Jan. 14, 2021

NAHB: More Construction in Second-Home Markets

In areas with a lot of vacation and second homes, single-family construction rose 13.6% in the third quarter; in areas without second homes, it only rose 10.5%.

CHICAGO – More people are considering a second-home purchase as the remote work trend expands, and builders responded to the rising interest.

Single-family construction in second-home markets increased at an average annual rate of 13.6% in the third quarter, but it rose only 10.5% in other counties, according to data from the National Association of Home Builders (NAHB).

Multifamily development is also on the rise in second-home markets. It increased 11.1% in second-home counties but declined 0.9% in other areas during the third quarter, NAHB says.

NAHB identified high-concentration second-home counties as ones in which the majority of local housing stock isn’t classified as the taxpayer’s principal residence and a major portion consists of non-rental properties.

As of 2018, Americans owned about 7.4 million second homes – about 5.6% of the nation’s housing stock, and NAHB says almost 70% of second-home counties are located in rural areas.

“Remote work arrangements have made it possible for some wealthier Americans to move to alternate locations that are not just small, suburban shifts from within their current metro area,” says NAHB.

Beyond vacationers, second-home demand could also be expanding thanks to an acceleration of retirement plans, as well as stock market gains.

Source: Realtor Magazine (01/07/21)

Jan. 13, 2021

Report: Buying Better Than Renting in Most Florida Markets

In 2 out of 3 U.S. markets, it’s cheaper to buy a home than rent – but the percentage is higher in Florida, and the study cited Tampa as one of the top markets for buying.

Florida map with blue circles for cities where it's better to buy
ATTOM Data Solutions

NEW YORK – Homeownership is a better deal than renting, despite rapidly escalating home prices over the last few months, according to a new study released by ATTOM Data Solutions, a real estate research firm. Owning a median-priced three-bedroom home is more affordable than renting a three-bedroom property in two out of three counties (63%, or 572 counties out of the 915 U.S. counties analyzed).

Record low mortgage rates help offset some steep home price increases. Median home prices have risen more than average rents in 83% of the counties tracked.

“Home prices are rising faster than rents and wages in a majority of the country,” says Todd Teta, chief product officer with ATTOM Data Solutions. “Yet homeownership is still more affordable, as amazingly low mortgage rates that dropped below 3% are helping to keep the cost of rising home prices in check.”

Teta calls that trend “startling, but “it shows how both the cost of renting has been relatively high compared to the cost of ownership, and how declining interest rates are having a notable impact on the housing market and homeownership.”

Teta says the rent vs. buy analysis later in 2021 is uncertain, however, with COVID-19 outbreak still raging on and hampering economic growth. “But right now, owning a home still appears to be a financially sound choice for those who can afford it,” Teta says.

Homeownership was generally found to be the most affordable option in counties with a population of less than 1 million, particularly among those with less than 500,000 people, the study found. The most affordable homeownership markets tend to be located in the South and Midwest, while the least affordable tend to be located in the West and Northeast, the study notes.

The study pinpoints some of the following areas where it’s most affordable to buy than rent:

  • St. Louis County, Mo.
  • Pinellas County (Tampa), Fla.
  • Milwaukee County, Wis.
  • Marion County (Indianapolis), Ind.
  • Shelby County (Memphis), Tenn.

 Source: ATTOM Data Solutions

Jan. 12, 2021

What Credit Score Do You Need to Buy a House?

With record-low interest rates, more buyers can afford a home – or a better home. But they have to qualify for a mortgage first, and their credit score could be a problem.

CHARLOTTE, N.C. – Interest rates to buy a home are at a historic low so this could be a great time to purchase a house. It’s important to know what credit score you need to buy a home. It’s also important to understand how a better credit score could potentially save you lots of money on interest payments. What follows are typical credit score requirements for mortgages and information on how credit scores can influence mortgage interest rates, from myFICO.

Minimum FICO score requirements

Before we get into how much you could save based on your FICO Score, let’s take a look at the different types of loans and the minimum score they require.

Conventional loan: Minimum FICO score required 620
A conventional mortgage is a loan that is eligible to be purchased, guaranteed or securitized by Fannie Mae or Freddie Mac, which makes these loans more affordable to borrowers. This type of loan falls into two categories: conforming and non-conforming. A conforming loan is one in which the amount falls within the maximum limits of the two government agencies that back most mortgages. Loans that don’t fall within these limits are non-conforming and are considered “Jumbo” loans.

Jumbo loan: Minimum FICO score required none (though most lenders require 680)
A jumbo loan is financing that exceeds the limits set by the Federal Housing Finance Agency. This means they are not eligible to be purchased, guaranteed or securitized by Fannie Mae or Freddie Mac (the two government agencies referred to in #1 above). Therefore, this is a non-conforming loan.

FHA loan: Minimum FICO score required 500 (with 10% down) or 580 (with 3.5% down)
An FHA loan is for borrowers with limited down payment ability and whose credit history is higher risk. An FHA loan requires two mortgage insurance premiums: one is paid upfront, and the other is paid annually for the life of the loan (if you put down less than 10%).

VA loan: Minimum FICO score required none (though most lenders require 620)
A VA (Veteran Affairs) loan is a $0 down mortgage issued by private lenders and partially-backed or guaranteed by the Department of Veteran Affairs. Eligible borrowers can use this type of loan to purchase a property as their primary residence or refinance an existing mortgage.

How FICO scores influence mortgage interest rates

Some people might think having a higher credit score won’t make a big difference when it comes to interest rates. Nothing could be further from the truth. Lenders generally take into account FICO score “ranges” (i.e., 620+, 660+, 700+), and having a score in a higher range could save you thousands of dollars over the life of a mortgage loan.

A LendingTree study showed that borrowers with a “fair” score (580-669) pay significantly more in interest than those in the “very good” range (740-799). For an average loan amount of $253,435, the average mortgage borrower with a “very good” credit score paid about $219,660 in interest over time, while the “fair” score borrowers paid $261,076. If the borrower had waited until their score increased by 71 points, they would have saved over $41,000 in interest payments.

The study concluded that borrowers who have debt across credit cards, personal loans, car loans, student loans, and mortgages could save more than $56,000 by moving their credit score range from “fair” to “very good.” (That’s about $316 per month.)

So before deciding to purchase a home, check your FICO score and consider whether you might be on the cusp of getting a better interest rate. You can use the myFICO Loan Savings Calculator to calculate potential savings based on your personal financial situation.

Jan. 11, 2021

Experts: Mortgage Rates Have Probably Hit Bottom

At 2.65%, the average 30-year, FRM hit its 17th record low in less than a year. But experts predict an increase soon as the “forces behind the drop” shift.

WASHINGTON – On Jan. 7, Freddie Mac reported that the average 30-year fixed mortgage rate fell to 2.65% – the 17th historic low in less than a year. The new record low is down from 2.67% a week earlier and 3.64% a year ago.

The average 15-year fixed mortgage rate also slipped to 2.16% from 2.17% a week ago and 3.07% a year ago, though the average five-year adjustable mortgage rate edged up to 2.75% from 2.71% a week ago, down from 3.3% a year ago.

“A new year, a new record low mortgage rate,” says Freddie Mac chief economist Sam Khater.

However, Khater thinks the 2.65% might be at least one of the last times mortgage rates set a record before moving higher.

“The forces behind the drop in rates have been shifting over the last few months, and rates are poised to rise modestly this year,” he says. “The combination of rising mortgage rates and increasing home prices will accelerate the decline in affordability and further squeeze potential homebuyers during the spring home sales season.”

 

Posted in National News
Jan. 8, 2021

New Year, New Record-Low Mortgage Rate: 2.65%

The pandemic pushed mortgage rates lower in 2020 and kept doing so this first week of 2021. The 30-year, fixed-rate is down from last week’s 2.67% and last year’s 3.64%.

WASHINGTON (AP) – U.S. long-term mortgage rates declined this week to new record lows for the first week of 2021.

The year opens against the continuing backdrop of damage from the coronavirus pandemic on the U.S. and global economies, which suppressed home loan rates through most of 2020.

Mortgage buyer Freddie Mac reported Thursday that the average rate on the benchmark 30-year fixed-rate home loan slipped to 2.65% from 2.67% from last week. By contrast, the rate stood at 3.64% a year ago.

The average rate on 15-year fixed-rate loans, popular among homeowners seeking to refinance their mortgages, ticked down to 2.16% from 2.17%.

Mortgage rates are set to rise modestly this year as economic factors shift, according to Freddie Mac chief economist Sam Khater. The record-low lending rates have helped push buyers into the housing market, but a lack of available homes has left many would-be homebuyers empty-handed. The lack of supply had pushed prices up even before the pandemic struck last March.

A continued rise in home prices could intensify the squeeze on potential purchasers during the spring homebuying season, Khater says.

Jan. 7, 2021

Future of Real Estate? Lots of Gen X, Millennial Buyers

About 12M new households will form by 2028, though total home sales could be as high as 25M since some will replace older sellers leaving homeownership for good.

NEW YORK – Between 2018 and 2028, the number of households is projected to increase by up to 12 million, and Generation X and millennials are expected to drive most of that household formation.

However, the total number of home sales could be higher as younger buyers replace dropped households over that time. Overall, the two generations could create nearly 25 million new households by 2028, according to the CoreLogic Insights Blog.

The largest cohort of millennial buyers have yet to surface on the market, researchers note. That segment, from ages 28 to 30, numbers nearly 15 million and is approaching the average age to buy a first home, 33 years old.

But the market already faces a home inventory shortage – the lowest level on record – as these younger generations prepare to enter the housing market. As a result, home prices have increased 1.6-times the rate of incomes over the past two decades.

Record low mortgage rates over the past few months have helped offset high prices, but first-time homebuyers face increasing affordability woes as they try to come up with a down payment. While the monthly mortgage payment and insurance have dropped by 3% compared to a year ago, the down payment needed is up 8% – from about $20,000 to about $22,000 for a median-priced home at $225,000.

“This may be a daunting challenge for some younger buyers, particularly given that the median financial asset holding of families headed by a person under 35 years of age is only about $8,500,” CoreLogic notes on its blog.

Source: “Affordability Challenges Ahead: Large Demographic Tailwind Has Arrived Amid Lowest Inventory of Homes for Sale,” CoreLogic Insights Blog (Dec. 29, 2020)

Jan. 6, 2021

2 out of 5 CEOs Predict Full Recovery in 2021

How long will an economic rebound take once the nation moves past COVID-19? Many CEOs expect a strong bounce-back once Americans feel safe outside homes.

NEW YORK – More than 40% of company CEOs believe business conditions will recover to pre-pandemic levels in 2021, according to a quarterly survey from the Business Roundtable. The CEOs of the nation’s largest companies – which employ some 15 million people – expect their firms to hire more employees and invest more over the next six months.

The CEOs expect the economy to grow at a 1.9% annual rate in 2021, an improvement over a negative growth rate expected this year due to the pandemic. Overall, CEOs are optimistic about sales growth and capital spending in the new year.

The upbeat survey comes shortly after a report that showed the pace of job growth more muted in November. Economists expressed concern that those numbers could worsen in December and January as the COVID-19 outbreak continues to spread.

The economy regained 12.3 million of the 22.16 million nonfarm payroll jobs it lost during the initial COVID-19 outbreak in March and April, a 55% recovery rate. The U.S. needs about 9.3 million jobs to reach pre-pandemic levels, according to the National Association of Realtors®’ Economists’ Outlook blog.

From May to November, the acceleration of e-commerce, housing demand, COVID-19 research/testing, and information technology services fueled job growth.

“The housing market has been soaring despite the subdued job market due to record low mortgage rates,” says Lawrence Yun, NAR’s chief economist. “However, the rates will not fall further, so the jobs recovery becomes even more important to sustain home buying. Jobs are also critical for commercial real estate.”

Source: Business Roundtable; “CEOs Are Much More Upbeat About U.S. Economy, Survey Finds,” MarketWatch.com (Dec. 7, 2020); and “Job Recovery Tracker As of November 2020,” National Association of REALTORS® Economists’ Outlook blog (Dec. 7, 2020)

© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688

Posted in National News
Jan. 4, 2021

2021 Florida Real Estate Economy: To Plan, You Must First Understand

Florida's residential and commercial markets have synergy: Changes in one impact the other. Florida Realtors’ economists will explore their business bond in a Feb. 4 webinar.

ORLANDO, Fla – 2020 brought dramatic changes as Americans quickly leveraged technology to connect to office headquarters, stores and to each other. In doing so, we brought much of what was done in formal buildings into our homes.

The way we engage with buildings and our homes changed seemingly overnight – and perhaps forever. Now, more than ever, it’s important to connect the dots between commercial and residential real estate.

The 2021 Florida Real Estate Trends event will air on Feb. 4, 2021. During the event, a panel of experts assembled by Florida Realtors research team will discuss the delicate interplay between commercial and residential real estate that will unfold next year.

The prominence of remote work, school and social distancing shifted what a home needs to be. The prospect of increased remote work also shifts where a home needs to be, as many are no longer tethered to traditional employment hubs. The panelists will discuss the major changes in commercial real estate and what it means for residential brokers.

On the commercial side, Nancy Muscatello, Managing Consultant for CoStar Advisory Services, will discuss how people’s engagement with hotel and retail has shifted significantly – and what it means for those asset types as well as for warehouse and distribution centers supporting e-commerce.

Chris Owen, director of Florida research for Cushman and Wakefield, will address the impact remote work has had on office occupancy and what office use may look like once the U.S. returns to “normal.”

Finally, Kristine Smale, senior vice president, Zonda Advisory, will help connect the commercial trends to what is happening in Florida residential real estate. She will address shifts in consumer demand toward single-family homes in the suburbs and whether builders are adapting to demand for home offices and more separate spaces.

I’ll moderate the discussion (Jennifer Quinn, Florida Realtors economist and Director of Economic Development) and ask the questions every Realtor wants to know as we fully embrace 2021.

Jennifer Quinn is an economist and Florida Realtors Director of Economic Development

© 2021 Florida Realtors®

Jan. 4, 2021

Relocators Head to Sunny Sites – 5 Florida Cities in Top 20

Report: Of the top 20 cities preferred by relocating Americans, 17 offer sunny, warm weather – and that list includes 5 Fla. metros from Tallahassee to Fort Myers.

ORLANDO, Fla. – According to a report from relocation services provider Updater, 17 of the top U.S. 20 cities for inbound growth were year-round, warm-weather cities.

Of those 17, Florida dominated the list with five spots in the top 20: Tallahassee (No. 3), West Palm Beach (No. 11), Tampa (No. 15), Orlando (No. 16), and Fort Myers (No. 20).

Updater analyzed a random sampling of 1.5 million household moves across the United States that took place from January through November 2020. It found that Americans departed the largest, most densely populated cities in the United States and took to smaller cities, and Southern states that had been attractive destinations for years spiked during the pandemic.

Source: Orlando Business Journal (12/21/20)

Dec. 23, 2020

Florida's November Housing Market: Sales, Median Prices, New Listings Up

Florida Realtors’ data: Single-family home sales are up 22.9% year-over-year, median sales price up 14.1%; condo sales up 30.2%, median price up 16.9%. Chief Economist O’Connor: All 22 of Fla.’s metros saw gains in closed sales – but inventory remains far below normal levels.

ORLANDO, Fla. – In November, Florida’s housing market reported more closed sales, more new pending sales, higher median prices and more new listings compared to a year ago, despite the ongoing pandemic, according to Florida Realtors® latest housing data. Single-family existing home sales rose 22.9% compared to a year ago.

“Our homes are more important than ever, becoming the hub of our daily lives as we continue to take steps to safeguard our health, our families and our communities in the face of the ongoing pandemic,” says 2020 Florida Realtors President Barry Grooms, a Realtor and co-owner of Florida Suncoast Real Estate Inc. in Bradenton. “With high demand, Florida’s housing market continues to gain momentum and provide support for the state’s economy.”

Realtors are available in every community to help guide buyers and sellers through today’s challenging market conditions of high demand and shortage of homes for sale.”

In November, closed sales of single-family homes statewide totaled 26,406, up 22.9% year-over-year, while existing condo-townhouse sales totaled 11,003, up 30.2% over November 2019. Closed sales may occur from 30- to 90-plus days after sales contracts are written.

The statewide median sales prices for both single-family homes and condo-townhouse properties rose year-over-year in November for 107 consecutive months. The statewide median sales price for single-family existing homes was $305,000, up 14.1% from the previous year, according to data from Florida Realtors Research Department in partnership with local Realtor boards/associations. Last month’s statewide median price for condo-townhouse units was $228,000, up 16.9% over the year-ago figure. The median is the midpoint; half the homes sold for more, half for less.

Florida Realtors Chief Economist Dr. Brad O’Connor noted that November’s closed sales registered the highest percent year-over-year increase of any month this year, except for October’s 26.9% year-over-year rise.

“This growth in sales remained very broad-based in November, with all 22 of Florida’s metro areas seeing positive year-over-year gains,” he said. “The question remains, though, how long can we keep up this pace? Mortgage rates remain at all-time lows and demand will likely remain strong in the coming months, but inventory levels – particularly for single-family homes – remain far below normal levels. As of the end of November, our statewide inventory of single-family homes was down 41.3% compared to a year ago. Even listings of properties north of a million dollars, where we’ve had more inventory, are down by almost 25%.”

This lack of supply continues to keep home prices elevated because of strong competition for the properties that are on the market, O’Connor explained.

“In November, the median price among closed sales of single-family homes was $305,000, which matches October’s figure but still represents a 14.1% year-over-year increase,” he said. “Some of this figure represents a shift in the mix of the types of homes that are selling – we’ve seen a greater share of luxury home sales this year because the inventory shortage hasn’t hit this segment of the market as hard. However, a substantial amount of this increase is entirely due to the lack of supply in the face of strong demand resulting in greater competition among prospective home buyers.”

Meanwhile, inventory hasn’t been quite as much of an issue in the condo/townhouse category, O’Connor said. Still, statewide, that category was down 14.5% year-over-year at the end of November.

New listings statewide increased year-over-year in both property type categories in November, by just 0.3% for single-family existing homes and by 4.2% for condo and townhouse units.

On the supply side of the market, inventory (active listings) remains constrained, particularly in the single-family existing home category, which was at a very limited 2-months’ supply in November. Condo-townhouse inventory was at a 4.7-months’ supply.

According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 2.77% in November 2020, significantly lower than the 3.70% averaged during the same month a year earlier.

To see the full statewide housing activity reports, go to the Florida Realtors Tools and Research section. Realtors also have access to local market data (password protected) through Florida Realtors’ SunStats resource.

© 2020 Florida Realtors®