The Black Knight Mortgage Monitor for May doesn’t even hint at a housing crisis on the horizon. Affordability is again (or maybe still) a concern, but buyers are out there, and home prices reflect that fact. Homeowners are performing well on their mortgages (and aren’t about to give up their low rates), and while the current report doesn’t touch on the subject, continue to build on their equity. In addition, builders are getting back in the game, shoring up hope of a lessening in the perennial shortage of available homes.
Home prices, which eased late last year have now risen for five straight months, completely reversing the earlier declines. Black Knight says its Home Price Index hit an all-time high, rising 0.7 percent from April to May. While the year-over-year growth rate is currently hovering at 0.1 percent, the May increase is equivalent to annualized growth of 8.9 percent. If the recent pattern continues, that annual growth rate may turn and begin trending higher as early as next month.
Twenty-seven of the 50 largest U.S. markets have returned to their previous price peaks or set new ones this spring. Even the West Coast, where some of the largest downward corrections happened last year, saw many of its markets reheat in May. San Jose was up 1.4 percent, Los Angeles rose 1.0 percent, and Seattle gained 0.9 percent. Austin, Texas is a major exception to the price hikes. The deficit from its peak continues to grow, reaching -13.8 percent in May.
“There is no doubt that the housing market has reignited from a home price perspective,” according to Black Knight Vice President Andy Walden. “Firming prices have now fully erased the pullback we tracked through the last half of 2022 and lifted the seasonally adjusted Black Knight HPI to a new record high in May.
This, of course, means that affordability is taking a hit, fueled by rising interest rates as well as home prices. As of June 22, with 30-year rates at 6.67 percent, it required $2,258 per month in principal and interest to make the monthly payment on a median-priced home, given 20 percent down on a 30-year mortgage. This exceeds the previous high of $2,234 required last October. Nationally, it takes 35.7 percent of median household income to make the average P&I payment. Only rising income since the fall of 2022 has kept May from being the most unaffordable month in the past 37 years.
Inventories continue to be the principal driver of home prices. For-sale listings have deteriorated in 95 percent of major markets this year and are at about half of pre-pandemic levels. Meanwhile, more than 60 percent of existing mortgage holders – and potential sellers – are sitting on first lien rates below 4 percent, with significant disincentive to list in this high-priced, low inventory, high-rate environment.
Still, prepayments (SMM or single-month mortality) rose by 23 percent in May to 0.54 percent, the highest level since September. Twenty-eight percent of prepayments were related to home sales, but all drivers rose by double digits. There were 22 business days in the month, two more than in April, which also accounted for a 10 percent increase in the SMM. Prepayments are still down 40 percent year-over-year.
Walden commented, “As it stands, housing affordability remains dangerously close to the 37-year lows reached late last year, despite the Federal Reserve’s attempts to cool the market. The challenge for the Fed now is to chart a path forward toward a ‘soft landing’ without reheating the housing market and reigniting inflation. But the same lever used to reduce demand – raising rates – has not only made housing unaffordable almost universally across major markets, but it has also resulted in significant supply shortages by discouraging potential sellers unwilling to list in such an environment, further strengthening prices. At this point, even if rates come down, but not so sharply as to entice potential sellers out of their sub-3.5 percent mortgages, it could risk a widespread reheating of home prices across the U.S.”
Walden sees welcome news in May’s residential construction data. “New construction starts and completions were both strong in May. However, most projects underway in the month were 5+ multi-family units, as opposed to single-family residential (SFR) units. SFRs made up just 40 percent of the total and is now at construction levels still approximately 30 percent below the 2005 peak.”
There is also good news on the mortgage delinquency front. The national delinquency rate fell 11 basis points (bps) in May to 3.10 percent, returning to a near-record low after a calendar-driven spike in April. The number of borrowers missing a single payment dropped by 94,000 or 9.5 percent erasing nearly half of the prior month’s increase. Loans 90 or more days past due, are down 30 percent year-over-year and within 1 percent of the post-Great Recession low in 2019.
You may have heard the good news: In recent weeks, several mortgage and real estate brokerage execs have exclaimed that we may have already reached the bottom of the market. For prospective home buyers and sellers, that could mean a gradual decline in mortgage rates, which would unlock inventory and—dare I say—sales activity.
But there are still ultra-competitive markets in America where those conditions will simply be offset by rising prices.
You may have seen a picture making the rounds on Housing Twitter and LinkedIn recently. It shows about 50 people waiting in line at an open house in Mount Laurel, New Jersey. The house ended up having five offers and sold for $50,000 over ask.
In much of suburban New Jersey, where new construction is rarer than cheap Bruce Springsteen tickets, the pandemic-era conditions never left. There’s still plenty of money and demand emanating from New York City and Philadelphia and very little inventory. I mean very little inventory.
In New Jersey, the median list price last week of a single family home checked in at $565,000, according to Altos Research data. In May 2020, it was $425,000. Single family inventory last week fell to 8,556; three years ago it was 21,874.
This has serious consequences for real estate agents and loan officers alike, since it’s usually a zero sum game. You land the client and get a commission, or you don’t and you get bupkis.
“I sent pre-approvals two-to-three times a day, and then there are 30-plus offers on the homes and I virtually never get contracts,” one veteran loan officer told HW in late March. “One home recently had over 60 offers! Incredibly frustrating, and I know and have spoken with multiple $100 million-per-year originators/friends who are writing nothing here as well.”
If mortgage rates were to fall into the 5% range and stay there for a period, I think we’d see some supply shake loose in New Jersey. But for markets like suburban New Jersey, the demand will still vastly exceed the supply for years to come. There’s simply no easy or fast way to overcome two decades of underbuilding, NIMBYism and poor housing policies. It’s great for existing homeowners whose properties become more valuable due to scarcity. But it’s bad for everyone else, agents and loan officers included.
According to Altos data, the housing fever is even higher in Rhode Island, Massachusetts and Connecticut. In Connecticut, single-family inventory has dropped 80% in the past six years while prices have increased by 44%, according to data from the Federal Reserve Bank of St. Louis. And this is just the Northeast – try finding a home in Los Angeles for under $1 million.
What’s it like in your neck of the woods? Share your story with me at [email protected] and we’ll look at supply and demand in your market.
DataDigest is a newsletter in which HW Media Managing Editor James Kleimann breaks down the biggest stories in housing through a data lens. Sign up here! Have a subject in mind? Email him at [email protected]
As the spring homebuying season comes to an end, there are distinct signs of the housing market reheating from a home price perspective. The lack of inventory drove home prices up, challenging potential buyers, Black Knight pointed out in its monthly mortgage monitor report.
The reheating is widespread with more than half of the 50 largest U.S. markets seeing prices at or above 2022 peaks. On a seasonally adjusted basis, Black Knight’s home price index hit a new record high in May, having now fully reversed the correction in home prices seen late last year.
Although the backward-looking annual growth rate sat at 0.1% in May, the exceptionally strong 0.7% month-over-month gain would equate to an annualized growth rate of 8.9%, Black Knight’s mortgage monitor report noted.
That would mean the annual home price growth rate would remain at or near 0% for only a short time before inflecting and trending sharply higher in coming months, Andy Walden, Black Knight’s vice president of enterprise research, said.
While prices are still well below peak levels across the West and in many pandemic boom towns, price firming in recent months has begun to close those gaps.
Austin, Texas, is a notable exception. Inventory in Austin continues to run above pre-pandemic levels, putting downward pressure on prices, which have fallen to -13.8% below peak, the largest gap of any market.
Just eight of the top 50 markets are currently more than 5% below their 2022 peaks.
The price jumps for homes comes down to the lack of inventory, the report pointed out.
For-sale listings deteriorated in 95% of major U.S. markets in 2023. Active listings are still down more than 50% from pre-pandemic levels.
“New construction starts and completions were both strong in May, which is welcome news. However, most projects underway in the month were 5+ multi-family units, as opposed to single-family residential units,” Walden said.
Single family residential units account for just 40% of the total number of projects underway.
“As it stands, housing affordability remains dangerously close to the 37-year lows reached late last year, despite the Federal Reserve’s attempts to cool the market. The challenge for the Fed now is to chart a path forward toward a ‘soft landing’ without reheating the housing market and reigniting inflation,” Walden noted.
The same lever used to reduce demand – which is raising rates – has made housing unaffordable across major markets and resulted in significant supply shortages by discouraging potential sellers unwilling to list, further strengthening prices, Walden explained.
As of June 22, with 30-year rates at 6.67%, the principal and interest (P&I) payment needed to buy the median-priced home rose to $2,258, marking the highest payment on record.
Factoring in current income levels, only about 35.7% of median household income makes the average P&I payment.
It would take a 30% drop in home prices to get back to normal affordability, according to the report. Alternatively, if prices stayed the same and rates fell to 5%, it would take 19% income growth to get the market back to normal affordability.
“At this point, even if rates come down, but not so sharply as to entice potential sellers out of their sub-3.5% mortgages, it could risk a widespread reheating of home prices across the U.S,” Walden said.
Zillow is forecasting an end to housing inventory problems, but we may have to wait a while for it to happen.
The
company says it expects to see “flood of homes” coming onto the
market over the next twenty years. Those homes will primarily be
existing homes currently occupied by baby boomers, which will be sold
off once their owners pass away.
The Baby Boomer generation, once 76 million strong in the U.S., dwarfed the 55 million Gen-Xers and 62 million Millennials it immediately preceded. Today, about a third of America’s homes are owned by those 60 and older, and a new Zillow analysis shows the impact their aging will have on the housing market.
The
“Silver Tsunami”, as Zillow calls it, is estimated to hit in
earnest as the number of seniors aged 60 or older who pass away each
year rises during the 2020s and 2030s. In the decade from 2007 to
2017, roughly 730,000 U.S. homes were released into the market each
year by seniors aged 60 or older. From 2017 to 2027 and from 2027 to
2037 that number is set to rise to 920,000 and 1.17 million per year,
respectively. This means more than 27% of today’s owner-occupied
homes will become available by 2037.
While
virtually all areas will feel the effects to some degree – between
one-fifth and one-third of the current owner-occupied housing stock
was impacted in every metro analyzed – this wave won’t hit all at
once and won’t strike all markets equally.
Retirement
hubs like Florida and Arizona are likely to feel the sharpest impact.
If demand erodes because fewer people choose to retire there in the
coming years, those areas might end up with excess housing. Also
heavily impacted will be regions like the Rust Belt, which saw
younger people move away in recent decades, leaving older generations
to make up a larger share of the population.
Some
regions will be far less affected. These include Salt Lake City,
where a much smaller share of homeowners are in their golden years,
as well as Atlanta, Austin, Dallas and Houston – all of which are
vibrant but relatively inexpensive places that tend to attract
younger residents looking for an affordable alternative to expensive
coastal cities.
Still,
the differences in the share of homes released by seniors among
metros are small compared to the differences within them. Palm
Springs, for example, will see 45% of its owner-occupied homes
vacated by 2037, compared with 23.8% of the combined L.A.-Riverside
metro area overall. El Mirage and Sun City figure to see nearly
two-third of their homes available, compared with 28.2% of the
Phoenix area at-large.
Housing
released by the Silver Tsunami – upwards of 20 million homes
hitting the market through the mid-2030s – will provide a
substantial and sustained boost to supply, comparable to the
fluctuations that new home construction experienced in the 2000s
boom-bust cycle. Whether this housing is appropriately located,
priced and styled to meet future demand will be an important factor
in how it pairs with new construction to alleviate today’s housing
shortage. It seems likely that the construction industry in the
coming two decades will place a greater emphasis than before on
updating existing properties.
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected]
“New home construction is taking on an increased role in the marketplace because many home owners with loans well below current mortgage rates are electing to stay put, and this is keeping the supply of existing homes at a very low level,” Alicia Huey, the NAHB chair, said in a statement. “While this is fueling cautious optimism among builders, they continue to face ongoing challenges to meet a growing demand for new construction. These include shortages of transformers and other building materials and tightening credit conditions for residential real estate development and construction brought on by the actions of the Federal Reserve to raise interest rates.”
Although interest rates have more than doubled since 2021, home builders are still cautiously optimistic about business, something the NAHB attributes to builders’ usage of buyer incentives. However, as sales have picked up this spring and existing home sales remain at record lows, the use of sales inducements from homebuilders has slowed.
In May, the share of homebuilders reducing home prices dropped to 27%, down from 30% in April and 36% in November 2022, with the average price reduction hovering at 6%, unchanged for the past four months. Additionally, the share of homebuilders offering some type of incentive dropped to 54% in May, compared to 59% in April and 62% last December.
“Lack of existing inventory continues to drive buyers to new construction,” Robert Dietz, the NAHB’s chief economist, said in a statement. “In March, 33% of homes listed for sale were new homes in various stages of construction. That share from 2000-2019 was a 12.7% average. With limited available housing inventory, new construction will continue to be a significant part of prospective buyers’ search in the quarters ahead.”
The three other indices monitored by the NAHB rose in May. The gauge measuring current sales conditions rose to 56, up five points month over month. The component analyzing sales expectations for the next six months rose seven points to a reading of 57. Compared to a month prior, the gauge measuring traffic of prospective buyers rose two points to 33.
Regionally, the three-month moving averages for HMI rose in three out of the four regions, with the West gaining three points to a reading of 41, the South increasing three points to 52, and the Midwest rising two points to a reading of 39. The Northeast held steady month over month at a reading of 45.
Another survey, the BTIG/HomeSphere State of the Industry Report, also reported an improvement in homebuilder outlook.
According to the survey, nearly twice as many builders reported sales that were better than expected (38%), than those who report sales that were worse than expected (20%) in April. In addition, nearly three times as many builders saw traffic as better than expected (42%) versus worse than expected (15%). The share of builders reporting a year over year decrease in sales also shrank to 34% in April, compared to 40% in March.
The BTIG/HomeSphere study is an electronic survey of approximately 75-125 small- to mid-sized homebuilders that sell, on average, 50-100 homes per year throughout the nation. In April, the survey had 124 respondents.
Like the homebuilder confidence survey, the BTIG survey also found that homebuilders are easing up on buyer incentives. Of the 124 respondents, 17% cut some, most of all prices versus 22% last month, while just 22% of surveyed builders reported increasing some, most or all incentives compared to 27% a month prior. In addition, 30% of homebuilders reported raising some, most or all base prices in April, up from 21% in March.
“New home demand momentum has continued to accelerate throughout the spring season, which is in-line with anecdotal public builder commentary,” Carl Reichardt, a BTIG analyst, said in a statement. “With comparisons for both sales and traffic beginning to ease meaningfully, we expect results should become stronger on a year/year basis next month.”
After extraordinary home value growth characterized a frenzied housing market in 2017 and 2018, this year’s slowdown felt like a welcome return to normalcy for many in the industry. And Zillow is predicting more of the same in 2020, with the market set to stabilize near historic norms.
Changing
tastes as millennials make up a growing share of home buyers will
impact the market. Homes will get smaller, bold colors and prints
will return to home designs and demand will stay high as more and
more people reach typical home buying age.
Here’s Zillow’s predictions for housing in 2020:
Homes will continue to shrink
The sprawling, suburban homes that Baby Boomers coveted will increasingly become a relic of the past in 2020 and into the next decade as the median square footage of newly built, single-family homes will fall for the fourth time in five years. The typical U.S. home has shrunk by more than 80 square feet since 2015i. Millennials, the largest group of buyers in 2020, are proving to be have much different tastes and lifestyles than their parents’ generation. Many prefer homes in urban areas with an abundance of amenities within walking distance over the mansions in the exurbs that boomers are vacating.
The U.S. will not enter a recession in 2020
As recently as July, half of experts surveyed by Zillow predicted a recession would begin in 2020. However, the U.S. economy has remained resilient to expected headwinds like ongoing trade volatility and the possibility of a stock market retreat. Consumer spending has picked back up – reflecting healthy consumer confidence – job creation is on a steady path and annual wage growth has stayed at or above 3% since October 2018. Economic and home value growth should continue into 2021, although perhaps at a slower pace than in recent years.
Home value and rent growth will be slower and steadier
Home value growth is expected to grow 2.8% from December 2019 to December 2020, according to a survey of more than 100 housing experts and economistsii. That’s down from 4.7% annual growth in October, the latest month for which data is available. Zillow expects rent growth to continue accelerating into the spring, before dipping below 2% by the end of 2020.
Mortgage rates will stay low, keeping housing demand high
Mortgage rates fell markedly in 2019 and are expected to remain low for the bulk of 2020. That will keep demand strong and continue to fuel decent price growth in the nation’s most broadly affordable markets. But low rates don’t help overcome the upfront hurdle of high down payment requirements, pushing buyers in expensive areas to fan out in search of areas they can better afford.
Sales will climb again after a downturn in 2018
For-sale inventory is near historic lows, but that doesn’t mean a dearth of sales. In fact, the low inventory is largely a result of high demand from buyers that snatch up homes as soon as they hit the market. There are more and more potential buyers as the large Millennial generation is reaching peak homebuying age in greater numbers each year, and they are benefiting from low mortgage rates, an increase in new construction permits and technology – such as Zillow Offers and other iBuyers – that is reducing friction in the market.
Color will make a comeback
Goodbye, Hygge. Hello, color! Fun will return to home design in the form of bold prints, lively wallpaper and brightly hued walls. After a decade of Scandinavian modern design that dominated retail and social media feeds as Americans embraced neutrals, minimalism and clutter-free living, expect a shift toward playful, creative design. Look for color to be injected in unexpected ways in kitchen cabinetry and appliances, in lighting fixtures and on interior doors and moldings.
“With the housing market stabilizing from the drama of the price recovery and the slowdown during 2019’s home shopping season, we have a rare moment of calm to reflect on what housing might look like in the year to come,” Zillow’s Director of Economic Research Skylar Olsen said in a statememt. “If current trends hold, then slower means healthier and smaller means more affordable. Yes, we expect a slower market than we’ve become accustomed to the last few years, but don’t mistake this for a buyer-friendly environment – consumers will continue to absorb available inventory and the market will remain competitive in much of the country. But while the national story is a confident one, housing in some manufacturing-heavy markets may see adversity. The struggle could be even more stark, since similarly affordable housing markets with a more balanced job profile may be 2020’s rising stars.”
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected]
Mortgage rates jumped this week as investors grapple with persistent positive economic data and a hawkish Fed.
The Freddie Mac’s Primary Mortgage Market Survey, which focuses on conventional and conforming loans with a 20% down payment, shows the 30-year fixed rate averaged 6.81% as of July 6, up significantly from last week’s 6.71%. By contrast, the 30-year was at 5.30% a year ago at this time.
Other mortgage indexes also show rates rising.
The 30-year fixed rate for conventional loans was 7.08% at Mortgage News Daily on Thursday morning, up 17 basis points from the previous week. HousingWire’s Mortgage Rates Center showed Optimal Blue’s 30-year fixed rate for conventional loans at 6.92% on Wednesday, compared to 6.69% the previous week.
“Mortgage rates continued their upward trajectory again this week, rising to the highest rate this year so far,” said Sam Khater, Freddie Mac’s chief economist in a statement. “This upward trend is being driven by a resilient economy, persistent inflation and a more hawkish tone from the Federal Reserve.”
High rates combined with low inventory continue to price many potential homebuyers out of the market, added Khater.
Markets are still digesting the Federal Reserve’s most recent FOMC meeting, during which Federal Reserve Chair Jerome Powell hinted at additional rate hikes before the end of the year. The 10-year Treasury yield was north of 4.0% on Thursday, a threshold not seen since March of this year.
Economic resilience is taking investors aback. Consumer spending keeps growing, as do auto sales, which were expected to soften. Real estate markets also speak to resilient conditions, as buyers have accepted mortgage rates in the new normal of 6% – 7% range and kept a steady pace of sales over the past few months. In addition, builders are recognizing the demand and the opportunity it presents, and they are pushing construction activity higher – about one-third of homes on the market are new construction, more than double normal levels.
The U.S. jobs market remains strong with U.S. companies adding almost half a million jobs last month, as reported by Bloomberg. Capital markets are looking for further clues and a hint about the outlook for the second half of the year in the next payroll employment report.
“The challenge for housing markets is the unfolding dynamic between supply, demand, and borrowing costs,” said George Ratiu, chief economist of Keeping Current Matters in a statement. “The number of homes for sale has been growing, and properties are sitting longer on the market, giving buyers more options and time to decide. At the same time, homeowners have held back from listing, keeping the supply of existing homes in check and driving prices higher. There are also clear signs of seasonality in this year’s housing markets, a good development on the road back toward health. However, we have a way to go to regain balance.”
Lisa Sturtevant, Chief Economist of Bright MLS, said economic conditions will cool in the second half and mortgage rates will come down.
“However, there will be no return to the 3% rates we had during the pandemic,” she said. “Homebuyers have had to accept the ‘new normal’ of rates around 6.5% or even a little higher. With affordability at near-record lows and inventory still very limited, buyers will continue to find the market challenging in the second half of 2023. Home shoppers will have to compromise on the features they want in a home or the neighborhood they are looking in.”
When it comes to purchasing a home, buyers may have difficulty finding financing beyond the conforming loan limit. In this instance, you may need to apply for a jumbo loan. Whether your sights are set on a new construction home in Boise or a cabin home in McCall, let’s break down what a jumbo loan is in Oklahoma, the 2023 conforming loan limits, and what’s needed to qualify for this type of loan.
What is a jumbo loan?
What exactly is a jumbo loan in Idaho? A jumbo loan is a specialized type of mortgage that comes into play when you’re seeking financing for a home that surpasses the conforming loan limits (CLL) established by the Federal Housing Finance Agency (FHFA). Typically, this type of loan is necessary for upscale, luxurious properties or those situated in pricey housing markets.
If you need to borrow more than the conforming loan limit, you’ll need a jumbo loan. Idaho jumbo loans allow you to borrow more money to buy a more expensive home, but they also come with higher interest rates and stricter requirements than conventional loans.
What is the jumbo loan limit in Idaho?
In 2023, the conforming loan limit for a single-family home in most U.S. markets is $726,200. However, this limit can be higher in areas where the median home price is significantly above the national average.
$726,200 is the conforming loan limit in most Idaho counties
$1,089,300 is the maximum limit in Idaho’s more expensive counties
Keep in mind that the amount being borrowed is what determines whether or not you’ll need a jumbo loan, not the price of the home. So, if you were to put $50,000 down on a $750,000 home in Boise County, the mortgage would be $700,000, which is under the conforming loan limit for this area. In this case, your loan wouldn’t be considered a jumbo loan.
The following counties in Idaho have a conforming loan limit beyond $726,200 for 2023:
County
Conforming Loan Limit
Blaine County
$740,600
Camas County
$740,600
Teton County
$1,089,300
To identify the conforming loan limits where you’re considering buying a home in Idaho, check out this FHFA map.
What are the requirements for a jumbo loan in Idaho?
As previously mentioned, the requirements for a jumbo loan are much more stringent than a conforming loan. The specific requirements can vary from lender to lender, but below are the typical requirements for borrowers seeking a jumbo loan in Idaho.
Higher credit score: When it comes to applying for a jumbo loan, credit score requirements are typically more stringent than for conventional mortgages. While some lenders may be willing to accept a lower score, a credit score of at least 720 is generally required to qualify for a jumbo loan. It’s important to have a strong credit profile and a solid financial history to increase your chances of being approved for a jumbo loan.
Larger down payment: Buying a high-priced home usually requires a larger down payment from the buyer. Conventional loans may offer programs for down payments as low as 3%- 5%, but jumbo loans require a minimum down payment of 10%, with some lenders requiring up to 30%. If the homebuyer puts down less than 20%, they will likely need to pay for private mortgage insurance (PMI).
More assets: Idaho jumbo loan borrowers are typically required to have additional assets. In particular, lenders may require borrowers to demonstrate sufficient liquid assets or savings to cover one year’s worth of loan payments.
Lower debt-to-income ratio (DTI): Mortgage lenders consider a borrower’s debt-to-income ratio (DTI) when evaluating their eligibility for a jumbo loan. To qualify for a jumbo mortgage in Idaho, borrowers typically need a DTI below 43%, though closer to 36% is preferred. The DTI represents the borrower’s monthly debt payments divided by their gross monthly income.
Additional home appraisals: For a jumbo loan, mortgage lenders may require a second appraisal to ensure that the property’s value is accurate. This is particularly true in areas where there are few comparable home sales. The home appraisal acts as a second opinion and helps the mortgage lender to mitigate their risk. It’s important to note that the cost of a secondary appraisal may be higher than a typical home appraisal, particularly in areas with fewer sales.
More home buyers are being tempted onto the market by the incredibly low mortgage rates being offered, but they’re becoming increasingly frustrated at the limited choice of homes for sale.
The combination of an unseasonable surge in buyer demand and reduced housing inventories, there simply aren’t enough homes to satisfy everyone who’s looking, CNBC reported.
Indeed,
housing inventories nationwide fell 2.5% in September, compared to
the same month one year ago. But the situation gets even worse when
we consider the most affordable segment of the market. According to
CNBC, inventory of homes priced at $200,000 or less is down 10%
compared to a year ago, while the $200,000 to $750,000 segment saw no
change. Unfortunately, economists believe inventory in that price
range will also fall in the coming months.
“If,
or better yet, when inventory in this segment begins to take a
downturn, the vast majority of home buyers are going to feel its
effects as their options rapidly dwindle,” George Raitu,
realtor.com’s senior economist, told CNBC. “September inventory
trends, especially in the mid-market, may be the canary in the coal
mine that we could be headed for even lower levels of inventory in
early 2020.”
The
most likely result of this growing demand for homes and the shortage
of available options is that home prices will rise, which may
eventually help to reduce demand and balance things out.
But
right now, buyers are being increasingly tempted to have a look due
to the low mortgage rates on offer. According to Freddie Mac, the
30-year fixed-rate mortgage hovered around 3.5% in September, well
below the average of 5% we saw last November. And both new and
existing home sales have increased simultaneously, as rates decline.
Even
worse, it seems builders are unable to make up the shortfall. Robert
Dietz, chief economist of the National Association of Home Builders,
told CNBC that new construction is unlikely to be fast enough to
provide buyers with the options they want at affordable price points.
He said that just 10% of sales of newly built homes are priced at
$200,000 or less, whereas that percentage was at 40% just ten years
ago. He adds that the new home market is undersupplied by around 1
million housing units overall.
“We’ve
faced what has been called a perfect storm of supply-side
challenges,” Dietz said. “There has been an ongoing labor
shortage, we lack the necessary land and lots to build homes, we’ve
had building material cost concerns, and then probably the most
important factor has been higher regulatory costs since the Great
Recession.”
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected]
With the news this month that the housing market hit a milestone by showing the first year-over-year price decline in recent memory, homeowners who’d considered finally selling their home this year are finding themselves discouraged yet again.
What happened, they might wonder, to the not-so-distant glory days of frantic bidding wars and over-ask offers? Plenty of frustrated owners seem worried that the window for a fast and lucrative home sale might be shutting fast.
But here’s the reality: The U.S. housing market is no monolith. Although it’s true that many of the hottest markets of the past few years have seen prices fall in the wake of higher mortgage interest rates that broadly dampened home shoppers’ buying power, there are still cities where buyers continue to snatch up homes quickly and where sellers are getting their full asking price—or more.
This is why the Realtor.com® data team dug in to find the U.S. real estate markets that most favor sellers. (Sorry, buyers!)
The best places for sellers generally have persistently low housing inventory, strong demand from buyers, and often—but not always—lower prices that have room to swell. These are generally affordable metropolitan areas in the Northeast with a few in the Midwest.
Three of the metros on our list—Hartford, CT, Worcester, MA, and Providence, RI—are so close, you could tour homes in all of them in a single day. Our ranking also has one spot in the South and a somewhat bizarre outlier in California—more on that later.
To figure out if an area is a buyer’s or seller’s market, Pamela Ermen likes to track the change in the number of closed sales per month, compared with the change in the number of new listings per month.
“When sales are going up and inventory is going down, that’s a real seller’s market,” says Ermen, a Virginia Beach–based Realtor® at Re/Max and a speaker and coach at Real Estate Guidance.
Still, sellers who focus solely on low inventory can wrongly conclude that they can list their home at a higher price than an agent might advise. That can lead to their property languishing on the market not receiving strong offers. Meanwhile, buyers who focus only on the number of sales going down might wrongly think there’s less competition. That might result in heartache when they find out the hard way that many homes are still getting multiple offers.
To find true seller-friendly places, the Realtor.com data team looked at the May 2023 listing data for the 100 largest metropolitan areas. Then we ranked each based on the number of days that the median listing is on the market, combined with the portion of listings that have had the price reduced. These metrics tell us where homes are selling faster than average and with fewer sellers having to reduce their price to make the sale.
We selected just one metro area per state to ensure geographical diversity. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)
Here’s where sellers can expect the market to be most tilted in their favor this summer.
A house currently on the market for $174.9K in Rochester, NY
(Realtor.com)
Median list price: $265,000 Median days on the market: 13 Listings with a price reduction: 1 in 17
Rochester, on the western edge of New York along the southern shore of Lake Ontario, not only is at the top of our seller’s saviors list—it’s also in a class of its own. Rochester had both the lowest number of days on the market and the lowest portion of listings with a price reduction. But this is nothing new for the so-called Flower City.
The metro area has become a mainstay of the Realtor.com hottest real estate markets list. It’s also where sellers are usually still getting their asking price, and where buyers can find one of the largest selections of homes for less than $200,000. Plus, home prices are well below the national median list price of $441,500 in May.
These affordable homes have made the area appealing to locals, out-of-towners, and investors.
“If you’re priced right in our market, you can expect to still sell in about one week,” says Jenna May, a local real estate agent at Keller Williams Realty.
When the market was at its pandemic peak in 2022, and even before anyone had heard of COVID-19, Rochester was still leading the nation in the low number of days on the market. Demand here for homes is high and seems destined to stay that way.
“There are people who are offering $80,000 over listing price and not getting the home,” says May. “It’s that competitive.”
A house currently on the market for $355K in Hartford, CT
(Realtor.com)
Median list price: $424,925 Median days on the market: 19 Listings with a price reduction: 1 in 14
The capital city of Connecticut is also no stranger to the Realtor.com list of the nation’s hottest real estate markets. Hartford is the largest population hub in the state, with 1.2 million residents.
It also boasts home prices that are about 5% below the national median.
“The Northeast has been well undervalued compared with other markets—and not just for years, but for decades,” says Lisa Barrall-Matt, a senior broker at Berkshire Hathaway in West Hartford.
Homes in the Hartford area have been priced $100,000 less than comparable homes in other markets, Barrall-Matt says, for so long that she began to take it for granted.
Now, she’s feeling vindicated: “I used to say, ‘Why aren’t prices higher?’ Now I’m saying, ‘Where’s the ceiling?’”
A house currently on the market for $499K in Portland, ME
(Realtor.com)
Median list price: $622,500 Median days on the market: 24 Listings with a price reduction: 1 in 13
Portland became a popular pandemic destination for Northeasterners looking for a scenic, coastal city with some great restaurants, entertainment, and a brewery scene. The area has a rich history, having a Native American presence dating more than 10,000 years before becoming an early Colonial settlement.
The above-average prices in this artsy city on Casco Bay aren’t keeping sellers from enjoying quick sales. In fact, few listings are getting marked down. The demand for housing here is just so strong. Portland has been featured on our list of the best places to retire in 2022, and it has one of the last year’s hottest neighborhoods: Windham, just on the northwestern edge of Portland proper.
Prices in Portland have grown significantly faster during the pandemic—from May 2019 to now—than they did in most of the country. Where prices rose about 40% nationally, prices in Portland have grown by about 62%. Just since this time last year, prices rose 17%.
A newer four-bedroom home in South Portland that’s within walking distance of Fore River is listed for $650,000, close to the area average.
A house currently on the market for $380K in Worcester, MA
(Realtor.com)
Median list price: $517,450 Median days on the market: 19 Listings with a price reduction: 1 in 10
Worcester, about 40 miles west of Boston, was nicknamed the “Heart of the Commonwealth” because of its central location in Massachusetts.
This medium-sized metro has a name that’s fun to say, like “rooster” but with a W. But it simply doesn’t have enough homes to match the high interest from potential buyers, according to Nick McNeil, a local Realtor with the Lux Group.
“The amount of demand and the absolute lack of inventory is nuts,” he says. “And there’s not much room for new construction in this area, with tight regulations on what can be built.”
Until there’s some kind of change in the supply and demand dynamic in the area, McNeil says, it’s going to be hard for buyers, and relatively easy for sellers—as long as they’re not also trying to buy.
“The best situation you can be in is if you can sell now,” he says.
A house currently on the market for $549K in Allentown, PA
(Realtor.com)
Median list price: $384,250 Median days on the market: 25 Listings with a price reduction: 1 in 10
Amid the rolling hills of Eastern Pennsylvania’s Lehigh Valley, about 60 miles northwest of Philadelphia, Allentown has a few things going for sellers right now. The portion of homes with a price reduction is about half the national average, and homes are selling about 40% faster.
Like some other places on this list, the homes in this historic steel town are priced below the national average. But local incomes are a bit higher than average, offering buyers more affordability. That’s helping the real estate market to remain competitive as buyers seek out deals.
Allentown offers a mix of urban, suburban, and rural lifestyles, making it broadly attractive for buyers.
What’s especially notable about the area is the price growth over the past several years. Allentown metro prices have risen by 78% since before the pandemic, ahead of all the other places on this list.
For about the local median price in Allentown, buyers can find a five-bedroom bungalow in the Hamilton Park neighborhood west of downtown Allentown.
A condo currently on the market for $225K in Milwaukee, WI
(Realtor.com)
Median list price: $374,950 Median days on the market: 29 Listings with a price reduction: 1 in 11
Perched on the western shore of Lake Michigan in southeastern Wisconsin, Milwaukee is known for its breweries, including Miller and Pabst. It’s also where Harley-Davidson was founded. And it’s been a staple of housing affordability for some time.
However, prices have been rising in Milwaukee’s metro area: They rose by around 11% compared with this time last year.
The median number of days on the market is below the average now, just like it was before the pandemic. The same goes for the portion of listings with a price reduction. This is all very good news for home sellers hoping for a quick, profitable sale.
For $375,000, a buyer can get a large, four-bedroom home just 5 minutes from hiking trails, a golf course, and a dog park, all along the shoreline.
A new construction home currently on the market for $400K in Virginia Beach, VA
(Realtor.com)
Median list price: $386,973 Median days on the market: 29 Listings with a price reduction: 1 in 9
The Virginia Beach metro area, a popular vacation spot for beach, maritime history, and seafood lovers, is another place where incomes are higher than average and home prices are lower.
Last year, sellers could count on getting multiple offers, usually leading to potential buyers bidding up the price, says Virginia Beach–based Realtor Ermen. Now, it’s not as easy to figure out that pricing sweet spot. If the home is listed too high, that’s when there’s eventually pressure to reduce the price.
In the month of May, even with a low number of price reductions, Erman says, “90% of price reductions were made before the listing hit the average time on market.”
That indicates sellers are getting antsy, and probably would have been better off pricing the home lower to begin with. But homes that are priced to sell are still moving briskly.
A house currently on the market for $1.3M in San Jose, CA
(Realtor.com)
Median list price: $1,530,000 Median days on the market: 25 Listings with a price reduction: 1 in 9
San Jose is the oddball on this list.
Nestled in the heart of Silicon Valley, it is one of the most expensive real estate markets in the nation. Homes in this San Francisco Bay Area hot spot cost more than triple the national average, which means real estate attracts a very specific buyer.
Because San Jose is a global technology hub, its population is very diverse, and not just racially or ethnically. Roughly 40% of residents were born outside of the U.S., according to the U.S. Census Bureau. Most significantly, many residents have tons of money to spend, whether they’re high-salaried tech employees or they have had an entrepreneurial startup windfall.
Local real estate agents will tell you that San Jose is simply insulated from many of the market dynamics because the clientele is so wealthy. If they’re making an all-cash purchase, they don’t have to worry about higher mortgage rates. And that’s a big boon for sellers.
A condo currently on the market for $450K in Providence, RI
(Realtor.com)
Median list price: $539,950 Median days on the market: 31 Listings with a price reduction: 1 in 10
Providence, home to Brown University and the Rhode Island School of Design, is a bustling town filled with older homes. About 50 miles southwest of Boston, it’s one of the medium-sized, Northeastern metros on our list that are enjoying especially strong housing markets right now.
Providence prices are significantly above the national average, but compared with nearby Boston, where the median list price is north of $850,000, Providence is a downright bargain.
Plus, it’s got a lot going for it. It boasts beautiful scenery along the Seekonk River, a thriving arts scene, and good jobs. The headquarters for CVS is located in nearby Woonsocket.
In Providence, for $550,000, a little above the local average, buyers can find a midcentury two-bedroom home with classic brick construction about 15 minutes from downtown.
A house currently on the market for $150K in Toledo, OH
(Realtor.com)
Median list price: $229,950 Median days on the market: 31 Listings with a price reduction: 1 in 9
Home prices in this Rust Belt city, which has struggled in more recent years, are still dramatically lower than the national average—about 45% less expensive. And with the focus of buyers on affordability, it’s no wonder that Toledo has taken off.
In the past year, median list prices in Toledo have risen by 25% (10% per square foot), which is quite a bit higher than before the pandemic.
For less than the median list price in Toledo, buyers can get a massive, six-bedroom home in Toledo’s Old West End neighborhood, just northwest of downtown.