In the competitive market, many aspiring home buyers continue to be priced out, according to a new study from the National Association of Home Builders.

About 87.5 million households are unable to afford a median-priced new home. If prices rise by just $1,000, an additional 117,932 people would be priced out, according to the NAHB’s 2022 Priced-Out Estimates report.

Higher home prices, the highest inflation in 40 years, and rising mortgage rates are affecting more household budgets.

The NAHB released the following pyramid that breaks down affordability. The pyramid shows that about 36 million households cannot afford a $150,000 home. The top of the pyramid shows that about 3 million households can buy a home priced above $1.55 million.

Source: “Pyramid Shows 36 Million Households Cannot Afford a $150,000 Home,” National Association of Home Builders’ Eye on Housing blog (March 14, 2022)

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All-Cash Buyers More Likely to Win Bidding Wars

Buyers who offered an all-cash transaction were four times more likely to win in a competitive offer situation than those who didn’t in 2021, according to a report from Redfin. All-cash offers were found to be significantly more successful than other strategies, such as waiving the financing contingency or a pre-inspection.

Bidding wars have grown more common in today’s marketplace as buyers rush to compete for a limited stock of homes for sale. There were about four offers for every home sold in January, according to the REALTORS® Confidence Index Survey from January 2022.

According to Redfin’s analysis, the strategies that were the most effective in competitive offer situations, and their rate of improvement in transactions, were:

• All cash: 334%
• Waiving financing contingency: 31%
• Pre-inspection: 25%
• Waiving inspection contingency: No significant improvement
• Escalation clause: No significant improvement

But, while cash is king, buyers using financing can succeed. Amanda Peterson, a Fort Worth, Texas, real estate professional with Redfin, says she advises her buyers to be financially prepared before submitting an offer and to know how much they’re willing to spend over their offer for a house they truly want.

“We have detailed conversations about how much over asking price they’re willing to go and which contingencies they can waive,” Peterson says. “If a buyer has a low down payment or another scenario that doesn’t typically win a bidding war, I’ve had success explaining buyers’ unique situations to the listing agent and making it clear that their finances are reliable and the deal will close.” Source: “All-Cash Homebuyers Are Four Times More Likely to Win a Bidding War,” Redfin (March 14, 2022)

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Russians Unloading Luxury Homes Across US

Wealthy Russians across the country are reportedly trying to sell hundreds of millions of dollars worth of U.S. property, the New York Post reports. The sales are being triggered by Russia’s invasion of Ukraine and growing sanctions that could put some oligarch’s fortunes in doubt.

The Post documents several recent listings, both on and off the market, by wealthy Russians in the U.S. For example, Alexei Kuzmichev, owner of Russia’s largest private bank, Alfa-Bank, is one of the Russian nationals who own U.S. property and faces sanctions. He has listed his $41 million quadruplex in Manhattan. The Post also reports that Valery Kogan, the billionaire owner of Moscow’s Domodedovo Airport, and his wife reportedly have an off-market listing for their $50 million Plaza Hotel home as well as their other New York City and Greenwich, Conn., properties.

“We have seen a significant number of ultra-high-end properties hit the market in an attempt to liquidate before accounts get shut down,” Erin Sykes, a broker and international chief economist at Nest Seekers International, told the Post.

A hot spot in Sunny Isles Beach, Fla.—known as “Little Moscow” for its Russian population—has seen active listings grow by 9% since Russia invaded Ukraine, Sykes notes.

“I’ve never had my phone blow up like this ever in my life. There is a feeling of potential panic,” Dolly Lenz with New York–based Dolly Lenz Real Estate, told the Post. She says she’s getting inquiries from potential sellers who want to know how much their property is worth, are interested in all-cash deals, and want to sell quietly. “The fear is there, like, where does this stop? Every day there is some senator saying LLCs must be further regulated and undressed. They are afraid of getting their assets seized, even if it is just guilt by association.” Another brokerage representative says they also are increasingly fielding phone calls from Americans looking to buy distressed Russian assets. Source: “Wealthy Russians Are Quietly Looking to Unload Trophy Homes Across the U.S.,” New York Post (March 11, 2022)

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Reprinted with permission

State-by-State Breakdown of Fourth-Quarter Equity Gains

Rising home prices have brought rising equity gains for homeowners. In the fourth quarter, the average homeowner nationwide gained about $55,300 in equity over the past year, according to a new analysis released by CoreLogic, its latest quarterly “Homeowner Equity Insights” report.

Western state homeowners are continuing to see some of the largest equity gains by dollar value.

For example, Hawaii, California, and Washington saw the largest increases in average equity gains in the fourth quarter. Hawaii posted an average $128,300 annual gain, followed by a $117,000 increase in California, and $95,500 in Washington.

Source: “Homeowner Equity Insights,” CoreLogic (March 10, 2022)

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Reprinted with permission

Mortgage Rates Rise to 3.85%

Following two weeks of declines, mortgage rates edged up, and economists say that consumers should expect further increases over the coming weeks.

The Federal Reserve will likely raise its short-term interest rates at its meeting next week. While the Fed’s benchmark rates do not have a direct effect on mortgage rates, they do often influence them and likely will lead to an increase, the National Association of REALTORS® notes on its Economists’ Outlook blog.

But even though mortgage rates are rising, consumers should bear in mind that rates remain near historic lows. For comparison, in 1982 when inflation was rising roughly at the same pace as it is now, mortgage rates were 16% on average, Nadia Evanelou, senior economist and director of forecasting at the National Association of REALTORS®, writs on the association’s blog. This week, the 30-year fixed-rate mortgage averaged 3.85%, as a comparison.

The latest increase in mortgage rates comes as Treasury yields increase, notes Sam Khater, Freddie Mac’s chief economist. “Over the long-term we expect rates to continue to rise as inflation broadens and shortages increasingly impact many segments of the economy. However, uncertainty about the war in Ukraine is driving rate volatility that likely will continue in the short-term.”

Freddie Mac reports the following national averages with mortgage rates for the week ending March 10:

• 30-year fixed-rate mortgages: averaged 3.85%, with an average of 0.8 points, rising from last week’s 3.76% average. Last year at this time, 30-year rates averaged 3.05%.
• 15-year fixed-rate mortgages: averaged 3.09%, with an average of 0.8 points, rising from last week’s 3.01% average. A year ago, 15-year rates averaged 2.38%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.97%, with an average of 0.3 points, rising from last week’s 2.91% average. A year ago, 5-year ARMs averaged 2.77%.

Freddie Mac reports average commitment rates along with points to better reflect the total upfront costs of obtaining the mortgage. Source: Freddie Mac and “Instant Reaction: Mortgage Rates, March 10, 2022,” National Association of REALTORS® Economists’ Outlook blog

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Soaring Housing Costs Contribute to Highest Inflation in 40 Years

Housing costs are one of the top three categories causing inflation in the U.S. to surge, the U.S. Department of Labor announced Thursday. The largest items in households’ budgets—shelter, gasoline, and food—were the main culprits in February that fueled the highest inflation rates since 1982.

The Consumer Price Index, which measures price fluctuations in goods and services, increased 7.9% in February compared to a year earlier.

“There’s nowhere to hide,” Greg McBride, chief financial analyst for Bankrate, told CNBC. “This is hitting everybody … [with inflation] most pronounced on items that are necessities.”

Household grocery bills increased 8.6% over the last year; that is the fastest pace since 1981. Gasoline prices are up 38% compared to a year ago, although that statistic does not reflect the latest increases at the pump following Russia’s invasion of Ukraine.

Shelter costs such as rents are up 4.7% compared to last year. That is the highest since May 1991. “That comparatively benign increase … is likely to put the biggest squeeze on household budgets for the remainder of the year,” McBride told CNBC. Housing comprises more than a third of households’ average budgets.

Also, mortgage rates rose this week in response to higher inflation, averaging 3.85%, Freddie Mac reports.

“While it’s too soon to know how the war in Ukraine will affect the U.S. economy, it seems that it will continue to put upward pressure on inflation,” Nadia Evanelou, senior economist and director of forecasting at the National Association of REALTORS®, writes on the association’s blog.

In an attempt to try to tame inflation, the Federal Reserve is expected to start raising its short-term interest rates next week. Source: “There Is ‘Nowhere to Hide’ for Consumers as Inflation Hits Food, Gas, Housing,” CNBC (March 10, 2022) and “Instant Reaction: Mortgage Rates, March 10, 2022,” National Association of REALTORS® Economists’ Outlook blog

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Reprinted with permission