Buyers Boost Spending on Remodeling

Home buying is good for the economy. Each home purchase triggers significant spending on furnishings, appliances and remodeling.

A recent study from the National Association of REALTORS® estimated that, in 2021, the housing market generated a median of about $113,000 in economic impact per home sale. Read more: How Home Sales Help Local Economies

The National Association of Home Builders recently released a study documenting the economic benefit of a home sale. During the first year after closing on a house, a typical buyer of a newly built single-family detached home spends, on average, $9,250 more than a similar non-moving homeowner. A buyer of an existing single-family detached home tends to spend over $5,240 more than a similar non-moving owner, the NAHB analysis found.

The study finds that buyers of newly built homes spend the most on property alterations and repairs following a move, despite the home being brand-new. “A typical new-home buyer … is estimated to spend almost twice as much on these projects ($9,288) compared to an identical household that stays put in a house they already own,” the NAHB notes on its Eye on Housing blog. Researchers say the extra spending is most common for building outdoor features, like patios, pools, walkways, fences, landscaping and various additions to the new home.

Buyers of new homes also spent considerably more on furnishings following their move. They spent an average of $4,729 on furnishings and $4,138 on appliances following a move.

Buyers of an existing home also tended to spend the most on property alterations and repairs following a move—$7,391. (That is still below the $9,288 that new-home buyers spent.)

“In the case of buying an older home, most of this extra spending goes to property repairs, alterations, and various remodeling projects,” the NAHB notes.

Buyers of existing homes spent $2,988, on average, on furnishings and $2,799 on appliances, also less than purchasers of new-home construction, the study finds.

Source: 

“How a Home Purchase Boosts Consumer Spending,” National Association of Home Builders’ Eye on Housing blog (June 6, 2022)

©National Association of REALTORS® Reprinted with permission

Buyers May Be Gaining Leverage

A turning point may be occurring in the housing market. Fewer people were searching for “homes for sale” on Google during the week ending May 21, down 10% from a year earlier. Home tour activity is falling slightly, mortgage purchase applications are down 14% compared to a year earlier, and, while it’s still uncommon, more home sellers are dropping their asking prices.

Meanwhile, housing inventories are showing a slight improvement. Active inventory rose 8% annually, the first time that benchmark has been reached in nearly three years, realtor.com®’s monthly housing trends report shows. A rising number of homeowners may be growing more confident in selling, and they may want to cash out before any slowdowns in the housing market.

Competition is still tight. Fifty-four percent of homes that went under contract had an accepted offer within the first two weeks of being listed, Redfin reports. Thirty-nine percent of homes went under contract within one week of hitting the market.

Home prices are still high. The median national home price climbed to an all-time high in May, reaching $447,000, realtor.com® reports.

Aspiring buyers are expressing greater concerns over prices. Fannie Mae’s home purchase sentiment index showed that 79% of respondents reported that it’s a bad time to buy a home, a new survey high. Affordability is the main reason for their concern, the survey found.

Mortgage rates and home prices have climbed, pushing on buyers’ budgets. “The sudden surge in mortgage rates led to a sudden and significant cool down in the housing market in May,” says Chen Zao, the lead of Redfin’s economics research team. “However, mortgage rates are now stabilizing and homes remain in short supply, so while we do expect home price growth rates to decline, we don’t expect prices to fall much at a national level. For home buyers trying to determine the best timing this year, the main benefit of waiting is that there may be less competition as supply starts to build up.”

Source: 

Fannie Mae and “Housing Market Update: Homebuyers Regain Some Control as Supply Grows and Demand Pulls Back,” Redfin (June 2, 2022)

©National Association of REALTORS® Reprinted with permission

Check out this handy moving check list to ensure moving day is less of a hassle! With the help of myself and Katy Sychterz of RoundPoint Mortgage, (NMLS# 183951 – 484.534.5107) we can explore homebuying options to help you meet your goals. #RealEstate #Realtor #HomePurchase #BuyersMarket #PlymouthMeetingRP 

Are you ready to buy a new home? Get pre-approved today! With the help of myself and Katy Sychterz of RoundPoint Mortgage, (NMLS# 183951 – 484.534.5107) we can explore homebuying options to help you meet your goals. #RealEstate #Realtor #HomePurchase #BuyersMarket #PlymouthMeetingRP 

HUD Program Takes Aim at Housing Supply Crisis

The Department of Housing and Urban Development announced a new program to help remedy the nation’s housing supply shortage by boosting affordable housing. HUD’s “Our Way Home” initiative sets out to increase housing supply by helping local communities preserve and add affordable housing in their area for rentals and homeownership. This may include several initiatives, like advocating for zoning changes, holding roundtables to engage local and state leadership for solutions, and more.

The National Association of REALTORS® welcomed HUD’s announcement to combat the housing supply challenge. “As NAR has long recognized, a collaborative approach that involves local partners is critical to building strong, thriving, and inclusive communities,” NAR President Leslie Rouda Smith said in a statement about HUD’s new initiative. “‘Our Way Home’ promises to not only provide tools and resources necessary to address the supply shortages plaguing the country, but it will also improve vital HUD programs based on feedback gained through this effort.”

NAR commissioned a report last year that found the U.S. faces a housing shortfall of 5.5 million housing units. The gap is so large, NAR says, that eliminating it will likely take more than a decade. The combination of record-high home prices and record-low housing inventories is making homeownership increasingly difficult to achieve, particularly for Americans of color and first-generation home buyers, NAR says in its recent “Double Trouble” report.

“This historic shortage of affordable housing requires a once-in-a-generation response,” Rouda Smith says. NAR supports zoning reform, greater allocations to increase new-home construction, expanded financing options, and tax incentives that will increase investments to convert unused commercial spaces into residential.

“The shortage of affordable housing has been growing for decades—but this is a solvable crisis,” Marcia L. Fudge, HUD’s secretary, said in the “Our Way Home” initiative announcement. “Across the country, we are seeing many communities ending exclusionary zoning, building affordable housing in communities that previously did not allow it. We are seeing communities use innovative building models and materials, and design homes that are sustainable and resilient. And we’re seeing communities tackle homelessness by building permanent affordable housing with services. These are the types of community wins that we want to elevate with ‘Our Way Home’ and encourage others to follow.”

Source: 

National Association of REALTORS® and HUD.gov

©National Association of REALTORS® Reprinted with permission

Buying a home is easy when you have great credit! Follow these six credit tips to help ensure you have a smooth mortgage experience. With the help of myself and Katy Sychterz of RoundPoint Mortgage, (NMLS# 183951 – 484.534.5107) we can explore homebuying options to help you meet your goals. #RealEstate #Realtor #HomePurchase #BuyersMarket #PlymouthMeetingRP 

Calculating your Debt-To-Income ratio (DTI) is one of the simplest ways to get a handle on your financial health. With the help of myself and Katy Sychterz of RoundPoint Mortgage, (NMLS# 183951 – 484.534.5107) we can explore homebuying options to help you meet your goals. #RealEstate #Realtor #HomePurchase #BuyersMarket #PlymouthMeetingRP 

Mortgage Applications Are Falling

The housing market is showing more signs of slowing. Purchase applications fell 1% last week compared to the previous week and volume is now 14% lower than a year ago, the Mortgage Bankers Association’s latest index shows.

Overall, mortgage demand, which includes applications for refinancings and home purchases, has fallen to its lowest level since December 2018.

Mortgage rates have been moving higher over recent weeks, leading to the softening demand, analysts say. The average contract interest rate for 30-year fixed-rate mortgage loans with a 20% down payment was 5.33% last week, the MBA reports.

Rising interest rates and home prices have been dampening housing affordability, at least for some price segments. “Demand is high at the upper end of the market, and the supply and affordability challenges are not as detrimental to these borrowers as they are to first-time buyers,” says Joel Kan, an MBA economist.

The average contract interest rate for a 30-year fixed-rate mortgage with a jumbo loan balance—that is, greater than $647,200—fell to 4.93% last week from 5.02%, the MBA reports.

Source: 

“Mortgage Demand Falls to the Lowest Level Since the End of 2018, Even as Interest Rates Ease a Bit,” CNBC (June 1, 2022)

©National Association of REALTORS® Reprinted with permission

Zones With the Greatest Price Increases

Opportunity zones are booming. From the first quarter compared to the fourth quarter of 2021, 55% of qualified opportunity zones saw a jump of at least 20% in median single-family home and condo prices, according to a new report from ATTOM Data Solutions. Home prices in distressed neighborhoods nationwide continue to keep up with the gains in the broader national housing market, the report notes.

Opportunity zones, established by Congress in the Tax Cuts and Jobs Act of 2017, offer investors tax breaks in exchange for making long-term investments in the revitalization of low-income federally designated neighborhoods nationwide.

Despite recent gains, typical home values in opportunity zones remain lower than those in most other neighborhoods across the country in the first quarter. The median price is less than the national median of $320,500 in 76% of the opportunity zones analyzed, according to the report. Of the zones tracked in the report, 35% had median prices less than $150,000 and another 15 percent had medians ranging from $150,000 to $199,999.

But some areas are seeing a large increase in opportunity zone prices. In the first quarter, the states with the largest portion of zones where median prices increased annually were in the West, led by Utah (median prices up, year over year, in 97% of zones), Arizona (97%), Nevada (93%), Oregon (88%) and Florida (87%).

The ATTOM Data Solutions report uncovered the following 10 opportunity zones based on median home prices above the national median of $320,500 and the greatest quarterly increases.

Source: 

ATTOM Data Solutions

©National Association of REALTORS® Reprinted with permission

Sellers Dropping Asking Prices

Some homeowners may need to reset their price expectations. Signs of a slowing real estate market are growing across the country—existing-home sales and new-home sales are falling as well as pending home sales. Pending home sales fell for the sixth consecutive month in April and are now at the slowest pace in nearly 10 years, the National Association of REALTORS® reported last week.

Homes are still selling fast but a slowdown is evident in many markets. Amid rising mortgage rates that are pricing more buyers out, some home sellers are having to revisit their asking price.

Price drops are particularly more common in migration hotspots, places that have been relatively affordable but saw home values surge as more people have migrated in from coastal areas since the pandemic began, a new report from Redfin says. For example, in Boise, Idaho, home prices are up 62% over the past two years. In April, 41% of home sellers dropped their prices, the largest of 108 metro areas tracked by Redfin.

More than 20% of home sellers dropped their price in April in seven of the 10 most popular migration destinations, the report says. Other areas that are seeing a rise in price drops include Cape Coral, Fla. (at 33% in April); New Orleans (32%); Baton Rouge, La (31%); and Sacramento, Calif. (30%).

“Many places like Boise or Sacramento that saw a surge in migration and a sharp increase in home prices over the past two years have now seen an abrupt drop-off in demand, leading sellers to drop their prices with increasing frequency,” says Daryl Fairweather, Redfin’s chief economist. “When mortgage rates were at or below 3%, both local and out-of-town home buyers were more willing and able to tolerate high prices, but at 5%, many are priced out. A home’s price is driven by the balance of supply and demand, and when demand drops off and supply increases like it is now, rapid price increases evaporate quickly.”

Lawrence Yun, NAR’s chief economist, said in a recent release on the latest housing data that higher mortgage rates have increased the cost of purchasing a home by more than 25% compared to last year. In many cases, that could mean the higher mortgage payments are leading up to $500 more per month for borrowers. Further, higher home prices add another 15% to that figure, Yun says. Also, households are facing rapid inflation that is increasing everyday costs, like fuel and food.

Source: 

“Home Sellers in Migration Hotspots Increasingly Turn to Price Drops,” Redfin (May 27, 2022)

©National Association of REALTORS® Reprinted with permission

Contract Signings Hit Slowest Pace in Nearly a Decade

The housing market is slowing: Pending home sales fell 3.9% in April, marking the sixth consecutive month for declines and the slowest pace in nearly 10 years. NAR’s Pending Home Sales Index—a forward-looking indicator of home sales based on contract signings—was down 9.1% in April compared to a year earlier.

Lawrence Yun, NAR’s chief economist, attributes the slowdown to the recent sharp rise in mortgage rates, which are adding considerably to buyers’ borrowing costs. Higher mortgage rates have increased the cost of purchasing a home by more than 25% compared to last year. In many cases, that could mean the higher mortgage payments are leading up to $500 more per month for borrowers. Further, higher home prices add another 15% to that figure, Yun says. Also, households are facing rapid inflation that is increasing everyday costs, like fuel and food.

While buyers face headwinds, current homeowners are seeing significant increases in equity. “The vast majority of homeowners are enjoying huge wealth gains and are not under financial stress with their home as a result of having locked into historically low interest rates, or because they are not carrying a mortgage,” Yun says. “However, in this present market, potential home buyers are challenged and thus may attempt to mitigate the rising cost of ownership by opting for a 5-year adjustable-rate mortgage or by widening their geographic search to more affordable regions.”

Also, Yun says home sales could stabilize in the coming months if mortgage rates moderate at the current level of 5.3% and job gains continue.

If rates climb to 6%, Yun forecasts that existing-home sales to slow by 9% in 2022. He predicts home price appreciation to moderate to 5% by the end of the year.

“Home prices appear in no danger of any meaningful decline,” Yun says. “There is an ongoing housing shortage, and properly listed homes are still selling swiftly—generally seeing a contract signed within a month.”

Source: 

National Association of REALTORS®

©National Association of REALTORS® Reprinted with permission

Over 10 Years, Homeowners Obtained $240K in Equity

As prices climb, homeowners who’ve owned their homes for a while have seen a boost in appreciation.

Over the past decade, a homeowner who purchased a single-family existing home would have gained $229,400 in home equity if the home were sold at the median price in the fourth quarter of 2021, according to a new analysis by the National Association of REALTORS®, as reported on the association’s Economists’ Outlook blog.

In the past five years, home prices have notably climbed—rising at an annual pace of nearly 10%, NAR reports. A homeowner who purchased a typical home five years ago would have gained $125,300 from just price appreciation alone.

The Western region of the U.S. has had the most areas of the country where homeowners have built up the largest amount of home equity, led by San Jose-Sunnyvale-Santa Clara, Calif.; San Francisco-Oakland-Hayward, Calif.; Anaheim-Santa Ana-Irvine, Calif.; and urban Honolulu, Hawaii.

Source: 

“Homeowners Typically Built Housing Wealth of $240,200 Over 10 Years,” National Association of REALTORS® Economists’ Outlook blog (May 25, 2022)

©National Association of REALTORS
®Reprinted with permission