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Hao Hong, chief economist at Grow Investment Group, discusses China’s economic outlook and Chinese banks’ “very large exposure” to the property sector.
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Tag: home sales
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New-home sales drop in October to much lower level than expected
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The numbers: U.S. new-home sales fell 5.6% to a seasonally adjusted annual rate of 679,000 in October, from a revised 719,000 in September, the government reported Monday.
Analysts polled by the Wall Street Journal had forecast new-home sales to occur at a seasonally adjusted annual rate of 725,000 in October.
The data are often revised sharply….
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Home Prices Could Come Down. What It Would Take for an Ugly Slide.
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Nov 12, 2023, 1:00 am EST
Home prices keep going up, defying mortgage rates at 23-year highs and a housing market that hasn’t been this unaffordable since the 1980s. Everything looks steady on the surface but prolonged national U.S. home price declines could be around the corner for the first time in more than a decade, according to one housing expert.
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Long Island home sales improve, though rates still high amid low supply | Long Island Business News
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Sales of Long Island homes rebounded somewhat last month, despite a continued dearth of supply and higher mortgage rates.
There were 2,090 homes in Nassau and Suffolk counties contracted for sale in October, up from the 1,941 homes contracted the previous month, according to preliminary numbers from OneKey MLS.
Last month’s pending home sales were nearly the same as the 2,110 homes contracted for sale in Oct. 2022, marking the first time in more than two years that monthly pending Long Island home sales didn’t see a significant year-over-year drop.
Home sales on Long Island continue to be hampered by a lack of available inventory. There were 5,804 Long Island homes listed for sale with OneKey MLS as of Monday, 2,275 in Nassau and 2,809 in Suffolk. That’s 12.6 percent fewer than the 6,641 homes that were listed for sale at the end of Oct. 2021 and Oct. 2022 and 34.6 percent fewer than the 8,869 homes listed for sale at the end of Oct. 2020.
The limited supply of available homes for sale amid still strong demand has fueled a rise in prices. The median price of closed home sales in Suffolk last month reached $600,000 for the first time ever. The median price in Suffolk last month represents an increase of 9.1 percent over the $550,000 median price from a year ago.
In Nassau, home prices in October actually retreated a bit from the previous month. The median price of closed home sales in Nassau last month was $720,000, a rise of 6.7 percent from the $675,000 median of Oct. 2022. But last month’s $720,000 Nassau median price was $13,550 lower than the $733,550 median from the previous month and the first drop in the county’s median home sales price since February.
Despite the improved sales numbers last month, brokers maintain that higher mortgage rates are keeping Long Island’s housing market from a broader recovery. The average rate on a 30-year fixed loan in New York is 7.82 percent this week, according to bankrate.com.
“For the first time in three years, the sentiment has changed, and things are slowing down as higher rates are starting to have an impact on the traditional homebuying borrower,” said Shahzad Qureshi, owner/broker of Syosset-based Pinnacle Real Estate Consulting.
Qureshi, a 13-year veteran of the Long Island residential real estate industry who owns and build houses here, pointed out that if a buyer puts 20 percent down on a $750,000 house, the $600,000 loan on the balance at 7.5 percent results in monthly payments of about $5,000, not counting property taxes and other expenses.
“Specifically, I’ve found that in the $700,000 to $1 million price range, the numbers no longer make sense for a first-time buyer to purchase a $700,000 house with a 7-plus-percent interest rate,” he said. “You can rent that same house for less, without the headaches of owning a home.”
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David Winzelberg
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Thinking of getting an adjustable-rate mortgage? Here are 3 questions to ask.
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Demand for adjustable-rate mortgages (ARMs) is growing as interest rates on conventional home loans surge and as people seek an affordable on-ramp for buying a home.
The average interest on a 30-year fixed rate mortgage hit 8% last month, reaching its highest level since August 2000. By comparison, rates on the average ARM currently range between 7.12% and 7.65%, according to Bankrate.
Still, ARMs aren’t right for everyone. Here are three questions homebuyers should ask when considering an adjustable-rate mortgage.
What different types of ARMs could I apply for?
Adjustable-rate mortgages typically come in four forms: 3, 5, 7 or 10. Those figures refer to the number of years your interest rate will be the same or “fixed.” There are two numbers that homebuyers should pay attention to on an ARM — the fixed-rate period and the floating-rate period. The floating-rate period refers to how often your mortgage rate will change.
During the floating-rate period, your mortgage rate could increase or decrease depending on what the typical interest rates are at the time. If your rate increases, the amount you pay monthly for your mortgage will increase as well.
For example, a 5/6 ARM means the mortgage rate will be locked in — meaning it will not increase or decrease — for the first five years of the home loan. After five years, your mortgage rate will change every six months based on what current rates look like. A 10/1 ARM means the mortgage rate is fixed for a decade, after which it will adjust once a year based on current rates, until the entire loan is paid.
Is an ARM an ideal option for me?
A homebuyer looking to sell the property during the fixed-rate period is a great candidate for an ARM, according to the National Association of Realtors. It’s a better option for people who have unstable income sources that change often, NAR said.
ARMs are not a good route to take if you are someone who wants a consistent mortgage amount month after month, according to NerdWallet. Because of the way interest rates fluctuate during an ARM loan, borrowers could face substantially higher mortgage payments at a time when they may not be able to afford it.
For example, someone using a 5/1 ARM on a $394,000 home (the median home price for September according to NAR) purchased with a 20% down payment, would pay roughly $2,891 a month for the first five years of the mortgage, based on today’s 8% interest rate. After five years, if interest rates happen to rise to 12% in 2028, that mortgage will jump to $3,720.
Will I save money if I get an ARM?
In the short term, yes, because the fixed-rate period of an ARM usually comes at an interest rate that’s lower than what someone would pay for a conventional home loan. But the savings aren’t guaranteed over the long run. No one knows what interest rates will be in the future, and the floating-period of an ARM is when a homebuyer is most vulnerable to having to meet higher monthly mortgage payments.
Still, mortgage experts say borrowers typically enjoy lower-than-average payments during an ARM’s fixed-rate period. Those savings could continue into the floating period depending on current rates, but anyone who takes out an ARM must be able to afford a higher mortgage payment if interest rates skyrocket after the ARM’s fixed-rate period.
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Hong Kong’s property prices won’t pop any time soon. Here’s why
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Residential buildings in Hong Kong, China on October 23, 2023.
Vernon Yuen | Nurphoto | Getty Images
Hong Kong’s leader John Lee this week eased the city’s decade-old residential property cooling measures — but questions remain on whether it’s enough to boost market sentiment and low transaction volumes for the private housing sector.
“Although relaxation of property restrictions was highly anticipated, the BSD [buyers’ stamp duty] cut from 15.0% to 7.5% surprised us; the other relaxations were in-line,” Citi’s Ken Yeung wrote in a note.
He doesn’t expect the move to reverse downward trend in Hong Kong’s property prices as interest rates remain high.
According to data from real estate agency Midland Realty, the second-hand property market average turnover ratio between 2017 and 2023 stands at 3.7%. That’s compared with 8.7% before the cooling measures took effect in 2010.
Buggle Lau, chief analyst at Midland Realty told CNBC the average turnover ratio in 2022 to 2023 are at historic lows, as property prices have corrected down by nearly 20% since their peak in August 2021.
He expects the policy address will give property prices “a chance to stabilize” and for volumes to pick up.
For the market to fully recover, both in terms of price and volume, interest rates will have to come down next year, the property analyst said.
He expects a further 5% downside on prices in the first half of next year should there be a rate cut.
Homeowners’ struggles
Hong Kong homeowner KC Mok has been trying to sell his apartment before his family immigrates at the end of the year — a popular reason for people selling their property in recent years.
The 41-year-old told CNBC that his 707 sq. ft. 3-bedroom apartment is currently listing at $9.5 million Hong Kong dollars ($1.21million), 20% lower than his purchase price in 2019.
He said many people have been viewing his place, but the only offer he received so far is a mismatch.
“Now when we come to selling the apartment, we found that the value of the apartment [is] already like $2 million dollars less, so a little bit depressed but we have to leave so it’s the timing maybe,” Mok said, acknowledging that the latest cooling measures “will help a little bit” for his situation.
Meanwhile, 33-year-old Kitty Yiu considers herself “lucky” as she sold her apartment and started renting in February, just before property prices fell and interest rates rose.
Yiu gave birth to her firstborn earlier this year and needed a bigger home to accommodate her growing family.
“To be honest, we are still in a struggle to see whether we should buy a new flat, like to buy a flat again,” she said.
“I think the price at this moment is still high, even if it’s having a downward trend, but for me I think it’s still overpriced,” said Yiu who doesn’t think the latest policy relief would increase her appetite to purchase a house.
Unlike Mok and Yiu, Eugene Law faces the struggle of rising mortgage rates as a new homeowner.
Together with his mother, Law, who is 30, purchased a flat at pre-construction in 2021 and moved in last year. His mortgage rate started at 1.9% and is currently at 3.375%. That means he needs to pay an additional HKD $6,000 ($767.09) per month for the interest, which he says makes him feel “so bad.”
“[It was] unexpected … because I expected the HIBOR may rise but I didn’t expect the prime rate will also rise, and also in a very high percentage.”
Prospective homebuyers in Hong Kong can choose to peg their mortgage rate with HIBOR or prime rate – known as the “H Plan” and “P Plan.” HIBOR refers to the interest rate for interbank borrowing, while prime rate is determined by individual banks.
In a low interest rate environment, the prime rate is usually the more popular choice as it is considered more stable, and easier for the mortgagor to make financial plans.
Despite regretting the timing of his purchase, Law said the latest easing of policy would not have affected the decision.
Risks for Hong Kong property
A recent report from UBS showed Hong Kong is the 6th overvalued city on their Global Real Estate Bubble Index. Zurich, Tokyo and Miami are the top three.
“Biggest risk [to Hong Kong’s property market] will be [a] pro-longed high-rate environment, and hence further mortgage cost increase. Longer run will be geopolitical risk,” said UBS’s china property market Mark Leung in an email to CNBC.
While describing the current sentiment as “a bit weak,” he expects the policy address would release sizable purchasing power from non-local expats who are waiting to become permanent residents.
With the second-hand market bid-ask spread remaining high and many homeowners not willing to sell their properties at a discount, Leung said he expects little room for property prices to reverse the downward trend.
For the primary market, he expects developers will now be more willing to cut prices in order to boost sales and “recycle cash, given higher interest rate environment.”
“Price-wise should be muted, as we think developers may be aggressive in price setting, hence cap the price rebound potential,” he added.
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Cost of repairs and renovations adds thousands of dollars to homeownership
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Monthly mortgage payments aren’t the only recurring cost tied to owning a home. Money spent on maintenance, renovations and repairs, particularly for older houses, can easily cost homeowners thousands of dollars.
The median amount Americans spent on home renovations in 2022 was $22,000, according to home improvement website Houzz. That’s up from $14,000 in 2018. Among the top 10% of homes that spent the most on renovations last year, the median spend was $140,000 or more.
Experts in residential construction told CBS MoneyWatch that no homeowner can escape home maintenance because appliances eventually break down and weather erodes parts of a home’s exterior. The higher annual spend is also a reflection of the higher cost of materials which have risen exponentially over recent years.
“A two-by-four may have been $7 and it went up to $15,” said Matthew Francis, who teaches building construction at Pennsylvania College of Technology. “A sheet of OSB (oriented strand board) was $10 and it went up to $70. Straight down the line, material prices just skyrocketed through the roof.”
Contractors that specialize in home renovations are also charging more because the cost of their employee health insurance, workmen compensation and liability insurance have increased, Francis added.
Most of the renovations that Americans with older homes completed in recent years involved replacing ceiling tiles, drywall, flooring, paneling, plumbing fixtures and water heaters, according to U.S. Census data released this month. These days, homeowners are also focusing on fixing and replacing things like toilets, sinks, shower tiles and pipe associated with those systems, said Alan Archuleta, chairman of the home remodelers council at the National Association of Home Builders.
“Kitchens and bathrooms have the most working products in them, so they have the most points of failure,” he added.
Exposure to elements
The most common exterior renovations homeowners included deck repair, window replacements, new doors and roof repair, the Census data shows. Archuleta and Francis said decades of exposure to rain, snow, sunlight and wind damages the wood used on decks, as well as window panes and roof shingles.
“Nowadays, they say shingles have lifetime warranties, but in 25, 30, 35 years you’re going to be replacing your roof,” said Francis, who spent 15 years as a project manager for a construction company. “The environment really does tear down the asphalt shingles and you’re going to need to make sure it’s waterproof.”
Archuleta and Francis said there are some renovations that homeowners can do on their own, which could save money, including interior painting, power washing the siding and clearing the gutters. And even if someone doesn’t get to repairing those areas immediately, your house will still be safe, experts said.
“The bones of your house are not going to go bad,” Francis said. “It’s the material that you put on your house or in your house that may go bad or you may want to change aesthetically down the road.”
Here’s the median amount homeowners spent on renovating specific areas of their home last year, according to Houzz.
- Kitchen ($20,000)
- Main bathroom ($13,500)
- Guest bathroom or living room ($5,000)
- Laundry room ($3,000)
- Main bedroom ($2,500)
- Dining room or home office ($2,000)
- Guest bedroom ($1,000)
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U.S. pending home sales stay near record low despite modest pickup in September
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The numbers: U.S. pending home sales rebounded in September but remain near a record low as high mortgage rates and low inventory continue to hurt the real-estate sector.
Pending home sales rose 1.1% in September from the previous month, according to the monthly index released Thursday by the National Association of Realtors.
But pending home sales were still depressed on an annual basis due to the dearth of home listings. The September figure was the second-lowest reading since the NAR began tracking the data in 2001.
Transactions were down 11% from last year.
Nonetheless, the sales pace exceeded expectations on Wall Street. Economists were expecting pending home sales to fall 1.5% in September.
Pending home sales reflect transactions where the contract has been signed for the sale of an existing home, but the sale has not yet closed. Economists view it as an indicator of the direction of existing-home sales in subsequent months.
The NAR also released an updated forecast for existing-home sales on Thursday. The group expects sales to fall 17.5% in 2023 to a pace of 4.15 million, which will be the slowest pace since 2008. Yet due to low inventory, the median home price will increase by 0.1% in 2023, the NAR said, to $386,700.
The group expects home sales to rebound in 2024, rising 13.5% to a rate of 4.71 million. Home prices are expected to rise 0.7% next year, to $389,500.
The NAR also expects the 30-year mortgage rate to fall to 6.9% in 2023 and 6.3% in 2024. The 30-year was averaging 7.98% as of Wednesday, according to Mortgage News Daily.
Big picture: The U.S. housing market is dealing with problems on both the demand and supply sides, but the NAR seems confident that the sector will recover in the new year.
At present, not only are rates high enough to discourage home buyers, the lack of inventory is also making homes more expensive, which further spooks buyers. The NAR expects the pace of existing-home sales to fall to the slowest in 15 years, when the U.S. was in the midst of a recession caused by the subprime-lending crisis.
What the realtors said: “Because of home builders’ ability to create more inventory, new-home sales could be higher this year despite increasing mortgage rates,” NAR Chief Economist Lawrence Yun said. “This underscores the importance of increased inventory in helping to get the overall housing market moving.”
Market reaction: Stocks
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were mixed in early trading on Thursday. The yield on the 10-year Treasury note
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U.S. home sales fell in September to the lowest level since the Great Recession
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The numbers: Home sales in September fell to the lowest level since 2010, as high mortgage rates continue to hammer the housing market.
Aside from low inventory, rising rates are eroding buyers’ purchasing power, and drying up demand. Sales of previously owned homes fell by 2% to an annual rate of 3.96 million in September, the National Association of Realtors said Thursday.
That’s the number of homes that would be sold over an entire year if sales took place at the same rate every month as they did in September. The numbers are seasonally adjusted.
The drop in sales was slightly better than what Wall Street was expecting. They forecasted existing-home sales to total 3.9 million in September.
Compared to September 2022, home sales are down by 15.4%.
Key details: The median price for an existing home in September rose for the third month in a row to $394,300. Prices are up 2.8% from a year ago. That was the highest price for the month of September since NAR began tracking the data.
Home prices peaked in June 2022, when the median price of a resale home hit $413,800.
Around 26% of properties are being sold above list price, the NAR noted.
The total number of homes for sale in September fell by 8.1% from last year, to 1.13 million units. Housing inventory for the month of September was the lowest since 1999, when the NAR began tracking the data.
Homes listed for sale remained on the market for 21 days on average, up from the previous month. Last September, homes were only on the market for 19 days.
Sales of existing homes rose only in the Northeast in September, as compared with the previous month, by 4.2%. The median price of a home in the region was $439,900.
All-cash buyers made up 29% of sales, highest since January 2023. The share of individual investors or second-home buyers was 18%. About 27% of homes were sold to first-time home buyers.
Big picture: The U.S. housing market is in the midst of a serious slowdown that is primarily driven by high mortgage rates. High rates spook home buyers, drying up demand, and high rates also deter homeowners from selling since they may have to purchase another home. For a homeowner with a 3% mortgage rate for the next few decades, there’s little incentive to move.
And the residential sector is likely to see sales fall further in October’s data, as the 30-year mortgage inches even higher. Demand for mortgages has collapsed, and some outlets like Mortgage News Daily are quoting a rate of 8% for the 30-year.
Existing-home sales in 2023 could fall to the slowest pace since the housing bubble burst in 2008, real-estate brokerage Redfin said on Thursday, at a 4.1 million pace.
What the realtors said: “Mortgage rates and limited inventory has been the story throughout this year — no different this month, other than the fact that interest rates are moving higher,” said Lawrence Yun, chief economist at the National Association of Realtors.
“The Federal Reserve simply cannot keep raising interest rates in light of softening inflation and weakening job gains,” he added. “We don’t want the Fed to overdo it and cause great harm to real estate.”
Yun also questioned whether there will be a “fundamental change” or a temporary one to the “American way of life” due to the slowdown in sales.
Market reaction: Stocks were down in early trading on Thursday. The yield on the 10-year note
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Mortgage rates touch 8% for the first time since August 2000
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Mortgage rates hit 8% on Wednesday, the highest level since August 2000 and deepening an affordability crisis for homebuyers.
The average rate for a 30-year loan touched 8% on Wednesday, according to Mortgage News Daily, which surveys a range of lenders to determine current home loan rates.
Higher borrowing costs — paired with elevated prices — have made home buying unaffordable for a larger swath of buyers, economists and researchers say. In about a dozen U.S. states, families with a median income for their area cannot afford a mortgage, according to recent research from Moody’s. That’s up from only two states in 2019.
“The 23-year high in mortgage rates also goes a long way towards explaining why sellers have withdrawn from the market,” Thomas Ryan, a property economist with Capital Economics, said in a research note Wednesday. “The increase in mortgage costs homeowners would incur by getting a new mortgage to move has stopped many from attempting to move altogether and led listings of new homes for sale to drop by a third.”
Rising mortgage rates come at a time when median home prices have remained elevated for most of 2023. The national median home price was $430,000 last month, up from $400,000 in January, according to Realtor.com.
Still, other groups tracking home loans peg the 30-year mortgage at slightly below 8%. The Mortgage Bankers Association (MBA) said on Wednesday that the typical home loan stood at 7.7% this week, while Freddie pegged the average rate at 7.57% as of Oct. 12.
Impact on home sales
Even high-income earners in cities like Boston, Miami, Phoenix, Salt Lake City and Seattle cannot afford a mortgage under the median home prices in those areas, a LendingTree report released Tuesday found.
“Ultimately, until mortgage rates and home prices both start to show more significant and sustained declines, affordability challenges are likely to persist for high and low income earners alike,” LendingTree Senior Economist Jacob Channel said in the report.
Higher mortgage rates have contributed to the decline in mortgage applications and home sales, according to data from the MBA and the National Association of Realtors.
Mortgage rates have jumped this year partly because the Federal Reserve raised its benchmark rate several times in an attempt to cool inflation.
A group of housing associations this month urged Fed Reserve officials to hold off on additional rate hikes and to take other actions that would help lower mortgage rates. The Community Home Lenders of America, National Association of Realtors and Independent Community Bankers of America also sent a letter to U.S. Department of Treasury Secretary Janet Yellen this month asking for relief.
Rising mortgage rates have made “a significant negative effect on the ability of a family to qualify for and purchase a home, particularly for first-time homebuyers,” the groups said in a letter to Yellen.
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LI home prices hit new highs amid scant supply | Long Island Business News
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Long Island home prices hit record highs again last month as limited inventory and higher mortgage rates slowed sales.
The median price of closed home sales in Nassau County climbed to $733,550 in September and the median price of closed sales in Suffolk County reached $590,950, according to preliminary numbers from OneKey MLS. Home prices have now set new high-water marks for each of the last three months.
Real estate brokers say those all-time high prices can be directly attributed to the limited number of homes on the market, as listing inventory remains at historically low levels.
There were 5,095 Long Island homes listed for sale with OneKey MLS as of Tuesday, down 24.7 percent from the 6,760 homes listed for sale at the end of Sept. 2022 and 28 percent fewer than the 7,075 homes listed for sale in Sept. 2021.
Higher mortgage rates have been one of the biggest factors in the low inventory of available homes for sale, as most homeowners have mortgages at much lower rates and don’t want a higher monthly payment for their next home. The average rate for a 30-year fixed mortgage in New York this week is 7.8 percent, according to bankrate.com, more than double the rate of 18 months ago and the highest rate since 2000.
Home sales activity continues to lag thanks to the low inventory and high mortgage rates and is the slowest it’s been since 2014.
There were 1,941 homes contracted for sale last month in Nassau and Suffolk counties, that’s down 11.1 percent from the 2,183 homes contracted for sale in Sept. 2022 and 33.7 percent fewer than the 2,929 Long Island homes contracted for sale in Sept. 2021, according to OneKey MLS.
In the first nine months of the year, there were 19,156 Long Island homes contracted for sale, a drop of 15.2 percent from the 22,597 pending home sales in the first nine months of 2022, and 31.2 percent fewer than the 27,874 pending sales from January through September of 2021.
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David Winzelberg
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Mortgage rates haven’t been this high since 2000
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Mortgage rates continue to climb, hitting their highest level in nearly 23 years. The average rate on a 30-year fixed-rate loan rose to 7.49%, from 7.31% last week, Freddie Mac said Thursday. The average rate on a 15-year mortgage rate rose to 6.78% from 6.72% last week.
“Several factors, including shifts in inflation, the job market and uncertainty around the Federal Reserve’s next move, are contributing to the highest mortgage rates in a generation,” said Sam Khater, Freddie Mac’s chief economist. “Unsurprisingly, this is pulling back homebuyer demand.”
Depending on the length of the loan, rising mortgage rates add hundreds of dollars to a mortgage payment. While mortgage rates don’t necessarily mirror the Fed’s rate increases, they tend to track the yield on the 10-year Treasury note.
Rising mortgage rates aren’t the only issue making homeownership more expensive. Many homeowners who locked in a lower rate during the pandemic have opted not to sell out of fear of having to buy another property at today’s elevated rates, thus depleting the supply of homes for sale. A dip in inventory is also acting to push up home prices.
The national median existing home price rose in August to $407,100, up 3.9% from a year ago, according to the National Association of Realtors. The typical mortgage payment hit $2,170, up 18% from a year earlier, according to the Mortgage Bankers Association.
The combination of increasing mortgage rates and a shortage of properties for sale has worsened the affordability crunch by keeping prices near all-time highs. Indeed, those costs have continued to climb even as sales of previously occupied homes fell 21% through the first eight months of the year compared with the same period of time in 2022.
Boston, Chicago, Miami, San Diego and Washington, D.C., have seen some sharpest year-over-year increases in home prices, according to data from real estate research firm CoreLogic.
Home prices have climbed in recent months, but “with a slower buying season ahead and the surging cost of homeownership, additional monthly price gains may taper off,” Selma Hepp, chief economist at CoreLogic, said in a report this week.
—The Associated Press contributed to this report.
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Homes
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The typical American cannot afford to buy a home in a growing number of communities across the nation, according to common lending standsards, and there’s no clear sign of conditions getting better soon.
That’s the takeaway from a new report released Thursday by real estate data provider ATTOM. Researchers at ATTOM examined the median home prices last year for roughly 575 U.S. counties and found that 99% of those counties now have homes priced too far out of reach for the average American who makes approximately $71,214 a year, according to the report.
Housing experts said a couple of trends explain why prices continue to climb. Interest rates on home loans grew past 7% this year, adding hundreds of dollars per month to a potential mortgage payment. Meanwhile, homeowners who locked in at lower mortgage rates during the pandemic have opted not to sell their home out of fear of having to buy another house at today’s elevated rates.
“The only people who are selling right now are people who really need to move because of a life event — divorce, marriage, new baby, new job, etc.,” Daryl Fairweather, chief economist of Redfin, told CBS MoneyWatch. “That lack of new inventory is keeping prices high.”
The national median existing home price was $407,100, up 3.9% from a year ago, according to the National Association of Realtors. The average interest rate on a 30-year home loan was 7.19%, up from 6.48% at the beginning of 2023, according to Freddie Mac. Prices will remain unaffordable as long as mortgage rates continue to rise, Fairweather said.
“The dynamics influencing the U.S. housing market appear to continuously work against everyday Americans, potentially to the point where they could start to have a significant impact on home prices,” Barber said in a statement Thursday. “We will see how this shakes out as the peak 2023 buying season winds down.”
Nearly impossible for first-time buyers
ATTOM’s data adds to a growing body of real estate research in recent years, all of which conclude that it’s nearly impossible for house hunters to buy a property. It’s an especially tall task for younger millennial shoppers, one expert said.
“First-time home buyers, who are often the most sensitive to interest rates, have had to postpone their home-buying dreams,” said Dan Hnatkovskyy, co-founder of new home construction startup NewHomesMate, told CBS MoneyWatch. “Those older buyers with more cash on hand can buy down interest rates, or they can absorb a higher monthly payment and are still buying homes across the country.”
ATTOM defined “unaffordable” as someone who must devote more than 28% of their income toward paying for a particular home. Factoring in a mortgage payment, homeowners insurance and property taxes, the typical home priced today would require 35% of someone’s annual wages, ATTOM said.
Cities with the most unaffordable homes include Los Angeles, Chicago, Phoenix, San Diego and Orange County, California, ATTOM said. Communities surrounding Cleveland, Detroit, Houston, Philadelphia or Pittsburgh have the most affordable homes compared with median salaries for residents there, ATTOM said.
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‘House-rich’ Americans are sitting on nearly $30 trillion in home equity. Here’s how to tap it
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Many Americans are house-rich, at least on paper.
Thanks to skyrocketing housing prices, homeowners are now sitting on nearly $30 trillion in home equity, according to the St. Louis Federal Reserve — just shy of the 2022 peak.
That’s roughly $200,000 cash per homeowner in equity that can be tapped, which is the amount most lenders will allow you to take out while still leaving 20% equity in the home as a cushion.
How to tap your home for cash
Up until last year, taking cash out by refinancing was a popular way to access the equity you’ve accumulated in your home. With mortgage rates currently over 7%, that’s suddenly a lot less appealing.
Even with high rates of home equity, borrowers are more likely to take out a second loan to pull cash out, rather than lose their low rate through a cash-out refi.
Otherwise, a home equity line of credit, also known as a HELOC, lets you borrow money against a portion of your home’s equity. Instead of taking out a home loan at a fixed amount, a HELOC is a revolving line of credit, but with better rates than a credit card, that you can use when you want to, or just have on hand.
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Homeowners say roughly 5% rate is tipping point for them to move
More unmarried couples are buying homes together
Some costly financial surprises for first-time homebuyersLast year, originations of home equity loans and HELOCs increased 50% compared with two years earlier, according to the Mortgage Bankers Association, or MBA.
“Given the nearly $30 trillion of accumulated equity in real estate, there is untapped potential for home equity lending for lenders and borrowers,” said Marina Walsh, MBA’s vice president of industry analysis.
Factor in the terms, rates and risks
When it comes to borrowing against your home, the terms can vary greatly, according to a LendingTree report that analyzed more than 580,000 home equity loan offers across the country.
The average home equity loan amount offered to homeowners is $104,102, LendingTree found. Homes in Iowa had the most favorable terms with an average interest rate of 9.88% — two percentage points higher than the average rate of 7.88% offered in Maryland, the lowest in the nation.
Still, at less than 10%, rates are significantly lower than what it costs to borrow on credit cards, which charge roughly 20%, on average.
However, “it’s not that easy to withdraw money from your home,” said Zillow’s senior economist, Nicole Bachaud. “Not everybody is going to qualify for getting an extra loan.”
Fewer banks offered this option during the height of the Covid pandemic, when lenders tightened their standards to reduce their risk. Access to HELOCs has improved, although the most preferable terms still go to borrowers with higher credit scores and lower debt-to-income ratios.
“Though a home equity loan can be a good way to pay for big expenses, like major renovations, or to consolidate high-interest debt, getting one isn’t without drawback,” added Jacob Channel, LendingTree’s senior economist.
“Not only can qualifying for a home equity loan be more challenging than qualifying for other types of debt, defaulting on a home equity loan can have serious negative consequences,” Channel said. In some extreme instances, defaulting on a home equity loan can mean that you’ll lose your house, he noted.
Even now, “borrowers shouldn’t rush out to get a home equity loan until they fully understand all of the risks associated with them,” Channel cautioned.
Keep in mind that different lenders will also offer different terms and interest rates, Bachaud added. She recommended talking to several mortgage companies or loan officers, as well as weighing all the costs before deciding what makes the most sense.
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How Wall Street’s REIT giants are reshaping U.S. real estate
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U.S real estate investment trusts today manage $4.5 trillion in real estate worldwide. Many groups on Wall Street offer these tax-friendly funds to retail investors.
KKR’s real estate business is one of the big players in the REIT game. The private equity firm manages multiple REIT funds. The KKR Real Estate Select Trust, which currently manages $1.5 billion in assets, paid a dividend of 5.4% to its investors in July 2023.
But the benefits extend beyond returns.
“When you look at the after tax equivalent of that yield, it is very compelling.” said Billy Butcher, CEO of KKR’s global real estate business. “The depreciation from our properties has covered 100% of the income generated by our properties, and there’s no tax on that dividend,” he said in an interview with CNBC.
Larger funds sometimes contain a diversified pool of assets. Categories may include office, student housing, casino, timberlands, radio and cell towers, server farms, self-storage properties, billboards, and much more.
“Back in the 1960s, there were three or four different types [of REITs], said Sher Hafeez, a managing director at Jones Lang LaSalle, a real estate services firm. “Now, I can count at least 20 different types.”
Top performing REIT sub-sectors in recent years include data centers, self-storage properties, residential housing and tower REITs. Residential housing delivered a return of 16% from 2010 to 2020, according to a S&P Global Investments report.
The investor-friendly tax rules can also increase the pace of large-scale development.
“Having REITs there as a potential exit helps the market, and helps the availability of financing,” said Michael Pestronk, CEO and co-founder of Post Brothers, a Philadelphia-based housing developer.
Some funds like Invitation Homes and American Homes 4 Rent were founded in the yearslong slowdown in U.S. home construction. At the time, REITs bought and managed commercial-scale properties, which could include products like master-planned communities or traditional apartment complexes.
In recent years, publicly traded trusts have targeted single-family rental market, and today, these REITs have grown tremendously — enough to build new neighborhoods in their entirety.
Watch the video above to learn the fundamentals of real estate investment trusts.
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China Rolls Out New Mortgage Rules to Boost Home Sales, Xinhua Says
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Chinese regulators eased the nation’s mortgage requirements to let more home buyers enjoy favorable mortgage conditions that were previously limited to first-time home purchasers, the state-run Xinhua News Agency said on Friday.
China’s central bank, the Ministry of Housing and Urban-Rural Development and the National Financial Regulatory Administration jointly eased the requirements for home buyers who have already purchased homes to boost property sales as the real-estate slump continued, according to Xinhua.
Home buyers who don’t have family members with houses registered under their names can enjoy favorable terms that were previously limited to people buying their first homes, according to Xinhua.
First-home buyers are normally given cheaper mortgage rates than other buyers who have at least one apartment. First-home buyers are also required to make smaller down payments, as low as 20% of the total property value.
Write to Singapore editors at singaporeeditors@dowjones.com
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UK House Prices Fell at Fastest Rate on Month Since 2018
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By Joe Hoppe
The average house price in the U.K. fell 1.9%, or 7,012 pounds ($8,938) in the month to August 12–the biggest fall in asking prices in a month since 2018–according to new data from Rightmove released on Monday.
The average price of property coming to the market fell on month to GBP364,895, outpacing the usual summer slowdown of a drop of 0.9% for the month, the online property portal said. On an annual basis, house prices fell 0.1%, swinging from growth of 0.5% in July.
This bigger-than-average dip indicates some sellers are taking the initiative to price competitively, and tempt buyers that might be more preoccupied with holidays, inflation and the highest interest rates since 2008, Rightmove said.
“While a 1.9% drop in just one month seems dramatic, it’s in part an expected seasonal drop as sellers coming to market realise that they have to compromise on price due to the traditionally quieter summer holiday period,” Rightmove property-science director Tim Bannister said.
First-time buyer asking prices slipped 0.9% on month to GBP223,614, and were down 0.2% on year. Second-stepper prices fell 0.8% on month to GBP338,137, while top-of-the-ladder homes fell furthest, slipping 3.4% to GBP664,756.
Agreed sales were 15% behind levels seen in the more normal, prepandemic year of 2019, worse than the month before which was 12% below 2019’s figure. First-time buyer demand, however, is holding up better and is down just 10% compared with 2019, partly due to record rents and scarce rental properties.
“The lower level of agreed sales compared to this time in 2019 indicates the affordability challenges that many buyers currently face. However, with sales holding up more strongly in the typical first-time buyer sector, the prospect [of] owning your own home remains an appealing option for those that can afford it, with the alternative being an extremely frenzied rental market, where rents are at record levels,” Bannister said.
The portal measured 123,692 prices across the U.K. over the period of July 9 to Aug. 12.
Write to Joe Hoppe at joseph.hoppe@wsj.com
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Nvidia, Lowe’s, Dollar Tree, and More to Watch
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The majority of second-quarter earnings season is over, with a handful of major technology and retail names left to report this week. Economists will be focused on any news from an annual gathering of monetary policy thinkers and practitioners in Jackson Hole, Wyoming.
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Buying a Home Is Getting Out of Reach. Those 7% Mortgage Rates Are the Reason Why.
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Buying a Home Is Getting Out of Reach. How Much 7% Mortgage Rates Need to Fall.
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