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Tag: National Association of Realtors

  • More sellers are pulling their homes off the market. Here’s why.

    In a sign of sellers’ frustration with steadily increasing listing times more property owners are opting to pull their homes off the market rather than lower the asking price. 

    That’s according to the July 2025 monthly housing report from Realtor.com, which shows that delistings, or homes removed from the market without having been sold, were up 38% in June, since the start of the year, and 48% from a year ago. 

    “Fewer and fewer sellers are deciding to enter the market, and increasingly more are deciding to jump out” Jake Krimmel, senior economist at Realtor.com told CBS MoneyWatch. 

    Delistings for June appear in the July report as a one-month lag for delisting data is needed to determine that a delisted home is truly delisted and hasn’t been sold, Realtor.com notes. 

    Signs of deadlock

    Unable to find buyers willing to pay the original listing price, a growing number of sellers are pulling their homes off the market, rather than compromise on the amount, according the real estate listings website. 

    One indicator that more sellers exiting the housing market is the ratio between the number of delistings and listings. For every 100 new homes listed nationally in June, 21 homes were taken off the market, the report found. That’s up from 13 delisted homes per 100 new listings in May. 

    The consequence? A rise in delistings could push buyers and sellers further apart, creating a deadlock in the housing market, according to Krimmel.

    “The thing that’s going to prevent buyers and sellers from getting closer together is if all the sellers who maybe could or should be lowering their prices to meet the demand where it is, are instead taking their homes off the market altogether,” he said. “So it’s kind of like keeping us in this holding pattern.” 

    The trend comes as the supply of homes for sale begins to grow in certain U.S. regions, causing prices in those areas to drop. The number of homes for sale in July rose 24.8% year over year, according to the report, a post-pandemic high. 

    Despite the rise in housing inventory, sales remain relatively stagnant, with steep prices and stubbornly high mortgage rates continuing to deter many would-be homebuyers, experts told CBS MoneyWatch. That jibes with data from the Realtor.com report which shows that pending home sales, or listings under contract, fell 3% in July compared with last year, nearly double the 1.6% year-over-year drop in June. 

    Homeowners in no hurry to sell

    When sellers are in a pinch, they typically opt to lower the price of their home so they can offload it quicker. However, those who are not up against the same type of time constraints may be willing to wait it out longer — especially if they’re benefiting from a favorable mortgage rate.

    “Maybe you’re locked into payments that are relatively affordable for you,” said Krimmel. “You would prefer to sell, but not at a price that you’re not comfortable with.”

    Another factor experts say is playing into the delisting trend the surge in housing prices during the COVID-19 pandemic, when the housing market was red hot. As newly remote workers flocked to previously untapped locations like Austin, Texas, home prices rose at record levels, giving sellers a chance to cash in. While the market has since cooled substantially, seller’s pricing expectations have been slower to catch up, experts say. 

    “Maybe we’ve gotten a bit spoiled by very high home prices over the last many years and but we are seeing some softness in the market right now,” Nancy Vanden Houten, lead U.S. economist at Oxford Economics, told CBS MoneyWatch.

    That may not be true in all markets, however. Miami is one of the places where sellers have been most unwilling to budge on price. According to Realtor.com’s analysis of June delisting data, 59 homes were delisted for ever 100 new homes listed in the southern Florida city— the highest ratio among the cities Realtor.com tracked. Meanwhile, less than 18% of listed homes in Miami came with a price reduction in July, according to Realtor.com. 

    “If sellers are choosing to take properties off the market rather than lower prices, it may signal renewed confidence in Miami’s future, and a growing belief that this is a market worth holding for the long haul,” Ana Bozovic, a Miami-based real estate agent and founder of Analytics Miami, told Realtor.com.

    Mary Cunningham

    Mary Cunningham is a reporter for CBS MoneyWatch. Before joining the business and finance vertical, she worked at “60 Minutes,” CBSNews.com and CBS News 24/7 as part of the CBS News Associate Program.

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  • Looking to buy a home? You may now need to factor in the cost of your agent’s commission

    Looking to buy a home? You may now need to factor in the cost of your agent’s commission

    LOS ANGELES (AP) — Thinking of buying a home with the help of a real estate agent? You can no longer take it for granted that a seller will cover the cost of your agent’s commission.

    Home sellers have traditionally offered a blanket commission to a buyer’s agent when they listed their home on the market. But that will no longer be allowed as of this weekend, when various changes to U.S. real estate industry practices are set to take effect.

    A homebuyer may still try to negotiate such an offer from the seller. But if they decline, that would leave the homebuyer on the hook for paying for their agent’s services.

    The National Association of Realtors is behind the policy changes, which stem from its $418 million settlement earlier this year of federal class-action lawsuits that claimed U.S. homeowners were forced to pay artificially inflated real estate agent commissions when they sold their home.

    Companies behind several major real estate brokerage brands, including Keller Williams, Anywhere Real Estate, HomeServices of America, Re/Max and Redfin, also agreed to pay millions and make policy changes to make home seller lawsuits go away.

    The new rules, which go into effect nationally on Saturday, apply to brokers and agents representing clients looking to buy or sell a home advertised on a multiple listing service, or MLS, affiliated with the NAR.

    They boil down to two significant changes: Blanket offers of compensation on behalf of sellers to buyers’ agents will no longer be included in listings posted on the MLS, though they can still be made through other means. And homebuyers will be required to sign detailed representation agreements when they hire an agent.

    It remains to be seen whether the policy overhaul will lead to lower agent commissions or fewer sellers opting not to offer to cover the buyer’s agent fees.

    But the changes are likely to have the biggest impact on home shoppers — especially first-time buyers already facing elevated mortgage rates, a shortage of properties on the market and record-high home prices. They will now have to factor in the cost of hiring an agent if a seller isn’t willing to cover it.

    “This will have a negative impact on a buyer’s ability to purchase a home, and so there are going to be quite a few large scale changes in the buyer’s process,” said Bret Weinstein, CEO of Guide Real Estate, a brokerage in Denver.

    Homebuyer representation agreements

    Home shoppers who want to work with an agent will have to sign an agreement upfront that details the services that agent will provide and how much they will be paid, including whether it’s through a commission split with a seller’s agent.

    Generally, an agent who represents a buyer typically receives around 2.5%-3% commission based on the purchase price of the home. Agents then share part of their commission with their brokerage.

    Similar buyer representation agreements are already required in roughly 20 states. However, the new rules require that buyer agreements be completed before an agent begins working on a client’s behalf. That includes before the agent takes a buyer to tour a home, whether in person or virtually. A buyer can still go to an open house without signing a representation agreement.

    “The big change now is that we are required to ask the buyer to commit to us early and hire us early in the process,” said Andrea Ratcliff, a Redfin agent in Indianapolis, where the policy changes were rolled out July 1.

    One home shopper she spoke with was put off by the changes and the prospect of covering an agent’s fees, she said.

    “They definitely weren’t ready to commit to me — weren’t ready commit to any agent, because they weren’t prepared to take on that cost,” Ratcliff said.

    Removing buyer-agent compensation offers from home listings

    Traditionally, a buyer’s agent’s commission has been paid by the seller. Agents who work with homeowners to market and sell their home would list the property on an MLS and include how much their client was offering to pay a buyer’s agent, a practice known as an offer of “cooperative compensation.” That’s when a seller agrees in advance to offer a commission on the sale of their home to be split between their agent and the buyer’s representative, typically around 2.5%-3% each.

    The home sellers behind the lawsuits against the NAR and others argued sellers have had little choice but to offer to cover the buyer’s agent’s compensation in order to ensure their listing was shown to as many prospective buyers as possible.

    To address this, homes listed on an MLS will no longer include a seller’s offer to cover the cost of a buyer’s agent’s services. However, they will still be allowed to advertise them practically anywhere else, including the agent’s own website, a display at an open house, or when communicating directly with an agent representing a prospective homebuyer.

    Sellers may still elect to pay for a buyer’s agent’s compensation, but without the pressure of making a public, blanket offer on the MLS. Some may opt to pocket the savings and only cover their own agent’s commission.

    “If there’s not a clear offer of cooperative compensation from the seller through their broker to the buyer’s broker, then yeah, it’s going to be part of (the) negotiation,” said Kevin Sears, president of the National Association of Realtors. “I think that will be something that we see changing in the marketplace.”

    Where does this leave buyers and sellers?

    Much of how the industry policy changes play out for buyers and sellers will depend largely on the state of the local housing market.

    In a sluggish housing market where homes are taking longer to move and sellers are having to lower prices, it’s more likely that a buyer will be able to negotiate for the seller to cover their agent’s commission. In a hotter market, where properties are selling fast and receiving multiple offers, sellers will have the leverage to accept an offer from a buyer who isn’t asking for them to cover their agent’s fees.

    While sales of previously occupied U.S. homes have been in a slump since 2022, years of underbuilding and other factors have kept the inventory of homes for sale at near all-time lows. That’s pushed up prices and fueled multiple offers for many homes, giving a clear edge to sellers in most markets.

    Still, real estate agents say sellers should keep offering to cover the buyer’s agent commission.

    “We’ve advised that it would be wise for sellers to continue to be open to covering some or all of the buyer’s costs, because the last thing you want to do when you are selling something is to make it complicated for someone to buy it or to limit the number of people who can buy it,” said Alex McEwen, associate broker with Selling Utah in Orem, Utah.

    As for homebuyers, they will have to budget for the possibility that a seller won’t cover their agent’s fees. Those who can’t afford to do so may have to come to an arrangement with their agent to only pursue listings where the seller is offering buyer’s agent compensation.

    Will commissions come down?

    It’s unclear whether the policy changes will spur sellers or buyers to negotiate lower broker commissions, and whether they’ll succeed if they do.

    Buyer-agent commissions have eased somewhat this year: The average buyer’s agent commission fell nationally from 2.62% at the beginning of the year to 2.55% through July 14, according to an analysis by Redfin. However, because home prices have kept rising this year, the average commission paid to a buyer’s agent in dollar terms has risen about 1.7% since January to $15,377.

    Stephen Brobeck, senior fellow at Consumer Federation of America, expects that more sellers will be encouraged to negotiate with their agent lower their commission by at least half a percentage point.

    “That represents, over the course of a year in the housing market, a very large sum of money,” he said.

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  • Video: How Chaos at a Realtors Group Could Change the Industry

    Video: How Chaos at a Realtors Group Could Change the Industry



    The National Association of Realtors is facing antitrust lawsuits and sexual harassment allegations, and real estate agents are now looking for alternatives.



    Karen Hanley, Debra Kamin, Ruru Kuo and James Surdam

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  • Home sales slowed to a crawl in 2023. Here’s why.

    Home sales slowed to a crawl in 2023. Here’s why.

    Home sales plunged in 2023 to a nearly 30-year low amid surging mortgage rates, a shortage of available properties and rising real estate prices. 

    The National Association of Realtors said Friday that existing U.S. home sales totaled 4.09 million last year, an 18.7% decline from 2022. That is the weakest year for home sales since 1995 and the biggest annual decline since 2007, the start of the housing slump of the late 2000s.

    The median national home price for all of last year edged up just under 1% to record high $389,800, the NAR said. Only about 16% of homes around the country were affordable for the typical home buyer last year, Redfin economist Zhao Chen told CBS News last month. By comparison, the share stood at about 40% prior to 2022.

    Last year’s home sales slump echoes the nearly 18% annual decline in 2022, when mortgage rates began rising, eventually more than doubling by the end of the year. That trend continued in 2023, driving the average rate on a 30-year mortgage by late October to 7.79%, the highest level since late 2000.

    The sharply higher home loan borrowing costs limited home hunters’ buying power on top of years of soaring prices. A dearth of homes for sale also kept many would-be homebuyers and sellers on the sidelines.

    “A persistent shortage of homes for sale and some uptick in demand due to the recent decline in mortgage will keep home price growth positive 2024,” Nancy Vanden Houten, lead U.S. economist for Oxford Economics, said in a research note. “If more sellers enter the market in response to lower mortgage rates, the increase in supply might weigh on prices, but only at the margin.”

    Home prices rose for the sixth straight month in December. The national median home sales price rose 4.4% in December from a year earlier to $382,600, the NAR said.

    Mortgage rates have been mostly easing since November, echoing a pullback in the 10-year Treasury yield, which lenders use as a guide to pricing loans. The yield has largely come down on hopes that inflation has cooled enough for the Federal Reserve to shift to cutting interest rates this year.


    Home inventory remains below pre-pandemic levels

    04:08

    The average rate on a 30-year home loan was 6.6% this week, according to mortgage buyer Freddie Mac. If rates continue to ease, as many economists expect, that should help boost demand heading into the spring homebuying season, which traditionally begins in late February.

    Still, the average rate remains sharply higher than just two years ago, when it was 3.56%. That large gap between rates now and then has helped limit the number of previously occupied homes on the market by discouraging homeowners who locked in rock-bottom rates from selling.

    “We need more inventory to get the market moving,” said Lawrence Yun, the NAR’s chief economist.

    Despite easing mortgage rates, existing home sales fell 1% in December from the previous month to a seasonally adjusted annual rate of 3.78 million, the slowest sales pace since August 2010, the NAR said.

    Where are mortgage rates headed?

    Many economists expect mortgage rates to remain just above 6% by year-end.

    “We expect mortgage rates to drop back from 6.8% currently to 6.25% by the end of the year,” Thomas Ryan, property economist with Capital Economics, in a report. “In our view, that modest fall won’t be enough to unwind mortgage rate ‘lock-in’ and bring a great deal more stock onto the market. Because of that, we’re forecasting a  subdued recovery in sales volumes to 4.3 million by end-2024.”

    December’s sales fell 6.2% from a year earlier. Last month’s sales pace is short of the roughly 3.83 million that economists were expecting, according to FactSet.

    “The latest month’s sales look to be the bottom before inevitably turning higher in the new year,” Yun said. “Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.”

    According to a recent survey from Fannie Mae, as of December some 31% of consumers expected mortgage rates to decline over the next 12 months, a more optimistic outlook than the previous month. 

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  • Inflation Fears Explain A Seeming Housing Market Mystery

    Inflation Fears Explain A Seeming Housing Market Mystery

    Housing has become increasingly expensive. According to the National Association of Realtors, mortgage rates on average have risen by more than a full percentage point over the last 12 months. The average price of a home has inched up as well. Taken together and measured against household incomes, the statisticians at the Association estimate that affordability of home ownership for the average American has plummeted nearly 10% over the past year and today sits at its lowest level since 2011. Economics 101 would tell us that demand should slack off. Yet, home sales continue to rise. The Census Bureau reports that sales of privately owned houses fell off a bit in October, the most recent period for which data are available, but remain some 18% above year-ago levels. Sales have held up in defiance of standard price theory because Americans are still very concerned about inflation.

    Indeed, the behavior of the housing market, more than any other economic gauge, announces that Americans, though aware of easing rates of inflation recently, are concerned that the economy is far from out of the woods on this matter. They fear a rising cost of living and exhibit that fear by flocking to the best inflation hedge available to them — home ownership — and secure it even if it means stretching their household budget to the limit. Few homeowners can quote the numbers, but the history of the last great inflation guides their decisions. From the mid-1970s to the mid-1980s, the crushing burden of 6.2% inflation a year tracked by the Bureau of Labor Statistics was still bested by an 8.7% rise in residential real estate values recorded by the Census Bureau. The 2.5 percentage point difference more than made up for the burden of paying mortgage rates that rose to double digits during that time.

    For others, the logic of ownership is compelling in yet a different way, even if it means paying high mortgage rates and stretching the household budget to do so. Once the house is secure, whether financed with a cash purchase or a fixed rate mortgage even a high-rate one, the family has fixed the price of a major budget item – shelter – a great comfort when people fear that all other prices will rise unpredictably. For those who remain wary of inflation – and that is most people outside the White House – the peace of mind purchased this way is well worth the budget strains. Affordability might prevent a purchase as large or in as desirable location as hoped, but these benefits justify sliding down the pricing distribution. And this kind of buying has held up demand, despite rising costs.

    Pricing might have given way despite this support for demand were it not that supply has also declined. It seems that existing owners, especially those who purchased at the very low mortgage rates that prevailed until last year, have no desire to walk away from such advantages. If for some reason, they need to change residences, they cling to the original mortgage and the house to which it is attached and rent the property, encouraged further by the 11% rise in national rents recorded between 2021 and 2022. They then rent in their new location until conditions for a new purchase are more favorable. Then they sell the old house to buy a new one. At the same time, homebuilders, the Census Bureau reports, have cut back on the construction of single-family houses, some 4.4% over the last year, and some, noting the earlier rise in rents, have turned to the construction of rental properties. Together, this shift by builders and the relative slowdown in the supply of owner-occupied dwellings available for sale has held up prices in this area of the market while causing a sudden halt this year in what was a powerful uptrend in rents.

    As is so often the case, the matter is more complex than simple supply-demand-price considerations, especially in a product like housing that lasts for a lot longer than a haircut. If and when inflation fears fade and the Federal Reserve begins to lower interest rates, matters will seem equally perplexing as this confluence of motivations works in reverse.

    Milton Ezrati, Senior Contributor

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  • Legal Marijuana And Property Values

    Legal Marijuana And Property Values

    Ohio just became the 24th recreational legal state and over 50% of the country live where you can got to a dispensary and buy a pre-roll, gummies, etc. States with legal weed benefit greatly from tax revenue, usually more than alcohol review and crime doesn’t increase. But what about legal marijuana and property values?

    On average, in states where recreational marijuana is legal, cities with retail dispensaries saw home values increase $22,888 more than cities where marijuana is illegal from 2014 to 2019 according to the National Association of Realtors (NAR).

     RELATED: Will Americans Tolerate Marijuana Odors As Legalization Progresses?

    In general, states with full legalization are also states with a younger population and a larger industry bases, attracting a more broadminded population.  Also, a Gallup poll suggested household with over $100,000 income are most likely to support legalization.

    Photo by Kindel Media from Pexels

    There are downsides in the home real estate market for cannabis users. Like tobacco, weed can leave an oder in a home which can directly affect selling/leasing a property. A survey by NAR released in April of 2023 discovered in states where medical marijuana is legal and roughly two-fifths of members in states where both medical and recreational marijuana are legal had no issues leasing a property after the use of marijuana in a property (similar to 2021). When there were issues, the most common issue was the smell, which 30 to 35 percent of these members had encountered.

    RELATED: Great Fall Whiskeys

    With commercial real estate, there is also interesting data. States where medical and recreational marijuana use is legal, there has been an increased demand in warehouses and storefronts. There is also an increase in property purchasing over leasing in the past year, the majority have seen the increases with warehouses, followed by land, and storefronts.

    Another study shows residential property values in legal states outpaced those which still ban marijuana by $48,983 over the past decade. This recently released research is from Real Estate Witch, an online publication owned by Clever Real Estate.

     

    Sarah Johns

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  • Americans pay $100 billion in real estate commissions but get ready for a 30% cut on that, expert says

    Americans pay $100 billion in real estate commissions but get ready for a 30% cut on that, expert says

    Home buyers and sellers had a big week. Significant changes to how—and how much—they pay real-estate agents became more likely after a $1.8 billion verdict on Tuesday against the National Association of Realtors and large residential brokerages.

    The defendants artificially inflated commissions and “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law,” a federal jury in Missouri found. 

    The lawsuit (and two others) could lead to a 30% reduction in the $100 billion that Americans pay each year in real-estate commissions, said Ryan Tomasello, a real-estate industry analyst with Keefe, Bruyette & Woods, in a research note on the case, reported the Wall Street Journal.

    “We believe changes to the residential brokerage industry’s commission structure could cause the annual commission pool to decline by upwards of 30% over time,” he said. 

    NAR will appeal, and that process could take years. In a statement provided to Fortune, NAR vice president of communications, Mantill Williams, said its rules “prioritize consumers, support market-driven pricing and promote business competition.” The organization will ask the judge to reduce the verdict in the interim, he added.

    Housing market implications

    But Anthony Lamacchia, whose brokerage Lamacchia Realty has more than 500 agents in various states, told the Journal: “I have a hard time believing that this could be the verdict and there’s no material changes. It’s just what, and when, and what does it lead to?” 

    The judge might require changes to how brokerages operate, but whether that happens or not, the ruling could spur real-estate brokerages, fearful of potential liability, to implement new practices. Before the trial, two of the four big real estate broker franchisors named in the case, RE/MAX and Anywhere Real Estate, agreed to settlements, pending approval from the judge.

    The other two were Keller Williams Realty and HomeServices of America, an affiliate of Berkshire Hathaway. A spokesperson for HomeServices, which plans to appeal, said in a statement: “Today’s decision means that buyers will face even more obstacles in an already challenging real estate market, and sellers will have a harder time realizing the value of their homes.” 

    Another upshot of the ruling could be new business models finally breaking through. For years, real-estate startups have tried and failed to upend the way agents are paid. Among them was REX, cofounded by ex-Goldman Sachs partner Jack Ryan.

    “This will be a catalyst,” Ryan told the Journal, “because no one could break the cartel.”

    Steve Mollman

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  • Housing industry urges Powell to stop raising interest rates or risk an economic hard landing

    Housing industry urges Powell to stop raising interest rates or risk an economic hard landing

    New homes under construction in Miami, Florida, Sept. 22, 2023.

    Joe Raedle | Getty Images

    Top real estate and banking officials are calling on the Federal Reserve to stop raising interest rates as the industry suffers through surging housing costs and a “historic shortage” of available homes for sale.

    In a letter Monday addressed to the Fed Board of Governors and Chair Jerome Powell, the officials voiced their worries about the direction of monetary policy and the impact it is having on the beleaguered real estate market.

    The National Association of Home Builders, the Mortgage Bankers Association and the National Association of Realtors said they wrote the letter “to convey profound concern shared
    among our collective memberships that ongoing market uncertainty about the Fed’s rate path is contributing to recent interest rate hikes and volatility.”

    The groups ask the Fed not to “contemplate further rate hikes” and not to actively sell its holdings of mortgage securities at least until the housing market has stabilized.

    “We urge the Fed to take these simple steps to ensure that this sector does not precipitate the hard landing the Fed has tried so hard to avoid,” the group said.

    The letter comes as the Fed is weighing how it should proceed with monetary policy after raising its key borrowing rate 11 times since March 2022.

    In recent days, several officials have noted that the central bank could be in a position to hold off on further increases as it assesses the impact the previous ones have had on various parts of the economy. However, there appears to be little appetite for easing, with the benchmark fed funds rate now pegged in a range between 5.25%-5.5%, its highest in some 22 years.

    At the same time, the housing market is suffering through constrained inventory levels, prices that have jumped nearly 30% since the early days of the Covid pandemic and sales volumes that are off more than 15% from a year ago.

    The letter notes that the rate hikes have “exacerbated housing affordability and created additional disruptions for a real estate market that is already straining to adjust to a dramatic pullback in both mortgage origination and home sale volume. These market challenges occur amidst a historic shortage of attainable housing.”

    At recent meetings, Powell has acknowledged dislocations in the housing market. During his July news conference, the chair noted “this will take some time to work through. Hopefully, more supply comes on line.”

    The average 30-year mortgage rate is now just shy of 8%, according to Bankrate, while the average home price has climbed to $407,100, with available inventory at the equivalent of 3.3 months. NAR officials estimate that inventory would need to double to bring down prices.

    “The speed and magnitude of these rate increases, and resulting dislocation in our industry, is painful and unprecedented in the absence of larger economic turmoil,” the letter said.

    The groups also point out that spreads between the 30-year mortgage rate and the 10-year Treasury yield are at historically high levels, while shelter costs are a principal driver for increases in the consumer price index inflation gauge.

    As part of an effort to reduce its bond holdings, the Fed has reduced its mortgage holdings by nearly $230 billion since June 2022. However, it has done so through passively allowing maturing bonds to roll off its balance sheet, rather than reinvesting. There has been some concern that the Fed might get more aggressive and start actively selling its mortgage-backed securities holdings into the market, though no plans to do so have been announced.

    The Fed doesn't have to keep threatening hikes, says Fundstrat Co-Founder Tom Lee

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  • Mortgage rates haven’t been this high since 2000

    Mortgage rates haven’t been this high since 2000

    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. 


    Buying a home now unaffordable in 99% of America, report finds

    03:45

    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. 

    Khristopher J. Brooks

    Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.

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  • Acute Housing Shortage Carries Health Risks For Aspiring First Time Home Buyers

    Acute Housing Shortage Carries Health Risks For Aspiring First Time Home Buyers

    It’s no secret that there’s a housing shortage in the U.S. and there’s plenty of blame to go around for its myriad causes. These range from the homebuilding industry citing laws and regulations like California’s Environmental Quality Act (popularly known as CEQA), to immigration advocates pointing out a shortage of foreign construction workers exacerbating an ongoing labor problem, to housing professionals criticizing NIMBYism and vacation rentals, to economists noting the lock-in effect of rising mortgage rates preventing moves, to builders choosing to build single family rentals rather than for sale homes in a recently-expanded BTR trend, to 60 Minutes turning the camera on investors converting resale properties – especially at the starter home level – to rentals with a dramatic headline: “Would-be home buyers may be forced to rent the American dream, rather than buy it.”

    Dream Deferred

    Why has homeownership been held up as the “American Dream” for more than a century? Lenders, builders and real estate professionals have certainly promoted it as a business opportunity for their firms, but its enduring popularity with everyday Americans and their elected officials speaks to more than pure commerce.

    In a 2016 report, the National Association of Realtors wrote, “In addition to tangible financial benefits, homeownership brings substantial social benefits for families, communities, and the country as a whole.” It specifically cited civic participation, educational achievement, property maintenance, reduced crime and health benefits as among the reasons why lawmakers have provided incentives to buy and invest in homes.

    I sent questionnaires to three housing experts to get their written responses on the shortage, its causes and impacts on different groups – particularly first time buyers and household health and well-being. I included their responses below. Here are a few quick take-aways:

    1. Homeownership often improves a family’s overall well-being, including physical and mental health.
    2. Those most impacted by the housing shortage are first-time buyers.
    3. Build to rent and resale to rental conversions aren’t major contributors to the housing shortage, but policy makers need to be looking at options to increase homes in their regions.

    Housing and Health

    “The pandemic illuminated the critical importance of home,” recalled Habitat for Humanity CEO Jonathan Reckford. “The message from public health officials was clear: For the health of your family, and that of your community, the best thing you can do is stay at home. But what if the home you are using as a refuge is making you even more sick? For many low-income households, especially vulnerable populations like the elderly and immunocompromised, the lack of safe and decent shelter made it extraordinarily more difficult to combat the coronavirus pandemic.”

    Habitat actually published a Health Benefits of Homeownership report a year before Covid struck the U.S. It begins this way: “‘A quality home is more than just a roof and walls,’ says Renée Glover, former chair of Habitat for Humanity International’s board of directors. ‘It provides homeowners with feelings of stability and pride, as well as generating measurable results such as decreased doctor visits and increased high school graduation rates.’” The report cited a correlation between living in substandard housing and a range of health problems, including asthma, exposure to toxic substances, injuries and mental health issues. “Homeowners have a significant health advantage over renters, on average,” its authors stated. One quoted home recipient commented that her previous rental was contaminated by mold.

    “Unsafe or unhealthy housing exposes residents to allergens and other hazards like overcrowding,” the report concluded, noting also that many of these areas without quality housing are food deserts with limited safe outdoor space and proximity to highways and industrial pollution.

    Low income populations are most impacted by the housing shortage (and its related health impacts), which is most acute at the affordable level.

    Non-Starter Homes

    “The dramatic decline in entry-level home construction has been a major driver of our national housing shortage,” shared Reckford. “Annual production of smaller, less expensive newly constructed homes has fallen dramatically since the late 1970s, and we have built too few units ever since the 2008 housing market crash.”

    The Habitat leader sees this most in the nation’s costliest states, including California, New York and Hawaii. “What is challenging now is that historically affordable markets like Tampa, Austin, and Charlotte have seen housing prices double or triple in a few years,” he added. Reckford cites land, the cost of construction and labor shortages as the dominant factors. “Zoning and regulatory barriers have increased costs and make it slower and harder to build,” he also noted.

    Real estate industry group National Association of Realtors’ deputy chief economist Jessica Lautz wrote, “There are a number of factors that have held back building such as labor constraints, land availability, density restrictions within local communities, and – in recent years – supply shortages.”

    First time buyers’ share of the market has dropped to its lowest level since the group started collecting data in 1981, she revealed. Year-over-year home price gains and a lack of equity have kept them out of the market, she added, noting. “The housing shortage is acutely impacting first-time buyers more than others.”

    There may be more of these aspiring buyers entering the market too. According to real estate industry analysts John Burns Research & Consulting, there’s been an unexpected increase in family formations this year, and that often drives a couple’s home buying decision and timing. “While the number of adults in America grew at the lowest rate in decades from 2020–2022, household formations actually surged — the opposite of what we expected — to 1.5 million per year.” The company’s vice president of research Eric Finnigan tweeted those findings on June 20, adding his own take: “Home builders now expect to increase single-family starts this year,” emphasizing increase with all capital letters, and declaring, “Game ON!” Depending on what they build — and for whom — this could bring some relief to those would-be homeowners.

    Build to Rent

    One particular category won’t help them much — at least in the short term. Single family and townhouse rentals were largely the domain of local, individual or small-holdings landlords for many years, but have exploded recently as a corporate residential real estate category. Burns predicted a 90% increase in BTR supply, with 708 new communities totaling more than 131,000 homes in its latest newsletter. (Experts minimize the effect this may be having on competitive demand for land and construction teams for building homes for sale, but statistically, it can’t be zero and is rapidly increasing.)

    Kelly Mangold, an RCLCO real estate consultancy principal, sees the Sunbelt as a BTR growth region, along with markets like Atlanta that are moderately priced with what she identified as having fewer barriers to entry. Reckford isn’t critical where BTRs are confirmed: “Build-to-rent increases supply, so that is more helpful at a time when we need far more units.”

    Lautz sees it as a potential positive too. “The Midwest had the largest share of built-to-rent housing starts in 2022 at 12%. As this region is more affordable than others, it is possible this helps a segment who would like to purchase a home save for a larger space,” she suggested.

    In the meantime, young savers can enjoy the benefits that come with having a yard and their own walls for single family rentals. While they’re avoiding the costs of homeownership, they aren’t building equity.

    Elder Moves

    In that regard, the older homeowner who doesn’t want ongoing home maintenance chores and who is finding a shortage of appealing homes becomes an ideal BTR prospect. Downsizing retirees with decades of home equity are the least impacted by the housing shortage and current high mortgage rate environment, Mangold noted. “However, they still have to deal with the existing scarcity which may make it more difficult to find a home that meets their needs in their desired location.” A maintenance-free new construction rental community located near their adult children and grandchildren may be appealing to some.

    More aging-in-place friendly developments can find eager, stable tenants among this older population, while young DIY-friendly parents can buy and improve their former properties.

    Affordability Solutions

    “Reforming land use policies can help bridge the gap between construction costs and the prices that new homebuyers can afford,” Reckford suggested, and states are starting to implement those.

    Mangold agrees that the regulatory environment makes it difficult to get new developments approved. This, she pointed out, “limits the supply in any given market and contributes to scarcity and high pricing.”

    Policymakers across the country are looking at regulatory changes, especially where single family zoning is concerned. In some cases, builders can now put a duplex or fourplex in one of these former neighborhoods. In other areas, parking rules are being jettisoned near transit to accommodate more townhouse and multi-family construction. Some of those will be rentals. Others can offer new opportunities to own a slide of the American dream, condo-style.

    Jamie Gold, Contributor

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  • Rent or buy? Here’s how to make that decision in the current real estate market

    Rent or buy? Here’s how to make that decision in the current real estate market

    Choosing whether to rent or buy has never been a simple decision — and this ever-changing housing market isn’t making it any easier. With surging mortgage rates, record rents and home prices, a potential economic downturn and other lifestyle considerations, there’s so much to factor in.

    “This is an extraordinarily unique market because of the pandemic and because there was such a run on housing so you have home prices very high, you also have rent prices very high,” said Diana Olick, senior climate and real estate correspondent for CNBC.

    By the numbers, renting is often cheaper. On average across the 50 largest metro areas in the U.S., a typical renter pays about 40% less per month than a first-time homeowner, based on asking rents and monthly mortgage payments, according to Realtor.com.

    In December 2022, it was more cost-effective to rent than buy in 45 of those metros, the real estate site found. That’s up from 30 markets the prior year.

    How does that work out in terms of monthly costs? In the top 10 metro regions that favored renting, monthly starter homeownership costs were an average of $1,920 higher than rents.

    But that has not proven to be the case for everyone.

    Leland and Stephanie Jernigan recently purchased their first home in Cleveland for $285,000 — or about $100 per square foot. The family of seven will also have Leland’s mother, who has been fighting breast cancer, moving in with them.

    By their calculations, this move — which expands their space threefold and allowing them to take care of Leland’s mother — will be saving them more than $700 per month.

    ‘You don’t buy a house based on the price of the house’

    “You don’t buy a house based on the price of the house,” Olick said. “You buy it based on the monthly payment that’s going to be principal and interest and insurance and property taxes. If that calculation works for you and it’s not that much of your income, perhaps a third of your income, then it’s probably a good bet for you, especially if you expect to stay in that home for more than 10 years. You will build equity in the home over the long term, and renting a house is really just throwing money out.”

    Mortgage rates dropped slightly in early March, due to the stress on the banking system from the recent bank failures. They are moving up again, although they are currently not as high as they were last fall. The average rate on a 30-year fixed-rate mortgage is 6.59% as of April — up from 3.3% around the same time in 2021.

    But that hasn’t significantly dampened demand.

    “As the markets kind of bubbled in certain parts of the country and other parts of the country priced out, we’ve seen a lot of investors coming in looking for affordable homes that they can buy and rent,” said Michael Azzam, a real estate agent and founder of The Azzam Group in Cleveland.

    “We’re still seeing relatively high demand” he added. “Prices have still continued to appreciate even with interest rates where they’re at. And so we’re still seeing a pretty active market here.”

    Buying a home is part of the American Dream

    The Jernigans are achieving a big part of the American Dream. Buying a home is a life event that 74% of respondents in a 2022 Bankrate survey ranked as the highest gauge of prosperity — eclipsing even having a career, children or a college degree.

    The purchase is also a full-circle moment for Leland, who grew up in East Cleveland, where his family was on government assistance.

    “I came from a single-mother home who struggled to put food on the table and always wanted better for her children … it was more criminals than there were police … It is not the type of neighborhood that I wanted my children to grow up in,” said Jernigan.

    The new homeowner also has his eye on building a brighter future for more children than just his own. Jernigan plans to purchase homes in his old neighborhood, renovate them and create a safe space for those growing up like he did.

    “I’m here because someone saw me and saw the potential in me and gave me advice that helped me. … and I just want to pay it forward to someone else” Jernigan said.

    Watch the video above to learn more.

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  • U.S. home sales fell in March, in tepid start to spring homebuying season

    U.S. home sales fell in March, in tepid start to spring homebuying season

    The spring homebuying season in the U.S. is off to a tepid start as buyers contend with sharply higher mortgage rates and near historic-low inventory of properties on the market.

    Existing U.S. home sales fell 2.4% last month from February to a seasonally adjusted annual rate of 4.44 million, the National Association of Realtors said Thursday. That’s below the 4.5 million home sales economists were expecting, according to FactSet.

    Sales slumped 22% compared with March last year. The annual drop was steepest in markets across the Western part of the country, where sales sank more than 30% from a year ago.

    The national median home price slipped 0.9% from March last year to $375,700, the NAR said. That’s the biggest annual median home price drop since January 2012.

    While the drop in prices is good news for buyers after years of soaring home values, a stubbornly low inventory of properties for sale continues to drive bidding wars in many markets, especially for the most affordable homes.

    Some 28% of homes purchased last month sold for more than their list price, said Lawrence Yun, the NAR’s chief economist.

    “Home sales are trying to recover and are highly sensitive to changes in mortgage rates,” Yun said. “Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand.”

    High prices and rates repel buyers

    The U.S. housing market has been slow to regain its footing this year after posting its deepest slump in nearly a decade last year. Homebuyers continue to grapple with sharply higher mortgage rates, which can add hundreds of a dollars a month in costs, on top of home prices that have only come down slightly recently after soaring in recent years.

    While more homes traditionally hit the market during the spring homebuying season, the number of properties for sale remains near historic lows at under 1 million, limiting options for would-be buyers.

    Some 980,000 homes were on the market by the end of March, the NAR said. That’s an increase of 1% from February and 5.4% from March last year. Even so, that amounts to a 2.6-month supply at the current sales pace. In a more balanced market between buyers and sellers, there is a 5- to 6-month supply.

    The inventory of homes for sale has yet to return to pre-pandemic levels. Last month’s inventory was down 41% from March 2019, when there were 1.7 million homes on the market.

    The uptick in homes for sale in March reflects properties sitting on the market longer. The number of homes listed for sale for the first time in March was down 17% from a year earlier, Yun said.

    High mortgage rates keep sellers locked in

    Many homeowners who locked in a mortgage rate in 2020 and 2021, when they averaged below 3%, are reluctant to sell now that rates have doubled, which is limiting the inventory of homes for sale.

    The average rate on a 30-year mortgage reached a two-decade high of 7.08% in the fall following a series of interest rate hikes by the Federal Reserve. Higher rates can add hundreds of a dollars a month in costs for homebuyers, on top of already high home prices.

    Rates eased in February then ticked higher in early March, reaching an average of 6.73% by the second week of the month. The average rate on a fixed-rate 30-year home loan rose to 6.39% this week, snapping a five-week slide, according to mortgage buyer Freddie Mac. The rate averaged 5.11% a year ago.

    The combination of high borrowing costs and intense competition for the most affordable homes on the market is keeping many first-time buyers on the sidelines. They accounted for 28% of home sales in March, up from 27% in February but down from 30% in March last year, the NAR said.

    “First-time buyers are still struggling,” Yun said.

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  • Falling Mortgage Rates Set To Boost Home Sales By More Than 200,0000

    Falling Mortgage Rates Set To Boost Home Sales By More Than 200,0000

    The decline in mortgage rates over the last month likely will boost U.S. home sales by more than 200,000 as cheaper financing results in more people qualifying for loans, according to Lawerence Yun, chief economist of the National Association of Realtors.

    “Each half a percentage point drop in mortgage rates results is an additional 200,000 home sales, and likely even more,” said Yun. “Since more people will qualify for mortgages, it leads to more sales.”

    The average U.S. rate for a 30-year fixed home loan dropped to 6.28% last week from 6.73% in March’s first week, according to Freddie Mac. That decline in the cost of financing reduces monthly payments, meaning more buyers will pass the debt-to-income test lenders use to qualify applications.

    “Lower mortgage rates open the gate – not for everyone, but for people who were on the margins,” Yun said.

    Mortgage rates likely will remain near
    near
     the current level in the short term and decline further in the coming months, Yun said. The average U.S. rate for a 30-year fixed mortgage probably will be 6.3% in the second quarter and 5.9% in the third quarter, he said.

    About 40% of U.S. home sales go under contract in the April to June period, according to data from NAR. Those sales typically close about two months later, with the buyers moving in the summer months.

    “We’re smack dab in the peak of the spring home-buying season right now,” said Bill Banfield, executive vice president of capital markets for Rocket Mortgage. “People want to get into a home and settle their families before the new school year starts.”

    Mortgage rates hit 20-year highs at the end of October and again in early November, according to Freddie Mac data, after inflation spooked investors and the Federal Reserve ended a bond-buying program aimed at supporting the economy during the worst of the pandemic.

    Rates remained near those peaks until last month’s failure of Silicon Valley Bank, the 16th-largest U.S. commercial bank by assets, and Signature Bank, a smaller bank based in New York that catered to cryptocurrency investors.

    That financial instability sent Wall Street investors scurrying for the perceived safety of the bonds markets. The increase in competition for fixed assets sent the average yield on 10-year Treasuries, a benchmark for mortgage rates, to a seven-month low last week, according to data from Intercontinental Exchange.

    “Whenever there is unrest in the markets, mortgage rates tend to drop – especially with the Federal Reserve committed to fighting inflation,” said John Hardesty, general manager of the mortgage division at Argyle, a payroll data verification platform used by lenders. “We’re seeing some settling in mortgage rates, and it’s the perfect time for that.”

    Kathleen Howley, Senior Contributor

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  • These features may ‘set you ahead of the competition’ when selling your home, research finds

    These features may ‘set you ahead of the competition’ when selling your home, research finds

    A prospective home buyer is shown a home by a real estate agent in Coral Gables, Florida.

    Joe Raedle | Getty Images

    Today’s home sellers may be able to command higher prices due to recent increases.

    Certain luxury features may help sell your home for more money or faster than expected, according to new research from Zillow.

    “If you have these features in your home already, you should definitely flaunt them in your listing description,” said Amanda Pendleton, Zillow’s home trends expert. “That is going to set you ahead of the competition.”

    The real estate website evaluated 271 design terms and features included in almost 2 million home sales in 2022. Those that came out on top may add up to about $17,400 on a typical U.S. home.

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    Two chef-friendly features topped the list of those that helped sell homes for more — steam ovens, which helped push prices up 5.3% over similar homes without them, and pizza ovens, which increased prices by 3.7%.

    Other features that rounded out the top 10 included professional appliances, which had price premiums of 3.6%; terrazzo, 2.6%; “she sheds,” 2.5%; soapstone, 2.5%; quartz, 2.4%; a modern farmhouse, 2.4%; hurricane or storm shutters, 2.3%; and mid-century design, 2.3%,

    Zillow also looked at which features helped sell homes faster than expected.

    Doorbell cameras topped that list, helping to sell homes 5.1 days faster. That was followed by soapstone, with a 3.8 day advantage; open shelving, 3.5; heat pumps, 3; fenced yards , 2.9; mid-century, 2.8; hardwood, 2.4; walkability, 2.4; shiplap walling or siding, 2.3; and gas furnaces, 2.3.

    To be sure, homeowners should not necessarily add these features with the idea they will see sale premiums, Pendleton said.

    Moreover, some more unique features — like she sheds, spaces dedicated specifically to female home dwellers and their hobbies — may make it so it takes a bit longer to find a buyer who appreciates the amenities.

    However, the features are signals of perceived qualify a buyer associates with a nice home right now.

    “These personalized features kind of add that wow factor to a home,” Pendleton said.

    Emphasis on improvements that spark joy

    The current housing market is “anything but traditional,” Pendleton notes.

    For buyers, there’s not as many listings to choose from as homeowners do not want to give up their ultra-low interest rates, she noted.

    “Homes that are well priced and well marketed are going to find a buyer very quickly today,” Pendleton said.

    Existing homeowners are now more likely to be thinking of different ways to re-envision their space, according to Jessica Lautz, deputy chief economist at the National Association of Realtors.

    Personalized features kind of add that wow factor to a home.

    Amanda Pendleton

    home trends expert at Zillow

    “There are a lot of people who want to remodel because they are locked into low interest rates and have no intention of leaving their property,” Lautz said.

    At the top of homeowners’ wish lists are ways to maximize the square footage of their home, Lautz said, such as basement remodels or attic or closet conversions. Adding home offices is also very popular as people continue to live hybrid lifestyles.

    Some improvements also stand to provide a 100% or more return when a home is put on the market.

    The top of that list includes hardwood floor refinishing, according to Lautz, which not only makes a home look more beautiful but also makes it more marketable.

    “It brings a lot of joy, and it has a lot of bang for the buck when you go to sell your home,” Lautz said.

    Putting in new wood flooring or upgrading the home’s insulation also tend to provide returns of 100% or more, she said.

    Zillow’s research found certain features may actually hurt a home’s resale value. That includes tile countertops or laminate flooring or countertops. Walk-in closets may also negatively impact a home’s value, as buyers may prefer to use the space for other purposes.

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  • Vast majority of U.S. homes are unaffordable to the average buyer

    Vast majority of U.S. homes are unaffordable to the average buyer

    The cost of buying a home is drifting further out of financial reach for the average American, according to a report from Redfin. 

    The real estate website analyzed homes that went on sale last year and found that only 21% of them were affordable, meaning that nearly 80% of homes were outside the typical buyer’s budget. By comparison, about 60% of homes were considered affordable in 2021, the report released Friday found.  

    Redfin Deputy Chief Economist Taylor Marr said those stats boil down to one truth: housing affordability is at its lowest point in history. 

    “Many millennials were able to buy their first home before or during the pandemic homebuying boom, but many others were priced out of homeownership and forced to keep renting,” he said in the report. “That means a lot of young adults missed out on a major wealth-building opportunity: the value of homes owned by millennials has risen nearly 30% in the past year.”


    MoneyWatch: How to maneuver the housing market slowdown

    03:47

    Redfin defined an “affordable” home as one whose mortgage payment would equal 30% or less of the average monthly income of residents in the county where the home sits. Redfin found that the highest percentage of affordable homes were in Akron, Cleveland and Dayton in Ohio, Pittsburgh and St. Louis, Missouri. Five California cities — Anaheim, Los Angeles, Oxnard, San Diego and San Francisco — had the lowest percentage of affordable homes. 

    The Redfin report dovetails with a recent Bloomberg analysis that shows Americans will need a higher income to land their first home. First-time buyers in 2022 had a typical household income of as much as $90,000 compared to just $70,000 in 2019, Bloomberg reported Friday. 

    The housing market is expected to pick up steam in the coming weeks as the historically hectic spring buying season kicks into gear. House hunters today face mortgage rates of around 6.6%, up from 3.75% a year ago. The median home price hit $415,000 last month, up from $406,000 in January, according to National Association of Realtors data. 

    Why are prices rising?

    Home prices are climbing for a couple of reasons, Redfin said. The Federal Reserve’s monthslong battle with soaring inflation has helped push mortgage rates skyward, thus increasing borrowing costs for buyers. Also, demand for homes soared in 2022 and builders couldn’t keep up with the pace, driving prices for existing homes even higher. 

    The next few months will be tough sledding for buyers and sellers alike. Many homeowners are leery of selling because they might have to buy another house at a much higher mortgage rate, while buyers are still seeing far elevated prices, Daryl Fairweather, chief economist at Redfin, told CBS News on Thursday.

    “The one silver lining is that if you manage to be able to afford a home, if you can get that mortgage, you’re going to face a lot less competition,” Fairweather said.

    Khristopher J. Brooks

    Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.

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  • Housing Market Continues To Slide – Sales Down 4% In November

    Housing Market Continues To Slide – Sales Down 4% In November

    Key Takeaways

    • Existing home signed sales contracts went down 4% in November, extending the slide to ten months straight.
    • It’s further evidence of a continued slowdown in the housing sector, with prices down 9.1% since May.
    • It’s an expected side effect of the Fed’s policy of raising interest rates to bring down inflation, with the average 30 year fixed rate mortgage doubling over the past year.

    The housing market in the US has had a rough few months. According to the National Association of Realtors, contracts to buy previously owned homes in the US fell a lot more than expected in November – the sixth straight month of decline.

    The main reason behind the fall is due to the Federal Reserve raising interest rates in an attempt to curb inflation, which is causing the housing market to almost grind to a halt.

    The NAR’s Pending Home Sales Index, which is based on signed contracts, showed that the number of contracts fell by 4% to 73.9 in November. To put that in perspective, contracts are down 37.8% compared to the same time the previous year. Ouch.

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    Why is the housing market slowing down?

    But why is this happening? Well, the housing market is particularly sensitive to changes in interest rates, and the Fed’s aggressive rate hikes have caused borrowing costs to increase significantly. In fact, the 30-year fixed mortgage rate reached 7% in October for the first time since 2002, more than doubling in just nine months.

    New mortgages are now a heck of a lot more expensive than they were a year ago, and it’s making potential buyers wary of diving in on such a major purchase.

    This sudden increase in borrowing costs has essentially pulled the rug out from under what had been a red-hot housing market, which was fueled by historically low borrowing costs and a rush to the suburbs during the coronavirus pandemic.

    The decline in signed contracts means that existing home sales are also certain to fall after notching their 10th straight monthly decrease in November. According to data from the previous week, the annual sales rates of both new and existing homes have decreased by 35% since the beginning of the year, reaching their lowest point since 2011. This represents one of the quickest declines on record.

    And to make matters worse, new single-family housing starts and permit issuance reached a two-and-a-half-year low last month as well.

    So, it looks like the housing market is feeling the effects of the Fed’s actions in real-time, and it’s not looking good. NAR Chief Economist Lawrence Yun summed it up by saying, “falling home sales and construction have hurt broader economic activity.”

    Where to from here for the housing market?

    There’s no getting away from it, the situation is probably going to get worse before it gets better. The Fed has made it clear that they plan to hike rates as much as they need to in order to get inflation back down to the target range of 2-3%.

    It has started to come to head back down, but it’s still staggeringly high at 7.1%.

    That means we can expect rates to go up further from here, and potentially by quite a lot. For potential homebuyers, mortgages are therefore going to continue to get more expensive. That’s going to mean fewer buyers on the market for homes, which is going to further put the brakes on real estate activity.

    And that’s the whole point.

    Anyone who expects the housing market to pick up soon will find themselves face to face with the Fed, who are determined to take the heat out and bring down inflation.

    After every Federal Open Market Committee meeting, where the members of the Fed agree on where to set the rates, individual members are surveyed on where they see rates 12 months from now.

    This is known as the ‘dot plot’ due to the way the data is represented, and the current dot plot shows the median expectation for rates is that they hit 5.1% by the end of next year. That’s still a significant increase from the current level of 4.25 – 4.5%.

    What does that mean for potential home buyers?

    If you’ve been looking to get on the housing ladder, this change in interest rate policy is likely to have thrown you for a bit of a loop. The houses you’ve been eyeing up probably haven’t come down in price, but the mortgage you’d need to buy it definitely has.

    The ongoing pressure on the housing market is likely to cause prices to moderate in the short to medium term. We’ve already seen this start to happen. According to Redfin, the median sale price in May in the US hit $433,425. In May, that’s slid to $393,682.

    If interest rate continue to go up as they’re expected to, and home sale numbers also continue to fall, it’s highly likely that prices will keep going down too.

    That’s going to take some of the sting out of the rising cost of a mortgage. You’ll still be paying a higher level of interest than you would have been 12 months ago, but if the price of the home you’re buying going down too, then the mortgage might not be as big.

    Either way, one of the best ways to help insulate yourself against these sorts of changes is to have a bigger down payment.

    The bigger the down payment, the more mortgages that will likely be available to you and the lower your ongoing repayments can be. For those looking to boost the size of their down payment, there are a couple of options you can consider.

    Obviously you could try to save more of your income. That’s easier said than done in the era of sky high cost of living. The other alternative is to look to the investment markets in an aim to grow your down payment that way.

    Wading into markets right now can be a challenge. It could be a great time to get in, with the major falls we’ve seen, but they could also have further to fall. If you’re nervous, consider adding our AI-powered Portfolio Protection.

    This uses AI to analyze your portfolio’s sensitivity to a range of different risk factors such as interest rate risk, overall market risk and oil risk. It then automatically implements sophisticated hedging strategies to help guard against them.

    It’s the type of strategy usually reserved for high flying hedge fund clients, but we’ve made it available for everyone. You can add Portfolio Protection to any of our Foundation Kits.

    Download Q.ai today for access to AI-powered investment strategies.

    Q.ai – Powering a Personal Wealth Movement, Contributor

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  • Existing Home Sales Tumble For A Record 9th Straight Month

    Existing Home Sales Tumble For A Record 9th Straight Month

    Existing home sales retreated for the ninth straight month in October as higher mortgage rates discouraged potential buyers, according to the National Association of Realtors. All four major U.S. regions registered month-over-month and year-over-year declines.

    Total existing home sales — completed transactions that include single-family homes, townhomes, condominiums and co-ops — decreased 5.9% from September to a seasonally adjusted annual rate of 4.43 million in October. Year-over-year, sales dropped by 28.4% (down from 6.19 million in October 2021).

    “More potential home buyers were squeezed out from qualifying for a mortgage in October as mortgage rates climbed higher,” said NAR chief economist Lawrence Yun. “The impact is greater in expensive areas of the country and in markets that witnessed significant home price gains in recent years.”

    Total housing inventory registered at the end of October was 1.22 million units, which was down 0.8% from both September and one year ago (1.23 million). Unsold inventory sits at a 3.3-month supply at the current sales pace, up from 3.1 months in September and 2.4 months in October 2021.

    “Inventory levels are still tight, which is why some homes for sale are still receiving multiple offers,” Yun added. “In October, 24% of homes received over the asking price. Conversely, homes sitting on the market for more than 120 days saw prices reduced by an average of 15.8%.”

    The median existing-home price for all housing types in October was $379,100, a gain of 6.6% from October 2021 ($355,700), as prices rose in all regions. This marks 128 consecutive months of year-over-year increases, the longest-running streak on record.

    Properties typically remained on the market for 21 days in October, up from 19 days in September and 18 days in October 2021. Sixty-four percent of homes sold in October 2022 were on the market for less than a month.

    “Affordability constraints are throwing a wrench into the previous momentum of the market, causing home buyers to step back as they are being priced out,” said Zillow senior economist Nicole Bachaud. “And home sellers are not immune either. Current rates are forcing would-be sellers to stay put in their existing homes with much lower rates, reducing the flow of new listings onto the market.”

    “Both a pullback in demand and supply are limiting sales counts,” she added. “Without a significant improvement in affordability, existing home sales will likely continue to disappoint compared to the pandemic peak. Recent downward movement in mortgage rates might provide some reprieve in the coming months, but with home values appearing to hold strong, affordability challenges remain top of mind.”

    First-time buyers were responsible for 28% of sales in October, down from 29% in both September 2022 and October 2021. NAR’s 2022 Profile of Home Buyers and Sellers – released earlier this month – found that the annual share of first-time buyers was 26%, the lowest since NAR began tracking the data.

    “Home sales are plummeting, and prices have fallen four months in a row,” said Holden Lewis, home and mortgage expert for NerdWallet. “It’s a classic tale of prices falling along with demand. But supply is dwindling, too, a situation that has kept prices from falling further than they otherwise would have.”

    All-cash sales accounted for 26% of transactions in October, up from 22% in September and 24% in October 2021. Individual investors or second-home buyers, who make up many cash sales, purchased 16% of homes in October, up from 15% in September, but down from 17% in October 2021. Distressed sales – foreclosures and short sales – represented 1% of sales in October, down from 2% in September and identical to October 2021.

    According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.90% in October, up from 6.11% in September. The average commitment rate across all of 2021 was 2.96%.

    “Mortgage rates have come down since peaking in mid-November, so home sales may be close to reaching the bottom in the current housing cycle,” said Yun.

    Realtor.com’s Market Trends Report in October shows that the largest year-over-year median list price growth occurred in Milwaukee (+34.5%), Miami (+25.1%) and Kansas City (+21.4%). Phoenix reported the highest increase in the share of homes that had prices reduced compared to last year (+35.9 percentage points), followed by Austin (+31.2 percentage points) and Las Vegas (+24.4 percentage points).

    Single-family and condo/co-op sales

    Single-family home sales declined to a seasonally adjusted annual rate of 3.95 million in October, down 6.4% from 4.22 million in September and 28.2% from one year ago. The median existing single-family home price was $384,900 in October, up 6.2% from October 2021.

    Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 480,000 units in October, down 2% from September and 30.4% from the previous year. The median existing condo price was $331,000 in October, an annual increase of 10.1%.

    “For consumers looking to buy or sell a home, having a Realtor by their side to navigate one of the more challenging and complex markets we’ve seen in some time will be essential to successfully completing transactions,” said NAR President Kenny Parcell, a Realtor from Spanish Fork, Utah and broker-owner of Equity Real Estate Utah. “Realtors understand local market conditions and provide timely and trusted advice, from listing to closing.”

    Regional breakdown

    Existing-home sales in the Northeast trailed off 6.6% from September to an annual rate of 570,000 in October, a decline of 23.0% from October 2021. The median price in the Northeast was $408,700, an increase of 8.0% from the previous year.

    Existing-home sales in the Midwest retracted 5.3% from the previous month to an annual rate of 1,080,000 in October, falling 25.5% from the prior year. The median price in the Midwest was $274,500, up 5.9% from October 2021.

    In the South, existing-home sales declined 4.8% in October from September to an annual rate of 1,980,000, a 27.2% decrease from this time last year. The median price in the South was $346,300, an increase of 8% from one year ago.

    Existing-home sales in the West waned 9.1% from September to an annual rate of 800,000 in October, down 37.5% from one year ago. The median price in the West was $588,400, a 5.3% increase from October 2021.

    Compass president Neda Navab said would-be sellers locked in at ultra-low mortgage rates are understandably reluctant to list their homes for sale today and trade that rate in for one that is twice as high, which keeps inventory low and upward pressure on prices.

    “There have been some faint signals recently that mortgage interest rates may be at or near their peak, and might fall into the 5% range late in the second quarter or in the second half of 2023,” she said. “But that’s by no means guaranteed, and rates will more likely need to fall back into the 4% range to really unlock demand again – which still looks to be a long way off.”

    Brenda Richardson, Senior Contributor

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