Rising Rates

Home buyers this spring are facing a double whammy of rising home prices and mortgage rates. The 30-year fixed-rate mortgage rose to 4.72% this week, from 3.13% when compared to a year ago, Freddie Mac reports.

Over the last three months, mortgage rates have risen by 1.5 percentage points, the fastest three-month rise since May 1994. Also, during the first two months of 2022, home prices have climbed by more than 15% compared to a year ago, Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®, writes on the association’s blog.

But housing demand remains high, Evangelou says. A severe housing shortage due to underbuilding has occurred over the last decade. “Housing demand will remain strong due to favorable demographics and shifts in buyers’ preferences as teleworking remains in place,” Evangelou says.

As such, home prices are expected to rise 5.1% in 2022, according to NAR’s projections.

Buyers are weathering the higher mortgage rates for now. Mortgage rates still remain low by historical standards. A more typical historical average is 8%, according to NAR.

Freddie Mac reports the following national averages with mortgage rates for the week ending April 7:

• 30-year fixed-rate mortgages: averaged 4.72%, with an average 0.8 point, increasing from last week’s 4.67% average. A year ago, 30-year rates averaged 3.13%.
• 15-year fixed-rate mortgages: averaged 3.91%, with an average 0.8 point, increasing from last week’s 3.83% average. A year ago, 15-year rates averaged 2.42%.
• 5-year hybrid adjustable-rate mortgages: averaged 3.56%, with an average 0.3 point, rising from last week’s 3.50% average. Last year at this time, 5-year ARMs averaged 2.92%.

Freddie Mac reports points along with average commitment rates to better reflect the total upfront costs of obtaining a mortgage. Source: Freddie Mac and “Instant Reaction: Mortgage Rates, April 7, 2022,” National Association of REALTORS® Economists’ Outlook blog

©National Association of REALTORS®
Reprinted with permission

Housing Inventory Turnaround Possible

A new survey shows many homeowners plan to list their home over the next six months, with high expectations for making a profit on the sale. Sixty-four percent of about 3,000 consumers recently surveyed by realtor.com® said they intend to sell their home this spring or summer. That could bring some welcome relief to a housing market that has been starved for inventory.

“While sellers are expected to hold the upper hand in 2022, navigating the listing process remains a challenge—particularly for those also buying in today’s fast-paced market,” says George Ratiu, senior economist and manager of economic research at realtor.com®. “Homeowners who are ready to move forward with pandemic-delayed plans will find plenty of opportunity this spring and summer. Although accelerating inflation is leading to higher housing costs and living expenses, many buyers remain interested in finding a home. At the same time, recent housing trends suggest demand is beginning to moderate as higher mortgage rates push monthly payments out of some buyers’ budgets, underscoring the long-term need for more affordable inventory.”

Homeowners have great expectations for when they do decide to sell. Aspiring sellers responding to the survey say a top reason is the desire to profit from the current market.

Millennials are expected to represent nearly half—49%–of sellers who plan to list within the next six months. They have financial motivation to stick to their plans, the survey found. Their top reasons for selling are pressure from rising inflation and economic uncertainty. They showed higher shares than other generations of wanting to move to a more affordable home and a need to sell for financial reasons.

Regardless of age, aspiring sellers are readying their homes to list. They are taking steps to prepare, such as making repairs, cleaning, and decluttering.

The majority of those who have already listed found success: Eighty percent of recent sellers say they sold at or above their asking price, according to the realtor.com® survey. They also reported other benefits of selling in the competitive market, such as buyers forgoing repair concessions (28%); offers within a week (27%); and waived contingencies like inspections (25%). Source: Move Inc.

©National Association of REALTORS®
Reprinted with permission

5% Mortgage Rates on the Horizon

Mortgage rates have been rising quickly over the past month. A year ago, the 30-year fixed-rate mortgage was 3.18%. Last week, it averaged 4.67%, according to Freddie Mac.

Mortgage rates surged more than 90 basis points in March alone. And 5% mortgage rates may be here sooner than many housing analysts had originally predicted.

Several leading housing economists recently told MarketWatch that 30-year fixed rates may hit 5% within the next month, while others believe that landmark will come later this year.

“Even if rates slow their recent pace of increase, they’re likely to hit 5% by mid-year unless something big changes in the outlook,” Danielle Hale, realtor.com®’s chief economist, told MarketWatch.

Jeff Ostrowski, an analyst at Bankrate, told MarketWatch he believes 5% rates will arrive even sooner—sometime this spring.

Lawrence Yun, chief economist of the National Association of REALTORS®, says he believes the higher mortgage rates will cool the market somewhat in the coming months. “At a 5% rate, home sales this year may even fall by 10%,” he says.

But Hale is optimistic that buyer demand will remain strong. “We have a large generation of younger households, more than 45 million of whom are in prime household formation and home buying years of 26 to 35,” she told MarketWatch. “And while the monthly costs of buying are higher, the monthly costs of renting are also up, more than 17% in the last year. … Rising rents and higher costs of home buying have younger households hoping to move, stuck between a rock and a hard place.”

And even as mortgage rates climb, Yun does not expect home prices to turn negative. “Home prices are on firmer ground, even if mortgage rates rise to 6%, since the rents are rising strongly,” he told MarketWatch. Source: “‘Inevitable,’ in the Very Near Future.’ 4 Economists and Real Estate Pros on Exactly When Mortgage Rates Will Hit 5%,” MarketWatch (April 4, 2022)

©National Association of REALTORS®
Reprinted with permission

Hope for Weary Buyers

As the spring buying season kicks off, many aspiring home buyers may find themselves priced out and feel frustrated by the competition. Home prices are higher, as are mortgage rates. Bidding wars remain fierce.

But housing analysts say home buyers may soon see a change and a possible opening for those who’ve been frustrated by the competition and the soaring prices.

The signs may seem dim at the moment: Home buyers are paying about 30% more for a house than they would have just a year ago due to higher sales prices and mortgage rates, according to realtor.com®. Mortgage rates have risen by nearly a point and a half over the past year, which has increased borrowing costs. Mortgage rates, about 3% last year, are now pushing toward 5%.

Lawrence Yun, chief economist of the National Association of REALTORS®, recently said in a statement that “there will be an inevitable slowdown in home sales.” He said people should be watching homes’ days on the market and looking for a decrease in multiple offers as the earliest signs of the slowdown. “Home sellers should not expect big easy profit gains,” he says. But Yun also told MarketWatch that he doesn’t believe home prices will turn negative either.

Realtor.com® says home prices may initially rise over the next few weeks as some buyers rush to snatch up properties ahead of any further rate increases. But real estate experts believe that the huge run-up in prices may be nearing an end.

With higher mortgage rates, “housing is going to have to adjust,” says Danielle Hale, realtor.com®’s chief economist, who adds that she sees uncertainty on how the market will do so, though.

Economic matters are proving to be wild cards for the housing industry. The highest inflation in 40 years is hitting consumers’ pocketbooks. Sixty-two percent of Americans say that inflation has affected their spending, according to the Capital One Marketplace Index.

“Homebuyers have to be able to afford their mortgage payments and all of the other things in their budget, [which is] getting harder to do,” Hale says. Source: “Homebuyers, Take Heart: Prices Could Flatten—or Even Dip—This Year,” realtor.com® (April 6, 2022) and “Instant Reaction: Jobs, April 1, 2022,” National Association of REALTORS®

Yard Care Tips Heading Into Spring

Homeowners have been spending more time in their backyards since the pandemic began. For a growing share of owners, it’s become a new hobby or a place to relax. Sixty-nine percent of Americans recently surveyed say that doing yard work—either maintaining it or adding or updating features—is one of the ways they like to relieve stress these days, according to a Yards Study from Harris Poll.

“Over the last few years, families have used their yards more than ever before, and the Harris Poll indicates a vast majority of those who have a yard plan to invest even more in their yard in the coming year,” says Kris Kiser, president and CEO of the TurfMutt Foundation, which was created by the Outdoor Power Equipment Institute with a mission of teaching others how to “save the planet, one yard at a time.”

The 5 Biggest Yard and Patio Staging Mistakes

Baby Got Back(yard)! Maximize Your Outdoor Space

The TurfMutt Foundation offers the following tips for maintaining or enjoying a lawn or landscape this spring:

Plant more, early, and often. Adding trees, bushes, grass, and flowering plants can be a good yard investment, but they often take time to grow. Plant early as recommended to enjoy the benefits faster. Remember the golden rule of backyarding: right plant, right place. Location, maintenance, sunlight, and watering needs should all be considered, along with your climate zone.

Consider the full picture. Your yard is an important part of the connected ecosystem, and adding flowering plants, trees, and shrubs gives wildlife and pollinators food and shelter. Check your climate zone for landscaping options that support the birds, bees, butterflies, and other wildlife that call your neighborhood home.

Care for your yard properly. Only water when necessary. Overwatered grass gets lazy, growing roots in a horizontal pattern. With less water, grass sends its roots deeper—vertically—seeking water. By working harder, grass does a better job of sequestering carbon and releasing oxygen. Install watering solutions like smart controllers on irrigation systems that help conserve water while maintaining your backyard.

Also, find the just-right length to cut your turfgrass—typically between 2 and 3 inches, according to the TurfMutt Foundation. Source: TurfMutt Foundation

©National Association of REALTORS®
Reprinted with permission

Borrowing Costs Jump as Rates Continue to Increase

For the fourth consecutive week, mortgage rates surged, up more than 90 basis points in one month.

Rates have jumped from 3.76% to 4.67% in just March alone, significantly increasing the borrowing costs for buyers, Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®, wrote for the association’s blog.

The monthly payment for a median-priced home with a 30-year fixed-rate mortgage rose more than $170 in March due to higher rates, Evangelou notes.

In the past three months, that amount has been increasing even more. For example, LendingTree offers the following example: A 30-year, fixed-rate mortgage loan worth $300,000 would have cost a buyer about $1,283 a month with the average rate on Dec. 30, 2021, of 3.11%. But at the current average rate of 4.67%, that monthly cost has jumped to $1,551—an increase of $268 a month, $3,216 a year, and $96,480 over the lifetime of the loan.

Still, even with the latest jump in mortgage rates, borrowing costs do remain low by historical standards. From 2002 up until 2009, rates generally were between 5% and 6.5%, LendingTree notes.

However, buyers are facing higher asking prices for homes, and rates are projected to continue inching up.

“Mortgage rates continued moving upward in the face of rapidly rising inflation as well as the prospect of strong demand for goods and ongoing supply disruptions,” says Sam Khater, Freddie Mac’s chief economist. “Purchase demand has weakened modestly but has continued to outpace expectations. This is largely due to unmet demand from first-time homebuyers as well as a select few who had been waiting for rates to hit a cyclical low.”

Freddie Mac reports the following national averages with mortgage rates for the week ending March 31:

• 30-year fixed-rate mortgages: averaged 4.67%, with an average 0.8 points, rising from last week’s 4.42%. Last year at this time, 30-year rates averaged 3.18%.
• 15-year fixed-rate mortgages: averaged 3.83%, with an average 0.8 points, up from last week’s 3.63% average. A year ago at this time, 15-year rates averaged 2.45%.
• 5-year hybrid adjustable-rate mortgages: averaged 3.50%, with an average 0.3 points, up from last week’s 3.36%. A year ago, 5-year ARMS averaged 2.84%.

Freddie Mac reports commitment rates along with average points to better reflect the total upfront cost of obtaining the mortgage. Source: Freddie Mac and “Instant Reaction: Mortgage Rates, March 31, 2022,” National Association of REALTORS® Economists’ Outlook blog

©National Association of REALTORS®
Reprinted with permission