
• 5-year hybrid adjustable-rate mortgages: averaged 4.93%, with an average 0.2 point, increasing from last week’s 4.64% average. A year ago, 5-year ARMs averaged 2.51%.

Trying a Different Mortgage Option May Offer Savings

As the average for the 30-year fixed-rate mortgage rises, more home buyers are reaching for adjustable-rate mortgages or 15-year fixed-rate mortgages to lock in a lower rate. A new survey from LendingTree shows that 15-year mortgages could save home buyers an average of $214,899 in interest over the lifetime of their loan compared to 30-year mortgages. Homeowners in California, Hawaii, Washington, Massachusetts and New York stand to save the most from 15-year fixed-rate mortgages, the study shows.

“Borrowers should always keep in mind that different loan types exist and that one size doesn’t necessarily fit all,” says Jacob Channel, LendingTree’s senior economist. “For example, while a 15-year fixed mortgage may be the best option for some, it isn’t always the best option for everyone. Borrowers shouldn’t feel discouraged if they can’t afford a mortgage with a shorter repayment term. Ultimately, while factors like how much interest a loan charges or how long it will take to be paid off are important, they aren’t as important as whether or not that loan is affordable to a borrower.”

©National Association of REALTORS®
Reprinted with permission

REALTORS® Are Donating More Money, Time to Charity

REALTORS® are building deep connections within their communities, giving more money and devoting more time to support numerous causes from neighborhood cleanups to fundraising for those in need. Eighty-three percent of the nation’s 1.5 million REALTORS® cite community involvement as an important component of their business plan, according to the National Association of REALTORS®’ newly released 2022 Community Aid and Real Estate (CARE) Report. The report highlights the monetary contributions and volunteer efforts of NAR members, broker-owners and REALTOR® association executives and staff.

Two-thirds of REALTORS® say they volunteer on a monthly basis, spending an average of eight hours per month giving back, the report shows. Further, 79% made charitable donations last year. REALTORS® were most likely last year to volunteer to deliver food to the elderly or help food banks with COVID-19 relief efforts, according to the report. Twenty-two percent of REALTORS® say they hosted an annual fundraiser for their local community or nonprofits.

“REALTORS® are deeply involved in their communities, and this report shines a light on the great volunteer efforts by NAR members,” says NAR President Leslie Rouda Smith. “It is inspiring to see REALTORS® across the country continue to boost local charitable efforts, and I’m proud to be part of such a compassionate and caring group.”

Associations Encourage More Members to Get Involved

Charitable giving by REALTOR® associations has climbed 20% since 2020, the report shows. The typical REALTOR® association donated more than $12,000 to the community last year, up from $10,000 in 2020. Eighty-five percent of associations hold events that encourage their members to volunteer within their community, according to the report. At least half of the nation’s local and state REALTOR® associations planned volunteer projects for the week-long 2022 REALTOR® Volunteer Days event in June.

For example, Florida REALTORS® recently held a volunteer event called “Clean Up Florida’s Waters,” in which members across the state teamed up to clear more than 18,000 pounds of trash and debris from 36 miles of Florida waterways.

Additionally, NAR’s Good Neighbor Awards each year recognizes the extraordinary impact of REALTORS® in their community or beyond through volunteer work. The 2022 Good Neighbor finalists have been announced, and you can vote for your favorite cause through Sept. 30.

©National Association of REALTORS®
Reprinted with permission