Apache is functioning normally
Here’s everything you need to know about rising mortgage rates and whether they will fall in the future.
Why are mortgages going up?
Rising interest rates mean it costs more to borrow money from banks and other lenders, while people who save money in banks receive more interest for putting their money into accounts.
The Bank of England says it is increasing interest rates to bring inflation down but it takes time to work, usually up to two years.
The idea is that higher interest rates mean less money is being spent in the UK and that brings down the overall spending in the economy and slows price rises down.
As mortgages are a type of credit, they are affected by rising interest rates.
However, not all mortgages are affected. People who have a fixed-rate mortgage will be largely insulated from interest rate rises until the fixed rate comes to an end and a new one needs to be negotiated.
People on tracker mortgages are more susceptible to interest rate rises because they follow the base rates set by the Bank of England.
Many mortgage lenders already put up fixed-rate mortgages for new customers ahead of the interest rate, according to Rightmove’s mortgage expert Matt Smith.
Get the latest news and insight into how the Big Issue magazine is made by signing up for the Inside Big Issue newsletter
The property expert said the average interest rate for a five-year fixed 85% mortgage rose from 4.44% to 4.52% ahead of the BoE announcement. That works out at an extra £14 a month for someone purchasing a typical property and spreading the cost over 25 years.
Smith said people on tracker mortgages may be hit harder by the BoE’s decision to raise interest rates.
The Rightmove expert said: “Those on a tracker mortgage will be more disappointed with the news, as they may have thought that the base rate had peaked in March given some of the positive signs for the wider economy, and this is another cost they will need to factor into their monthly budget when the full rate rise is passed on.”
The rise in interest rates has seen the housing market slow down with the number of transactions and mortgage approvals declining in April 2023.
There were 82,120 property transactions in the UK in April, according to HMRC’s seasonally adjusted figures. That represented an 8% drop compared to March while also a quarter down on April 2022.
Mortgage approvals also plunged. There were 48,690 mortgages given the greenlight in the UK in April 2023 according to the Bank of England’s statistics. That figure is 5% lower than in March and more than a quarter lower than a year ago and levels seen between 2018 and 2019.
How high will mortgage rates go in the UK?
It’s impossible to say how high interest rates may go without the aid of a crystal ball but the Bank of England has given some indication of how it expects things to progress in the future.
The central bank has targeted getting inflation down to 2% by the end of 2024 – it is currently at a “higher than expected” 8.7%.
BoE forecasts predict that interest rates will peak at 4.75% at the end of 2023 before falling to around 3.5% by 2025.
But while inflation remains high, there is the possibility of interest rates rising to counteract it and that could mean a 13th consecutive monthly rise might be on the cards in June.
In fact, stubborn inflation rates mean rises could continue for a while yet.
Are mortgage rates coming down in 2023?
With interest rates set to remain high until inflation starts to fall, that could see mortgage rates continue on an upward trajectory.
Rightmove’s Smith said: “Looking ahead, if the Bank of England outlines a positive view on the prospect for inflation and base rates, we could see mortgage rates fall, as they have done after recent base rate decisions. But if the bank is more cautious, we can expect rates to continue their upward trend in the short term.”
However, the bad news for people paying off mortgages is that a lot of the pain could still be to come.
Think tank Resolution Foundation said two-thirds of the eventual £12 billion increase in annual mortgage costs across Britain may still yet to be passed on.
That’s because fixed-rate mortgages have become more popular in recent years – the think tank said fixed-rate deals accounted for £4 out of every £10 spent before the financial crisis but now £9 out of every £10 lent is at a fixed rate.
Mortgages that are at a fixed rate for five years also became the most popular product between 2016 and 2022, overtaking two-year fixed mortgages.
In fact, inflation figures in April suggested rising interest rates will continue. Inflation in the year up to April was 8.7% and although that was down from the 10.1% recorded in March it was still higher than expected. Financial analysts had reportedly anticipated inflation to fall to 8.2%.
That led to predictions the Bank of England could raise rates to as high as 5.5% in a bid to control inflation.
Kellie Steed, Uswitch’s mortgages expert, said: “While many experts thought that the series of consecutive Bank of England base rate rises were ending, more recent analysis suggests that it will reach 5.5% by the end of the year, with no signs of rates beginning to fall until at least February 2024.
“It’s clear that both recent and anticipated future base rate lifts, as well as increased swap rates, have already been factored into many lender’s rate decisions, with Nationwide, Halifax, Santander, Virgin Money and Atom mortgages all pushing up their fixed rates over the past few days.”
Your support changes lives. Find out how you can help us help more people by signing up for a subscription
What support is available if you’re struggling to pay your mortgage?
Rising mortgage payments may not be something that every household can absorb, particularly with the wider cost of living crisis driving up other costs.
If you are struggling to pay your mortgage, the first thing you should do is contact your lender to discuss your options.
If you are receiving universal credit or other benefits, you may be able to get a Support for Mortgage Interest Loan to help you cover rising interest payments. This is from the Department for Work and Pensions (DWP) and you have to repay the loan when you sell the property.
Additional support is available in Scotland through the Home Owners’ Support Fund. This is based on two schemes – the Mortgage to Shared Equity scheme will see the Scottish Government buy a stake in a property to reduce the loan while the Mortgage to Rent scheme allows a social landlord to buy a property and rent it back.
Around one in seven mortgage holders who seek help from StepChange are in arrears on their mortgage, the debt charity said.
“The situation is becoming increasingly precarious for many people and widespread problem debt is a risk, particularly for financially vulnerable households,” said Vikki Brownridge, chief executive of StepChange in a call for firms to be “proactive” in supporting people who are struggling to pay.
“For anyone worried about housing costs and their ability to cover payments, it’s important to reach out for help as early as possible, whether that’s through contacting their lender, or a free debt advice charity like StepChange.”
If you are struggling to pay, support from StepChange and other debt charities is available or you can call the National Debtline on 0808 808 4000 or contact Citizens Advice for advice.
Do you have a story to tell or opinions to share about this? We want to hear from you. Get in touch and tell us more.
Source: bigissue.com
Apache is functioning normally
It’s official, there’s a new sheriff in town and his name is Glenn Sanford, founder of eXp Holdings and CEO of eXp Realty. The firm moved from number three to number one by transaction sides in the 2023 RealTrends 500 rankings, based on 2022 data.
Compass, headed by CEO Robert Reffkin, took the top spot this year by sales volume. A big initiative for Compass this year is to reinforce the importance of culture and encourage agents to go into the office, which is already a requirement at headquarters in New York City. “There’s an energy when agents get together in person,” Reffkin said.
As for eXp, in a recent interview, Sanford acknowledged that his firm wasn’t immune to the challenges of the current market. However, he said that they were in a position to “weather the market.”
After more than 20 years with the Anywhere Advisors entity of Anywhere Real Estate and the HomeServices of America entity of Berkshire Hathaway HomeServices consistently being number one or two in both categories on the RealTrends 500, eXp Realty and Compass rose to these positions and displaced the old guard in less than 10 years.
What this shows is that there is not one path to growth. “Their paths to such growth were very different in some ways and the same in others. Compass used its capital and a focus on high-producing agents and teams in high-end markets to achieve its results. eXp used a mixture of its own equity, revenue sharing and the virtual nature of its business to gain its position. Access to and use of capital, therefore, was key for both organizations,” said Steve Murray, partner of RTC Consulting.
It is noteworthy that eXp was the only one of the top four firms to grow both its closed transactions and its sales volume in 2022 when sales of existing homes were down significantly. Compass, for its part, declined at a slower rate than the two other giants of the industry. One thing remains true for these firms and all others in the residential brokerage business: Recruiting and retaining agents and teams remains the core driver of growth.
The full list of 2023 RealTrends 500 brokerage firms was released on March 24 and announced in The Wall Street Journal the same day.
Source: housingwire.com
Apache is functioning normally
- The economist Selma Hepp says home prices in some areas are rising because of limited inventory.
- Areas that saw price declines during the pandemic are expected to make a comeback, she said.
- Anaheim, California; Seattle; and Sacramento, California; topped the list of Metropolitan areas.
The US housing market started off on a solid footing this year as home prices rose.
But it’s not necessarily because buyers are back in droves. High mortgage rates have kept would-be sellers locked into their current properties, making inventory tight and raising demand for the little that’s on the market, Selma Hepp, the chief economist at CoreLogic, said.
In April, prices for single-family homes rose by 2% year-over-year and 1.2% from the previous month, according to CoreLogic’s Home Price Index. The increase is above the seasonal monthly average, which has historically been at 0.9%, Hepp added.
National home prices are expected to grow 4% this year. But not all markets will fall in line with the average. In fact, there is likely to be a bifurcation in price moves across the US.
The trend is set to follow a reversion back to the mean or a return from pandemic-era migration. In the early days of the lockdowns, some markets saw a rapid appreciation in home prices while others saw double-digit declines, Hepp said.
People moved from expensive West Coast markets and cities to more affordable areas. Now, she said that markets that saw values increase rapidly were leveling out to be more in line with the incomes in those areas.
“When you look long-term, home prices tend to revert back to the rate of growth of income,” Hepp said. “And whenever you have a situation where home-price gains exceed income gains, it’s likely to readjust at some point because if folks can’t afford homes in those markets, then there’s no sales activity. That means home prices decline.”
On the other end, markets that experienced steep price plunges are expected to make a comeback, especially areas that have low inventory, she said.
Below is a list of 51 metropolitan areas expected to see the most home-price increases in the next 12 months, from the highest to the lowest.
The data is taken from CoreLogic’s HPI, which measures the year-over-year changes in single-family-home values based on data from more than 400 US cities. The index changes are based on repeat sales of the same properties.
The metropolitan areas listed below have the highest probability of seeing price declines in the next 12 months.
“In these markets, when we look at how much prices exceed local incomes, it has been substantial. And that increases the vulnerability for price declines going forward,” Hepp said.
Finally, while mortgage rates can be difficult to predict, Hepp said that we had likely peaked for the year. CoreLogic expects that mortgage rates will gradually decline for the remainder of the year to about 5.8% if inflation rates continue to decline, she said.
Source: businessinsider.com
Apache is functioning normally
The housing market, which is facing challenges with mortgage rates, affordability, prices and inventory, hasn’t been this purchase-dominant in decades, according to Black Knight’s originations market monitor report.
Today, nearly nine out of every 10 mortgages originated is a purchase loan, the report notes.
Last month, purchase locks accounted for 88% of the market mix, marking a record high. Rate lock activity was up 14% in May, but the bulk of the increase is attributed to the month having two more business days than April, according to Black Knight.
Adjusting for the difference, daily volume was up just 4% compared to April.
Purchase locks were up almost 15%, however, and cash-out refinances increased 7%, according to the report. Rate/term refinance locks also climbed last month, increasing 13% from April.
Overall, May was an improvement over April, but mortgage lending remains constrained.
“While rate locks on purchase loans rose from April, they also dipped to their lowest level yet relative to 2018 and 2019 averages as rates rose late in the month,” Andy Walden, vice president of enterprise research at Black Knight, said.
Purchase loans have made up the lion’s share of origination activity for much of the last year, a harbinger that both slowing home sales as well as purchase mortgage origination volumes are likely on the horizon, Walden said.
In addition, purchase lock counts were down 37% last month compared to 12 months ago, and declined 29% compared to levels seen in 2019.
The average purchase price climbed for the sixth consecutive month in May, hitting $454,000, while the average loan amount increased to $360,000.
Data showed that late in the month, more borrowers sought relief from rising fixed rates. The adjustable-rate mortgage (ARM) share of lock activity in May increased to 8.41% compared to April.
Credit scores for conforming, FHA and VA borrowers also increased again in May, which is indicative of tightening credit standards in an uncertain economic environment, with purchase lock credit scores nearing record highs.
At the same time, the level of economic uncertainty in the market resulted in historically wide spreads between 10-year Treasury yields and 30-year mortgage rates, and that uncertainty appears to be trickling down to tightening credit standards across the board, the report notes.
“Uncertainty breeds a fear of risk, and that is likely driving the rises we’ve seen in down payments and credit scores among recent originations. The credit box is certainly tightening, but it’s far from the only challenge facing prospective homebuyers,” Walden said.
Source: housingwire.com
Apache is functioning normally
Despite mortgage rates reaching the highest level in 14 years, mortgage applications increased 4.2% from the prior week, according to the latest Mortgage Bankers Association (MBA) survey for the week ending June 17.
“Mortgage rates continued to surge last week, with the 30-year fixed mortgage rate jumping 33 basis points to 5.98% – the highest since November 2008 and the largest single-week increase since 2009,” Joel Kan, associate vice president of economic and industry forecasting for the trade group, said in a statement.
Rates for mortgage loans were strongly impacted by tightening monetary policy to combat rising inflation. On June 10, the U.S. Consumer Price Index showed an 8.6% increase year-over-year in May, the highest level in four decades. Consequently, the Federal Reserve raised the federal funds rate by 75 basis points last week, a rate hike not seen since 1994. Another 0.75% hike is expected from the Fed’s meeting in July.
With mortgage rates now at almost double what they were a year ago, refinancing applications decreased 3% from the prior week and were 77% lower than the same week in 2021. Refis were 29.7% of total applications last week, decreasing from 31.7% the previous week, the survey shows.
Meanwhile, the seasonally adjusted purchase index ticked up 8% from the prior week but was 9.4% down from the same week a year ago. According to Kan, purchase applications increased for the second straight week, driven mainly by conventional applications.
Higher rates usually cool off prices, and Kan noted a potential trend in this week’s data. “The average loan size, at just over $420,000, is well below its $460,000 peak earlier this year and is potentially a sign that home price growth is moderating,” the economist said.
Here’s how home price appreciation impacts taxes – And what that means for servicers
Real estate prices (and home appreciation) have been on a tear over the past few years. But sooner or later all this good fortune will translate into higher assessments and tax increases. Here’s what servicers should be doing to anticipate tax issues this year.
Presented by: LERETA
The adjustable-rate mortgages (ARM) share of applications jumped to over 10.6%, demonstrating continued popularity among borrowers. The average interest rate for a 5/1 ARM rose to 4.78% from 4.57% a week prior, according to the MBA
The FHA share of total applications increased to 12% from 11.8% the week prior. Meanwhile, the VA share went from 11.7% to 10.7%. The USDA share of total applications declined to 0.5% from 0.6% the week prior.
The trade group estimates the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) increased to 5.98%, from 5.65% the previous week. For jumbo mortgage loans (greater than $647,200), it went to 5.49% from 5.25%.
Source: housingwire.com
Apache is functioning normally
Mortgage credit availability dipped for three consecutive months, largely due to shrinking refinance loans, according to the monthly Mortgage Credit Availability Index, (MCAI) which fell by 0.9% to 120 in May, the lowest level since July 2021, according to the Mortgage Bankers Association.
A decline of the index, benchmarked to 100 in March 2012, indicates lending standards are tightening while an increase suggests loosening credit.
“The index remains more than 30 percent below pre-pandemic levels, as credit tightening has occurred in recent months around refinance loan programs,” said Joel Kan, associate vice president of economic and industry forecasting at MBA.
Credit tightening was most notable in the government and jumbo segments, Kan added.
Both the Conventional MCAI, which does not include loans backed by the government, decreased 0.4% and the Government MCAI, which examines FHA, VA, and USDA loan programs, dropped 1.3%
Of the component indices of the Conventional MCAI, the Jumbo MCAI fell by 1.1% and the Conforming MCAI rose by 1%.
What opportunities do lenders miss out on by not focusing on credit
HousingWire recently spoke to Mike Darne, Vice President of Marketing for CreditXpert, who said focusing first on the borrower’s credit holds the key to winning business that other lenders won’t even see.
Presented by: CreditXpert
“The decrease in government credit was driven mainly by a reduction in streamline refinance programs, as mortgage rates increased sharply through May, slowing refinance activity. Jumbo credit availability, which was starting to see a more meaningful recovery from 2020s pullback, declined after three months of expansion,” Kan said.
The drop in mortgage credit availability follows a free fall of refinance applications driven by rising mortgage rates — 5.23% as of June 9 — measured by Freddie Mac. While purchase mortgage rates fell for three consecutive weeks after hitting 5.3% in the second week of May, they recently rebounded, according to the Freddie Mac PMMS, and remained high enough to still suppress refinance activity.
MBAs index for refinance applications dropped 6% for the week ending June 3 from the previous week. Compared to the same week a year ago, the index was 75% lower.
Weakness in both refinance and purchase applications drove down mortgage application volume last week. MBAs Market Composite Index dropped 6.5%, marking the lowest level in 22 years.
The persistently low housing inventory and the jump in mortgage rates during the past two months are putting pressure on the purchase market, Kan said, regarding the drop in mortgage application volume this week.
“These worsening affordability challenges have been particularly hard on prospective first-time buyers,” he said.
Source: housingwire.com
Apache is functioning normally
With mortgage rates still in the mid 6% range, borrowers who received mortgages in April 2023 paid an average of $2,343 a month, up 28% from a year prior.
That’s according to the latest origination data from mortgage tech firm Candor Technology.
Per data from Candor’s underwriting engine, the average buyer in April 2023 received a loan worth about $366,000 at an average APR of 6.5%.
A year ago, the average buyer would have paid $1,830 a month with a $351,297 mortgage at an interest rate of 4.6%.
The average income in April 2022 was $7,333 a month, according to Candor. In April 2023, the average borrower’s income had shot up to $8,550 a month. Still, the average monthly payment to income was 27.4% in April 2024, up from 24.9% a year ago.
“The recent interest rate hike from the Federal Reserve continues to keep the cost of home buying elevated when compared to the same period one year ago,” said Sara Knochel, CEO of data and analytics at Candor. “However, we are also seeing the homebuyer’s average income on the rise as well, which indicates more Americans may be picking up side income sources in order to finance their home purchase.”
Check out the last 12 months below:
Source: housingwire.com
Apache is functioning normally
The real estate market is kind of strange at the moment.
Everyone expected mortgage rates to jump in 2019, but so far they’ve done the exact opposite.
At the same time, home price appreciation has slowed in much of the country, creating a situation where affordability is actually better than it was a year ago.
To make matters even weirder, negative equity is increasing again, a topic I haven’t discussed for many years.
Refi Candidates Up 75% From November
First those refis – amazingly, the number of homeowners who could both qualify for and benefit from a mortgage refinance rose almost 75% from the 10-year low seen in November 2018, per the latest Black Knight Mortgage Monitor for January 2019.
It also marked a 16% year-over-year increase and the highest number of eligible candidates since January 2018.
There are about 3.27 million homeowners today who could reduce their mortgage rate by at least 0.75%, which would obviously amount of some serious savings monthly and over the life of the loan.
However, the numbers are still down a hefty 30% from late 2017 when 30-year fixed mortgage rates stood below 4%.
Sadly, Black Knight believes the impact will be muted because some 85% of homeowners took out their mortgages more than seven years ago, meaning they’re not likely to refinance.
Still, roughly 250,000 homeowners who took out their mortgages just last year could stand to benefit greatly from a refi, especially those who received rates on the higher end of the spectrum due to bad timing and/or bad credit, etc.
Falling Home Prices?
Now let’s address home prices, which after some really solid years of growth, seem to be getting tested.
It could just be an affordability issue, as new home buyers simply don’t have the ability to purchase real estate at today’s relatively sky-high prices.
Certainly, it’s not for a lack of wanting to buy, nor is it an inventory issue – low supply continues to be a problem.
Despite a limited housing stock and still-low mortgage rates, annual home price appreciation slowed for the 10th straight month in December, per Black Knight.
It fell from a high of 6.8% YoY growth in February 2018 to just 4.6% at the end of 2018, and on a monthly basis in December, the average home price actually declined 0.3%.
The average home price has fallen a combined 0.82% over the past four months, marking a $2,440 loss.
And Black Knight economists expect the same trend in January based on early data collection.
Now the good news – because home price gains have moderated, and even fallen over the past several months, housing affordability has increased.
A prospective home buyer today needs just 22.2% of their median income to purchase the average-priced home with a 20% down payment on a 30-year fixed-rate mortgage.
That’s slightly lower than the post-recession high of 23.4% seen just a few months back, and well below the long-term average of 25% seen in the late 1990s and early pre-bubble 2000s.
Additionally, despite the recent slowdown, annual home price growth is still outpacing its 25-year average of 3.9%, so if anything, the real estate market is simply normalizing after some really hot (unsustainable) years.
Underwater Mortgages Are Back?
That brings us to the issue of negative equity, something I definitely haven’t mentioned on this blog in a long, long time.
It was a hot topic post-housing crisis when something like half of all borrowers with a mortgage owed more than their homes were worth.
That led to a new definition for “underwater” in the dictionary, the advent of underwater mortgage insurance, and the very popular and widely-used HARP refinance program.
Now Corelogic is telling us that the quarterly increase in negative equity during the fourth quarter of 2018 was the first in four years.
Between the third and fourth quarter of 2018, the total number of mortgaged homes in negative equity increased 1.6% to 2.2 million homes, representing 4.2% of all mortgaged properties.
It was the first quarterly increase since the fourth quarter of 2015, and led to some 35,000 properties falling into underwater positions.
Before we ring the alarm bells, if you consider the year-over-year basis, the number of mortgaged properties in negative equity actually fell by a significantly larger 14%, representing some 351,000 homeowners.
And the CoreLogic Home Price Index estimates a 4.5% increase in home prices from December 2018 to the end of 2019, which should lift another 350,000 homeowners above water.
Still hard to believe that millions remain underwater on their mortgages in light of the massive home price gains realized since the recovery got underway. Tells you how bad things got.
Negative equity peaked at a staggering 26% of mortgaged residential properties during the fourth quarter of 2009. It’s been nearly a decade since those very dismal times.
Source: thetruthaboutmortgage.com
Apache is functioning normally
Of all the housing market bugaboos that haunt and frustrate wannabe buyers in this stressed, prime-time selling season of 2023 (Sky-high prices! Rising mortgage rates! Inflation and economic uncertainty!), one challenge still sits at the center of everything: finding a good home to purchase.
America’s been in a severe housing shortage since at least the earliest days of the COVID-19 pandemic, and it affects just about all else. A shortage of inventory leads to frenzied bidding wars, out-of-reach price tags, and market paralysis.
But the situation is changing, at least in some markets. And Realtor.com® decided to find out where. When it comes to home inventory levels in America, it’s both the best of times and the worst of times—it all depends on where you live.
To gain some insight into where things stand going into the crucial summer season, the data team at Realtor.com crunched the numbers to determine the metropolitan areas with the largest increases—and most substantial decreases—in available home inventory.
You can see for yourself in the table below the change in housing inventory in the 100 largest metros.
So what did we find? Well, across the country, inventory is up year over year, by a little more than 20%. But this is largely a function of the incredibly low inventory levels of the past couple of years. There aren’t more sellers coming onto the market. Instead, homes are sitting longer. And even the current bump in year-over-year inventory still puts this year below pre-pandemic levels. Nationally, the number of new listings was down 22.7% in May compared with the previous year
And the data underscores a truth that has become increasingly evident: There’s no single, monolithic housing market. Instead, real estate has become a tapestry of regional markets, each with unique patterns.
In certain regions, particularly in the more affordable pockets of the Midwest and Northeast, inventory remains tight. Despite higher mortgage rates casting a shadow over buyers and sellers alike, homes are selling at a brisk pace, prices continue to rise, and inventory remains relatively low compared with previous years.
Compare that to the West and South, where hot markets like Austin, TX, Nashville, TN, and Sarasota, FL, have seen inventory more than double compared with this time last year. These pandemic-era boomtowns have been on a roller coaster when it comes to pricing, inventory, and demand.
Nick Libert, a real estate agent with EXIT Strategy Realty in Chicago, calls this a “balanced-stagnant market.”
Elevated rates have put the brakes on the overall housing market activity, from the perspective of buyers and sellers, but a bridled demand is still very much present.
“Not a lot of people are moving,” Libert says. “Part of the reason is there’s very little to look at.”
So let’s take a look at the biggest markets to see what’s what in different parts of the country.
We found where inventory is up and down the most in the 100 largest U.S. metros by going through the Realtor.com monthly housing market data to compare inventory in May 2023 with May 2022. We selected just one per state to ensure geographic diversity. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)
Where inventory has risen the most
1. Sarasota, FL
May 2023 year-over-year active listings change: +128.1%
May 2023 median list price: $549,900
What a difference a year makes.
Located on the southwestern coast of Florida, known for picturesque white-sand beaches and barrier islands along its Gulf of Mexico shoreline, the Sarasota metro experienced the biggest year-over-year jump in inventory. There were nearly 2.3 times the number of active listings, at just shy of 4,600, this May compared with last.
Unsurprisingly, homes are sitting on the market almost twice as long, now taking about 7.5 weeks to sell.
This midsized metro, which serves as the spring training destination for the Baltimore Orioles, is relatively expensive compared with much of Florida. Median list prices are about 9% above the median state price—only Miami is priced higher.
Carissa Pelczynski, a real estate agent at Preferred Shore in Sarasota, says the attitude of many of the out-of-town buyers who were driving prices up during the pandemic has shifted in the past several months.
“People are just more hesitant now,” Pelczynski says.
Also adding to the inventory glut, according to Pelcynski: Too many sellers are pricing their homes as if the market were still as hot as it was a year or two ago. (It’s not.)
2. Nashville, TN
May 2023 year-over-year active listings change: +124.7%
May 2023 median list price: $580,000
Music City is the next stop on our list, with a jump in inventory almost as large as Sarasota’s. This icon of the South is home to the Grand Ole Opry and the Country Music Hall of Fame, and it’s an increasingly popular destination for buyers.
What’s especially notable about Nashville right now is that even as inventory is more than double what it was this time last year, in May the price per square foot hit an all-time high. It surpassed the previous high mark in June 2022.
Homes in Nashville are generally larger than average, with a median size of almost 2,200 square feet. It’s also about 15% more expensive than the national median price per square foot.
A recently listed, 500-square-foot condo just southeast of downtown Nashville and within walking distance of the Cumberland River is around $515,000.This newly constructed, four-bedroom townhome is on the market for about $600,000.
Watch: The Best Cities in the U.S. for Home Sellers Right Now
—
3. Austin, TX
May 2023 year-over-year active listings change: +112.5%
May 2023 median list price: $583,751
It seems no list of real estate superlatives is complete without Austin. The Lone Star State’s capital city had become one of the hottest markets in the country during the pandemic, with demand—and as a result, prices—exploding. Builders raced to put up homes in the area.
But when mortgage rates rose in 2022, the Austin market was one that cooled the most, with list prices falling 15% from May 2022 to January of this year. Since then, prices have been creeping back up, now at 9% below last year’s peak.
Even as prices are back on the rise, the typical Austin home is on the market for eight long weeks before selling, compared with just two weeks during the spring 2022 pandemic pump peak.
No place on our list has a larger portion of listings that have had a price reduction, with more than 1 in 3 listings having been discounted by the seller.
The number of homes available in the Austin metro is back to pre-pandemic levels, thanks in part to the boom in new construction.
4. New Orleans, LA
May 2023 year-over-year active listings change: +81.0%
May 2023 median list price: $345,000
The number of homes available in the Big Easy has earned it a place on our list, with an 81% increase.
Worth noting: By this same time last year, New Orleans inventory was already back on the rise. Measuring from the inventory low point, New Orleans has also seen the number of available homes more than double.
The inventory increase hasn’t quite put it back to pre-pandemic levels, but if the upward trajectory continues, New Orleans should reach that milestone in the coming months.
And although list prices in New Orleans haven’t been as swingy as they’ve been in a place like Austin, they have crept back up—and are now less than 1 percentage point shy of the all-time high set in March 2022.
A newly listed, midcentury boathouse on New Orlean’s iconic Lake Pontchartrain can be found for about $375,000.
5. Tulsa, OK
May 2023 year-over-year active listings change: +74.1%
May 2023 median list price: $369,450
There are plenty of homes for sale in Tulsa—they just aren’t the more affordably priced properties that buyers are seeking.
“We have so much more inventory right now, and we just have less buyers,” says local real estate agent Tiffany Johnson, of Tiffany Johnson Homes.
It’s a price point game, she says. “You can’t find anything under $150,000, and anything under $300,000 is selling quickly.”
The market has shifted a lot since last year, especially for sellers who now face more competition.
“The buyers who are in the market are very serious. They will make a move quick, but they have so many houses to choose from, so [sellers and agents ] have to be almost perfect,” Johnson says. “They have to find ways to actually market these homes now.”
Rounding out the top 10 metros where the number of homes for sale has increased the most is Raleigh, NC, at 72.7%; Wichita, KS, at 59.8%; Las Vegas, at 57.5%; Greenville, SC, at 57.1%; and Omaha, NE, at 54.4%.
Where inventory is down the most
1. San Jose, CA
May 2023 year-over-year active listings change: -35.3%
May 2023 median list price: $1,530,000
Topping the list of places where inventory is tightest is Silicon Valley’s San Jose. The tech hub is one of the most expensive metros in the nation, with a median price tag of $1.5 million.
Posing another hurdle for buyers: The number of homes for sale is still near record lows. The metro area, with more than 2 million people, had fewer than 1,000 homes for sale in May.
Tuan Tran, a Realtor® at Home Page Real Estate in San Jose, sees changes in this unique and wealthy home market amid turbulence in the tech business.
“Now I see a lot of investors holding back,” Tran says, adding that they are waiting to see whether a tech recession runs deeper. “Inflation is still high. Paychecks haven’t gotten much bigger.”
2. Hartford, CT
May 2023 year-over-year active listings change: -26.0%
May 2023 median list price: $424,925
Hartford topped our list of markets that will dominate in 2023, and the low home inventory seems to be proving us right.
Buyers from around the Northeast have poured into the “Insurance Capital of the World,” about 90 minutes southwest of Boston and 2.5 hours northeast of New York City, due to the reasonably priced homes for sale and good jobs available.
The city has the fewest price reductions of any city, with only 1 in 14 listings with a markdown.
In another sign of the market’s strength, Hartford boasts the fastest-selling homes of any place on our list, with the typical home spending just 19 days on the market. That’s less than half the national median time of 43 days in May.
3. Milwaukee, WI
May 2023 year-over-year active listings change: -23.4%
May 2023 median list price: $374,950
The housing markets in many traditionally affordable, Midwestern cities, like Milwaukee, have continued to chug along, while other pricier markets have sputtered or stalled.
In May, there were 23% fewer homes for sale than the year before. And the median home in Milwaukee is selling in 29 days, just four days more than the all-time low of 25 days in May 2022.
Another indicator of the overall strength of the Milwaukee market: The relatively small portion of homes that have had a price reduction. Only 1 in 10 is marked down.
For those considering selling in Milwaukee, the metrics suggest a quick sale, likely without a price drop, is still the norm right now. Buyers might want to consider this updated, three-bedroom, two-bathroom Cape Cod for about $225,000.
4. Dayton, OH
May 2023 year-over-year active listings change: -20.3%
May 2023 median list price: $234,950
Dayton, a Rust Belt city bout an hour northeast of Cincinnati, is the most affordable of all the cities on our list, with prices 45% below the national median. The “Gem City” is home to the National Museum of the U.S. Air Force.
In contrast to what we’ve seen in the markets that got hot during the pandemic pump, prices in Dayton have been steady: no big swings up or down, but a rather steady and slight incline.
Dayton’s median listing price per square foot in May was up 6.7% year over year.
Buyers can find big deals in Dayton. This four-bedroom, 2.5-bathroom house on a third of an acre is for sale for $219,000.
5. Chicago, IL
May 2023 year-over-year active listings change: -18.5%
May 2023 median list price: $376,000
The Windy City features near-record low inventory right now.
The number of available homes crept up by about 2% from April to May. But aside from the February 2022 nadir in inventory, there haven’t been this few homes on the market in Chicago in recent history. (Realtor.com listing data goes back to mid-2016.)
“Currently, what my buyers are seeing—and my sellers are experiencing—is that the north side of Chicago, along the lakefront, has, by far, the most pronounced drop,” says Libert of EXIT Strategy Realty in Chicago.
The rest of the top 10 metros with the largest decrease in inventory were Washington, DC, at -15.6%; Bakersfield, CA, at -13.2%; Albany, NY, at -13.1%; Allentown, PA, at -12.5%; and Seattle, at -10.8%.
Source: realtor.com
Apache is functioning normally
The simplest options strategies, and safest for beginners, include purchasing calls and/or puts — typically called “going long.” For the bearish investor who believes an asset will see price declines over a well-defined period of time, the simplest strategy is to purchase puts on those assets, i.e., pursue a long put strategy.
What Is a Long Put?
The term “Long Put” describes the strategy of buying put options as well as the options contract itself. The investor who purchases a put has purchased the right to sell an underlying security at a specific price over a specific time period. Being the buyer and holder of any options makes you “long” that option contract.
Because the contract in question is a put, the investor is long the put and bullish on the put option as they expect the put options price to rise. The put option holder is bearish on the underlying asset as they expect its price of the asset to go down.
Since the investor has not sold the underlying asset or its options, the investor does not hold a short position.
💡 Recommended: Options Trading Strategies for Beginners
Maximum Loss
In comparison to other options strategies, long puts are low risk due to their limited and well-defined downside. The maximum amount an investor can lose is the premium paid at the initiation of the transaction.
Maximum Loss = Premium Paid
Because different trading platforms have different commission structures, (some may even provide commission-free trading) commissions are typically omitted from profit and loss calculations.
Maximum Profit
The maximum gain for a long put strategy occurs when the underlying asset drops to zero. While this gain is also limited and defined, it is typically far greater than the potential downside. The maximum gain on a long put strategy is defined as the strike price of the put less the premium paid.
Maximum Profit = Strike Price – Premium Paid
Breakeven Price
The breakeven price on a long put strategy occurs at the strike price less the premium. Note that the formula for the maximum gain and the breakeven price is the same but the two formulas are measuring different things.
The breakeven price is the point at which the investor begins to make a profit. As the price drops past breakeven toward zero, hopefully, the investor can realize the maximum gain possible.
Breakeven Price = Strike Price – Premium Paid
Why Investors Use Long Puts
Investors utilize a long put strategy for three main reasons:
• Speculation: The investor identifies an asset they believe will decrease in price over a defined time period. Buying a long put allows the investor to profit from this forecasted price decrease if it happens.
• Hedging: Sometimes an investor already holds an asset like a stock or exchange-traded fund (ETF) and is concerned that the price of the asset may drop in the short term, but still wants to hold the asset for the long term.
By purchasing a long put, the investor can offset any short-term losses through gains on the put and keep control of the underlying asset. For most assets, this hedging strategy provides cheap insurance.
• Combination strategies: For experienced investors, long puts can be part of complicated multi-leg strategies involving the sale or purchase of other options, both calls and puts, to pursue different investment objectives.
Long Put vs Short Put
In contrast, a short put options strategy occurs when the investor sells a put. Being the seller of a put means the options contract seller is obligated by the options contract to sell shares in an underlying security to the option buyer at the buyer’s discretion.
Everything about short puts is the opposite to long puts:
Long Puts | Short Puts | |
---|---|---|
Investor role | Buyer | Seller |
Investor responsibility | Right/Discretion | Obligation |
Investor outlook — Asset | Bearish | Neutral to Bullish |
Risk | Premium | (Strike Price – Premium) |
Reward | (Strike Price – Premium) | Premium |
Long Put Option Example
An investor has been watching XYZ stock, which is trading at $100 per share. The investor believes the $100 share price for XYZ is excessive and believes the share price will fall over the next 30 days.
The investor purchases a long put with a strike price of $95 per share for a premium of $5 and an expiration date of 60 days from today. Because options contracts are sold based on 100 share lots, the price for this contract will be $5 x 100 = $500.
The options contract gives the investor the right to sell 100 shares of XYZ at $95 for the next 60 days.
The breakeven price on this investment is:
Breakeven Price = Strike Price – Premium Paid
Breakeven Price = $95 – $5 = $90
Should XYZ be trading below $90 at expiration, the option trade will be profitable.
If XYZ stock should fall to $0 at expiration, the investor will realize their maximum possible profit:
Maximum Profit = Strike Price – Premium Paid
Maximum Profit = $95 – $5 = $90 profit per share or $9,000 per put option
However, if XYZ stock should stay above $90 at expiration, the investor will realize their maximum possible loss and the option will expire worthless:
Maximum Loss = Premium Paid
Maximum Loss = $5 per share or $500 per put option
Even if XYZ rose above the $100 price at purchase, the investor’s loss would still be limited to $500.
The Takeaway
Long put options provide an excellent entry point for newly minted options investors to dip their toes into the market. The trading strategy offers significant profit potential if investors make the right call on the underlying security’s future performance while providing limited downside risk.
If you’re ready to try your hand at options trading, You can set up an Active Invest account and trade options online from the SoFi mobile app or through the web platform.
And if you have any questions, SoFi offers educational resources about options to learn more. SoFi doesn’t charge commissions, and members have access to complimentary financial advice from a professional.
With SoFi, user-friendly options trading is finally here.
Photo credit: iStock/Paul Bradbury
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at [email protected] Please read the prospectus carefully prior to investing. Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.
SOIN223451
Source: sofi.com