Listing Prices Hit Highest Median Ever

Listing prices rose to a median of $405,000 in March, an all-time high, according to realtor.com®’s latest Monthly Housing Trends Report. However, economists say that buyers may soon see relief with expectations of more inventory coming that could help relieve some of the pricing pressures.

Housing inventory is expected to hit positive territory year over year this summer, according to realtor.com®’s report.

“Despite the $405,000 price tag, March data reveals we are starting to take some steps toward a more balanced market,” says Danielle Hale, realtor.com®’s chief economist. “Buyer demand is moderating in the face of high costs, and we’re beginning to see more homeowners take price cuts on their listings and overall inventory declines lessen in response. Assuming all these factors and new construction hold steady, we could begin to see inventory increases this summer—welcome news for buyers who have endured pandemic home shopping and can continue their journey despite higher buying costs.”

But buyers currently in the market remain eager to find a home in the hopes of locking in lower borrowing costs ahead of further mortgage rate increases. Homes are still selling fast: The typical home spent 38 days on the market in March, which is 11 days less than a year ago, according to realtor.com®.

Even with buyer demand remaining high, sellers are finding buyers do have limits to what they’ll pay. Price reductions are increasing in some markets: 25 of the largest 50 metros saw an increase in price reductions in March, compared to 18 in February. The share of homes having their price reduced in March rose slightly to 6% compared to 5.8% a year ago, realtor.com® reports. Still, price reductions remain 9 percentage points below what’s considered more normal levels for the market.

Metro Breakdown of List Prices

The following markets posted the highest year-over-year median list price growth in March:

• Miami: 37%
• Las Vegas: 35.2%
• Tampa, Fla.: 32%

Source: Move Inc.

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Big Ask for Housing in Biden Budget

President Joe Biden requested historic funding for housing supply in his federal budget proposal for the fiscal year that begins October 1, 2022. The proposal was released Monday.

A requested 34% increase over last year for the Department of Housing and Urban Development includes $50 billion in grants and loans to increase the supply of affordable housing. This amount includes $32 billion for the Housing Choice Voucher Program and nearly $2 billion in funding for the HOME Investment Partnership to create more affordable homeownership opportunities.

“This unprecedented investment demonstrates how seriously the White House views the supply crisis,” says Shannon McGahn, NAR’s chief advocacy officer. “We worked with the administration and Congress over the past year on comprehensive policy proposals, and now a consensus is growing across Washington that decisive action is needed.”

In 2021, NAR commissioned a landmark report on housing supply, which confirmed a shortage of nearly 6 million residential housing units nationwide. “NAR’s report became the center of conversation on housing supply, and our policy recommendations are showing up in proposed legislation in Washington and around the country,” McGahn says.

To close the supply gap, NAR supports new funding for affordable housing construction, preserving and expanding tax incentives to renovate distressed properties, converting unused commercial space to residential, and encouraging and incentivizing zoning reform.

The proposal now moves to Congress.

“A president’s budget is a wish list of policy goals and ambitions,” McGahn explains. “Many changes will be made to this plan, but it is good news that the White House sees this issue for what it is—a crisis—and many in Congress on both sides of the aisle agree. The next step is that Congress will hold hearings on this budget proposal. We will continue to work with lawmakers and encourage an all-hands approach to the supply shortage so that the American dream is achievable for all Americans.”

NAR’s policy team is analyzing Biden’s full $5.8 trillion budget request and will have a comprehensive write-up on nar.realtor.

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Affordable Places to Buy a Vacation Home

Vacation homes remain a popular pandemic trend. More Americans have been warming up to the idea of being untethered from jobs with remote work and experiencing a growing desire for a family getaway home or potential rental revenue stream. Vacation homes remain in demand.

But home prices have skyrocketed. Are more buyers becoming priced out of the second-home market? The number of vacation-home sales has fallen 15% so far this year compared to last year, according to realtor.com®. But that may be more from dwindling for-sale options than an indication of lessening demand.

Realtor.com®’s research team recently identified some vacation markets that offer affordability. However, the markets may not have the familiar names of Cape Cod or Lake Tahoe, they say.

“We’ve seen rising demand for homes in vacation destinations within a three-hour drive of major metro areas, especially in mountain and waterfront areas where people can be outdoors and there’s less [population] density,” Daned Kirkham, senior director of real estate at the vocational rental management firm Vacasa, told realtor.com®. “Even as urban markets have seen tourism return, the popularity of the off-the-beaten-path getaways hasn’t wavered.”

The median sales price for a vacation home was $429,000 in February. But in some markets, buyers are finding prices that cost much less but still offer a vacation getaway. Here are some of the most affordable towns in the U.S. for a vacation home, according to realtor.com®:

1. Branson, Mo.

• Median second-home purchase price: $299,000

2. East Stroudsburg, Pa.

• Median second-home purchase price: $299,500

3. Whitewater, Wis.

• Median second-home purchase price: $314,000

4. Myrtle Beach, S.C.

• Median second-home purchase price: $341,000

5. Cullowhee, N.C.

• Median second-home purchase price: $365,750

6. The Villages, Fla.

• Median second-home purchase price: $378,690

7. Lake Havasu City, Ariz.

• Median second-home purchase price: $383,210

View the full list and more about each town at realtor.com®. Source: “Here Are the 10 Towns in America Where You Can Still Buy an Affordable (and Great) Vacation Home,” realtor.com® (March 28, 2022)

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Ways Buyers Can Sweeten Their Offers

Competition is growing more intense heading into the spring season’s busy buying market. Buyers will continue to compete for a limited number of homes for sale. Real estate professionals recently discussed with realtor.com® how their buyers are getting their offers on a home to stand out, besides increasing the amount they’re willing to pay.

Boost your earnest money.

Home sellers may look more favorably on a buyer’s offer that has more skin in the game. Earnest money is usually about 1% to 3% after an offer is accepted. “Buyers can get a leg up by putting down more earnest money and making a portion, if not all of it, guaranteed,” Mike Opyd, managing broker and owner of Chicago’s RE/MAX Next, told realtor.com®. “Yes, this means the sellers get to keep the money if the deal falls apart for any reason at any time. However, it makes a buyer look a lot more committed to doing whatever it takes.”

Add in a leaseback.

Home sellers are increasingly facing a problem of their own: not being able to find a home to move into after quickly selling their property. Buyers can offer a leaseback that allows the home seller more time to find a new place. “If the seller is living in the property, the buyer can offer to lease it back for 60 to 90 days, at no charge, to allow them time to find their next place,” Glen Pizzolorusso, an associate broker with Compass in Fairfield County, Conn., told realtor.com®. Read more about these add-ons: What If Your Sellers Have Nowhere to Go?

Consider an escalation clause.

This contract addendum can be used when a bidding war is likely. It will increase the buyer’s offer amount if the seller receives multiple offers that increase the amount of the most likely successful offer. It will raise a buyer’s offer if competitive bids roll in. But real estate professionals are torn on this tactic as it does tip the buyer’s hand on how much their client is ultimately willing to pay. Still, if a buyer is really willing to pay more for a home, an escalation clause could give them flexibility if other bids come in, and they wouldn’t lose out on a purchase because the first amount in their offers was lower than the maximum they would have been willing to pay.

View four more ways buyers can better compete this spring. Source: “7 Secrets No One Tells You That’ll Help You Buy a House Right Now,” realtor.com® (March 23, 2022)

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Happiest Cities in 2022

Location may play a big part in how happy you are. Some cities in the U.S. appear to have happier residents than others.

For example, on the top 10 list, more cities were in California than any other state. WalletHub researchers used positive-psychology research to rank the nation’s 180 largest cities by happiness of residents. They examined 30 indicators, including income, a city’s growth rate, average leisure time per day, commutes, work hours, depression rates, and more.

https://cdn.wallethub.com/wallethub/embed/32619/geochart-happiest-cities-2022.htmlSource: WalletHub Source: “2022’s Happiest Cities in America,” WalletHub (March 1, 2022)

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FHA, VA Loan Demand Drops on Higher Rates

First-time buyers and veterans may be facing increasing obstacles to affording homeownership. In response, mortgage applications for home purchases involving Federal Housing Administration and Veterans Affairs loans are falling. The loans tend to be popular with first-time buyers, veterans, and those with lower incomes less able to pay a large down payment for a home purchase.

“First-time home buyers who rely on these government programs are increasingly challenged by both the rapid increase in home prices and higher mortgage rates,” Mike Fratantoni, chief economist of the Mortgage Bankers Association, said in a statement.

A survey by the National Association of REALTORS® in the summer of 2021 showed house hunters using conventional financing were edging out buyers using government-backed loans. Eighty-nine percent of sellers would be more likely to accept an offer from a buyer with conventional financing. Only 30% said they would be willing to accept one using an FHA or a VA loan.

Buyers who are making an offer using FHA or VA financing are finding it difficult to compete against buyers who are offering cash or using conventional financing. Some real estate pros say it’s because VA and FHA loans tend to have low appraisals, problematic when home prices are rising fast and homes are selling quickly. Also, government-backed loans tend to be slower to close.

Nevertheless, mortgage demand softened across the board last week, regardless of loan type, with economists pointing to a sharp increase in mortgage rates.

Total mortgage application volume dropped 8.1% last week compared to the previous week, the MBA’s seasonally adjusted index shows. Also, the average contract interest rate on a 30-year fixed-rate mortgage with conforming loan balances rose to 4.50%, a significant jump from 4.27% the previous week and from the below-4% rates that were more common at the beginning of the year. Source: “Mortgage Refinance Demand Plunges 14%, as Interest Rates Spike Higher,” CNBC (March 23, 2022)

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Mortgage Rates Surge to 4.42%

Elevated inflation and the Federal Reserve’s monetary tightening policy drove the latest leap in mortgage rates this week. Since the beginning of this year, mortgage rates have jumped by 1.2%. The typical home buyer would need to spend $250 more every month to be able to purchase a home, Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®, writes on the association’s blog.

The 30-year fixed-rate mortgage moved up to a 4.42% average this week, more than a quarter of a percentage point compared to last week, Freddie Mac reports in its latest mortgage market survey. Rates continued to rise across loan types. “Rising inflation, escalating geopolitical uncertainty, and the Federal Reserve’s actions are driving rates higher and weakening consumers’ purchasing power,” says Sam Khater, Freddie Mac’s chief economist. “In short, the rise in mortgage rates, combined with continued house price appreciation, is increasing monthly mortgage payments and quickly affecting home buyers’ ability to keep up with the market.”

Freddie Mac reports the following national averages with mortgage rates for the week ending March 24:

• 30-year fixed-rate mortgages: averaged 4.42%, with an average 0.8 point, rising from last week’s 4.16% average. Last year at this time, 30-year rates averaged 3.17%.
• 15-year fixed-rate mortgages: averaged 3.63%, with an average 0.8 point, increasing from last week’s 3.39% average. A year ago, 15-year rates averaged 2.45%.
• 5-year hybrid adjustable-rate mortgages: averaged 3.36%, with an average 0.3 point, increasing from last week’s 3.19% average. A year ago, 5-year ARMs averaged 2.84%.

Freddie Mac reports average commitment rates along with average points to better reflect the total upfront cost of obtaining a mortgage. Source: Freddie Mac and “Instant Reaction: Mortgage Rates, March 24, 2022,” National Association of REALTORS® Economists’ Outlook blog (March 24, 2022)

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New-Home Sales Softened in February

Material and labor shortages continue to constrain both new-home supply and sales, economists said as February saw another dip in new-home sales. Buyer demand remains high, but builders struggle to add greater inventory.

Sales of new single-family homes reached a seasonally adjusted annual rate of 772,000 in February, down 2% from January and down 6.2% compared to a year ago, the U.S. Census Bureau and the Department of Housing and Urban Development reported Wednesday. Still, sales remain above pre-pandemic levels. Also, new-home sales did post a significant increase in the Northeast, up 59.3% over last month. The Midwest also posted a 6.3% increase in February. But new-home sales fell 1.7% in the South and by 13% in the West.

Buyers may turn to the new-home market finding fewer and fewer selections in the existing-home market.

“With resale inventory so low and rental occupancy rates high, the new-home market is close to the only game in town,” Ali Wolf, chief economist at Zonda, told BUILDER. “The problem is, the new-home market is running into its own inventory shortages as well. Home sales would be higher if we had more homes for sale and more builders willing to sell them, but for now, the ongoing material and labor shortages are holding the market back from full potential.”

Higher home prices and rising mortgage rates also may start to sideline more potential buyers. The median sales price of a new home jumped 10.7% from a year ago, reaching $400,600 in February. The average sales price was $511,000. New-home prices have increased 31% compared to three years ago.

“We may be approaching a pivot point when higher home costs and higher mortgage rates cool both sales and price increases, but given the supply-and-demand imbalance, we may not hit that point this year,” Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia, told Reuters.

Builders also are facing an all-time high in a backlog of homes that are approved for construction but not yet started. They say delays are caused by higher prices and shortages of common construction materials like lumber for framing, cabinets, garage doors, countertops, and appliances. Source: “U.S. New Home Sales Drop Further as Mortgage Rates Rise; Prices Push Higher,” Reuters (March 23, 2022) and “New-Home Sales Continue to Soften in February,” BUILDER (March 23, 2022)

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